Evaluation of the Super ESPC Program: Level 2 -- Recalculated Cost Savings

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This report presents the results of Level 2 of a three-tiered evaluation of the U.S. Department of Energy Federal Energy Management Program's Super Energy Savings Performance Contract (Super ESPC) Program. Level 1 of the analysis studied all of the Super ESPC projects for which at least one Annual Measurement & Verification (M&V) Report had been produced by April 2006. For those 102 projects in aggregate, we found that the value of cost savings reported by the energy service company (ESCO) in the Annual M&V Reports was 108% of the cost savings guaranteed in the contracts. We also compared estimated energy ... continued below

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Shonder, John A & Hughes, Patrick April 1, 2009.

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This report presents the results of Level 2 of a three-tiered evaluation of the U.S. Department of Energy Federal Energy Management Program's Super Energy Savings Performance Contract (Super ESPC) Program. Level 1 of the analysis studied all of the Super ESPC projects for which at least one Annual Measurement & Verification (M&V) Report had been produced by April 2006. For those 102 projects in aggregate, we found that the value of cost savings reported by the energy service company (ESCO) in the Annual M&V Reports was 108% of the cost savings guaranteed in the contracts. We also compared estimated energy savings (which are not guaranteed, but are the basis for the guaranteed cost savings) to the energy savings reported by the ESCO in the Annual M&V Report. In aggregate, reported energy savings were 99.8% of estimated energy savings on the basis of site energy, or 102% of estimated energy savings based on source energy. Level 2 focused on a random sample of 27 projects taken from the 102 Super ESPC projects studied in Level 1. The objectives were, for each project in the sample, to: repeat the calculations of the annual energy and cost savings in the most recent Annual M&V Report to validate the ESCO's results or correct any errors, and recalculate the value of the reported energy, water, and operations and maintenance (O&M) savings using actual utility prices paid at the project site instead of the 'contract' energy prices - the prices that are established in the project contract as those to be used by the ESCO to calculate the annual cost savings, which determine whether the guarantee has been met. Level 3 analysis will be conducted on three to five projects from the Level 2 sample that meet validity criteria for whole-building or whole-facility data analysis. This effort will verify energy and cost savings using statistical analysis of actual utility use, cost, and weather data. This approach, which can only be used for projects meeting particular validity criteria, is described in Shonder and Florita (2003) and Shonder and Hughes (2005). To address the first objective of the Level 2 analysis, we first assembled all the necessary information, and then repeated the ESCOs' calculations of reported annual cost savings. Only minor errors were encountered, the most common being the use of incorrect escalation rates to calculate utility prices or O&M savings. Altogether, our corrected calculations of the ESCO's reported cost savings were within 0.6% of the ESCOs' reported cost savings, and errors found were as likely to favor the government as they were the ESCO. To address the second objective, we gathered data on utility use and cost from central databases maintained by the Department of Defense and the General Services Administration, and directly from some of the sites, to determine the prices of natural gas and electricity actually paid at the sites during the periods addressed by the annual reports. We used these data to compare the actual utility costs at the sites to the contract utility prices. For natural gas, as expected, we found that prices had risen much faster than had been anticipated in the contracts. In 17 of the 18 projects for which the comparison was possible, contract gas prices were found to be lower than the average actual prices being paid. We conclude that overall in the program, the estimates of gas prices and gas price escalation rates used in the Super ESPC projects have been conservative. For electricity, it was possible to compare contract prices with the actual (estimated) marginal prices of electricity in 20 projects. In 14 of these projects, the overall contract electricity price was found to be lower than the marginal price of electricity paid to the serving utility. Thus it appears that conservative estimates of electricity prices and escalation rates have been used in the program as well. Finally we calculated the value of the reported energy savings using the prices of utilities actually paid by the sites instead of the contract prices. In 16 of the 22 projects (where this calculation was possible), the recalculated annual cost savings were greater than the annual cost savings reported by the ESCO. In the aggregate for the 22 projects analyzed, the annual cost savings calculated using actual energy prices were found to be 111% of the ESCO-reported savings. Using statistical methods to expand this estimate to the entire 102-project population of Super ESPC projects, we estimate that the total annual cost savings calculated using actual energy prices instead of contract energy prices are about 110% of the reported annual cost savings. We can combine the results of the Level 1 and Level 2 studies to estimate overall cost savings realized by the government for the entire 102-project population of Super ESPC projects examined in Level 1.

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  • Report No.: ORNL/TM-2007/065
  • Grant Number: DE-AC05-00OR22725
  • DOI: 10.2172/951603 | External Link
  • Office of Scientific & Technical Information Report Number: 951603
  • Archival Resource Key: ark:/67531/metadc929561

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  • April 1, 2009

Added to The UNT Digital Library

  • Nov. 13, 2016, 7:26 p.m.

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  • Nov. 21, 2016, 6:42 p.m.

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Shonder, John A & Hughes, Patrick. Evaluation of the Super ESPC Program: Level 2 -- Recalculated Cost Savings, report, April 1, 2009; [Tennessee]. (digital.library.unt.edu/ark:/67531/metadc929561/: accessed December 15, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.