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Beyond Simple Payback: Calculating The True Value of Project Savings

November 11, 2018



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