Objective of the Project :

Development of ESCO
Energy Performance Contracts (EPCs)
To work with select ESCOs:
to identify efficiency projects
through capacity building,
assistance in terms of
preparation of agreements
and assist in third party
financing, if required.
Issues raised by ESCOs, Clients
Payment security
How to ensure timely payment from energy savings are obtained?
How to avoid successive payment defaults from the Client?
Dispute Resolution mechanism
In case there is a default, what are the possible remedies?
What is the legal procedure in such cases?
In case of client:
How do I ensure that the energy savings guaranteed are
being met?
How can I verify this?
Observations
Takes multiple iterations to arrive at a configuration
for the project to be implemented under a contract
Ideal Scenario: 3-4 months
Present Scenario : 6-8-12 months :
too long a time as baselines may vary
Issues Addressed
AEEE has developed a set of documents:
A Standard Energy Performance Contract
(EPC) document
and
A Measurement & Verification Template.
A. Standard Energy Performance
Contract (EPC) document
Provides a consistent basis to negotiate an EPC
contract between the customer and the ESCO.
Cover the rights and obligations of both parties for
implementing an EPC.
Key Clauses of the Standard EPC
Contract
Obligations of the ESCO, Client
Payment to ESCO
The procedure for making timely payments
Construction Schedule and Equipment Installation
Base Year Energy Adjustments
Measurement and Verification Plan
Dispute Resolution Mechanism: In case a dispute arises ,
what remedies can help in settlement of case.
Termination and Exit Clause: In case both parties wish to
terminate the contract , what will be the possible exit
clause.
EPC Contract- Key features
Simplified, easy to follow
Designed keeping in mind the ESCO, Client
Reduced Document Length
Can be suitably modified to the needs and use of
individual projects
Mechanism for Dispute Resolution
Clearly lists out Duties and Obligations of parties
involved
How can standard contracts
help the Industry?
ESCO/Client can work through the contracting process
with the least amount of difficulty
Provide a reference point for negotiating an EPC
contracts
Reduces the time for negotiating a contract
Need for multiple iterations
Intended to safeguard the interest of parties involved
Involvement of Key Stakeholders
Developed incorporating inputs of various
stakeholders including
Legal experts
Experts fromthe Industry,
AEEE Teamcomprising of senior experts,
and most importantly practicing ESCOs
Currently being used by a number of ESCOs as part of
the negotiating process
Standard Document need for
modifications
Can be used in its current form for executing most energy
performance contract projects.
However, the contract must be fully negotiated between the
parties and that these negotiations may lead to modification
of the contract
Measurement & Verification
Process of using measurement to reliably determine
actual savings for energy, demand, cost and within a
site.
M&V is intended to answer the question,
how can I be sure Im really
saving energy first and then
money?
Key Observations
Most ESCOs agree that M&V forms a key part of any
EPC negotiating process,
However, only a handful ESCOs document a M&V plan
prior to implementing a project
Reasons:
How do we start documenting an M&V plan How do
we follow it?
Are there any set rules for following this?
B. Standard M&V Template
Developed to assist M&V planners incorporate the various design
elements of a M&V plan
Applicable to all EE projects
Developed with an aim to
Help project team to capture all the site information Key
parameters, variables
Identify the risks involved
Keep the client informed about the savings
Helps detect issues and scope for correction - in case savings are not
being met
Standard M&V Template
Based out of the:
The U.S. Department of Energy's Federal Energy
Management Program (FEMP)
The Efficiency Valuation Organization (EVO) IPMVP
(International Performance Measurement and
Verification Protocol)
Office of Environment and Heritage NSW Documents
M&V Planning Template
Snapshot of the M&V Template
Contents of the M&V Template
Presented in a spreadsheet for ease of calculations with the
following contents:
Project Summary:
Summary of the various ECMs and budget associated, teams
for the projects. (Intended for the Top Management)
ECM Background:
This would comprise of the present site description and
implementation strategy
Contents of the M&V Template
M&V Design:
preferred M&V Option,
measurement boundary,
details of key parameters,
process information relating to conducting measurements,
calculating saving and uncertainty.
M&V Schedule:
To capture the schedule and time of reporting M&V
M&V Results:
A step by step list of tasks accomplished and savings achieved
Intended Outcomes
Increased awareness and knowledge among industries
on technologies for energy savings
Increased readiness of industry to implement EE
projects
Increased preparedness of ESCO delivery including
mechanisms of M&V and dispute resolution
Other Necessary Conditions
Ensure senior management involvement and support
Define roles and responsibilities
Identify key stakeholders at an early stage and nurture
consensus
Initiate M&V at the planning and feasibility stages of a
project
Report any uncertainties in savings arriving during the
period along with suitable reasons
Few Learnings
Availability of finance for EPCs remains key issue
Role of enablers important to arrive at a ESCO contract
involvement of an independent third party secures the
contract
M&V is the crux of the Performance contracting = key to
success of the project
Slow progress in terms of project approvals and signing of
agreements
No standard procedure adopted for arriving at a contract
Next Steps
Continue dialogue with ESCOs for Technical Support
Spell out detailed procedure for a systematic approach
to an EPC
Finalise Standard ESCO performance contract for
ESCO projects
Obtain a consensus on acceptance of Performance Contract
from the various ESCOs
Practical Applications of the
Standard Contract and
M&V Template
Standard Contract
The Key clauses described before include:
Obligations of the ESCO, Client
Dispute Resolution
What can be done in case of a dispute
Payment to ESCO
The procedure for making timely payments
Termination of Payments
Construction Schedule and Equipment Installation
Base Year Energy Adjustments
Measurement and Verification Plan
Getting into the details of a few
clauses
Obligations of the ESCO and Client
Defines the obligation of the ESCO for the entire
duration of the contract.
the inclusions are:
reasonable steps to protect the Equipment from
damage,
notifying the ESCO within twenty-four hours after
Client's actual knowledge and occurrence of any
malfunction and alteration
or modification in any energy-related equipment or its
operation.
Equipment Warranties and
Compatibility
Indemnifies against loss of the equipment due to
defects in materials and workmanship for a specified
period.
Payments to the ESCO
Describes the scope of intervention for the energy
efficiency project identified by the ESCO.
Payments due to ESCO are to be calculated in
accordance with the provisions of mutually agreed
predetermined payment schedule as set forth in
Schedule D of the contract, and ESCO shall provide to
the client an invoice of the total amount due.
Base Year Energy Adjustments
Typically, the most difficult aspect of M&V for
Customers is for understanding that the baseline
energy consumption needs to be changed, updated or
modified to reflect changes to the environment of the
ECMs.
Sharing some of the practical experiences
Dispute Resolution
The parties should view any dispute that may arise as
an issue to be resolved within the framework of the
contract, rather than as an irreparable breakdown of
the relationship.
Options include:
Resolving amicably
Through Mediation
Independent Arbitration
Sole Arbitrators vs. 3 Arbitrators
Schedules and Exhibits
All Schedules attached hereto or to be attached hereto,
constitute the entire Contract between both parties
Includes:
EQUIPMENT TO BE INSTALLED BY ESCO
BASELINE ENERGY CONSUMPTION
SAVINGS MEASUREMENT & CALCULATION FORMULAE; METHODOLOGY
TO ADJUST BASELINE
PAYMENTS TO ESCO
ENERGY SAVINGS ESTIMATE
M&V PLAN SUMMARY (ATTACH FULL M&V IN A SEPARATE SHEET)
A few important points to consider..
It is important to note that though dispute resolution
and legal referral is important, it is only to be used as a
last resort
On the first instance of any conflict, both parties would
like to resolve the issue amicably
Also, most of the established clients/customers have
an internal procedure for dispute redressal
The contract, however will safe guard the interests of
both parties
Other factors to consider during
negotiations
Tariff changes (Rs/Unit) during the course of the
performance contract? In such cases how will the savings
be shared?
In case of excess savings/ shortfall in savings; how will the
payments to the ESCO be affected?
After developing a baseline, if there are any major
variations in the load of facility, how can adjustments be
made?
Documenting a M&V plan and sharing it with the client
The M&V Template
Energy savings cant be measured directly by meters or
instruments.
Actual energy use can be measured directly before the
retrofit and then after the retrofit
In an industrial setting independent variables affecting
a processs energy use (i.e. production levels) can vary
significantly from the baseline period to the
performance period
Typically M&V plans comprises of :
Project Summary
ECM Intent
Budget
M&V Option
Measurement Boundary
Key Measurement Parameters
Potential interactive effects
Measurement equipment required
Measurement Period
M&V
Template
The M&V template has
all the components of an
M&V plan.
Provides a reference
point for documenting a
M&V plan
M&V Template
Provides a
Summary of the
Project intended
for the use of the
top management
Thank You!
Ashwin Jayaram
ashwin@aeee.in
Milind Chittawar
milind.chittawar@seetechsolutions.in