There is a lot of ‘hype’ around energy efficiency right now and it’s coming from a range of different sources. The Federal government have ratified the Paris climate change agreement, committing Australia to reduce emission reduction by 26-28% below 2005 levels by 2030. A big part of this is directly through energy efficiency measures identified in the National Energy Productivity Plan. Energy efficiency also forms a part of the current Emission Reduction Fund (ERF), the post-2020 ERF and Safeguard Mechanism, and the broad ‘Technology improvements’ category.

ERF Target

The NSW Government recently announced their Energy Efficiency Action Plan, which was lauded as one of the most comprehensive policy plans by the Energy Efficiency Council. Amongst other targets, the action plan is aiming to have 50% of NSW commercial floor space to have a NABERS rating of 4 stars.

The reason why I use the word ‘hype’ is because on the ground the amount of action happening in energy efficiency isn’t quite matching all the talk. And unfortunately, it has been like this for some time. Particularly in comparison to its more popular side-kick, renewable energy.

Part of the reason for this lack of action, particularly in comparison to renewables, is the historical lack of certainty in energy efficiency as an investment. Renewable energy has a straightforward investment proposition – if the sun shines, electricity is produced and measured in the same way we’ve always measured electricity. You sell the electricity or use it to offset your bill. For energy efficiency, every project is different and uses a raft of different technologies, with little quality control or consistency between projects.

But I see three elements that are going to start to increase the quality of energy efficiency as an investment. They are Automated Measurement and Verification (AM&V), Energy Analytics (or Energy Intelligence), and the Investor Confidence Project.

Investor Confidence Project

The Investor Confidence Project is aiming to standardize energy efficiency by creating a transparent and consistent process for projects in commercial and multifamily buildings. Those of you in the industry will be aware that every energy efficiency project is unique, and can have its own nuances. It seems that stressing that ‘every project is unique’ is a mandate for engineers everywhere (I’ve been guilty of this before as well). Maybe we are just subconsciously protecting our jobs! Because of how unique projects can be, creating energy efficiency as a ‘bankable’ resource is a challenge.

This is where the Investor Confidence Project is stepping in by creating a process for developing and delivering energy efficiency projects in conjunction with completing independent quality assurance. By certifying a projects as ‘investment ready’, financial investors know that a consistent process has been followed and the quality of the project has been independently verified. The Investor Confidence Project is gaining traction in the United States and Europe and hopefully, it won't be long before we see a similar program in Australia.

Automated Measurement & Verification

Measurement & Verification is the process of proving how much energy has been saved following an energy efficiency upgrade. In simple terms this could be done by comparing utility bills but variations in weather, occupancy, production all need to be considered. Typically, this involved an engineer spending hours creating complicated spreadsheets, which required the customer to be an engineer to interpret. And engineers aren’t the cheapest folks to have trawling through spreadsheets (although it’s a great business for engineers). The issue with this manual M&V approach is that to justify the costs the project must be large. So, smaller projects missed out on the certainty of energy savings afforded by M&V. Even on large projects there was limited consistency, and vastly different levels of confidence around the energy savings achieved.  

Automated Measurement & Verification, or M&V 2.0, takes the bulk of the manual spreadsheet manipulation out of the equation. Firstly, this makes M&V a cheaper proposition, opening a wider marketplace to benefit from certainty in energy savings. Secondly, it creates a level of consistency and accuracy between projects opening the option of pay-for-performance energy efficiency. Finally, AM&V systems also add a portal for users to view energy efficiency in the same way they view a normal energy bill.

How does AM&V achieve this? It starts with big data, smart meters and artificial intelligence. Smart meters, and other connected sensors, have enabled data scientists to compile huge amounts of data to train and test artificial intelligence algorithms to model energy savings. The artificial intelligence algorithms can be tested on data sets for hundreds of buildings to refine the models and improve accuracy.

Thanks to the improved accuracy and confidence, AM&V lends itself to pay-for-performance energy efficiency. With traditional energy sources, there is a cost per unit of energy consumed ($/kWh). For pay-for-performance energy efficiency, this would be a cost per unit of energy saved. As an end user this creates the possibility of $0 upfront cost and only having to pay for energy savings if they are actually achieved.

Finally, quality AM&V systems also provide an approachable interface so non-engineer users can interpret the performance of their energy efficiency upgrade.

Energy Analytics

Remember old energy management systems? They were epitomised by a computer sitting in the darkest corner of the most dimly lit room, under a pile of old energy audits, gathering dust. Whilst their intention was good, the manual intervention that was required to get anything meaningful out of the data was prohibitive. Not only did you have to be a spreadsheet and energy guru, you also needed a lot of time.

Energy Analytics or Energy Intelligence is the big data/artificial intelligence evolution of the energy management systems of yesteryear. At a minimum, these systems ‘understand’ your usage patterns, alert you if something abnormal has occurred, and provide an insight on what you need to do to fix the issue. If you want a more advanced system, they can even detect a specific fault and diagnose a remedy to bring the systems performance back to expected standards. On top of that, it works in near real-time so facility managers have a chance to rectify any issues shortly after they occur, not months later after the utility bill arrives.

Energy analytics makes staying on top of energy savings so much simpler. Whether the service is managed in-house or outsourced, it brings more certainty to energy savings being achieved.

Bringing it all together

There is now a process for creating consistency and transparency across energy efficiency projects, incorporating independent quality assurance, that improves investor confidence. Energy savings can be accurately, and easily, measured with automated measurement and verification, opening the option of pay-for-performance energy efficiency. Analytics can identify anomalies in energy consumption meaning any loss of savings can be quickly rectified, restoring the investment quality.

For a building owner, it puts energy efficiency on the same quality and certainty level as investing in solar or a solar power purchasing agreement. The challenge is getting the same level of engagement with energy efficiency that solar now has.

Written by Kieran McLean, Certified Energy Manager, Certified Measurement & Verification Professional and Founder of EQ esco.

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