TECHNICAL REPORT 011/17 ASSESSING AND MEASURING THE PERFORMANCE OF ENERGY EFFICIENCY PROJECTS ESMAP MISSION The Energy Sector Management Assistance Program (ESMAP) is a global knowledge and technical assistance program administered by the World Bank. It provides analytical and advisory services to low- and middle- income countries to increase their know-how and institutional capac- ity to achieve environmentally sustainable energy solutions for poverty reduction and economic growth. ESMAP is funded by Australia, Austria, Denmark, the European Commission, Finland, France, Germany, Iceland, Japan, Lithuania, the Netherlands, Norway, the Rockefeller Foundation, Sweden, Switzerland, and the United Kingdom, as well as the World Bank. 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Written by | Monali Ranade, Martina Bosi, Sara Mills-Knapp, Stephane de la Rue du Can, and International Institute for Energy Conservation Energy Sector Management Assistance Program | The World Bank TA B L E O F C O N T E N T S Abbreviations iii Acknowledgments iv Executive Summary v Overview x 1| ENERGY EFFICIENCY: THE FIRST FUEL 1 2| MEASUREMENT & VERIFICATION: A REVIEW 9 2.1 Overview of Existing Measurement & Verification Protocols 10 2.2 Review of Measurement & Verification Experience 11 2.2.1 World Bank Projects 11 2.2.2 External Projects 14 2.3 Conclusion 18 3| UNDERSTANDING THE MEASUREMENT & VERIFICATION PROCESS 21 3.1 Fundamental Principles for Measurement & Verification 21 3.2 Understanding the Cost of Monitoring & Verification 21 3.3 Recap of Energy Savings Calculations 23 3.3.1 Energy Cost Savings and Price Risk 24 3.3.2 Uncertainty 24 3.4 The Rebound Effect 25 3.5 Recommendations for Undertaking an Effective Measurement & Verification Plan 28 4| METHODS FOR QUANTIFYING MULTIPLE BENEFITS OF ENERGY EFFICIENCY 31 4.1 Description of THE Multiple Benefits of Energy Efficiency 32 4.1.1 Recipient Benefits 32 4.1.2 Energy Supply Benefits 37 4.1.3 Public Budget Benefits 40 4.1.4 Air Emissions Benefits 41 4.1.5 Economic Benefits 44 4.2 Summary of International Experience 47 4.3 Sector-Specific Experience 49 4.3.1 Street Lighting Energy Efficiency Measures 49 4.3.2 Multifamily Buildings 50 4.4 Recommendations For Inclusion of Multiple Benefits of Energy Efficiency in Measurement & Verification 51 5| STEP-BY-STEP MEASUREMENT & VERIFICATION 55 ANNEX 1 | Lexicon 61 ANNEX 2 | Comparison M&V—EM&V—MRV 65 ANNEX 3 | List of Monitoring & Verification Protocols 67 ANNEX 4 | Summary of Monitoring & Verification Protocols 69 ANNEX 5 | Comparison of Monitoring & Verification Protocols 80 ANNEX 6 | Advancements in Monitoring & Verification Technologies 86 ANNEX 7 | List of Methodologies for Assessing Co-Benefits/Multiple Benefits 88 ANNEX 8 | Massachusetts Recommended Values for Non-Energy Impacts 93 ANNEX 9 | Thermal Comfort Survey 96 ANNEX 10 | Measure of Labor Productivity 97 ANNEX 11 | Impacts Identified in Recent UK Energy Efficiency Policy Initiatives 98 REFERENCES 99 ii List of Figures and Tables Figure 1.1 Energy Efficiency and the Global Climate Goals 2 Figure 1.2 The Multiple Benefits of Energy Efficiency 4 Figure 3.1 Relation between M&V Cost and M&V Rigor 23 Figure 4.1 Multiple Benefits of Energy Efficiency Accrued to Vermont Energy Providers in 2010 38 Figure 5.1 Measurement & Verification Flow Chart 58 Table ES.1 Most Commonly Cited Multiple Benefits of Energy Efficiency vi Table 1.1 Most Commonly Cited Multiple Benefits of Energy Efficiency 6 Table 2.1 Key Features Observed in Reviewed World Bank Energy Efficiency Projects 12 Table 2.2 Key Features Observed in Reviewed Energy Efficiency Projects from Different Agencies 15 Table 4.1 Methods of Quantifying the Multiple Benefits of Energy Efficiency 31 Table 4.2 Recipient Benefits of Energy Efficiency 33 Table 4.3 Quantification Methods for Recipient Benefits 34 Table 4.4 Power Supply Benefits of Energy Efficiency 37 Table 4.5 Utility MBEE Resulting from Low-income Energy Efficiency Programs (in USD/year/participant) 39 Table 4.6 Public Budget Benefits of Energy Efficiency 40 Table 4.7 Air Emissions Benefits of Energy Efficiency 42 Table 4.8 Economic Benefits of Energy Efficiency 45 ii A B B R E V I AT I O N S € Euro (currency) IMF International Monetary Fund ADB Asian Development Bank IPMVP International Performance Measurement and Verification Protocol AMI Advanced metering infrastructure kWh Kilowatt-hours CCMS Centralized control & monitoring system LED Light-emitting diode CDM Clean Development Mechanism M&V Measurement and verification CER Certified emission reduction MBEE Multiple benefits of energy efficiency COMBI Calculating and Operationalizing the Multiple Benefits of Energy MRV Measurement, reporting, and verification Efficiency in Europe Mtoe Million tonnes of oil equivalent DSM Demand-side management NEB Non-energy benefit ECM Energy conservation measure (equivalent to energy efficiency NEI Non-energy impact measure) O&M Operation and Maintenance EE Energy efficiency OECD Organisation for Economic Co-operation and Development EESL Energy Efficiency Services Ltd. PM10 Particulate matter 10 EM&V Evaluation, measurement, and verification R2E2 Renewable Energy and Energy Efficiency Fund EMS Energy management system RCT Randomized control trial EPC Energy performance contracts SEforALL Sustainable Energy for All (United Nations initiative) ESCO Energy service company SLCP Short-lived climate pollutant G20 Group of Twenty (international forum) T&D Transmission and distribution GEF Global Environment Facility UNFCCC United Nations Framework Convention on Climate Change GHG Greenhouse gas WAP US Weatherized Assistance Program HVAC Heating, ventilation, and air conditioning WHO World Health Organization IEA International Energy Agency IGEA Investment Grade Energy Audit All currency in United States dollars (USD, US$, $), unless otherwise indicated. iii ACKNOWLEDGMENTS This report is produced as part of the City Energy Efficiency Transformation Initiative (CEETI) of the Energy Sector Management Assistance Program (ESMAP) to develop global and practical knowledge to support Energy Efficiency in developing countries. The task team comprised of Monali Ranade (co-Task Team Leader/Senior Operations Officer), Martina Bosi (co-Task Team Leader/Senior Energy Specialist), and Sara Mills-Knapp (Consultant) of the World Bank Group. Stephane de la Rue du Can (Consultant) is the lead author of Chapter 4 of this report. The review of measurement and verification (M&V) protocols provided in Chapters 2, 3, and 5 was conducted by an International Institute for Energy Conservation (IIEC) team, led by Sanjay Dube. The team appreciates the valuable comments and contributions of the expert peer reviewers of the report, Jas Singh (Senior Energy Specialist, World Bank), Jonathan Sinton (Senior Energy Specialist, World Bank), and Luiz Maurer (Principal Industry Specialist, International Finance Corporation). The team also appreciates the inputs from Mary-Ellen Foley (Senior Environmental Specialist, World Bank) regarding issues related to Ozone Depleting Substances (ODS). Funding was provided by ESMAP and the Climate Change Cross Cutting Solutions Area (CC-CCSA) of the World Bank Group. For more information, visit www.esmap.org. iv EXECUTIVE SUMMARY Energy efficiency is a cost-effective solution to meet energy, climate change, and sustainable development goals and critical for supporting access to affordable, reliable, and sustainable energy services in developing countries. The energy efficiency potential is vast and largely untapped across the world. This is widely recognized by most governments, the development community, and international organizations, and forms the foundation of global initiatives such as Sustainable Energy for All. The benefits of improving energy efficiency are multiple, but so are the barriers. There is no silver bullet, but recognizing the multiple benefits of energy efficiency (MBEE)— including energy savings, as well as others (Table ES.1)—and making them more visible and credible is an integral part of the solution. If demonstrated suitably, these multiple benefits can motivate stakeholders to invest and participate in energy efficiency programs. An intrinsic challenge facing energy efficiency projects is that the benefits are not physically visible. The difficulty in reliably predicting and measuring the energy that will be saved and quantifying the associated nonenergy benefits (e.g., environmental benefits or increased comfort levels in the case of energy efficiency in buildings) can make it more difficult or less interesting for policy makers, investors, and energy users in general to focus efforts and resources to scale up energy efficiency. This report seeks to make a contribution to scaling up energy efficiency through improved planning and design of energy efficiency interventions in developing countries by starting with the basic management principle of “What gets measured gets done.” It includes a review of global experience with the measurement and verification (M&V) of energy efficiency and the emerging field of assessing the multiple benefits of energy efficiency. Through the references, examples, data, and practices highlighted, this reports seeks to help practitioners demonstrate the performance of energy efficiency interventions. The report makes the case that M&V should be a critical aspect of any energy efficiency project or program in order to ensure value for money, justify continued or increased funding, as well as provide the basis of performance-based payment mechanisms. M&V is essential to assess resource savings and to ensure that savings persist over time. Energy efficiency practitioners use M&V for several reasons, such as, to: t Improve engineering design and project costing t Enhance energy savings through adjustments in facility operations and maintenance t Document financial transactions (e.g., for energy efficiency projects where financial payments are performance based) t Enhance financing for energy efficiency projects t Support development of broader energy efficiency programs Executive Summary v TABLE ES.1 Most Commonly Cited Multiple Benefits of Energy Efficiency DESCRIPTION INDICATORS METHODS Participant Benefits Energy savings Unit of energy saved (e.g., kWh) and monetary value Measurement O&M cost reductions Replacement and inspection rate of equipment and monetary value Measurement Health impacts Hospitalization and mortality rates, medical costs Measurement Labor productivity Days off work, days off school Measurement Comfort Indoor temperature, humidity level, and monetary value Survey of willingness to pay or comparison Energy access Energy services provided (lumen-hours in the case of lighting, useful Measurement energy in the case of heating or cooling) Water savings Quantity of water saved (liters) and monetary value Measurement Property values Monetary value Measurement Safety Number of accidents prevented Measurement Competitiveness Market share, cost per unit of output, energy intensity Measurement Avoided capacity Avoided capacity (kW) and saved monetary value Power sector modeling Avoided T&D Avoided kWh losses and saved monetary value Power sector modeling Avoided peak load Avoided peak capacity (kW) and saved monetary value Power sector modeling Reduced credit and Saved monetary value Measurement collection costs Increased reliability Value added ($) produced, number of avoided power outages Modeling measurement Energy security Avoided energy imports (terajoules, etc.) and saved monetary value Modeling Public budget savings Saved monetary value Measurement Avoided energy subsidy Saved monetary value Modeling Indirect public budget Saved monetary value Modeling GHG emissions Tonne of CO2 equivalent and saved monetary value of avoided damages Measurement and emis- sions factors Pollutant emissions Tonne of pollutants reduced and saved monetary value of avoided Measurement and con- damages centration modeling Ozone Depleting Tonne of ozone depleting potential and saved monetary value of avoided Measurement and emis- Substance damages sions factors GDP growth Monetary value Macroeconomic modeling Job creation Net number of jobs created Macroeconomic modeling Energy Price $/kWh reduction Macroeconomic modeling Energy poverty Number of households Survey CO2—carbon dioxide; GDP—gross domestic product; GHG—greenhouse gas; kWh—kilowatt-hour; O&M—operations and maintenance; T&D—transmission and distribution Assessing and Measuring the Performance of Energy Efficiency Projects vi t Provide opportunities to capture climate change mitigation benefit and emission reduction credits t Increase public and market awareness of energy efficiency The report provides an overview of M&V practices for energy efficiency, noting that different terms are used to describe the process to measure and verify the performance of energy efficiency activities: Measurement Measurement and Verification. M&V is crucial to and Verification (M&V), Evaluation, Measurement, and establish the credibility of the benefits of energy efficiency Verification (EM&V), or Measurement, Reporting, and and build confidence in the performance of energy efficiency Verification (MRV). They share the common objective to activities. Accounting for energy efficiency’s multiple benefits “assess the outcome” of an energy efficiency intervention can help drive more energy efficiency actions. With greater and provide a framework for measuring and verifying confidence that theoretical energy savings and nonenergy project outcomes in a transparent, reliable, and consistent benefits are realized in practice and a better understanding by governments and stakeholders of the value of energy manner. Energy professionals and stakeholders use efficiency, a stronger case can be made for investments, as established protocols and methodologies to develop well as for the replication and scaling up of energy efficiency project-specific measurement and verification plans. interventions. These documents are not standards, hence, there is no compliance mechanism associated with the protocols. Practitioners have to decide to what degree their energy efficiency activities would conform their energy efficiency activities to the protocols, with decisions typically depending on the projects’ scope, cost of M&V, and the use/value/benefits of a more rigorous M&V system. The effort and rigor associated with M&V of energy efficiency projects or programs should typically be commensurate with the project capital investment and savings risk. The appropriate level of M&V rigor can often be determined by considering three factors: (i) the predictability of equipment operation; (ii) the magnitude of M&V costs in relation to the value of the energy savings and nonenergy benefits produced by the project; and (iii) technical capacity of the operators. A review of publicly available documentation for select energy efficiency projects undertaken by the World Bank and other organizations indicates that while preparation documentation for energy efficiency projects typically include methods for estimating energy savings ex ante, very few projects include, from the start, the provisions or methods to systematically measure and assess, ex-post, the actual performance of energy efficiency projects and programs. This can lead to: (i) potential under- or overestimation of energy savings; (ii) possibly undermining the credibility of energy efficiency interventions and their potential replication or scale up; (iii) missed opportunities for learning from the actual performance of the energy efficiency interventions and; (iv) making it difficult to develop and enable energy performance contracts. Evidence indicates that projects involving ex-post payment for energy efficiency performance often have a greater incentive to undertake rigorous M&V. This report highlights that energy efficiency projects should include, from the beginning, the elaboration of an M&V plan that outlines how the performance of the project will be monitored and assessed. It is important to strike a delicate balance between cost, rigor, and complexity. Factors that can influence the M&V costs include: project complexity, levels of uncertainty, existing energy Executive Summary vii management systems, and the risk allocation for achieved savings. Providing adequate accuracy while ensuring a reasonable cost of M&V can be challenging. In the case of projects where parameters are fairly constant and actual measurements may not be possible for the baseline development and energy savings calculation, a “deemed savings” approach may be considered. While such an approach typically has less precision (as it consists of multiplying the number of installed energy efficiency measures by a “deemed” value of savings per measure) and may increase the level of uncertainty of the achieved energy savings, it has greater simplicity and lower associated costs. In order to address the higher uncertainty levels, it is typically recommended to use a conservative approach to reduce overestimation of impact. Combining deemed or “default” input assumptions with some site-specific inputs and/or sample measurements can contribute to enhancing the robustness of the estimated energy savings. There is no empirical formula or easy way to define a point where rigor and M&V costs intersect. One must rely on judgment and experience to determine a cost-effective approach. A few strategies for keeping M&V costs low while maintaining the rigor include the following: t Use extensive metering in the baseline period and stipulate values for the parameters that cannot be metered. t Verify key performance items using periodic rather than continuous data collection (not to be confused with continuous M&V) to reduce data collection and management issues. t Rely upon existing instrumentation, energy management systems, and energy management behavioral practices wherever possible. For the assessment and evaluation of the performance of energy efficiency projects in developing countries, this report highlights the importance of also considering whether there is unsatisfied (suppressed) and growing energy demand. Such situations should be taken into account with baseline assumptions reflecting increasing energy consumption in the future. An increase in energy consumption following the implementation of energy efficiency measures—compared to the baseline energy use—is typically referenced as a rebound effect (or “take-back effect”). In the case of developing countries, and in particular emerging economies, improving energy efficiency often comes along with increasing energy consumption (to meet unmet and growing demand for energy services). Thus, the performance of energy efficiency is not so much about “doing more with less [energy]” (which was applicable to industrialized countries), but rather “doing even more [energy services] with more [energy]” and contributing to raising standards of living and promoting prosperity. This shift in how energy efficiency should be considered is reflected in the increased focus on the multiple benefits generated by energy efficiency investments and policies. Inclusion of the multiple benefits of energy efficiency (MBEE) can play a crucial role in enhancing the value of M&V for stakeholders. In many instances, the nonenergy benefits from an energy efficiency project could be higher and/or have a greater influence on decision making than the energy saved. For example, an energy efficiency streetlight project can improve visibility, contributing to fewer road accidents while increasing the perception of security among pedestrians and leading to lower energy consumption per light point. The topic of MBEE encompasses a wide range of impacts, Assessing and Measuring the Performance of Energy Efficiency Projects viii including economic; health and physical comfort; social; and environmental (locally and globally), among others. Identifying and assessing all of the direct and indirect benefits of energy efficiency is an evolving field; nonetheless, the existing body of evidence and analysis already highlights its relevance and is leading a growing number of practitioners wanting to take MBEE into account in their assessments of energy efficiency activities. From a direct benefit perspective, multiple beneficiaries can be identified. Recipient benefits refer to the benefits that accrue to the participants of a program (end-users). The importance of these benefits also varies according to recipients’ income levels. Low-income households tend to receive greater health and comfort benefits from energy efficiency programs because their baseline conditions before improvements are generally lower than those of average-income households. Benefits to electricity supplier (the power sector) are numerous. They include deferring the need to build new infrastructure to meet growing demand and increasing grid reliability. Important benefits of energy efficiency programs accrue in the public budget. This is most pronounced when government agencies are the recipients, such as with public buildings or street lighting energy efficiency retrofits. However, additional nonenergy benefits to public budget exist. In economies that subsidize end-use energy tariffs, energy efficiency programs reduce fiscal expenditures on energy subsidies, which enable them to lower deficits or increase spending in other priority areas, such as health and education. Energy efficiency improvements can deliver benefits across the whole economy, with direct and indirect impacts on economic activity, employment, trade balance, and energy prices. MBEE are often omitted from assessments of the benefit of energy efficiency programs for three main reasons: lack of data, lack of consensus for quantifying their impact and monetary values, and lack of resources to conduct the analysis. However, MBEE significantly contribute to economic growth, social welfare, and environmental health, justifying policy makers and program administrators in overcoming these barriers and including MBEE in evaluations of energy efficiency programs so that the socio- economic benefit of these programs can be optimized. The following steps are recommended for incorporation of MBEE in analysis of energy efficiency projects: 1 | Identify the benefits most relevant to the overarching programs goals and to the stakeholders Ability to improve understanding and demonstration of 2 | Determine the goal of quantifying the benefits the social and economic benefits would strengthen the (advertising, stakeholder engagement, program incentives for government agencies to undertake effective decision, impact evaluation) measurement and verification (M&V) of the energy efficiency benefits. This is part of a learning process. 3 | Consider MBEE at the beginning of program design As more data and evidence are collected from ongoing and planning projects, it will improve the design and performance of future projects and provide insights into effective assessment. 4 | Determine the form in which benefits will be quantified (monetized or not) 5 | Develop the evidence base and establish reference studies 6 | Streamline the quantification process by adopting/developing appropriate model and tools Executive Summary ix OVERVIEW This report seeks to make a contribution to scaling up energy efficiency through improved planning and design of energy efficiency interventions in the developing countries by starting with the basic management principle of “What gets measured gets done.” The report reviews global experience with the measurement and verification (M&V) of energy efficiency and the emerging field of recognizing the multiple benefits of energy efficiency (MBEE). Through the references, examples, data and practices highlighted in this report, this reports seeks to help practitioners demonstrate the performance of energy efficiency interventions. The overarching objective is to enable project developers, policy makers and investors to better consider energy efficiency as a cost-effective solution to meet energy, climate and key development objectives. This report builds on the existing body of work on energy efficiency M&V within and outside the World Bank Group. Chapter 1 provides a brief introduction. Chapters 2 and 3 are intended to serve as guidance to improve the assessment of energy efficiency interventions in a transparent and consistent manner. The report presents a review of major M&V protocols used by the energy efficiency community across the world. The review compiles a lexicon of the commonly used terminologies and compares the M&V protocols, in terms of scope, application, and key features. In the context of the MBEE, the opportunity for expanding the current M&V approaches is presented for further research. An analysis of select energy efficiency projects identifies key issues with M&V of energy savings and opportunities to improve demonstration of actual performance of energy efficiency interventions, focusing on energy efficiency in lighting and buildings. Chapter 4 presents a review of the latest practices in capturing MBEE. This report seeks to lay the foundation to a systematic approach of integrating MBEE in project documents by identifying main MBEE (focusing energy efficiency in buildings and public lighting) and giving examples of metrics developed to account for MBEE. It gives a brief overview of the experience of institutions that are increasingly seeking to support incorporating MBEE in investment decisions and communication strategies. A few methods of quantifying the MBEE investments are outlined, with recommendations for stakeholders interested in pursuing quantification and incorporation of MBEE in decision making and for future research. Chapter 5 provides an illustration of the key steps in ensuring effective M&V of energy efficiency projects. M&V of the MBEE is an evolving field. Nonetheless, the existing body of evidence and analysis already highlights its relevance and is leading a growing number of practitioners wanting to take MBEE into account in their assessments of energy efficiency activities. This report is intended to provide a comprehensive review of the current landscape. Readers are encouraged to build on this report to share emerging experiences, insights and new research questions with the global energy efficiency community. Assessing and Measuring the Performance of Energy Efficiency Projects x 1 ENERGY EFFICIENCY: THE FIRST FUEL Energy efficiency is a cost-effective solution to meet energy, climate change, and development goals. Energy efficiency is also central to the overall World Bank Group engagement in the energy sector aimed at supporting developing countries’ access to affordable, reliable, and sustainable energy services, recognizing that modern energy services can help improve the quality of life for millions around the world and underpin progress in all areas of development.1 Literature describes energy efficiency as “the hidden fuel” given its inherent lack of visibility. The narrative around energy efficiency is changing to position it as the “first fuel,”2 given its significant contribution to meeting energy demand, as well as the large market for energy efficiency investments (IEA 2015). In the case of developing countries, energy efficiency provides an opportunity to sustainably grow energy services and support development and economic growth. The International Energy Agency’s (IEA) “Bridge Scenario”—which proposes a set of energy actions to raise climate ambition, in line with the world’s climate goal of limiting global temperature rise below 2°C—identifies energy efficiency as one of the five measures, and largest contributor, to achieve a peak in emissions around 2020, using only proven technologies and without harming economic growth (IEA 2015). Investments in energy efficiency can curb energy demand growth and emissions growth in the near term while fueling economic growth and without compromising goals of greater access to reliable and affordable energy services. These attributes are making energy efficiency attractive propositions for national governments, as well as subnational entities. In fact, as urban areas account for two-thirds of global energy consumption (and greenhouse gas emissions), cities have become a key focus of energy efficiency policy. Global energy demand is projected to increase by about 32 to 45% above 2013 levels by 2040,3 with all of the net growth coming from non-OECD (Organisation for Economic Co-operation and Development) countries—already responsible for 58% in 2013 and increasing 55% in 2040 (IEA 2015).4 According to the IEA Energy Efficiency Market Report, in 2014, energy efficiency investments since 1990 were estimated to have enabled countries to avoid primary energy imports of at least 190 Mtoe (given existing import patterns), with an estimated value of $80 billion. The potential and importance of energy efficiency in the context of global energy demand trends in general, and for the developing world in particular, is huge and merits renewed attention. Notwithstanding this emerging role for energy efficiency, projections reveal that under existing policies, the vast majority of economically viable energy efficiency investments (e.g., in buildings, transport, etc.) may remain unrealized. No country has fully utilized the potential to improve the energy efficiency of its economy and most still have scope to go considerably further. There are a number of recommended enabling conditions to address barriers to energy efficiency financing and perceived risks,5 including the need for clear and easy measurement.6 Assessing and Measuring the Performance of Energy Efficiency Projects 1 FIGURE 1.1 Energy Efficiency and the Global Climate Goals Global Energy-Related GHG Emissions Savings by Measure, 2030 40 Fossil-fuel Subsidy Reform INDC Scenario 35 10% Upstream Methane Energy Gt CO2-eq Reductions Bridge Scenario Efficiency 15% 30 49% 17% 25 Renewables Investment 9% 20 2000 2014 2020 2025 2030 Reducing Inefficient Coal Source | World Energy Outlook Special Report: Energy and Climate Change 2015. “What Gets Measured, Gets Managed” An intrinsic challenge facing energy efficiency projects is linked to the particular feature that their benefits—energy savings and others—are not physically visible. The difficulty in reliably predicting the energy that will be saved and quantifying the associated nonenergy benefits (e.g., environmental benefits or increased comfort levels in the case of energy efficiency in buildings) can make it more difficult/less interesting for policy makers, investors, and energy users in general to focus efforts and resources to scale up energy efficiency. This report seeks to make a contribution to scaling up energy efficiency through the planning and design of energy efficiency interventions in the developing countries by starting with the basic management principle of “what gets measured gets done.” Effective measurement and verification (M&V) systems are crucial not only to capture the energy efficiency gains but also to appropriately capture multiple benefits of energy efficiency (MBEE) so investment and policy decisions are better informed and enabled. Given that the bulk of energy consumption takes place in urban areas combined with significant energy efficiency potential,7 this report focuses on urban public lighting and buildings, which can also offer demonstration and replication potential. M&V is recognized as a crucial confidence building tool for assessing the performance of energy efficiency interventions. It is also key for sustaining energy efficiency over time. Moreover, M&V can be the basis of certain contracts in cases where payments for energy efficiency investments are Chapter 1 2 Energy Efficiency is the ratio of the energy service provided (output) by a system compared to the amount of energy used (input). This implies that two sets of benefits would accrue to a typical energy efficiency project: first, reduction in energy consumption by the system; second, a potential improvement in the level of service (e.g., lighting, heating, cooling) delivered by the system without a corresponding increase in energy consumption. Traditionally, measurement and verification systems focus on the first which, from an electricity sector perspective, is a primary benefit. However, as typical demand-side energy efficiency interventions also closely involve the consumer, the second benefit is equally (if not more) important. This is particularly relevant for consumers in the developing countries, where level of service in the baseline scenario (i.e., the scenario against which the performance of energy efficiency activities is assessed) may be low, and in many cases involve suppressed (unmet) demand, meaning that a key development objective is to improve the level of service. This needs to be properly evaluated when appraising energy efficiency investment decisions. In the context of developing countries and emerging economies in particular, the concept of energy efficiency requires shifting from the notion that energy efficiency is about “doing more with less” to “doing even more [energy services] with more [energy]” to recognize and take into account the full productive impact and contribution of energy efficiency. For the purpose of this report, these nonenergy, co-benefits are being called “Multiple Benefits of Energy Efficiency.” performance based (e.g., energy performance contracts). Globally, tools and protocols for M&V of energy efficiency projects have flourished and have continually improved in range of applications and level of precision. Recent years have seen a rapid emergence of new technology solutions that seek to simplify and streamline the M&V process. In developing countries, actual energy savings achieved by localized energy efficiency interventions are often accompanied by growing electricity demand. The literature on energy efficiency, which is predominantly based on experiences in the United States and Europe, identifies factors such as rebound effects (i.e., greater energy use enabled by increased disposable income resulting from energy efficiency measures) as having a negative impact on the overall benefit from energy efficiency projects. This makes sense from a purely energy use perspective. However, the so-called rebound effect may also signify an improvement in the overall level and/or quality of energy service to the consumer. For example, the IEA notes that in the case of emerging economies countries, the performance of energy efficiency is not so much about “doing more with less [energy]” (which was applicable to industrialized countries), but rather “doing even more [energy services] with more [energy]” and contributing to raising standards of living and promoting prosperity.8 Systematic Measurement of Multiple Benefits of Energy Efficiency The literature of the past 20 years has identified a wide range of MBEE with varying classifications applied to different world regions or by different organizations. Terminology also varies among regions, studies, and organizations. IEA (2014) uses the term “multiple benefits” for MBEE; other terms used include: “co-benefits,” “ancillary benefits,” “nonenergy benefits,” and “nonenergy impacts.” This report Assessing and Measuring the Performance of Energy Efficiency Projects 3 uses the IEA term to acknowledge and recognize the multitude of benefits that can be generated with scaling up energy efficiency (Figure 1.2). In developing countries where energy demand is constrained by insufficient supply to meet energy service needs because of low income, inadequate infrastructure, high technology costs, or a combination of these factors, energy efficiency benefits can include reducing poverty; increasing energy access; and contributing to economic development, FIGURE 1.2 The Multiple Benefits of Energy Efficiency Energy Asset Savings GHG Values Emissions Disposable Energy Income Security Public Energy Budgets Delivery Energy Efficiency Resource Improvement Energy Management Prices Local Air Macroeconomic Pollution Impacts Industrial Employment Productivity Health and Poverty Well-being Alleviation Source | IEA 2014. Chapter 1 4 public health, and environmental preservation. Failure to recognize these multiple benefits leads to an underestimation of the value of energy efficiency. However, many questions remain regarding how to account for MBEE in practice and how to integrate them into policy and program investment decisions and evaluations. Development institutions, including the World Bank Group, have for many years used MBEE to describe the additional benefits of energy efficiency in project information documents. However, the reference to MBEE has generally remained anecdotal and has not been systematically integrated in project outcome indicators or project appraisals. MBEE are often characterized from the perspective of the beneficiary to which a particular MBEE accrues. For example, MBEE can be assessed for the recipients of an energy efficiency measure, for specific stakeholders such as energy providers or building owners, or for society as a whole. For recipients of an energy efficiency measure, benefits may include, for example, reduced water usage expenditures from water-saving measures or increased comfort after a building retrofit. For energy providers or utilities, benefits include the avoided cost of building new power plants and avoided maintenance cost of transmission and distribution lines. For society, the most often-cited benefits are environmental, economic, and social. In some cases, benefits are classified at the level at which their impacts are assessed, for example micro, macro, local, national, or global. Identifying each party’s perspective or level of analysis helps to differentiate benefits, reduce the risk of double counting, and ensure a comprehensive approach. Information about benefits can be used in different ways. Quantified information about benefits can be part of a communication strategy to raise awareness and increase support for activities that enhance energy efficiency from industrial, environmental, health, development, or road security stakeholders. It can be used as part of a marketing strategy to convince potential participants to opt into an energy efficiency program, or to increase the level of private investment in energy efficiency measures, or to demonstrate the achieved impacts. To effectively inform and influence policy and investment decisions based on cost-benefit analysis, it is important to estimate the monetized value of the benefits. The biggest challenge of estimating MBEE is due to the multidisciplinary nature of MBEE which also requires engineering, economic, environmental, and health impact assessments. A considerable number of MBEE have been considered in the literature. Table 1.1 lists the most often-cited MBEE, along with associated indicators and assessment methods. Effective M&V systems are crucial not only to capture the energy efficiency gains but also to appropriately capture the MBEE so investment and policy decisions are better informed and enabled. Assessing and Measuring the Performance of Energy Efficiency Projects 5 TABLE 1.1 Most Commonly Cited Multiple Benefits of Energy Efficiency DESCRIPTION INDICATORS METHODS Participant Benefits Energy savings Unit of energy saved (e.g., kWh) and monetary value Measurement O&M cost reductions Replacement and inspection rate of equipment and monetary value Measurement Health impacts Hospitalization and mortality rates, medical costs Measurement Labor productivity Days off of work, days off school Measurement Comfort Indoor temperature, humidity level, and monetary value Survey of willingness to pay or comparison Energy Access Energy Services Provided (lumen-hours in the case of lighting, useful Measurement energy in the case of heating or cooling) Water savings Quantity of water saved (liters) and monetary value Measurement Property values Monetary value Measurement Safety Number of accident prevented Measurement Competitiveness Market share, cost per unit of output, energy intensity Measurement Avoided capacity Avoided capacity (kW) and saved monetary value Power sector modeling Avoided T&D Avoided kWh losses and saved monetary value Power sector modeling Avoided peak load Avoided peak capacity (kW) and saved monetary value Power sector modeling Reduced credit and Saved monetary value Measurement collection costs Increased reliability $ of value added produced, number of avoided power outage Modeling measurement Energy security Avoided energy imports (terajoules, etc.) and saved monetary value Modeling Public budget savings Saved monetary value Measurement Avoided energy subsidy Saved monetary value Modeling Indirect public budget Saved monetary value Modeling GHG emissions Tonne of CO2 equivalent and saved monetary value of avoided damages Measurement and emis- sions factors Pollutant emissions Tonne of pollutants reduced and saved monetary value of avoided Measurement and con- damages centration modeling Ozone Depleting Tonne of ozone depleting potential and saved monetary value of avoided Measurement and emis- Substances damages sions factors GDP growth Monetary value Macroeconomic modeling Job creation Net number of jobs created Macroeconomic modeling Energy Price $/kWh reduction Macroeconomic modeling Energy poverty Number of households Survey CO2—carbon dioxide; GDP—gross domestic product; GHG—greenhouse gas; kWh—kilowatt-hour; O&M—operations and maintenance; T&D—transmission and distribution Chapter 1 6 ENDNOTES 1 The World Bank approach is in line—and supportive of—the goals of the UN’s Sustainable Energy for All (SEforALL) which includes the goal of doubling the improvement rate of energy efficiency, along with achieving universal access to modern energy service and doubling the share of renewable energy in the energy mix. The tracking of progress of all countries towards the SEforALL three energy goals, is enabled by the Global Tracking Framework which consists of a suite of indicators and an accompanying data platform. For more information, see http://trackingenergy4all.worldbank.org 2 IEA analysis has shown that energy efficiency is not just a “hidden fuel” but is also the “first fuel” in many large economies. For example, in 2014, global final energy consumption expanded by 0.7%, but without efficiency improvements the growth would have been around three times higher (IEA WEO 2015). 3 Under the IEA’s 2015 World Energy Outlook “Current Policies Scenario”—taking into account only those policies that were enacted as of mid-2015—global energy demand is projected to increase 45% between 2013 and 2040; under its “New Policies Scenario”—describing a pathway for energy markets based on the continuation of existing policies and measures, as well as the cautious implementation of announced policy proposals, even if they are yet to be formally adopted—global energy demand increases by 32% from 2013 to 2040. 4 Under the IEA’s New Policies Scenario (IEA 2015). 5 As is highlighted in the IEA’s World Energy Investment Outlook 2014. 6 The other listed conditions are: (i) stable and favorable regulatory frameworks; (ii) clear price signals; (iii) increased knowledge about energy efficiency across stakeholders; and (iv) standardization of the energy efficiency investment process. 7 For example, according to the IEA, more than 80% of the global economic energy efficiency potential in buildings remains untapped under its “new policies” scenario, which assumes that countries follow policy commitments and plans they have announced (IEA 2015). 8 The IEA (2016) notes that targeting “increased energy productivity,” which seeks to increase the value of each unit of energy consumed in an economy, resonates better with policy makers in emerging and developing economies than “reducing energy intensity.” Assessing and Measuring the Performance of Energy Efficiency Projects 7 2 M E A S U R E M E N T & V E R I F I C AT I O N : A R E V I E W This chapter provides an introduction to the definitions, terminologies, and existing measurement and verification (M&V) protocols for energy efficiency activities. A lexicon of terminologies and key concepts is provided in Annex 1. All protocols share the common objective, which is to “assess the outcome” of an energy efficiency intervention. The three most common terms for the process to measure and verify the performance of energy efficiency activities are: Measurement and Verification; Evaluation, Measurement, and Verification; or Measurement, Reporting, and Verification. The terminologies reflect the evolution and expansion of the scope for M&V over the past three decades. A summary is provided in Annex 2. Measurement and verification (M&V) approaches continue to share some fundamental principles, which include quantification of key parameters, such as electricity consumption and greenhouse gas (GHG) emissions before and after implementation of the energy efficiency interventions and a check of the reliability of the measured data and methodology. In evaluation, measurement, and verification (EM&V), “evaluation” is introduced to check if the project/program has met its goal. In measurement, reporting, and verification (MRV), “reporting” is introduced for communicating the progress in achieving objectives and implementing project related activities. The terminologies are also equally applicable to single projects or to a portfolio of projects or programs. This report uses the term M&V as the focus is on quantification of benefits of energy efficiency. M&V is essential to assess resource savings and to ensure that savings persist over time. It can also be used to mitigate different challenges that arise in energy efficiency projects. Energy efficiency practitioners use M&V for several reasons,9 including: t Improve engineering design and project costing. The preparation of a comprehensive project design and costing should include all M&V activities and costs in the assessment of a project’s economics. Good M&V can also inform future project designs. t Enhance energy savings through adjustments in facility operations and maintenance. M&V can help discover and manage operation and maintenance (O&M) problems and improve functional efficiency of the facility, as well as sustain the energy and cost savings over time. t Document financial transactions. In energy efficiency projects where financial payments are based on performance (e.g., energy performance contract (EPC) projects), the M&V plan forms the basis for documenting performance in a transparent manner (which can be subject to independent, third-party verification). t Enhance financing for energy efficiency projects. Good M&V increases the transparency and credibility of the performance of energy efficiency project investments. Such credibility can enhance the confidence of investors and financiers in the energy efficiency project’s performance. Assessing and Measuring the Performance of Energy Efficiency Projects 9 t Support development of broader energy efficiency programs. The performance of energy efficiency activities at selected sites, determined by their M&V, can help predict the performance at unmeasured sites and potentially justify an expansion of the energy efficiency program. t Provide opportunity to generate emission reduction credits. Robust M&V for energy efficiency is essential for the documentation and accounting of associated emission reductions that could be sold in carbon markets (where these exist). t Increase public and market awareness of energy efficiency potential. Clear and transparent M&V can help raise awareness on the potential of energy efficiency investments and help encourage investments. 2.1 OVERVIEW OF EXISTING MEASUREMENT & VERIFICATION PROTOCOLS This section presents an overview of the key M&V protocols used around the world. Most of the protocols were developed to assist energy professionals and stakeholders in measuring, computing, and reporting savings achieved from energy efficiency projects and programs. The protocols provide a framework for measuring and verifying project outcomes in a transparent, reliable, and consistent manner. Energy professionals and stakeholders use M&V protocols to develop project-specific M&V plans. These documents are not standards, hence, there is no compliance mechanism associated with the protocols. Practitioners have to decide to what degree their energy efficiency activities would conform to the protocols; a decision that typically depends on the projects’ scope, the use/value/benefits of more rigorous M&V, and the associated M&V cost. The effort required and rigor achieved associated with M&V of energy efficiency projects or programs should typically be commensurate with the project capital investment and savings risk. In fact, the appropriate level of M&V rigor can often be determined by considering three main factors: (i) the predictability of equipment operation; (ii) the magnitude of M&V costs in relation to the value of the energy savings benefits produced by the project; and (iii) technical capacity of the operators. The M&V protocols reviewed are limited to those published and available in the public domain and have been categorized by application. A list of the M&V protocols is provided in Annex 3 and a descriptive summary of the protocols is provided in Annex 4. Individual energy efficiency project- based M&V is used to determine the savings of an individual energy efficiency project (e.g., replacement of inefficient lamps with energy efficient light-emitting diodes (LED) in a building). The program-based M&V activities involve evaluating a large number of individual projects leading to impact/performance evaluation at the program level (e.g., an appliance replacement program covering a particular geographic area). For emission reduction market-based systems, M&V determines the energy savings of eligible energy efficiency activities and their associated GHG emission reductions which can subsequently be sold. A comparison of M&V protocols by their applications is provided in Annex 5. Chapter 2 10 2.2 REVIEW OF MEASUREMENT & VERIFICATION EXPERIENCE This section presents the findings of a review of energy efficiency projects to understand the type and extent of M&V provisions for determining the energy performance and whether and how other associated social, economic, and environmental benefits have been documented. The review process primarily focused on the lighting and public building sector projects. 2.2.1 World Bank Projects World Bank Energy Efficiency The World Bank has implemented a number of energy Projects Reviewed efficiency projects in the public sector, with an objective t Energy Efficiency Project, Armenia to achieve energy savings and to contribute to social and t Energy Efficient Lighting Carbon Offset Project, India environmental benefits. This section has reviewed the t Energy Efficiency Project, Bosnia & Herzegovina publicly available details of the M&V plans or guidelines used in a sample of World Bank projects. t Montenegro Energy Efficiency Project An overview of the M&V provisions outlined in the reviewed World Bank energy efficiency projects is presented below and summarized in Table 2.1. 1 | The Energy Efficiency Project, Armenia (2012)10 was aimed at energy efficiency improvements in public sector buildings (e.g., administrative buildings, schools, hospitals) and street lighting. The energy efficiency benefits included reduced energy cost, improved comfort level, and nonstructural upgrade of facilities. The publicly available project document provided detailed M&V guidelines to develop a site-specific M&V plan. The M&V guidelines included the formulas to calculate the heating comfort levels and boiler efficiencies. They also included the measurement periods, energy pricing, data requirements, and expected impacts. Post-installation M&V activities were also specified along with provisions for baseline adjustments. The overall monitoring and evaluation of the program was linked to the Renewable Resources and Energy Efficiency (R2E2) Fund. It covered the financial viability of energy efficiency subprojects; energy savings from the implementation of energy efficiency measures; the project pipeline; disbursed, committed, and invested amounts; defaults; and GHG reductions. The reporting from the R2E2 Fund was based on the commissioning and O&M reports provided by the contractors. Emission reductions were estimated based on the observed reduction in heating/energy intensity of retrofitted public and other social facilities after implementation of energy efficiency measures. In addition, the R2E2 Fund regularly reviewed a sample of subprojects to monitor the progress. 2 | The Energy Efficient Lighting Carbon Offset Project in India (2003–06)11 was a bundled street lighting energy efficiency project covering seven municipalities. The energy efficiency improvements in street lighting infrastructure consisted of replacing inefficient street lighting fixtures (T12 fluorescent tube lights and sodium and mercury vapor high-intensity discharge light bulbs) to more efficient T5 fluorescent tube lights, including changing magnetic ballasts to electronic ballasts. The project also consisted of installing a load management system to improve energy Assessing and Measuring the Performance of Energy Efficiency Projects 11 TABLE 2.1 Key Features Observed in Reviewed World Bank Energy Efficiency Projects ENERGY EFFICIENT ENERGY EFFICIENCY LIGHTING CARBON ENERGY EFFICIENCY MONTENEGRO ENERGY PROJECT, ARMENIA OFFSET PROJECT, PROJECT, BOSNIA AND EFFICIENCY PROJECT (2012– ) INDIA (2003–06) HERZEGOVINA (2014– ) (2008–14) Key Features The M&V guidelines in the M&V is based on a standard A detailed M&V plan is in The M&V activities have been bidding document provide methodology approved under place based on the TOR for assigned to an independent detailed engineering calcula- CDM, which makes the M&V hiring an M&V consultant. third-party consultant. tions. This reduces ambiguity plan robust and transparent. The scope of work details the Social impact is analyzed and clarifies the level of effort. The M&V methodology necessary activities such as under this initiative through The Energy Service Agree- provides details on ex ante energy audits, actual pre- and social monitoring and target ment has provisions for and ex post calculations, data post-measurements, and also evaluation survey. baseline adjustment, payment and parameters measured, energy modeling. schedule, and energy savings, duration, environmental which are understood to be impact, etc. in the M&V plan as well. This is essential with respect to resolving potential conflicts. Opportunities to Strengthen M&V Aspects (based on review of publicly available documents) 1. Inclusion of specific M&V 1. The M&V methodology 1. Development of an overall 1. Inclusion, in the technical plan for each individual used was CDM AMS-II.C M&V plan (to accompany the M&E report, of information project type. (version 9), which is for presentation of M&V require- on the methodology, data 2. Inclusion of clearly defined demand-side energy effi- ments which is included in the sources, equipment used, roles and responsibilities for ciency activities for specific reviewed project documenta- etc., in order to enable a better M&V activities. technologies such as lamps, tion). It is good practice to understanding and assess- 3. Clearly defined duration ballasts, refrigerators, motors, develop the M&V plan at ment of the results of M&E of M&V (This is important fans, air conditioners, pump- the same time as the project activities. when energy consump- ing systems, and chillers. design. 2. Presentation of the analysis tion is affected by seasonal Moving forward, a more suit- methodology underpinning variations). able methodology, AMS-II.L, the technical M&E report. 4. Inclusion of an overall developed for demand-side 3. Extension of the data plan, ex ante, for the program activities for efficient outdoor collection period beyond the evaluation and analysis of and street lighting technolo- 14 days (on average) specified impacts. gies can be used. in the report. 4. Quantification of the social satisfaction which has been evaluated under the program. Note | This analysis is based on publicly available project documents. It is possible that there are other documents, which were not publically available at the time of this review, where some of the issues may or may not be addressed. consumption. Dimming of lights was also incorporated in this project. The project yielded energy savings up to 60% and improved power factor of 0.95 compared to 0.70 for old installations. As it was developed as a Clean Development Project to benefit from carbon finance,12 the project followed the specific Clean Development Mechanism (CDM)13 M&V methodology associated with “Demand-Side Energy Efficiency Activities for Specific Technologies (AMS-II.C, Ver. 9)” to monitor and verify the project’s emission reductions. The project design document included calculations of baseline and project emissions based on the same CDM methodology. Chapter 2 12 3 | The Bosnia and Herzegovina Energy Efficiency Project (2014–18)14 supports energy efficiency investments in public facilities. The project aims at demonstrating benefits of energy efficiency improvements in public-sector buildings (such as schools, hospitals, and government buildings) and supporting a scalable energy efficiency financing model. Project documentation includes plans for M&V activities. It also includes detailed terms of reference (TOR) for conducting the detailed energy audit, monitoring and evaluation, developing technical designs, and supervising the retrofitting of public buildings. The TOR spells out the activities that are to be carried out as part of M&V, detailing the energy audit requirements, pre- and post-retrofit activities, reporting requirements, possible energy efficiency measures such as upgrading indoor lighting, roof thermal insulation and renovation, wall thermal insulation, basement thermal insulation, and retrofitting buildings heating, cooling, and domestic hot water system(s). 4 | The Montenegro Energy Efficiency Project (2008–14)15 focused on energy efficiency improvements in public facilities such as schools, hospitals, and government buildings. The energy efficiency improvements were broadly classified as thermal envelope measures and mechanical improvements. The thermal improvement measures consist of insulation of walls, roofs, attics, etc. The mechanical improvements consist of heating, ventilation, and air conditioning (HVAC) improvements and solar thermal water heating systems. M&V activities have been carried out as specified in the project’s “Methodology for Technical Monitoring and Evaluation of the Results Achieved.” A combined technical monitoring summary report with information on all project sites was prepared consisting of a summary of the monitoring program findings, building retrofit measures, building retrofit costs, monitoring activities, energy savings, financial savings, carbon emission reductions, building comfort, etc. The data measurement periods for each site were taken over 14 days on an average. The analysis of the aforementioned projects suggests that no single M&V approach is equally suitable in all project situations. The costs of alternative approaches will vary, and the selection of M&V methods will depend on the characteristics and objectives of individual projects (e.g., projects involving monetization of energy savings versus program evaluations). The appropriate M&V approach will depend on its role (e.g., whether it is the basis of payment), type of information that is required, tolerable risk, and the cost involved. Below are some good practices that can be drawn from the review of the aforementioned projects which could be used as guiding principles for designing M&V plans for future energy efficiency projects. Use of established standard M&V protocol. Established M&V protocols should be considered for developing M&V plans. There is often no need to start from scratch or reinvent the wheel, in the presence of internationally approved robust M&V methodologies, including CDM methodologies. As mentioned above, it is important to also consider the cost associated with using a particular M&V protocol or methodology, as the magnitude of the M&V costs should be commensurate with the value of the benefits (e.g., energy cost savings, emission reduction certificates, etc.) produced by the energy efficiency project. Reducing uncertainty. Ambiguity of outcome can be avoided through a structured analysis method and use of continuous monitoring, although continuous monitoring may not always be feasible. The Assessing and Measuring the Performance of Energy Efficiency Projects 13 Energy Efficiency Project in Armenia provided detailed engineering calculations for M&V in the bidding document. The Energy Efficiency Project Bosnia and Herzegovina provided a detailed M&V plan in the TOR document as well. Increase transparency. The requirement to report on the performance of energy efficiency projects helps provide transparency. Using an independent third party for carrying out M&V helps enhance confidence in reported performance, such as with the Energy Efficiency Project in Bosnia and Herzegovina. Measure the co-benefits of intervention. Measuring the social and ancillary benefits of the energy efficiency intervention will help in an all-encompassing analysis of the project to enable better assessment of a project’s overall impact. The Montenegro Energy Efficiency Project included the measurement of the social impact of the initiative through social monitoring and a target evaluation survey. (The multiple benefits of energy efficiency are discussed further later in this report). 2.2.2 External Projects A review of a number of external projects was carried out to Non-World Bank Energy Efficiency examine the M&V provisions included in energy efficiency Projects Reviewed project documents of agencies. A summary is provided t Bangladesh Energy Efficiency Improvements (ADB) in Table 2.2. A number of energy efficiency projects t Visakhapatnam Street lighting Project, India (EESL) implemented by agencies such as Asian Development t Energy Efficient Street Lighting for Tongatapu, Tonga Bank (ADB), United States Agency for International (ADB/GEF) Development (USAID), KfW Development Bank, Japanese t Energy Efficient Lighting in Commercial Sector, Samoa International Cooperation Agency (JICA), public-sector (ADB) agencies, and Global Environment Facility (GEF) were short listed to select four projects for the review. The criteria for selection of projects were based on the elaboration of the M&V component employed by the projects implemented by other agencies and availability of information for review. 1 | Bangladesh Energy Efficiency Improvements Project (2011–13).16 The Bangladesh energy efficiency improvement project for street lighting and water pumping was a technical assistance project funded by ADB. The main objective of this technical assistance was to introduce energy efficiency programs in municipalities by: (a) establishing best practices through pilot demonstration projects in Tongi Pourashava; (b) capacity building of municipal engineers and officials throughout Bangladesh toward the adoption of energy efficiency projects in street lighting and water pumping; and (c) raising awareness among the stakeholders and public representatives with regard to energy efficiency initiatives. The activities under this program consisted of pilot demonstrations and capacity building using various training programs. The declared energy savings from the energy efficiency water pumping program were 0.696 million kWh per year and those from energy efficiency street lighting were 0.26 million kWh per year.17 The M&V of the Bangladesh Energy Efficiency Improvements Project consisted of energy audits, baseline development, cost–benefit analysis, ex ante and ex post data collection, etc. The M&V Chapter 2 14 TABLE 2.2 Key Features Observed in Reviewed Energy Efficiency Projects from Different Agencies ENERGY EFFICIENT BANGLADESH VISAKHAPATNAM LIGHTING IN ENERGY EFFICIENT ENERGY EFFICIENCY STREET LIGHTING COMMERCIAL SECTOR, STREET LIGHTING, IMPROVEMENTS (ADB) PROJECT, INDIA (EESL) SAMOA (ADB) TONGA (ADB) (2011–13) (2014–15) (2011–15) (2011–15) Key Features 1. Detailed energy audits were 1. A central control and moni- 1. Internationally recognized 1. The M&V methodology conducted for each potential toring system is installed, M&V protocol (IPMVP) was approved by CDM AMS-II.L site. which provides continuous used to develop the M&V is used, which is relevant to 2. Pre- and post-retrofit monitoring and control of plan. street lighting project. measurements were recorded street lights. This should 2. The M&V plan details the 2. The M&V plan details the to estimate the energy continue to provide informa- methods as well as data for methods as well as data for savings. tion on the performance of the baseline, post-retrofit mea- baseline, post-retrofit mea- 3. CDM potential was also project. surements, and results. surements, and results. evaluated to take advantage 3. The M&V plan also 3. The M&V plan also of saleable CDM credits provides details and speci- provides details and speci- (certified emission reductions, fications of devices used for fications of devices used for CERs). M&V. M&V. 4. An evaluation of non- 4. The M&V plan has pictures 4. The M&V plan has pictures energy component (capacity of equipment procured, on- of equipment procured, on- building) was carried out for site installation, measurement site installation, measurement this project. equipment, etc. equipment, etc. Opportunities to Strengthen M&V Aspects (based on review of publicly available documents) Even though pre- and post- Baseline data were not avail- Baseline data were not avail- M&V plan could be strength- retrofit measurements were able, hence the baseline was able, hence the baseline was ened with: Inclusion of provi- recorded, a deemed saving developed using deemed developed using deemed sions for baseline adjustment approach was used for the savings approach. savings approach. (which might have an effect on street lighting project as unre- Given the installation of a Given the installation of a future M&V activities). solved variations were found central control and monitoring central control and monitoring Description of the payment in the real-time data. system, ex post energy sav- system, ex post energy sav- arrangement between the Measurement and verifica- ings calculation could have ings calculation could have utility and the energy service tion could have been done been considered. been considered. company (usually a part of the on a sample size and then M&V plan). Inclusion of the extrapolated to the entire proj- sample size calculation. ect, which would have saved time and M&V cost. The evaluation of the nonenergy component was qualitative; and could have been strength- ened, including with some quantification. Note | This analysis is based on publicly available project documents. It is possible that there are other documents, which were not publically available at the time of this review, where some of the issues may or may not have been addressed. Assessing and Measuring the Performance of Energy Efficiency Projects 15 process consisted of identification and procurement of required M&V equipment (30 single digital energy meters, 10 voltage controllers, 10 timer controls), setting up of measuring instruments, collection of energy consumption values to establish the baseline energy consumption before the implementation of the pilot projects, collection of energy consumption values to estimate the energy savings after the implementation of the pilot projects, data analysis, and reporting on energy and monetary savings. Further, an assessment was carried out for energy efficiency street lighting and energy efficiency water pumping projects to analyze if these could potentially be registered as official CDM projects and generate CDM credits based on emission reductions resulting from the verified energy savings. The analysis showed that the water pumping project could possibly be developed as a programmatic CDM project, but it would not be worth it for street lighting, largely due to the high transaction costs (for MRV) that would be involved. Subsequently, a project information note was prepared for the water pumping CDM project and submitted to the CDM authority (Designated National Authority) in Bangladesh and ADB. 2 | Visakhapatnam Street Lighting Project, India (2014–15).18 The project was implemented by Energy Efficiency Services Limited (EESL) on behest of Greater Visakhapatnam Municipal Corporation. This was not a typical retrofit project as the street lighting infrastructure had sustained considerable damage as a result of Cyclone Hudhud. Proper baseline data were not available, since only 10,000 streetlights were operational out of the total 90,000 streetlights. The Vishakhapatnam Street Lighting Project uses an annuity-based deemed-savings approach to quantify the energy savings. Energy savings from the implementation of the project form the basis for arriving at the annuity amount. This methodology is simple to use. The annuity-based methodology is based on savings determined by extrapolation of limited measurements to the entire area of the street lighting project. Payments are determined from these measurements without linking to electricity bills or actual or metered savings. A central control and monitoring system has been installed as part of this project, which will help in the automation of streetlights and continuous monitoring in the reporting period of the project. 3 | Energy Efficient Lighting in Commercial Sector, Samoa (2011–15).19 This project was part of the program on Promoting Energy Efficiency in Pacific initiative, which was co-financed by ADB and Global Environment Facility (GEF). Overall the program covered five Pacific developing member countries—the Cook Islands, Papua New Guinea, Samoa, Tonga, and Vanuatu—with a goal of reducing energy consumption in the residential, commercial, and public sectors through the implementation of energy efficiency measures, and to establish the policy and implementation frameworks to move toward the goals of reducing fossil fuel imports, achieving total energy savings, and reducing GHG emissions. This particular project involved cost-effective energy savings in the commercial sector through the replacement of five-foot T8 fluorescent lamps with magnetic ballasts, which have a rated power consumption of 76.9 W (including ballast power losses) with energy-efficient LED batteries that have a total rated power consumption of 28.8 W (including LED driver). The project was able to achieve energy savings of 145,003 kWh per year, cost savings of $53,702 per year, and GHG emission reduction of 116 tCO2 per year. Chapter 2 16 The Energy Efficient Lighting in Commercial Sector, Samoa project had a detailed M&V report, which described the activities undertaken as part of the M&V exercise. The M&V plan followed international protocols such as the International Performance Measurement and Verification Protocol (IPMVP) and CDM rules for lighting retrofits. The activities consisted of pre- and post- retrofit baseline measurement, along with light quality measurement, sample size selection based on IPMVP, etc. The M&V report also provided detailed information on the measurement equipment, equipment procured, and also gave the delivery and installation dates along with photographs. 4 | Energy Efficient Street Lighting, Tonga (2011–15).20 Cofinanced by ADB and GEF, this project was part of the large program on Promoting Energy Efficiency in Pacific (PEEP2). This energy efficiency street lighting project was implemented in the Tongatapu region in Tonga. The project aimed to achieve cost-effective energy savings through the replacement of 100/150/250 W high- pressure sodium (HPS) lamps together with existing luminaires installed in the Tongatapu Island with high-efficiency LED luminaires. The project resulted in energy savings of 67,180 kWh per year, cost savings of $20,342 per year, and GHG emission reductions of 60 tCO2 per year. The M&V for Energy Efficient Street Lighting Project, Tonga, complied with both IPMVP Option A and CDM methodology AMS II.L “demand-side activities for efficient outdoor and street lighting technologies.” The M&V activities consisted of pre- and post-baseline measurements, light quality measurement, etc. The M&V report provided details in measurement boundary, parameters measured, baseline energy savings calculations, and light quality measurement methodology. The document was supplemented with information on measurement equipment and photographs of the M&V activities. These projects also suggest some cross-cutting takeaways such as the following: Using established standard M&V protocol. Established M&V protocols (as provided in Annex 3) are available and can be utilized for developing M&V plans. The Energy Efficient Lighting in Commercial Sector Project, Samoa, and Energy Efficient Street Lighting Project, Tonga, have utilized internationally accepted protocols such as IPMVP and AMS-II to develop M&V plans. Reducing uncertainty. Ambiguity of outcome should be avoided through a structured analysis method and use of continuous monitoring, particularly when energy savings (and/or associated GHG reductions) generate payment. The M&V plans for Energy Efficient Lighting in Commercial Sector, Samoa, and Energy Efficient Street Lighting, Tonga, provided detailed methods for baseline and post- installation measurements. The Visakhapatnam Street Lighting Project uses a centralized control & monitoring system to continuously monitor streetlights. Measuring co-benefits of intervention. Measuring the social and ancillary benefits of the energy efficiency intervention will help in an all-encompassing analysis of the project. The Bangladesh Energy Efficiency Improvements Project made an effort to evaluate the capacity-building activity carried out under the project. Assessing and Measuring the Performance of Energy Efficiency Projects 17 2.3 CONCLUSION Energy efficiency projects should include, from the beginning, the elaboration of an M&V plan that outlines how the performance of the project will be monitored and assessed. The review of a sample of projects indicates that while the energy efficiency projects examined include methods for estimating energy savings ex ante (i.e., during the project preparation phase), very few projects include, from the start, the provisions or methods to systematically measure and assess, ex post, the actual performance of energy efficiency projects and programs. This can lead to: t Potential under- or overestimation of energy savings; t Possibility of undermining the credibility of energy efficiency interventions and, thus, their potential replication or scale up; t Missed opportunities for learning from the actual performance of the energy efficiency interventions; and t Making it difficult to develop and enable energy performance contracts. In the case of energy efficiency projects in developing countries, situations of unsatisfied and growing energy demand typically affect the assessment of the performance of energy efficiency projects. Such situations should be taken into account with baseline assumptions reflecting increasing energy consumption in the future. In the advanced economies, an increase in energy consumption following the implementation of energy efficiency measures is typically referenced as the rebound effect or take-back effect (see Section 3.4). However, in developing economies, increases in energy consumption accompanying energy efficiency interventions may be a reflection of suppressed demand, where the “baseline” reflects inadequate or unsatisfied quantity and low quality of energy services, ignoring the multiple benefits of energy efficiency. These issues are further discussed in the following chapters. ENDNOTES 9 See for example, Better Buildings Partnership (http://www.betterbuildingspartnership.co.uk/) or Clinton Climate Initiative (https://www.clintonfoundation.org/our-work/clinton-climate-initiative). 10 http://www.worldbank.org/projects/P116680/electricity-supply-reliability-energy-efficiency-project?lang=en 11 http://documents.worldbank.org/curated/en/2015/03/24119801/india-street-lighting-energy-efficiency-p107069- implementation-status-results-report-sequence-03 12 The project consisted of the sale of the first 500,000 emission reductions resulting from improvements in the energy efficiency of street lighting at seven municipalities to the World Bank-managed Spanish Carbon Fund. 13 The Clean Development Mechanism is a project-based mechanism established under the Kyoto Protocol to the UN Framework Convention on Climate Change. It allows emission reductions achieved through mitigation activities in developing countries to be counted against part of the emissions target taken by the industrialized countries. (https://cdm.unfccc.int) Chapter 2 18 14 http://www.worldbank.org/projects/P143580/?lang=en&tab=details 15 http://www.worldbank.org/projects/P107992/energy-efficiency-public-buildings?lang=en 16 Bangladesh Energy Efficiency Improvements—ADB/Econoler International Canada. 17 Ibid. 18 Energy efficiency Urban Street Lighting Project India—Case Study—AEEE. 19 Promoting Energy Efficiency in the Pacific (Phase 2)—M&V Report—ADB. 20 Ibid. Assessing and Measuring the Performance of Energy Efficiency Projects 19 3 U N D E R S TA N D I N G T H E M E A S U R E M E N T & V E R I F I C AT I O N P R O C E S S 3.1 FUNDAMENTAL PRINCIPLES FOR MEASUREMENT & VERIFICATION Apart from measuring and verifying the energy savings, it is important that the M&V methodology employed should enhance the effectiveness of energy efficiency programs. The M&V approach should not be overbearing on the energy efficiency project. It is important to strike a delicate balance between cost, rigor, and complexity. Some fundamental principles that should be followed with respect to M&V are as follows: Accuracy. M&V cost is a major consideration with respect to accuracy. The M&V should be as accurate as possible with the available budget. M&V costs should be small relative to the monetary value of the savings being evaluated. M&V expenditures should also be consistent with the financial implications of over- or under-reporting the performance of a project. Accuracy trade-offs should be accompanied by increased conservativeness in any estimates and judgments. Thoroughness. The reporting of energy savings should consider all effects of a project. M&V activities should be thorough and should be able to use the measurements to quantify all the significant effects while estimating the program benefits. Conservativeness. In programs where savings are estimated due to poor data availability, conservative values should be adopted to avoid any risks in over- or under-estimation of benefits and impacts. Measurement/Estimation. Critical performance parameters should be measured, while other less critical or predictable parameters may be estimated. Transparency. All M&V activities should be clearly defined and disclosed. The M&V plan and M&V reports should reflect the actual savings and the methods used for measuring the savings. Transparency is very important for avoiding any conflict at any stage when it comes to sharing of benefits among stakeholders. 3.2 UNDERSTANDING THE COST OF MONITORING & VERIFICATION It is difficult to make generalizations on the costs of M&V because of the wide range of energy efficiency projects and different activities associated with M&V. International Performance Measurement and Verification Protocol (IPMVP) suggests that M&V costs are typically less than 10% of the total project cost (EVO 2007). Factors that can influence the M&V costs are as follows: t Value of projected savings t Complexity of efficiency equipment Assessing and Measuring the Performance of Energy Efficiency Projects 21 t Total amount of equipment t Number of interactive effects among resource-consuming systems t Level of uncertainty of savings t Risk allocation for achieved savings between the owner and the energy service company t Other valuable uses of M&V data (e.g., optimizing O&M, selling carbon credits) t Availability and capability of an energy management system t Frequency of M&V activities t Complexity and size of the project Based on the type of M&V approach used (Birr 2001), the M&V costs in percentage of total project cost could be as follows: t Retrofit isolation with measurement of key parameters: 1%–5% t Retrofit isolation with measurement of all parameters: 3%–10% t Whole facility measurement: 1%–3% (if meters are already installed) t Computer simulation costs: 3%–10% Balancing Cost and Rigor A challenging aspect of M&V is providing adequate accuracy while ensuring the cost of M&V is reasonable. There is no empirical formula or easy way to define a point where rigor and M&V costs intersect. One must rely on judgment and experience to determine a cost-effective approach. Figure 3.1 represents the incremental value of the information obtained from additional M&V which will at some point be less than the cost to obtain it. A few strategies for keeping M&V costs low while maintaining the rigor include the following: t Use extensive metering in the baseline period and stipulate values for parameters which cannot be metered t Verify key performance items using periodic rather than continuous data collection (should not be confused with continuous M&V) to reduce data collection and management issues t Rely upon existing instrumentation, energy management systems, and energy management behavioral practices wherever possible t Engage a third-party M&V expert to assist in the development of the M&V plan to ensure key agency interests are protected and costs are minimized Ultimately, it is also important to consider in which cases the value/contribution of greater M&V rigor may justify greater M&V efforts and potentially expenses. Chapter 3 22 FIGURE 3.1 Relation between M&V Cost and M&V Rigor M&V cost % Uncertainty in savings M&V Rigor Source | US DOE 2008. 3.3 RECAP OF ENERGY SAVINGS CALCULATIONS The standard equation for calculating savings from energy efficiency projects is as follows: Energy Savings = Adjusted Baseline Energy – Actual Energy and Adjusted Baseline Energy = Baseline Energy ± Routine Adjustments ± Non-Routine Adjustments Where, Actual Energy = Energy consumption measured during the post-retrofit/post-investment performance period Baseline Energy = Energy consumption measured during the baseline period Routine Adjustments = Adjustments due to regular changes in independent variables (e.g., changing weather conditions, varying production levels) Non-Routine Adjustments = One-off or infrequent changes in energy use or demand that occur due to changes in static factors (e.g., building facade changes, extreme weather events, building extensions, and changes to equipment) Assessing and Measuring the Performance of Energy Efficiency Projects 23 3.3.1 Energy Cost Savings and Price Risk The success of energy efficiency projects is almost always evaluated based on financial returns and energy saved. A successful energy efficiency project will result in financial benefit due to reduction in energy use, which may be compared to the pre-investment/pre-retrofit level or compared to business- as-usual projected energy levels. This is known as energy cost avoidance or cost savings. Energy efficiency projects often result in other financial benefits that improve the project’s payback. Project Savings = Energy Cost Savings + Other Financial Benefits Where, Energy Cost Savings = Avoided energy cost (or cost saving) resulting from the energy efficiency project Other Financial Benefits = Other areas of project savings (e.g., maintenance cost, future equipment replacement cost) Non-financial co-benefits can also be evaluated to determine the overall success of the project. The equation for cost avoidance is: Energy Cost Savings = Pricing Structure × (Energy Use adjusted baseline – Energy Use actual) The energy baseline is adjusted for post-retrofit conditions. The same energy pricing is applied to the adjusted baseline as well as the actual energy usage. Energy Cost Savings are important as these take into account the changes in factors that determine energy use (e.g., changes in site activities, effects of independent variables such as production or weather, price risks such as changes to energy contracts, structures, or tariff rates, etc.). 3.3.2 Uncertainty Any measured savings include some degree of uncertainty. Since no instrument can be perfectly accurate, all measurements contain some error or difference between the true and observed value. In addition, energy savings are based on measured values and to some extent on estimates. The goal is to reduce the uncertainty in the reported energy savings values, which can be accomplished by limiting the errors in measurements and analysis conducted. Calculating the uncertainty in the estimated savings is not required for most projects, but uncertainty is often estimated in order to set the overall level of savings guarantee in performance contract projects. The uncertainty at the project level falls under four types: measurement, sampling, estimation, and modeling. The project often does not contain one or more of the four components. The total project uncertainty is calculated by taking the square root of the sum of the squares of the individual standard errors (SE) of the components, as follows: SEProject = ͙(SEMeasurement)2 + (SESampling)2 + (SEEstimation)2 + (SEModeling)2 Chapter 3 24 Measurement. Measurement uncertainty is introduced due to metering equipment inaccuracies. For example, the specifications for a meter may indicate that it is accurate to within ±3%, meaning that any reading taken using the meter may be up to 3% off in either direction. Additional error in measurements may be introduced if the instrument is not properly calibrated or if it is inappropriately used. Data management can also introduce errors. If the accuracy of any instrument is less than suitable, the measurements may introduce unacceptable levels of error into the energy calculations. Instrumentation accuracy requirements should be sufficient to ensure that overall energy and cost estimates are reasonable. Annex 6 provides a note on technologies for M&V. Sampling. Sampling uncertainty occurs when measurements are taken on a sample and the results are generalized to the entire population of the appliance/equipment. For example, it may not be economical to monitor the hours on every fixture in a building lighting retrofit. So a sample is monitored and the results are applied to the remainder of the lighting population. Sampling uncertainty is calculated from the standard deviation of the sampled results. When the standard deviation is large, the uncertainty is also large. Estimating. Estimates have to be made when values cannot be measured directly. When engineering estimates are used in place of actual measurements, uncertainty is introduced. This uncertainty needs to be estimated based on the expected accuracy of the estimated values. For example, the efficiency of a motor may be estimated rather than measured directly. The estimate would be based on the type and age of the motor and may result in an estimated stipulation error of ±15% (e.g., 75%, between 60% and 90%). If a building engineer who is familiar with the motor gives additional operational information about the equipment, the uncertainty may be less, such as ±10% (e.g., 75%, between 67.5% and 82.5%). Modeling. Modeling uncertainty is introduced when savings are estimated using engineering or simulation models. The accuracy of any model is based on the ability of the model to account for all variations in energy use by employing the proper analysis techniques, including all relevant variables and excluding those that are irrelevant. Calculating the uncertainty in the estimated savings is not always required, but this uncertainty is often estimated in order to set the overall level of savings guarantee for each energy efficiency measure. Including the uncertainty in calculated savings provides a more meaningful statement of savings. Uncertainty is typically proportional to the complexity of the energy efficiency measure. 3.4 THE REBOUND EFFECT What is called “rebound effect” assumes an improvement in energy efficiency (at technology or policy level) but also a portion of the achieved energy cost savings used toward more/better energy services which constitute a “rebound.” In effect, it is a reduction in expected overall energy savings from an energy efficiency investment because of behavioral responses leading to energy consumption. A rebound effect typically lowers the achieved reduction in energy use compared to the forecasted reduction in energy use that may ignore consumer and/or market responses. Such consumer and Assessing and Measuring the Performance of Energy Efficiency Projects 25 market-wide responses can occur because the energy efficiency improvement changes relative prices and income level. The rebound effect refers to that portion of energy savings that is lost due to consumer and market responses as a result of energy efficiency improvements. It is the difference between the actual reductions in energy consumption and the forecasted reduction in energy consumption, a forecast that may ignore the consumer and market responses. The rebound effect can be induced as a result of energy cost savings being utilized toward more/better energy services to overcome suppressed energy demand or improved product attributes resulting in a market response in the form of increased usage, as noted above. Increasingly, literature emphasizes the importance of linking this rebound effect to developmental benefits in the case of developing countries. For example, the IEA points out that in the case of developing countries, and in particular emerging economies, improving energy efficiency often comes along with increasing energy consumption (to meet unmet and growing demand for energy services)—something the IEA refers to as “energy efficient prosperity.” In the case of these countries, the performance of energy efficiency is not so much about “doing more with less [energy]” (which is applicable to industrialized countries), but rather “doing even more [energy services] with more [energy]” and contributing to raising standards of living and promoting prosperity.21 This shift in how energy efficiency should be considered is reflected in the increased focus on the multiple-benefits generated by energy efficiency investments and policies and will be discussed in the next chapter. While the energy efficiency literature and measurement methods will be evolving to better reflect energy efficiency’s multiple productive impacts, the rebound effect is traditionally expressed in the percentage of the forecasted reduction in energy use lost due to consumer and market response. Example: Consider an appliance that uses 100 kWh per year of electricity. Suppose this appliance is replaced by an efficient appliance that is expected to save 10 kWh per year before consumer and market responses. The consumer and market responses, as a result of energy efficiency, increase energy use by 1 kWh per year, resulting in a rebound effect of 10%, since 1 kWh of the 10 kWh annual energy savings is taken back by the consumer and market responses. The aforementioned broad definition captures the principle of rebound effect, but it does not dwell on different factors associated with how energy efficiency is improved and other energy- and cost- related attributes. There are two highly generalized scenarios. It is important to pay close attention to consumer behavioral considerations when identifying scenarios applicable to specific projects, as the rebound effect in underserved areas, where baseline service level was very low, could be significantly high. The scenarios presented below are for illustrative purposes only: Scenario 1 | Energy efficiency improves while all other attributes remain constant. In this case, the rebound effect can be completely credited to energy efficiency. For example, a car manufacturer improves fuel efficiency as a result of an innovation without any increase in product cost and also holding other attributes constant. The subsequent market and consumer responses can be Chapter 3 26 considered (close to) a pure concept of rebound as it captures only the responses induced by energy efficiency. Scenario 2 | Energy efficiency improves but other attributes, such as cost of energy services and/or product, change (increase or decrease). For example, government policy requires car manufacturers to improve fuel efficiency and, in this case, the energy efficiency improvements are costly, resulting in an increase in car cost. This may also induce changes in other attributes such as size and capacity. Subsequently, price and energy services provided change along with energy efficiency. The rebound effect in this case is compounded with energy efficiency and other attributes. When accounting for rebound effect, it is important to distinguish between the two aforementioned scenarios. Important considerations for the rebound effect include the following: 1 | Energy demand can increase due to many factors. Economic growth and improved technologies are among the important factors. It is crucial to understand the socioeconomic, consumer behavior, and cultural factors and not rush to labelling everything as a “rebound effect.” 2 | It would be expected that what is traditionally labelled rebound effect could be higher in developing countries than in developed countries because of large unmet energy demand that may be partly satisfied by using money saved from a particular energy efficiency measure or investment. However, the relative size of the rebound effect is unclear. It is theorized that if energy services and other goods such as food and clothing are substitutes, the rebound effect is high. If they are complements, then the rebound is lower. 3 | As mentioned above, a major misunderstanding associated with rebound is that it is perceived as an undesirable effect. This perception comes from focusing on energy reduction as the sole objective of a project or program, rather than welfare maximization. Rebound is a product of a consumer’s response to changes in relative process, so by preference it provides welfare benefits. In fact, while some argue that the rebound effect annuls part of the benefits of energy efficiency activities, others (e.g., Gillingham 2014) argue that including rebound effect in energy efficiency evaluations is most likely to add to the count of benefits and the only increase in costs are due to external costs from additional usage. 4 | In the cases of energy efficiency activities implemented in situations of supressed demand,22 it is particularly important to consider how the level of the baseline (against which energy savings are assessed) is set.23 For example, in situations with suppressed demand, it may not be adequate to set the energy use baseline at a constant level over time, but rather recognize that the energy use baseline should be differentiated according to desired and attained level/quality of service. The idea is that energy efficiency activities would avoid future (less efficient) energy use while meeting the demand for improved level/quality of service. Rebound effect is a complex phenomenon and is difficult to estimate. At the project level, M&V activities can include assessment of rebound effect and try to attribute the rebound to the factors responsible for it (such as productivity, socioeconomic improvement, etc.). Quantifying the rebound Assessing and Measuring the Performance of Energy Efficiency Projects 27 will be a challenging task unless it is a direct rebound. The rebound effect induced by a program or on a macroeconomic scale should be part of the energy efficiency program design. It should be incorporated into projections or energy forecasting models during program design stage. Also, determining the level of rebound will require good statistical sampling and follow-on analysis to estimate the scale of rebound. It is also advisable to consider the improved utility for consumers or the improved welfare impact on project beneficiaries, as an economic benefit. It is also important to document and account for the benefits and development impacts that may come with energy efficiency policies and interventions, so these important impacts of energy efficiency are not simply swept under the “rebound” rug. The next section discusses this in greater detail. 3.5 RECOMMENDATIONS FOR UNDERTAKING AN EFFECTIVE MEASUREMENT & VERIFICATION PLAN There are a number of M&V protocols and guidebooks M&V should be a critical aspect of any energy efficiency available to successfully prepare and implement project- projects or programs in order to ensure value for money, specific M&V plans. The review conducted in this report justify continued or increased funding, and establish the shows that M&V is an evolving subject and can be basis of payment mechanisms. adapted to different contexts. It is also important to note that the decision to conform to a particular M&V standard or protocol is determined by many elements such as region, economics, capacity, and project type. A delicate balance has to be maintained between a robust and reliable M&V that is not only cost effective, but also easy to implement. When using an international M&V protocol/guideline, it is up to the practitioner to decide how rigorously to conform to the guidance document. Often it is advisable to use multiple approaches within the same M&V plan without affecting the overall quality of the M&V. As an example, it would be acceptable to measure only the “key parameters” in a lighting retrofit while measuring “all parameters” for a heating, ventilation, and air conditioning (HVAC) retrofit. This type of strategy would help in reducing the overall cost of the M&V without affecting its quality. The review of a sample of projects undertaken as part of this report reveals gaps or opportunities for strengthening in the current M&V and impact evaluation of energy efficiency projects. The gaps and omissions in the M&V activities can lead to improper analysis of the outcomes and loss of confidence in the performance of energy efficiency activities. This is especially true in developing countries where the energy service company (ESCO) business and project implementation through the route of energy performance contract (EPC) are still evolving. Project developers and energy service companies should not consider M&V as an extra activity. Instead M&V should be integrated as a value-adding activity, which can build the confidence of program stakeholders and ensure fair sharing of benefits. Inclusion of the multiple benefits of energy efficiency (MBEE) can play a crucial role in enhancing the value of M&V for the stakeholders. In many instances, the nonenergy benefits from an energy Chapter 3 28 efficiency project could be much higher than the energy saved. For example, an energy efficiency street lighting project can enhance lighting quality, reducing road accidents, while increasing the perception of security among pedestrians. The social benefits can be monetized in the form of reduced government spending. ENDNOTES 21 Philippe Benoit, IEA (December 2015), presentation at COP21. 22 “Suppressed demand” typically refers to situations where a minimum service level to meet basic human needs (e.g., basic energy services such as lighting, cooking, drinking water supply, and space heating), was unavailable prior to the implementation of the energy efficiency activity. 23 The issue of suppressed demand in low-income communities has also been discussed in the context the UNFCCC Clean Development Mechanism, resulting in the inclusion of suppressed demand in baseline and monitoring methodologies. See https://cdm.unfccc.int/Reference/Guidclarif/meth/meth_guid41.pdf Assessing and Measuring the Performance of Energy Efficiency Projects 29 4 M E T H O D S F O R Q U A N T I F Y I N G M U LT I P L E BENEFITS OF ENERGY EFFICIENCY The multiple benefits of energy efficiency (MBEE) are typically less tangible and more difficult to quantify than energy savings. Moreover, policy decision-making tools require that benefits are monetized to enable comparison with costs of energy efficiency programs. Table 4.1 summarizes some of the methods used to quantify and, in some cases, also monetize MBEE. Monetizing the quantified benefits often requires the extra step of assigning a value to the benefits, for example a carbon price in the case of carbon mitigation benefits or the statistical value of life in the case of health. A detailed list of methodologies is provided in Annex 7. Collecting primary data may be expensive (e.g., conducting measurement analysis) and take time (e.g., conducting surveys). However, once a reasonable level of evidence has been developed through primary data collection methods for a specific benefit, it is possible to use these examples as references to estimate probable impact at a larger scale or for a similar situation. TABLE 4.1 Methods of Quantifying the Multiple Benefits of Energy Efficiency EXAMPLES METHODS DESCRIPTION OF BENEFITS Measurement The impact of energy savings cannot be directly measured but inferred through t 0.DPTUSFEVDUJPOT the establishment of a baseline which represents what would have occurred in the t 8BUFSTBWJOHT absence of a program. There are two approaches possible to estimate a baseline t 6UJMJUJFTSFEVDFE (SEEAction, 2012): $SFEJUBOEDPMMFDUJPO t   on-control Group Approaches: baseline energy use is estimated and t N costs compared with post-program energy use measurements or assumptions to t )FBMUIJNQBDUT estimate savings t 4BGFUZ  ontrol Group Approaches: a comparison group’s energy use is compared t C &OWJSPOOFNFOUBM t  with the energy use of program participants using, for example, a randomized impacts (e.g., GHG) control trial (RCT).24 Modeling Different types of modeling, such as bottom-up cost assessment, input-output t &DPOPNJDBDUJWJUZ tables and macroeconomic, computable general/partial equilibrium, models are t &NQMPZNFOU used to assess the economic impacts. Modeling of power systems can be used "WPJEFEQPXFSTVQQMZ t  to calculate the benefits of avoided power supply costs attributable to the energy costs efficiency program. Surveys Surveys are powerful tools to gather data and information for estimating MBEE. t $PNGPSU Questions included in surveys can be quantitative and/or qualitative. For example, t 1SPEVDUJWJUZ a survey about labor productivity may ask employees about sick day counts and t 0.DPTUSFEVDUJPOT also include questions about stress level or comfort level in a specific environment. t )FBMUIJNQBDUT Surveys can also be used to monetize less-tangible benefits by asking respon- t 4BGFUZ dents to set a price on benefits through willingness-to-pay or contingent valuation methods. These types of surveys help to determine how much participants value a benefit.25 Many survey techniques exist and surveys should be designed carefully to maxi- mize the robustness of the information collected. Assessing and Measuring the Performance of Energy Efficiency Projects 31 In fact, many of the current valuations of the MBEE rely on estimates from previous studies that have established some evidence base. Having an established evidence base derived from a rigorous analysis is a key factor to scale up the use of accounting for MBEE. 4.1 DESCRIPTION OF THE MULTIPLE BENEFITS OF ENERGY EFFICIENCY The topic of MBEE encompasses a wide range of impacts, including economic, health and physical comfort, social, and environmental (both local and global), among others. Identifying all of the direct and indirect benefits of energy efficiency is an evolving field. This section describes some of the benefits commonly cited in the literature, generally employed quantification methods, and examples of their impacts. 4.1.1 Recipient Benefits Description Recipient benefits refer to the benefits that accrue to the participants of a program. The range of these benefits are Low-income households tend to receive greater health and large and depend on the target of the program (residential, comfort benefits from energy efficiency programs because commercial, public, and industrial sectors) as well as the their baseline conditions before improvements are generally energy efficiency measures considered (lighting, heating, lower than those of average-income households. cooling, steam, etc.). The importance of these benefits also varies according to recipients’ income levels. In a study for the state of Massachusetts, USA, 29 different benefits were identified just for the residential sector, ranging from noise reduction to more durable homes (Tetra Tech and NMR 2011; see Annex 8 for a full list). Table 4.2 describes some of the most common recipient energy efficiency benefits beyond energy cost saving benefits. If demonstrated suitably, these multiple benefits can become the prime motivation for recipients to participate in a program and invest in energy efficiency measures. Quantification Method Some benefits are relatively easy to measure, such as water savings or O&M reductions. Others are subjective and less tangible, such as “increased comfort,” and others, such as improved health or productivity, are difficult to measure and require rigorous study to show evidence. Table 4.3 lists indicators that can be used for measurement. O&M cost savings would constitute a notable portion of an energy efficiency project’s saving benefits, yet O&M cost savings are rarely calculated rigorously. Measurement consists of collecting data and conducting interviews with facility O&M staff regarding systems operation, occupancy patterns, and problems with equipment reliability before and after implementation of an energy efficiency measure. Chapter 4 32 TABLE 4.2 Recipient Benefits of Energy Efficiency ENERGY EFFICIENCY BENEFITS DESCRIPTION MEASURES Operating and Measures that both reduce energy use and the cost of operating or main- All Maintenance taining a building, for example, replacing an incandescent lamp (average (Lighting programs gener- (O&M) Cost lifetime 1,000 hours) with an LED lamp (24,000 hours) eliminates multiple ally have the greatest O&M lamp replacements, which can save significant O&M costs, especially in benefits) the business sector where paid staff change light bulbs. Health Impacts Improvement in human health as the result of efficiency measures installed Building measures in residences and businesses include improvements in indoor air quality, better ventilation, moisture control, building envelope noise protection improvements, etc. Labor Productivity Improving the energy efficiency of a building can result in gains in worker Insulation retrofit productivity. Measures such as replacing an older air conditioning or Heating/Cooling system lighting system with a more efficient system can improve air quality, improvements increase comfort, and reduce glare on computer screens, all of which Lighting contribute to increasing employee productivity. Since labor costs generally represent the largest share of a commercial entity’s costs, even a small percentage gain in productivity can result in significant cost savings. Comfort Energy efficiency measures affect comfort through temperature, indoor air Building measures quality, lighting, acoustics, physical space, and humidity. Energy Access Energy efficiency increases the level of energy services delivered per unit All of energy delivered. This is especially relevant for investments in new capacity in developing countries and investment in renewable energy. The amount needed to be invested can be reduced if the energy supplied is used to purchase energy efficient equipment. Energy efficiency maximizes the level of service delivered by energy supply while minimizing its cost and its environmental impacts. Water Savings Measures that are designed to save energy and that also reduce water and Water heating wastewater flows, (e.g., low-flow showerheads). Washing machine Dishwasher Property Value Investments in energy efficiency increase the value of the property where Building measures the measures are installed. People increasingly value a well-insulated energy-efficient home which is perceived as more comfortable, healthier, and cheaper to run. Safety Energy efficiency can improve visibility and therefore public safety. LED’s House retrofit white color rendering and uniform illumination patterns are considered to Street lighting improve visibility, which helps reduce criminal activity and can improve safety for drivers, cyclists, and pedestrians. Competitiveness Energy efficiency is strongly linked in various ways with competitiveness: Industry programs energy efficiency contributes toward reducing overall company expenses, reduces waste, increases productivity, modernizes production lines, and, in some cases, boosts innovation, all of which contribute to an increase in competiveness for companies. Moreover, by lowering energy costs, energy efficiency also contributes toward reducing the exposure to the risks stem- ming from volatile energy prices. Assessing and Measuring the Performance of Energy Efficiency Projects 33 TABLE 4.3 Quantification Methods for Recipient Benefits BENEFITS INDICATORS O&M Cost Reductions Replacement and inspection rate of equipment and monetary value ($, €, etc.) Health Impacts Hospitalization and mortality rates, medical costs Labor Productivity Days off work, days off school Comfort Indoor temperature, humidity level, and monetary value ($, €, etc.) Energy Access Energy services provided (lumen-hours in the case of lighting, useful energy in the case of heating or cooling, etc.) Water Savings Quantity of water saved (liters) and monetary value ($, €, etc.) Increased Property Values Monetary value ($, €, etc.) Safety Number of accidents prevented Competitiveness Market share, cost per unit of output, energy intensity O&M cost savings can result from a lower replacement rate of equipment (lamps for example), reduced cooling systems inspection, reduced repair costs, or reduced tenant turnover (Cluett and Amann 2015). Health impacts are generally difficult to measure. Solid evidence based studies, generally using randomized control trial (RCT) methods, need to be developed to show the benefits of energy efficiency improvements on health. Once evidence is established, modeling can be used to assess impacts from energy efficiency on health in other projects, as it is the case in the United Kingdom, later in this chapter. Labor productivity gains from energy efficiency improvements in buildings are rarely measured due to the difficulty of quantifying knowledge-based output from service companies (Miller, et al. 2009). However, some studies have shown and quantify the productivity benefits of a more energy efficient building environment by collecting data on absenteeism, hours worked, tardiness, safety rule violations, number of grievances filed, and employee turnover, for example, before and after a program implementation (Building Efficiency Initiative 2013; Munch et al. 2012; ASHRAE 2010; Seppanen et al. 2006; Hedge et al. 2004; Loftness et al. 2003). These data can be complemented by qualitative information collected though surveys that ask employees to report on productivity. Annex 10 provides quantitative and qualitative indicators of labor productivity measures. Comfort improvements can be measured by the level of satisfaction of building occupants through surveys which ask about the comfort of home or workplace (see Annex 9). Comfort benefits can also be quantified through a willingness-to-pay survey or through the level of energy taken back for increasing thermal comfort (Tetra Tech and NMR 2011; Payne et al. 2015). It is also possible to measure thermal comfort improvements by measuring indoor temperature. Some energy efficiency measures, like the application of cool roofs, can minimize the heat gain of a building and reduce indoor temperature (Garg et al. 2016). Chapter 4 34 While the benefit of energy efficiency to energy access in developing countries is generally admitted, methods and metrics to quantify this benefit are still evolving. The first step is to move away from the binary definition of energy access (having/not having an electricity connection) and to consider the services that energy enables (lighting, cooling, entertainment, etc.). Greater efficiency increases access to energy services by expanding the amount of services that can be provided by a fixed amount (or cost) of energy. The benefits of energy efficiency on energy access can be measured by an increase in the level of energy services accessed by households, such as lumen hours in the case of lighting, useful energy in the case of heating or cooling, etc. The World Bank is supporting a multitier approach where the definition of energy access26 is based on the performance of the energy supplied. Through this new approach, the benefits of energy efficiency are defined as increased in the duration of energy services and improvement in the affordability of energy services to households. In this framework, Tier 1 level of energy access includes the amount of lighting in lumen hours per day and phone charging. As the tier level increases, the level of energy services is augmented (ESMAP 2014). Water savings occurring from energy efficiency measures, such as low-flow showerheads, can be estimated by using engineering supplemented by measurement of water use before and after the implementation of a measure. Increased property value is measured by tracking sales data or interviewing real estate experts. An alternative is to conduct post-upgrade property value appraisal. The Appraisal Institute (2013) provides real estate appraisers with detailed information on how to analyze the effects of energy performance on property value. This contributes to showing the lending opportunity for financial institutions. Increased safety is assessed by measuring the number of accidents before and after a program or by conducting surveys about the perceived safety improvements from users (Frith and Jackett 2013). Competitiveness is a widely used term and many definitions are associated with this concept. Measurement can be defined in two ways: (i) comparatively to others by using data on market share, or (ii) accordingly to cost indicators, by collecting data on the energy productivity of a company (reverse of energy intensity). Understanding Impacts This section includes select examples of studies that have assessed recipient benefit impacts. United Kingdom. The Health Impact of Domestic Energy Efficiency Measures (HIDEEM) model was developed to estimate and monetize the health impacts associated with energy efficiency measures in houses (UCL 2016). This model is used by the Department of Energy and Climate Change in making program development decisions. India. Passive technologies that reduce heat gain such as cool roofs, reflective wall coatings, exterior shading, etc., contribute to reduce cooling demand and improve thermal comfort. A case study in Hyderabad showed an average in-room temperature reduction of 2°C and a peak reduction of 4.3°C (Garg et al. 2016). Assessing and Measuring the Performance of Energy Efficiency Projects 35 Massachusetts, United States. Tetra Tech and NMR (2011) quantified health and comfort benefits by surveying 209 energy efficiency program participants and 213 low-income program participants. A willingness-to-pay survey asked participants to value impacts relative to the average bill savings for specific measures, mainly building shell and/or heating, ventilation, and air-conditioning improvements. This study identified recommended values per participant, ranging from $27 to $279, for 56 different benefits that accrued to utilities, occupants, and society. These recommended values are often used as reference estimates to quantify benefits in cost-benefit analyses in other states (Rhode Island, for example). A complete list of the values per type of benefit is given in Annex 8. Bangladesh. Phadke et al. (2015) show that the use of super-efficient off-grid lighting and appliances can reduce the cost of off-grid energy service by up to 50% and therefore increase access to energy services. The study demonstrates that the use of LED in solar home systems allowed for a reduction in the size of and an increase in the demand for additional energy services in the solar home system. A 20 watt-peak system can deliver the energy services for a household that would have once needed a much more costly 50 watt-peak system by using super-efficient equipment. Mexico. The Green Mortgage Program was created in 2007 to promote the use of eco-technologies in new housing development and retrofit of existing houses in Mexico. Along with average annual electricity savings of 600 to 1544 kWh (depending on the climatic zone) and 2,890 to 3,115 kWh in gas, the program reduced water consumption by 85 m3 in water per home per year (Buildings Efficiency Initiative 2013). United Kingdom. A study from the Department of Energy and Climate Change (2013) reveals that making energy saving improvements increases a property’s value by 14% on average and up to 38% in some parts of England. New Zealand. Grimes et al. (2012) assessed the costs and benefits of the Warm Up New Zealand: Heat Smart Programme. This program offered subsidies for insulating buildings and/or installing clean heating in residences. Detailed evaluation of this program shows that energy benefits alone were insufficient to justify program expenditures, but the benefit-to-cost ratio exceeded 4:1 when health benefits were included. United States Weatherization Assistance Program. According to a retrospective evaluation of the 2008 WAP, the program’s benefit-cost ratio was 1:4 when only energy savings costs and benefits are accounted for, but improves when health and safety benefits and costs are included (US DOE 2015). The result is in part because a small share of program costs were invested to address health and safety issues found in homes (typically around 15% of the funds invested in a weatherized unit) (ORNL 2014). For example, while WAP technicians were in homes installing energy-savings measures, they fixed broken windows and installed working smoke detectors. Mexico. The 2016 Implementation Completion and Results Report for the World Bank Efficient Lighting and Appliances project assesses the project’s performance. The project was implemented over the 2011–15 period and replaced over 45 million incandescent bulbs with compact fluorescent lamps (CFL), including a portion distributed to households in low-income communities (including indigenous Chapter 4 36 communities) and appliances (refrigerators and air conditioners). The project resulted in energy savings of over 10,000 GWh and mitigated over 5 Million tCO2e. The report notes, but does not quantify, other economic benefits, including: (i) delaying or avoiding new power generation infrastructure; (ii) reduction in consumers’ electricity bills; (iii) mitigation of the burden of the electricity subsidies; and (iv) enhanced energy security. 4.1.2 Energy Supply Benefits Description Benefits to electricity supply are numerous. They include deferring the need to build new infrastructure to meet growing demand and increasing grid reliability. IEA (2014) identifies 21 multiple benefits that accrue to energy providers. Table 4.4 describes some of the most-referenced MBEEs related to grid infrastructure and reliability. Quantification Methods In the United States, the typical approach for quantifying MBEE programs is to calculate “avoided costs,” defined as costs that would have been incurred if the energy efficiency measures had not been put in place. Different methods, using modeling approaches, are used to calculate energy- and TABLE 4.4 Power Supply Benefits of Energy Efficiency BENEFITS DESCRIPTION INDICATORS Avoided capacity costs Demand reductions from energy efficiency measures reduce the need Avoided capacity (KW) for additional generation capacity to meet demand. and saved monetary value ($, €, etc.) Avoided T&D costs Implementing energy efficiency measures can avoid the need for T&D Avoided kWh losses and expansion and associated costs. saved monetary value ($, €, etc.) Reduce peak load Energy efficiency reduces costly investments needed to meet demand Avoided peak capacity (KW) during peak hours. and saved monetary value ($, €, etc.) Reduced credit and In the case of low-income energy efficiency programs, utilities can $ savings collection costs realize financial savings from reduced costs associated with arrearages and late payments, uncollectible bills and bad debt write-offs, service terminations and reconnections, bill-related customer calls, and the bill collections process. Increased reliability By reducing electricity demand, energy efficiency programs increase $ of value added produced electricity system reliability and help prevent demand from exceeding Number of avoided power maximum capacity when it otherwise would have, thereby preventing outages blackouts. Benefits include the value added from avoiding blackouts. Energy security By reducing energy demand, energy efficiency contributes to reducing Avoided energy imports (tj, a country’s dependence on imported energy and increases its energy etc.) and saved monetary security. value ($, €, etc.) T&D—Transmission and Distribution Assessing and Measuring the Performance of Energy Efficiency Projects 37 capacity-related avoided costs, as explained by Elefant (n.d.). Energy efficiency measures can avoid costs such as those associated with line losses and reserve margins. See a description in Lazar and Colburn (2013). For impacts of reduced credit and collection costs from low-income energy efficiency programs, the quantification method often includes pre- and post-program billing data from a treatment and a comparison group. However, as mentioned earlier, collecting primary data may be expensive and many of the current valuations of this benefit in utility programs in the United States now rely on estimates from previous studies. Increased reliability benefits can be assessed by first determining how an energy efficiency project affects the number and length of customer outages and then multiplying that expected change by the estimated cost of an outage. The estimated cost of an outage is determined based on customers’ economic activities. Understanding Impacts 2010 Vermont energy efficiency program portfolio assessment. Figure 4.1 reports the costs and benefits of Vermont energy efficiency programs portfolio in 2010, taken from the IEA (2014) publication on MBEE. The levelized cost of energy efficiency measures is $39 per megawatt hour compared to benefits to energy providers estimated at $104.8 per megawatt hour, which results in an overall benefit-cost ratio of 2.3 to 1. Avoided distribution capacity costs are the largest nonenergy benefits, equal to 35% of the energy benefits. Avoided line losses represent 18%, avoided generation capacity costs represent 16%, avoided transmission capacity costs 6%, and avoided reserve requirements 1% of energy benefits. FIGURE 4.1 Multiple Benefits of Energy Efficiency Accrued to Vermont Energy Providers in 2010 120 Avoided reserve requirements 100 Transmission capacity 80 Generation capacity USD/MWh CO2 emissions 60 Line losses 40 Distribution capacity Energy generation 20 0 Costs Benefits Note | Values are expressed as levelized USD/MWh. Source | IEA 2014. (Original: Efficiency Vermont 2012: Annual Report 2010, Efficiency Vermont) Chapter 4 38 TABLE 4.5 Utility MBEE Resulting from Low-income Energy Efficiency Programs (in USD/year/participant) TERMINATIONS SAFETY-RELATED CARRYING COST BAD DEBT AND CUSTOMER EMERGENCY ON ARREARAGES WRITE-OFFS RECONNECTIONS CALLS NOTICES CALLS 1.37 to 4.00 0.48 to 6.09 0.07 to 7.00 0.07 to 1.58 0.04 to 1.49 0.07 to 15.58 Source | Tetra Tech and NMR report 2011. United States. Table 4.5 reports a range of estimated values for utility financial savings from reduced credit and collection costs (in USD/year/participant) for eight low-income programs in the United States. As specified in Tetra Tech and NMR (2011), there are several reasons for the variability in the magnitude of impacts reported in the literature, including differences in program structure and utility cost structures and policies. Kyrgyzstan. Using a RCT method and measuring household’s electricity consumption at the transformer substation level, Carranza and Meeks (2015) provide evidence on the benefits of increased reliability of electricity services from a CFL program. Results show that households that were recipients of the program experienced approximately two fewer electricity outages per month on average. Uganda. One of the primary objectives of the World Bank Power Sector Development Operation project, started in 2007, was to reduce power shortages by implementing energy efficiency measures and adding new capacity in Uganda. At project closure, the evaluation report found that monthly energy unmet demand was reduced by about 95% due to an estimated 55 GWh of energy savings per year through a number of energy efficiency initiatives related to energy use efficiency and load management (World Bank 2012). South Africa. Serious electricity shortages experienced in 2008 triggered the implementation of energy efficiency policies in South Africa. The government decided to include an environmental levy in electricity tariff to fund the implementation of energy efficiency demand-side management programs targeting various energy efficiency measures/technologies (e.g., energy efficient indoor and street lighting, heat pumps, energy management systems, etc.). During the energy crisis, the utility company Eskom used energy efficiency actively to reduce the gap between supply and demand of electricity. Energy efficiency is now included as a resource of choice in planning for future energy resources (de la Rue du Can et al. 2013). India. Sathaye and Gupta (2010) evaluated the aggregate economic benefits from reducing the gap between supply and demand of electricity through the implementation of energy efficiency programs in India. They estimated that the resulting cumulative production increase would contribute $505 billion to GDP between 2009 and 2017, which can be compared with India’s 2007–08 GDP of $911 billion. Assessing and Measuring the Performance of Energy Efficiency Projects 39 Sri Lanka, Thailand, and Vietnam. Selvakkumaran and Limmeechokchai (2013) focus on the effect of energy efficiency measures on energy security in three developing countries: Sri Lanka, Thailand, and Vietnam. Results show that energy efficiency in Sri Lanka significantly increases the energy security whilst also accruing co-benefits of CO2 mitigation and mitigation of local air pollution. In the case of Thailand and Vietnam, energy security is enhanced in the short term. 4.1.3 Public Budget Benefits Description Important benefits of energy efficiency programs accrue in the public budget when governments are the beneficiaries of the program, such as public buildings or street lighting energy efficiency retrofits. This is part of the recipient energy savings benefits which is covered in Section 4.1.1. Additional benefits to the public budget exist. In economies that subsidize end-use energy tariffs, energy efficiency programs reduce fiscal expenditures on energy subsidies, which enable governments to lower deficits or increase spending in other priority areas, such as health and education. Public budget increases can also result from increased spending effects (increased tax revenue and reduced payout for unemployment benefits). However, indirect benefits should be balanced with decreases in fuel/energy tax revenues resulting from decreases in energy consumption. In some countries, fuels are taxed at a higher rate than other goods (excise duties), so shifting consumption from fuel to other goods will lead to lower tax revenues. Table 4.6 lists public budget MBEE programs. Quantification Methods While indirect impacts are difficult to quantify and depend on macroeconomic activity impacts, reduction of energy subsidies that result from reductions in energy use can be estimated based on the cost of energy subsidy per kilowatt hour consumed. However, the level of energy subsidy per kilowatt hour or terajoule of energy sold is not always directly available. The IEA and International Monetary Fund (IMF) use similar methodologies to estimate energy subsidies, comparing average end-user TABLE 4.6 Public Budget Benefits of Energy Efficiency BENEFITS DESCRIPTION Reduced energy subsidies Reducing energy consumption reduces public funds spent on energy subsidies. budget Indirect public budget Energy efficiency programs result in consumers paying less in energy bills. Consumers may spend effect the saved funds for goods and services, which, in turn, can create jobs and thus reduce payout for unemployment benefits. Energy efficiency programs can also improve occupant health, which reduces health care costs. Energy efficiency measures increase property values and thus property tax revenues. Reduced energy demand also reduces the need for public investment in energy infrastructure. Chapter 4 40 prices with the full cost of supply. The difference represents the amount by which an end-use price falls short of the full cost of supply (IEA 2013; IMF 2013). Understanding Impacts Mexico. In Mexico where the presence of subsidies on the price of electricity distorts resource allocation by encouraging excessive energy consumption and reducing incentives for investment in energy efficiency, Leventis et al. (2013) found that avoided subsidy payments alone could finance incentive programs that cover the full incremental cost of refrigerators that are 27% more efficient and televisions that are 32% more efficient than baseline models. European Union. Copenhagen Economics (2012) estimates that annual investment of $56 billion in the energy efficiency renovations of buildings through 2020 in the European Union would result in permanent public revenue gains and €5 to €6 billion of reduced need for energy-consumption subsidies, as well as €9 to €12 billion from reduced public spending on energy bills (e.g., in public buildings and institutions). The study also estimates permanent revenue losses of €4 to €5 billion from reduced fuel consumption taxes. In total, annual permanent net public revenue gains could reach €30–40 billion in 2020, if health-related benefits (e.g., fewer hospitalizations) from energy efficiency renovations are included. In addition, the study estimates approximately 760,000 to 1,480,000 jobs will be created annually as a result of energy efficiency programs, which would lead to an additional annual reduction of cost in public budgets. Germany. The Residential Energy Efficiency Buildings Program of KfW between 2006 and 2014 benefitted 50% of all newly built residential and 33% of all refurbished buildings, as well as 2,000 public buildings. The energy efficiency program created approximately 440,000 jobs, additional tax revenue, social security contributions, and reduced costs for unemployment amounting to reduction in the public budget of about €4 to €5 for each Euro spent (Schüring 2014). 4.1.4 Air Emissions Benefits Description Air emissions resulting from energy consumption are the major cause of global warming. Some of these emissions have strong warming effects, but are short lived, classified as short-lived climate pollutants (SLCPs). Air emissions are also a source of indoor and outdoor pollution and a cause of ozone depletion. A study from the World Health Organization (WHO 2014a) estimates that 3.7 million and 4.3 million premature deaths could be attributed to ambient (outdoor) air pollution and household (indoor) air pollution in 2012, respectively. Outdoor air pollution, notably in concentration of human settlements like cities, causes a spectrum of health effects, ranging from eye irritation to death. Additionally, methane emissions are a source of diminished agriculture production. Table 4.7 below lists air emissions MBEE. Reduced air emissions that result from energy efficiency can contribute to decreased global warming impacts, improved human health, and reduced ozone depletion. Assessing and Measuring the Performance of Energy Efficiency Projects 41 TABLE 4.7 Air Emissions Benefits of Energy Efficiency EMISSIONS SOURCE DAMAGE Carbon dioxide (CO2) Energy combustion Global warming Industrial processes Sulfur dioxide (SO2) Energy combustion Respiratory diseases Industrial processes Acidification of forests and waterways Methane (CH4) Animal waste Global warming (SLCP) Landfills Respiratory diseases Fuel Diminished agriculture productivity Nitrogen oxides (NOx) Energy combustion Respiratory diseases Fertilizer use Crop yield impacts Global warming (SLCP) Black carbon (BC) Energy combustion Global warming (SLCP) Increase in premature deaths Hydrocholorofluorocarbons (HCFCs) Refrigerant Global warming Chlorofluorocarbons (CFCs) Ozone depletion Hydrofluorocarbons (HFCs) Refrigerant Global warming (SLCP) SLCP—short-lived climate pollutants Quantification Method Methods for assessing benefits of air emissions reductions entail first estimating the quantities of emissions reduced and then determining the value of these quantities. GHG emissions are estimated by applying emissions factors to the quantity of energy saved. For fuel savings, default values27 are available in the Intergovernmental Panel on Climate Change 2006 Guidelines. For electricity savings, emissions factors need to be based on the fuel mix of the electricity saved (including the transmission and distribution saved). For energy measures that reduce peak electricity, marginal emissions factors can be calculated to reflect emissions variations during peak periods. Methodologies have been developed to calculate grid emissions factors (e.g., through the UNFCCC Clean Development Mechanism). GHG emissions have different global warming potential which represents the ability of each GHG to trap heat in the atmosphere relative to carbon dioxide (CO2) over a specified time horizon (see IPCC 2007, 2014 and GHG Protocol for more detail). Estimating the cost of avoided damages due to GHG emissions reduction can be done by using the social cost of carbon. The social cost of carbon is an estimate of the direct effects of carbon emissions on the economy—it estimates how much damage climate change will cause by considering net agricultural productivity loss, human health effects, property damages from increased flood risk, and the value of ecosystem services due to climate change. In the United Kingdom, the social cost carbon value has been used in policy analysis and regulatory impact assessment since 2002 and was revised in 2007 and 2010 (IPCC 2014). In the United States, the government also estimates the social cost of carbon to be used by all agencies in their regulatory emissions-reduction impacts analysis. The four social cost of carbon estimates are: $14, $46, $68, and $138 per metric ton of CO2 emissions in the year 2025 Chapter 4 42 (2007 dollars), based on 5%, 3%, and 2.5% average discount rates and 95th percentile, respectively (USG 2010; US EPA 2015). The IMF (2014) uses an illustrative damage value of $35 per MtCO2 based on a study that estimates taxes on coal, natural gas, gasoline, and diesel needed to reflect environmental costs. For air pollutants, different tools exist to estimate the pollutant concentrations and their effect on human health (mortalities, years of life lost) and crop yield. Quantitative estimates of air pollution health impacts have become an increasingly critical input to policy decisions, and many governments have invested in tools that best represent localized impacts and provide timely information. Internationally, organizations such as the World Health Organization (WHO) and the World Bank have invested in similar tools to quantify air pollution-related health impacts for a variety of purposes. Global Model of Ambient Particulates (GMAPS) is an econometric model developed by the World Bank to predict ambient PM10 levels for world cities larger than 100,000. Another tool used in the World Bank and Climate Works Foundation study (2014) is the Fast Scenario Screening Tool (TM5-FASST). Researchers can then place a monetary value on the damages caused by air pollution and assess the monetary damages associated with emitting a given type of pollutant. These cost assessments help optimize policies with respect to their health benefits and costs. Jaramilloa and Muller (2016) estimate the monetary damages due to air pollution exposure (PM2.5, SO2, NOx, NH3, and VOC) from electric power generation, oil and gas extraction, coal mining, and oil refineries in the United States. They point out the importance of considering spatial distribution of population in the impacts of air emissions when estimating the benefits of policies. The WHO organized a workshop in 2014 to discuss the evidence for air pollution health effects and propose expert advice on the best options and methods to estimate health risks from air pollution and its sources. A document reviews available air pollution analysis methods and tools globally (WHO 2014b). Understanding Impacts Global Impacts of Short-Lived Climate Pollutants. The United Nations Environment Program (UNEP 2016) estimates that, by 2030, using technologies and strategies available today, reduced SLCP emissions could avoid an estimated 2.4 million premature deaths from outdoor air pollution annually and about 32 million tons of crop losses per year. Maryland, United States. Itron (2015) estimated the benefit from reduced air emissions (CO2, NOx, SO2) from State of Maryland energy efficiency programs at $79 million over the lives of the program, equivalent to $0.011 per kilowatt hour saved by the programs in 2013, using an assumed CO2 damage cost of $45 per ton. The study estimated that counting air emissions benefits increases the statewide benefit-cost ratio to 2:1, a 16% increase over the ratio of 1:8 without air emissions benefits. United States, the European Union, China, India, Mexico, and Brazil. The World Bank and Climate Works Foundation study (WB-CWF 2014) examined the benefits from policies that stimulate a shift to clean transport, improved industrial energy efficiency, and more energy-efficient buildings and appliances through regulations, taxes, and incentives in six major economies—United States, the Assessing and Measuring the Performance of Energy Efficiency Projects 43 European Union, China, India, Mexico, and Brazil. The study found that those policies would prevent 94,000 premature pollution-related deaths and 8.5 gigatons of CO2-equivalent emissions in 2030. Global. In a study analyzing more than 150 countries, the IMF (2014) explored how to align fuel taxes with environmental damages that reflect global warming, air pollution, road congestion, and other adverse environmental impacts of energy use. The study develops a practical methodology, and associated tools, to show how the major environmental damages from energy can be quantified for different countries and used to design corrective fuel taxes that reflect environmental costs. 4.1.5 Economic Benefits Description Energy efficiency improvements deliver benefits across the whole economy, with direct and indirect impacts on economic activity, employment, trade balance, and energy prices. t Direct impacts include the additional economic activity associated with local commercial services and industries in response to energy efficiency program investments. Energy efficiency programs lead to purchases of goods and services in the economy (e.g., labor for energy audits, increased sales of energy efficient equipment, labor for training energy auditors, etc.). t Indirect impacts include economic activity associated with increased disposable income or higher profits from the cost reductions associated with energy saved. Together, these financial flows have multiplier effects locally and regionally on the economic activity and job creation. The positive economic multipliers associated with these expenditures are generally larger than the impacts from the energy sector. Energy efficiency improvements also help alleviate household poverty and are often considered a more long-term solution to alleviate poverty than energy subsidies and direct financial support, leading many countries to implement energy efficiency programs targeting low-income households. A recent publication from the World Bank analyzed the benefits that energy efficiency has on diminishing the distributional affordability impact of raising energy tariffs to cost recovery levels (Ruggeri Laderchi et al. 2013). Raising energy tariffs to cost recovery levels can result in very high increases and energy efficiency can help cushion this impact. The term “energy poverty” (or “fuel poverty”) has been developed to refer to situations where households are unable to afford their basic energy needs. Three factors influence energy poverty: household income, energy prices, and energy efficiency of equipment and buildings. When energy efficiency is improved, households can decide to either expand the energy services provided from a fixed amount (or cost) of energy or reduce their energy demand and keep the same level of service as before the measure, or a combination of both. In all cases, household wealth increases. As mentioned in previous sections, when a consumer decides to expand the energy services, this reduces the energy savings potential and is often referred to as a direct rebound effect or take-back effect in the literature (see de la Rue du Can 2015, for a brief information note on this Chapter 4 44 TABLE 4.8 Economic Benefits of Energy Efficiency BENEFITS INDICATORS METHODS GDP Growth Monetary value ($, €, etc.) Macroeconomic modeling Job Creation Net number of jobs created Macroeconomic modeling Energy Poverty Number of households Survey Price $/kWh reduction Macroeconomic modeling Trade Balance Monetary value ($, €, etc.) Macroeconomic modeling topic). However, this can also be considered as an economic benefit of expanding the amount of energy services that can be provided by a fixed amount (or cost) of energy (IEA 2014). Indeed, the United Kingdom’s treasury guidance document on project appraisal recommends considering comfort take-back as a welfare benefit to the consumer (see “United Kingdom” section below). In developing countries, energy poverty is generally defined in terms of inadequate and unreliable access to energy services and reliance on traditional biomass. Energy poverty is recognized as a major barrier to economic growth and to health and well being (UN 2010; IEA 2010). In fact, ensuring access to affordable, reliable, sustainable and modern energy is recognized as one of the United Nations Sustainable Development Goals adopted in 2015 (UN SDG 7). Energy efficiency also contributes to reduction in energy prices, as it reduces the demand for energy. In competitive markets, the marginal unit price of energy increases with the amount required. Therefore, a decrease in supply due to a reduction of demand results in price reduction. This phenomenon is referred as Demand Reduction Induced Price Effect (DRIPE) in the United States’ utility industry (Chernick and Plunkett 2014). Price suppression has been accepted as an energy efficiency benefit by regulators in Massachusetts, Delaware, Connecticut, the District of Columbia, and Rhode Island. Quantification Methods To assess the economic impact of energy efficiency programs, a combination of modeling approaches is generally needed. First, the total investment necessary from public and private funds is estimated using technology-based bottom-up models that gather information on the cost of energy efficiency measures. The total estimated investment is then introduced into economic models to determine impact on economic activity and job creation. Economic models, such as computable general equilibrium, are generally used because they cover the whole economy of a country and integrate input-output tables to estimate the impacts of additional investment in a sector of the economy. How energy efficiency measures influence economic sectors (i.e., positively or negatively) depends on a country’s economic structure and on the design and scale of the underlying policies. There is no consensus on which method to use internationally to define the energy poverty line below which households are considered to be in fuel poverty. Eurostat, the statistical office of the European Assessing and Measuring the Performance of Energy Efficiency Projects 45 Union, surveys household income and living conditions annually. Information that relate to energy poverty is collected through three indicators: t the percentage of households experiencing an inability to keep their home adequately warm t the percentage of homes that are damp, rotting, or leaking t the percentage of homes that are behind on utility bill payments Atanasiu et al. (2014) used a combination of these indicators to describe the current fuel poverty situation in Europe. This study estimates that between 50 and 125 million people in Europe currently suffer from fuel poverty and are unable to afford proper indoor thermal comfort. Bulgaria and Lithuania have the highest rates in Europe of residents unable to keep their homes adequately warm. In developing countries, the term energy affordability is often used, notably in the context of tariff reforms which require moving from subsidized tariffs to cost reflective tariffs. These transitions have a large impact on the energy affordability of households, as the increase can be very steep. Ruggeri Laderchi et al. (2013) recommend implementing energy efficiency programs to lower the impact of higher tariffs on the affordability of energy services. The multitier approach currently being developed by the World Bank’s Energy Sector Management Assistance Program (ESMAP) and described above, also helps to demonstrate the impact of energy efficiency interventions as a contributor to a higher level of affordability of energy services (ESMAP 2014). The affordability of energy is considered as an attribute of achieving energy access. Examples Global. The IEA (2014) reports that GDP changes from large-scale energy efficiency policies are positive, with economic growth ranging from 0.25% to 1.1% per year. According to the IEA, the potential for job creation ranges from 8 to 27 job years per €1 million invested in energy efficiency measures. Eastern Europe and Central Asia. Ruggeri Laderchi et al. (2013) show that energy efficiency programs reduce the negative impact of raising energy tariffs to cost recovery levels measures on households and the economy. The report assessed, at the micro level for the whole region, the distributional impact of raising energy tariffs to cost recovery levels and simulating policy options to cushion these impacts. They estimate that most countries in the region could save 0.5 to 1% of GDP by improving the effectiveness of social assistance systems and increasing energy efficiency. United States. United States Department of Energy (US DOE) employment impact analysis estimates the aggregate indirect national job impacts from the implementation of minimum energy performance standards, using a model called ImSET 3.1.12 (Impact of Sector Energy Technologies). This is a customized version of the national input-output model for building energy technologies. European Union. In Europe, many studies have recently been published on energy poverty and the need to scale up energy efficiency programs to help alleviate it (Atanasiu et al. 2014; Pye et al. 2015; Chapter 4 46 Schumacher et al. 2015; Mzavanadze et al. 2015). However, most studies report the effectiveness of measures to alleviate poverty as the number of households participating in the programs. No quantification of the impact of energy efficiency programs on energy poverty was found. 4.2 SUMMARY OF INTERNATIONAL EXPERIENCE This section gives a brief overview of the experience in integrating the quantification on MBEE in energy efficiency investment programs and select international initiatives. United States In the United States, MBEE are generally referred to as non-energy benefits (NEB). However, more recently the term non-energy impacts (NEI) has become more common, to encompass both the positive and negative effects of energy efficiency programs. Non-energy impacts are grouped into three classes based on “beneficiary” or “perspective.” These classes are utilities, program participants, and society. Assessment of non-energy impacts has generally focused on low-income programs where non-energy benefits are part of the program goals. However, recognizing the additional value that these benefits bring, an increasing number of state regulators are now working to include them in cost-effectiveness tests, program design and marketing strategies (Skumatz 2009; Malmgren and Skumatz 2014). In the United States, energy efficiency programs are funded through utility rates, and each state regulatory agency has its own mandate regarding the specific test(s) and requirements for demonstrating program cost effectiveness (Cluett and Amann 2015). Malmgren and Skumatz (2014) identified four different ways that state regulators include non-energy benefits in energy efficiency program assessments and cost-effectiveness tests: 1 | Adders. Incorporating an adjustment factor to reflect subsets of non-energy benefits contributions to all benefits: t Iowa, Colorado, Oregon, Washington, Vermont, New York, Washington DC, and other states include simple adders (between 7.5% and 25%) (Skumatz 2014) 2 | “Readily measured” non-energy benefits. Incorporating “easy-to-measure” benefits: t Massachusetts, Vermont, Colorado, New Hampshire, Oregon, Connecticut, Rhode Island, Maine, Washington DC, and others such as BC Hydro (Canadian electric utility) include subsets of “readily measured” non-energy benefits (Skumatz 2014) t These benefits generally include: t O&M expenditure reductions t Water and sewer usage reductions 3 | Measuring non-energy benefits. Direct measurement of most non-energy benefits 4 | Hybrid approach. Using an adder and measuring easy-to-measure benefits Assessing and Measuring the Performance of Energy Efficiency Projects 47 The National Efficiency Screening Project (2014) recommends using alternative screening tests or setting a lower cost-benefit screening threshold for programs that have many hard-to-quantify benefits. United Kingdom The United Kingdom Treasury publishes a guidance document called the Green Book on how to appraise proposals before committing funds to a policy, program or project. The Green Book is supplemented by additional guidance documents giving more information on particular issues and on applying the Green Book in specific contexts. For example, the United Kingdom Treasury provides additional guidance for valuation of energy use and GHG emissions for appraisal, as well as an excel-based calculation toolkit and data tables containing the carbon values, energy prices, long-run variable energy supply costs, emissions factors, and air quality damage costs over the 2010–2100 period (UK Treasury 2015a; UK Treasury 2015b). The background document explains the theory and rationale behind the methodology applied to valuing changes to energy efficiency. Direct rebound effect28 is considered as a welfare benefit (comfort take-back) to the consumer and is valued using the retail price of energy which is higher than the long-run variable costs used for valuing energy savings. Payne et al. (2015) describe how the Green Book and its related documents have been applied in recent impact assessments of energy efficiency programs in the United Kingdom. (See Annex 11 for a summary table showing the value of the different benefits and costs identified which result in the benefit cost ratio.) European Union Horizon 2020—the biggest European Union Research and Innovation program—is funding a three- year project entitled Calculating and Operationalizing the Multiple Benefits of Energy Efficiency in Europe (COMBI). COMBI aims to quantify the multiple nonenergy benefits of energy efficiency in the EU-28 area and was developed because existing research on the MBEE is incomplete and dispersed. The overall objective is to provide a comprehensive overview of the existing benefits in Europe for policy makers, evaluators, and the interested public and to make research findings accessible. One of COMBI’s goals is to develop a graphical online tool to visualize the multiple energy efficiency impacts and their aggregation. The project is organized around five main working group research topics: t Air pollution t Resources t Social welfare t Macroeconomy t Energy system Chapter 4 48 The project is coordinated by the Wuppertal Institute with the University of Antwerp, University of Manchester, Copenhagen Economics, and Advanced Buildings and Urban Design as research partners. International The IEA has conducted several workshops on MBEE at which key international experts have shared their work. This led to the frequently cited 2014 IEA publication describing MBEE in five areas: macroeconomic development, public budgets, health and well-being, industrial productivity, and energy delivery. The IEA has also put forward the concept of “energy efficient prosperity” that considers the social and economic benefits of enhancing energy efficiency, which is especially relevant for developing countries.29 UNEP (2015) published a report entitled “The Multiple Benefits of Measures to Improve Energy Efficiency,” which summarizes the results of four detailed studies. The report’s objective is to illustrate how MBEE can be used to promote efficiency in the Energy Efficiency Accelerators Initiative, which is part of Sustainable Energy for All. The report estimates energy-savings potential using two different models, compares the results, assesses the economic impact of realizing the energy efficiency potential estimated in the G20 countries, and provides case studies of 25 programs in 8 thematic areas. The survey provides qualitative insights into the economic, social, and environmental benefits attributable to increased energy efficiency, which macroeconomic models cannot capture. 4.3 SECTOR-SPECIFIC EXPERIENCE 4.3.1 Street Lighting Energy Efficiency Measures Large energy savings are possible with technology advancements in LED street lighting and controls. The main benefit of this advanced technology is reduction of energy consumption (often reaching 50% or more) without compromising the level of lighting. This reduces municipalities’ electricity costs,30 which translates into a reduced budgetary burden. Energy efficient LED streetlights bring additional benefits such as reduced carbon emissions, improved visibility and public safety, and reduced light pollution. Potential MBEE: t Maintenance cost savings. LEDs have a longer life than the incumbent units they generally replace (10–15 years versus 4–6 years), which decreases maintenance requirements. In addition, remote monitoring is often installed with LEDs, which helps to identify system problems in real time. t Air emissions reductions. As in many other energy efficiency projects, saved energy can reduce emissions, depending on the mix of fuels used to generate power. Assessing and Measuring the Performance of Energy Efficiency Projects 49 t Improved public safety. LEDs’ white color rendering and uniform illumination patterns31 are considered to improve visibility, which helps reduce criminal activity and can improve safety for drivers, cyclists, and pedestrians. The New Zealand Transport Agency Economic Evaluation Manual cites a 35% reduction in crashes resulting from upgrading or improving poor lighting (Frith and Jackett 2013). t Reduced light pollution. LEDs are designed to be directional, so their light flow is controllable, which can reduce the amount of light directed into the night sky. This feature helps to reduce light pollution and sky glow (unnecessary illumination of night sky by artificial lighting). However, the greater content of blue wavelength light in LEDs produce more glare, which contributes to light pollution (IDA 2016). t Reduced waste. Most conventional fluorescent, high-intensity discharge, or high-pressure sodium lamps contain a range of materials, including mercury that can be damaging to the environment if not disposed of correctly. Because LEDs contain no toxic materials and are completely recyclable, they can greatly contribute to sustainability goals. Additionally, their long operational life span means that replacement lamps no longer need to be manufactured, which saves materials, labor, and energy. 4.3.2 Multifamily Buildings In countries with cold climates, buildings generally represent the largest source of energy consumption. In countries with warm climates, the soaring penetration of air conditioning is contributing to increase the share of buildings in energy consumption, notably when the indirect energy used for the production of electricity used in building is accounted for. Buildings are also considered part of the solution, as a large source of untapped energy efficiency potential exists in this sector with investment costs that are lower than the cost of the supply of energy. Moreover, energy efficiency in buildings has numerous benefits that are directly tangible to households. Potential MBEE: t Lower energy bills. Energy savings allow reducing the cost of energy to the building occupants. t Increased comfort. Measures like improved insulation of buildings or more efficient air conditioners contribute in increasing the comfort of the building occupants. t Reduced operation and maintenance. Energy efficiency can reduce O&M costs by reducing the frequency or intensity of work needed for addressing equipment, lighting, and building durability issues. For example, Cluett and Amann (2015) report a 17% decrease in O&M costs from air sealing, roof cavity insulation, and furnace replacement measures in a study of multifamily building program MBEE in the United States. t Reduced air emissions. Some energy efficiency projects targeting biomass cookstoves can reduce drastically the level of harmful indoor emissions. Moreover, because the main source of Chapter 4 50 energy in buildings is generally electricity, some energy efficiency projects targeting appliances and lighting can mitigate GHG emissions and air pollution significantly, depending on the mix of fuels used directly and to generate power in the country considered. t Economic impacts. The implementation of energy efficiency measures in the building sector often results in increases in job creation from local companies that have to implement the measures. In some cases, trainings on energy efficiency improvement and energy efficiency assessment are also necessary, increasing the labor impact. 4.4 RECOMMENDATIONS FOR INCLUSION OF MULTIPLE BENEFITS OF ENERGY EFFICIENCY IN MEASUREMENT & VERIFICATION MBEE are often omitted from assessments of the benefit of energy efficiency programs for three main reasons: lack of data, lack of consensus for quantifying their impact and monetary values, and lack of resources to conduct the analysis. However, MBEE contribute significantly to economic growth, social welfare, and environmental health, justifying efforts by policy makers and program administrators in overcoming these barriers and for including MBEE in evaluations of energy efficiency programs so that the social benefit of these programs can be optimized. In some cases, evidence has shown that when MBEE are accounted for, program’s benefit-cost ratio is increased fourfold (see examples in section 4.1.1, Recipient Benefits). Not accounting for MBEE may lead to suboptimized allocation of funds. This recognition has led many national government agencies to increasingly integrate MBEE to inform energy efficiency policies and program investment decisions. Cost-benefit and appraisal methodologies are being updated to increase the number of MBEE being considered, quantified, and assessed. However, many gaps remain in practice and current scientific evidence is largely derived from studies in North America, Western Europe, and Oceania (mostly Australia and New Zealand). Although the multitude of energy efficiency benefits makes clear the broad value of energy efficiency programs, it also creates challenges. A large number of benefits exist. A first selection must be applied to identify the benefits most relevant to a country’s stakeholders and beneficiaries which correspond to the overarching goal(s) of the program. Information about benefits can also be used in different ways; how the information is used determines whether the benefits can simply be quantified in physical terms or must be expressed in monetary terms. Once the most valuable or relevant benefit categories are selected for a given purpose, decisions must be made about how to measure the benefits and how to generate results that are robust enough to inform energy efficiency policy making. Continued research on the topic of MBEE has resulted in new modeling tools that can provide comprehensive benefits calculations and streamline the process. However, tools have typically been developed and used in the United States and the European Union, and rarely cover developing or emerging economies. Assessing and Measuring the Performance of Energy Efficiency Projects 51 Based on this analysis, the following steps are recommended for incorporation of MBEE in analysis of energy efficiency projects: 1 | Identify the benefits most relevant to the overarching program’s goals and to the counterparts 2 | Determine the goal of quantifying the benefits (advertising, stakeholder engagement, program decision, impact evaluation) 3 | Consider MBEE at the beginning of a program design and planning 4 | Determine the form in which benefits will be quantified (monetized or not) 5 | Develop the evidence base and establish reference studies, most likely based on randomized control trial (RCT) methods or willingness-to-pay surveys 6 | Streamline the quantification process by developing appropriate model and tools Quantification of benefits require selecting a method. Less tangible benefits are sometimes quantified differently across countries (e.g., comfort level is estimated differently in the United States and United Kingdom). Comparison of methods and discussion about which method to apply in the context of developing countries can help to build a consensus around the method finally selected. Although an increasing number of research projects and publications have recently studied MBEE, the focus had tended to be either on developed economies or global macroeconomic impacts. Researchers and practitioners commonly agree that accounting for MBEE is especially essential for assessing low-income household energy efficiency results. The quantification of MBEE in developing countries could also have significant impacts for policy and investment decisions. Public sector interest in energy efficiency is expected to encompass multiple benefits, including social and economic. MBEE can help identify appropriate incentives to encourage assessment of energy efficiency projects. More research is in fact needed to explore MBEE for developing countries, to deepen understanding of the opportunities that MBEE offer society, to develop evidence and quantify MBEE in their context, to determine transferability of methods used in developed countries to developing countries context, and to develop models and tools to provide a robust base for rapid decision making. ENDNOTES 24 RCT studies randomly assign individuals to an intervention group or to a control group, in order to measure the effects of the intervention by comparing the results from both groups. 25 The reliability of survey methods to monetize the value of benefits is the subject of much debate. Wobus et al. (2007) examine the range of methods for valuing nonenergy impacts and assess the benefits and constraints of each approach in the context of U.S. utility energy efficiency program assessments. Chapter 4 52 26 “Access to energy is the ability to avail energy that is adequate, available when needed, reliable, of good quality, affordable, legal, convenient, healthy & safe, for all required energy services across household, productive and community uses” (ESMAP 2014). 27 Many countries have developed specific emissions factors. 28 Estimates of rebound effects appear to vary widely depending on the type of equipment or energy use targeted, the magnitude of the efficiency improvements considered, and the class of consumers affected (see de la Rue du Can et al. 2015). 29 See https://www.iea.org/topics/energyefficiency/beyondenergyefficiency/energyefficientprosperity/ 30 In municipalities, spending on public lighting can account between 10–40% of their overall energy bills. 31 http://apps1.eere.energy.gov/buildings/publications/pdfs/ssl/ssl_whitepaper_nov2010.pdf Assessing and Measuring the Performance of Energy Efficiency Projects 53 5 S T E P - B Y- S T E P M E A S U R E M E N T & V E R I F I C AT I O N Based on industry experience, literature review, the M&V protocols summarized earlier, and the review of projects, the following steps have been outlined. The following steps provide generic guidance on how to plan and implement M&V for energy efficiency projects and programs. 1 | Role of Stakeholders. Define the roles of different stakeholders with respect to M&V. This is particularly important to identify the energy efficiency benefits most relevant to each of the stakeholders. There are typically three main stakeholders: (a) energy efficiency project beneficiary, (b) energy efficiency project implementer, and (c) project/program administrator. With respect to M&V, measurement can be done by the project implementer or project beneficiary or by a third party. The verification has to be done by the project administrator or a third party engaged by the program administrator. The overall program evaluation should be done by a third party independent of the project proponent or program administrators. 2 | Identify the relevant MBEE. Energy savings is the primary goal of most energy efficiency interventions. Once the key stakeholders have been identified, identify the MBEE that may be most relevant and attractive to the stakeholders (using Table 1.1). The selection of M&V methods will depend on the MBEE, including energy savings, identified for the project. 3 | M&V Methodologies. Discuss and develop the M&V plan in close consultation with the project proponents (implementer and beneficiary) based on the particular features of the energy efficiency project and considering standard M&V protocols, namely, IPMVP or CDM methodologies for energy efficiency projects, such as AMS-II.C (demand-side energy efficiency for specific technologies) and AMS-II.L (demand-side activities for efficient outdoor and street lighting technologies). These are recommended as they are the most comprehensive, transparent, and flexible M&V methodologies. CDM-approved M&V methodologies for energy efficiency projects can be used for non-CDM projects, focusing the baseline and monitoring aspects of the methodologies (while other CDM-specific requirements can be ignored). In general, it is still not common practice in developing countries for project implementing agencies to use internationally approved M&V protocols, as they tend to lead to additional project costs, and the implementing agencies are often not technically equipped to use the international protocols. However, particularly where energy savings or other benefits are to be monetized or form the basis of payment, these protocols can help strengthen energy efficiency projects. When feasible, it is also useful to consider building the capacity of the project stakeholders in understanding M&V. The M&V plans come in all shapes and sizes and reflect upon the complexity and size of the project and the budget of M&V. For example, the retrofit isolation method involves narrowing of the measurement boundary to wrap tightly around the system, area, or equipment affected by Assessing and Measuring the Performance of Energy Efficiency Projects 55 an energy efficiency measure. The purpose is to reduce the effort required to understand and incorporate independent variables and static factors that affect site energy use but are unrelated to the energy efficiency measure. Though more accurate results may be obtained by avoiding complexity, tightening a boundary typically requires additional metering at the boundary edge, which may lead to increased M&V cost. Ultimately, the project proponent should make a decision on how to conduct the M&V of the energy efficiency project at the design stage of the project and clearly lay out the M&V plan— along with the identification of factors which may trigger adjustments—for the life of the project. 4 | M&V Plan Templates. The M&V planning process and standard M&V templates are publicly available and can be useful references for developing project-specific M&V plans. There are useful M&V guidelines in the public domain: Measurement and Verification for Federal Energy Projects of the Federal Energy Management Program and Measurement and Verification Operational Guide of New South Wales Government have detailed M&V templates, which are easy to use (refer to Annexes 3 to 5 for further details.) 5 | Activities before and after Implementation. It is often recommended to carry out an energy audit—or a detailed investment grade energy audit (IGEA) where appropriate—before the implementation of energy efficiency measures and commissioning process (rather than after implementation). In fact, this is typically the case where energy savings performance contracts are involved. IGEAs help get a better perspective on the feasibility of the measures, thus helping in the decision-making process with respect to implementing energy efficiency retrofits. The IGEA cost should not exceed 10% of the annual utility bill (US DOE 2011). Commissioning is the quality assurance procedure upon implementation of the project. It is a systematic, documented, and collaborative process, which includes inspection, testing, and training to confirm that the energy efficiency project components meet their requirement. As a general rule, the commission cost represents approximately between 0.6% and 1.8% of the project cost (PECI 2002). In case an IGEA is not possible, it is recommended to undertake a less intensive energy audit (or at a minimum, a walk-through energy audit). For some of the MBEE, additional information may have to be collected through qualitative surveys, focus group discussions, and other techniques. 6 | Third-Party Verification. It is typically recommended that the M&V activities should be carried out by an independent third party to ensure transparency in the M&V process. M&V by a third party gives unbiased and specialized evaluation of the system and energy performance of an energy efficiency project. At the same time, M&V services through the use of a third-party provider need to be weighed carefully between budget constraints and quality assurance. 7 | Deemed Savings Approach. The deemed savings approach consists of multiplying the number of installed measures by an estimated (or deemed) savings per measure, which is derived from historical evaluations. This approach is attractive because of its simplicity and lower associated costs. The Public Utility Commission of Texas used a deemed savings approach to estimate the savings generated from its residential lighting program, which involved retrofitting incandescent Chapter 5 56 lamps with CFLs.32 However, the deemed savings approach typically has less precision (by definition) and thus may increase the level of uncertainty of the actual achieved energy savings. A deemed savings approach may nonetheless be appropriate if actual measurement is not possible for baseline development and energy savings calculations. A deemed savings approach is often considered suitable in the case of projects where the key parameters are fairly constant. In order to address the higher uncertainty levels associated with deemed savings, it is typically recommended to use a conservative approach to address any risk of overestimation of impact. A slightly more complex approach to estimating savings—but more robust—is to use simplified, predefined calculations that employ a combination of deemed or “default” input assumptions with some site-specific inputs and/or sample measurements. The deemed savings approach requires no further evaluation, M&V, engineering analysis, or market research provided that there is a mechanism to ensure that energy efficiency measures are indeed installed and operated in accordance with the measure description and technical requirements. 8 | M&V Process. At the beginning of the project, it is important to outline the M&V process. The process should be made as simple as possible. An illustrative flow chart is provided in Figure 5.1. The schematic highlights the logical process flow, main activities, their output, and quick reference notes. For example, once the decision on performing M&V is taken, the next logical step is M&V design. M&V design is the main activity. The outputs of M&V design are decisions on M&V option, measurement boundary, etc. The quick reference notes draw attention to important factors like the feasibility, level of effort, and so on. 9 | Baseline Development. A baseline study should be conducted before the onset of energy efficiency activities in order to establish the pre-installation exposure conditions of the outcome level indicators. This means determining ex ante the data to be collected and conducting relevant measurements and data/information gathering on the pre-energy efficiency project situation and energy use. (Although it is not uncommon—yet more challenging—for baseline studies to be conducted after the retrofit activities have already begun.) It is important to consider that in some cases there may be a need to make adjustments to the baseline (e.g., colder weather may involve changing assumptions for the energy needed to provide heating services). It is important to consider the possibility of such potential adjustments from the outset. t Baseline data/inventory: A baseline study should mention all the categories and subcategories of parameters for which data are collected. An inventory of all equipment should be prepared to conduct the verification in the future. The source of the data should be recorded properly. t Identification of static factors: Identify the static factors that will affect energy use in the measurement boundary but are not included in the routine adjustment. For example, for a lighting project, this could be a substantial change that might occur in the operating hours, or lux levels. Assessing and Measuring the Performance of Energy Efficiency Projects 57 FIGURE 5.1 Measurement & Verification Flow Chart %()*%*  '(&"*%!*) 0 T/'& !$'#$%* (&'&) ) %()*%*  - *- %- (- y %*+(& ) 0 (!,() 0 %!*) !)!&%&%'(&"* ''(& '(&($ 0 ,(##''(& &( &(%& &'*!&% 0 ,#+**& )+($%*&+%( y *($!%)!!#!*/!%)* )!% Ke/'($*() ''(& % %*(*!,*) e.'*#,#&&(* '(*!%/# 0 *($!%)!% Re,!-$&!/!%))( y) #$%* Sa,!%),)+%(*!%*/ 0 *($!%'(&"* !$!% *!$!%()&+(+* '#% +* 0 ('('#% '#%'('(*!&% 0 ('(&*&&#) )#!% 0 Ke/'($*($)+(- * * $%**&*($!%)#!%e 0 * (*&##*!&%)'( %(/$&#% %(/ '#% %#/)!) +%(*!%*/ 0 %(/*%#/)!)#&% % +%(*!%*/ -!* +%(*!%*/&()#!% %(/+) $'#$%* ) P&)*(*(&!* 0 Ke/'($*( $)+($%* X $)+($%*'&)* * !%)*##*!&% X 0 )#!%"+)*$%* Sa,!%)% 0 #+#*%(/ +%(*!%*/%#/)!) ),!%)%+%(*!%*/ '&(*!% +*&$ 0 '&(*&+*&$) ('&(* 0 Sa,!%).'()) 0 .*('&#*),!%) (&"*#&) Note | The term energy conservation measure (ECM) in this figure is equivalent to the term “energy efficiency measure” used throughout this report. Source | NSW OEH 2012. Chapter 5 58 t Measurement techniques: It is recommended that a decision be made about the measurement techniques well in advance, and the barriers and challenges that might be faced should be listed. t Linkage with planned activities: The baseline study should be closely linked with the critical aspects of the monitoring plan so that the data collected can be replicated, if necessary, during the ongoing activity monitoring and any subsequent evaluations. Baseline data should provide the minimum information required to assess the quality of the activity implementation and to measure the development results. t Clear goals and objectives: It is recommended that the project’s logical framework be reviewed to ensure that it is clear and well structured. Logical and precisely expressed outputs, component level objectives, purpose, and goal for an activity will assist data collection, making clear what needs to be measured. t Data management system: Planning should include adequate provision for data collation and analysis, including appropriate staff, materials such as computer software and recording forms, data storage facilities, and a clear picture of who will need to access data and in what form. t Reconstructing baseline data: In the event no baseline study was carried out prior to installation and completion of the project and no baseline data are available, reconstructing the baseline data is necessary, using secondary data, project records, and interviews. 10 | Post-Implementation. Post-implementation data must be collected using the same principles/ techniques defined ex ante and as applied to baseline data collection so as to maintain uniformity in the data collection process and decrease the associated uncertainties. For example, in an energy efficiency street lighting project, it is advisable to use the same energy meter and sampling system to record baseline energy consumption and post retrofit energy consumption. 11 | M&V Report. Define the expected final M&V report outline at the beginning of the project. t Use the details within the M&V plan to shape the report, including goals, expected outcomes, and measures for success. t Use both words and diagrams to demonstrate the savings. t Add pictures that demonstrate the energy efficiency measures on-site and the process for conducting measurements. t Describe step-by-step data analysis and savings calculations. Add equations with explanations if they are unfamiliar to the audience. t Report savings figures using an appropriate number of significant digits. t Note that “actual” savings can only be stated for the post-implementation measurement period. Any extrapolation beyond this is considered an estimate. Assessing and Measuring the Performance of Energy Efficiency Projects 59 12 | Risk and Responsibility Matrix. A risk and responsibility matrix should be included clearly highlighting the risk and responsibilities associated with M&V along with an approach to complete the responsibilities. 13 | Continuous M&V. Instead of a onetime M&V approach, it is preferable to use continuous monitoring with the help of technologies such as energy management systems (EMS) and central control and monitoring systems where appropriate and feasible. Verification activities can be performed at regular intervals. This approach will help the beneficiary in sustainable energy efficiency. However, continuous M&V comes at a cost. It is important to perform a proper cost–benefit analysis before committing to invest in it. In most projects where such sophisticated equipment is installed, it is considered an energy efficiency measure in its own right with a specific payback and, thus, is not included in the cost of M&V. Annex 6 provides a short note on the recent advancements in technologies that could be useful in conducting M&V. 14 | Impact Evaluation. Apart from project-specific M&V, it is recommended to undertake overall program impact evaluation for multiple projects within the same portfolio. The impact evaluation will estimate the net change in electricity usage, demand, and also the behavioral impacts that are expected to produce change in the energy use. This means the impact evaluation will estimate the direct impact (i.e., energy savings), and the indirect impact in the form of behavioral changes that will lead to energy savings, as well as other potential associated impacts. 15 | Rebound Effect (and MBEE). A rebound effect is frequently observed in energy efficiency projects, although the magnitude is often not so large and does not overwhelm the savings from the project. It is often advisable to focus on the economic efficiency of the project in a broader sense rather than focusing on the rebound. Instead of considering the rebound effect as a deterrent or negative aspect of energy efficiency projects, efforts should be made, as mentioned above, to include the social and economic MBEE associated with energy efficiency interventions in the impact evaluation. Particularly, in the context of developing countries, consideration of energy efficient prosperity, as suggested by the IEA, may be relevant. ENDNOTE 32 Details of the methodology can be found in Texas Technical Reference Manual Volume 2: Residential Measures Guide for PY2015 Implementation. Chapter 5 60 ANNEX 1 | LEXICON Actual Peak Reduction: The actual peak reduction in the annual peak load (measured in kilowatts) achieved by customers that participate in a utility demand-side management (DSM) program. It reflects the changes in the demand for electricity resulting from a utility DSM program that is in effect at the same time the utility experiences its annual peak load, as opposed to the installed peak load reduction capability (i.e., potential peak reduction). Adjusted Gross Savings: Gross energy savings that are adjusted to include what can be physically counted and reliably measured, such as installation/in-service rates, breakage of equipment, data errors, hours of use, measure persistence rates, and so on. Adjusted gross savings can also be calculated by applying a realization rate to gross savings estimates. Most regions determine adjusted gross savings through M&V activities, although the M&V methods vary substantially. Baseline: Baseline is the starting condition or metric against which the result of an intervention is evaluated. For energy efficiency projects, it can be defined as the level of energy consumption that occurs prior to implementation of energy efficiency measures. This can also be referred to as “business-as-usual,” if the baseline demonstrates independent change in the level of energy consumption, prior to or during, implementation of energy efficiency projects or programs. The baseline condition takes into account whether the measure is replacing equipment at burnout versus retrofitting or changing the performance of existing equipment that has substantial remaining service life. The baseline can also represent typical business-as-usual conditions for greenfield energy efficiency interventions. Baseline Adjustment: The nonroutine adjustments arising during the post-retrofit (or post commissioning) period that could not be anticipated (and may require custom engineering analysis). Base Year: The period serving as the reference point to assess the impact/performance of implementation of an energy efficiency measure or action. The “base year” may be limited to a single season if the measure’s impacts are not observable in multiple seasons. Benchmarking: It is a method for measuring the energy performance of a building, process (e.g., industrial process) or a program through the tracking of the energy use of a building, process or a program and then comparing it to the average for a similar building, process or program. Benchmarking allows direct comparisons of the energy use by accounting for variables such as local climate, area, patterns of use, operating hours and behavioral changes. Deemed Savings: A predetermined, validated estimate of energy and peak demand energy savings attributable to an energy efficiency measure in a particular type of application that may be used in lieu of direct measurement and verification activities. Also called “stipulated” energy savings. Demand-Side Management: Demand-side management (DSM) typically involves utility-sponsored activities designed to save electricity or gas through shaving the peaks during different times of the Assessing and Measuring the Performance of Energy Efficiency Projects 61 day. The ultimate goal of DSM for most utilities is to avoid the need to invest in new power plants or other equipment. Energy Audit: An energy audit is an assessment of current energy performance of an industry, building, process, equipment, or entity, which is conducted to determine and prioritize energy-saving improvements. Energy Conservation: Conservation is the process of preserving or using wisely. With respect to energy, conservation is reduction in energy-using behavior leading to using less energy services and to energy savings. It differs from energy efficiency in the sense that energy efficiency refers to energy reduction without sacrificing services. Energy Conservation Measure: An energy conservation measure (ECM) is a project conducted or technology implemented that reduces the consumption of energy in a facility, industry, equipment, process or entity. Energy Efficiency: Energy efficiency is the ratio of the energy service provided by a system to the energy put into it. Services provided can include building-sector end uses such as lighting, refrigeration, and heating; industrial processes; or vehicle transportation. Unlike conservation, which involves some reduction of service, energy efficiency provides energy reductions compared to a baseline without sacrifice of service. Energy Efficiency Program: Energy efficiency programs are a collection of similar projects that are intended to motivate customers in a specific market segment to implement more energy-efficient technologies and measures. Energy Efficiency Projects: An energy efficiency project is an activity or course of action involving one or multiple energy efficiency measures at a single facility, industry, site or program. Energy Efficiency Certificate: An energy efficiency certificate is a document or a seal certifying the authenticity of an electric appliance or a system for being energy efficient. Examples of such certificates are the “Energy Star” on appliances and Leadership in Energy and Environmental Design (LEED) certificates (silver, gold, platinum, etc.) for buildings. “White certificates,” a type of energy efficiency certificates, are tradable instruments giving proof of the achievement of end-use energy savings through energy efficiency improvement initiatives and projects. Energy Management System: An energy management system (EMS) is the mechanism to monitor, control, and optimize the performance of any energy system. Energy Performance Contract: A contract between two or more parties where payment is based on achieving specified results, typically, guaranteed reductions in energy consumption and/or operating costs. Also known as energy savings performance contract (ESPC). Energy Savings Performance Contract: An energy savings performance contract (ESPC) is a form of “creative financing” for capital improvement, which allows funding energy upgrades from energy cost reductions. Under an ESPC arrangement, an energy service company (ESCO) typically implements a project to deliver energy efficiency, or a renewable energy project, and uses the stream of income from ANNEX 1 | Lexicon 62 the cost savings, or the renewable energy produced, to repay the costs of the project, including the costs of the investment. Energy Service Company: An energy service company (ESCO) is an organization that provides energy efficiency and DSM-related services to facilities, utilities, industries, and other energy- consuming establishments. Free Ridership or Freeriders: The impact of customers targeted by a program who are tracked and measured by the program, but who would have adopted the recommended practice or measure in the absence of the program. Freeriders, if present and measured, will decrease a program’s overall impacts and cost effectiveness. Free Drivers: Customers that install the energy efficiency measure as a result of the indirect effects of the energy efficiency program but never collect a rebate or incentive. Gross Energy Savings: The change in energy consumption and/or demand that results directly from program-related actions taken by participants in an efficiency program, regardless of why they participated. This is the physical change in energy use after taking into account factors not caused by the program (e.g., changes in weather or building occupancy). Impact Evaluation: The process of measuring the effects and predicted longevity of an energy efficiency, water efficiency, or renewable energy program with sufficient confidence and precision upon which to evaluate cost effectiveness and to validate investment decisions. Investment Grade Energy Audit: An investment grade energy audit is a comprehensive analysis of potentially priced energy efficiency improvements with a distinct focus on financial concerns and return on investment. Key Performance Indicators: Key performance indicators (KPI) are metrics that are used to evaluate factors that are crucial to the success of a program/project. The KPIs differ for different programs. As an example for energy efficiency, the KPIs may be energy saved, payback period, etc., or they can also be social development and improved access to energy. Market Evaluation: Market evaluations are assessments of the structure or functioning of a market, the behavior of market participants, and/or market changes that result from one or more energy efficiency programs. Market evaluations indicate how the overall supply chain and market for energy efficiency products work and how they have been affected by a program. Measurement and Verification: Measurement and verification (M&V) is the process for quantifying energy savings from individual sites or projects (through data collection, monitoring, and analysis) and ensuring that the energy savings are being generated with a certain degree of confidence. Since savings cannot be directly measured, the M&V methodology is based on developing a plan to gather measurements on variables that are affected by the implementation of the energy efficiency project or measure. M&V can be a subset of program evaluation. Measurement Boundary: (i) The virtual contour of a device or system separating a set of processes considered to be relevant, in terms of an energy efficiency improvement action, from those that are not Assessing and Measuring the Performance of Energy Efficiency Projects 63 relevant. All the energy consumed by the equipment or system(s) within the measurement boundary must be measured or estimated. (ii) A notional boundary that defines the physical scope of an M&V project. The effects of an ECM are determined at this boundary. Metering: Collection of energy and water consumption data over time at a facility through the use of measurement devices. Multiple Benefits (of Energy Efficiency): The term multiple benefits aims to capture the many different benefits to different stakeholders as a result of investment in energy efficiency, apart from the energy saved and monitory benefits, which are often overlooked. Multiple benefits are also referred to as “co-benefits,” “ancillary benefits,” and “non-energy benefits.” Net Energy Savings: Net energy or demand savings are the change in energy consumption and/or demand that is attributable to a particular energy efficiency program. Estimating the net energy savings typically involves assessing free ridership and spillover. Net-to-Gross: An adjustment to overall program impacts that corrects for free drivers and freeridership effects. Payback Period: A payback period, in the energy efficiency industry, is the ratio of the estimated total cost of an efficiency measure divided by its annual financial savings. This figure is one way to determine whether an energy efficiency measure is cost effective. More sophisticated versions of this calculation may take interest rates and discount rates into account. Protocols: Protocols are sets of rules or guidance documents that aim to standardize procedures across different economies. In the energy efficiency sector, the term most commonly refers to measurement and verification protocols that are used to evaluate energy efficiency projects/programs. Rebound Effect (Take-Back Effect): Rebound effect is the term used to describe the effect that the lower costs of energy services, due to increased energy efficiency, has on consumer behavior both individually and nationally. It is essentially the extent of the energy saving produced by an energy efficiency investment that is taken back by consumers in the form of higher consumption, typically in the form of more hours of use. It may also take the form of a higher quality of energy service. Satisfied Energy Demand: Satisfied energy demand is the level of energy services that would be reached with access to better quality and more affordable services, and that would be adequate and reasonable for households (usually rural) to meet their basic needs (i.e., satisfied demand is seen when the income effect and energy cost effect are overcome). Spillover: Additional energy efficiency measures implemented by an energy customer that were induced due to participation in an efficiency incentive program. Nonparticipant spillover comprises action influenced by an energy program but not linked to participation. Suppressed Energy Demand: Suppressed energy demand is the situation where energy services provided are insufficient for necessary human development (due to poverty or lack of access to modern energy infrastructure) or only available to an inadequate level. ANNEX 1 | Lexicon 64 ANNEX 2 | COMPARISON M&V—EM&V—MRV EVALUATION, MEASUREMENT, MEASUREMENT AND MEASUREMENT, AND REPORTING, AND TYPES VERIFICATION (M&V) VERIFICATION (EM&V) VERIFICATION (MRV) Origin In a reaction to the lower-than- EM&V evolved to carry out impact The term MRV has its origin in expected investments in energy evaluation of the energy efficiency the international climate change efficiency in the 1990s related to program portfolios implemented by negotiations. It was coined in the high uncertainty associated with the investor-owned utilities (IOUs) 2007 Bali Action Plan (Para. 1b), future energy savings, the US in the United States. bringing together all aspects Department of Energy and Lawrence The earliest such efforts involved pertaining to transparency in the Berkeley National Laboratory initi- project-based measurement and climate regime, including, but not ated an effort in 1994 to establish verification (PB-MV) of individual only, the implementation of GHG an international consensus on projects; this was followed by mitigation activities. methods to determine energy/water an evolution and improvement efficiency and promote third-party in practices for a broad range of investment in energy efficiency energy efficiency program strategies projects. The effort also sought to and delivery mechanisms across help create a secondary market for sectors. energy efficiency investments (EVO website). This led to the publica- tion of the North American Energy Measurement and Verification Protocol (NEMVP) in 1996. The 1997 updated version was renamed the International Performance and Verification Protocol. Definition M&V activities comprise the EM&V is the collection of methods In the context of the UNFCCC, documentation of energy or and processes used to assess the MRV is a term used to describe all demand savings at individual sites performance of energy efficiency measures that states take to collect or projects using options that programs to measure the energy or data on emissions, mitigation involve measurement, engineering demand savings, and to determine actions, and support, to compile calculations, analysis, simulation if the program is generating the this information in reports and modeling, etc. expected level of savings (US DOE inventories, and to subject these to website). The addition of “evalu- some form of independent review ation” refers to an independent or analysis. process to determine the success It cover countries’ quantitative and cost effectiveness and to estimates of GHG emissions capture lessons. (which may be associated with several measures, including EE) (measuring), communication of progress in achieving objectives, and implementing climate change- related activities (i.e., reporting), and procedures to ensure that the reported information is prepared in accordance with agreed method- ologies (verification), which often involves some form of third-party (international) review or analysis. Assessing and Measuring the Performance of Energy Efficiency Projects 65 EVALUATION, MEASUREMENT, MEASUREMENT AND MEASUREMENT, AND REPORTING, AND TYPES VERIFICATION (M&V) VERIFICATION (EM&V) VERIFICATION (MRV) Scope M&V typically applies to energy While EM&V can be used for both MRV is associated with the trans- efficiency projects. It can cover all projects and programs, it is a pro- parency and accountability of GHG types of energy efficiency activities cess typically adopted in the context mitigation actions (including energy (e.g., in residential as well as of programs. It covers all types efficiency as well as all other miti- industrial sectors). of programs seeking to enhance gation and sequestration activities) energy efficiency (e.g., incentive and financial and technical support schemes, DSM programs). for mitigation. In the specific case of mitigation actions through EE, MRV can apply to projects and programs. Stakeholders Project owner, project implementer, Government bodies, project admin- International community, project funder istrators, utilities governments, stakeholders of market-based mechanism, project implementer, project owner ANNEX 2 | Comparison M&V—EM&V—MRV 66 A N N E X 3 | L I S T O F M O N I T O R I N G & V E R I F I C AT I O N P R O T O C O L S UTILIZATION EXAMPLES OF M&V PROTOCOLS OR GUIDELINES DESCRIPTION Individual Energy Effi- IPMVP Protocols or guidelines for ciency Project M&V ASHRAE Guideline 14 evaluating energy savings Federal Energy Management Program (FEMP) for a single energy efficiency Australia’s BPG M&V project implemented in Fide’s Mexico M&V Guide an industrial enterprise or ClubS2E (France—energy efficiency stakeholders) building (e.g., a project Measurement & Verification Process for Calculating and Reporting on implemented by an ESCO). Energy and Demand Performance (CEM) This could be based on a measure-isolation approach or a whole-facility approach. Energy Efficiency The California Evaluation Framework, 2004 Protocols or guidelines Program Evaluation California Energy Efficiency Evaluation Protocol, 2006 for evaluating real energy National Energy Efficiency Evaluation, M&V Standard, USA LBL savings generated by energy Model Energy Efficiency Program Impact Evaluation Guide, US EPA efficiency programs. The Evaluation and Monitoring for the EU directive on Energy End-Use program evaluation includes Efficiency and Energy Service, Intelligent Energy Europe, 2009 prEN several components, one of 15900 Energy Efficiency Services (Europe) them being the energy sav- Energy Efficiency Program Impact Evaluation Guide, US Department ings impact evaluation. Dif- of Energy (US DOE), SEE Action program, 2012 ferent evaluation techniques Arkansas EM&V protocol may be used to demonstrate Common State-wide Energy Efficiency Reporting Guidelines (not the savings achieved. Per- M&V per se but an integration of different states’ savings; may be of forming M&V on a sample of interest to such a large country as China, India) or all the projects included in the program is one of them. There are many other protocols and guidelines that, though they share similar basic concepts and principles, are adapted to specific contexts of individual jurisdictions. Nationwide/Region-wide CIPEC program, the Canadian government (voluntary) Procedures for calculating Tracking of Trends in Dutch Long-term Agreements (LTAs) (voluntary) energy intensity performed Energy Use Indices or by government ministries, Energy Intensity Since many countries track these indicators, there are many more statistical agencies, or examples. research institutions. Could be voluntary initiatives or government regulation to collect energy consumption information. Assessing and Measuring the Performance of Energy Efficiency Projects 67 UTILIZATION EXAMPLES OF M&V PROTOCOLS OR GUIDELINES DESCRIPTION Emergency Manage- ISO 50001 Energy Management System (Global) Energy management ment Systems for EN16001—Energy Management Standard (Europe) processes and procedures Organizations implemented in an orga- nization to monitor energy performance. The energy performance indicators (EnPIs) can be based on energy units or on other units (e.g., COP for chillers). The energy measurement system is only one component of a larger long-term initiative in a facility or organization. In some organizations, the data collected and organized within the framework of the EMS can be used to conduct M&V of energy savings. Climate Change— World Resource Institute (WRI), Greenhouse Gas Protocol, World Protocols for measuring Emission Trading Business Council for Sustainable Development emission reductions. Often Scheme; Monitoring, European Union Méthodologies (EU ETS) included as part of an emis- Reporting, Verification Western Climate Initiative (WCI) sions trading scheme (ETS). (MRV) New Zealand ETS For energy efficiency projects US Northeast and Mid-Atlantic State Regional Greenhouse Initiative submitted as part of the ETS (RGGI) scheme, there is always an California ETS (Cal ETS) M&V component to calculate Australia “Clean Energy Future” Carbon Pricing Mechanism energy savings. These sav- Tokyo Cap-and-Trade Program (Tokyo C&T) ings are then converted into Perform, Trade, Achieve (PAT) India emission reductions. Climate Action Reserve ODS Project Protocol VCS Recovery and Destruction of ODS from Products  Energy Efficiency Certifi- Italian White Certificate Scheme Protocol for measuring cate Exchange/Trading French White Certificate Scheme energy efficiency achieved Schemes UK Energy Efficiency Commitment Scheme by individual projects or (White Certificates) programs. They are used in the context of white certificate schemes. Source | World Bank 2013. ANNEX 3 | List of Monitoring & Verification Protocols 68 A N N E X 4 | S U M M A R Y O F M O N I T O R I N G & V E R I F I C AT I O N P R O T O C O L S International Performance Measurement and Verification Protocol (IPMVP): IPMVP Volume I is an international measurement and verification (M&V) protocol describing different methods to determine water and energy savings of energy efficiency projects. IPMVP was first published in 1996 under the name of North American Energy Measurement and verification protocol (NEMVP). It was first developed by a volunteer committee under the United States Department of Energy (US DOE). Since 2001, the committee in charge of IPMVP has developed into Efficiency Valuation Organization (EVO), a not-for-profit organization to improve the protocol’s content and promote its use. IPMVP is in its fourth version of publication and is translated into more than 11 languages, describing the common practices of savings measurement, calculations, and follow-up of energy or water efficiency projects. IPMVP presents four M&V options to evaluate a project’s savings and the activities include on-site studies, energy or water flow measurements, and follow-up of independent variables, calculations, and reports. It also presents the M&V principles, the structure of an M&V plan, and explanations on measurement boundaries, adjustment bases, measurement period, and reporting (EVO 2012). M&V methods prescribed in IPMVP are presented in Table A4.1. IPMVP presents a framework for transparent, reliable, and consistent reporting on the project’s savings, which can be used to develop M&V plans for projects. IPMVP Volume 1 is a support document describing common practices in measurement, calculation, and monitoring of savings achieved by energy efficiency or water projects at end-user facilities (which are generally buildings, plants, or factories, but can also be public lighting systems and municipal water distribution networks). M&V activities include studies of energy efficiency measures implemented at sites, measurement of the flow of energy or water, identification of independent variables that affect energy usage, baseline modeling, and savings calculation and reporting. M&V activities carried out by adhering to the IPMVP can help ensure establishing conservative, transparent, and verifiable savings. IPMVP consists of three parts as follows: t Volume 1 describes the current practices in terms of measuring, calculating, and monitoring the savings generated by Energy Efficiency Improvement Actions. It defines the terminology to be used in the M&V Plan, as well as the procedures allowing an economically viable determination of the energy efficiency savings. t Volume 2 is devoted to the internal environmental quality of buildings, in particular the quality of indoor air, insofar as their appearance may be influenced by the S2E project. t Volume 3 describes the concepts and practices for the determination of energy savings in new buildings and gives further implementation examples. Assessing and Measuring the Performance of Energy Efficiency Projects 69 TABLE A4.1 IPMVP M&V Guideline Approaches APPROACH DESCRIPTION Option A: Retrofit isolation—key Key performance parameters are measured that define the energy use of the ECMs parameter measurement and contribute to the project. The measurements can be for a short duration or con- tinuous in nature depending on the expected variations in the measured parameter and length of the reporting period. Parameters that are not measured are estimated, and these estimates may be based on historical data or on the manufacturer’s specifi- cations along with the source. Option B: Retrofit isolation— This option is more detailed than Option A in the sense that all the parameters measurement of all parameters required to calculate energy savings of the ECMs have to be measured. This usually means measuring energy consumption and operating hours. Option C: Whole facility In this approach, energy savings are determined by measuring the energy consump- tion for an entire facility or sub-facility. Electric, gas meter, and utility billing data are used to determine the baseline for energy savings calculations. The measurement is continuous for the entire length of reporting period. Option D: Calibrated simulation Computer simulations of energy consumption of the entire facility or sub-facility aided by software are used to determine the energy savings. Usually used when multiple systems affect the facility energy use and no meters exist in the baseline period. Baseline energy use, determined using the calibrated simulation, is compared to a simulation of reporting period energy use. Source | EVO 2012; World Bank 2013. Comment: IPMVP provides a comprehensive framework for M&V and has become the de facto M&V standard in many countries, including the United States. IPMVP helps develop transparent and robust M&V plans, though the level of emphasis varies from region to region. Federal Energy Management Program (FEMP): FEMP M&V Guidelines were launched in the United States to help the federal government agencies measure and verify energy savings achieved in federal buildings. FEMP provides guidelines and methods for measuring and verifying energy, water, and cost savings obtained from a performance contract targeting federal buildings. The United States Energy Policy requires federal buildings to reduce their energy intensity. Hence, to assist federal agencies in reducing energy and cost of their building, FEMP was developed. FEMP is basically an application of IPMVP for federal buildings. It contains procedures and guidelines for quantifying the savings resulting from cogeneration, renewable energy, water conservation, and energy efficiency equipment projects. Version 2.2 of the FEMP M&V Guidelines was developed to provide methods and specific guidelines for the M&V of energy savings achieved through an energy performance contract targeting a federal building. Version 3 of the FEMP M&V Guidelines was published in 2008. It contains procedures and guidelines for quantifying savings achieved by projects in cogeneration, renewable energy, water conservation, and energy-efficient equipment. Currently (as on June 2015) in the draft stage, Version 4.0 includes revised definitions of the four main M&V options and provides a tighter overall presentation by moving much of the auxiliary material to ANNEX 4 | Summary of Monitoring & Verification Protocols 70 TABLE A4.2 FEMP M&V Guideline Approaches APPROACH DESCRIPTION Option A: Retrofit isolation—key Key performance parameters are measured that define the energy use of the ECMs parameter measurement and contribute to the project. The measurements can be for a short duration or con- tinuous in nature depending on the expected variations in the measured parameter and length of the reporting period. Parameters that are not measured are estimated, and these estimates may be based on historical data or on the manufacturer’s specifi- cations along with the source. Option B: Retrofit isolation— This option is more detailed than Option A in the sense that all the parameters measurement of all parameters required to calculate energy savings of the ECMs have to be measured. This usually means measuring energy consumption and operating hours. Option C: Whole facility In this approach, energy savings are determined by measuring the energy consump- tion for an entire facility or sub-facility. Electric, gas meter, and utility billing data are used to determine the baseline for energy savings calculations. The measurement is continuous for the entire length of the reporting period. Option D: Calibrated simulation Computer simulations of energy consumption of the entire facility or sub-facility aided by software are used to determine the energy savings. Usually used when multiple systems affect the facility energy use and no meters exist in the baseline period. Baseline energy use, determined using the calibrated simulation, is compared to a simulation of reporting period energy use. stand-alone documents. It also includes a new section that provides general M&V guidance for the majority of the standard energy conservation measures and water conservation measures typically implemented in federal energy savings performance contracts (ESPC) (US DOE 2008). M&V methods prescribed in the FEMP are presented in Table A4.2. FEMP is an application of IPMVP for federal buildings with detailed guidelines and examples on the approaches applicable to certain energy conservation measures normally found in federal buildings. Unlike other protocols that only present a general framework, FEMP provides specific measurement plans adapted to most common measures implemented in buildings. Comment: FEMP is limited to the United States and is exclusively used for measuring and verifying energy savings achieved in federal buildings through energy efficiency activities. FEMP and IPMVP are complementary documents. FEMP M&V Guide is an application document based on the 1997 version of IPMVP specifically prepared for the federal building sector in the United States. FEMP M&V Guide also provides a more detailed guidance on the application of different M&V options for specific energy conservation measures common in federal buildings. ASHRAE Guideline 14: The ASHRAE Guideline 14 was published in April 2000 with the aim to standardize the energy savings calculation procedures. This guideline can be considered a more technical version of IPMVP. The guideline provides three approaches to energy savings as presented in Table A4.3. Assessing and Measuring the Performance of Energy Efficiency Projects 71 TABLE A4.3 ASHRAE Guideline 14 M&V Options APPROACH DESCRIPTION Option A: Whole building approach This approach uses the main energy meter normally installed by the electricity, gas, oil, or hot water utility. Measures of energy conservation can address one or more subsystems in the building. It is often necessary to use billing history to define the baseline. Option B: Retrofit isolation This approach uses measuring devices to isolate the energy consumed by sub- approach systems affected by the extent of energy conservation. The baseline is determined from the observed measurements before installing the ECM. All parameters must be measured. Option C: Whole building calibrated This method applies to an entire building; computer software is used to create a simulation approach simulation model of consumption and energy demand for the building. Parameters affected by ECM are changed in the model to increase the accuracy level of energy savings results. Source | NRCan’s CanmetENERGY (2008). The ASHRAE Guideline requires measurement of all parameters; estimation is not permitted. It requires that an uncertainty analysis be introduced and discussed for each measurement plan as well. The guideline is well developed, detailed, and exhaustive, hence less flexible and can be difficult to use for someone who is not an M&V expert. Also due to it exhaustive nature, the M&V cost will tend to be high and hence not very suitable for simple projects (ASHRAE 2002). Comment: The ASHRAE Guideline 14 is comprehensive and provides thorough technical description of M&V. Though detailed and well developed, Guideline 14 is not extensively used by energy service companies (ESCO) or M&V practitioners for the following reasons: t The AHSHRAE Guideline 14 has to be purchased, as opposed to other protocols that can be downloaded for free. t Being a highly technical document, it is considered too academic and hence not practical for everyday M&V activities. t It is considered less flexible as there is no room for stipulation or limited metering (World Bank 2013). CDM Methodology—AMS-II.C (Demand-side energy efficiency activities for specific technologies) and AMS-II.L (Demand-side activities for efficient outdoor and street lighting technologies): The Clean Development Mechanism (CDM) requires the application of a baseline and monitoring methodology in order to determine the amount of certified emission reductions (CER) generated by a mitigation CDM project activity in a host country (UNFCCC 2016). “Methodologies for small-scale CDM project activities” is relevant to DSM activities in the public sector. AMS-II.C is for demand-side energy efficiency activities for specific technologies such as lamps, ballasts, refrigerators, motors, fans, air conditioners, pumping systems, and chillers. AMS-II.L is meant for demand-side activities for efficient outdoor and street lighting technologies. The CDM methodology document provides ANNEX 4 | Summary of Monitoring & Verification Protocols 72 the user with necessary guidelines to develop and implement an M&V plan per the CDM criteria so as to qualify for emission reduction certificates. The main contents of the guideline documents are scope and applicability, normative references, definitions, baseline methodologies, and monitoring methodologies. Comment: AMS.II.C and AMS.II.L are very comprehensive documents. The documents provide definitions and calculation methodologies for baseline development along with monitoring techniques. The project proponents need to follow these guidelines in carrying out the M&V of energy efficiency projects to qualify for emission reduction certificates. Australia’s Best Practice Guide to Measurement and Verification of Energy Savings: This best practice guide was developed by the Australian Energy Performance Contracting Association (AEPCA) with the support of the Innovation Access Program (IAccP) in 2004. This guide is almost similar to IPMVP with respect to M&V options. It also uses ASHRAE and FEMP guidelines for uncertainty and cost evaluation of M&V benefits (NRCan’s CanmetENERGY 2008). The guide aims to encourage development of energy efficiency projects in Australia with primary focus on energy savings performance contract. Comment: The Best Practices Guide is mostly used in the Australian continent. TABLE A4.4 GSEP M&V Methodologies METHODOLOGY DESCRIPTION Stipulated This methodology employs highly probable assumption (preferably a known fact) that has been agreed on in writing by all stakeholders as part of the M&V plan. (For example, the time period in which lighting systems will be operational can be stipu- lated due to it being controlled with timers or building management systems.) Measurement This methodology implies that the parameter in question will be physically measured using approved, calibrated measurement instruments and appropriate measure- ment periods. The measurement period should be long enough to capture the major energy-governing factors within the facility/boundary, i.e., the measurement period should fairly represent all operating conditions of a normal operating cycle. The length of the reporting period should be determined with due consideration of the life of the EE measure and the likelihood of degradation of originally achieved savings over time. Inference In this methodology, a suitable parameter is inferred when its value is determined by relating this (unknown) parameter to some other (known) parameter or parameters. There are two circumstances under which this method (inference) can be used: t 8IFOUIFGVOEBNFOUBMSFMBUJPOTIJQ T JTBSFLOPXO t 8IFOBSFMBUJPOTIJQNBZCFFYUSBDUFEGSPNBEBUBTFU Simulation This method is a detailed computer simulation of the system (or components of the system) using commercially available simulation packages. Simulation can be particularly useful in cases where the interaction between variables is present and required. Assessing and Measuring the Performance of Energy Efficiency Projects 73 Measurement & Verification Process for Calculating and Reporting on Energy and Demand Performance—General Guidance: The Global Superior Energy Performance (GSEP) Energy Management Working Group published this guide in September 2014 with the aim to help organizations around the world assess the impacts of energy efficiency projects. The guide provides a framework to develop consistent project-specific M&V plans. The guide defines three standard parameters (i.e., operating hours, load, and system efficiencies) essential from an energy saving’s point of view and presents four methodologies to obtain these parameters. Section II of the guide provides a framework for developing a project-specific M&V plan along with templates and flowcharts walking the user through the process. Measurement and Verification CLUBS2E: This guide is created by CLUBS2E (France) with the aim to make it easier to adopt and implement IPMVP protocol. The intention of this guide is to integrate the broad scope of IPMVP into a documentary context for the purposes of presentation and assistance with implementation. The California Evaluation Framework: This framework was published in June 2004 by the California Public Utilities Commission (CPUC). The framework provides an approach for planning and conducting evaluation of California’s energy efficiency programs. The framework provides a systematic approach to conduct evaluation so that all programs are able to document their effects and compare to other programs and supply options. The framework covers key concepts and considerations required for planning and conducting evaluation of energy efficiency programs. The framework details the following nine components required for performing program evaluation: t Impact evaluation, and M&V approaches t Process evaluation t Information and education program and evaluation t Market transformation program evaluation t Nonenergy effects evaluation t Uncertainty t Sampling t Evaluation and cost effectiveness t The use of evaluation roadmap Comment: The California Evaluation Framework forms the backbone of the California Energy Efficiency Evaluation Protocols. ANNEX 4 | Summary of Monitoring & Verification Protocols 74 California Energy Efficiency Evaluation Protocols (Evaluators Protocols): Published in April 2006, the protocols are the primary guiding tools for policy makers to plan and structure evaluation efforts for energy efficiency programs. The protocols are significantly grounded in the California Evaluation Framework of June 2004 presented on the previous page. The evaluation types covered include the following: direct and indirect impact (including the associated M&V approaches), market effects, emerging technology, codes and standards, and process evaluations. This document includes a separate protocol for each of the following categories: t Impact evaluation—direct and indirect effects t M&V (IPMVP) t Process evaluation t Market effects evaluation t Codes and standards program evaluation t Emerging technology program evaluation t Sampling and uncertainty protocol (for use in determining evaluation sampling approaches), reporting protocol (to guide evaluation data collection and reporting) t Effective useful life protocol (used to establish the period over which energy savings can be relied upon) Comment: The protocol is used by program evaluators to conduct evaluations of California’s energy efficiency programs and program portfolios. It is also used by policy makers to plan and structure evaluation efforts. National Energy Efficiency Evaluation, Measurement and Verification (EM&V) Standard: Scoping Study of Issues and Implementation Requirements: Prepared and published in April 2011 by the Ernest Orlando Lawrence Berkeley National Laboratory (LBNL) and prepared for the United States Government, this document presents a study on the scope of developing national-level EM&V standards. The document provides the following: t A set of definitions applicable to an EM&V Standard t A literature review of existing standards guidelines related to EM&V and evaluation of bottom-up versus top-down evaluation approaches t A summary of EM&V-related provisions of the federal legislative proposal that includes national (US) efficiency resource requirement t An annotated list of issues that are likely to be central to and need to be considered as part of developing a national EM&V standard for energy efficiency Assessing and Measuring the Performance of Energy Efficiency Projects 75 The document identifies four high-level issues associated with developing national EM&V standards and proceeds to nine issue topic categories that, if addressed and resolved, would take care of the high-level issues. The document also provides brief summaries of a few selected EM&V guidelines, protocols, and standards and concludes with a draft outline for EM&V national standards. Model Energy Efficiency Program Impact Evaluation Guide: The guide was published in November 2007 as part of the National Action Plan for Energy Efficiency (US). The guide provides guidance on model approaches for calculating energy, demand, and emissions savings resulting from energy efficiency programs. It aims to assist utilities, utility regulators, and others in the implementation of the National Action Plan for Energy Efficiency and the pursuit of its long-term goals. The guide describes a structure and several model approaches for calculating energy, demand, and emissions savings from facility energy efficiency programs that are implemented by cities, states, utilities, companies, and similar entities. It provides direction on evaluation process and key issues related to documenting, energy and demand savings, avoided emissions, and comparing demand- and supply-side resources. The guide also discusses the evaluation planning issues as well as presents some evaluation plan outlines. Evaluation and Monitoring for the EU Directive on Energy End-Use Efficiency and Energy Services (EMEEES): The EU Directive on Energy End-Use Efficiency and Energy Services, also known as Energy Service Directive (ESD), requires the member states to achieve the annual energy savings targets of 9% or more. EMEEES assists the European Commission in developing methods to evaluate the measures implemented to achieve the energy savings targets set out by the ESD. EMEEES has prepared a general method for bottom-up and top-down calculation methods plus guidelines for ensuring consistency between the results of bottom-up and top-down calculations. The bottom-up method starts from data at the level of a specific energy efficiency improvement measure (e.g., energy savings per participant and number of participants) and then aggregates results from all the measures. The top-down method starts from the global data (e.g., national statistics for energy consumption or equipment sales), then going down to more disaggregated data when necessary (e.g., energy efficiency indicators already corrected for some structural or weather effects). EMEEES developed 20 bottom-up case applications and 14 top-down cases of these general methods, which already cover the largest part of potential ESD energy savings from the energy efficiency improvement measures the member states have pledged to implement in their national energy efficiency action plans. ANNEX 4 | Summary of Monitoring & Verification Protocols 76 ISO 50001 Energy Management Standard (EnMS): ISO 50001 is a voluntary international standard developed by the International Organization for Standardization (ISO) to manage and improve energy performance. ISO 50001 EnMS is a framework developed for industrial facilities, commercial facilities, and organizations to manage energy, which includes energy procurement and use. The EnMS institutes a structure and discipline to implement technical and managerial strategies to cut energy consumption and GHG emissions. The standard addresses the following: t Energy use and consumption t Measurement, documentation, and reporting of energy use and consumption t Design and procurement practices for energy-using equipment, systems, and processes t All variables affecting energy performance that can be monitored and influenced by the organization ISO 50001 requires continuous energy performance improvement, but it does not include prescriptive energy performance improvement goals. It provides a framework through which each organization can set and pursue its own goals for improving energy performance. Certification by an independent auditor of conformity of the user’s energy management system to ISO 50001 is not a requirement of the standard itself. To certify or not is a decision to be taken by the ISO 50001 user, unless imposed by regulation. Alternatives to independent (third-party) certification include inviting an organization’s customers to verify its implementation of ISO 50001 in conformity with the standard (second-party verification) or self-declaring its conformity. EN16001-Energy Management Standard (Europe): The EN16001-Energy Management Standard is the European standard on energy management, similar to ISO 50001. EN16001 offers a systematic approach to monitor and reduce the energy consumption in all kinds of organizations. Like ISO 50001, it is based on plan-do-check-act cycle, with requirements for establishing an energy policy with solid objectives, putting in place activities to reduce and monitor energy use, verifying energy savings, and planning improvements. It offers a comprehensive set of guidelines to meet carbon emission reduction requirements. The Greenhouse Gas Protocol—A Corporate Accounting and Reporting Standard: The Greenhouse Gas Protocol is a multi-stakeholder partnership of businesses, nongovernmental organizations, governments, and others, spearheaded by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). The protocol sets global standards for how to measure, manage, and report GHG emissions. It serves as the basis for nearly every GHG standard and program in the world—from the ISO to The Climate Registry—as well as hundreds of GHG inventories prepared by individual companies. Assessing and Measuring the Performance of Energy Efficiency Projects 77 The protocol also offers developing countries an internationally accepted management tool to help their businesses to compete in the global marketplace and their governments to make informed decisions about climate change. The protocol sets out standard and/or guidance on the following: GHG accounting and reporting principle, business goals and inventory design, setting organizational boundaries, setting operational boundaries, tracking emissions, calculating GHG emissions, managing inventory quality, accounting GHG reduction, reporting GHG emissions, verifying GHG emissions, and setting GHG targets. EU Emissions Trading System (EU ETS): EU ETS is the foundation of the EU’s policy to fight against climate change and a key tool to reduce GHG emissions costs effectively. It is the first, and still the biggest, international system for trading GHG emissions allowance, covering more than 11,000 power stations and industrial plants in 31 countries (28 EU countries plus Iceland, Liechtenstein, and Norway). The system works on the cap-and-trade principle. A cap is set on the total amount of emissions that can be emitted by installations covered by the system. Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. EU ETS focuses on emissions that can be measured, reported, and verified with a high level of accuracy. The system covers emissions of carbon dioxide (CO2) from power plants, a wide range of energy-intensive industry sectors, and commercial airlines. It also covers nitrous oxide emissions from the production of certain acids and emissions of perfluorocarbons from aluminum production. Businesses must monitor and report their emissions each year and have their emission reports audited by Similar to the EU and its EU ETS, several countries and an accredited professional. Accounting and reporting jurisdictions have implemented multi-sector market-based can be done following protocols such as “The GHG cap-and-trade programs. (See World Bank 2016b). Protocols” summarized above. After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. These allowances are then cancelled so that they cannot be used again. The accurate accounting of all allowances issued is assured by a single EU registry with strong security measures. A company is penalized if it does not surrender enough allowances to cover its emissions. It has to buy allowances to make up the shortfall, is “named and shamed” by having its name published, and must pay a dissuasive fine for each excess tonne of GHG emitted. The fine in 2013 was €100 per tonne of CO2 (or the equivalent amount of N2O or PFCs). The penalty rises annually in line with the annual rate of inflation in the Eurozone. White Certificate Scheme: White Certificates are obligations imposed on electric and gas utilities to attain certain reduction in energy consumption among medium and large energy end users. These ANNEX 4 | Summary of Monitoring & Verification Protocols 78 are coupled with tradable energy savings certificates. The scheme has been developed to promote implementation of energy efficiency in industry. White Certificate obligations impose energy savings targets on energy companies; if the mandated targets are not met, they have to pay a penalty. The White Certificates are given to the utilities; whenever an amount of energy is saved, the utility can use the certificate for its target compliance or can sell the certificate to parties who cannot meet their targets, similar to emissions trading. They can be seen as a means of internalizing energy-use externalities and addressing energy efficiency market failures (Giraudet and Finon 2014). In Europe, the White Certificate Scheme is implemented in Italy, France, and the UK. The savings verification approaches used in the three countries are explained in the following paragraphs: The Italian White Certificate Scheme uses three M&V approaches: deemed savings approach with default factors for free riding; an engineering approach (delivery mechanism and persistence); and a third approach based on monitoring plans whereby energy savings are quantified via a comparison of measured or calculated consumptions before and after the project. All monitoring plans must be submitted for preapproval to the Regulatory Authority for Electricity and Gas (AEEG) and must conform to predetermined criteria (Bertoldi and Rezessy 2008). The French White Certificate Scheme uses a list of standardized actions with the saving evaluation method. Currently, a number of standard actions are employed in different sectors: 31 in the residential sector, 22 in the commercial sector, 3 in the industrial sector, and 3 in the transport sector (Bertoldi and Rezessy 2008). In the UK Energy Efficiency Commitment Scheme, the savings of a project are calculated and agreed based on a standard estimate taking into account the technology used, weighted for fuel type, and discounted over the lifetime of the measure. There is limited ex post verification of the energy savings carried out by the government in order to inform the design of standardized estimates in future periods (Bertoldi and Rezessy 2008). Assessing and Measuring the Performance of Energy Efficiency Projects 79 80 A N N E X 5 | C O M PA R I S O N O F M O N I T O R I N G & V E R I F I C AT I O N P R O T O C O L S GEOGRAPHICAL PROTOCOL APPLICATION KEY FEATURES COVERAGE COMMENTS International Perfor- IPMVP is an international M&V pro- IPMVP presents four M&V options to Global IPMVP is one of the most compre- mance Measurement tocol describing different methods to evaluate a project’s savings: hensive frameworks for M&V. It is and Verification Protocol determine water and energy savings of Option A: Retrofit isolation—key used extensively and has become (IPMVP) Volume I. energy efficiency projects. It presents a parameter measurement the de facto M&V standard in many framework for transparent, reliable, and Option B: Retrofit isolation—measure- countries. consistent reporting a project’s saving, ment of all parameters which can be used to develop M&V Option C: Whole facility plan for projects. Option D: Calibrated simulation IPMVP is available in more than 11 languages. Federal Energy Manage- FEMP M&V guidelines were launched Similar to IPMVP, FEMP presents four USA FEMP is an application of IPMVP ment Program (FEMP) in the United States to help the federal M&V options: for federal buildings with detailed government agencies measure and Option A: Retrofit isolation with mea- guidelines and examples on the verify energy savings achieved in surement of key parameters approaches applicable to certain ANNEX 5 | Comparison of Monitoring & Verification Protocols federal buildings. FEMP provides Option B: Retrofit isolation with mea- energy conservation measures guidelines and methods for measuring surement of all parameters normally found in federal buildings. and verifying energy, water, and cost Option C: Whole facility measurement FEMP provides specific mea- savings obtained from a performance Option D: Calibrated computer surement plans adapted to most contract targeting federal building. simulation common measures implemented in buildings. ASHRAE Guideline 14 The ASHRAE guideline 14 is a highly The guideline provides three USA Though detailed and well devel- technical M&V protocol. approaches to measure and verify oped, Guideline 14 is not exten- energy savings: sively used because of its highly Whole building approach technical nature. It is considered Retrofit isolation approach too academic and hence not practi- Whole building calibrated simulation cal for everyday M&V activities. approach The protocol requires measurement of all parameters, and estimation is not permitted. (continued) GEOGRAPHICAL PROTOCOL APPLICATION KEY FEATURES COVERAGE COMMENTS CDM Methodology- The AMS-II.C methodology is for These documents provide the user with Global The methodologies AMS.II.C and AMS-II.C and AMS-II.L demand-side energy efficiency activi- necessary instructions to develop and AMS.II.L are very comprehensive ties for specific technologies such as implement M&V plan as per the CDM documents. They provide defini- lamps, ballasts, refrigerators, motors, criteria so as to qualify for emission tions and calculation methods for fans, air conditioners, pumping reduction certificates. The main con- baseline development along with systems, and chillers. tents of the methodology documents are monitoring techniques. Project The AMS-II.L methodology is for scope and applicability, normative refer- proponents need to follow these demand-side energy efficiency activi- ences, definitions, baseline methodolo- guidelines in carrying out the ties for efficient outdoor and street gies, and monitoring methodologies. M&V of energy efficiency projects lighting technologies. to qualify for emission reduction certificates under the CDM. Australia’s Best Practice The guide aims to encourage develop- This guide is almost similar to IPMVP Australia, Asia This best practice guide was Guide to Measurement ment of energy efficiency projects with respect to M&V options, and it Pacific developed by the Australian Energy and Verification of in Australia with primary focus on also uses ASHRAE and FEMP guide- Performance Contracting Associa- Energy Savings energy savings through performance lines for uncertainty and cost evaluation tion (AEPCA) with the support of contracting. of M&V benefits (NRCan’s CanmetEN- the Innovation Access Program ERGY, 2008). (IAccP) in 2004. Measurement and Veri- The guide provides a framework to The guide defines three standard — The guide provides framework for fication Process for Cal- develop consistent project-specific parameters (i.e., operating hours, load developing project-specific M&V culating and Reporting M&V plans. and system efficiencies) essential from plan along with templates and on Energy and Demand the point of view of energy savings and flowcharts walking the user through Performance: General presents four methodologies to obtain the process. Guidance these parameters: Stipulated Measurement Inference Simulation Measurement and Verifi- This guide is created by CLUBS2E This guide integrates the broad scope France — cation CLUBS2E (France) with an aim to make it of IPMVP into a documentary context easier to adopt and implement IPMVP for the purpose of presentation and protocol. assistance with implementation. Assessing and Measuring the Performance of Energy Efficiency Projects 81 82 The California Evaluation The framework provides an approach The framework covers key concepts California, USA The framework provides a system- Framework for planning and conducting evalua- and consideration required for planning atic approach to conduct evaluation tion of California’s energy efficiency and conducting evaluation of energy so that all programs are able to programs. efficiency programs. The framework document their effects and compare details nine components required for to other programs and supply performing program evaluation: options. 1. Impact evaluation and M&V approaches 2. Process evaluation 3. Information and education program and evaluation 4. Market transformation program evaluation 5. Nonenergy effects evaluation 6. Uncertainty 7. Sampling 8. Evaluation and cost effectiveness 9. Use of evaluation roadmap California Energy This is a primary guiding tool for This document includes a separate California, USA The protocol is used by program Efficiency Evaluation policy makers to plan and structure protocol for each of the following evaluators to evaluate California’s ANNEX 5 | Comparison of Monitoring & Verification Protocols Protocols (Evaluators evaluation efforts for energy efficiency categories: energy efficiency programs and Protocols) programs. Impact evaluation—direct and indirect program portfolios. It is also used effects by policy makers to plan and Measurement and verification (IPMVP) structure evaluation efforts. Process evaluation Market effects evaluation Codes and standards program evaluation Emerging technology program evaluation Sampling and uncertainty protocol (for use in determining evaluation sampling approaches); reporting protocol (to guide evaluation data collection and reporting) Effective useful life protocol (used to establish the period over which energy savings can be relied upon) (continued) GEOGRAPHICAL PROTOCOL APPLICATION KEY FEATURES COVERAGE COMMENTS National Energy This document presents a study on The document provides: USA The document identifies four Efficiency Evaluation, the scope of developing national-level A set of definitions applicable to an high-level issues associated with Measurement and Verifi- EM&V standards. EM&V Standard developing national EM&V stan- cation (EM&V) Standard: A literature review of existing standards dards and proceeds to nine issue Scoping Study of Issues guidelines related to EM&V and evalu- topic categories that, if addressed and Implementation ation of bottom-up versus top-down and resolved, would take care of the Requirements evaluation approaches high-level issues. A summary of EM&V-related provisions The document also provides of the federal legislative proposal that brief summaries of a few selected includes national (USA) efficiency EM&V guidelines, protocols, and resource requirements standards, and concludes with a An annotated list of issues that are draft outline for EM&V national likely to be central to and need to be standards. considered part of developing a national EM&V standard for EE Model Energy Efficiency The guide aims to assist utilities, utility The guide describes a structure and USA — Program Impact Evalua- regulators, and others in the imple- several model approaches for calculat- tion Guide mentation of the National Action Plan ing energy, demand, and emissions for Energy Efficiency and the pursuit of savings from facility energy efficiency its long-term goals. programs that are implemented by cities, states, utilities, companies, and similar entities. Evaluation and Monitor- EMEEES assists the European Com- EMEEES has general method for Europe — ing for the EU Directive mission in developing methods to bottom-up and top-down calculation on Energy End-Use evaluate the measures implemented methods plus guidelines for ensuring Efficiency and Energy to achieve the energy saving targets consistency between the results of Services (EMEEES) set out by the Energy Service Directive bottom-up and top-down calculations. (ESD). Assessing and Measuring the Performance of Energy Efficiency Projects 83 84 ISO 50001 Energy ISO 50001 EnMS is a framework The standard addresses: Global ISO 50001 is a voluntary inter- Management Standard developed for industrial facilities, com- Energy use and consumption national standard developed by (EnMS) mercial facilities, and organizations to Measurement, documentation, the International Organization for manage energy, which includes energy and reporting of energy use and Standardization (ISO) to manage procurement and use. The EnMS consumption and improve energy performance. institutes a structure and discipline to Design and procurement practices for Certification by an independent implement technical and managerial energy-using equipment, systems, and auditor of conformity of the user’s strategies to cut energy consumption processes energy management system to ISO and GHG emissions. All variables affecting energy per- 50001 is not a requirement of the formance that can be monitored and standard itself. To certify or not is influenced by the organization a decision to be taken by the ISO 50001 user, unless imposed by regulation. Alternatives to indepen- dent (third-party) certification are to invite the organization’s customers to verify its implementation of ISO 50001 in conformity with the stan- ANNEX 5 | Comparison of Monitoring & Verification Protocols dard (second-party verification), or to self-declare its conformity. EN16001- Energy The EN16001-Energy Management EN16001 offers a systematic approach Europe — Management Standard Standard is the European standard on to monitor and reduce the energy con- (Europe) energy management similar to ISO sumption in all kinds of organizations. 50001. The Greenhouse Gas The protocol sets global standards for The protocol sets out standard and/or Global It serves as the basis for nearly Protocol: A Corporate how to measure, manage, and report guidance on the following: GHG every GHG standard and program Accounting and Report- GHG emissions. accounting and reporting principle, in the world—from the Interna- ing Standard business goals and inventory design, tional Standards Organization to setting organizational boundaries, The Climate Registry—as well setting operational boundaries, tracking as hundreds of GHG inventories emissions, calculating GHG emissions, prepared by individual companies. managing inventory quality, accounting GHG reduction, reporting GHG emis- sions, verifying GHG emissions, setting GHG targets. (continued) GEOGRAPHICAL PROTOCOL APPLICATION KEY FEATURES COVERAGE COMMENTS EU Emissions Trading EU ETS is the first and still the biggest The system works on the cap-and-trade Europe Similar to the European Union and System (EU ETS) international system for trading GHG principle. A cap is set at the EU level on its EU ETS, several countries and emissions allowance. It is a critical the total amount of emissions that can jurisdictions have implemented element of the European Union’s policy be emitted by the covered installations. multi-sector market-based cap- to fight against climate change and a Within the cap, companies receive or and-trade programs. (See World key tool to reduce GHG emissions cost buy emission allowances, which they Bank’s State and Trends of Carbon effectively. can trade with one another as needed. Pricing 2016). They can also buy limited amounts of international credits from emission- saving projects around the world. At the end of each year each company must surrender enough allowances to cover all its emissions, otherwise fines are imposed. White Certificate The scheme has been developed to White certificate obligations impose Italy, France, Great — Scheme promote implementation of energy energy-saving targets on energy Britain, Flanders, efficiency in industry. companies. If the mandated targets are Denmark It is an accounting tool and a tradable not met, they have to pay a penalty. The commodity. white certificates are given to the utili- ties. Whenever an amount of energy is saved, the utility can use the certificate for its target compliance or can sell it to parties who cannot meet their targets, similar to emissions trading. They can be seen as a means of internalizing energy-use externalities and addressing energy efficiency market failures. Assessing and Measuring the Performance of Energy Efficiency Projects 85 A N N E X 6 | A D VA N C E M E N T S I N M O N I T O R I N G & V E R I F I C AT I O N TECHNOLOGIES Advancements in information technology have had a big impact on the monitoring of energy efficiency programs. An important aspect is continuous M&V. Continuous M&V will help enhance transparency and confidence in achieved savings from energy efficiency projects by ensuring that the systems designed into a facility actually work as anticipated during operation, and that the facility does not overuse energy. Some of the new and upcoming technologies that have gained popularity and steady market growth in buildings, street lighting, and other public energy efficiency programs are energy management systems, central control and monitoring systems (CCMS), and advanced metering infrastructure (AMI). All of these technologies have similar modus operandi, in the sense that they have the capability to communicate with equipment and at the same time control and monitor them. Energy management systems (EMS): EMS are computer-aided mechanisms to monitor, control, and optimize the performance of any energy project. When used in reference to building management, they are referred to as building management systems (BMS) or building automation systems (BAS). Efficient use of EMS can save 10%–40% on electric bills. An EMS can enhance existing operations by allowing control of various aspects of energy use, including lighting, and HVAC from a central point, reducing error intensity caused by manual operation of these services. The Clean Energy Ministerial defines an Energy Management System (EnMS) as a suite of procedures and practices that ensure systematic tracking, analysis, and planning of energy use through a Plan- Do-Check-Act framework of continual improvement. (www.cleanenergyministerial.org) Central control and monitoring systems (CCMS): A CCMS can be regarded as a variation of EMS. The CCMS can be used in commercial/public buildings or public infrastructure projects such as street lighting and water pumping. There are three basic tasks that should be performed to qualify as a CCMS: monitor, control, and schedule. The basic system should be able to monitor the energy consumption, voltage, and other parameters. The system should be able to control the energy-consuming equipment, and the system should be able to schedule the operating hours of the equipment. The ability to remotely manage these three tasks makes the CCMS a vital tool in energy efficiency initiatives. In the context of street lighting, the CCMS operates either through wires or wirelessly, enabling individual lights to be switched on or off, dimmed, and monitored independently. Dimming and trimming strategies can then be developed, which contribute to energy savings and allow for lights to be independently monitored, reducing the need for scouting. CCMS has excellent monitoring capacity by virtue of two-way communication, which makes operation and maintenance easy. Though it increases the initial capital costs and requires some lifetime operating costs, CCMS can generate up to 20% more energy savings. A N N E X 6 | A d v a n c e m e n t s i n M o n i t o r i n g & V e r i f i c a t i o n Te c h n o l o g i e s 86 Advanced metering infrastructure (AMI): AMI is a combination of smart meters, communication networks, and data management systems that allows two-way communication between utilities and customers. Customer systems include advanced meters, visual home displays, home communication networks, energy management systems, and other equipment that enable smart grid functions in residential, commercial, and industrial facilities (SMARTGRID.GOV 2015). The customers can use AMI to remotely monitor and control their energy systems using computers and smart phones. The objectives of AMI are remote meter reading, error-free data, network problem identification, load profiling, energy audit and partial load curtailment, demand response, etc. The AMI consists of various hardware and software components essential for monitoring and recording data, transmitting information, and controlling usage. The components used in AMI include the following: t Smart meter: An advanced meter capable of collecting and recording information about energy, water, etc., and transmitting it to the utility at fixed intervals through communication networks. It can also receive information from the utility on pricing, demand response, and faults and convey it to the consumer. t Communication network: Two-way communication from a smart meter to the utility and vice versa as well as with the consumer. Networks such as phone lines, cellular 2G/3G, radio frequency, Wi-Fi, etc. t Meter data acquisition system: Software applications in the control center hardware and the DCUs (data concentrator units) used to acquire data from meters via communication networks and send them to the MDMS (ISGF 2015). t Meter data management system: Host system that receives, stores, and analyses the metering information (ISGF 2015). t Home area network: It can be an extension of AMI deployed at consumer premises to facilitate the communication of home appliances with AMI and hence enable a better control of loads by both utility and consumer (ISGF 2015). With these advances in communication technologies, it is possible to monitor and control the energy consumption of appliances and equipment and to record and maintain historical data of every last kWh used with more precision. However, these advanced technologies come with a cost, which is likely to go down over time with greater use. Nonetheless, in many cases (especially where energy costs are high), these technologies can already be justified as they can ensure higher energy savings, reduced O&M costs, reduced downtime, quick restoration, improved monitoring capacities, and reduced power thefts. Assessing and Measuring the Performance of Energy Efficiency Projects 87 88 A N N E X 7 | L I S T O F M E T H O D O L O G I E S F O R A S S E S S I N G C O - B E N E F I T S / M U LT I P L E B E N E F I T S COUNTRY/ IMPACT OF CO2 EMISSION REDUCTION CO-BENEFITS REGION METHODOLOGY PHYSICAL INDICATOR MONETARY INDICATOR REFERENCES Quantifiable Health Effects Morbidity USA, New A double-blind, multiple USA: A drop of concentration of the USA: Improved ventilation may result in Mendell et al., reduction Zealand, crossover intervention smallest airborne particles by 94% net savings of €302/employee-year that 2002; Milton Denmark Initial self-completed back- resulted in a decrease in confusion on a national scale represents produc- et al., 2000; ground questionnaires; then scale by 3.7%, fatigue scale by 2.5%, tivity gain of €17 billion/year. Schweitzer and shorter weekly questionnaires the feeling of “stuffy” air 5.3%, of “too USA: NPV** over the lifetime of Tonn, 2002; assessing the outcomes humid” by 7.0%, of “too cold” by 5.5%, improved ventilation can reach as high Wyon, 1994; Environmental measurements and “too warm” by 3.5%. as €1652/hh. Stoecklein and Statistical analysis USA: Cooler temperatures within the USA: Better ventilation and indoor Scumatz, 2007; Cost–benefit analysis recommended comfort range resulted air quality reduce influenza and cold Fisk, 1999; Fisk, Literature review in a decrease in the chest tightness by by 9%–20% (ca 16–37 million 2000a Authors’ adjustment/estimates 23.4% per each 1°C decrease. cases) that translates into savings of Denmark: Better thermal air quality €4.5–10.6 billion/year. led to better concentration of 15% of New Zealand: Health benefits due to a respondents and a 34% decrease in weatherization program amount to “sick building syndrome*” cases. €35/hh-year or 18.5% of the total annual energy savings of a household. Mortality reduction Hungary; Bottom-up study (with Monte USA: Every 10 g/m3 increase in ambient Hungary: Energy-saving program Aunan, et al. USA, Carlo simulation) particulate matter (the day before deaths resulted in the total health benefit of 2000; Samet ANNEX 7 | List of Methodologies for Assessing Co-Benefits/Multiple Benefits Ireland, Statistic time-series analysis: occur) brings a 0.5% increase in the €489 million/year due to a decrease et al., 2000; Norway semi-parametric log-linear overall mortality. in chronic respiratory diseases and Clinch and model, a weighted two-stage Ireland, Norway: The share of excess premature mortality. Healy, 1999 regression winter mortality attributable to poor Ireland, Norway: The total mortality Analysis of mortality statistics thermal housing standards is 50% for benefit of a hypothetical thermal- with a population of a similar cardiovascular disease and 57% for improving program is €1.5 billion country as the control group respiratory disease. (undiscounted) for a study in the left column. Environmental (ecological) Co-Benefits General New Direct computation New Zealand: Benefits to the environment gained after the weatherization program Stoecklein and environmental Zealand Willingness to pay/accept, amount to €44/hh-year in 2007, which accounts for around 18.7% of the total Scumatz, 2007 benefits contingent valuation, other annual energy expenditures saved. survey-based methods (continued) COUNTRY/ IMPACT OF CO2 EMISSION REDUCTION CO-BENEFITS REGION METHODOLOGY PHYSICAL INDICATOR MONETARY INDICATOR REFERENCES Cleaner indoor air USA Literature review USA: A sample considered a reduction of concentration of the smallest airborne Mendell et al., Data analysis particles by 94%. 2002; Kats, 2005 USA: The reduction in emissions per year of a green school as compared to the average practice: t QPVOETPG/0x—a principal component of smog t QPVOETPG402—a principal cause of acid rain t  QPVOETPG$02—GHG and the principal product of combustion QPVOETPGDPBSTFQBSUJDVMBUFNBUUFS 1. ‰BQSJODJQBMDBVTFPGSFTQJSB- t  tory illness and an important contributor to smog Fish impingement USA Literature review USA: NPV of reduction in fish impingement over the lifetime of weatherization Schweitzer and Authors’ adjustment/estimates measures is €17.6/hh. Tonn, 2002 Wastewater and USA Literature review USA: NPV of reduction in wastewater and sewage over the lifetime of weatheriza- Schweitzer and sewage Authors’ adjustment/estimates tion measures is €2.6–495.3/hh. Tonn, 2002 Construction and USA Statistical analysis USA: Construction and demolition diversion rates are 50%–75% lower in green SBTF, 2001; demolition waste NPV analysis with a 7% DR buildings (with the maximum of 99% in some projects) as compared to an average Kats, 2005 benefits over 20 years practice. USA: A sample of 21 green buildings submitted for certification, 81% of such buildings reduced construction waste by at least 50%, 38% of such buildings reduced construction waste by 75% or more. Reduction in air USA Literature review USA: A green school emits 544 kg USA: The study in the left column Schweitzer and pollution (indoor + Authors’ adjustment/estimates of NOx, 590 kg of SO2, 265 tonnes of results in NPV €0.4/ft2 (~€0.037/m2) Tonn, 2002; outdoor) Statistical analysis CO2, 68 kg of coarse particulate matter over 20 years. Kats, (PM10) less in comparison with the USA: NPV of air emission reduction 2005; Kats, 2006 average practice. (CO2, SOx, NOx, CO, CH4, PM) over lifetime of the measures is (all in thousand euro/hh): (a) from natural gas burning 30.2–37.7; (b) from electricity consumption €118–185; (c) air emis- sions of heavy metals is 0.75–12.8. Economic Co-Benefits and Ancillary Financial Impacts Indirect second- USA NPV analysis with a 7% DR USA: Efficiency-driven reductions in demand result in a long-term energy price Kats, 2006; ary impact from over 20 years decrease equal to 100%–200% of direct energy savings; assuming the indirect Wiser reduced overall Literature review price impact of 50% over 20 years from an efficient school design, the impact of et al., 2005; market demand Simplified quantification of indirect energy cost reduction for new and retrofitted schools has NPV €0.21/m2. O’Connor, 2004; and resulting lower the effect of renewable energy/ USA: 1% decrease in the national natural gas demand through energy efficiency Platts Research & energy prices energy efficiency on gas prices and renewable energy measures leads to a long-term wellhead price reduction Consulting, market wide and bills of 0.8%–2%; the indirect monetary savings from this price decrease amounted 2004 Using a range of plausible to 90% of the direct monetary savings, that is, €14.6 million for all customers inverse elasticity estimates (cumulative 5-year impact, 1998–2002, over June–September peak hours). USA: 1% reduction in natural gas demand resulted in a 0.75%–2.5% reduction in the long-term wellhead prices. Assessing and Measuring the Performance of Energy Efficiency Projects 89 90 Enhanced learning USA Review of the financial benefits Better environmental condition leads to enhanced learning abilities; a 3%–5% Hanushek, 2005 in “greened” of education improvement in learning and test scores is equivalent to a 1.4% lifetime annual buildings earnings increase; an increase in test scores from 50% to 84% is associated with a 12% increase in annual earnings. Employees’ USA, Statistical analysis USA: The improved quality of schools USA: If the cost of teacher loss is 50% Buckley, et al. retention: avoided Washington Literature review increases teacher retention by 3%. of salary, the left column tops study 2005; Kats, reduced-activity State, Bottom-up model USA/The State of Washington: “Green- equals to a saving of €0.28/m2 if ~214 2005; Paladino & days Ireland NPV analysis with a 7% DR ing” schools could bring 5% per year of m2/teacher is assumed. Company, 2005; over 20 years improvement in teacher retention. USA/The State of Washington (left col- Clinch and A walk-through assessment of umn): Savings of $160,000/year during Healy, 2001 schools 20 years (not discounted). Survey Ireland: The annual value of the mor- bidity benefits of the energy efficiency program is €58 million excluding reduced-activity days and €66.6 million including them. Improved USA Case studies on documented USA: In well day-lighted buildings, USA: The productivity can improve by Lovins, 2005; productivity productivity gains labor productivity rises by about 7.1%, 1.8%, and 1.2% with lighting, Fisk, 2000a; Empirical measurements 6%–16%, students’ test scores show ventilation, and thermal control by a Fisk, Computer-based literature ~20%–26% faster learning, and retail tenant; an average workforce productiv- 2000b; searches, reviews of conference sales rise 40%. ity increase is 0.5%–34% each control Heschong proceedings, and discussions USA: Students with the most day light- type. A 1% increase in productivity Mahone Group, with researchers ing show 20%–26% better results than (~ca 5 min/day) is equal to €452–528/ 1999; Multivariate linear regression those with the least day lighting. employee-year or €0.21/m2-year; a Federspiel, analysis of student performance USA: Ventilation rates less than 100% 1.5% increase in productivity 2002; Menzies, data outdoor air and temperature higher (~ca 7 min/day) is equal to ~€754/ 1997; Kats, Log-linear regression model than 25.4°C result in lower work employee-year or €0.35/m2-year. 2003; Pape, Statistical analysis performance. USA: More comfortable temperature 1998; Shades of ANNEX 7 | List of Methodologies for Assessing Co-Benefits/Multiple Benefits Questionnaire Canada: A new ventilation system and lighting result in productivity Green, 2002 NPV analysis with a 7% DR improved the productivity of co-workers increase by 0.5%–5%; considering over 20 years by 11% versus reduced productivity by only United States office workers, 4% in a control group. such a change translates into an USA: After building retrofitting, annual productivity increase of roughly absenteeism rates dropped by 40% and €15–121 billion. productivity increased by more than 5%; after moving to a retrofitted facility, two business units monitored 83% and 57% reductions in voluntary terminations versus a control group with 11% reduction in voluntary termination of employment. (continued) COUNTRY/ IMPACT OF CO2 EMISSION REDUCTION CO-BENEFITS REGION METHODOLOGY PHYSICAL INDICATOR MONETARY INDICATOR REFERENCES Avoided USA Literature review NPV of avoided unemployment over the lifetime of weatherization measures is Schweitzer and unemployment Authors’ adjustment and €0–137.9/hh. Tonn, 2002 calculations Lower bad debt USA Literature review NPV of lower bad debt write-off over the lifetime of weatherization measures is Schweitzer and write-off Authors’ adjustment/estimates €11.3–2610/hh. Tonn, 2002 Employment USA NPV analysis with a 7% DR USA: Green schools create more jobs than conventional schools; the long-term Kats, 2005; creation over 20 years employment impact of increased energy efficiency may provide €0.21/m2 of Schweitzer and Literature review benefits. Tonn, 2002; Authors’ adjustment/estimates USA: NPV of direct and indirect employment creation over the lifetime of the O’Connor, 2004; Statistical assessment of the 5- measures is €86.7–3200/hh. (Note: This benefit occurs only once in the year in Kats, 2005 year energy efficiency programs which weatherization is performed.) USA: Energy efficiency investment of €85.2 million in the Massachusetts economy in 2002 created 1780 new short-term jobs; in addition, lowered energy bills for participants and for Massachusetts resulted in additional spending, creat- ing 315 new long-term jobs; energy efficiency jobs added €104.8 million to the gross state product, including €48.2 million in disposable income (in 2002 in Massachusetts). Rate subsidies USA Literature review NPV of avoided rate subsidies over the lifetime of weatherization measures is Schweitzer and avoided Authors’ adjustment/estimates €4.5–52.8/hh. Tonn, 2002 National energy USA Literature review NPV of enhanced national energy security over the lifetime of weatherization Schweitzer and security Authors’ adjustment/estimates measures is €56.5–2488/hh. Tonn, 2002 Service provision benefits Transmission and USA Literature review USA: NPV over the lifetime of weatherization measures installed is €24.9–60.3/hh. Schweitzer and distribution loss Authors’ adjustment/estimates Tonn, 2002 reduction Fewer emergency USA Literature review USA: NPV of fewer emergency gas service calls over the lifetime of weatherization Schweitzer and gas service calls Authors’ adjustment/estimates measures is €29.4–151.5/hh. Tonn, 2002 Utilities’ insurance USA Literature review USA: NPV of utilities insurance cost reduction over the lifetime of weatherization Schweitzer and savings Authors’ adjustment/estimates measures is €0–1.5/hh. Tonn, 2002 Decreased number New Zealand Direct computation Bill-related calls became less frequent after the implementation of weatherization Stoecklein and of bill-related calls Willingness to pay, willingness program, which resulted in savings of NZ$ 30 (~€15.9/hh-year), i.e., 7% of the Scumatz, 2007 to accept, contingent valua- total saved energy costs. tion, and other survey-based methods Social co-benefits Improved social UK Survey monitoring the impact of UK: Energy efficiency schemes applied to 6 million households in January– DEFRA, 2005 Assessing and Measuring the Performance of Energy Efficiency Projects welfare and poverty energy company schemes that December 2003 resulted in the average benefit of €12.7/hh-year. alleviation were set up to fuel poverty 91 92 Safety increase, USA Literature review USA: NPV over the lifetime of the measures installed is €0–418/hh. Schweitzer and fewer fires Authors’ adjustment/estimates Tonn, 2002 Increased comfort Ireland, A computer-simulation energy Ireland: Household temperature Ireland: The total comfort benefits of the Clinch and New Zealand assessment model increased from 14°C to 17.7°C once program for households (described in Healy, 2003; Direct computation the energy efficiency program was the left column) amount to €473 million Stoecklein and Willingness to pay, willingness completed. The analysis showed that discounted at 5% over 20 years. Scumatz, 2007 to accept, contingent valua- comfort benefits peak at year 7 and then New Zealand: Comfort (including noise tion, and other survey-based decline gradually until year 20. reduction) benefits after the weatheriza- methods tion program were estimated as €103/ hh-year, i.e., 43% of the saved energy costs. Source | Diana Ürge-Vorsatz 2009. ANNEX 7 | List of Methodologies for Assessing Co-Benefits/Multiple Benefits ANNEX 8 | MASSACHUSETTS RECOMMENDED VALUES FOR NON-ENERGY IMPACTS NON-ENERGY QUANTITY METHOD OF RECOMMENDED IMPACTS (YES/NO) QUANTIFICATION VALUE DURATION Utility Perspective Arrearages Yes Literature $2.61 Annual Bad debt write-offs Yes Literature $3.74 Annual Terminations and Yes Literature $0.43 Annual reconnections Rate discounts Yes Algorithm & PA data Algorithm Annual Complaints and payment No None for now None — plans Customer calls Yes Literature $0.58 Annual Collections notices Yes Literature $0.34 Annual Safety-related emergency Yes Literature $8.43 Annual calls Increased electricity system No Quantified Elsewhere None — reliability Transmission and distribu- No Quantified Elsewhere None — tion savings Insurance savings Yes Literature National WAP Evaluation — (2011) Participant Perspective (occupant) Higher comfort levels Yes Survey $125 (NLI retrofits); $77 Annual (NLI new construction)/ $101 (L1) Improved sense of environ- No Quantified Elsewhere None Annual mental responsibility Quieter interior environment Yes Survey $31 (NLI retrofits); $40 (NLI Annual new construction)/ $30 (L1) Reduced noise No None for now None Annual (dishwashers) Lighting quality & lifetime Yes TRM Report $3.50/CFL fixture; $3.00 per One time CFL bulb Increased housing property Yes Survey $1,998 (NLI retrofits); $72 Onetime (Annual for value (NLI RNC/$949 (L1) NLI RNC) Buffers energy price No Quantified Elsewhere None — increase Assessing and Measuring the Performance of Energy Efficiency Projects 93 NON-ENERGY QUANTITY METHOD OF RECOMMENDED IMPACTS (YES/NO) QUANTIFICATION VALUE DURATION Reducing energy expenses, No Quantified Elsewhere None — making more money avail- able for other uses, such as health care Reduced need to move and No Quantified Elsewhere None — costs of moving, including homelessness Reduced detergent usage No None None Annual (dishwashers) Reduced water usage and Yes Algorithm from $3.70 Annual sewer costs (dishwashers) literature Reduced water usage and No None — — sewer costs (tankless water heaters) Reduced water usage and Yes Algorithm from Algorithm Annual sewer costs (faucet aerators) literature Reduced water usage and Yes Algorithm from Algorithm Annual sewer costs (low-flow literature showerheads) More durable home and Yes Survey $149 (NLI retrofits)/$35 (LI) Annual less maintenance Equipment and appliance Yes Survey $124 (NLI retrofits)/$54 (LI) Annual maintenance requirements Health related NEIs Yes Survey $4 (NLI retrofits)/$19 (LI) Annual Improved safety (heating Yes Algorithm & PA data $37.40 (avoided fire Annual system, ventilation, carbon deaths); $0.03 (avoided fire monoxide, fires) injuries); $1.24 (avoided fire property damage); $6.38 (avoided CO poisonings; all LI Improved safety (lighting) No None for now None — Heat (or lack thereof) No None None — generated Warm up delay No None for now None — Product lifetime No None None — Availability of hot water No None for now None — Product performance No None for now None — Window AC NEIs Yes Literature $49.50 Annual Bill-related calls No Quantified Elsewhere None — Termination and No Quantified Elsewhere None — reconnection Reduced transaction costs No None None — Education No None None — (continued) ANNEX 8 | Massachusetts Recommended Values for Non-Energy Impacts 94 NON-ENERGY QUANTITY METHOD OF RECOMMENDED IMPACTS (YES/NO) QUANTIFICATION VALUE DURATION Societal Perspective Weatherization by utility No None for now None — programs saves costs of inspections and upgrades by other agencies Equity and Hardship No None None — Improved Health No None for now None — Improved Safety No None for now None — Water No None for now None — National Security Yes Algorithm from Algorithm Annual literature Participant Perspective (owners of low-income rental housing), per Housing Unit Marketability/ease of finding Yes Survey $0.96 Annual renters Reduced tenant turnover Yes Survey $0 Annual Property value Yes Survey $17.03 One time Equipment maintenance Yes Survey $3.91 Annual (heating and cooling systems) Reduced maintenance Yes Survey $66.73 Annual (lighting) Durability of property Yes Survey $36.85 Annual Tenant complaints Yes Survey $19.61 Annual Non-Resource Benefits Appliance Recycling— Yes Algorithm from $1.06 One time Avoided landfill space literature Appliance Recycling— Yes Algorithm from $1.25 One time Reduced emissions due to literature recycling plastic and glass, reduced emissions Appliance Recycling— Yes Algorithm from $170.22 One time Reduced emissions due to literature incineration of insulating foam Source | Tetra Tech, Inc. and NMR 2011. Assessing and Measuring the Performance of Energy Efficiency Projects 95 ANNEX 9 | THERMAL COMFORT SURVEY FACTOR DESCRIPTION YES Air temperature Does the air feel warm or hot? Does the temperature in the workplace fluctuate during a normal working day? Does the temperature in the workplace change a lot during hot or cold seasonal variations? Radiant temperature is there a heat source in the environment? Is there any equipment that produces steam? Is the workplace affected by external weather conditions? Humidity Are your employees wearing PPE that is vapour impermeable? Do your employees complain that the air is too dry? Do your employees complain that the air is humid? Air movement Is cold or warm air blowing directly into the workspace? Are employees complaining of draught? Metabolic rate Is work rate moderate to intensive in warm or hot conditions? Are employees sedentary in cool or cold environments? PPE Is PPE being worn that protects against harmful toxins, chemicals, asbestos, flames, extreme heat, etc? Can employees make individual alterations to their clothing in response to the thermal environment? Is respiratory protection being worn? What your employees Do your employees think that there is a thermal comfort problem? think Source | http://www.hse.gov.uk/temperature/assets/docs/thermal-comfort-checklist.pdf ANNEX 9 | Thermal Comfort Survey 96 ANNEX 10 | MEASURE OF LABOR PRODUCTIVITY MEASURES OF PRODUCTIVITY METHODS OF MEASUREMENT Speed Quantative: Data collection Accuracy Absenteeism Incidence of complaints Cycle time of a process Billable hours Ability to work more hours Qualitative: Questionnaires, observation, structured interviews, More creative focus groups, self assessment Learn better Sustain stress better More harmonious Feel healthier Respond more positively to requests Source: Building Efficiency Initiative 2013. Assessing and Measuring the Performance of Energy Efficiency Projects 97 ANNEX 11 | IMPACTS IDENTIFIED IN RECENT U K   E N E R G Y   E F F I C I E N C Y P O L I C Y I N I T I AT I V E S PART L BUILDING PRS MINIMUM EE GREEN DEAL/ECO REGULATIONS STANDARDS2 AREA OF IMPACT1 JUNE 2012 AUGUST 2013 JULY 2014 Energy savings €21,331 million €1,661 million €582 million Increased comfort €4,910 million mention €155 million 3 Carbon reductions €8,173 million €455 million €125 million Air quality €2,041 million €10 million Energy security mention mention mention Sustainability mention no mention no mention BENEFITS Fuel poverty 125,000–250,000 households no mention mention Economic growth mention no mention mention Employment 38–60,000 jobs no mention 8,400 jobs Asset values no mention mention mention Tax revenues no mention mention no mention Welfare spending no mention no mention mention Physical health mention mention €36 million4 Mental well-being5 mention no mention Installation €14,404 million €1,571 million6 €329 million 7 Additional €4,936 million — €33 million Assessment €1,728 million — €16 million Finance €2,166 million — €205 million COSTS8, 9 Business cost €1,345 million — — Administration €57 million mention — Transition — €7 million — Understanding regs — — €23 million Unintended health mention mention mention Net Present Value €11 ,820 million €539 million €269 million Benefit-Cost Ratio 1.5:1 1.3:1 1.5:1 1 Quantified values are central estimates. 2 These estimates are for the preferred Option 1 proposal, domestic CBA. 3 Lifetime non-traded carbon savings, and lifetime EU allowance savings. 4 A UK policy objective that encompasses a range of other impacts described elsewhere. 5 There is no quantification of this since comfort take is not assumed relevant in the new homes model. 6 An estimate of health impacts from HIDEEM was included as an indication of impact, but was not counted in headline total quantification of benefits from the policy, see main body for further discussion. 7 The additional capital costs of compliance with regulations. 8 These hidden and overlooked costs to participants; sometimes termed “hassle” costs. 9 The classification of costs varies between each assessment. 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