90 Energy Project Financing: Resources and Strategies for Success
Implement Quality Measures
Customers too often insist on quantity instead of quality. One
federal procurement officer reportedly told an ESCO the military base
would rather have “15 Tempos than 10 Volvos.” The agency may have
reasons for needing 15 sets of wheels, but when the focus is energy,
the ESCO must look at parts, repairs, maintenance and savings persis-
tence.Operations and Maintenance (O&M)
Too often overlooked, energy efficient O&M practices are abso-
lutely vital to the success of a project. An evaluation of the schools
and hospitals federal energy grants program (Institutional Conservation
Program) after eight grant cycles revealed that in effective energy man-
agement programs found that up to 80 percent of the savings could be
attributed to energy efficient O&M practices. If ESCOs are to guarantee
the savings from a measure, they must look beyond the equipment to
its “care and feeding” over the life of the contract. If the ESCO does not
perform the maintenance, it must; (a) train the owner’s staff; (b) police
the O&M practices; and/or (c) discount the predicted level of savings.
In all cases the associated risk level must be evaluated.Measurement and Savings Verification (M&V)
Once the recommended measures are known and approved, the
ESCO and owner should cooperatively establish the desired level of ac-
curacy and the associated costs for M&V, that they are willing to have
the project carry. The question is: How much accuracy are the parties
willing to pay for? When M&V costs are included in the project, they
cut into the savings and thereby diminish the amount of equipment and
services that can be funded. But anytime money changes hands based
upon savings, those savings need to be quantified in an acceptable
manner. The International Performance Measurement and Verification
Protocol (IPMVP) is the most broadly accepted means of measuring and
verifying savings. The IPMVP guidelines can be downloaded from the
organization’s website: evo-world.org. (Accessibility to the guidelines
requires membership in EVO.)Project Management
The “business end” of the project, securing the savings, doesn’t
begin until the equipment is installed. Weak ESCOs tend to think of the