Independent Measurement & Verification (M&V): building trust. Alex Rathmell Managing Director

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1 Independent Measurement & Verification (M&V): building trust Alex Rathmell Managing Director

Why we re here Major barriers to uptake of energy efficiency measures: Uncertainty around the level of savings achieved (Ernst & Young, 2011) Lack of

2 Why we re here Major barriers to uptake of energy efficiency measures: Uncertainty around the level of savings achieved (Ernst & Young, 2011) Lack of trust and access to information (DECC, 2012) Lack of information about the energy performance of technologies may translate into underinvestment in energy efficiency. (UN Industrial Development Organisation, 2011) Four barriers identified by UK Department of Energy & Climate Change s Energy Efficiency Strategy : 1. Embryonic market 2. Information 3. Misaligned financial incentives 4. Undervaluing energy efficiency Copyright EEVS Insight Ltd 2014

3 Why we re here Two key issues: 1. Unsubstantiated and unreliable supply-side performance claims 2. No standardisation of what constitutes energy saving, undermining quality of performance information. What if: My business has grown? The weather has changed? A range of energy-saving measures have been implemented? The technology supplier has measured the savings? Copyright EEVS Insight Ltd 2014

About us We independently evaluate energy saving projects, and use the results to provide information services for the energy efficiency industry.

4 About us We independently evaluate energy saving projects, and use the results to provide information services for the energy efficiency industry. Independent Measurement & Verification (M&V) Measure the savings achieved by demand reduction projects Certainty in returns Enabler of third party finance Industry information services Market data on the energy efficiency sector In partnership with Bloomberg New Energy Finance EEVS Insight Ltd 2014

M&V Measurement and Verification (M&V): The engineering discipline

Savings: defined as avoided energy use Standard: IPMVP (International

US ESCO industry, now widely used internationally IPMVP: A framework

mitigates uncertainty in project outcome IPMVP Adherent evaluation

5 M&V Measurement and Verification (M&V): The engineering discipline around isolating a saving from other factors that affect energy use Savings: defined as avoided energy use Standard: IPMVP (International Performance Measurement & Verification Protocol Source: EVO Pedigree: US ESCO industry, now widely used internationally IPMVP: A framework for a standardised investment-grade evaluation of energy savings mitigates uncertainty in project outcome IPMVP Adherent evaluation carried out by a qualified CMVP Copyright EEVS Insight Ltd 2014

6 Independent M&V Commercial interests are at stake For an investment grade evaluation: Adherence to IPMVP Qualified CMVP Adequate M&V budget Independent analysis (not ESCO, not Host) or verification Transparent reporting to all parties Copyright EEVS Insight Ltd 2014

7 The Evaluation Process Audit Baseline Implement Verify M&V Plan Commit to methodology Savings report Prove performance Objective evaluation needs a wrap around process Savings reporting repeated periodically (e.g. annually) to check persistence of savings Savings report incorporates client-specific performance metrics Multiple savings reports are used for benchmarking Copyright EEVS Insight Ltd 2014

UK) Energy saving measures are being deployed Chart 1.

8 The UK perspective: Energy Efficiency is happening Respondents across consumer and supplier sides of energy saving industry (mostly UK) Energy saving measures are being deployed Chart 1.3 Consumers commissioning energy efficiency projects (Trends Vol 6) EEVS Insight Ltd 2014

9 Lighting upgrades are the most popular energy efficiency measure (around 25% of projects) Mostly upgrades to LED and/or improved controls Chart 1.4 Technologies commissioned (Trends Vol 6) EEVS Insight Ltd 2014

10 Payback period requirements Chart 1.8 Financial payback (Trends Annual Report) EEVS Insight Ltd 2014

11 Sources of finance Chart 1.7 Sources of finance (Trends Vol 6) EEVS Insight Ltd 2014

12 The story so far Single technology projects Tight payback requirements Purchased from capex budget Little performance monitoring poor quality information Multi-technology, deep retrofits are still rare Significant unexploited potential for energy efficiency EEVS Insight Ltd 2014

Drivers of Energy Performance Contracting Energy

invest Green Investment Bank Technology Utility 2.

drivers and incentives Article 18 of the Energy

13 Drivers of Energy Performance Contracting Energy prices, security and decarbonisation Appetite to invest Green Investment Bank Technology Utility 2.0 Standards, codes of practice Frameworks Legislative drivers and incentives Article 18 of the Energy Efficiency Directive Electricity Market Reform? ESOS? EEVS Insight Ltd 2014

M&V delivery models Where ESCO M&V is used ESCOs tend to use deemed savings and IPMVP Option A Client persuaded to sign off savings quickly no long term visibility

Growth in ISO 50001 (plan, do, check, act) Our focus: training empower clients to manage larger projects Procurement frameworks are moving to independent M&V Correct the

14 M&V delivery models Where ESCO M&V is used ESCOs tend to use deemed savings and IPMVP Option A Client persuaded to sign off savings quickly no long term visibility Name-drop IPMVP Not much client M&V. yet. Growth in ISO (plan, do, check, act) Our focus: training empower clients to manage larger projects Procurement frameworks are moving to independent M&V Correct the asymmetry between ESCO and client Independent verification of ESCO outputs becoming common Green Investment Bank and other 3 rd party investors / financiers require independent M&V for NDEE investments Corporates realising benefit of holding suppliers to account through independent M&V EEVS Insight Ltd 2014

15 A current ESCO project Host: a District Council in England 28% saving expected, 12 year project 5-site retrofit project including leisure centres, office and car park SPV established to deliver energy savings Third party investment Investment return paid from savings Independent M&V by EEVS with attribution analysis Investment and return Investor Independent M&V EEVS M&V Plans Savings Reports ECM vendors ECM vendors ESCO ECM installations O&M Host ECM vendors Proportion of energy savings Copyright EEVS Insight Ltd 2014

16 A current ESCO project ECM Leisure Centre 1 Leisure Centre 2 Leisure Centre 3 Car Park Office Lighting upgrade Biomass boiler Air handling units Variable speed drives Boiler optimisation Valve insulation Vending machine controls Copyright EEVS Insight Ltd 2014

Annual savings reconciliation and payments End of project: further savings retained by Host Office actual and

17 A current ESCO project Opportunity assessment Investment Grade Audit Independent validation of IGA M&V Plans Investment Committee sign-off Install, operate maintain Quarterly Savings Reports (yr 1) Annual Savings Report Annual savings reconciliation and payments End of project: further savings retained by Host Office actual and expected electricity use Regression analysis Leisure Centre 3 actual and expected gas use Copyright EEVS Insight Ltd 2014

18 Applicable to performance contracts, or any energy efficiency investment Proven performance gains (confidence) Communicate savings achievements based on auditable figures Evidence shows that end-users are not using M&V in a structured way Highlight best technologies (credibility) Understand where savings come from Investment or procurement decisions based on verified performance analysis not supplier claims Manage performance risk (transparency) Independent M&V Build confidence through standardised, transparent savings verification Copyright EEVS Insight Ltd 2014

19 Energy Efficiency Verification Specialists Independent Measurement & Verification (M&V): building trust Alex Rathmell Managing Director

Driving investment and growth through professional evaluation in the emerging energysaving

Driving investment and growth through professional evaluation in the emerging energysaving industry Hilary Wood - Operations Director Graham Johnson Senior Energy Analyst Who are we? We are provide Measurement