Beyond Simple Payback: Calculating The True Value of Project Savings
Calculating the potential savings that a resource efficiency project might generate can be a guessing game at best, and at worst, outright misleading.
This is because factors such as the 'rebound effect' that can lead to increased consumption after the project has actually been implemented.
Image: The ‘rebound effect’ in action.
For example, more efficient heating may be installed at a site where you would expect a reduction in kWh used, however, the tenants, knowing that the heating is now more efficient, may decide to turn on the heating more often than they used to or not be as diligent about turning them off as they would have been prior to the implementation of the project.
This can lead to reduced savings from the initial projections, or in some case actually lead to all of the savings being wiped out by the increased consumption!
Therefore, you need to factor this in to your savings projections and most definitely take this into account when calculating realised savings after the project is completed.
So if you want to increase your accuracy of calculating the real savings of a project you need to first have a Monitoring & Targeting (M&T) programme in place.
The Energy Efficiency and Conservation Authority (EECA) estimates that the savings realised by just having an effective M&T program amount to 5-25% of your total utility expenditure!
Then once you have a M&T program set up (such as e-Bench®), you now need a framework to follow that has a high level of scientific, engineering and financial rigour that will give a sense of robustness and credibility.
This credibility will need to be there to combat and rebut any claims of greenwashing and for your own piece of mind to know that you have your numbers right.
So what would be the best framework to use?
Introducing: the IPMVP
The International Performance Measurement and Verification Protocol (IPMVP) which was specifically developed to be able to measure energy efficiency or a lack of consumption.
The IPMVP has international acceptance by operating in 8 different languages and in over 60 countries. It is a certified programme administered by the Efficiency Valuation Organisation (EVO).
In New Zealand, the IPMVP is recognised by EECA, with the administration of the Certified Measurement & Verification Professional (CMVP) being managed on behalf of EVO by the Energy Management Association of New Zealand (EMANZ). There are now over 40 active CVMP professionals in New Zealand, with the number of CVMP professionals worldwide estimated to be over 3,000.
The IPMVP uses the following equation to calculate realised project savings…
Savings = (Baseline Period Energy – Reporting Period Energy) ± Adjustment
The adjustments allow you to account for factors such as the rebound effect or increases in output for industrial efficiency gains (such as a factor increasing production output after the efficient equipment has been installed).
A typical IPMVP Measurement & Verification Process (M&V) is illustrated below:
With the help of EECA’s guides and documentation, you may be able to complete step one (estimating savings and creating a business plan) by yourself but for steps 2-4 you are probably going to need the help of an M&V professional.
That is because adhering to the proper IPMVP methods, procedures and principles is a challenge for an untrained individual.
However, here at Energy TS we have a couple software solutions which can help out with the process.
First, when it comes to following monitoring and targeting plan we have e-Bench® as we alluded to earlier in this article.
e-Bench® will help you achieve those 5-25% savings of having a M&T program in place and it will track and verify changes to energy use after a project has been completed.
However, to calculate the realised savings of a project, as per IPMVP methods, procedures and principles you will also need our e-Calc™ software.
e-Calc™: Know The Payback
With e-Calc™ you don’t need to be trained in IPMVP methods to be able to calculate realised savings in accordance with the methodology. The software automatically populates with consumption data from e-Bench® and then calculates realised savings over time after the implementation of the project.
Demonstrate the value sustainability delivers
e-Calc™ makes it easy to demonstrate the impact and ongoing savings from your current programmes and make compelling business cases for new initiatives.
The cloud-based e-Calc™ makes it easy to see the financial impact of changes in energy and environmental management. Savings or avoided costs can be reported in dollars, greenhouse gas emissions and kilowatt hours, meaning you can show others the value your energy or environmental projects deliver in their language.
Accurately report and forecast
e-Calc™ helps facilities, energy, procurement and sustainability managers’ report on success with confidence and build compelling financials to influence budget decisions. It gives the knowledge to minimise costs and maximise the returns from environmental management programmes.
e-Calc™ lets you demonstrate the value and need for a corporate social responsibility programme and provides the structure for sustainability reporting, providing greenhouse gas emission reporting in accordance with ISO 14064 and energy management reporting in accordance with ISO 50001.
e-Calc™ was awarded a Commendation in the Ricoh Mega Efficiency Innovation Category at the 2016 NZI Sustainable Business Network Awards.
To find out more about how e-Calc™ can help you know the payback of energy, water and waste initiatives or how to access the EECA business subsidy available for M&T, get in touch with the Energy TS team today.