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The impact of measurement and verification option choice on financial returns for clients in energy performance contracts

Fennell, PJ; Ruyssevelt, PA; Smith, AZP; (2017) The impact of measurement and verification option choice on financial returns for clients in energy performance contracts. In: Proceedings of the International Symposium to Promote Innovation & Research in Energy Efficiency 2017 (INSPIRE-2017). International Symposium to Promote Innovation & Research in Energy Efficiency (INSPIRE): Jaipur, India. Green open access

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Abstract

Energy Performance Contracts (EPCs) differ from traditional energy efficiency upgrades due to the degree of performance risk transferred to the supplier (ESCO) for the level of energy savings delivered. While there are many different forms of EPC a fundamental component of all is the need to agree how savings will be measured and verified, in order to determine if the guaranteed level has been achieved. The choice of Measurement and Verification (M&V) strategy is typically approached as a trade-off between the cost and complexity of the measurement method and the need for accuracy. However, different M&V strategies imply different measurement boundaries for energy savings and thus the level of savings covered by the guarantee can vary significantly. While many commentators have pointed to the importance of robust M&V arrangements, there has been almost no discussion of the commercial implications of the choice of strategy. In this study, stochastic modelling is used to take account of the large number of uncertainties inherent in any building retrofit project when exploring the consequences of the choice of measurement boundary for a lighting upgrade project. The results highlight the need for a more sophisticated understanding of the impacts of the trade-off between cost of monitoring and accuracy of results. Without this the ESCO industry risks a loss of trust as a result of a sizeable proportion of clients receiving lower than expected savings with no recourse under the guarantee.

Type: Proceedings paper
Title: The impact of measurement and verification option choice on financial returns for clients in energy performance contracts
Event: International Symposium to Promote Innovation & Research in Energy Efficiency 2017 (INSPIRE-2017)
Location: Jaipur
Dates: 29 November 2017 - 01 December 2017
Open access status: An open access version is available from UCL Discovery
Publisher version: http://inspire.ind.in/
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/1573207
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