M&V Part 1: M&V Part 1: D.O. ReviewD.O. Review

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Your InstructorYour Instructor

Mark Stetz, P.E. Worked with FEMP since 1997. Serves as FEMP’s M&V Specialist. Contributed to FEMP M&V Guidelines,

Detailed Guidelines, and more. Contact Information:

970-385-4932 mstetz@nexant.com

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M&V Workshop GoalsM&V Workshop Goals

Part 1: D.O. ReviewM&V in the Four Phases

Part 2: Risk AssessmentRisk Assessment and Allocation

Part 3: FEMP M&V MethodsMethods and Applications

Part 4: M&V Plan ReviewChecklist, FEMP M&V Methods

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DO M&V OverviewDO M&V Overview

Legal Stuff & Definitions Purpose of M&V M&V in the Four Phases

Contractor ResponsibilitiesAgency Responsibilities

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Legal Stuff & DefinitionsLegal Stuff & Definitions

Sections C.4, H.23, and H.24 of the IDIQ require the following submittals:

M&V Overview Site-Specific M&V Plan Detailed Energy Survey Risk / Responsibility Matrix Commissioning & Post-Installation Reports Annual M&V Reports

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M&V OverviewM&V Overview

The M&V Overview (a.k.a. Initial M&V Plan) is submitted as part of Initial Proposal. It is not a complete plan, but:

Describes intended approach. Purposely lacks detail. Intended as a starting point for negotiation.

The overview allows the agency and the contractor to develop a satisfactory M&V plan.

Legal Stuff

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Site Specific M&V PlanSite Specific M&V Plan

The Site Specific M&V Plan includes:What will be done (and when).How will performance be verified.Who will conduct these activities (and

when).How will savings be calculated.How will performance be adjusted to

account for varying conditions.

Legal Stuff

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Detailed Energy SurveyDetailed Energy Survey

The Detailed Energy Survey defines the baseline of the facility, which consists of:

Energy use and cost history. Equipment list and measured performance. Factors that influence energy use. Operations and maintenance costs.

If this information is not documented, it is lost. It cannot be determined after installation.

Legal Stuff

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Responsibility MatrixResponsibility Matrix

The Responsibility Matrix describes how the contractor will address risk factors that affect savings and project economics. These are broadly characterized as:Equipment PerformanceFacility Usage and OperationsFinancial and Economic

Responsibility Matrix drives M&V Plan.

Legal Stuff

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Commissioning Plan & ReportCommissioning Plan & Report

Commissioning is the process of making a project or measure work.

Hardware installation alone does not ensure proper operation- many projects require calibration, programming, and adjustment after installation.

In some cases, this process is more important than the hardware itself.

Legal Stuff

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Post-Installation M&V ReportPost-Installation M&V Report

The contractor submits the Post-Installation M&V Report after the project has been installed and commissioned. It includes:

Project description. List of installed equipment (as-built). Performance measurements. Expected savings for the first year.

Legal Stuff

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Annual Performance ReportsAnnual Performance Reports

The contractor submits Annual Performance Reports to demonstrate that savings have occurred. They should include:

Project description. Performance measurements. Realized savings for the year. Comparison to the guaranteed amounts.

Legal Stuff

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Purpose of M&VPurpose of M&V

Performance Contracting is an arrangement where the exact benefits are only known afterwards.

There is an element of risk related to the uncertainty of the delivered benefit.M&V quantifies the benefits.M&V allocates risk between parties. M&V supports the guarantee.

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SavingsSavings

SuperESPC recognizes two types of savings:

Energy Cost Savings Energy-Related Cost Savings

Purpose of M&V

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Energy Cost SavingsEnergy Cost Savings

Reductions in energy use Reductions in peak demand Reductions in energy rates Shifting time-of-use to lower cost periods Converting to less expensive fuels Self-generation (and cogeneration / CHP) Reduced water use

Purpose of M&V

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Energy-Related Cost SavingsEnergy-Related Cost Savings

Energy-related cost savings are primarily due to reduced O&M expenses:

Parts & labor costs. Emergency repair costs. Equipment replacement costs.

Cost savings must come from existing budgets!

Purpose of M&V

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SuperESPC is Guaranteed SavingsSuperESPC is Guaranteed Savings

1 2 3 4 5 6 7 8 9 10 11 12 13 14Contract Year

Savings

Actual

Estimated

Guaranteed

Actual saving will fluctuate, but should always be greater than the guaranteed amount.

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You Need M&V Because...You Need M&V Because...

Savings are guaranteed, but actual savings fluctuate every year.

Without M&V, how do you know the guarantee is being met?

M&V verifies guarantee is met. Is contractually required (IDIQ).

“What you don’t measure, you can’t manage.” (Jack Welch, former GE CEO)

Purpose of M&V

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When Do You Need M&V?When Do You Need M&V?

Before DO Award: Predicts energy savings potential for a project. Cost savings are used to justify the project.Both parties must understand and agree on

the M&V strategy.

After DO Award: Ensures that the government only pays for

realized savings.

Purpose of M&V

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M&V During the Four PhasesM&V During the Four Phases

Phase Agency Activity ESCO Activity

1. Planning Consider project motivation.

2. Project Development

Review M&V Plan,

Review Risk & Responsibility Matrix.

Develop Initial Proposal,

Develop Initial M&V Plan and Risk & Responsibility Matrix.

3. Negotiation and Award

Evaluate M&V Plan(s).

Witness DES and M&V activities.

Perform Detailed Energy Survey,Develop Baseline,Refine M&V Plan.

4. Implement DO

Witness M&V activities. Review and approve reports.

Commission Project,Submit Post-Installation Report,Submit Annual Reports

Phase 1 Phase 2 Phase 3 Phase 4

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Phase 1: PlanningPhase 1: Planning

What are project motivators? Infrastructure upgrade.Want to reduce energy and O&M costs.Want to comply with EO 13123.

What does M&V need to accomplish?Monitor equipment performance.Find additional savings, improve O&M.Enforce guarantees.Satisfy law.

Phase 1 Phase 2 Phase 3 Phase 4

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Agency ResponsibilitiesAgency Responsibilities

Define project goals in terms of:Energy cost savingsEnergy-related cost savingsEquipment upgrades

Define M&V Requirements:Total energy & cost savingsEquipment performanceLong-term verification

These will be part of the DO-RFP!

Phase 1 Phase 2 Phase 3 Phase 4

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Phase 2: Project DevelopmentPhase 2: Project Development

Contractor Responsibilities Complete Responsibility Matrix. Develop M&V Overview. Explain and justify approach:

What will be measured?What will not?How will agency be protected?How will contractor prove performance?

Phase 1 Phase 2 Phase 3 Phase 4

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Agency ResponsibilitiesAgency Responsibilities

Discuss planned physical or operational site changes with contractor.

Provide energy use and rates to contractor. Review Responsibility Matrix, M&V

Overview & assumptions. Provide critical comments and feedback. Engage PF or 3rd party support.

Phase 1 Phase 2 Phase 3 Phase 4

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Phase 3: Negotiation and AwardPhase 3: Negotiation and Award

Contractor Responsibilities Modify Responsibility Matrix and Initial

M&V Plan to satisfy agency needs and desires.

Complete Site Specific M&V Plan. Perform Detailed Energy Survey and

document baseline information.

M&V Plan drives DES activities.

Phase 1 Phase 2 Phase 3 Phase 4

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Agency ResponsibilitiesAgency Responsibilities

Review M&V Plan and estimated savings. Provide critical comments and feedback. Approve Final M&V Plan. Participate in and witness DES activities. Engage PF or 3rd party support.

Phase 1 Phase 2 Phase 3 Phase 4

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Phase 4: ImplementationPhase 4: Implementation

Contractor Responsibilities Commission measures. Submit Commissioning and

Post-Installation M&V Reports. Submit Annual M&V Reports.

Phase 1 Phase 2 Phase 3 Phase 4

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Agency ResponsibilitiesAgency Responsibilities

Agency Responsibilities Witness M&V activities and observe

commissioning. Be involved! Approve Commissioning and Post-Installation

reports. Conduct specified O&M activities. Review Annual Reports. Engage PF support.

Phase 1 Phase 2 Phase 3 Phase 4

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Review and DiscussionReview and Discussion

Benefits from SuperESPC are only known after project implementation.

Savings guarantees are only as good as the M&V supporting them.

The Agency sets the M&V goals; the ESCO implements the plan.

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Review QuestionsReview Questions

Why is M&V needed? Who is responsible for M&V?