ENERGY PERFORMANCE CONTRACTS MONITORING AND VERIFICATION
The principles of M&V should be routinely applied to such technologies to ensure that they continue to deliver over their lifetime
become extended or a new extension is added? In such cases it is important to provide adjustments to the baseline to incorporate the changes, which may be based on metered data, modelling, or even educated assumptions. Again it is essential that all parties agree on the methodology adopted to account for these so-called ‘static factors’.
Uncertainty In all but the simplest systems, energy consumption will vary and it is seldom possible to assign these variations to individual driving factors. It is often necessary to include statistical analysis of reported energy use to determine how much confidence one can have that savings are being made. The importance of this is to determine the appropriate cost of metering and measurement. If a particular level of metering results in a high level of uncertainty, it may be cost-effective to spend more money to improve accuracy. Good analysis can help with this type of decision.
Reporting The reporting process will tell all parties what savings, if any, have been made. It needs to show clearly how the reported savings have been arrived at, and what adjustments have been made to account for variable and static factors. As with baselines, the method of reporting should be agreed by all parties at the beginning of the project. The aim is to avoid disputes, and to provide independent arbitration if either side questions the results. Much of this analysis and reporting is
not new. M&V should perhaps be seen as a sub-set of the wider activity of monitoring and targeting (M&T), which has been carried out in the UK for years. Many of the techniques such as regression analysis, cumulative sum control chart (Cusum) and energy signatures are standard procedures, which can be used in M&V projects. M&V just gives these a new focus for interpreting energy data.
ENERGY PERFORMANCE CONTRACT FINANCIAL ARRANGEMENTS
Figure 1 shows a notional example of how money flows in an energy performance contract (EPC). The example uses a simplified case of a constant rate of energy use for both the baseline and post ECM installation. However, the actual energy use is seen to vary (perhaps because the ECM has failed to operate). The Fee Cap is the level of energy use that the client would expect to pay. The difference between this cap and the post installation consumption is the fee the client pays to the contractor. If, however, the actual energy use rises above this Fee Cap, then the contractor has to pay the difference to the client.
It is in the interest of the contractor to ensure that the actual energy consumption is always as low as possible to ensure a maximum rate of return on the capital investment. The fee paid in any period will depend on actual metered energy consumption.
The issue becomes much more complex when the energy consumption varies (as is usually the case). The baseline should show expected variations, and the variations in actual consumption need to be correctly explained, i.e. whether from expected natural variations (say in the weather), or from operational changes (such as changes in working hours). The cause of the variations will be important in determining which party is responsible for the apparent savings not being achieved, and therefore in which direction money transfers need to take place.
Baseline Fee cap
Calculated energy after ECM Actual consumption
Costs M&V is an additional cost to the project and needs to be factored into the business case. It would normally be paid for by the contractor, but the M&V specialists may not necessarily be appointed by the contractor. The general guidance is that M&V should cost no more than 10% of the annual savings, although set-up costs may exceed this in the first year. It will often depend on the degree of accuracy required by a particular project. The discussions above have centred on
energy savings measures and typical energy performance contracting. However, low carbon technologies, including integrated renewables, also provide energy generation (solar, wind, CHP and so on). There is evidence that many of these do not live up to expectations, partly due to poor commissioning, lack of maintenance, or simply a lack of understanding how systems should work. These are being included in EPCs, and in some instances are subject to performance guarantees. The principles of M&V should be routinely
Fee
Saving to client
Jan
Re-imbursed to client
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
applied to such technologies to ensure that they continue to deliver over their lifetime. It may even become the norm that clients expect performance guarantees on all low carbon designs and systems, especially where they are perceived as a significant extra investment in a new build or refurbishment project. If this does become the case, then the engineering design community will need to be well versed in the language and practice of M&V. CJ
TONY DAY is energy services director at TEAM
46
CIBSE Journal December 2012
www.cibsejournal.com
Energy
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