IPMVP and improving energy-efficiency: The importance of independent measurement & verification March 2013
White Paper: Improving energy efficiency: The importance of independent measurement & verification ________________________________________________________________________________
Energy-efficiency is now recognised as a key to the UKs economic revival. At the time of writing the UK Green Building Council is the latest organisation urging George Osborne – and the upcoming budget – to support this valuable sector of the UK economy1. Energy efficiency is a market with tremendous potential but remains largely untapped. In this White Paper, we put forward a reason for this inertia – a lack of trust in the industry and uncertainty around the real level of savings that can be delivered to customers.
We put forward good practice and independent
Measurement & Verification (M&V) as a simple and cost effective solution to help overcome these barriers and to help to drive the sector forward (regardless of what’s in George Osborne’s red box). In a context of persistent global recession, it is vital for the UK economy to find ways to innovate and to develop new markets that can contribute to growth. A recent Carbon Trust research study showed that the UK market for energy efficiency technology could be c£9 billion2. Of course, it also enables the UK to move closer to meeting its climate targets. In 2013 however, the market is still in its infancy. As a result it suffers from a debilitating lack of market transparency as technology suppliers keen to take market share are prone to making unsubstantiated and so potentially over-blown 1 2
http://www.ukgbc.org/news/budget-2013-%E2%80%93-uk-gbc-calls-coalition-commitment-energy-efficiency http://www.carbontrust.com/about-us/press/2012/07/rsa-partners-carbon-trust-energy-efficiency-savings 1|P a g e
performance claims about their particular energy-saving product. The result is that commercial consumers lack both a clear understanding of what the industry can actually deliver and much needed trust in supply side of the industry. This is a shame because there are plenty of very good energy saving technologies out there – tarred with the same brush. In this situation, where trust is low and financial and operational risk is high, investment is naturally curtailed. This, in our view, is simply a symptom of the relative youth of this emerging market – yet it remains one of the key barriers to growth and must be addressed if the industry is to deliver its potential. So the key question is: How do we turn this high potential industry into a transparent, trusted, accountable and truly professional business sector? It is surprisingly simple and can be summed up with an eminently sensible (and so widely over-used) business maxim: “what gets measured, gets done”. Robust and reliable performance information is the crucial first building block to good business decision-making and communications. How does one make an informed commercial decision without it?
A cursory glance at a Reuters or
Bloomberg webpage is evidence enough; it is the life-blood of the financial services industry and is the very foundation of any ‘investible’ asset class (at scale at any rate). Energy efficiency is not yet mature enough to benefit from information overload – where readily available, accurate and reliable performance information can be used to drive decision-making at the touch of a button. Yet this dearth of performance information is detrimental; without the tools for the job it prevents executives from spending on energy efficiency products and services. Rather, investment decisions are more likely to be deferred as commercial risks (e.g. over costs) outweigh the potential, but highly uncertain, rewards (i.e. return on investment). 2|P a g e
Alternatively, those customers that do make purchase decisions without reliable performance information to hand do so with something of a ‘leap of faith’, taking a supplier’s word on trust. Yet with major vested interests on the line, stated savings of technologies may be optimistic. This can lead to disappointment if those savings fail to materialise or are inconclusive. In fact, the lack of objective performance information means it is not easy to identify the best-performing technologies within the marketplace and this can lead to the perverse outcome where inferior technologies (but with bold, unverified performance claims) take market share from the best performing technologies (which have also failed to get performance verified). The solution is widespread adoption of good practice and independent Measurement and Verification of energy efficiency projects. This is starting to gain increasing momentum and is already used by the market leaders such as Drumbeat Energy which is prepared to “walk the talk” (to use another over-used business catchphrase) and subject their performance to external verification. Indeed, independent Measurement & Verification (M&V for short) is one of these tools which, if used and applied widely, could transform the fortunes of the energyefficiency industry. A key benefit is investment certainty – something all businesses crave. By including an independent M&V process into any sale – thereby removing ambiguity of savings results – customers have much greater trust in a project or technology and are able to make faster, more confident decisions about deployment. By the same token, suppliers will be able to build up much-needed credibility and positive reputation, so important to business development. Industry best practice M&V is based on the International Performance Measurement and Verification Protocol (IPMVP) a US-developed and widely-accepted framework for evaluating energy efficiency products, projects and services. In our view, the use 3|P a g e
of IPMVP - which is managed by not-for-profit organisation EVO (Efficiency Valuation Organisation)3 – would provide this (currently absent) foundation for improving the transparency and attractiveness of the market for energy-efficiency products and services. It will ultimately help to drive much improved market growth. The all-important output of an IPMVP-led performance measurement process is a periodic savings figure showing how much less energy has been used than would have been if the energy efficiency technology or project had not been implemented. Getting to this requires an analytical process with a strong degree of specialism, and analysts should carry the ‘CMVP’ certification to demonstrate competence. As a result a key challenge for an IPMVP performance analysis process is that it needs to deliver the answer (i.e. how much energy has this project saved?) without being so complex that it becomes overly expensive. Luckily, IPMVP takes a pragmatic view on this and has been designed in such a way that M&V can be readily delivered without materially impacting the economics of an energy-saving initiative. IPMVP defines an appropriate level of expenditure on M&V – no more than 10% of the expected financial saving is considered an acceptable maximum level and most projects will be much less than this. An essential part of the risk management process, this is a small price to pay to achieve peace of mind that a major investment is delivering the savings that were promised upfront. Indeed our final comment, or plea, is to keep in mind cost versus value and lessons from other UK industries. Just think of the recent horsemeat, or bankers’ bonuses, scandals; through a lack of process certainty and accountability, the organisations in those industries have done nothing to enhance customer trust and corporate
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reputation – quite the opposite. Sales volumes must be under threat as a result and some businesses won’t survive.
The same must be true for energy efficiency.
Uncertain, incorrect or over-blown energy saving promises will only undermine our industry’s reputation and long-term development. High quality, independent performance analysis is a small price to pay to ensure that this doesn’t happen and that as an industry we are trusted to deliver proven value for money and long-term customer satisfaction. _________________________________________________________________________________________________________
Contact us: Drumbeat Energy Limited – Specialists in Energy Management Systems Regent’s Place, 338 Euston Road, London NW1 3BT Telephone: 020 7078 4103 Email: email@example.com Web: www.drumbeatenergy.com
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White Paper: Improving energy efficiency: The importance of independent measurement & verification