302 Energy Project Financing: Resources and Strategies for Success
- operation of the project is related to its actual usage, defined as
operation hours, ton hours etc.
Typically, an ESCO is responsible for the performance of any
equipment or systems it installs. Depending on the energy performance
contract, either the ESCO or the Owner may be responsible for the
operation of the equipment. It is important to allow for changes in
equipment operation that may result from factors outside either party’s
control, such as weather. Responsibility for maintenance may be as-
signed to either party or shared. Consider four categories of variables
that account for all of the changes that might affect energy cost avoid-
ance:
1 ESCO-controlled variables—retrofit performance
2 Owner-controlled variables—facility characteristics, operation
3 ESCO and/or owner controlled variable—maintenance
4 Variables that are outside of either party’s control—weather, en-
ergy prices, natural disaster
The M&V Plan should clearly identify these variables for all ECMs
before the project is implemented. The M&V process requires the skills
of professionals familiar with measurement and collection techniques,
data manipulation, interpretation, and technology performance. In some
circumstances, it may be preferable that a third party be obtained by
the owner to judge whether energy performance contract terms are ap-
propriate and, later, are being applied correctly. In order to adequately
understand the implications of various measurement strategies, the
M&V professional should have a thorough understanding of the ECMs
being installed and the services provided.
2.3 FINANCIAL RISK, MEASUREMENT
When creating financed energy efficiency project agreements, the
parties enter into a contract defining and allocating risk among the par-
ties. Generally, the lender will be looking for the most straight forward
allocation of risks. In financing efficiency projects, most risks (beyond
general creditworthiness of the parties) relate to one basic issue: will the