SEPA
United States
Environmental Protection
Agency
Office of Atmospheric Programs
Air and Radiation
(6202J)
EPA-430-B-07-001
July 2007
             Climate Protection Division

             CREATING AN ENERGY EFFICIENCY
             AND RENEWABLE ENERGY
             SET-ASIDE IN THE NOx BUDGET
             TRADING PROGRAM:
     Evaluation, Measurement, and Verification of Electricity Savings
      for Determining Emission Reductions from Energy Efficiency
                  and Renewable Energy Actions
                           July 2007

-------
Preface
This guidance document was written in 2004, peer-reviewed, and subsequently updated in 20061.  It is
the third of three NOX SIP Call guidance documents that the U.S. Environmental Protection Agency
(EPA) is issuing to help states capture the air quality benefits of energy efficiency and renewable
energy (EE/RE) actions. It is  intended to assist states  with the design of their EE/RE evaluation,
measurement and verification requirements of their emissions control programs.

In 1998, the  EPA  promulgated a rule,  commonly known as the NOX SIP Call, to address regional
transport of ground-level ozone, the main component of smog. Ground-level ozone is transported by
the wind, and tends to be a problem over broad regional areas, particularly in the eastern United States.
Emissions of Nitrogen Oxides (NOX) react in the atmosphere to form compounds that contribute to the
formation of ozone. These compounds, as well as ozone itself, can travel hundreds  of miles across
state boundaries to affect public health in  areas far from the source of the emissions. Thus, regions
with "clean" air - those that meet or attain the  national air quality standards  for ozone - may be
contributing to a downwind region's ozone problem because of transport.

The  Clean Air Act requires  that a State Implementation Plan (SIP) contain provisions to  prevent a
state's facilities  or sources from contributing  significantly to air pollution problems "downwind,"
specifically in those areas that fail to meet the national  air quality standards for ozone. By reducing
emissions of NOX, the transport of ground-level ozone across state boundaries  can be reduced. The
NOX SIP Call includes a model NOX Budget Trading Program that allows states to achieve the required
emissions reductions in a cost-effective manner.

Policies that promote  EE/RE actions  can reduce emissions of pollutants,  including NOX. These
emissions reductions can be recognized in a state's SIP through the use of the voluntary Energy
Efficiency  and Renewable Energy Set-Aside Program. An EE/RE Set-Aside is a pool of allowances
that are awarded to energy efficiency and renewable energy  projects that reduce electricity generation.
The  Set-Aside comes from within the state's NOX allowance budget to ensure that the  total number of
allowances in circulation do not exceed the allowable  maximum.  The Set-Aside Program focuses
primarily on end-use  electricity efficiency and renewable energy actions, since the amount and source
of electricity consumed by end-users affects the quantity of NOX emitted at an electricity generating
unit(EGU).

The  Set-Aside Program is  one example of how EPA  is giving states guidance and  flexibility in
meeting their air quality attainment goals. The Program is consistent with two EPA goals: (1) reducing
the total economic  cost of meeting the proposed NOX cap and (2) encouraging the adoption of EE/RE
practices and technologies.

While this  guidance is intended for use with the NOX Set-Aside Program, the  basic principles can be
applied to other programs that include EE/RE actions as  an  emission mitigation strategy. It  is
important to note that actual emissions reductions in a cap and trade program (i.e., reductions beyond
the capped level) occur only if the allowances allocated to an efficiency or renewable energy activity
are retired.
1 The National Action Plan for Energy Efficiency is developing a "Model Energy Efficiency Program
Impact Evaluation Guide" that will be available in Fall 2007.  For more information, see:
http://www.epa.gov/cleanenergy/actionplan/eeactionplan.htm

-------
Acknowledgments
This document was prepared for the U.S. Environmental Protection Agency by Steven Schiller of
Schiller Consulting, Inc. (steve@schiller.com) under contract to Stratus Consulting. EPA's project
manager is Nikolaas Dietsch. He can be contacted at dietsch.nikolaas@epamail.epa.gov.

This  work  includes  significant contributions from  evaluation,  measurement, and  verification
guidelines prepared by other organizations including the Efficiency  Valuation Organization (the
International Performance Measurement and Verification Protocol); American  Society of Heating,
Refrigerating and Air-Conditioning Engineers; FEMP; California Measurement Advisory Council;
World Resources Institute and World Business Council for Sustainable Development, and Lawrence
Berkeley National Laboratory.

A draft version of this document underwent a Technical Peer Review coordinated by Perrin Quarles
Associates (PQA) in 2004.  The EPA project manager for that version of the document was Edgar
Mercado.  Thirteen reviewers provided comments with particularly detailed and helpful suggestions
provided by  John Cowan, Satish Kumar, Laura Vimmerstedt, and Ed Vine.  Debra Jacobson and Art
Diem provided valuable comments on Chapter 8.

-------
Table of Contents
Preface	ii

Table of Contents	iv

List of Tables	vii

List of Figures	viii

List of Acronyms	ix

Executive Summary	x
  Introduction and Summary of Evaluation Approach	x
  Contents of Document	xiii
Chapter 1 Introduction	1-1
  1.1  EPA NOX SIP Call and the EE/RE Set-Aside PRogram	1-1
     1.1.1  Background	1-1
     1.1.2  NOx SIP Call	1-2
     1.1.3  The Energy Efficiency and Renew able Energy (EE/RE) Set-Aside	1-3
  1.2   Summary of State Set-Aside Programs	1-5
  1.3   Summary of two Previous EE/RE Set-Aside Guidance Documents	1-6
     1.3.1  Overview of First Guidance Document	1-6
     1.3.2  Overview of Second Guidance Document	1-7
  1.4   Eligible projects for the EE/RE Set-Aside	1-8
  1.5   Linking Emissions Reductions from an EE/RE Set-Aside to a State Implementation Plan	1-9
  1.6 Organization of the Guidance Document	Error! Bookmark not defined.
Chapter 2 Evaluation Issues and Notes on Terminology	2-1
  2.1  Basic Evaluation Accounting Standards	2-1
  2.2 Allowance Allocations versus Emission Reductions	2-3
  2.3 Key Evaluation Issues	2-4
  2.4 Terminology	2-7
Chapter 3 Determining NOX Allowances for EE/RE Projects and Programs	3-1
  3.1  Renewable versus Energy Efficiency Measurement and Verification	3-1
  3.2  Program Versus Project Evaluation	3-1
  3.3  Evaluation Process Flow Chart	3-2

-------
  3.4   Sample Calculations	3-5
     3.4.1   Sample Energy Efficiency Project	3-5
     3.4.2   Sample Renewable Energy Project	3-7
  3.5   Discussion of Individual Steps In Evaluation Process	3-8
     3.5.1   Confirming Compliance with NOX Program Requirements	3-8
     3.5.2   Calculating Gross Energy Savings	3-9
     3.5.3   Calculating Net Energy Savings	3-10
     3.5.4   Allocating NOX Allowances to EE/RE Projects and Programs	3-11
     3.5.5   Documentation, Certification, Tracking, Reporting and Persistence Evaluation	3-12

Chapter 4 Energy Efficiency Measurement and Verification Concepts	4-1

  4.1   Overview Of Measurement And Verification Approach For Determining Energy Savings	4-1

  4.2   M&VResource Documents	4-3
     4.2.1   International Performance Measurement and Verification Protocol (IPMVP)	4-3
     4.2.2   Federal Energy Management Program (FEMP) M&V Guidelines 	4-4
     4.2.3   ASHRAE Guideline 14-2002 Measurement of Energy and Demand Savings 	4-5
     4.2.4   Acid Rain Program: "Conservation and Verification Protocols" (CVP)	4-5
     4.2.5   State and Utility Program M&V Guidelines	4-6
     4.2.6   Program Based M&V Guidance Documents	4-7
  4.3   Measurement And Verification Options	4-7
     4.3.1   M&V Option A - Retrofit Isolation: Key Parameter Measurement	4-9
     4.3.2   M&V Option B - Retrofit Isolation: All Parameter Measurement	4-10
     4.3.3   M&V Option C - Whole Facility	4-10
     4.3.4   M&V Option D - Calibrated Simulation	4-11

  4.4   Selected M&V Issues	4-12
     4.4.1   Defining a Baseline	4-12
     4.4.2   Baseline Adjustments	4-13
     4.4.3   Net to Gross Adjustments	4-14

Chapter 5 Calculating Energy Efficiency Savings Using Existing Documentation - Quality Assurance
Guidelines	5-1

  5.2   Quality Assurance Guidelines	5-2
     5.2.1   Minimum Requirements	5-2
     5.2.2   Quality Assurance Issues for Data Collection and Analysis Methods	5-4
     5.2.3   M&V Option Specific Quality Assurance Issues	5-7
  5.3   Inspections and Persistence Reviews	5-14

  5.4   Baseline Reviews	5-14
  5.5   Minimum Accuracy Standards and Discounting	5-15

  5.6   Calculating ozone season savings from annual savings	5-16

  5.7   Independent Review	5-16

Chapter 6 Calculating Energy Efficiency Savings Using New Analyses-Establishing a NOX Set-Aside
Specific M&V Protocol	6-1

  6.1   Requirements for a Project M&V Plan	6-2
     6.1.1   Selecting an M&V Option	6-2
     6.1.2   Project Specific M&V Plan - Energy Efficiency Projects	6-4

  6.2   Sampling	6-8

-------
  6.3   Large-Scale Meter Data Analysis Method	6-10
Chapter 7 Measurement and Verification for Renewable Energy Projects	7-1
  7.1   M&VApproaches and Options	7-1
  7.2   Programs Versus Projects	7-3
  7.3   Net Metering of Electrical Output and Fuel Use	7-3
  7.4   Information on Metering	7-3
  7.5   Project Specific M&V Plan-Renewable Energy Projects	 7-4
Chapter 8 Determining Emissions Allocation Rates and Potential Emissions Reductions From Electricity
Savings	8-1
  8.1 Introduction	8-1
  8.2 Options for Establishing an Emissions Allocation Rate	8-1
  8.3 Calculating emissions reductions	8-2
     8.4.1 System Average Emissions Rate	8-2
     8.4.2 Dispatch Models	8-3
     8.4.3 Medium Effort Calculation Approaches	8-3
Appendix:   References and Useful Information Sources	A-l
  A.I EPA and State NO* SIP Call Related Documents	A-l
  A. 2 Project M&V Guidelines	A-3
  A.3 Program Evaluation Resources	A-4
  A.4 Emission Reduction Calculation Resources	A-5
  A. 5 Transmission and Distribution Loss Resource	A-6
  A.6 Resources Relating to M&V and Emissions Reduction Documentation	A-7
  A. 7 General Energy Efficiency and Renewable Energy Resources	A-9
  A.8 References	A-10

-------
List of Tables
Table 1.1      State-by-State Allowances and Energy Efficiency & Renewables Set-Aside Example
              Allowances and Estimated Electricity Savings

Table 1.2      First Guidance Design Recommendations

Table 1.3      Second Guidance Design Recommendations

Table 4.1      IPMVP M&V Options (from IPMVP 2007)

Table 5.1      Minimum Requirements for Evaluation and M&V Submittals for NOX Set-Aside
              Program

Table 5.2      Quality Assurance Issues for Each IPMVP M&V Option

Table 5.3      Quality Assurance Issues for IPMVP Option A: Partially Measured Retrofit Isolation

Table 5.4      Quality Assurance Issues for IPMVP Option B: Retrofit Isolation

Table 5.5      Quality Assurance Issues for IPMVP Option C: Whole Facility Analyses

Table 5.6      Quality Assurance Issues for IPMVP Option D: Calibrated Simulation

Table 6.1      Applications for Each IPMVP Option

Table 6.2      Energy Efficiency Project M&V Plan Content Components

Table 6.3      Energy Efficiency Measure-Specific M&V Plan Components

Table 7.1      IPMVP Options and Approaches for Renewable Energy Projects

-------
List of Figures	






Figure ES-1    Evaluation Process for NOX Set-Aside Program



Figure 1-1     Compliance Dates in the NOX SIP Call Region



Figure 3-1     Evaluation Process for NOX Set-Aside Program



Figure 4-1     Comparison of Energy Use Before and After an Energy Project Is Implemented

-------
List of Acronyms
AAR




ASHRAE




BAU




CAA




CHP




CVP




DOE




DSM




EE/RE




ESCO




EGU




EPA




FEMP




HVAC




IPMVP




kWh




MWh




M&V




NAAQS




NATS




NOX




SIP
Authorized Account Representative




American Society of Heating Refrigeration and Air-Conditioning Engineers




"Business-as-usual" or baseline




Clean Air Act




Combined Heat and Power




Conservation Verification Protocol




United States Department of Energy




Demand Side Management




Energy Efficiency and Renewable Energy (as in EE/RE projects)




Energy Services Company




Electricity Generating Unit




United States Environmental Protection Agency




United States Federal Energy Management Program




Heating Ventilation and Air Conditioning




International Performance Measurement and Verification Protocol




kilowatt-hour




Megawatt-hour




Measurement and Verification




National Ambient Air Quality Standards




NOX Account Tracking System




Oxides of Nitrogen




State Implementation Plan

-------
Executive Summary
INTRODUCTION AND SUMMARY OF EVALUATION APPROACH

This guidance describes best-practice approaches  for documenting electricity  savings and resulting
NOX reductions from EE/RE projects or programs. It provides background, discussion of relevant
issues, and a recommended process. Unfortunately, this guidance document, and all similar manuals,
does not offer  specific  step-by-step instructions for all project types and circumstances.   This  is
because (a) there are many variables associated with the myriad EE/RE technologies and applications,
and (b) deciding  "how  accurate is accurate enough" varies for different applications.  What this
guidance document  does  provide  is an overall best-practice  approach for calculating electricity
savings, resources that  provide  electricity savings calculation  details  for  common project types,
information on options  for calculating NOX savings from kWh savings, and  guidance on what to
include in reports submitted for allowance documentation.

When implementing  an  EE/RE Set-Aside, states need to define an evaluation process for qualifying
projects that takes into account the  range of possible measures, while balancing transaction costs (for
both the State and the applicants) with  documentation, accuracy and precision requirements. To this
end, states  can  develop  a  procedures manual that describes the steps or tasks necessary for proper
documentation of NOX reductions.

In this document, evaluation is the term used for the overall process of determining  the potential
emission reductions  resulting from  displaced  electricity generation  requirements  at  core-source
electricity generating units (EGUs). Measurement and verification (M&V) is a  component of the
evaluation  process that  is associated with  documenting electricity savings  (efficiency projects) or
production  (renewables  projects) at a particular project  site. The  recommended evaluation  process
consists of: (a) confirming  that the EE/RE project or program meets the basic  requirements of the Set-
Aside Program, (b) calculating net electricity (kWh) savings at the EGU, and (c) converting these
savings to NOX emission allowance values. In addition,  each state may want to have a persistence
analysis process to ensure that the savings continue through the term of the  allowance allocation.
Figure ES-1 summarizes the evaluation process.

-------
              Figure ES-1:  Evaluation  Process for NOX Set-Aside Program
                                     Step 1. Confirm e-igitaility
                                     and eornphsnce with NO^
                                            Program
                                     1. Displaces com EGU
                                     2. Not s-eqinied by ragshsiaa. voluntary action
                                     3. Not foi compliance or s esenrtms credits already
                                     required
                                     4. In operation dining required years sad time of
                                         (ozone sea^ois)
                                     5. Savings aggregated to at least one ton
                                       Real, measurable and lone term benefits
   Step 2A Calcu ate Gross Energy
              Savings
Review and modify, as required, existing
 gross electricity savings ana-yses (See
Chapter 5 for EE projects and Chapter 7
           for RE projects)
                         Slep 2B Calculate Gross Energy Savings
                              New analyses used to determine
                          electncrty savings (see Chapter 6 for EE
                          projects and Chapter 7 for RE projects)
                                                               Step 3.  Calcu'S^e Net Energy Savings
                                                                  Apply net to gross factors, e.g.
                                                               transmission and distribution factor, to
                                                                   obtain net electricity savings
Sources of \0X factors:
1) eGRID or OTC Emission
Reduction Workbook
2J EPA defsuh value of
0.00!5Ib;.l-\Vli
3) EPA approved ejaissioss
model
Step 4. Calculate Emission
       Reductions
   Apply NOXfactors to
   electricity savings for
calculation of NO,, reduction
     
-------
Confirming that individual projects or programs meet the basic Set-Aside Program  requirements is
accomplished through a checklist process.  Calculating electricity savings is done through either (a)
evaluating  the documentation and accuracy of M&V activities that have already been completed as
part of an EE/RE project  or program implementation, or (b) conducting  new  M&V  activities
specifically for determining  Set-Aside Program emissions reductions. If an existing M&V analysis is
allowed, the state may employ an independent review of the documentation, set minimum accuracy
standards, and consider adopting discount factors to reduce the risk of electricity savings uncertainty.

Of particular concern is whether the baseline conditions assumed for the savings calculation are
consistent with the NOX SIP Call Program baseline, or business as usual, requirements. A proper
baseline definition is needed in order to ensure that NOX reductions are in addition to what would have
occurred in the absence of the subject project or program. If the electricity savings are calculated at a
site level, the state may wish to add a transmission and distribution loss factor.

Calculating the quantity of NOX allowances allocated to  qualified projects or programs  can be  done
using either the EPA default allocation  factor (indicated  in the NOX SIP Call as 0.0015 Ibs/kWh), a
system average emissions rate, or an avoided  marginal emissions rate. If the allowance allocation rate
is  based on the emissions rate at which EE/RE projects displace pollution from  EGUs, then the
number of awarded allowance approximates the potential emissions reduction (assuming allowances
are subsequently retired). Several approaches for  calculating system average and marginal displaced
emissions rates are discussed in Chapter  8.

The following  are  examples  of allowance  calculations for an  energy efficiency  program and  a
renewable energy project. These are presented to illustrate how the evaluation process discussed in this
document can be applied  to determine  energy savings or generation,  and the  resulting quantity of
allowances. More detailed versions of these examples are included in Chapter 3.

•   A utility  has a program that pays  incentives for  energy-efficient  lighting in new  construction
    projects built by its customers. The  utility reports that it has calculated savings during the ozone
    season of 2,190 MWh and has requested NOX  Set-Aside Program allowances. The utility program
    meets  the  eligibility requirements  of the Set-Aside Program since, although the utility has
    generating units, the lighting projects are for its customers. The 2,190 MWh savings value needs
    to be reduced though, because it was calculated with the assumption of baseline lighting that is
    less efficient than current state code requirements. The state code requirements  were considered
    when EPA made the statewide NOX allocation. In addition, the savings reported by the utility  were
    audited by the state utility commission and were  found to over  estimate savings  by  10%.
    Combined, the  audit and baseline  corrections reduce the savings  value  to  1,750 MWh. These
    savings are calculated on a site level and  can be increased, in this example by 5%, to account for
    transmission and distribution losses, bringing the net savings eligible for allowances to 1,837
    MWh or 1,837,000 kWh. Using the  EPA's default value  of 0.0015 Ibs of NOX per kWh results in
    1.38 annual tons of NOX reductions or one NOX allowance for the utility's program.

•   A private developer installs a wind  turbine farm. A metering report indicates that the wind  farm
    generated 3,500 MWh of electricity during the ozone season. The project is eligible for the Set-
    Aside Program  and because the turbines do not use fuel, the baseline energy consumption is zero
    and thus  the wind generators'  output is the  savings. An  audit by an independent  consultant
    indicates that the metering  reports for several of the individual wind turbines were incomplete and
    spot testing of some electricity meters indicates accuracy problems  as high as 5%. Therefore, the
    consultant  suggested discounting the  reported  savings by 5%.  The net savings eligible for
    allowances are therefore calculated as 3,325 MWh. Using the EPA's  eGRID electricity and
    emissions  model indicates that the  emission factor, for  where the  wind turbines are located, is

-------
    0.002 Ibs of NOX per kWh - resulting in 3.325 tons of reductions. Thus, three annual tons of NOX
    allowances are allocated to the wind turbine program.
CONTENTS OF DOCUMENT

This document includes eight chapters and an appendix that provide information about: (a) the Set-
Aside Program, (b) the fundamentals  of evaluation and M&V,  (c) calculating emission  allowance
allocations for EE/RE activities, (d) a recommended approach for determining emission allowances in
the Set-Aside  Program, and (e) resources for additional information. The "Key Issues" sections in
Chapter 2 describe the  distinction between allowance allocations and actual reductions of emissions,
as well as issues such  as additionality and determining the appropriate level of analysis rigor. The
"Resources" include a wealth of information that can be used by a state to prepare its guidelines, or by
participants as they implement their own EE/RE projects or programs and apply for allowances. The
"Resources" include other EPA documents on the Set-Aside Program, general and specific resources
on M&V from the EE/RE industry, emission factor calculation methods, general  resources on how
emission reductions are calculated for other programs, and Web sites with information on EE/RE
projects and technologies.

-------
Chapter 1  Introduction
1.1     EPA NOx SIP CALL AND THE EE/RE SET-ASIDE PROGRAM


1.1.1   Background
The Clean Air Act Amendments of 1990 and the Pollution Prevention Act (PPA) of 1990 recognize
the  significant role that energy efficiency and renewable energy resources  can play  in  reducing
pollution and achieving the nation's environmental goals. The 1990  CAA  enlists greater use of
market-based controls and incentives for implementing energy-efficient technologies and practices.
One  example is  the successful ENERGY STAR voluntary programs. It also promotes reliance on
pollution prevention strategies, such  as the encouragement of energy conservation and renewable
energy resources in the Acid Rain Program. In addition, the 1990 PPA promotes source reduction by
facilitating  the adoption of particular techniques by businesses, including increasing efficiency in
energy use, substituting environmentally benign fuels, and using design approaches that reduce energy
demand.

Through voluntary programs, EPA has shown that energy efficiency and renewable energy resources
are an effective means  for reducing environmental pollution while increasing economic benefits. Many
economic studies have recognized that energy efficiency and renewable energy investments provide
broad societal benefits, both economic and environmental, that are not all rewarded in  the revenue
streams derived by investors in these projects. A major study by the U.S. Department of Energy2
(DOE) also shows  that accelerated adoption of energy efficiency is an economically sound means to
reduce emissions while developing the U.S. economy.

Energy efficiency and renewable energy resources can  result in reductions of fossil-fuel energy use,
which are a primary cause  of pollution emissions. As greater penetration of energy-efficient products
and renewable energy  resources  occurs through  a number of programs and  other policies, the air
pollution reduction impact has become significant.  However, the air pollution emission reductions
from energy efficiency and renewable energy have not been systematically recognized in air quality
attainment processes.

The EPA has provided states with the option of including energy efficiency and renewable energy in
the NOX Budget Trading Program in order to (1)  reduce the total  economic cost of meeting the
proposed NOX cap; (2) encouraging the adoption of energy efficiency and renewable energy practices
and technologies; and (3) reduce future pollution related liabilities by recognizing the positive impacts
of energy efficiency and renewable energy on emissions  reductions.
2 Inter-laboratory Working Group, 2000

-------
1.1.2   NOx SIP Call
In September 1998 EPA promulgated a rule to address regional transport of ground level ozone, which
is the main component of smog. Ground-level ozone is transported by the wind, and tends to be a
problem over broad regional areas, particularly in the eastern United States. Emissions of NOX react in
the atmosphere to form compounds that contribute to the formation of ozone. These compounds, as
well as ozone itself, can travel hundreds of miles across state boundaries to affect public health in
areas far from the source of the emissions. Thus, regions with "clean" air, those that meet or attain the
national air quality standards for ozone, may be contributing to a downwind region's ozone problem
because of transport.

The Clean Air Act requires that a state implementation plan (SIP) contain provisions to prevent a
state's  facilities or sources from contributing  significantly to air pollution problems "downwind,"
specifically in those areas that fail to meet national air quality standards for ozone. Based  on this
authority, EPA issued the final rule, commonly known as the NOx SIP Call in 1998. The rule initially
required 22 states and the  District of Columbia to submit SIPs that address the regional transport of
ground-level ozone through reductions in NOX.  The states subject to the final action were: Alabama,
Connecticut,  Delaware, Georgia, Illinois,  Indiana,  Kentucky, Massachusetts, Maryland, Michigan,
Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Virginia, West Virginia, and Wisconsin.

The rule  required states to submit their  SIPs by  September 1999 and to put reduction measures in
place by May 1, 2003. The District of Columbia and other Ozone  Transport Commission (OTC) states
in the  Northeast, with the exception of New Hampshire,  began monitoring NOx in 2002 and
implemented  programs in 2003.  Compliance  in most other NOx  SIP Call states  was  delayed  by
litigation until May 31, 2004, with required monitoring beginning in 2003.  Because of the litigation,
the compliance dates in affected portions of Georgia and Missouri are delayed until May 2007 and, for
2004 only, limited to May 31 to September 30 in  eleven states. In addition, Wisconsin was removed
from the reduction requirements.

Figure 1.1: Compliance Dates in the NOXSIP  Call Region
Under the NOX SIP call, EPA set an ozone season NOX budget for each affected state, essentially a cap
on emissions from May 1 to September 30 each year. States had the option of participating in the NOX

-------
Budget Trading Program to meet NOX SIP Call requirements.  The NOX Budget Trading Program sets
emissions limits for the affected sources in the form of NOX "allowances" for each state during each
ozone season. One allowance authorizes the emission of one ton of NOX.  Under the NOX Budget
Trading Program, EPA provides a specific number  of allowances per year to  each state.  The states
then determine how to allocate the allowances.  States may hold back a portion of their allowance
budget to set aside  allowances for new sources, energy  efficiency  and renewable energy, or other
purposes.

In order to demonstrate compliance, budget sources  must monitor and report their actual emissions to
EPA. Under the trading program, most sources use  continuous emissions monitoring systems.  Units
that  operate  infrequently  ("peaking" units), or units with low  NOX emissions  may use  simpler
estimation methods. Regardless of the method used to determine emissions, the data used to support
these determinations is reported to EPA electronically (by July 30 for the months  of May and June,
and by October 30, for the months of July, August, and September).

Sources demonstrate their compliance by holding enough allowances in their accounts to cover their
ozone season emissions. If sources do not have enough allowances to cover their emissions based on
their initial allocation, they may take advantage  of  the flexibility provided by the  allowance market
and buy allowances. Sources have until November 30th of each year, two months after the end of the
ozone season, to  ensure that they hold adequate allowances. The EPA verifies  that sources hold
adequate emissions allowances through standardized  monitoring and reporting procedures.

Allowances may be bought,  sold or traded in a market-based program between the affected sources
and other private parties. Trading allows industry flexibility while ensuring that overall emissions are
reduced. For example, if one company finds the cost  of reducing emissions to be relatively  low, it may
be able  to  reduce  its emissions more than required.  That company  then could sell  or trade
"allowances" it does not need to a company for which reductions would be more expensive. Sources
also  may receive allowances for  achieving reductions earlier than required and may  "bank" the
resulting allowances for future use.

When designed and implemented  properly, a market-based cap  and trade  program offers  many
advantages over its traditional  command  and  control counterpart, including (1) reduced  cost  of
compliance,  (2) creation of incentives for early  reductions, (3) creation of incentives for emissions
reductions beyond those required by regulations,  (4) promotion of innovation, and (5) increased
flexibility. A market system that employs  a fixed tonnage limitation for a group of sources provides
the greatest  certainty  that a specified level of emissions will be attained and maintained since  a
predetermined level  of reductions is ensured. With respect to transport of pollution, an emissions cap
also  provides the  greatest  assurance to  downwind states  that emissions from upwind states will be
effectively managed overtime.


1.1.3  The  Energy Efficiency and Renewable Energy (EE/RE) Set-Aside
An EE/RE Set-Aside  is a pool  of allowances that  is  reserved for energy efficiency and renewable
energy projects that reduce fossil fuel electricity  generation.  The EPA suggests that  5% to 15% of a
state's NOX budget be made available for an EE/RE  Set-Aside  (the actual percentage is determined by
individual states).  An EE/RE  Set-Aside comes from within a state's NOX budget for core sources. EPA
has defined two key principles that underlie the EE/RE Set-Aside Program within the NOX Budget
Trading Program: (1) encouraging  energy efficiency  and renewable energy actions that would not
occur without a set-aside; and (2) doing so while maintaining the integrity of the NOX budget.

EE/RE set-asides comes from within a state's NOX budget to ensure that the use of these  allowances

-------
will not cause a state to exceed its budget. It comes from the electricity budget in order to:  (1) be
consistent with the goal of awarding end user actions, and (2)  avoid  the  possibility of double-
rewarding allowances. This means that EE/RE set-aside allowances are not intended for actions that
reduce or displace on-site fuel use. Rather, EE/RE allowances are intended  to reward  actions that
result in a  reduction in electricity generation at a core electric generating unit (EGU) through
reductions in demand (e.g., efficiency project) or reducing the amount of electricity used from the grid
(e.g., renewable generation project).

On-site fuel reductions at core sources that receive allocations are not eligible for the  EE/RE Set-Aside
Program because: (1) they  are the result of supply-side management actions, and  (2) they are self-
rewarding.  Supply-side efficiency improvements are not attributable to  end user actions  in the same
way that DSM and other energy efficiency and renewable energy actions are in reducing electricity
generation.  To illustrate, a reduction in fuel use due to efficiency improvements at a core source boiler
reduces NOX generation at that boiler and frees up allowances for the core source to use elsewhere in
that facility or in other company facilities, or to trade  in the market. If additional allowances were
awarded to this activity, then the owner or operator of the boiler would essentially be  rewarded twice.

The EE/RE set-aside focuses primarily on renewable energy and end-user electricity efficiency actions
because the amount and source of electricity that users consume affects the amount of NOX emitted at
a core source EGU. Rewarding an end use project that reduces or  displaces electricity generation is
very different from the situation described above for a core facility fuel efficiency project.  Since the
end user and  the electricity generator are usually two different entities, the  chance for double
rewarding is minimized.

For example,  take a  situation  in which  a comprehensive energy  efficiency retrofit project is
implemented in a commercial building. The electricity generating facility will enjoy the benefit of the
reduction in NOX that the end user's efficiency improvement has achieved. The end  user's action will
therefore reduce the electricity generator's need for allowances; and potentially free up allowances for
the generator to use otherwise or to trade in the market.  However, the Set-Aside (set aside from those
that would have been given to the core sources) allowance, for the actions taken, will go to the sponsor
of the commercial building efficiency project, who is free to keep or trade  the allowances  in the
market.  This guidance is primarily for designing systems that reward this kind of end user activity.

The EE/RE Set-Aside Program is a means by which end users implementing these projects can receive
some  of the appropriate rewards for their role  in providing  a specific environmental benefit -
preventing NOX emissions - while broadly benefiting the economy. States which choose to incorporate
a set-aside into the NOX Budget Trading Program can expect to realize economic benefits as a result of
reduced electricity consumption  and reduced need for expenditures on pollution control equipment,
both of which  can lead to lower electricity rates. These  projects can also lead directly to job creation
and growth in gross state product. Energy efficiency and renewable energy deployment benefits can
accrue to electricity consumers, electric generators, and the state economy at large.

Table 1.1 summarizes the estimated NOX allowances allocated to each state, along with the NOX and
estimated electricity reductions associated with a hypothetical 5% Set-Aside.

Table 1.1   State-by-State Allowances and EE/RE Set-Aside Example Allowances and
            Estimated Potential Electricity Savings as of 1998 (Note that MA, CT and Rl were
           subsequently adjusted)

-------
State
AL
CT
DC
DE
GA
IL
IN
KY
MA
MD
Ml
MO
NC
NJ
NY
OH
PA
Rl
SC
TN
VA
Wl
TOTALS
EGU Maximum
Summer NOX Tons
(1)
28,884
2,545
207
3,489
30,061
30,165
46,627
36,315
14,619
14,788
26,344
23,171
29,967
7,898
29,391
45,776
48,038
1,115
16,286
25,386
18,009
16,751
522,271
NOX Tons at 5%
Set-Aside
1,444
127
10
174
1,503
1,508
2,331
1,816
731
739
1,317
1,159
1,498
395
1,470
2,289
2,402
56
814
1,269
900
838
26,114
MWh savings at 5% Set-
Aside (2)
1 ,925,600
169,667
13,800
232,600
2,004,067
2,011,000
3,108,467
2,421,000
974,600
985,867
1 ,756,267
1 ,544,733
1 ,997,800
526,533
1 ,959,400
3,051 ,733
3,202,533
74,333
1 ,085,733
1 ,692,400
1 ,200,600
1,116,733
34,818,067
Peak MW savings at 5%
Set-Aside (3)
879
77
6
106
915
918
1,419
1,105
445
450
802
705
912
240
895
1,393
1,462
34
496
773
548
510
15,899
(1)  Set-Aside based on revised state-by-state maximum summer NOX emission levels as presented in
    Appendix C of EPA Final Rule 40 CFR Parts 51, 72, 75, and 96 issued on October 20,1998.
(2)  MWh equivalent is based on EPA default value of 0.0015 Ibs of NOx/kWh; 1,000 kWh per MWh.
(3)  MW equivalent is based on a 60% load factor for the five ozone-season months.
1.2    SUMMARY OF STATE SET-ASIDE PROGRAMS

As of 2005, seven states have developed EE/RE Set-Aside Programs as part of their NOx SIP Call
efforts3. These  states are Indiana,  Maryland,  Massachusetts,  Missouri (implemented after  the
referenced 2005 report), New  Jersey, New York, and Ohio. These states have established EE/RE Set-
Aside Programs using 1% to 5% of their NOX trading program budget.

Programs  in  Massachusetts,  Missouri, New  Jersey, New York,  and  Ohio  address evaluation,
measurement, and verification (EM&V) requirements with specific procedures, which are summarized
below:

    •   Massachusetts stipulates that M&V of energy saved or generated by each project shall adhere
       to  the International Performance Measurements and Verification Protocol (IPMVP) or the
       U.S. EPA's Conservation Verification Protocol (CVP). Also required are M&V provisions of
       NEPOOL's  Operating Procedure  18  "Metering  and Telemetering"  or  other provisions
       acceptable to the state  agency.
    •   Missouri, in lieu of specific  M&V procedures, proposes to rely on a  requirement that all
       applications  be  submitted  with  certification by  a professional engineer attesting that
       information and calculations submitted in the application are complete and accurate. The state
  U.S. EPA, 2005

-------
       agency also has the right to require verification of data and calculations presented in the
       application as a condition for awarding the allowances and may include site visits by the
       agency or its agents.
    •  New  Jersey  has  a  specific  guidance  document  for energy  efficiency projects  (see
       "Measurement Protocol for Commercial, Industrial  and Residential Facilities," inc by ref at
       NJAC 7:27-31.21).

    •  New York requires that applicants follow protocols as specified by the state, and is currently
       developing additional guidance material that will clarify their M&V procedures.

    •  Ohio states in  its guidance that sponsors must use established M&V procedures. The guidance
       refers to M&V procedures developed by DOE and EPA as examples.

Web sites for these programs, where available, are listed in the Appendix.
1.3     SUMMARY OF TWO PREVIOUS EE/RE SET-ASIDE GUIDANCE DOCUMENTS

EPA has organized the Set-Aside Program guidance into three documents, which are available on the
EPA website: http://epa.gov/cleanenergy/

The first Set-Aside guidance document, Creating an Energy Efficiency and Renewable Energy Set-
Aside in the NOX Budget Trading Program: Establishing a Set-Aside,  focuses on the elements that
states typically consider in determining whether to establish a Set-Aside  Program. It discusses the
types of projects eligible for set-aside allowances, and how to determine an appropriately-sized set-
aside pool. The critical elements for crediting EE/RE allowances in a state's SIP are addressed.

The second Set-Aside guidance document is, Creating an Energy Efficiency and Renewable Energy
Set-Aside  in  the NOX Budget Trading Program: Designing  the Administrative and Quantitative
Elements. It focuses on the key design elements necessary for  quantifying and allocating allowances
under a Set-Aside Program.  While states can determine these elements after  their initial SIP
submission, it is important that they be decided upon before the Set-Aside Program begins.

In the first two guidance documents, EPA emphasizes that most elements can be determined by the
individual states. One of these is eligibility of various project types, which typically  differs from state
to state. State rules and instructions also vary for project timing, aggregation, documentation, EM&V,
allowance calculation, and length of award; as well as for procedures when the set-aside pool is under
or over subscribed; and in the type of guidance available to those who apply for set-aside allowances.


1.3.1    Overview of First Guidance Document

The  first  guidance document details factors to consider in determining the size  of the  set-aside,
including  determining what types of projects will be eligible, and length of time a project must be in
place to be eligible for an award. The design  issues that the first guidance document addresses include:

        1.  What types of projects are eligible for awards, and who would receive allowances?

        2.  Can the pool size be used so that most allowance awards go new projects?

        3.  How should the pool be sized to  include actions implemented before 2003?

        4.  How does pool size depend on the number of control periods the award will be given for
           (length of award)?

-------
       5.   How can states adjust their set-aside pools to handle over and under subscription?
The following table summarizes the recommended approach for the  design elements that the EPA
provides in the first guidance document:

Table 1.2   First Guidance Design Recommendations
Program Design Element
Size of Set-Aside
Eligibility of Applicants and
Projects
Focusing on "New" Projects
Credit for Early Actions
Length of Award
Over-Subscription
Under-Subscription
EPA's Recommendation
5-15 percent
Not more than one applicant for each project should receive
allowances— allowances should be awarded to end user
Pool large enough for "new" and "business-as-usual" projects
Yes
3 years
First come, first served
Pro-rata reallocation
1.3.2   Overview of Second Guidance Document
In the second guidance document, the EPA addresses the various program elements that states will
need to define for administering their Set-Aside Program. In particular, the second document focuses
on how to design the set-aside application process; how to allocate set-aside allowances to eligible
projects; how to translate energy savings and displacements into emissions reductions; the time frame
for processing applications  and  administering allocations;  and the kinds of documentation  and
reporting that can be used.

The design issues that the second guidance document addresses include:

       •   How should applicants request allowances from the  set-aside, and at what point in the
           control period should they apply?
       •   How can states design procedures for reviewing applications, and for notifying applicants
           that they have been accepted to the program?
       •   How can the energy savings from eligible projects be translated into emissions reductions?
       •   After energy savings  are  calculated, when should allowances be  distributed to  program
           participants?
       •   What type of information should be requested in forms and other submittals, and how
           should these forms be designed?
The EPA has recommended an approach for each design issue. The following table summarizes the
EPA's overall recommendations.
Table 1.3   Second Guidance Design Recommendations

-------
Program Design Element
Application Process
Translating Energy Savings and
Displacements into Emissions
Reductions
Accounting for "Business as Usual"
(BAU) or Baseline Uncertainty
Award Process
Timing
Documentation, tracking and reporting
EPA's Recommendation
"Two-step" process
Emissions factor
Compensation factor
"Seasonal Lag" option
Coordination between all processes
Establishment of appropriate NOX Account Tracking System
(NATS), Periodic and on-going documentation
In practice, state approaches vary for the design elements shown above in Table 1.3:

        •   The two-step application approach is  in place in Indiana and  Ohio;  and the  one step
           approach is taken in Massachusetts, Missouri, New Jersey, and New York.
        •   Missouri, New Jersey, New York and Ohio use the EPA's recommended conversion rate
           of 1.5 Ibs/MWh.  Indiana and Massachusetts use a variety of calculations for different
           categories of projects.
        •   Application deadlines and the timing of allowance distribution vary from state to state.
1.4     ELIGIBLE PROJECTS FOR THE EE/RE SET-ASIDE

Each State decides which types of projects and programs can be included in a Set-Aside Program. In
the EPA's first guidance document, Establishing an Energy Efficiency and Renewable Energy Set-
Aside, EPA provides general recommendations for determining the types of energy efficiency actions
and entities that could qualify for Set-Aside Program allowances. In that document, EPA states that
while it is up to each state to determine who and what types of projects qualify for allowances, it is
important that the  Set-Aside Program provides allowances only for reductions or displacements of
electricity use. As such, EPA recommends that states follow six major criteria that projects must meet
in order to be eligible to be awarded with EE/RE set-aside allowances:

        1.  Reduces or displaces electricity load from core source, EGUs in the SIP Call region
        2.  Is not required by Federal government regulation and is not used to generate compliance
           or permitting allowances

        3.  Is in operation in the year(s) for which it will receive allowances
        4.  Reduces or displaces energy during the summer ozone season (May 1-September 30)
        5.  Is capable of being documented and verified
        6.  Have savings that equal at least one ton of NOX allowances, or can be aggregated with
           other projects into one-ton increments

-------
Examples of the types of projects that would be eligible for the Set-Aside Program are:

        •   End-use energy efficiency projects, including demand-side management programs
        •   Highly efficient electricity generation for the predominant use of a single end user, such as
           combined cycle, combined heat and power, microturbine, and fuel cell systems
        •   Projects generating electricity through the capture of methane gas from sanitary landfills,
           water treatment plants, sewage treatment plants, or anaerobic digestion systems operating
           on animal or plant wastes
        •   Renewable energy generation projects that utilize resources  such as solar energy or wind
           energy
1.5     LINKING  EMISSIONS  REDUCTIONS  FROM AN  EE/RE  SET-ASIDE  TO  A  STATE
IMPLEMENTATION PLAN

By following  applicable  state and federal regulatory  procedures, states can gain "credit" for the
resulting NOX  reductions  in their SIP for ozone.  The  EPA recognizes that many of the traditional
measures  for  improving  air quality have been taken, and that  states value  new  and innovative
approaches to reducing emissions.  The 2004 document, Guidance on State Implementation Plan (SIP)
Credits for Emission Reductions from Electric-Sector Energy  Efficiency  or Renewable Energy
Measures,4 describes how emissions reductions from EE/RE resources can be applied to state SIP
provisions  regarding: reasonable  further progress (RFP),  rate  of progress (ROP), attainment
demonstrations, and maintenance plans. The 2004 Guidance document also outlines procedures for
ensuring that reductions are quantifiable, surplus, enforceable, and  permanent.  It is important to note
that only reductions calculated using an emissions rate  equivalent  to - or lower than - the displaced
emissions rate meet the "surplus" criterion.  This means that while allowances can be allocated to
EE/RE  resources  using a high (incentive) emissions rate, the rate for determining  total emissions
reductions eligible for SIP credit is the displaced emission rate.

The 2004 Guidance document is intended to serve as a living document that will be updated based on
new information.  EPA and state officials retain the discretion where appropriate to adopt approaches
to the approval of SIP measures on a case-by-case basis that differ from the guidance. Nevertheless,
as many areas of the country continue to experience challenges in meeting air quality standards, it is
expected that EE/RE resources will continue to play an important role in state plans for improving air
quality.
1.6     ORGANIZATION OF THE GUIDANCE DOCUMENT

This guidance document is divided into eight Chapters and one Appendix:

        •   Chapter 1, Introduction, discusses document organization and the NOX SIP Call Program.
        •   Chapter 2, Evaluation Issues and Notes on Terminology, covers basic emissions
           accounting standards, the difference between allowances and emission reductions, some
           other key evaluation issues, and terminology.
4 U.S. EPA, 2004

-------
       •   Chapter 3, Determining N(X Allowances from EE/RE Programs and Projects, describes
           the steps suggested for determining emissions allowances to be allocated to EE/RE
           projects. The rest of the Chapters support Chapter 3 with details and background
           information associated with the various steps.
       •   Chapter 4, Measurement and Verification Concepts, provides background information on
           the M&V process for calculating electricity savings from energy efficiency projects or
           programs in the context of the Set-Aside Program.
       •   Chapter 5, Calculating Energy Savings from Energy Efficiency Projects and Programs
           Using Existing Documentation, discusses how to determine electricity savings from
           efficiency projects or programs for the Set-Aside Program if the application for
           allowances includes an M&V report on electricity savings.
       •   Chapter 6, Calculating Energy Savings from Energy Efficiency Projects and Programs
           Using New Analyses  - Establishing a N(X Set-Aside Specific Evaluation Protocol, covers
           defining a state-specific process using the M&V Options defined in the IPMVP as well as
           background on other M&V approaches.
       •   Chapter 7, Measurement and Verification for Renewable Energy Projects, discusses
           determining electricity savings from renewable energy projects.
       •   Chapter 8, Determining Emission Allocation Rates and Potential Emissions Reductions
           from Electricity Savings, provides information and options for determining pounds per
           kWh emission rates that can be used to calculate an allowance allocation rate and potential
           emission reductions from EE/RE projects or programs.
The Appendix provides a list of  key resources that provide useful information on EM&V, emission
reductions, and EE/RE projects.

-------
Chapter 2  Evaluation Issues and Notes on Terminology
This Chapter provides background on some fundamental issues associated with conducting energy
efficiency and renewable energy project evaluations when the objective of the evaluations is to
determine emission reductions or allowances. The Chapter starts with a discussion of evaluation
standards as they relate to calculating emission reductions. Next is a discussion of the difference
between an emission allowance and an emission reduction in a cap and trade program.  Following this
discussion is a section on other key evaluation issues and a section on terminology.
2.1      BASIC EVALUATION ACCOUNTING STANDARDS

There are several general principles associated with the emissions accounting industry that can apply
to the NOX Set-Aside Program. Compliance with these principles should be the basis for evaluation
activities. These principles are summarized  in the World Resources Institute and World Business
Council For Sustainable Development document: GHG Protocol for Project Accounting5  The GHG
Protocol is the basis for the following discussion of the accounting  principles and how they apply to
the NOX Set-Aside Program.

    •   Relevance - Physical and temporal boundaries are properly defined for the project or program.
        Of particular importance for the Set-Aside Program are:
           o   The project and program are in an area served by the electric generating units (EGUs)
               in the state

           o   The time frame for the electricity saving analyses is the  ozone season. Electricity
               savings  calculated from most M&V efforts are  reported  for a complete  year  and
               converted to  a value  for the 5-month  ozone season based on measure-specific
               characteristics.6

    •   Completeness - The scope of evaluation takes into account the primary and secondary effects
        and the direct and indirect emissions associated with the project or program. Of particular
        relevance for the Set-Aside Program are:
           o   Increases (or decreases)  in on-site  fuel  or electricity  consumption are taken  into
               account7

           o   The baseline is appropriate for the NOX SIP Call  Program - the baseline defined for
               the  original use of a M&V report might be different  than that required for the NOX
               Program.8
5 The GHG Protocol for Project Accounting, released in December 2005, is a tool for determining the
greenhouse gas emission reduction benefits of climate mitigation projects. It was produced using a collaborative
process involving businesses, NGOs, governments, academics, and other (WRI and WBCSD, 2005a).
 For example, an energy efficiency retrofit of a heating system may not save any electricity during the summer
ozone season.
7 Examples might be fuel consumption for back up generation at a renewable energy plant or increased electric
heating requirements after a lighting retrofit reduces the heat gained in an office building from the lighting
system.

-------
        Consistency - Consistent definitions, assumptions, tests, and methods are used for defining
        the baseline and the project energy use and emissions. Examples of consistency include:
           o   Using the same measurement techniques for determining the  baseline and reporting
               period electricity consumption of a system

           o   Using the same assumptions for weather, indoor environment (temperature set points,
               illumination levels, etc.) and occupancy in a building for baseline and reporting period
               energy analyses

        Transparency - Documentation and reporting include all relevant information in a coherent
        and factual manner that allows reviewers to judge the reliability and accuracy of the data and
        results. Examples of good, transparent, analyses are:
           o   Project  descriptions  indicate the secondary emissions and  direct effects associated
               with the project or program clearly indicated

           o   Critical assumptions are stated and documented

           o   Documentation is presented in a format that allows the reviewer to follow a connected
               path from assumptions, to data collection, to data analysis, and to results

        Accuracy - NOX reductions  are  calculated  at a level of accuracy such that the savings  are
        neither intentionally over- nor under-estimated, the accuracy of the estimate is indicated, and
        the level of accuracy is sufficient for maintaining the integrity of the Set-Aside Program.
        Conservatism - When assumptions are required concerning the baseline definition, energy
        savings, or NOX emission factors, conservative assumptions are adopted. This is an important
        consideration for the  Set Aside  Program  in that  the  tendency  is towards  conservative
        estimates.  However, for determining the best estimate of actual savings and reductions  the
        estimate should not be prejudiced to optimistic or conservative.
 The most common example is that the baseline for a performance contract might be existing equipment,
whereas for the NOX Set-Aside Program the appropriate standard might be current energy standards, which
would most likely be more efficient than the existing equipment prior to a retrofit. The end result is lower
savings when comparing the energy use of new equipment with an energy standard versus comparing the new
equipment with the equipment that was actually replaced.

-------
2.2 ALLOWANCE ALLOCATIONS VERSUS EMISSION REDUCTIONS

Cap  and trade programs are enforced through the issuance of a limited number (equivalent to the
emissions cap) of allowances to core emission sources.   Through trading and banking of these
allowances,  individual  sources can vary their emissions, as long as the aggregate emissions for all
sources do not exceed the allowances  issued.   By  limiting the total volume of emissions for  a
particular set of sources, cap and trade programs automatically account for any action that reduces
emissions, including energy efficiency and renewable energy (EE/RE).

For example, consider an energy efficiency project that is projected to reduce electricity consumption
in a complex of privately owned buildings.  If electricity consumption is  reduced as anticipated, the
related pollution reduction occurs not at the buildings but at a fossil fuel unit (that itself receives
emission allowances). The owner of that fossil fuel unit can then sell unneeded allowances to other
emitting sources, but the total number of allowances is still at the capped level. This illustrates that
when allowance markets operate efficiently, total emissions in a capped system equal the capped level
regardless of new EE/RE resources.

When a state establishes a Set-Aside Program, a percentage of the state's  allowances is reserved for
qualifying EE/RE resources.  Allocating allowances to EE/RE projects does not result in emissions
above the cap since the RE allowances are "set-aside" or subtracted from the total number of allowed
core-source allowances. Thus, even if emissions reductions were "double-counting" by EGUs, project
developers,  or some other entity, total  emissions would  not  increase beyond the capped  level.
However, whether EE/RE projects result in actual emissions  reductions below the  cap, depends on
actions taken by the allowance holder.

EE/RE set-aside  allowance recipients can sell their allowances at the current trading price or "bank"
them in anticipation of receiving a higher price in the  future.  While this approach offers an incentive
for EE/RE project developers, the re-sale of allowances means that pollution reductions are unlikely to
occur to levels below the state set cap. Under a cap-and-trade program, the only way to ensure that real
emissions reductions below the  cap result from EE/RE resources is to remove set-aside program
allowances from circulation,  i.e. "retiring" them.  Retiring allowances allows  a state to  credit the
reductions towards its SIP goals. This linkage represents an opportunity for states that have adopted
all traditional emission control strategies to take advantage of new pollution reduction opportunities
and move closer towards compliance with federal air quality standards.

Two of the options, but not necessarily the only options, for crediting emissions reductions are:

        •   Baseline  Approach - Incorporating  the estimated effect that  EE/RE programs have on
           emissions within  the projected emissions inventory  baseline  provides  a corresponding
           decrease  in the  emissions cap.  With  this approach, there  is  no Set-Aside  Program.
           Essentially, the  cap is reduced to  account  for "parallel" EE/RE programs that are
           implemented as part of a state's overall approach to  energy resource and environmental
           management.
        •   Control Measures Approach  - Incorporating emission reductions from individual control
           measures, e.g., EE/RE projects or programs supported by a Set-Aside Program provide  a
           corresponding decrease in the emissions cap but, only if the allowances are retired.

While the title of this document uses the term "reductions", the methods discussed actually relate to
how  a state calculates the quantity of allowances  allocated to EE/RE activities within the cap and trade

-------
program.  Whether, these  allowances contribute to reductions beyond the capped level is a policy
decision that requires retiring of EE/RE allowances through voluntary actions by the EE/RE allowance
recipients or a re-purchase program operated by the state or another entity.
2.3 KEY EVALUATION ISSUES

When determining the quantity of allowances for allocation to energy efficiency or renewable energy
projects, states need  to address a number  of  issues.   Some of these are  unique to the  Set-Aside
Program, but most are common to other evaluation analyses. The key issues are discussed below.

Program versus project evaluation

A project is a single activity at one location.  Examples include an energy-efficient lighting retrofit in
an office building or a photovoltaic system installation at a factory. A program is a group of projects,
with similar characteristics that are installed in similar applications, such as a utility program to install
energy-efficient lighting in commercial buildings, a developer's program to  build a subdivision of
homes that have photovoltaic systems, or  a state residential  energy efficiency  code  program. As
described in this document, the techniques for determining savings from a single project or a group of
projects with similar characteristics (a program) are quite similar, with one exception. That exception
is that while each project is evaluated individually, programs are evaluated from a sample of projects
with the results applied to the entire program "population"9. The end result is that program evaluation
on a  "per-project" or "per-ton" basis tends to be much more cost-effective than project-by-project
analyses. As a result,  it is more cost-effective to encourage programs or large aggregations of similar
projects to participate in the Set-Aside Program.

Additionality

Additionality is the term used in the emission mitigation industry for addressing the key question of
how can one know that a project will produce reductions in emissions  that are additional to any that
would have occurred in the absence of the certified project activity.  This raises  the issue of defining
"baseline" or "business-as usual" conditions. As the baseline is a "what-if' value, it cannot be directly
measured and must be implied from  available  information. Energy savings and emission reductions
are calculated  as the difference between baseline and post-project  installation (reporting period)
energy use and emissions.

As discussed later in  this document, having consistent and simple baseline standards  is an important
part of a successful Set-Aside Program. In summary, baseline definitions will consist of: (a)  existing
conditions  (e.g., the  energy  consumption  of the  inefficient system  being  replaced),  (b)  code
requirements (e.g. appliance standards), or (c) baseline  levels  of activity included in a state's SIP (e.g.
a pre-existing, mandated statewide renewable energy portfolio).

Defining the Project or Program  - Assessment  Boundaries and Ownership
  9 The exception is when a large-scale data analysis approach is used. With this approach, statistical analyses
  are conducted on the energy usage data (typically collected from the meter data reported on utility bills) for all
  or most of the participants and possibly non-participants in the program. This approach is primarily used with
  residential programs where relatively homogenous homes and measures are implemented and project-specific
  analyses are not required or practical.

-------
When evaluating the emission reductions and the allowances to be allocated to EE/RE project, it is
important to properly define the project boundaries.  Ideally, all primary effects (the intended savings)
and secondary effects (unintended positive or negative effects) and all direct emissions (at the project
site) and indirect emissions (at other sites) will be taken into account10.

The  Set-Aside  Program  focuses  on indirect emission reductions  at EGUs that result from EE/RE
projects. Sometimes, though, secondary effects warrant consideration. For example, an on-site lighting
retrofit has a primary effect of reducing electricity consumption due to lower wattage light bulbs. The
secondary effect might be  increased space heating requirements due to the  lighting retrofit reducing
the space heat  gain from lighting.   From a programmatic perspective, a residential  air conditioner
program that promotes installation of more efficient air conditioning could have a secondary effect of
increasing the use of air  conditioning as the homeowners' cost of operation is reduced.  In addition,
for projects that increase on-site fuel consumption, such as a biomass-fueled boiler  with  auxiliary
natural gas consumption, direct emission calculations are required.

It  is  also appropriate to  consider ownership and control issues for the projects and programs  being
evaluated.  While not necessarily  a technical evaluation issue,  it is not  unusual  for  there  to be
questions associated with whether the facility owner, the contractor, or perhaps a state project sponsor
is to  receive the allowances.

Uncertainty, Error, Rigor and Risk

The terms uncertainty and error are not interchangeable. Error is applicable  when the  exact "correct"
value is  known,  while  uncertainty is  applicable  when  no such  knowledge is  available.  Error
calculations in savings estimates are possible with most renewable energy projects since the electricity
savings are equal to the  output of the project (i.e. the baseline is  zero).  For example, the electricity
savings from a photovoltaic system are equal to  the output of the system, which can be directly
measured.

However, the electricity saving  from energy efficiency projects cannot be measured.  The savings are
equal to baseline energy  consumption less the consumption associated with the new project, with the
understanding that baseline consumption is a hypothetical  value  that cannot be directly measured.
Thus, uncertainty is the more relevant term to use for energy efficiency savings calculations. While
this uncertainty can be disconcerting for some, the concept of the cap and trade program is that
irrespective of the uncertainties  associated with  any allowance, the cap  on allowances  prevents
emissions from increasing beyond a certain level.

For almost all  evaluations, complete and robust data will not be available to assess the  statistical
uncertainty in every parameter or in the overall savings estimates. For example, it is typical that a
single data point will be available  for key parameters  (e.g. power consumption or building occupancy).
While some parameters can be inferred from a sample of measurements, in most situations uncertainty
estimates require expert judgment.

Rigor is a term used to encompass the  issues of uncertainty and error for M&V activities and is
defined as the level of expected reliability of energy, and thus emission, reductions in terms of both
accuracy and precision. Accuracy refers  to the degree to which  the determined savings are near the
true value and  not biased,  e.g., off in one direction  or another.  Precision refers to the closeness of
agreement among  repeated measurements of the savings.  Rigor can be defined to be within certain
accuracy levels and precision limits.
  See Section 2.4 on Terminology for more information.

-------
Successful evaluations find the proper balance between rigor and cost - too much of either can result
in an unsuccessful Set-Aside Program.11  What is an acceptable level of rigor is  often a subjective
judgment based on the value  of the NOX allowances, the risk to the Set-Aside Program associated with
over- or underestimated savings, and a balance between encouraging EE/RE actions and high levels of
accuracy and precision. Each State can decide what level of risk it considers acceptable and thus its
requirements for rigor.

Using Electricity Savings Documentation Not Prepared for the Set-Aside  Program

With this document, EPA has established a two-pronged approach to providing guidance on M&V.
The first approach, as described in Chapter 4, involves quality assurance guidelines  for reviewing
M&V documentation not specifically prepared  for the Set-Aside Program, but submitted  with an
application for set-aside allowances. The second approach, as covered in Chapter 5, offers guidance on
what could be included in a project or program  M&V plan  specifically prepared for the Set-Aside
Program. Both approaches rely on standards common to all M&V activities: relevance, completeness,
transparency, consistency, accuracy, and conservativeness.  However, some form  of energy savings
documentation  will often be prepared as part  of a project or program implementation.   If this
documentation is usable, it can be more cost-effective for the state to evaluate this documentation than
to require a new M&V effort.

Persistence

Each state can determine the  number of ozone seasons for which each EE/RE application can be valid.
Persistence is a term for how long the energy savings (and emission allowances)  continue to be valid.
If the projects or programs are allowed to accrue allowances over multiple season , the state will have
an interest in validating the persistence of savings. The methods typically used are annual reviews of
savings  reports and inspections to  ensure that the projects  or programs are still operating properly.
Including a persistence  report and/or inspection procedure  is  an important  aspect of each state's
guidance documents.

Evaluation Costs and Value of Information

When designing and implementing a Set-Aside  Program, the challenges associated with evaluation
will be reduced to balancing the cost, effort and rigor  of various  approaches with the value of the
information  generated by the efforts. Most of the value of information is tied to the  value of NOX
allowances and overall Set-Aside Program integrity. The costs for high levels of confidence in the
EE/RE NOX allowance calculations must be compared to the  risks (and costs) associated with the value
of allowances being allocated to EE/RE projects and programs. In this sense, evaluation processes are
about risk management.  Low-risk  projects  require less evaluation rigor;  high-risk  projects require
more evaluation rigor. How much risk is acceptable is tied to the size of the set-aside, the value of the
allowances, other benefits of promoting EE/RE activities, and  the resources available to state agencies
and EE/RE promoters involved in implementing the Set-Aside  Program.

Understanding the implications of various M&V requirements on the transaction costs associated with
applying for and documenting allowances is an important part  of designing a state Set-Aside Program.
It is important to note that given the value of NOX allowances and the small number of credits that can
be generated from typical efficiency and renewables programs, the amount of effort that is appropriate
11 A good resource for uncertainty calculations are ASHRAE's Guideline 14 on Measurement of Demand and
Energy Savings (ASHRAE, 2002) and the WRI/WBCSD document Measurement and Estimation Uncertainty
for GHG Emissions (WRI and WBCSD, 2005b). See the Appendix for location of these documents.

-------
to spend on evaluation may be  limited.  The experience of other states and the M&V resource
documents described in Chapter 4 and referenced in the Appendix can provide guidance on this issue.

Other Project Types

This guidance document addresses electricity savings from renewable energy projects and demand
side efficiency projects. Some states may wish to include other project types such as combined heat
and power (CHP), supply side efficiency projects,  or thermal energy (e.g.  natural gas)  efficiency
projects. These can be valid project types and may be addressed in future EPA Guidance documents.
2.4 TERMINOLOGY

The EE/RE Set-Aside Program combines insights from two fields, environmental and energy
management, each of which has its own terminology and acronyms. In this document, the following
terms are and definitions are provided.

Two of the key terms are measurement and verification (M&V) and evaluation. These terms are
sometimes used interchangeably within the energy efficiency industry but have distinct meanings
within the emissions control field.  For the purposes of this document, these definitions are used:

Evaluation: The process of determining potential emission reductions from a project or program
including consideration of energy savings, emission factors, and any gross savings to net savings
adjustments required.

Measurement and verification (M&V): A subset of evaluation that is associated with the
documentation of energy savings or generation using one or more methods that can involve
measurements, engineering calculations, statistical analyses, and/or computer simulation modeling.

Other important terms are:

Allowances: Allowances represent the amount of a pollutant that a source is permitted to emit during
a specified time in the future under the NOx Budget Trading Program. Under the set-aside provision,
allowances are allocated to EE/RE projects and programs, and  are tracked in a NO5 Account Tracking
System. Allowances are often confused with credits earned in the context of project-based or offset
programs, in which sources trade with other facilities to attain compliance with a conventional
regulatory requirement. Cap and trade program basics are discussed at the following EPA Web site:
http://www.epa.gov/airmarkets/cap-trade/index.html

Baseline:  Conditions, including electricity consumption and related NOS emissions that would have
occurred without implementation of the subject project or program. Baseline conditions are sometimes
referred to as "business-as-usual" (BAU). Energy and emission reductions are  calculated as the
difference between the baseline and the project or program energy use and emissions. Options for
determining baselines include (a) "project specific" and (b) "multi-project" or  "performance
standards" baselines.  The "project specific" definition uses the subject site's existing or pre-project
circumstances to define the baseline; this could involve using site-specific historical energy use or
emissions data. "Multi-purpose" definitions utilize either conventional practices as the basis for a
baseline or energy codes and regulations to define the baseline energy use (e.g. equipment efficiency
standards).

-------
Core Sources: Primary NOX emitting sources granted allowances by the EPA under a state NOX
budget. For the purposes of the energy efficiency and renewable energy set-aside, allowances will
only be credited for electricity reducing measures that lower demand from EGUs larger than 25 MW.

Direct and Indirect Emissions:  Direct emissions are changes in emissions at the site (controlled by
the project sponsor or owner) where the project takes place. For EE/RE projects this includes
consideration of any increases or decreases in fuel use on-site (e.g., cogeneration fuel consumption)
due to the subject project or program. Indirect emissions are changes in emissions that occur at the
emissions source (e.g., the power plant or EGU). Indirect emissions are the primary source of
allowances under the EE/RE Set-Aside Program.

Measure: An energy efficiency measure is a specific activity that can be a part of or an entire energy
efficiency project. Examples of measures are lighting retrofits, motor replacement, and controls
retrofit. These might be completed at a single facility, and in  combination are considered a "project".

Net and Gross Savings: Calculation of savings at the site level (location of the renewable or energy
efficiency project - sometimes called facility level savings for energy efficiency projects) results in a
"gross  savings" estimate. Gross savings are calculated as the  difference between baseline and post-
installation energy use. Net savings are the savings that actually occur at the EGU, and are typically
calculated at the program level. There are a number of factors that states may take into consideration
when converting gross savings into net savings. For example, common factors  for consideration with
energy efficiency programs are increased savings due to transmission and distribution losses between
the project site and the EGUs, reduced savings due to lack of additionality, i.e. "free riders",  and
increased savings due to "spillover" effects (actions of non-program participants).

Persistence Review: Process for determining how long the  energy savings and emission allowances
continue to be valid once a project is installed.

Primary and Secondary Effects: Primary effects are those that the project or program are intended to
achieve. This may include reductions in energy use per unit of output (energy efficiency) or increases
in renewable energy generation.  Secondary effects are other,  unintended, impacts of the project or
program such as life cycle impacts (e.g., increasing energy use as it becomes more efficient and less
costly), activity shifting (e.g., when generation resources move to another location), and market
leakage (e.g., emission changes due to changes in supply or demand of commercial markets). These
secondary effects can be positive or negative.

Project: A single measure or group of energy efficiency and renewable energy  measures at one
location.  This could include energy-efficient lighting and motors retrofits in an office building, or a
photovoltaic system installation at a factory.

Program: A group of projects, with similar characteristics and installed in similar applications.
Examples could include a utility program to install energy-efficient lighting in commercial buildings, a
developer's program to build a subdivision of homes that have photovoltaic systems, or a state
residential energy efficiency code program.

Reporting Period: This is the time period (typically one to five years) after a project is installed and
during which allowances are applied for and perhaps approved.  This is also called the post-installation
period  or performance period.

-------
Rigor: The expected reliability, accuracy and precision, with which energy savings or emission
allowances are calculated. A higher level of rigor indicates more confidence that the results of the
evaluation are both accurate and precise, i.e., reliable. Accuracy is an indication of how close a value
is to the true value of the quantity in question. Precision is an indication of the closeness of agreement
among repeated measurements of the same physical quantity. The terms accuracy and precision can
be used in reference to the reliability of a model, measured data, or meter's measurements.

-------
Chapter 3   Determining NOX Allowances for EE/RE Projects and
Programs	
This Chapter provides a description of the recommended process for documenting NOX allowances
from energy efficiency and renewable energy projects  or programs. The first two sections compare
efficiency versus renewable projects, and project versus program evaluations, respectively. The third
section provides an overview and discussion of the steps with subsequent sections providing more
detail on each step.


3.1     RENEWABLE VERSUS ENERGY EFFICIENCY MEASUREMENT AND VERIFICATION

This document covers calculating electricity savings  associated with both energy efficiency and
renewable energy activities. The difference between the analysis of the two types of activities is that
with energy efficiency projects there will be a level of uncertainty associated with the energy savings
calculations that may be difficult to calculate  whereas with renewable energy projects there will be a
level of error that is relatively easy to calculate. This is because documenting the energy savings from
renewable energy projects involves a direct  measurement  of output.  In contrast, documenting the
energy savings from energy  efficiency projects involves  development  of a baseline  scenario that
estimates what would have happened in the absence of the efficiency project or program. As a result of
this added complexity, the majority of this document addresses M&V of energy efficiency activities.
3.2    PROGRAM VERSUS PROJECT EVALUATION

Each  state's Set-Aside Program will be  assigning allowances to either (a)  very large individual
projects, (b) aggregations12 of individual projects or (c) programs. Examples of individual projects are
a lighting retrofit in  an office building, a motor retrofit at an industrial facility, or a wind turbine
installation. Examples of programs would be a new energy efficiency building code sponsored by a
state,  a home compact florescent lighting rebate program sponsored by a utility, or an initiative by a
private company to install photovoltaics on the roofs of all their grocery stores.

Either a program or a project evaluation approach can be employed for the NOX Set-Aside Program.
However, a programmatic  approach to evaluation will be more cost-effective  on a per kWh, or per
NOX ton, saved basis because the savings associated with a sample of projects is applied to a large
number of projects.  This may be  an important consideration when designing a state's Set-Aside
Program and determining whether only programs, or both programs and projects can participate.

The project based evaluation approach involves determining savings and allowances associated with a
specific project. For aggregated  projects, the savings  from  each project are  added together to
determine the total allowances to be allocated to the projects. This approach is  used when only a few
projects are under consideration, when each project is unique enough that sampling approaches are not
valid, or when the savings that accrue to each project must be determined individually (for example, if
each project site owner intends to retain their own emission allowances).
12 A state could assign allowances to individual projects, however EPA will not place allowances in less than one
ton increments. A NOX ton would require on the order of 1.3 million ozone season kWh savings, or about a
dozen typical 50 kW projects, assuming an emissions factor of 0.0015 Ibs of NOX per kWh.

-------
Using the program approach, a sample of individual projects  is evaluated and the savings of the
sample projects are extrapolated to the total population of projects in the program. This is commonly
used in large programs where similar energy efficiency or renewable energy projects are installed  in
similar applications, e.g., rebates  for high efficiency air conditioners in single-family residences.  In
this example, a sample of homes might  be  selected and the electricity bills before and after the
installation of the high efficiency  air conditioners would be compared. The  savings from this sample
would then be applied to all the homes that participated in the program.
3.3     EVALUATION PROCESS FLOW CHART

This guidance document, like other M&V and evaluation manuals for EE/RE activities, describes an
overall approach. It does not offer a recipe for measuring and verifying individual projects.  This is
because (a) there are many project types, (b) the sources of uncertainty vary by project types, and (c)
deciding how accurate  is accurate enough  varies for different applications.   However,  what this
guidance document does provide is background and discussion of issues as well as recommendations
for what  could be  included in  M&V reports and reviews  of submitted M&V  reports,  general
information on how to calculate electricity savings, presentation of some options on how to calculate
NOX savings  from electricity savings, and notation of specific resources that contain sample M&V
approaches for common technologies. The goal of providing this guidance is that with this information
state representatives can design their own Set-Aside Program's evaluation requirements.

The evaluation process is presented in Figure 3.1. As a reminder, the calculation of electricity savings
is termed measurement and verification, or M&V. Evaluation is the overall process of determining the
emission allowances from the electricity savings.

The process consists of these steps:

        •   Step 1 - Confirming that the EE/RE project or program meets the basic requirements of
           the NOX Set-Aside  Program. Confirming  that the projects or programs meet the  basic
           requirements is completed through a checklist process.
        •   Step 2 -  Calculating gross electricity (kWh) savings or generation. Calculating  electricity
           savings  is  done through  either  (Step  2A)  evaluating M&V  activities that have  been
           completed  as part  of an EE/RE  project  or program  implementation  or (Step 2B)
           completing new  M&V activities  specifically for determining NOX emission reductions. If
           existing  M&V documentation is used, then the  state will want to have a process for
           independently validating  the reported electricity savings and possibly adjusting the
           reported values.  For such  reviews, the  state could provide Quality Assurance Guidelines
           (QAG) for checking submitted documentation. Chapter 5 provides information on a Set-
           Aside Program QAG.
           Irrespective of whether Step 2A or 2b is followed, a critical consideration is defining the
           baseline  conditions. The baseline conditions assumed for the savings calculation must be
           consistent with the EPA NOX Sip Call Program  baseline requirements.
        •   Step 3 - Determining net electricity savings at the generation source(s). In some instances,
           particularly  for programs,  it is appropriate for the gross savings calculated in Step 2 to be
           further adjusted.  These gross to net  adjustments might include  free riders,  spillover,
           secondary effects, and a transmission or distribution loss factor.

        •   Step 4  - Converting  electricity  savings to NOX  values. Calculating the NOX emission
           allowances associated with the electricity savings is done through either the use of a fixed

-------
value of NOX emissions per kWh or an electricity grid model. Several grid models are
available through the EPA and can be used for the Set-Aside Program.
Step 5 - Completing a persistence analysis to ensure that the savings continue through the
term of the allowances allocation. Persistence is typically evaluated through inspections or
a review of electricity consumption (energy efficiency projects) or production (renewable
energy projects) records.

-------
Figure 3-1: Evaluation Process for NOX Set-Aside Program
                                             Step 1. Confirm e-igtoilrcy
                                             and compliance with NOX
                                                    P rag-ram
           Step 2A Calcu'ate Gross Energy
                      Savmgs
        Review and modify, as required, existing
        gross electricity savings analyses [See
        Chapter 5 for EE projects and Chapter 7
                   for RE projects)
                                         isplaces core EGU
                                      2. No! reqim&d by resoladoa. voluntary action
                                      3. NOJ for compliance or seseratins credits already
                                      required
                                      4. In operation dtiiisg required years sad time of
                                      yeai (ozone seaso-n)
                                      5. SaviSgs aggregated to at least oiie toil
                                      6. Real, measurable and loag tarm b^uetlts
                          Step 28. Calculate Gross Energy Savings
                              New analyses used to determine
                          electricity savings (see Chapter 6 for EE
                           projects and Chapter 7 for RE projects)
        Sources of XOS factors:
        1) eGRID or OTC Emi
        Raducnon Workbook
        2') EPA default value of
        O.QGI5a».lWh
        3) EPA appro\-ed amissi
                                                                       Step 3.  Calcu'-ate Net Energy Sav-ngs
                                                                           Apply net to gross factors, e.g.
                                                                       transmission and distribution factor, to
                                                                            obtain net electricity savings
Step 4. Calculate Emission
       Reductions
   Apply hi Q% factors to
   electricity savings for
calculation of NO,, reduction
     (see Chapter 8)
                                  Result; tons of annual NOK savings (allowances)
                                                Step 5  Persistence
                                  Documentation, Certification, Reporting, and Annual
                                	Persistence Review fas re^uredj	

-------
3.4     SAMPLE CALCULATIONS

The following two examples demonstrate the calculation of allowances from an energy efficiency
program and a renewable energy project. When reviewing these examples it is important to recognize
that allowance prices can affect the decision to apply for allowances and the level of evaluation effort
that is cost-effective. Information on current emission allowance prices are available through
brokerage firms listed at http://www.epa.gov/airmarkets/trading/buying.html_._


3.4.1    Sample Energy Efficiency Project
A chain of grocery stores implements a program to replace its existing lighting with more energy-
efficient lighting. Over 100 stores replace 30,000 fixtures that consume  92 Watts each with the same
number of fixtures that consume 61 Watts. The estimated hours of operation for the lights are 3,800
per year, 1,600 of which are during the ozone season. The resulting savings estimate is 1,488,000 kWh
during the ozone season, which translates into  1.1 tons of NOX (rounded to a single one-ton allocation).
assuming the EPA NOX default value of 0.0015 Ibs of NOX per kWh.

Step 1: Compliance with NOx SIP Call Program Requirements
EPA recommends that projects meet the following criteria:
        •   The electricity saved at the stores displaces EGU provided electricity in the  state
        •   The project was not required by regulation, it was a voluntary project
        •   The project was not undertaken by an EGU or other party for NOX SIP Call compliance
           nor is it generating allowances already required
        •   The project is in operation during the ozone season
        •   The total savings are at least one ton of NOX
If the project meets the, it passes this step.
Step 2: M& V to determine gross electricity savings

This step involves calculating electricity savings from a project either through reviewing, and perhaps
modifying, existing M&V documentation or by undertaking a new M&V effort. Assuming, for this
project there is no existing M&V documentation, the state requires that the project sponsor conduct the
M&V and provide a report.  In this case, a typical M&V approach involves conducting an inventory of
a sample of the pre-retrofit and post-retrofit lighting fixtures to determine the reduction in power
demand13 and then measuring the operating  hours of the same sample to determine actual energy
savings during the ozone season.

The savings are equal to the difference between the baseline energy use and the post-retrofit energy
use during the ozone season. For this project the baseline energy usage is the sum of the baseline kWh
consumption  of the  replaced fixtures and the post-retrofit energy  usage is the kWh  for the new
fixtures.
13 Demand is electricity consumption per unit of time.

-------
The following simplified equation can be used to determine estimates of energy savings for lighting
efficiency projects:

kWh savingSt = [(kW/FixturebaSeiine x Quantitybaseime) - (kW/Fixturepost x Quantitypost)] x Operating Hours

Where:

        •   kWh Savingst = kilowatt-hour savings realized during post-installation time period t

        •   kW/Fixturebaseime = lighting baseline demand per fixture
        •   kW/FixturepoSt = lighting demand per fixture during post-installation (reporting) period
        •   Quantitybaseime = quantity of affected fixtures before the lighting retrofit
        •   Quantitypost = quantity of affected fixtures after the lighting retrofit
        •   Hours of Operation = total number of post-installation operating hours during the ozone
           season (assumes number is the same before and after the lighting retrofit)
        •   Note that 1,000 Watt hours equals one kilowatt-hour (kWh)
Thus, the energy savings equal:

[(92 Watts/fixture x 30,000 fixtures) -  (61 Watts/fixture  x 30,000  fixtures)]  x  1,600 hours  =
1,488,000,000 Watt hours or 1,488,000 kWh per ozone season.

Wattage values can be determined by fixture measurements with a power meter or from manufacturer
data. Operating hours can be obtained from measurements of hours that the fixtures are operating. This
is typically done for a sample of the fixtures using a type of meter that records, over a period of time,
the on and off status of light fixtures14.

Step 3: Net Electricity Savings Calculation

In some instances, it is appropriate for the savings  calculated to be modified to account for a variety of
factors. For  a lighting  project, these could  include  uncertainty in the  savings calculation  (e.g.
uncertainty  in operating  hour measurements)  and/or addition  of  savings  for  transmission and
distribution losses between the grocery stores and the power plant, which is the source of the displaced
NOX emissions.  Another common adjustment might be for the interactive savings associated with the
lighting retrofit. For this case, it might be savings associated with reductions in the cooling required in
the grocery stores due to less lighting and thus less  heat from the lights. However,  for simplicity, no
adjustments are assumed for this example.

Step 4: Calculate Emission Reduction
For this example, we assume that the state wishes to use the EPA's default value of 0.0015 Ibs of NOX
per kWh,  which results in 1.1 annual tons of NOX savings for the lighting retrofit program during the
NOX season.

The calculation is 1,488,000 kWh saved during NOX season times 0.0015 Ibs of NO* per kWh, which
equals 2,232  Ibs, or  1.1  tons. Since  allowances are allocated in integer units, the project could receive
a single, one-ton, allowance.
14 These devices are installed inside a light fixture and are generally known as "light-loggers."

-------
Step 5: Persistence Review
Depending on how the timing of a state's allocation process and the length of term for allowances, a
persistence review of energy savings from the lighting retrofit program may be required. For a typical
three-year allowance allocation, one can safely assume that the baseline is unlikely to change over the
life of the allowance award. However, other persistence issues can be important and impact energy and
emission savings.  To address this concern, for example, a project may be credited with five years
worth  of 1.1 tons of allowances only  if annual inspections are conducted. The annual  inspections
would involve confirming that the lighting fixtures are still in place and metering of operating hours to
ensure that lights are still operated as previously stated. Fewer hours would result in fewer kWh saved.


3.4.2   Sample Renewable Energy Project

A private developer installs a wind turbine farm.  Metering reports indicate that the  wind  farm
generated 3,500 MWh15 of electricity  during the ozone season. Using the EPA's eGRID electricity
database, the state  conducts a displaced emissions analysis and determines that pollution is offset from
surrounding electric generating units at the  rate of 0.002 Ibs of NOX per kWh. If the state adopts this
allocation rate, equivalent to the "displaced  emissions rate," then three annual tons of NOX allowances
can be allocated for the developer's wind turbine program.

Step 1: Compliance with NOX SIP Call Program Requirements

Using EPA's recommended criteria, this project passes this step:

        •  The electricity generated displaces electricity from an EGU in the state

        •  The project was not required by regulation, it was a voluntary project

        •  The project was not undertaken by a EGU or other party for NOX SIP Call compliance nor
           is it generating allowances already required
        •  The project is in operation during the ozone season

        •  The total savings are at least one ton of NOX

Step 2: M& V to determine gross electricity savings

Because the turbines do not use fuel, there are no on-site emissions from the project and therefore the
generated output is the savings. Electrical output is directly measured as it flows from individual or
groups of turbines into the electrical grid. In this case, the wind farm developer has submitted a report
indicating how much electricity entered the  grid during the ozone season. An audit by an independent
consultant  indicated that the metering  reports for  several of the  individual  wind  turbines  were
incomplete and, in addition,  spot testing of some electricity meters  indicated accuracy problems as
high as 5%.  Therefore, the consultant suggested discounting  the  reported savings by 5%. The net
savings eligible for allowances are therefore calculated as 3,325 MWh or 3,325,000 kWh.

Baseline issues are usually not relevant for renewable energy projects. This is because of the barriers
to investment in renewable projects indicate that they are  not "common  practice".  However, it is
possible that some projects would be installed to comply with a state Renewable Portfolio Standard. In
this situation, a state would have to decide  if the projects are "additional" or being used to comply
with a regulatory requirement.
15 One MWh equals 1,000 kWh.

-------
Step 3: Net Electricity Savings Calculation

In some instances, it may be appropriate for the savings calculated to be modified to account for a
variety of factors, such as secondary effects. However, no modifications are assumed for this example.

Step 4: Calculate Emission Reduction

For this example, we  assume that the state wishes to use the EPA's eGRID database of power plan
emissions to conduct a displaced emissions analysis.  The analysis  determines that 0.002 Ibs of NOX
per kWh is offset from surrounding power plants. Therefore, the NOX savings (in tons) are equal to
3,325,000 kWh saved times 0.002 Ibs of NOX per kWh equals 6,650  Ibs of NOX savings, or 3.325 tons.
If the state elects to allocate allowances at a rate equivalent to the displaced emissions rate, the project
could receive three allowances.

Step 5: Persistence Review

Depending on how the state decides to enforce timing of allowances and the length of term for such
allowances, there may be a need to  review the persistence of energy output from the wind turbine
farm. A persistence review  for wind turbines might  include (a)  an annual inspection to ensure the
turbines are still in place and  (b)  operating  log submittal  requirements  that  indicate electricity
generation during the ozone period. The state would likely require these submittals to be reviewed by
an independent auditor.
3.5     DISCUSSION OF INDIVIDUAL STEPS IN EVALUATION PROCESS

The evaluation process defined in Section 3.3 has the following steps:

        •   Step 1: Confirming eligibility and compliance with NOX Program

        •   Step 2: Calculating gross electricity savings at site level
        •   Step  3: Accounting  for baseline adjustments  and other effects (e.g. transmission  and
           distribution losses) and calculating net electricity savings at source level

        •   Step 4: Calculating NOX allowances from electricity savings

        •   Step 5: Documentation, certification, reporting, and annual persistence review (as needed)
The  following   sections  discuss  each  of these steps and  the documentation,  verification  and
certification activities.


3.5.1    Confirming Compliance with NOX Program Requirements


Each state  has flexibility in establishing criteria about which EE/RE resources it deems eligible to
participate  in the NOX Set-Aside Program.  However, EPA recommends that states provide allowance
awards only for projects or programs that meet the following criteria:

        •   Reduce or displace the electricity load from the electric generating units (EGU) that are
           affected under the NOX SIP Call
        •   Lead to energy savings during the summer ozone season

-------
        •   Include activities that are not already required by federal regulation and are not used to
           generate compliance or permitting allowances otherwise in the SIP16
        •   Operate in the ozone season for which an applicant will receive allowances
        •   Be capable of being measured and verified
        •   Convert to at least a one-ton increment (alone or by aggregating eligible projects)
In addition, EPA recommends that projects not benefit a core source entity by freeing up allowances
that the source has already been allocated (for example, by retiring an EGU). It is important that states
allow core source entities to qualify for allowances under the Set-Aside Program only if the action
entails:

        •   Installation of  a new combined heat  and power (CHP) system project  (provided
           allowances have not already been distributed to the project from the new source Set-
           Aside)
        •   Renewable energy projects ~ including wind, solar, biomass, and landfill methane - that
           are additional to a renewable portfolio standard (RPS).
        •   A DSM action either within or outside the source's facility
To help ensure that a given project or program meets a state's required criteria for NOX allowances, a
state can include a checklist. The process could require applicants to self-report compliance and then
sign the checklist. Each state could verify the self-reported information  through audits and/or
inspections.

The end-product of this step is confirmation  that the projects or programs under consideration  meet
the basic requirements of the Set-Aside Program.


3.5.2    Calculating Gross Energy Savings
It is important to follow a consistent set  of standards  and methods when measuring and verifying the
energy impacts of EE/RE projects or programs. Utilizing consistent M&V procedures  will help ensure
that claimed electricity reductions and  their associated emissions  reductions  are real. Chapters  4
through 7 focus on this subject of calculating electricity savings, i.e. the process of M&V.

The fact that energy efficiency and renewable energy actions vary widely means that  varying degrees
of accuracy  and rigor  for M&V may  be required.  The challenge is to balance transaction costs,
accuracy, and repeatability  with the value  of the allowances and EE/RE  action receiving the
allowances in the Set-Aside Program.

In general, energy savings  from implementing EE/RE actions are the difference between the energy
consumption after the action has  taken place and the consumption before the  action was undertaken.
1 fi
  A project should not be required by Federal government regulation. If so required, then no further incentive is
necessary to achieve its implementation, and rewarding such actions would be a form of double-counting.
Although this criterion applies to actions that are implemented as the result of a federal regulation, there are a
few exception: (1) projects that are the result of Executive Orders; Systems Benefits Charge (SBC) programs; (3)
Renewable Portfolio Standards; and (4) projects implemented in response to Model Energy Codes. See the first
Set-Aside guidance document, Guidance on Establishing an Energy Efficiency and Renew able Energy Set-Aside
in the NOX budget Trading Program, Volume 1 (U.S. EPA, 1999) for more details on EPA policies and
recommendations.

-------
Therefore, the ability to isolate savings for a given project will depend on a realistic definition of what
energy consumption would have been had the action not been undertaken. Thus, defining project
boundaries and a baseline is a critical step in calculating savings. Baseline adjustments are discussed
in Section 4.4 and 5.4.

For renewable energy, defining a baseline tends to be straightforward, as the baseline is typically zero;
i.e. the electrical output of the renewable project equals the "savings." However, for energy efficiency
projects, M&V depends to a great extent on several key factors: accurate estimate of pre-installation
energy use; understanding of the characteristics of the efficiency action and the electricity load being
reduced; and consideration of the associated measurement costs and sources of uncertainty. M&V also
requires  separating the  "real" energy  reductions  from those caused  by  extraneous factors like
operational changes, as well as consideration of the persistence of energy savings.

Fundamentally, the electricity  savings determination effort will utilize one or more of the following
M&V techniques:

        •  Inspections:  Documenting the existence, characteristics,  and  operation of baseline  or
           reporting period equipment and systems as well as factors that effect energy use
        •  Engineering  methods: The use of standard formulas and assumptions to calculate the
           energy use of the baseline and reporting period energy systems
        •  Statistical analyses: Comparing "before" and "after" electric meter data while taking into
           consideration changes such as  weather, facility occupancy, factory operating hours, etc.
           (this often involves multivariate statistical models)
        •  Computer simulation  of system performance: The use of computer models  for predicting
           the energy use  of systems e.g. F-Chart17 for solar energy systems and  DOE-218 for
           buildings (these models can be calibrated with actual performance data).
        •  Metering:  Directly measuring baseline  and reporting  period  energy  use, as  well  as
           monitoring of non-energy factors such as weather conditions

        •  Integrative methods:  Combining  some  or all of the  above  approaches.  For example
           metering and engineering methods could be utilized for calibrating computer simulations
           of baseline and reporting period models that receive efficiency retrofits
For calculating electricity savings under the Set-Aside Program, only savings during the ozone season
(the five months of May through September) count to wards NOX reductions. Many conventional M&V
assessment evaluate savings on an annual (12 month) basis. However, a calculation that simply takes
5/12 of the  annual savings  is only valid for the simplest of projects. For  example, a photovoltaic
system or air conditioning retrofit will typically generate more savings during the  summer while a
heating system retrofit will generate more savings during the winter.

The end-product of this step is an estimate of gross site electricity savings associated with the project
or program.  This will be in units ofkWh (during the ozone season) for the first program year.


3.5.3    Calculating Net Energy Savings

Calculation of energy  (electricity) savings at the project site or facility results in what is termed a
"gross savings  estimate." This is the value of savings directly calculated as the difference between


17 F-Chart, 2005
18 U.S. DOE, 2007

-------
baseline and reporting period energy use, at the site of the individual project(s). Net savings are the
electricity sources savings that occur at the  EGU. The difference between the two is that net savings
meet the definitions of the savings for the Set-Aside Program, whereas gross savings may not.

There are a number of factors that may need to be taken into consideration in order to convert gross
savings  into net savings. The most common factors for  consideration are  free riders,  spillover,
secondary effects, and a transmission or distribution loss-factor. Secondary effects and transmission or
distribution losses are addressed on either a project-by-project basis or at the  program level.  In
contrast, free rider and spillover net savings corrections are typically made at the program versus the
project level.
 Another possible consideration is on-site fuel use and any resulting NOX emissions, that might be
associated  with the subject project's use of fuel. In most cases, there will not be on-site emissions.
However, if projects such as natural  gas fueled cogeneration systems participate in the program, there
will be significant on-site emissions that need to be calculated. In such situations, the on-site NOX
emissions can be  deducted from the emissions savings.

Section 4.4.4 briefly covers net to gross considerations.

The end-product of this step is an estimate of the net source  electricity savings associated with the
project or program.  This will be typically reported in  units ofkWh (during the ozone season) for the
fir sty ear of the program.


3.5.4   Allocating NOX Allowances to EE/RE Projects and  Programs
Emissions  reduction  allowances can be allocated  once the  project has been  shown to  displace
electricity from core EGUs and net source  electricity  savings have been estimated. Actual emission
reductions  depend on which power plants the electricity is displaced from and the emissions rate from
those plants. Which power plant(s) would have provided the displaced electricity can vary from day to
day and even hour to hour. In addition, the emissions profile of the power plant can vary based on its
operating mode and fuel source.

For the Set-Aside Program, the allocation rate is a single value for the ozone season. The form of the
allocation rate is in pounds of NOX  per kWh (Ibs/kWh). There  are several sources and methods for
determining this Ibs/kWh factor:

        •   The EPA's default factor as indicated in the NOX Sip Call is 0.0015  Ibs/kWh
        •   A system average emissions rate either calculated or obtained from an emissions database
            such  as eGRID or the OTC Emission Reduction Workbook, both  of which  are available
            online (see Appendix for resources)
        •   An avoided marginal emissions  rate determined using an electrical grid simulation model
            that estimates emissions  factors
This subject is further discussed in Chapter 8.
The end-product of this step is a net estimate of the NOX savings associated with  the project or
program. This will be reported in units  of tons ofNOx (during the ozone season) for the first year of
the program.

-------
3.5.5   Documentation, Certification, Tracking, Reporting and Persistence Evaluation

Documentation, Certification, Tracking and Reporting
Documentation, certification, tracking,  and  reporting mechanisms  include  the  development of
appropriate NATS accounts, and any additional administrative forms  and reports, as determined by
each state. The procedures for reporting allowances under the Set-Aside Program are the same as those
established by the EPA under the  NOX Budget  Trading  Program. The  state  must open a general
account  in the NATS  to hold  the  allowances for the entire  Set-Aside Program. Applicants  for
allowances must also establish a general NATS account. The allowances will be directly transferred
from the  state  into the  project sponsor's account. EPA recommends that the state  designate a state
energy  official, air  official, or public  utility commission  official to be an Authorized Account
Representative (AAR) to manage the Set-Aside allowances.

It is recommended that the necessary Set-Aside  Program documentation be included in the initial
application submitted by a program or project sponsor for an allowance award. However, it is likely
that additional information will be exchanged between the state and the project sponsor after the initial
application is submitted but before  the  project sponsor is  awarded allowances. This may include
review of savings calculations conducted by the state, or its agent, and any follow-up submittals by the
applicant in response to  the reviews.

It is important that states provide feedback to the project sponsor when a proposal has been reviewed
and deemed acceptable. If the project is not deemed acceptable, it is important that the state provide
recommendations for the modifications  necessary  to make the project eligible for allowances. A
project  sponsor could then  provide documentation  alerting the state about the project's expected
implementation date, as well as periodic updates on the project's progress. EPA has provided example
forms (contained in the  second guidance document of this series) that states may use or adapt for their
Set-Aside Programs. Other  sample applications and forms can also be found in the Program M&V
manuals listed in the Appendix.

Persistence

Each state is responsible for determining when in the annual program cycle to distribute Set-Aside
Program allowances to qualified applicants, and for which allowance years they  are eligible. For
example, a state  can utilize the energy savings from  one  ozone control period to determine  the
allowance allocations for that allowance year,  or can use the savings to determine allocations for the
following year. The EPA recommends that states allocate allowances for the following ozone season,
termed  the seasonal lag option. Under the  seasonal lag  option,  a  project would have  to be
implemented and in  operation for a full ozone season before the state allocates an allowance award.
After documenting the evaluation of the first ozone season's electricity and NOX reduction, the project
sponsor would then be allocated allowances to be available for trading at the beginning of the second
ozone control period.

EPA also recommends that states  provide  allowances for three  years. For this limited  period,
persistence may not be an  important issue. However, it is  important that states be aware  of three
general persistence issues when awarding allowances:

        •  Physical life of the measures - what is the length of time the new light  fixture  will
           operate?
        •  Operating life of the measures -  will the new  motor be properly maintained, will  the
           factory continue to operate and use the new motor?

-------
        •   Changes in the baseline over time - will the new control system installed be commonplace
           in the future or required by code or regulation and thus not actually resulting in additional
           future savings?
If a state decides to conduct persistence reviews, there are three approaches for confirming persistence,
which can be used individually or in combination:

        •   Self-reported  annual documentation submitted by the  sponsor that  indicates  that the
           projects and programs are still in place and generating an equivalent or greater quantity of
           savings
        •   Inspections by the  state  or independent consultants  to  indicate that the  projects and
           programs are still in place and operating appropriately
        •   Annual evaluations that calculate savings for each year
EPA recommends that the first two options be utilized for allowances allocated for up to three years. It
is important that the allowance values only be adjusted if the results of the documentation submitted
by the sponsor (or the inspection reports) indicate significant changes are necessary. If the allowances
are allocated for more than three years, a more thorough review of savings could be conducted once
every two to three years.

The end-product of this step is an updated net estimate of the NOX savings associated with the project
or program.  This will be  reported in units of tons ofNOx  (during the ozone season) for subsequent
years of the allocation.

-------
Chapter 4   Energy Efficiency Measurement and Verification Concepts
For the NOX Set-Aside Program, gross program electricity savings can be determined with evaluations
based on either (a) M&V of individual projects (such as individual projects that make up a program)
or (b) statistical or regression analysis of the electric utility consumption data from a large number of
facilities participating  in an energy efficiency program. This guidance covers the individual project
M&V approach, not the statistical analysis of electric utility data for a large number of facilities..

Evaluations also include assessments to adjust gross electricity savings for the purpose  of deriving net
electricity savings. This net adjustment is estimated either at the program level (typical) or at the
project site level (a-typical).

A strict definition of M&V refers to site  surveys, metering of  energy  consumption, monitoring of
independent variables, and analysis activities associated with the calculation of gross energy savings
from individual sites or projects. M&V is an input into an emissions reduction evaluation which also
includes using one or more of the following techniques: inspections, engineering  methods, metering,
statistical  analyses, and computer  simulation  and modeling of system performance.  Often M&V
involves integration of several of these techniques. To help states define an  appropriate M&V process
for their  Set-Aside  Programs, this chapter provides  an introduction to M&V and  background
information that will help states understand related concepts and issues.

M&V for individual energy efficiency projects can be quite complicated. However, for renewable
energy projects that displace electricity - for example photovoltaic systems and wind turbines - the
M&V process for determining energy savings tends to be relatively straightforward; in most cases, it
simply involves measuring the electricity output of the renewable energy system.  However, there are
situations where M&V for renewable energy projects can be more complex (see Chapter 7).

Much of this Chapter is derived  directly from  the IPMVP,19  the FEMP M&V Guidelines20 and
American Society of Heating Refrigeration and Air-Conditioning Engineers (ASHRAE) Guideline
14,21 which are described below. These documents constitute the core M&V guidance documents used
for energy efficiency projects in the United States and many other countries.
4.1     OVERVIEW OF  MEASUREMENT AND VERIFICATION APPROACH  FOR DETERMINING
ENERGY SAVINGS

Energy savings are determined by comparing energy use before and after implementation of an energy
savings project. In general, the following equation applies:

Energy Savings = (Baseline Energy Use) - (Reporting Period Energy Use) ± (Adjustments)

       •   "Baseline Energy Use" is  the electricity consumption that occurred  during the period
           before  the project was  implemented and which is chosen as representative  of normal
           operations. It is sometimes referred to as "business-as-usual" (BAU)  energy use and is
           what would have occurred had there been no project.


19 EVO, 2007
20 U.S. DOE, 2000b
21 ASHRAE, 2002
                                            4-1

-------
        •   The "Adjustments" term in this general equation is used to re-state the energy use during
            the baseline and reporting periods under a common set  of conditions. This adjustments
            term distinguishes properly determined savings from a simple comparison of energy usage
            before  and after implementation of a project. The  "Adjustments" term in this general
            equation brings energy use in the two time periods to the same set of conditions. Examples
            of corrections are weather corrections, if the project involves heating or air-conditioning
            systems in a building or production levels  if the  project involves energy efficiency
            improvements in a factory.
 There is no direct way of measuring energy or demand savings, since  one cannot measure the absence
 of energy use. However, the absence of energy use can be estimated by comparing energy use from
 before  and after implementation  of a  project22. However, simple  comparison of  post-installation
 energy use with baseline energy use does not differentiate between the energy impacts of the project
 and the impacts of other factors such as weather or production levels. In order to assess the effect of
 the project alone, the influence of these complicating factors, must be addressed. For example, a more
 efficient air conditioner may consume  more electricity  after its installation if  the  post-installation
 weather is warmer than the weather prior to installation.

 The basic approach to M&V is shown in Figure 4.1. It involves projecting energy use patterns  of the
 pre-installation (baseline) period into the reporting period. Such a projection requires  adjustment of
 baseline energy use to reporting period conditions of weather, production level, occupancy, and other
 factors. Therefore, the M&V effort will  involve defining (a) the baseline energy use, (b) the reporting
 period  energy use, and (c) any adjustments made to the baseline energy use.

 Figure 4-1: Comparison of Energy Use Before and After an Energy Project Is Implemented
   1,000,000-1
                                                    Implementation
    750,000-
kWh
    500,000-
    250,000
                                                                 Actual
                                                                 Baseline
                                                                 Reporting Period
          Jan-01
Jul-01      Jan-02     Jul-02    Jan-03
 22
   Energy savings can also be calculated by comparing the reporting period energy use at the project(s) with the
 reporting period energy use of a "control group". Another approach is to turn a project "on and off' to evaluate a
 baseline when the project is "off and the reporting period performance when the project is "on". This approach
 is also only rarely used.

-------
        1.      Define data collection and analysis requirements, the M&V Options (see Section 4.3)
               and techniques that will be used, as well as the rigor and resource requirements, in a
               M&V Plan.
        2.      Define and quantify the  pre-installation baseline, including  (a) the equipment and
               systems being replaced, (b) baseline energy use and (c) factors that influence baseline
               energy use. This activity should occur before the project is installed.
        3.      Define and quantify the post-installation (reporting period) condition, including (a) the
               equipment and systems being installed, (b) post-installation energy use, and (c) factors
               that influence post-installation energy use. The baseline and reporting period energy
               use can be defined through site  surveys; spot, short-term, or long-term metering;
               engineering analyses; computer simulations; and/or analysis of utility billing data.
        4.      Calculate savings by comparing reporting period and baseline energy use.
        5.      Conduct annual M&V activities to (a) verify the operation of the installed equipment
               or system, (b) determine current year savings, and (c) estimate savings for subsequent
               years.


4.2     M&V RESOURCE DOCUMENTS

Before describing the options and methods for conducting M&V, it is important to note that there are a
wide variety of resources that provide useful information on M&V. While M&V is  an evolving
science, common practices exist and are described in several, frequently cited M&V documents.  Much
of the work in this guidance document draws on material in these documents.

These documents are important resources  for developing M&V rules for each  state, but perhaps more
importantly  they are  resources for those who will  actually  conduct the M&V.  The  first  set  of
documents listed (Sections 4.2.1 -  4.2.5) are designed for determining savings from individual
projects: IPMVP, FEMP  M&V Guidelines, ASHRAE Guideline 14, the EPA's Acid Rain Program
M&V Guidance and examples of state performance contracting M&V guidelines. The second  set of
documents (Section 4.2.6) describes programmatic approaches. In addition, the Appendix lists other
reference materials and resources.


4.2.1    International Performance Measurement and Verification Protocol (IPMVP)
The IPMVP provides  an overview of current best practice techniques for verifying results of energy
efficiency and renewable energy projects  in commercial and industrial facilities. Internationally, it is
the most recognized M&V protocol  for demand-side energy activities. The IPMVP was developed
with sponsorship of DOE and is  currently managed  by a non-profit organization23 that continually
maintains and updates the Protocol.

The IPMVP provides a framework and definitions that can help practitioners develop M&V plans for
their projects. It includes guidance on best practice for determining savings  from efficiency and
renewable energy projects. The IPMVP is probably best known for defining  four M&V  Options for
energy efficiency projects. These Options (A, B, C and D) differentiate the most common approaches
for M&V and are defined below in Section 4.3.
23 Efficiency Valuation Organization (EVO). The IPMVP and related M&V resources can be found at
http://www.evo-world.org.

-------
As of the date of this document, there are three current volumes:24

    •   Concepts and Options for Determining Energy Savings (Volume I)
    •   Concepts and Options for Improved Indoor Environmental Quality (Volume II)
    •   Applications:
           o  Concepts  and Practices  for Determining  Energy  Savings in Renewable  Energy
               Technologies Applications (Volume Ilia)
           o  Concepts and Options for Determining Energy Savings in New Construction (Volume
               nib)
A new version of the IPMVP "Concepts and Options for Determining Energy and Water Savings" is
due to be published during the first half of 2007.

One particular  caution when  using  the IPMVP  is that it is not a compliance document.  Simply
requiring parties to comply with the IPMVP is insufficient for defining how the actual M&V will be
conducted or for the level of rigor and uncertainty expected of the analyses. The IPMVP can, and often
is, referenced in M&V planning, but it may be  appropriate for additional requirements to be specified
to define the M&V requirements  of a state's Set-Aside Program. There are  several state-specific M&V
Guidance documents (listed in Sections 4.2.2 - 4.2.6) that provide more detailed requirements tailored
to their respective programs.


4.2.2   Federal Energy Management Program (FEMP) M&V Guidelines 25
The  purpose  of this document is to provide guidelines and methods for measuring and verifying the
savings associated with federal agency performance contracts. It contains procedures and guidelines
for quantifying the savings resulting from energy efficiency equipment, water conservation, improved
operation and maintenance, renewable energy,  and cogeneration projects. The Guidelines are divided
into  8 sections:

        •   Section I provides an introduction to the FEMP Program and an overview of M&V, as
           well as a summary  and index of the measure-specific M&V  methods included  in the
           document.
        •   Section II provides  an overview of procedures  for incorporating M&V into a project,
           details associated with M&V  plan preparation, and a "quick-start" guideline, including
           summary tables and checklists.
        •   Sections III to VI contain descriptions of measure-specific M&V  methods for energy
           projects; these four sections discuss M&V methods that are based on M&V Options A, B,
           C, and D, respectively.
        •   Section  VII   contains  descriptions  of measure-specific M&V   methods  for   water
           conservation measures.
24 These are the latest editions of the IPMVP.  They supersede the two previous editions of the document,
including the first version, which was titled the North-American Energy Measurement & Verification Protocol
(NEMVP).
  The current version of the FEMP M&V Guidelines is Version 2.2 (U.S. DOE, 2000b). A supplement to FEMP
M&V Guidelines - "Detailed Guidelines for FEMP M&V Option A" was published in 2002 (U.S. DOE, 2002).
These FEMP M&V Guidelines, and a number of other M&V resource documents, including some on the use of
stipulations for determining savings, M&V checklists and M&V resource lists, can be found at the Lawrence
Berkeley National Laboratory website http://ateam.lbl.gov/mv/.

-------
       •   Section VIII presents M&V method descriptions for other types of measures including
           new construction, operation and maintenance, cogeneration, and renewable energy.

Compared to the IPMVP, the FEMP Guidelines provides  similar background information but more
detail on measure specific M&V techniques. For example, there are quick summaries of techniques for
determining the savings from  lighting retrofits, motor retrofits, and chiller retrofits. The IPMVP,
however, provides more current definitions of the various M&V Options.


4.2.3   ASHRAE Guideline 14-2002 Measurement of Energy and Demand Savings26
This guideline was developed under the auspices of the American Society of Heating, Refrigerating
and Air-Conditioning Engineers (ASHRAE). ASHRAE is the professional engineering society that has
been  the most involved in writing  guidelines and standards  associated with  energy efficiency.
Compared to the FEMP M&V  Guidelines and the IPMVP, Guideline 14  is a more detailed technical
document that addresses the  analyses,  statistics  and physical measurement  of energy use  for
determining energy savings.

Guideline 14 provides guidance on how to use measured pre- and post-installation data for quantifying
energy and demand savings. Unlike most guidelines and protocols, it provides specific compliance
path for two of the three M&V options presented. In addition, to the technical background and a M&V
compliance path, the Guideline provides key information on project specific uncertainty analyses,
regression analyses, measurement systems and equipment, and case studies.

In the area of building  energy performance measurement,  ASHRAE also has a number of other
Standards and Research Project  documents that provide  useful  details on evaluating building
performance.  These include:

       •   Standard 105  - Standard Methods of Measuring  and  Expressing  Building  Energy
           Performance
       •   827-RP  - Methodology Development  to Measure In-Situ Chiller, Fan and  Pump
           Performance
       •   RP-1050 - Development of a Toolkit for Calculating Linear, Change-Point Linear and
           Multiple-Linear Inverse Building Energy Analysis Models (weather normalizations)

These, and other documents, are available at: www.ashrae.org.


4.2.4   Acid Rain Program: "Conservation and Verification Protocols" (CVP)
In 1990, as part of Title IV of the Clean Air Act Amendments, Congress set a national emissions cap
on SO2, to  be maintained through the issuance  of emission allowances under the  EPA's Acid Rain
Program. As  part of the cap-and-trade program, Congress created the Conservation and Renewable
Energy Reserve to award SO2 allowances as incentives for EE/RE measures.

The verification process was left to the states, but the EPA developed a voluntary guidance called the
"Conservation and Verification Protocols" (CVP). The CVP is an alternative or default option to help
states ensure that reported electricity reductions have taken place, and to  help determine  when
reductions have occurred. It was developed before the IPMVP, but generally falls within IPMVP's
Option B. There are two  savings verification paths detailed in the CVP: one for monitored energy use
26 The Guideline (ASHRAE, 2002) can be purchased at http://www.ashrae.org. As of the publication of this
document a new version of Guideline 14 is under development.

-------
and one for estimating stipulated energy savings from a limited number of conservation measures for
which expected energy savings are well understood.

It is generally believed that the M&V requirements in the CVP set the bar so high (especially with
regard to subsequent year allowances) that utilities either preferred to use their state's less rigorous
quantification  methodologies or  opted  not  to participate  in the process  at all. The  program's
requirements and its lack of flexibility restricted the program's potential success.


4.2.5 State and Utility Program M&V Guidelines
There are several utility and state sponsored  programs in the U.S. that offer incentive payments for
verified energy savings. Each of these incentive programs has guidelines specifying their individual
requirements for M&V. The following list of programs is not comprehensive, but includes programs
that have M&V guidelines that are easily accessible.

California Utility SPC Program27
The  San Diego Gas & Electric Company, Pacific Gas and Electric Company (PG&E), and Southern
California Edison Company offer a statewide energy-efficiency program under the direction of the
California Public Utilities Commission (CPUC). The Large Non-Residential Standard Performance
Contract (LNSPC) Program is a performance-based program that offers incentive payments to project
sponsors who develop projects delivering verified energy savings at Host Customer facilities. Energy
savings  are measured and verified annually by the project sponsor over a two-year period following
the approval and installation of the energy-efficiency equipment.

NYSERDA28
The  New York State Energy Research and Development Authority (NYSERDA)  offers the Energy
$martSM  Enhanced  Commercial/Industrial Performance  program. This program  offers fixed-price
incentives to energy service companies (ESCOs) that install cost electric energy efficiency measures.
Project-specific incentives are paid based on measured data from the performance period.

State of Hawaii Performance Contacting Guide29
The  state of  Hawaii has published A  Guide to  Performance  Contracting that includes M&V
Guidelines. These guidelines are modified from DOE's Rebuild America Program.

State of Texas Programs

Texas has statewide programs sponsored by the Public Utilities Commission of Texas. Examples are
the TXU Electric Delivery programs. TXUED's Energy Efficiency Markets (TEEM)30 currently has
several energy efficiency  programs, including: the mall Air-Conditioner Program and the Commercial
and Industrial  Standard Offer Program (SOP). The Texas Loan Star Program, which includes savings
M&V, is used as a funding mechanism for Texas State Agency energy projects.31 32
27 California, 2000
28 NYSERDA, 2003
29 Hawaii, 1998
30 Oncor, 2003
31 Texas SECO, 2007

-------
4.2.6   Program Based M&V Guidance Documents
There are established procedures associated with determining the savings from programs that are made
up  of a large  number of similar projects. These  procedures are usually associated with  utility-
sponsored energy efficiency programs where a regulatory body evaluates how much energy was
actually saved from a utility program. In these situations, a sample of projects may be investigated and
the savings extrapolated to the entire population of participants. The overall approach is called
program impact evaluation.

Two web-accessible databases provide information on program impact evaluations:

        •  CALifornia Measurement Advisory Council (CALMAC): http://www.calmac.org:
        •  Consortium for Energy Efficiency's Market Assessment and Program Evaluation (MAPE)
           Clearinghouse: http://www.cee 1 .org/eval/clearinghouse.php3.
Each of the websites has  a database with hundreds of independent energy efficiency program
evaluation  reports and guidelines used to prepare the reports.   One notable resource for program
impact  evaluation guidance is  the  State Of California Public Utilities Commission's April 2006
California  Energy Efficiency  Evaluation  Protocols:  Technical, Methodological,  and  Reporting
Requirements for Evaluation Professionals.  This document can be found at the CALMAC website.
4.3     MEASUREMENT AND VERIFICATION OPTIONS

The 2002 (and the soon to be published 2007) IPMVP defines four M&V options: Options A, B, C,
and D. The options are generic M&V approaches for energy projects. Having four options provides a
range of approaches  to determine energy savings with varying levels of rigor and cost. A particular
option is chosen based on the project-specific features of each project. These features include:

        •      Complexity of the energy efficiency project
        •      Uncertainty of the project savings
        •      Potential  for changes  in key  factors between  the  baseline  and post-installation
                  reporting period

        •      Value of project savings
The Options differ in their approach  to the  level  and duration of baseline and reporting period
measurements. Each option has advantages and disadvantages based on project-specific factors and the
needs of participants. M&V evaluations with Options A and B  are made at the project or system level.
Option C evaluations are  made at the whole building  or whole-facility level. Option  D evaluations,
which involve computer simulation modeling, are typically made at the whole-building level. Option
A involves  using  stipulated and  measured  values of the key factors needed to  determine energy
savings. Compared to Option A, Option B involves  using more spot,  short-term, and continuous
measurements. Options C usually relies on hourly or monthly utility energy bill data.  Option D may
include spot, short-term, or continuous measurements to calibrate computer models.

The four generic M&V options are summarized in  Table 4.1, which is  replicated directly from the
IPMVP. The  following subsections describe the Options in more detail using information from the
32 A number of calculation tools are also available from the Texas A&M System Energy Systems Laboratory
website: http://esl.eslwin.tamu.edu/resources/software.html.

-------
soon  to be published version  of  the IPMVP.  Chapter  6  contains information  on  selecting  an
appropriate M&V Option.

Table 4.1   IPMVP M&V Options (from to be published IPMVP 2007)
              M&V Option
   How Savings Are
       Calculated
   Cost (not from
      IPMVP)
     Typical Applications
A. Retrofit Isolation: Key Parameter
Measurement

Savings are determined by field
measurement of the key performance
parameters) which define the energy use of
the efficiency measures' affected system(s)
and/or the success of the project.
Measurement frequency ranges from short-
term to continuous, depending on the
expected variations in the measured
parameter, and the  length of the reporting
period.

Parameters not selected for field
measurement are estimated. Estimates can
based on historical data, manufacturer's
specifications, or engineering judgment.
Documentation of the source or justification
of the estimated parameter is required. The
plausible savings error arising from
estimation rather than measurement is
evaluated.
 B. Retrofit Isolation: All Parameter
 Measurement

 Savings are determined by field
 measurement of the energy use of the
 affected system. Measurement frequency
 ranges from short-term to continuous,
 depending on the expected variations in the
 savings and the length of the reporting
 period.
 C. Whole Facility

 Savings are determined by measuring
 energy use at the whole facility or sub-
 facility level. Continuous measurements of
 the entire facility's energy use are taken
 throughout the reporting period.
Engineering calculation
of baseline and reporting
period energy from:
short-term or continuous
measurements of key
operating parameters);
and estimated values.
Routine and non-routine
adjustments as required.
Short-term or continuous
measurements of
baseline and reporting-
period energy, and/or
engineering
computations using
measurements of proxies
of energy use.

Routine and non- routine
adjustments  as required.
Analysis of whole
facility baseline and
reporting period (utility)
meter data.

Routine adjustments as
required, using
techniques such as
simple comparison or
regression analysis.

Non-routine adjustments
as required.
Dependent on
number of
measurement points.
Approximately 1%
to 5% of project
construction cost of
items subject to
M&V.
Dependent on
number and type of
systems measured
and the term of
analysis/ metering.
Typically 3% to
10% of project
construction cost of
items subject to
M&V.
Dependent on
number and
complexity of
parameters in
analysis and number
of meters. Typically
1% to 5% of project
construction cost of
items subject to
M&V.
A lighting retrofit where power
draw is the key performance
parameter that is measured
periodically. Estimate
operating hours of the lights
based on building schedules,
occupant behavior, and/or prior
studies.
Application of a variable-
speed drive and controls to a
motor to adjust pump flow.
Measure electric power with a
meter installed on the electrical
supply to the motor, which
reads the power every minute.
In the baseline period this
meter is in place for a week to
verify constant loading. The
meter is in place throughout the
reporting period to track
variations in power use.

Multifaceted energy
management program affecting
many systems in a facility.
Measure energy use with the
gas and electric utility meters
for a twelve month baseline
period and throughout the
reporting period.

-------
M&V Option
D. Calibrated Simulation

Savings are determined through simulation
of the energy use of the whole facility, or of
a sub-facility.

Simulation routines are demonstrated to
adequately model actual energy
performance measured in the facility.





How Savings Are
Calculated
Energy use simulation,
calibrated with hourly or
monthly utility billing
data. (Energy end use
metering may be used to
help refine input data.)








Cost (not from
IPMVP)
Dependent on
number and
complexity of
systems evaluated.
Typically 3% to
10% of project
construction cost of
items subject to
M&V.





Typical Applications
Multifaceted, new construction,
energy management program
affecting many systems in a
facility - where no meter
existed in the baseline period.
Energy use measurements,
after installation of gas and
electric meters, are used to
calibrate a simulation.
Baseline energy use,
determined using the calibrated
simulation, is compared to a
simulation of reporting period
energy use.
4.3.1   M&V Option A - Retrofit Isolation: Key Parameter Measurement
Option A involves project or system level M&V assessments where the savings associated with a
particular project can be isolated.  With this Option, key performance  parameters or operational
parameters can be spot or short-term  measured during the baseline and post-installation  periods.
However, not all factors are measured under Option A; rather some parameters are stipulated rather
than measured. This level of verification may suffice for certain types of projects in which  a single
parameter represents a significant portion of the savings uncertainty.
Using Option A, energy and demand savings are  calculated using  "engineering methods".
methods involve developing estimates of energy and demand savings based on:
These
    •  Assumptions concerning operating characteristics of the equipment or facilities in which the
       equipment is  installed, which  are  informed by measurements (from spot to continuous).
       Examples are power draws (wattage) of light fixture  or fan motors and efficiencies of air-
       conditioners (kWh/ton) and heaters (Btu out/Btu in).

    •  Assumptions for how often the equipment is operated or what load it serves.  Examples are
       operating hours of lights or fixed speed fans and air conditioning loads (tons) or heater loads
       (Btu).
The most straightforward application of engineering methods involves using savings algorithms that
summarize how energy use is expected to change due to installation of the energy efficiency measure.
Savings  are  then estimated  by  changing the  model  parameters  that are  affected by  program
participation. With Option A, at least one of the key model parameters must be  measured. The
parameters  not  measured are  stipulated  based  on  assumptions  or analysis  of  historical  or
manufacturer's data. Using a stipulated  factor is appropriate only if supporting data demonstrate that
its value is not subject to fluctuation over the term of analysis.
This Option, and Option B, are best applied to programs that involve equipment retrofits or replacing
failed equipment with efficient models. All end-use technologies can be verified using Option A or B;

-------
however, the accuracy of this option is considered inversely proportional to the complexity of the
measure. Thus, the savings from a simple  lighting retrofit (less complex) may be more  accurately
determined with Option A or B than the savings from a chiller retrofit (more complex).

Also true with Options A and B is that measurement of all end-use equipment or systems may not be
required if statistically valid sampling is used. For example, both the operating hours for a selected
group of lighting fixtures and the power draw from a subset of representative  constant-load motors
may be metered.

Savings determinations under Option A can be less costly than under other Options, since the cost of
deriving a  stipulation is usually less than the cost of making measurements. However, since some
stipulation  is  allowed under this Option,  care  is needed to review the  engineering design and
installation to ensure that the stipulations are realistic and achievable, i.e., the equipment truly has the
potential to perform as assumed. At defined intervals during the reporting period, the installation can
be  re-inspected to verify continued existence  of the equipment and  its proper  operation and
maintenance. Such re-inspections will ensure continuation  of the potential to generate predicted
savings  and validate stipulations.


4.3.2    M&V Option B - Retrofit Isolation: All Parameter Measurement

Option B, as with Option A, involves project or system-level M&V assessments with performance and
operational parameters  measured at the  component or  system level.  Also,  Option B involves
procedures for verifying the potential to generate savings that are the same as Option A. In addition,
savings  calculations, as with Option A, involve  the use of engineering  methods.   However, unlike
Option A, stipulations of major factors are not allowed under Option B.

Thus, as compared to Option A, additional and often longer-term measurements are required. These
include  measurements of both equipment operating characteristics, measured with Option A, and the
Commonly measured parameters include operating  hours for lighting and HVAC equipment, wattage
for lighting and HVAC equipment,  and  line  flows and  pressure  for various compressed  air
applications.

Option B relies on the direct measurement of end uses affected by the project. Spot or  short-term
measurements  may be sufficient to characterize the baseline condition. Short-term  or continuous
measurements  of one or more parameters takes  place  after project  installation for determining
reporting period energy use.

All end-use technologies can be verified with  Option B, but the degree of difficulty  and costs
associated with verification increases as measurement complexity increases. The task of measuring or
determining energy savings using Option B can be more difficult and costly than  that of Option A. The
results, however, are typically more  reliable.  In addition, the use of longer-term measurements can
help with identifying under-performing efficiency projects  - which in turn can lead to improvements
in their performance.


4.3.3    M&V Option C - Whole Facility
Option C involves use of whole building meters or sub-meters to assess the energy performance of a
total building or facility. These meters are typically the ones used  for utility billing, although other
meters,  if properly calibrated, can also be used.  Option  C is the most common form of M&V for
building energy efficiency retrofits. With this option, the energy consumption from the baseline period
are compared with energy consumption bills of the reporting period.  Option C involves procedures for

-------
verifying the potential to generate savings that are the same as Option A.

The  evaluation of whole-building or facility level metered data are completed using techniques
ranging from simple bill comparisons to multivariate regression analysis. In general, however, simple
bill comparison methods are strongly discouraged for estimating energy savings because they do not
account for independent variables, such as weather. However, Option C regression  methods can be
very powerful tools for determining savings.

For the regression analyses to be accurate, a robust regression analysis can be used to detect energy
savings outside of normal variations in energy use over time. Critical variables may include weather,
occupancy schedules, throughput, control set points and operating schedules. Most applications of
Option C require at least 9 to 12 months of continuous baseline (pre- installation) meter data and at
least 9 to 12 months of continuous data reporting period (post-installation) meter data.  Whereas a
typical building may experience fluctuations in energy use of up to ten percent during the course of a
year, effective normalization for weather and operational characteristics will reveal less fluctuation so
that true energy savings may be identified.

All end-use technologies can be verified with  Option C. However, this option is intended for projects
where  savings are expected to be large enough to be discernible  from the  random or unexplained
energy variations normally found at the level of the whole facility meter. The larger the savings, or the
smaller the unexplained variations in the  baseline consumption, the easier it will be to  identify savings.
In addition, the longer the period of savings analysis after project installation, the less  significant is the
impact of short-term unexplained variations.

Another tool that can be used to analyze facility utility billing meter data is  EPA's Portfolio Manager,
which employs a methodology that is consistent with IPMVP Option C. While both options encourage
monitoring at the whole building level, one minor difference is that IPMVP determines savings at the
meter or sub-meter level so that performance changes  can be  assessed for individual parts  of the
facility. Portfolio Manager, on the other  hand, aggregates all meters in a building so that performance
changes can be assessed at the broader facility level. Additionally, because the Portfolio Manager
approach combines multiple meters, it must account for differences among fuel types.  This is done by
converting utility meter data into source energy (or, "primary energy") consumption.   If a building
contains only one meter and one fuel type, the two methods of analysis are identical. This would be
the case, for example, with a supermarket powered by electricity.

Any commercial building can enter and track utility billing data in Portfolio  Manager.  For many types
of commercial buildings, Portfolio Manager also provides an energy performance rating based on a
statistically rigorous multivariate regression analysis that controls for the key independent variables
driving energy use. The underlying data is  the nationally representative sample of buildings contained
in the Energy Information Administration's Commercial Buildings Energy Consumption Survey
(CBECS).  To date, about 30,000 buildings have used Portfolio Manager to  track, measure, and
monitor energy use at the whole building level.


4.3.4    M&V Option D - Calibrated Simulation

Option D  involves calibrated computer simulation models of systems, system components, or whole
facility energy consumption to  determine project energy savings.  Linking simulation inputs and results
to baseline or reporting period data calibrates the results to  actual billing or metered data. Typically,
reporting period energy use data are  compared with the baseline computer simulation energy use
prediction (using reporting period independent variable values) to determine energy savings.

-------
Manufacturer's data, spot measurements, or short-term measurements may be collected to characterize
baseline and reporting period conditions and operating schedules. The collected data serve to link the
simulation inputs to actual operating conditions. The model calibration is accomplished by comparing
simulation results with end-use or whole-building data. Whole-building models usually require at least
9 to 12 months  of pre-installation data for  baseline model  calibration. However,  these models are
sometimes calibrated with only reporting period data so that they can be used with new construction
projects -ones for which no baseline data exist.

Any end-use technology can be verified with Option D if the  size of the  drop in consumption is larger
than the associated simulation modeling error. This option may be used  in cases where there is a high
degree of interaction among installed energy systems,  or where the measurement of individual
component savings is difficult.  And,  as mentioned above,  Option D  is commonly used with new
construction energy efficiency programs, since there are no baseline  data.

Savings determined with Option D  are based on one or more complex estimates of energy use.
Therefore, the accuracy of the savings is completely dependent on how well the simulation  models are
calibrated and how well they  reflect  actual performance.  Since  building simulation models may
involve elaborate spreadsheets or vendor estimating programs,  accurate modeling and calibration are
the major challenges associated with Option D.
4.4     SELECTED M&V ISSUES


4.4.1    Defining a Baseline

Electricity  savings are calculated as the difference between adjusted baseline energy use and post-
project installation (reporting period) energy use. This is not a difficult calculation for most renewable
projects, since the baseline is usually "zero"  and net savings (or production) equals the electrical
output of the renewable system. However, with energy  efficiency projects, determining adjusted
baseline energy  use is often the most difficult aspect of M&V.  This is because once the project is
installed there is no longer a baseline to measure or document.

Additionality is the term used in the emission mitigation industry for the key question of whether one
can know that a project will produce "reductions in emissions that are additional to  any  that would
have  occurred in the absence  of the certified project activity." This raises  the issue of defining
"baseline"  or "business-as usual" conditions.  As baseline determination is  inherently a "what-if"
question, it cannot be directly measured and must be implied from available information.

The  baseline definitions  consists  of (a)  site-specific  issues and  (b)  broader,  policy-orientated
considerations.  Site-specific issues include  the  characteristics of equipment and/or systems in place
prior to an energy-efficient activity and how and when the equipment/systems were operated. In terms
of the characteristics of replaced equipment or  systems, it is also important to know when in the life-
cycle of the existing equipment or systems the new equipment/systems were installed.  The  options are
(a) "early-replacement" of equipment/systems  that had not reached the end of their useful life,  (b)
installation of new, energy-efficient equipment/systems  to replace failed equipment/systems, or (c)
new construction.

The broader  baseline policy issues for the Set-Aside Program  involve ensuring that  the emission
reductions  are "additional" to any  that would otherwise  occur due, for example, to federal, state,
and/or local energy standards. Examples of "standards" include:

-------
           A state energy code, triggered by new construction or major renovations, that specifies the
           maximum amount of energy use per square foot for buildings.

           A federal appliance standard, such as a minimum air conditioning efficiency.

Thus, for an  early  replacement, energy-efficient lighting retrofit,  the  baseline  selection decision
involves the type of lighting equipment replaced, the power consumption (watts/fixture)  of the
replaced equipment,  and the number of hours the lights would have operated. For an energy-efficient
lighting major renovation project, the baseline decisions may include  the considerations listed for a
retrofit, with the addition of building code, equipment standards, and standard practice issues.

Having consistent and  simple baseline  standards is  an  important  part  of a successful  Set-Aside
Program. Given the above considerations, baseline definitions can consist of:

        1.  The minimum efficiency standard. This can apply to both equipment and systems, or a
           whole facility, as  defined by a law, code  or by standard industry practice.  This is often
           used for new  construction, major  renovations, or equipment/systems that replaces failed
           equipment/systems.
        2.  The consumption  rate of the existing equipment or systems. The baseline is based on
           measurements or historic data, an inventory of pre-retrofit equipment, or a control-group's
           energy equipment. This is typically used where no standard exists and/or when the project
           is an "early replacement" activity - that is, prior to equipment failure.33
Option  2 typically provides higher energy savings and, therefore, is preferred  by most project and
program sponsors. EPA  suggests that Option 1 be used for new construction projects and that Option 2
be used for other project types.


4.4.2    Baseline Adjustments

As indicated above, the "adjustments" term in the  general savings equation is used to re-state  energy
use of the baseline and reporting periods under a common set of conditions. Adjustments can be either
"routine" or  "non-routine".   Routine  adjustments  are those  that are  predictable,  variable, and
measurable. Non-routine  adjustments are  those that tend to be one  time  events and are perhaps
unpredictable.  A non-routine adjustment would be required, for example, when a factory where the
project takes place changes its product line. Significant routine adjustments  are addressed in a M&V
plan whereas non-routine  adjustments, due to their nature, tend not to be addressed in the planning
process, but as they occur.

Some examples of routine adjustments for energy efficiency projects are:

        •  Weather adjustments for projects involving space heating or air conditioning in buildings

        •  Operating hours adjustments for indoor lighting retrofits

        •  Building occupancy adjustments for projects involving indoor air ventilation systems
oo
  A nuance for early replacement projects with respect to using either existing conditions or code requirements
for a baseline is if the replaced equipment/systems had a remaining lifetime shorter that the allowance time
period. In this situation, the first year(s) of the allowance might have an existing condition baseline and the later
years a code requirements baseline.  However, given the expected short lifetime of allowances, this nuance
should not be significant.

-------
        •   Production changes for projects involving industrial production processes

The characteristics that govern energy consumption, and thus the adjustments, are called independent
variables.  The appropriate independent variables to consider for defining baseline energy use can be
determined by "common sense",  regression analysis, or other forms of mathematical modeling.
Independent variables found to have a significant effect on the baseline period energy use can be
included as adjustments to calculation of savings and monitored at the same time as the reporting
period energy consumption data.

Perhaps the most common independent variable that needs to be considered is weather. Weather can
be measured in many different ways, but often just outdoor dry bulb temperature is  evaluated.  Tools
for addressing weather's impact on energy savings are  included in the project and program M&V
guideline documents listed in the Appendix.


4.4.3    Net to Gross Adjustments

M&V at the project level generally involves calculating "gross" energy savings. However, when
calculating emission savings, states will want to know the net impact of the EE/RE project or program,
or the "net" savings. Adjustments, as discussed above,  tend to be addressed at the project level,
whereas net to gross issues tend to be addressed at the program level.

The difference between gross  and net  savings is the savings that would  have occurred without the
influence of the program and the implementation of the subject projects.  Three common factors for
calculating net savings are:

        •   "Free rider" and "spillover" effects

        •   Secondary effects

        •   Electrical transmission and  distribution (T&D) losses
4.4.3.1 Free Riders and Spillover
Free riders and spillover are factors often taken into consideration for DSM programs conducted by
utilities and public agencies. Free riders are participants that would have implemented an EE or RE
project without the benefits  of the  sponsoring  program.  Spillover  projects  are activities  that
participants or non-participants in a program implement, but not because of the direct influence of the
program  (for example, they do not receive financial incentives).  The methods for determining free
riders and spillover include using reference values from similar program types, participant self-reports
and interviews, comparison of participants with non-participants, and econometric modeling.  For the
purposes of a Set-Aside Program, EPA recommends that states conduct minimal or no evaluation of
free rider and spillover issues. This is because of the nature of the cap and  trade program, the value
and risk of the allowances, and the types of projects being implemented under the Set-Aside Program.

4.4.3.2 Secondary Effects

Secondary  effects are unintended consequences  of a  project activity. The  main type of secondary
effects for  efficiency projects are referred to  as "interactive effects" - and  these can be substantial.
Interactive effects are the impacts that an energy efficiency measure has on energy use within a facility
and which are indirectly associated with the  measure. For example, reducing  lighting loads through an
energy efficient lighting retrofit can also reduce air conditioning and/or increase heating requirements.
This occurs because less heat is generated by energy efficient lighting.

-------
A broader type of secondary effect occurs when energy efficiency programs have effects beyond a
single facility and begin to impact energy supply and distributions systems. In this situation, the term
"leakage" is used.  Types of leakage includes one-time effects such as air emissions resulting from
construction  activities, or upstream and downstream effects such as  emissions associated with a
supply chain that supports the operation of a renewable energy project. These  types of secondary
effect tends to be negligible for efficiency and renewable projects, and is not suggested for inclusion in
evaluation analyses for the NOX SIP Call Set Aside Program.

4.4.3.3 T&D Losses

Once savings at the site level are calculated then the source level savings can be determined. In most
analyses of EE/RE projects the site and source savings are  assumed to be equal. However, inevitably
there will be some electrical  transmission and  distribution (T&D) losses.34 These can range from
negligible for a  high  voltage customer located close to  a  power plant to over 10% for smaller
customers located far from power plants. In addition, higher T&D losses  are inevitable during on-peak
hours. Thus, some jurisdictions have calculated on-peak, versus off-peak, T&D loss factors.

If a T&D loss factor is being considered, it is best to adopt one  factor (or perhaps two - one for on-
peak and one for off-peak) for the entire state  and not try to be too  fine grained. Two options for
quantifying T&D losses are (a) assuming a simple adder for source savings or (b) not including T&D
losses directly, but considering them a counterweight to uncertainty  in the site savings calculation.
The  adder could be a value  calculated for the specific transmission  and distribution network  in
question.  Potential sources of such data are local regulatory authorities, local utilities, and the regional
independent system operator (ISO).
EPA's CVP35 for the Acid Raid Program suggest the following default values for T&D losses,  as a
proportional adder to on-site energy savings:

        •      T&D savings for residential and commercial customers - 7%
        •      T&D savings for industrial customers - 3.5%
34 Transmission is typically considered the high voltage movement of electricity from a power plant to a sub-
station, and distribution is the lower voltage movement of electricity from a sub-station to the end users.
However, some high-energy use customers receive electricity at transmission voltage levels and thus have lower
T&D losses.
35 U.S. EPA,  1995

-------
Chapter 5   Calculating Energy Efficiency Savings Using Existing
	Documentation - Quality Assurance Guidelines
When  project sponsors apply to receive  allowances  from the  Set-Aside  Program, they provide
information about the EE/RE project or program. This information will often contain an indication of
the emissions savings associated with the  project or program including documentation  of how the
savings were  determined. Most likely, this emissions savings documentation (in the form of a M&V or
evaluation  report) will  not have  been  prepared for the sole purpose of applying for the Set-Aside
Program.

Instead, the documentation may have been prepared for other purposes (e.g., regulatory reporting for a
utility DSM program, or performance payments for a guaranteed energy savings agreement between a
contractor and a customer). Although not necessarily prepared per the M&V requirements of a state's
Set-Aside Program, the documentation may be sufficient for the purposes of the Set-Aside  Program.
Utilizing existing documentation  in combination with Quality Assurance Guidelines (QAG) can save
significant costs for the sponsor and encourage participation in the program. QAG can help determine
whether indicated savings, and the assumptions and rigor used to prepare the documentation, can be
used for the Set-Aside Program.

To initiate the approval process, a sponsor submits  the necessary  application materials with basic
information about their project or program using forms similar to those found in the EPA's second
guidance document, "Creating An Energy  Efficiency And Renewable Energy Set-Aside In  The NOX
Budget Trading Program: Designing the Administrative and Quantitative Elements.'" Attached to the
application is documentation that indicates  how the emission savings were determined. This savings
documentation consists  of an electricity savings M&V  report with a kWh  savings value  and a
calculation converting the electricity savings to an ozone season NOX emission reduction.

This savings  documentation is then reviewed, following the Quality Assurance Guidelines, for  use in
the Set-Aside Program and based on this review, either:

        •   Used "as is" for determining the NOX allowances that will be credited to  the subject
           project or program

        •   Revised by the state or applicant to provide a new value for the NOX allowances that will
           be credited to the subject project or program
        •   Discounted based on specific  concerns about the accuracy of the  emission reductions
           values provided
        •   Increased based on underestimated savings calculations that used more conservative than
           necessary baseline assumptions
        •   Rejected
The subject of this Chapter is the review of energy savings M&V documentation submitted to the Set-
Aside Program, but not necessarily prepared,  specifically for this program. The guidance  provided in
this section can also be used for reviewing documentation submitted in direct compliance with the
M&V requirements of a state Set-Aside Program, as discussed in Chapter 6.
                                             5-1

-------
The contents of this chapter are:

       •   Basic emission accounting standards

       •   Quality Assurance Guidelines with minimum requirements for any M&V documentation
       •   Inspections and persistence reviews
       •   Baseline reviews
       •   Setting accuracy standards and discounting for uncertainty
       •   Calculating ozone season savings from annual savings
       •   Using independent reviewers


5.1 QUALITY ASSURANCE GUIDELINES (QAG)

M&V guidelines and protocols focus on critical elements of M&V.  However, there is a wide variation
in actual project details such that guidelines and protocols provide more of an overall framework than
an explicit set of instructions for  completing  the actual  M&V.  Therefore, complying with these
guidelines is no guarantee that an M&V report is complete or accurate.
Thus, rather than have  applicants adhere to  the basic guidelines, a QAG can be used to judge
acceptability of the  submitted documentation. Adherence  to such quality assurance guidelines still
allows the M&V methods employed to be shaped by the specific circumstances of the projects or
programs, the uncertainty of the savings estimates, and the value of the allowances. A QAG covers
key issues associated with different data  collection and analysis methods  and requires sponsors to
describe how certain key issues were addressed rather than requiring them to address each M&V effort
in a specific way.

The QAG for the Set-Aside Program are presented in three forms:

            •  A list of minimum reporting requirements

            •  A summary table of quality assurance issues for different data collection and analyses
              methods, and
            •  Tables of specific issues for each IPMVP Option (A, B, C and D)
These QAG items are derived from related materials in the  California Demand-Side  Management
Advisory Committee (CADMAC) QAG, the FEMP M&V Checklist36, ASHRAE's37 Guideline 14-
2002 Measurement of Energy and Demand Savings, and  LBNL's38 Guidelines  for the Monitoring,
Evaluation, Reporting,  Verification, and  Certification of Energy-Efficiency Projects  for  Climate
Change Mitigation.


5.1.1 Minimum Requirements
Table 5.1 contains a checklist of minimum requirements  for an M&V documentation  report. EPA


36 U.S. DOE, 2000a
37 ASHRAE, 2002
38 Vine and Sathaye, 1999

-------
recommends  that  project  sponsors evaluate these  minimum requirements in order  to determine
whether an evaluation submitted with a Set-Aside Program application is complete.
Table 5.1       Minimum  Requirements for Evaluation or  M&V  Submittals for NOX Set-Aside
Program
    •   Program or project site(s) and measure(s) are reasonably defined
    •   Variables that affect energy and emissions savings are defined (e.g. weather) and assumptions for these
        variables are presented (e.g. actual or typical weather conditions were used in analyses)
    •   Time frame of savings analyses are defined in terms of savings during ozone season and number of
        years for persistence of savings
    •   Savings claimed are defined as primary, secondary, direct or indirect
    •   The M&V Option (A, B, C or D from IPMVP) that was used is defined
    •   Baseline equipment and conditions are defined; baseline adjustments are discussed
    •   Post-Installation (reporting period) equipment and conditions are defined
    •   Measurement and analysis activities are described including calculation details
    •   Critical assumptions and stipulations are defined and documented with supporting information
    •   Metering approach is defined  including the  equipment used, schedule of metering,  and  metering
        calibration
    •   Electronic, formatted data, directly from a meter or data logger, would be available, if requested
    •   Accuracy and precision of estimated savings are reported
    •   Sample sizes and documentation on how sample sizes were selected are provided (if used)
    •   Authors of analyses and documentation is indicated with their credentials and signatures on report
    •   Quality assurance methods are defined
The level of savings uncertainty and the effort required to verify both a project's potential to perform
and its actual performance will vary from project to project and program to program. Therefore, one
can expect diversity in M&V strategies and  level  of effort (rigor) between different  projects.  To
facilitate assessing the M&V rigor (accuracy and precision) justified for each project, it is helpful to
evaluate the savings claimed and the uncertainty of the savings.
One measure of uncertainty is the complexity of the project. The complexity "ranking" can correspond
to the following project characteristics (for energy efficiency projects):
        1.   Constant load, constant operating hours
        2.   Constant load, variable operating hours
                a.   Variable hours with a fixed pattern
                b.   Variable hours without a fixed pattern (e.g., weather-dependent)
        3.   Variable load, variable operating hours
                a.   Variable hours or load with a fixed pattern

-------
               b.  Variable hours or load without a fixed pattern (e.g., weather-dependent).
A lower position (higher number) in the above list corresponds to more complex projects, which
typically require more complex (and more expensive) M&V methods to determine energy savings.
Thus, one can use the above list to indicate the complexity of the energy efficiency projects being
evaluated. This approach captures the fact that the complexity of isolating savings from fluctuations in
load is the most critical determinant of uncertainty. A key implication is that installing utility meters
on complicated measures and systems ~ like many HVAC installations ~ can isolate savings and
thereby reduce uncertainty.

In summary, more rigorous (and expensive) M&V approaches are appropriate for high emissions
savings measures that are complex. Less rigorous M&V approaches are appropriate for less complex
measures with lower savings.


5.1.2   Quality Assurance Issues for Data Collection and Analysis Methods
Table 5.2 lists some general issues for the different  IPMVP Options A, B, C, and D.  More detailed
tables with issues for each Option are in the next section of this Chapter. These tables can be used as
checklists for what should be evaluated, i.e. checked for quality and documented in M&V reports. For
example, if an applicant submitted a M&V report using Option B analyses, one could use the second
column  of Table 5.2  as a checklist and supplement it with the  more  detailed explanation of each
checklist item in Table 5.4.

-------
Table 5.2   Quality Assurance Issues for Each IPMVP M&V Option

Option A:
Partially
Measured
Retrofit
Isolation
Option B:
Retrofit
Isolation
Option C:
Whole
Facility
Analyses
Option D:
Calibrated
Simulation
Combinations
of Options
For Individual Projects - Issues that need to be addressed for different M&V Options
M&V Rigor
Analytical
Assumptions
Calibration
Data Type and
Sources
Project Level
Sampling
Model Specification
and Error
Missing Data and
Outliers
Triangulation
Reasonableness
Analysis
Independent
Variables
Interactive Effects
Measurement
Duration
X
X
X
X
X

X

X
X
X
X
X
X
X
X
X

X

X
X
X
X
X
X
X
X

X
X

X
X

X
X
X
X
X

X
X

X
X
X
X
X
X
X
X

X
X
X
X
X
X
X
For Programs - Issues that need to be addressed for different M&V Options
Program Level
Sampling
Comparison Group

X


X


X
X

X


X
X


-------
The following are summary definitions of the categories listed in the Table 5.2:

For individual projects:

        •   Rigor - Was the accuracy and precision of the savings estimate calculated and reported? Is
           the rigor (or lack of rigor)  reported and  documented warranted based on the project
           savings, complexity and savings uncertainty?
        •   Analytical Assumptions - What were the key assumptions used in the analysis?
        •   Calibration - Were the input assumptions and calculated results of the analyses compared
           and adjusted to actual data? Was instrumentation calibrated?
        •   Data Type and Sources - Were the sources of data and the methods used in collecting data
           appropriate?
        •   Project Level Sampling - What sampling design was used to select the components to be
           metered? Do the samples meet basic statistical criteria for validity?
        •   Model Specification and Error - What was the  initial  and final model specification and
           how were specific modeling error issues identified and dealt with?
        •   Missing Data and Outliers - How were outliers and influential observations identified and
           handled? How were missing data handled?
        •   Triangulation - If more than one estimate of savings was calculated, how were the results
           combined to form one estimate?
        •   Reasonableness Analyses - Were "reality checks" made by  comparing M&V analysis
           results with actual utility bills or basic engineering calculations? Are key assumptions
           realistic?
        •   Independent Variables - What were the sources of data for independent variables (e.g.
           weather) that impact savings calculations?
        •   Interactive Effects: How were the interactions between different measures (installed at the
           same location) addressed?39
        •   Measurement Duration - What was the duration and interval of metering, does it cover the
           full range of operating conditions associated with the project?
For groups of projects in a program:

        •   Program Level  Sampling - What kind of sampling design was used. Did the samples meet
           basic statistical criteria for validity?
        •   Comparison Group - Was a comparison group utilized for estimating  savings, and if so,
           how was it selected as representative?
on
  Interactive effects are the effects that an energy efficiency measure has on energy use in a facility, but which
are indirectly associated with the measure. For example, reduction in lighting loads, through an energy efficient
lighting retrofit, will reduce air conditioning and/or increase heating requirements, since there is less heat
generated by the energy efficient lights.

-------
5.1.3   M&V Option Specific Quality Assurance Issues
The following tables raise issues for project sponsors and evaluators to consider and integrate into
their plans for adopting one of the four IPMVP Options.

Table 5.3   Quality Assurance Issues for IPMVP Option A: Partially Measured Retrofit Isolation

M&V Rigor
Analytical
Assumptions
Calibration
Data Type and
Sources
Project Level
Sampling
Missing Data
and Outliers
Reasonableness
Analysis
Independent
Variables
Interactive
Effects
Measurement
Duration
Program Level
Sampling
Option A Quality Assurance Issues
What was the basis for the use of this Option? Is the rigor (or lack of
rigor) reported and documented appropriate?
What were the key assumptions in the analyses and the source of
these assumptions?
Describe instrumentation calibration methods used.
1 . Describe the data that were collected to support the analysis.
2. Describe the source(s) and method(s) of collecting these data.
3. Describe which data were collected from site inspection, building
plans, stipulated, etc.
Describe how sampling was used, if at all, to meter only a
representative group; for example, if only some lighting circuits were
metered for a lighting retrofit. If samples were used for selected
measurements, indicate the selection process and the precision and
confidence intervals for the collected information.
Indicate whether outlier analyses were used and, if outliers were
identified, how they were identified, and how they were dealt with.
Indicate if any data were missing, why, and what was done to fill in data
gaps.
Describe how the energy savings results were evaluated to ensure they
are reasonable and consistent with other available information.
What were the independent variable (e.g., weather) data chosen for the
analyses and describe how they correspond to the facility and energy
efficiency measures?
Indicate if interactive effects were taken into account, and if so, how
they were determined.
What was the duration and interval of metering? How was it determined
to cover the full range of operating conditions associated with the
project?
If projects were selected to represent the entire population of projects in
a program, describe the sampling methods and the precision and
confidence intervals achieved.

-------
Table 5.4  Quality Assurance Issues for IPMVP Option B: Retrofit Isolation

M&V Rigor
Analytical
Assumptions
Calibration
Data Type and
Sources
Project Level
Sampling
Missing Data
and Outliers
Reasonableness
Analysis
Independent
Variables
Measurement
Duration
Program Level
Sampling
Option B Quality Assurance Issues
What was the basis for the use of this Option? Is the rigor (or lack of
rigor) reported and documented appropriate?
What were the key assumptions in the analyses and the source of
these assumptions?
Describe instrumentation calibration methods used.
1 . Describe the data that were collected to support the analysis.
2. Describe the method(s) of collecting and instrumentation used for
collecting data.
3. Describe which data were collected from site inspection, building
plans, stipulated, etc.
Describe how sampling was used, if at all, to meter only a
representative group; for example, if only some lighting circuits were
metered for a lighting retrofit. If samples were used for selected
measurements, indicate the selection process and the precision and
confidence intervals for the collected information.
Indicate whether outlier analyses were used and, if outliers were
identified, how they were identified, and how they were dealt with.
Indicate if any data were missing, why, and what was done to fill in data
gaps.
Describe how the energy savings results were evaluated to ensure they
are reasonable and consistent with other available information.
What were the independent variables (e.g., weather)? Indicate how
data on the variables were collected and validated as accurate and
relevant to savings calculation.
What was the duration and interval of metering? How was it determined
to cover the full range of operating conditions associated with the
project.
If projects were selected to represent the entire population of projects in
a program, describe the sampling methods and the precision and
confidence intervals achieved.
ASHRAE's Guideline  14-2002 for Measurement of Energy and Demand Savings includes several
minimum requirements established for retrofit isolation M&V approaches. They are paraphrased here
to provide additional guidance on defining specific requirements for use in Option B M&V analyses
40.
           The baseline data could be collected for a period of time that spans the full range of all
           independent variables expected to occur under normal facility operations for the ozone
           season.
40
  Descriptions of these criteria and definitions can be found in Guideline 14-2002. Related terminology is
defined in standard statistics texts.

-------
           Reasons could be reported for data gaps, elimination or estimation of any actual measured
           data in the baseline or post-retrofit reporting periods.
           Estimation of missing data could use actual  data  points that span the typical range  of
           independent variables.
           Where energy use measurement is less than continuous, periodic measurements could be
           made  of  demand, and  operating  periods of relevant equipment could  be  recorded
           continuously.
           Where multiple similar systems at one  facility are  involved, uncertainty and confidence
           calculations could include the impact of any sampling techniques used.
           The algorithm  for savings determination  could have  a net determination bias  error less
           than 0.005%. 41
           With each annual savings report, show at least the level of uncertainty and confidence
           interval in the savings determined during the post-retrofit period.
           The level of uncertainty must be less than 50%  of the annual reported savings,  at a
           confidence level of 68%.
41 Net determination bias is calculated by applying the baseline period's independent variable data to the
algorithms for savings determination. This test indicates computational uncertainty introduced by the baseline
model.

-------
Table 5.5  Quality Assurance Issues for IPMVP Option C: Whole Facility Analyses

M&V Rigor
Analytical
Assumptions
Calibration
Data Type and
Sources
Model
Specification
and Error
Missing Data
and Outliers
Reasonableness
Analysis
Independent
Variables
Measurement
Duration
Program Level
Sampling
Comparison
Group
Option C Quality Assurance Issues
What was the basis for the use of this Option? Is the rigor (or lack of
rigor) reported and documented appropriate?
What were the key assumptions in the analyses and the source of
these assumptions?
Describe facility meter calibration.
1 . Describe the data that were collected to support the analysis.
2. Describe the source(s) and method(s) of collecting these data.
3. Describe which data were collected from site inspection, building
plans, stipulated, etc.
1 . Describe model specifications.
2. If autocorrelation, heteroskedasticity, or collinearity was a problem,
describe the diagnosis carried out, the solutions attempted, and
their effects. If left untreated, explain why.
3. Indicate experience of person(s) who conducted modeling.
Indicate whether outlier analyses were used and, if outliers were
identified, how they were identified, and how they were dealt with.
Indicate if any data were missing, why, and what was done to fill in data
gaps.
Describe how the energy savings results were evaluated to ensure they
are reasonable and consistent with other available information.
What were the independent variables (e.g., weather)? Indicate how
data on the variables were collected and validated as accurate and
relevant to savings calculations.
What was the duration and interval of the analysis (e.g., how many
months of baseline and reporting period metering data were utilized to
develop a model)? How was it determined to cover the full range of
operating conditions associated with the project?
1 . If a sample was used, describe the sample.
2. Describe the size of the expected sample and achieved sample.
3. Describe the projected and achieved level of precision at a given
level of confidence.
4. Describe any tests or comparisons made to examine whether the
sample was representative of the whole population.
5. If a stratified sample was used, describe how the strata were
defined and how the allocation to strata was determined.
6. If the sample was weighted for analysis, describe the basis.
If a comparison group was used for comparing "treated" facilities with
non-participants, describe the comparison group and the basis for
selection.

-------
ASHRAE's  Guideline  14-2002 for Measurement of Energy and Demand Savings includes several
minimum requirements established  for Whole  Facility Option  C  M&V approaches. They are
paraphrased  here to provide additional guidance on defining specific requirements for use in Option C
M&V analyses:

       •   Baseline data could span the normal, full range of all independent variables under normal
           facility operations during the ozone  season. Given that the ozone season is only five
           months long, it is suggested that at least two seasons worth of baseline data be used.
       •   Reasons could be  reported for data gaps, data elimination, or estimation of any actual
           measured data in the baseline or post-retrofit periods. No more than 25% of the measured
           data could be excluded.
       •   Where multiple similar  facilities are  involved  (e.g.  a "program"), uncertainty and
           confidence calculations could include the impact of any sampling techniques used.
       •   The algorithm for savings determination could have a net determination bias error less
           than 0.005%.

       •   With each  annual  savings report, show at least  the level of uncertainty and confidence
           interval in the savings determined during the reporting period.
       •   The level  of uncertainty must be less than  50% of the annual reported savings, at a
           confidence level of 68%.

-------
Table 5.6  Quality Assurance Issues for IPMVP Option D: Calibrated Simulation

M&V Rigor
Analytical
Assumptions
Calibration
(metering and
model)
Data Type and
Sources
Model
Specification
and Error
Calibration
Data Type and
Sources
Missing Data
and Outliers
Independent
Variables
Reasonableness
Analysis
Interactive
Effects
Measurement
Duration
Program Level
Sampling
Option D Quality Assurance Issues
What was the basis for the use of this Option? Is the rigor (or lack of
rigor) reported and documented appropriate?
What were the key assumptions in the analyses and the source of
these assumptions?
1 . Describe instrumentation calibration methods used.
2. Describe how the calculations were calibrated to observed data
on usage levels.
3. Describe the criteria used to judge whether the model(S) and
calculations were appropriately calibrated.
4. Describe input values that were changed to bring the calculations
into calibration and give the reasons why a value was changed.
1 . Describe the data that were collected to support the analysis.
2. Describe the source(s) and method(s) of collecting these data.
3. Describe which data were collected from site inspection, building
plans, stipulated, etc.
1 . Describe simulation models used for analyses.
2. Indicate experience of person(s) responsible for modeling.
3. Report the mean of the differences between the simulated and
calibration data and other relevant statistical indicators
1 . Describe data collected, data collection method and calibration.
2. Indicate changes that were made in model as a result of
calibration efforts and the basis for those changes.
1 . Describe the data that were collected to support the analysis.
2. Describe the source(s) and method(s) of collecting these data.
3. Describe which data were collected from site inspection, building
plans, stipulated, etc.
Indicate whether outlier analyses were used and, if outliers were
identified, how they were identified, and how they were dealt with.
Indicate if any data were missing, why, and what was done to fill in data
gaps.
What were the independent variables (e.g., weather)? Indicate how
data on the variables were collected and validated as accurate and
relevant to savings calculations.
Describe how the energy savings results were evaluated to ensure they
are reasonable and consistent with other available information.
Indicate how interactive effects are addressed by modeling.
What was the duration and interval of metering used for collection of
calibration data, and how was it determined to cover the full range of
operating conditions associated with the project?
If projects were selected to represent the entire population of projects in
a program, describe the sampling methods and the precision and
confidence intervals achieved.

-------
In ASHRAE's Guideline  14-2002 for Measurement of Energy and Demand Savings several minimum
requirements are  established for calibrated  simulation Option D M&V  approaches.42 ASHRAE's
requirements for building calibrated simulation are paraphrased here to provide additional guidance on
reviewing Option D M&V efforts:

    •   The simulation tool used to develop models for buildings could be a computer-based program
       for the analysis of energy use in buildings. It could be commercially available or in the public
       domain. The  tool could be  able  to adequately  model the facility and energy  efficiency
       measures, performing calculations for each hour of the time period in question (e.g., for a one-
       year period the model could perform 8,760 hourly calculations). In addition, it could be able to
       explicitly model at least the following:
           o   Thermal mass effects

           o   Occupancy and operating schedules that can be separately defined for each day of the
               week and holidays

           o   Individual control  set points  for thermal  zones or  heating, ventilation,  and  air
               conditioning (HVAC) components

           o   Actual weather data

           o   User-definable part-load performance curves for mechanical equipment

           o   User-definable capacity and efficiency  correction curves  for mechanical equipment
               operating at non-rated conditions

    •   Provide a complete copy of the  input data, indicating which data are known  and which are
       assumed.  Report  the  source of all  data  described  as  "known" and  assess  its level of
       uncertainty.

    •   Report  the name and version of simulation software  used.  Indicate who  completed the
       analyses.  ASHRAE recommends  that the  skills  of the personnel include  five  years of
       computer simulation experience.

    •   Report the source and accuracy of the calibration data. Calibration data could contain at a
       minimum all measured monthly utility data from 12 bills spanning at least one year.
    •   The computer model could have an NMBE43 of no more than 5% and a CV (RMSE)44 of less
       than  15%  relative to  monthly calibration data. If hourly calibration data are used, these
       requirements could be 10% and 30%, respectively.
    •   With each  savings report, show at least the level of uncertainty and confidence  interval for the
       annual savings determined during the post-retrofit period.
    •   The level of uncertainty must be less than 50% of the annual reported savings, at a confidence
       level of 68%.
42 For ASHRAE, calibrated simulation refers to residential or commercial building analyses, versus say a
calibrated simulation of an industrial process facility.
43 NMBE - Net Mean Bias Error
44 CV(RMSE) - coefficient of variation, root mean square error - indicates the uncertainty inherent in the model.

-------
5.2     INSPECTIONS AND PERSISTENCE REVIEWS

If a state has available resources, a useful validation activity is to inspect projects, or a sample of
projects in a program, that are applying for NOX allowances. Such inspections would ideally include
reviews of both  pre-installation  (i.e., baseline  conditions) and reporting period conditions.  The
objective of such  inspections is not the recalculation of savings, but the assurance that the project(s),
as installed, have the potential to generate the indicated savings.

The same objective applies to persistence  reviews (annual inspections) of the facility to ensure  it is
still operating properly.  Persistence  reviews  can also include  an annual report by the project or
program sponsor in which they use new analyses to document the savings from a second year, third
year, etc. of operation.

During the inspections, a list of existing (baseline inspection) or new equipment can be cataloged, and
performance measurements  taken. For example, if constant load motors are  being  replaced, the
electrical draw of the existing and the new motors can be measured to confirm a critical element of the
savings calculation. In addition, observing the new equipment in operation and  interviewing facility
staff can provide additional confidence that the projects are, and will continue, generating savings.

For programs targeting integrated whole-building approaches to energy efficiency, utility bill analysis
can be used to statistically evaluate persistence. One useful tool that can be used for this purpose is
ENERGY STAR's Portfolio Manager (see p. 4-11 for more information).
5.3     BASELINE REVIEWS

It is important to review what baseline was assumed, how it was selected and how it was applied. For
renewable energy projects, the  baseline is usually assumed to be zero.  For energy efficiency projects
baselines, there are two types of baselines to review:

    •    Existing equipment, systems, and operational conditions, that existed prior to the installation
        of the project or program, or
    •    Existing conditions modified to account for state and/or federal energy standards and codes.
If the baseline was assumed to be existing conditions, then the following questions could be asked:

    •    Are their current state or federal energy  standards that apply to the equipment or systems
        impacted by the project or program?
    •    How were existing conditions documented?
    •    What surveys and measurements were conducted?
    •    What historical data were used for documenting assumptions?
If the baseline was assumed to be existing conditions, modified for energy codes or standards, then the
following questions could be asked:

    •    What current  state or federal  energy standards were assumed to apply to this project or
        program?
    •    How were the standards applied to the existing conditions to develop a new baseline?
    •    How were existing conditions documented?

-------
    •  What surveys and measurements were conducted?
    •  What historical data were used for documenting assumptions?


5.4    MINIMUM ACCURACY STANDARDS AND DISCOUNTING

In order to ensure confidence that the NOX allowance calculations are conservative and reliable there
are two general approaches that states can take to defining expectations for accuracy:

    •  Set minimum standards for evaluation and M&V accuracy (such as in the ASHRAE Guideline
       14 "Prescriptive Path" for Whole Facility Option C method,  as described above) and not
       accept lesser quality M&V  reporting.  The  desired accuracy levels  might be  defined as
       compliance  with the QAG  tables,  if the  tables are modified to include requirements  for
       specific accuracy and precision levels.
    •  Develop a graduated scale of discounting  based on the  accuracy with which  various M&V
       methods capture energy savings and emissions reductions. The discounting  rates could vary
       from zero for evaluation approaches that demonstrate high levels of confidence and precision
       to significant discounts for determined without complete metering. Discounting would allow
       participants to weigh the benefits of measurement methods and to select the one that provides
       the most accurate compromise between the  burden of M&V stringency and size  of award.
Discounting could be used with  caution - it can  simply add inaccuracy on top  of inaccuracy. For
example,  setting  discounting rates  for certain  methodologies  too  high may  discourage  program
participation and thus  may  restrict  a program's potential success.  Alternatively, the potential  for
gaming is inherent to any discounting strategy; if sponsors know that their savings will  be discounted,
for example by 20%, then they may "overestimate" savings by 20%.  The discount factor depends on
the risks  inherent in both predicting the savings result  and achieving and maintaining the  intended
equipment or personnel performance level that will  produce the predicted savings.

Given these issues around discounting, it may be better to define the limits of acceptable accuracy. For
accuracy requirements two  sources are ASHRAE  Guideline 14  and  the New England ISO  Forward
Capacity Market M&V Protocols that are being issued in the first quarter of 200745.

If a discounting approach is to be used, states may consult guidance from the EPA Acid Rain Program
(1995 and 1996) for discounting savings from energy efficiency programs implemented by utilities.46

    •  Default option - By relying  on default (stipulated)  savings,  allowable savings are restricted:
       credit is given for only 50% of first-year  savings,  and limited to one-half of the measure's
       physical lifetime.
    •  Inspection option - By inspecting (confirming) that measures are  both present  and operating,
       allowance is  allowed for 75% of first-year  savings and is limited to one-half of the measure's
       physical lifetime  (with  biennial  inspections), or 90% of first-year savings for  physical
       lifetimes of measures that do not require  active operation or maintenance  (e.g., building shell
       insulation, pipe insulation and window improvements).
    •  Monitoring  option - By  conducting monitoring over the life  of the measure,  one obtains
       allowances for a greater fraction of the savings and for a longer  period of time.  Biennial
       verification in subsequent years 1 and 3 (including inspection) is required, and savings for the
45 ISO-NE, 2007
 ' Vine and Sathaye, 1999

-------
       remainder of physical lifetimes are the average of the last two measurements. The monitoring
       option requires a 75% confidence in subsequent-year savings.

In summary, a state may wish to set minimum accuracy standards for NOX allowance evaluations. In
addition, as part of the review process a state may wish to  discount the savings and allowances
reported by an applicant. The basis for the discount may be  somewhat  subjective and rely on the
professional judgment of the reviewer,  with the backing of official state  guidance. The discounting
may be due to specific  concerns  about  the quality of the analyses, the reported (or unreported)
accuracy of the analyses, or concern for secondary effects that are not specifically addressed.
5.5    CALCULATING OZONE SEASON SAVINGS FROM ANNUAL SAVINGS

Ensuring that savings are properly reported for only the ozone season requires special attention when
reviewing applications.  Typically, M&V activities result in a calculation of annual energy savings.
For the Set-Aside Program, however, it is the savings during the five-month ozone season that are of
interest.

Unfortunately, only for the simplest energy-efficient projects can a simple  ratio (5/12) be used to
convert twelve-month savings to five-month savings. Projects for which the  5/12 ratio is potentially
applicable are projects with constant savings throughout the year,  (i.e., savings are not dependent on
weather or operational characteristics). An example of such a project would be a lighting retrofit in an
office building that is operated the same number of hours throughout the year.

However, energy consumption and savings typically vary throughout the year depending on whether it
is  an energy retrofit at a factory that has different production schedules throughout the year, or a
retrofit at a  school that is not  operated during the summer. Many energy efficiency measures'
performance also varies with  season, particularly those involving heating or  cooling systems. Even
outdoor lighting retrofits save less energy in the summer (when there are more daylight hours) than in
the winter. Therefore, for most projects, a month-by-month analysis and savings report are required to
determine what the savings are for the ozone season months of May through September.
5.6    INDEPENDENT REVIEW

Claims for allowances will need to be reviewed and certified by the state prior to their issuance. M&V
from EE/RE actions could be carried out by applicants or third parties using guidance provided in this
document and other industry sources, as listed in the Appendix. Regardless  of who performs the
measurement, appropriate documentation and proof of savings, such as utility billing data, data from
sub-metering, and sworn claims may be required to prevent fraudulent claims in the Set-Aside system.

Beyond certain minimum requirements, and particularly as it  relates to the accuracy of an evaluation
effort, there is a degree of professional judgment required to determine what is "good enough." M&V
involves  balancing accuracy and the time and  cost of obtaining incrementally  better  results. This
balancing act requires an understanding of the:

    •   Value of the information (the electricity and NOX savings) derived from a M&V effort
    •   Risk of excessively high or low savings - program integrity versus discouraging participation
       because of overly conservative estimates
    •   Accuracy, costs, and practical opportunities and limitations of various M&V approaches

-------
Planning for M&V, or the due-diligence review of a completed M&V effort, requires professional
judgment based on experience conducting M&V activities and knowing when incremental efforts to
improve accuracy will return a net benefit in savings determination accuracy. M&V certification and
oversight of energy savings could be designated to entities within the state with appropriate knowledge
and  experience with energy use,  efficiency and  measurement  issues, or independent,  third-party
consultants.

States may consider the use of independent third-party consultants to review applications. Third-party
savings verifiers are typically engineering consultants with experience and knowledge of the relevant
technologies, as well as with verifying energy efficiency or renewable project performance. Many are
participants in industry  groups such  as  the  Efficiency Valuation  Organization (http://www.evo-
worid.org), which offers  courses in M&V  and a Certified M&V Professional  (CMVP) program.
Utilities often employ these types  of consultants for their DSM programs, and may be a source of
recommendations.  The FEMP also has an M&V evaluation team (http://ateam.lbl.gov/mv/).

-------
Chapter 6   Calculating Energy Efficiency Savings Using New Analyses-
	Establishing a NOX Set-Aside Specific M&V Protocol	
In this guidance document there are two approaches defined for calculating energy savings. The first
approach, as described in Chapter 5, involves using Quality Assurance Guidelines for reviewing M&V
documentation that was not specifically prepared for the Set-Aside Program but is submitted with an
application for Set-Aside allowances. The second approach, as covered in this Chapter, is guidance on
what could be covered in a project or program specific M&V plan specifically prepared for the Set-
Aside Program. Both approaches rely on common standards that any M&V activity  should achieve:
relevance, completeness, transparency, consistency, accuracy, and conservativeness.

The core steps of an evaluation are:

        •   Gross program electricity savings are determined.
        •   Gross program electricity  savings may be converted to net electricity savings using  a
           range of possible considerations (e.g., free-rider corrections). This calculation is discussed
           briefly in Section 4.4.3. It is up to each state to decide whether it wants to include net to
           gross conversions in its M&V requirements.

        •   Emission factors are applied to net energy savings in order to determine NOX allowances.
In general, gross electricity savings are determined using one of the following methodologies:

        •   Project Based Measurement and Verification (M&V) Method. Individual project savings
           are determined using one or more of the four M&V Options defined in the IPMVP.  If a
           program is being evaluated, then a representative  sample of projects in the program is
           selected and the savings from those selected projects are determined and applied to the
           entire population of projects, i.e. the program. This project based M&V method is the
           most common method used for programs involving non-residential  facilities,  retrofit or
           new construction, which have  a wide  variety  of factors determining savings  and when
           individual facility savings values are desired. This method is the focus of this Guide.

        •   Large-Scale Data Analysis Method. This method is only used for large energy efficiency
           programs. Statistical analyses are conducted on the energy usage data (typically collected
           from the meter data reported on utility bills) for all or most of the participants and possibly
           non-participants  in  the program.   This  approach is  primarily  used  with residential
           programs  where  relatively homogenous  homes and  measures  are implemented   and
           project-specific analyses are not required or practical.

Section 6.1 discusses planning for the Project Based M&V method and Section  6.2 covers sampling
basics  as related to Project Based M&V.  Section 6.3 briefly reviews the large-scale data analysis
method.
                                             6-1

-------
6.1      REQUIREMENTS FOR A PROJECT M&V PLAN

This section  discusses the  M&V planning process for individual projects. Program  M&V,  which
addresses a large number of similar projects, is discussed in Section 6.2.

M&V activities fall into the following five areas.

        1.  Selecting  one of the four IPMVP Options for the project. The Options define general
           approaches to documenting savings.
        2.  Preparing a project-specific M&V plan that outlines  the details of what will be done to
           document savings.
        3.  Defining the  pre-installation baseline, including (a) equipment and systems, (b) baseline
           energy use, or (c) factors that influence baseline energy use. The baseline can be defined
           through a review of regulatory requirements (such as  minimum efficiency standards), site
           surveys, spot, short-term, or long term metering, and/or analysis of utility billing data.
        4.  Defining the post-installation, reporting  period  situation, including  (a) equipment and
           systems, (b)  post-installation energy use, or (c) factors that influence post installation
           energy use.  Site surveys; spot, short-term, or long-term metering;  and/or analysis of
           billing data can also be used for the reporting period assessment.
        5.  Conducting annual M&V  activities to (a) verify the  continued operation of the installed
           equipment or system, (b) determine current year savings, (c) identify factors that may
           adversely affect savings in the future, and (d) estimate savings for subsequent years.

As with many things, good M&V is based on both good planning and good implementation.


6.1.1    Selecting an M&V Option

The 2002 IPMVP, as discussed in Chapter 4, defines four M&V Options: Options A, B,  C, and D. The
Options are generic M&V approaches for energy projects. Having four Options provides a range of
approaches to determine  energy savings with varying levels of rigor and cost. Table 6.1, using text
from the IPMVP, lists the best energy efficiency applications for each of the Options.

-------
Table 6.1   Applications for Each IPMVP Option
Option A
Partially Measured
Retrofit Isolation
is best applied where:
• The magnitude of
savings is low for the
entire project or for
the portion of the
project to which
Option A is applied
• The project is simple
with respect to
having limited
independent
variables and
unknowns
• The risk of not
achieving savings is
low
• Interactive effects are
to be ignored or are
stipulated using
estimating methods
Option B
Retrofit Isolation

is best applied where:
• The project involves
simple equipment
replacements
• Energy savings
values per individual
measure are desired
• Interactive effects are
to be ignored or are
stipulated using
estimating methods
• Independent
variables are not
complex



Option C
Whole Facility

is best applied where:
• The project is
complex
• Predicted savings are
large as compared to
the recorded energy
use
• Energy savings
values per individual
measure aren't
needed
• Interactive effects47
are to be included.
• Independent
variables that affect
energy use are not
complex or
excessively difficult
to monitor
Option D
Calibrated Simulation

is best applied where:
• New construction
projects are
involved48
• Energy savings
values per measure
are desired
• Option C tools
cannot cost
effectively evaluate
particular measures
• Complex baseline
adjustments are
anticipated
• Baseline
measurement data
does not exist or
prohibitively
expensive to collect
One of the most important selection criteria for an Option is the cost of implementing the M&V. Some
Option-related elements of M&V costs are:

        •   Option A

           o   Number of measurement points

           o   Complexity of deriving the stipulation

           o   Frequency of post-retrofit inspections

        •       Option B

           o   Number of points and independent variables to be measured
47
  Interactive effects are the effects that an energy efficiency measure has on energy use in a facility, but which
are indirectly associated with the measure. For example, reductions in lighting loads, through an energy efficient
lighting retrofit, will reduce air conditioning and/or increase heating requirements, since there is less heat
 enerated by the energy efficient lights.
48
  IPMVP, 2006

-------
           o   Complexity of measurement systems

           o   Length of time measurement system must be maintained

           o   Frequency of post-retrofit inspections

        •       Option C

           o   Number of meters to be analyzed

           o   Number of independent variables used in models

        •       Option D

           o   Number and complexity of systems simulated

           o   Number of field measurements required for model input data

           o   Effort required for calibration of model

           o   Skill of those conducting simulations

While it is very difficult to generalize  about M&V costs, a rule of thumb is that M&V costs range
from 1% to 10% of project costs.  In  general, on  a per unit of energy saved, costs are inversely
proportional to the magnitude of the savings (i.e. large  project have lower per savings  unit M&V
costs) and directly  proportional  to uncertainty of  predicted  savings (i.e. projects  with greater
uncertainty in the predicted savings warrant higher M&V costs).

6.1.2    Project Specific M&V Plan - Energy Efficiency Projects
A project specific M&V plan could describe in a fair amount of detail what will  be done to document
the  savings from a project. It can be a plan for each energy efficiency measure included in the project,
for  example, when  a retrofit isolation approach is used. Or, it can cover the entire project - for
example, when whole facility analyses approach is used. The M&V plan will  consider the type of
energy efficiency measures involved and the desired level of accuracy.

The M&V plan could include a project  description, facility equipment inventories, descriptions of the
proposed measures,  energy savings estimates, a M&V budget, and proposed construction and M&V
schedules. A project-specific  M&V plan could demonstrate that any metering  and analysis will be
done in  a consistent and logical manner and with a level of accuracy acceptable to all parties.

It is important to realistically anticipate the costs and  level of effort associated with completing
metering and  data  analysis activities. Time and  budget requirements are often underestimated.
Improved time and  budget estimates can be achieved by properly defining the critical factors that
affect energy  consumption prior to completing the M&V  plan. Understanding  the value of the
project's savings is necessary for setting reasonable M&V goals and accuracy requirements.

The following tables summarize what  could be contained in the  M&V plans. Table 6.2 lists general
requirements for an overall plan.
Table 6.2  Energy Efficiency Project M&V Plan Content - General Components

-------
Category
Project Description
Project Savings and
Costs
Scheduling
Reporting
M&V Approach
M&V Plan Components
Project goals and objectives
Site characteristics and constraints (e.g. absence of
utility meter data at site)
Measure descriptions that include how savings will
be achieved
Estimated savings by Measure
Estimated M&V cost by Measure
Equipment installations
M&V activities
Raw data format
Compiled data format
Reporting interval
Accuracy and precision requirements
Options used
Person(s) responsible for M&V activities
Table 6.3 lists requirements that could be addressed for each measure (e.g., building lighting retrofit,
building air  conditioning  retrofit, control  system upgrade) that is  included in the project being
evaluated.

-------
Table 6.3  Energy Efficiency Project-Specific M&V Plan Contents  - Measure Specific
           Components
Category
Analysis Method
Metering and
Monitoring
Baseline
Determination
Savings Adjustments
M&V Plan Components
Data requirements
Basis of stipulated values
Savings calculation equations
Regression expressions
Computer simulation models
Metering protocols
Equipment
Equipment calibration protocols
Metering points
Sample Size
Sampling accuracy
Metering duration and interval
Performance factors
Operating factors
Existing service quality
Minimum performance
standards
Party responsible for
developing adjustments
Savings adjustment approach
_ „ 40
Examples
kW, operating hours, temperature
Lighting operating hours equal
4000/year based on metered
XYZ building
kWh savingst = [(kW/FixturebaseiineX
Quantitybaseiine) - (kW/Fixturepostx
Quantitypost)] x Operating Hours
Three parameter change-point
cooling model
DOE-2 simulation model
ASHRAE Guideline 14 pump multiple point
test throughout short term monitoring
ABC Watt Hour Meter with 2 watts
accuracy
MIST50 protocols
Flow rate, RMS power
25 lighting circuits out of 350
90% confidence/10% precision
2 weeks/1 5-minute data
Boiler efficiency
Load, operating hours
Indoor temperature set points
State energy code
Smith Engineers hired by Sponsor
Baseline adjusted for reported period
weather and building occupancy levels
When preparing a M&V plan one can use the resources found in energy efficiency project M&V
guidelines. References to some of these M&V Guidelines are found in the Appendix. Within these
guidelines, there are three types of M&V plans:

        •   Stipulated or Deemed Savings - for projects with well-known and documented savings
           (e.g. energy-efficient  appliances such as washing machines, computer  equipment and
49
  These examples are not for one particular type of project or IPMVP Option, but a variety of project types and
Options.
50"
  NIST - National Institute of Science and Technology

-------
           refrigerators, lighting retrofit projects with well understood operating hours). NYSERDA,
           Texas  TEEM,  and the California  Standard  Offer Program M&V  Guidelines  contain
           stipulated values and M&V methods for several typical energy efficiency measures.
        •   Prescriptive  Methods  -  for  projects  with significant M&V "experience"  and well
           understood determinants  of savings there are M&V  procedures and spreadsheets (e.g.
           lighting and  motor retrofits and  solar water heating system  installations).  The FEMP
           Guidelines contain  prescription  approaches  to  several  common  energy efficiency
           measures. The ASHRAE Guidelines contains a prescriptive method for Option C, whole
           facility analysis.
        •   Generic Approaches - Conceptual approaches applicable to a variety  of project types for
           which  deemed values cannot be established and for which prescriptive M&V methods are
           not available (e.g. comprehensive  building  retrofits and industrial energy efficiency
           measures). The FEMP and ASHRAE Guidelines contain several generic approaches.
For the deemed savings  approach, it is increasingly common to stipulate  a parameter or to hold its
value constant  regardless of what the actual value is during  the term  of the NOX allowance51. A
stipulation in a  M&V plan is essentially an agreement between the applicant and the  state to accept a
stipulated value, or a  set of assumptions, for use in determining the baseline  or reporting period
energy consumption. If certain requirements are met (e.g., satisfactory  commissioning results were
submitted, annual  verification of equipment  performance is performed, and maintenance  is being
done), the savings are considered to be confirmed.

Stipulated values could be based on reliable, traceable, and documented sources of information such
as:

        •   Standard tables, from recognized sources indicating the power consumption (wattage) of
           certain pieces of equipment that are being replaced or are  being  installed as part of a
           project (e.g.,  lighting fixture wattage tables)
        •   Manufacturer's specifications
        •   Building occupancy schedules
        •   Maintenance  logs
        •   Performance  curves published by national organizations
Sources of stipulated values must be documented in the M&V  plan.  Even when stipulated values are
used in place of measurements, verifying  equipment performance  is still recommended (with  the
caveat that direct stipulation of energy savings is never recommended).  Properly used, stipulations can
reduce M&V costs and simplify procedures. Improperly used, they can give M&V results an aura of
authority. Deciding whether parameters could  be  stipulated requires understanding how they  will
affect savings, judging their affect on reliability and uncertainty of results, and balancing the costs,
risks, and goals of the project and the Set-Aside Program.

Evaluation of a few key aspects of the project could drive decisions about whether to use stipulations
and how to use them effectively in an M&V plan:

        •   Availability of reliable information
        •   The project's likelihood of success in achieving savings
51 U.S. DOE, 2002

-------
        •   Uncertainty of the stipulated parameter and its contribution to overall project uncertainty
        •   The cost of measurement
Overall uncertainty in predicted savings, and the degree to which individual parameters contribute to
overall  uncertainty, could be  carefully considered in deciding whether to use stipulations. Savings
prediction uncertainty can be assessed by identifying the factors that affect savings and estimating the
potential influence of each factor. Factors having the greatest influence could be measured if at all
practical. Several "rules of thumb" are:

        •   The  most certain,  predictable parameters  can  be  estimated and  stipulated without
           significantly reducing accuracy.
        •   Stipulating parameters that represent a small degree of uncertainty in the predicted result
           and a small amount of savings will not produce  significant accuracy concerns.
        •   Parameters could be measured when savings and prediction uncertainty are both large.
        •   Even if savings are high, but uncertainty of predicted savings is low, full measurement
           may not be necessary for M&V purposes.
        •   If savings are small but the uncertainty in the predicted savings is high, stipulation would
           shift risk to the state and the project may not be appropriate for the Set-Aside Program.


6.2     SAMPLING

A program is a group of projects, with  similar characteristics and installed in similar applications.
Examples include a utility program to install energy-efficient lighting in commercial buildings,  a
developer's  program  to  build a subdivision  of homes that have photovoltaic systems, or a state
residential energy efficiency code program. The difference between project and program M&V is that
each project  is evaluated, while programs require a sample of included projects to be selected for
evaluation with the results applied to the entire program "population". Program evaluation, on a per
project  or ton of NOx basis, tends to be more cost-effective than individual project analyses.  Thus,
with respect to M&V, it is more cost-effective to encourage programs or large aggregations of similar
projects to participate in a state Set-Aside Program.

For each project  selected for  analysis within  a program, the M&V  Options A, B, C  and D are the
approaches that  can be  used. For Option C, whole  facility analyses, a billing analyses may be
conducted for a sample of projects selected from the population. Alternatively, the utility bills for the
entire population  may be analyzed.

When a sample needs to be selected, the following steps are typically employed:

        1.  The population of participants (and/or non-participants) to be represented by the sample is
           defined. This is called the  sample frame. Examples of frames are commercial businesses
           in a certain area, industrial businesses with certain levels of energy use, and residences
           with central air conditioning.
        2.  If the sample frame is not sufficiently homogenous, then the sample frame is  subdivided
           into subsets or strata of projects with similar characteristics.  For example, a sample frame
           of all industrial customers may be further divided into factories with similar products or
           operating schedules. Creating subsets of homogonous projects helps reduce the sample
           sizes  required for reliable estimates.

-------
        3.  The size of the project savings estimate (e.g. kWh/project) for the sample frame or for the
           sub-sets is estimated using initial engineering savings estimates, some preliminary tests, or
           information from other similar projects.
        4.  The variability of the savings estimate is calculated for the sample frame or the subsets.
           Variability is an indication of what range of values  for savings might be  found in the
           sample. The larger the amount of variation, the larger the sample size needs to be in order
           to reliably estimate savings.
        5.  The population size, the estimated savings impact, and the  estimated variance are used to
           calculate the sample sizes required to meet certain accuracy requirements for the sample
           frame as a whole or each  sub-set of the frame. Several statistical approaches are available
           for calculating sample sizes. Basic statistics books and several of the resources listed in
           the Appendix can be consulted.

A successful sample will be sufficiently representative of the population to enable one to  draw reliable
inferences about the population as a whole. The reliability (rigor) of a sample refers  to the confidence
with which one can state that the estimate produced by the sample falls  within a specified range of the
true value in the population. Any time an estimate of a variable (such as energy savings) is based on
measurements from a sample (rather than the entire population), the estimate typically will differ from
the true value  for the population. This difference will vary from sample to sample, so that one cannot
state with certainty the magnitude of any error in the estimate caused by using a sample. However, one
can state the likelihood or probability that the estimate falls within some specified  range of the true
value for the population.

Confidence information is typically given alongside the statistics resulting from sampling. Confidence
interval is the  likely range of the true value. Confidence level is the chance that the true value will be
inside the confidence interval calculated.  Confidence is often reported as paired percentages, such as
80/10, with an 80% confidence level and  10% confidence interval.  The following is an example:

        A sample of small office buildings retrofitted with energy-efficient air conditioners indicated
        savings of 5,000 kWh per building per ozone season, +/- 500 kWh with a confidence level of
        95%. In other words, the probability is 95% that the  5,000 kWh per building savings estimate
        falls within 500 kWh of the true  average savings for the entire  population. This  means that if
        one drew 100 different independent samples, 95% of them would produce  estimates within
        500 kWh of the  population average. This  probability  (95%) is referred to as the confidence
        level.  The  specified range (500 kWh) is the confidence interval. This confidence interval can
        be stated in absolute terms (±/-  500 kWh) or percentage  terms (for example, ±/-  10%). By
        increasing the size of the sample  used to produce the estimate, one can increase the  reliability
        of the  estimate (i.e., increase the confidence level and interval).

The reliability of a sample-based  estimate can be computed only after the metered data have been
gathered. Before collecting the data, one cannot state the level of reliability that a given sample size
will yield. However, one can compute the sample size that  is expected to be sufficient to  achieve a
specified reliability level. This is done by using projections of savings estimates and their variability in
the sample size calculations. If the projections are too conservative, the estimate will exceed the
reliability requirements. If these projections prove to be  overly optimistic, then the  reliability of the
estimates  will fall  short of the  requirements, requiring additional data collection to  achieve the
specified reliability level.

Another important aspect of sampling is the actual selection of the sample projects from a program.
There are  two  general  approaches  for  sample  selection: probability and non-probability based

-------
sampling. With a probability-based sample approach, projects are selected randomly. This may be for
the sample frame as a whole  or samples  selected for each subset of the  sample frame. When the
sample frame  is small, a non-probability based sample is usually selected. This approach involves
selecting projects on how representative they are of the population under consideration.

This guidance  document is not a manual on sample design. However, some basic concepts have been
presented that  can help a state official understand the requirements of sample design. As with other
aspects  of M&V, a proper sampling  plan requires  a through understanding of the projects,  the
populations impacted, and the factors that determine the energy savings. In addition, a proper sample
requires an experienced practitioner who understands the statistics associated with sample design.
6.3     LARGE-SCALE METER DATA ANALYSIS METHOD

Large-scale  data analysis  applies a  variety of  statistical  methods  to  measured  facility energy
consumption meter data (almost always whole  facility utility meter billing data) to estimate  gross
energy and demand impacts for a large energy  efficiency program. Unlike the M&V whole facility
analysis option (IPMVP Option C), the large-scale data analysis approach usually (a) involves analysis
of a census of project sites, versus a sample and  (b) does not involve on-site data collection for model
calibration.  However, on-site validation of measure installation is still  recommended for a sample of
projects.

Most analysis of meter data involves the use of comparison groups. In conducting assessments of the
impacts of programs,  evaluators have traditionally  used 'quasi-experimental design.'  Using this
approach, the behavior of the participants is compared to that of a similar group  of non-participants
(comparison group). The purpose is to estimate "what would have happened in  the absence of the
program." The two groups need to be similar on average. The only difference should be the fact that
one went through an energy efficiency program and one did not. The observed change in consumption
in the  comparison can be assumed to resemble the  change in  consumption that would have been
observed in the treated group had it not been through a program.

There are three  basic ways  that large-scale meter data analysis is employed for energy efficiency
programs:

        •   Time series comparison - compares the program participants' energy use before and after
           their projects are installed. With this method the  "comparison group" is the participants'
           pre consumption. Thus, this method has the advantage of not requiring a comparison
           group  of  non-participants. The  disadvantages  are  that  it cannot be used  with  new
           construction programs and even with well-established regression techniques, this approach
           cannot fully account for all changes in all the independent variables that might impact
           energy savings. The basic evaluation equations are:
                   Savings - Qpre-insatllation - Q]
post-installation •
                  Qpre-msatiiation = quantity of energy  used before the project was implemented,
                  corrected for independent variables
                   cpost-installation •
                              = quantity of energy used after the project was implemented
           Use of Comparison Group - compares the program participants' energy use after projects
           are installed with energy use of non-participants (i.e., they did not have projects installed).
           This method is used primarily for new construction programs, where there are no baseline

-------
data.  The  difficulty  with this  approach is usually related to the  cost of analyzing two
groups and finding  a  comparison group  with sufficiently similar characteristics as the
group of participants. The basic evaluation equations are:

    O   Savings = Qnon-particpants ~~ Vparticiupants

    o   Qparticrpants =  quantity of energy used by the participants after their projects are
        installed

    o   Qnon-particpants  = quantity of energy used by the control group of non-participants,
        after the participants installed their projects

Comparison Group/Time-Series- this approach combines  the two above  approaches and
thus has the advantages of comparing similar if not identical groups to each other while
accounting for efficiency savings that would have occurred irrespective of the program. If
the participant and comparison group are  available, it is a preferred approach. The basic
evaluation equations are:
    O   oaVingS    vVcpre-insatllation   Ncpost-installation) participants-  ~ VNcpre-insatllation   Ncpost-installation) non-
        participants

    o   Qpre-msatiiation = quantity of energy used before the project was implemented

    o   Qpost-mstaiiation- = quantity of energy used after the project was implemented

-------
                                Chapter 7       Measurement and Verification
                                for Renewable  Energy
                                Projects	
This chapter introduces  methods for determining savings from  renewable energy projects  and
discusses some related issues. There are  a variety of diverse technologies that convert renewable
energy into electricity. Despite individual differences, each renewable technology supplies electricity
and reduces the use of conventional sources. In contrast, energy efficiency projects reduce electricity
consumption. The implication is that renewable energy project M&V is simpler than energy efficiency
M&V.  This is because, in most instances, M&V simply involves measuring the electrical output of the
subject system to determine the quantity of electricity "saved".

The renewable energy projects covered in this chapter are the installation of devices or systems that
displace fossil  fuel-based electricity production through the use  of renewable  energy resources.
Examples of renewable technologies  include photovoltaics, biomass conversion systems (e.g., landfill
gas methane recovery projects), and wind systems.
7.1     M&V APPROACHES AND OPTIONS

There are two general approaches for calculating electricity savings:

       1.  Direct  Measurement.  This approach  assumes  that the  electricity  produced  by the
           renewable system  displaces energy that would have  been provided by an  electric
           generating unit (EGU). With this one-for-one replacement approach,  one  only needs to
           directly measure the net  amount of energy produced by the renewable  system. This
           approach is  most common with photovoltaic, wind, and biomass energy production
           projects (assuming there  is no  supplementary  firing with fossil fuels at the  biomass
           facility).
       2.  Net-Energy Use Calculation. With this  approach, purchased electrical  energy used at the
           project site during the reporting period is compared with a baseline to  determine the
           savings in electricity purchases. When  a baseline is adopted, there are four methods for
           calculating savings as defined in the 2003 IPMVP renewables protocol.52
           •   Comparison with a Control Group. Electricity consumption of the renewable energy
               system is compared with the electricity consumption of a control group, with similar
               characteristics under similar conditions. The control group is used as the baseline.
           •   Before and After Comparison. Electricity  consumption of the  renewable energy
               system is compared with the electricity consumption measured before  the renewable
               system was installed for the same loads. The pre-installation situation is  the baseline.
           •   On and Off  Comparison.  Electricity consumption is compared with the renewable
               energy  system  "on"  versus electricity  consumption  with  the  system "off."  The
               baseline equals the situation with the system "off."
           •   Calculated Reference  Method. The  baseline  is  determined  with  engineering
               calculations, and estimated electricity consumption is compared to metered energy use

52 IPMVP, 2003
                                             7-1

-------
              when the renewable energy system is in place. This approach has the weakness of
              using two different analyses methods (engineering  estimates and metered data) to
              determine a difference, i.e. the savings.
These  four methods usually  require measurement of electricity consumption or supply over an
extended period of time in order to capture the variation due to changing climatic conditions.

The four IPMVP Options (A, B, C and D) can also be used for renewable energy projects. Options A
and B  involve measurements of system performance and are the most common.  Option A involves
stipulation of some parameters while Option B requires maximum use of measurements in the energy
savings analyses. Option C measures the change in whole facility electricity use, usually with utility
metering data, associated with the installation of the renewable system. Option D involves the use of
computer simulations, calibrated with actual data, to determine savings  from a renewable system
installation.

Table 7.1 indicates how each IPMVP Option relates to the "direct" and "net energy use calculation"
M&V approaches.

Table 7.1  IPMVP Options and Approaches for Renewable Energy Projects
Approach/
IPMVP Option
Direct Measurement
Approach
Net Energy Use
Calculation Approach
Comparison
With Control
Group Method
Before and
After Comparison
Method
On/Off Comparison
Method
Calculated
Reference Method
Option A
Partially
Measured
Retrofit
Isolation
Xd>


X


X

X

Option B
Retrofit
Isolation
Xd>


X


X

X

Option C
Whole
Facility
Analyses



X


X



Option D
Calibrated
Simulation









X
(1) Preferred approaches

-------
7.2     PROGRAMS VERSUS PROJECTS

As discussed in prior Chapters, a program is  a collection  of similar projects installed in  similar
applications.  The M&V approaches for a renewable  energy program may be different than the
approaches used for individual projects, for  which the direct measurement of output is the usual
approach for determining savings. The mostly likely program scenarios under which direct metering of
system  output  would not be  used involve large numbers  of  renewable projects  where  direct
measurement of each system is impractical. For example, if a developer implements a photovoltaic
system  in a large subdivision it would  probably not be  cost-effective to meter the output of each
home's  system. In applications where a  large-scale program  of small individual projects is applying
for allowances, the use of sampling or the net-energy use calculation method would most likely apply.
Techniques such as calibrated computer simulation (IPMVP Option D) or analysis of utility billing
data (IPMVP Option C) are most appropriate in this context.
7.3     NET METERING OF ELECTRICAL OUTPUT AND FUEL USE

There are situations where the electrical output of the renewable  system is not directly indicative of
electricity savings - and the NOX savings. These are when:

    •   The system consumes electricity in order to produce electricity. The consumption is associated
        with what is known as parasitic loads. For example, a solar thermal electric system consumes
        electricity to power pumps that circulate fluid through the system. In these situations either the
        parasitic loads have to be directly measured and subtracted from the measured output of the
        system, or a "net output" meter that accounts for parasitic loads is used.
    •   The system consumes a fuel that results in on-site NOx emissions. An example is a landfill
        gas generation system that uses natural gas as a supplemental fuel. In these situations, either
        (a) on-site fuel consumption measurements could be taken and emission factors applied to the
        fuel use, or (b) on-site  emission levels can  be measured.  In both cases any NOx emissions
        calculated from the electricity production or savings  of the renewable system must be reduced
        by emissions associated with on-site fuel use.


7.4     INFORMATION ON METERING

Electricity measurements associated with generator output, parasitic loads, power delivered to the
project site, as well as power delivered to third parties and the utility may be needed. Electrical output
and parasitic loads can be measured  with many commercially available electricity meters. Often these
are the same types of meters used by utilities for billing purposes. All electrical meters (and related
equipment) are typically  provided,  installed, owned, and maintained by the project sponsor or the
servicing utility. Metering,  interconnection (including safety provisions), reporting and other related
issues could be in accordance with current electrical standards  and the requirements of the servicing
electric utility.

With the direct measurement approach, meters could indicate the project's gross output (in  kW and
kWh) less parasitic use, e.g., pump motors. More sophisticated metering may also show sales to  third
parties or the local utility, as well as any battery storage losses.  The goal is to measure net generation
of useful electricity that is used at the project site, provided to the local distribution utility, or provided
to other entities.

With the net energy-use approach, deliveries to and from the facility could be separately recorded and

-------
treated as separate transactions. Note that power may flow into (from the servicing distribution utility)
or out (to the servicing distribution utility) of the site at different times. This means that the metering
device could be capable of recording total inflows and outflows, rather than simply providing a net
delivered value. For purposes of power delivered to the site, a single meter that records energy supply
is  preferred. If a calculated transformer-loss value is used, it must be based on certified factory test
data for that particular transformer supplied by the manufacturer and acceptable to the state.

The following are some suggested metering requirements:

       •   kWh and demand metering at the point of delivery
       •   Time-of-delivery metering
       •   Conduit to accommodate a telephone line for remote meter reading
       •   Load profile recording equipment at the point of delivery, with data logger.


7.5    PROJECT SPECIFIC M&V PLAN - RENEWABLE ENERGY PROJECTS

M&V plans for renewable energy projects will need to  be custom developed since individual projects
are typically unique. The M&V plan could address the following elements:

       •   Describe the facility and the project; include information on how the project saves energy
           and what key variables affect the realization of savings. An accounting-type spreadsheet
           could be prepared that shows estimated  baseline and projected performance period data
           for electricity and fuel purchases. Each of these values will need to be verified (baseline)
           or determined before  and during the reporting period.
       •   Indicate who will conduct the M&V activities and prepare analyses and documentation.
       •   Define the details of how calculations will be made and the assumptions about significant
           variables or unknowns. The performance of most renewable  energy projects varies as a
           function  of environmental conditions, such as wind or solar radiation.  The appropriate
           factors could be documented in the plan.
       •   Accuracy and precision requirements.
       •   Describe any stipulations that will be made, and the  source of data for the stipulations.
           Describe any simulation software that may be used. Show how calculations of savings will
           be used to determine emission reductions.
       •   Specify  what metering and data logging equipment will be used, who will provide the
           equipment, its accuracy and calibration procedures,  and how data from the metering will
           be validated and reported, including formats. Electronic formatted  data directly from a
           meter or data logger is usually required.
       •   Specify  what additional management oversight logs will be  maintained, the nature and
           frequency of entries,  and the interpretation  that is to be assigned to the results.  Examples
           include logging equipment failures, equipment down time, and system outputs.
       •   Indicate how quality assurance will be maintained and repeatability confirmed.
       •   Indicate which reports will be prepared, what they will contain, and when they will be
           provided.

-------
Chapters  Determining   Emissions   Allocation  Rates   and  Potential
	Emissions Reductions  From Electricity Savings53	
 8.1 INTRODUCTION

When a state establishes an Energy Efficiency and Renewable Energy (EE/RE) Set-Aside Program, a
percentage of the  state's total quantity of allowances  is reserved  for qualifying EE/RE resources.
These allowances  are then allocated by the state to EE/RE projects on the basis of energy savings
(expressed in kWh) and an emissions  allocation rate, typically specified in pounds per kWh.  This
emissions allocation rate is determined by the state, and  can be set at any level deemed appropriate by
state  officials.  States may  choose  a conservative allocation rate or a high allocation rate, i.e. an
"incentive  rate," if they believe  it will encourage additional EE/RE projects. Another option  is to
adopt an allowance allocation rate  based on the estimated  rate at which EE/RE projects displace
pollution from electric generating units (EGUs). This Chapter presents several methods for calculating
this "displaced emissions rate".

In addition to serving as the basis for allocating allowances to EE/RE projects, displaced emissions
rates  can be used to approximate emissions reductions from conventional electricity sources. The
impact on air emissions varies depending on the conventional generation sources displaced as well as
the prevailing policy context. Regardless of the emissions rate selected, the only way to ensure
emissions reductions, within a cap and trade program, is to retire allowances.  Retiring allowances
effectively removes them from circulation so that they cannot be traded and used to authorize
emissions.  This is particularly important for states seeking to incorporate emissions reductions from
EE/RE resources into their SIP for air quality.
8.2 OPTIONS FOR ESTABLISHING AN EMISSIONS ALLOCATION RATE

As indicated above, states under the NOX Set-Aside Program can allocate allowances at any emissions
rate deemed appropriate. This choice depends on the extent to which states wish to incentivize EE/RE
resources, and whether consistency with the displaced emissions rate for EE/RE resources is desired.
Sources and methods for a Ibs/kWh allocation rate are:

    1.  The EPA default allocation factor as indicated in the NOX SIP Call: 0.0015 Ibs/kWh 54
    2.  A simple "system average" displaced emissions rate obtained from an emissions database such
        as eGRID
    3.  Detailed  time and  geographic zone specific displaced emissions rates calculated  with  an
        Hourly Dispatch Model
  Portions of this section are from the reports - Methods for Estimating Emissions Avoided by Renewable
Energy and Energy Efficiency (Keith and Biewald, 2005) and Final Report on the Clean Energy/Air Quality
Integration Initiative Pilot Project of the U.S. Department of Energy's Mid-Atlantic Regional Office (Jacobson,
et al., 2006). The second report publicizes the results of a pilot project that attempts to use renewable energy and
energy efficiency projects to obtain credits nitrogen oxide (NOX) emission reductions under the Clean Air Act.
54 This allocation rate is equivalent to the design emission rate of the NOX SIP Call cap and trade program,
0.151b NOx/MMBtu of heat input for a 10,000 Btu/kWh ECU.

-------
    4.  Displaced emissions rates calculated using a "middle ground" calculation method such as:

               "  Estimating Regional or State Average Emission Rates for Marginal EGUs
               "  Matching Capacity Curves to Load Curves
               "  Using Default "New Plant" Emission Rate

Methods 2 through 4 are discussed in Section 8.4.
8.3 CALCULATING EMISSIONS REDUCTIONS

Calculating emissions reductions from EE/RE involves multiplying the quantity of energy saved from
energy efficiency measures - or energy generated from renewable sources - by the mass of pollution
displaced for each unit of electricity saved or generated (e.g., Ibs/kWh). If allowances are retired, the
total ozone season emissions reductions can be estimated using the following equation:

                       Ozone Season NOX Savings (tons/ozone season) =

Displaced Emissions Factor (Ibs/kWh) x Ozone Season kWh Savings x (1 ton/2000 Ibs)

This equation  takes  the energy  savings or  renewable energy generation determined  through the
evaluation, measurement, and verification processes described in prior Chapters and multiplies it by an
emissions rate.

To achieve actual emissions reductions under a cap and trade program,  allowances allocated to EE/RE
resources must be retired.  When this occurs, one allowance removed from the system results in one
ton of pollution reduction. By setting the emissions allocation rate equivalent to the displaced
emissions rate, states can ensure that EE/RE resources receive allowances in proportion to the
emissions reductions that would occur in the absence of a cap and trade program - that is the quantity
of allowances available for retirement resembles the amount of avoided pollution.

8.4 METHODS FOR CALCULATING DISPLACED EMISSIONS RATES

The  methods for determining displaced emissions rates range  from fairly straightforward to highly
complex.  They include both spreadsheet-based calculations and dynamic modeling approaches  with
varying degrees of transparency, rigor, and cost. States could decide  which method best meets their
needs, given available resources and data quality requirements.


8.4.1 System Average Emissions Rate
One  simple approach for calculating emissions reductions from  EE/RE resources is to use regional or
system average displaced emission rates. Determining a system average rate involves dividing  total
annual emissions (typically in pounds, or Ibs) from all units in  a region or power system by the  total
energy output (typically in megawatt hours, or MWh) of those  units.  Sources for average  emissions
rates  include the  Ozone  Transport  Commission's "OTC  Workbook",55 the Clean  Air-Climate
Protection Software (CACPS),56  and EPA's  eGRID database57.  Each of these tools contains  pre-
calculated emissions  rates averaged at the utility, state, and regional  levels. While easy to apply,  a

55 Keith, et al., 2003
56 ICLEI, 2003
57 U.S. EPA, 2007

-------
shortcoming of this method is that it does not account for the complexity of regional power systems
and the fact that some units (such as base load units) are unlikely to be displaced by EE/RE resources.


8.4.2 Dispatch Models

At the other end of the complexity spectrum, computer-based "hourly dispatch models" capture a high
level of detail on the  specific  electric  generating units (EGU) displaced by  EE/RE projects or
programs.  An hourly dispatch model involves simulating hourly power dispatch to explicitly estimate
emissions from each unit in a system. In general, the model produces  a deterministic, least-cost system
dispatch based on a highly detailed representation of generating units - including some representation
of transmission constraints, forced outages, and energy transfers among different regions - in the area
of interest. If the power system is altered through load reduction or the introduction of an EE/RE
project,  the model calculates how this  would affect dispatch and then calculates resulting emissions
and prices. With dispatch models,  a year's worth of data are generally modeled on a chronological
(hourly) basis, with and without the new resource.  This approach is generally  considered the most
rigorous means of quantifying  displaced  emissions rates.  On the  downside, it is labor intensive,
expensive, and generally difficult for non-experts to evaluate.


8.4.3 Medium Effort Calculation Approaches
In between system average calculations and dispatch modeling, lie several "middle effort" approaches
to estimating displaced emission rates.  These methods have been developed by analysts to provide a
reasonably accurate estimate of displaced emissions at a lower cost than dispatch modeling. They
typically use  spreadsheets and  publicly available  data  to  identify the  marginal  generating units
supplying power at the time EE/RE resources are reducing consumption or the renewable generators
are  providing electricity. The two major steps  in a spreadsheet-based  analysis are determining the
relevant set of generating units (accounting for the location of the EE/RE resource, as well as transfers
between the  geographic region of  interest  an other power  areas) and estimating the displaced
emissions from those units.   These approaches consider  whether a  specific  project's impact  on the
electricity grid is  on currently  operating  EGUs (the  "operating  margin")  or on longer-term EGU
capacity additions and retirements (the "build margin").

The following "middle-ground" approaches can be used by states to estimate displaced emissions from
activities such as efficiency and renewable energy projects:

Estimating Regional or State Average Emission Rates for Marginal EGUs. This approach
assumes that total emissions are reduced at an average emission rate for each additional kWh of
emissions-free renewable energy or energy reduction. In order to provide more precise estimates of the
impact on the marginal EGUs that are most likely to be displaced, regional or state average rates are
adopted that exclude the baseload EGUs not "backed off by EE/RE projects system (baseload units
typically include nuclear, hydro-electric, and some coal plants).  The downside of this approach is that
it does not capture the subset of EGUs actually following load and thus subject to displacement.
These units could have significantly different emission rates than the overall regional average. This
approach was adopted in a 2006 analysis of New Jersey's Clean Energy Program - see Appendix for
resources.

Matching Capacity Curves to Load Curves. Generating units are typically dispatched in a
predictable order based on cost and other operational characteristics. This means it is  possible in
principle to predict which unit types will be "on the margin" at a given load level, and therefore what
the marginal emission rate is.  Data on regional power plants may be used to develop supply curves
representing different seasons and times of day. These curves are then used to match regional

-------
electricity loads to characteristic emission rates.  Although this method uses readily available public
data, it is based on a simplified view of dispatch process that does not account for transmission
congestion.

Using Default "New Plant" Emission Rate. This simple approach estimates avoided emissions over
the long term by adopting the emission rate of the generating unit most likely to be added to the
system, i.e. the "build margin" or "surrogate plant" analysis. It is based on the concept that the new
EE/RE resource displaces other potential market entrants. In recent years, estimates have used
emission rates from a gas-fired, combined-cycle power plant, as most of the newer plants adopt this
technology. However, with gas prices increasing and limited pipeline capacity making new gas plants
less feasible, advanced-technology coal plants are looking more attractive. Such changes in market
conditions could be tracked and accounted for in this "new plant" approach.
                                             8-4

-------
Appendix:  References and Useful Information Sources
A.1 EPA AND STATE NOx SIP CALL RELATED DOCUMENTS
Title/Description
URL Address
EPA NOX Set-Aside Documents
U.S. EPA. 1999. Guidance on Establishing an Energy Efficiency and
Renewable Energy (EE/RE) Set-Aside in the NOX Budget Trading
Program, Volume 1 .
U.S. EPA. 2000. Guidance on Establishing an Energy Efficiency and
Renewable Energy (EE/RE) Set-Aside in the NOX Budget Trading
Program, Volume 2.
U.S. EPA. 2004a. Guidance on State Implementation Plan (SIP) Credits
for Emission Reductions from Electric-sector Energy Efficiency and
Renewable Energy Measures.
U.S. EPA. 2004b. Incorporating Emerging and Voluntary Measures in a
State Implementation Plan (SIP).
U.S. EPA. 2004c. Integrating Energy Efficiency and Renewable Energy
Measures in the Air Quality Planning Process Guidance for State and
Local Officials. Fact Sheet.
U.S. EPA. 2005a. A Toolkit for States: Using Supplemental
Environmental Projects (SEPs) to Promote Energy Efficiency (EE) and
Renewable Energy (RE).
U.S. EPA. 2005b. State Set-Aside Programs for Energy Efficiency and
Renewable Energy Projects Under the NOX Budget Trading Program: A
Review of Programs in Indiana, Maryland, Massachusetts, Missouri,
New Jersey, New York, and Ohio. Draft Report.
U.S. EPA. 2006. Clean Energy-Environment Guide to Action: Policies,
Best Practices, and Action Steps for States.
http://www.epa.gov/cleane
nergy/pdf/ee -re_set-
asides voll.pdf
http://www.epa.gov/cleane
nergy/pdf/ee -re_set-
asides_vol2.pdf
http : //www .epa. gov/ttn/oar
pg/tl /memoranda/ere seere
m gd.pdf

http : //www .epa. gov/ttn/oar
pg/tl /memoranda/evm iev
m g.pdf

http://www.epa.gov/cleane
nergy/pdf/SIPS-factsht-
final nodraftmark.pdf

http://www.epa.gov/cleane
nergy/pdf/sep toolkit.pdf
http://www.epa.gov/cleane
nergy/pdf/eere rpt.pdf
http://www.epa.gov/cleane
nergy/stateandlocal/guidet
oaction.htm
Other EPA and State NOX SIP Call Related Documents
Hathaway, A., D. Jacobson, and C. High. 2005. Model State
Implementation Plan (SIP) Documentation for Wind Energy Purchase in
States with Renewable Energy Set-Aside. NREL/SR-500-38075.
National Renewable Energy Laboratory.
High, C. J. and K. M. Hathaway. 2007. Avoided Air Emissions from
Energy Efficiency and Renewable Electric Power Generation in the PJM
Interconnection Power Market Area. Draft. Resource Systems Group,
http://www.eere.energy.go
v/windandhydro/windpow
eringamerica/pdfs/wpa/sip
s_model.pdf

                                A-1

-------
Inc. Supported by funding from the U.S. Department of Energy, Clean
Energy/Air Quality Integration Initiative.
Indiana. 2003. NOx Budget Trading Program Energy Efficiency &
Renewable Energy Set-Aside Guidance Manual. Department of
Environmental Management and Department of Commerce.
http://www.in.gov/idem/pr
ograms/air/sip/guide .pdf
Jacobson, D., et al. 2006. Final Report on the Clean Energy/Air Quality
Integration Initiative Pilot Project of the U.S. Department of Energy's
Mid-Atlantic Regional Office. Prepared for U.S. DOE, DOE/GO-
102006-2354.
http://www.eere.energy.go
v/wip/clean energy  initiat
ive.html
Massachusetts. 2006. BWP AQ26 Public Benefit Set Aside NOX
Allowance. Department of Environmental Protection.
http: //www .mass. gov/dep/
air/approvals/aq26.pdf
Missouri. Energy Efficiency and Renewable Energy Set-Aside Program
Web site. Department of Natural Resources.
http://www.dnr.mo.gov/en
ergy/renewables/set-
asideprogram .htm
New York. 1998. NOX Budget State Implementation Plan. Department
of Environmental Conservation.
http://www.dec.state.ny.us
/website/dar/reports/noxbu
dget.html
U.S. EPA. 2005. Guidance on Incorporating Bundled Measures in a
State Implementation Plan.
http: //www .epa. gov/ttn/oar
pg/t 1 /memoranda/10 8 8 5 gu
ideibminsip.pdf
                                           A-2

-------
A.2 PROJECT M&V GUIDELINES
Title/Description
ASHRAE. 2002. Guideline 14-2002: Measurement of Energy and
Demand Savings.
California. 2000. Non-Residential Standard Performance Contract
Program Procedures Manual. Section III: Measurement and Verification
Guidelines.
ENERGY STAR. 2007. Portfolio Manager Overview Web site.
IPMVP. 2002. Concepts and Options for Determining Energy and Water
Savings, Volume I, Revised. DOE/GO-102002-1554.
IPMVP. 2003. Concepts and Practices for Determining Energy Savings
in Renewable Energy Technologies Applications, Volume III.
IPMVP. 2006. Concepts and Options for Determining Energy Savings in
New Construction, Volume III, Part 1 .
NYSERDA. 2003. New York State Energy Research and Development
Authority (NYSERDA) Standard Performance Contracting Program
Measurement and Verification Guideline.
Oncor. 2003 Measurement and Verification Guidelines.
U.S. DOE. 2000. FEMP M&V Requirements Checklist. Draft.
U.S. DOE. 2000. Measurement and Verification for Federal Energy
Projects, Version 2.2. DOE/GO-102000-0960.
U.S. DOE. 2002. Detailed Guidelines for FEMP M&V Option A.
U.S. DOE. 2003. Measurement & Verification Resources and Training
Opportunities, Revision 5.
Texas. 2007. Texas A&M System Energy Systems Laboratory Web site.
Texas SECO. 2007. LoanSTAR Technical Guidelines Web site.
URL Address
www.ashrae.com
http://www.pge.com/docs/
pdfs/biz/rebates/spc_contr
acts/2000 on_peak incent
ive/III-m&v.pdf

http://www.energystar.gov
/index.cfm?c=evaluate_per
formance .bus_portfolioma
nager
www.evo-world.org
www.evo-world.org
www.evo-world.org
http : //www .nvserda. org/pr
ograms/Commercial Indu
strial/cipp . asp ?i=PON
http://www.oncorgroup.co
m/electricitv/teem/default.
asp
http : //ateam .Ibl . gov/mv/do
cs/checklist.pdf
http://ateam.lbl.gov/mv/do
cs/26265.pdf
http : //ateam .Ibl . gov/mv/do
cs/OptionADetailedGuidel
ines.pdf
http : //ateam .Ibl . gov/mv/do
cs/OptionADetailedGuidel
ines.pdf
http://esl.eslwin.tamu.edu/
resources/software.html
http : //www . seco . cpa. state .t
x.us/ls guideline.htm
                                    A-3

-------
A.3 PROGRAM EVALUATION RESOURCES
Title/Description
California Measurement Advisory Council. 2007. CALifornia
Measurement Advisory Council (CALMAC) Database Web site.
California Public Utilities Commission. 2006. California Energy
Efficiency Evaluation Protocols: Technical, Methodological, and
Reporting Requirements for Evaluation Professionals.
Consortium for Energy Efficiency. 2007. Market Assessment and
Program Evaluation (MAPE) Clearinghouse.
Haberl, J., et al. 2003. Procedures for Calculation of NOX Emissions
Reductions from Implementation of the 2000 IECC/IRC Conservation
Code in Texas. Proceedings of the 2003 IBPSA Conference, Eindhoven,
Netherlands.
Hirst, E. and J. Reed, eds. 1991. Handbook of Evaluation of Utility
DSM Programs. ORNL/CON-336.
Princeton University. 2007. PRInceton Scorekeeping Method (PRISM)
Web site.
U.S. EPA. 1995. Conservation Verification Protocols, Version 2.0. EPA
430/B-95-012.
Violette, D., M. Ozog, M. Keneipp, and F. Stern. 1991. Impact
Evaluation of Demand-Side Management Programs, Volume I and II: A
Guide to Current Practice. EPRI CU-7179. Electric Power Research
Institute
URL Address
http://www.calmac.org
http : //www .calmac.org/eve
nts/EvaluatorsProtocols Fi
nal AdoptedviaRuling 06
-19-2006.pdf

http://www.cee 1 .org/eval/c
Iearinghouse.php3
http://www.ibpsa.org/proc
eedings/BS2003/BS03 04
43 450.pdf


http : //www .princeton.edu/
-marean/



                                 A-4

-------
A.4 EMISSION REDUCTION CALCULATION RESOURCES
Title/Description
Biewald, B. and G. Keith. 2004. Estimating Emission Reductions from
Energy Efficiency in the Northeast. Synapse Energy Economics,
ACEEE, Asilomar.
ICLEI. 2003. The Cities for Climate Protection Greenhouse Gas
Emissions Software.
Keith, G. and B. Biewald. 2005. Methods for Estimating Emissions
Avoided by Renewable Energy and Energy Efficiency. Final Draft.
Synapse Energy Economics Prepared for U.S. EPA. NREL/TR710-
37721.
Keith, G., D. White, and M. Ramiro. 2003. The OTC Emission
Reduction Workbook 2.1: Description and User's Manual. Synapse
Energy Economics.
Marnay, C., D. Fisher, S. Murtishaw, A. Phadke, L. Price, and J.
Sathaye. 2002. Estimating Carbon Dioxide Emissions Factors for the
California Electric Power Sector. LBNL 49945 . Lawrence Berkeley
National Laboratory.
Jacobson, D., et al. 2006. Final Report on the Clean Energy/Air Quality
Integration Initiative Pilot Project of the U.S. Department of Energy's
Mid-Atlantic Regional Office. Prepared for U.S. DOE, DOE/GO-
102006-2354.
U.S. EPA. 2007a. Clean Air Markets Allowance Trading Web site.
U.S. EPA. 2007b. Clean Air Markets Cap and Trade Web site.
U.S. EPA. 2007c. eGRID Web site.
URL Address
http://www.synapse-
energy.com/Downloads/Sy
napsePresentation.2004-
OS.Emission-Reductions-
from-Efficiency-in-
Northeast.pdf
http://www.cacpsoftware.o
http://www.synapse-
energy.com/Downloads/Sv
napseReport.2005-
07.POA-EPA.Displaced-
Emissions-Renewables-
and-Efficiencv-EPA .04-
55.pdf
http://www.cec.org/pubs d
ocs/documents/index.cfm?
varlan=english&ID=1240

http://ies.lbl.gOv/iespubs/4
9945.pdf

http://www.eere.energv.go
v/wip/clean energy initiat
ive.html
http ://www .epa.gov/airmar
kets/trading/
http://www.epa.gov/airmar
kets/capandtrade/
http ://www .epa.gov/cleane
nergy/egrid.htm#about
                                   A-5

-------
A.5 TRANSMISSION AND DISTRIBUTION LOSS RESOURCE
                       Title/Description
     URL Address
Western Area Power Administration. 1988. Distribution System Loss
Evaluation Manual.
http: //www. wapa. gov/es/p
ubs/topic.htm#td
                                         A-6

-------
A.6 RESOURCES RELATING TO M&V AND EMISSIONS REDUCTION DOCUMENTATION
                         Title/Description
      URL Address
 American Petroleum Institute. 2003a. Compendium of Greenhouse Gas
 Emissions Estimation Methodologies for the Oil and Gas Industry.
http: //www .api. org/ehs/cli
mate/new/upload/2004  C
OMPENDIUM.pdf
 American Petroleum Institute. 2003b. SANGEA™ Energy and
 Emissions Estimating System 2.0 Web site.
http://ghg.api.org/
 Hall, D., et al. 1995. Air Pollution Impacts from Demand Side
 Management. Energy 20: Number 1: 27-33.
 Kline, D. and L. Vimmerstedt. 2003. Alternatives for Evaluating the
 Emissions Impacts of Energy Efficiency and Renewable Energy (EERE)
 Measures. Draft. National Renewable Energy Laboratory.
 Lazarus, M., S. Kartha, and S. Bernow. 2001. Project Baselines and
 Boundaries for Project-Based GHG Emission Reduction Trading: A
 Report to the Greenhouse Gas Emission Trading Pilot Program. Tellus
 Institute.
http: //www. ghgprotocol .or
g/DocRoot/GCudX4J3KL
BrGLxcE5NT/GERT Tell
us BB report.pdf
 Ontario Ministry of the Environment. 2005. Emission Reduction Credit
 creation, recording and transfer rules, rules for renewable energy projects
 and conservation projects, and rules for the operation of the Ontario
 Emissions Trading Registry. Ontario Emissions Trading Code.
http://www.ene.gov.on.ca/
programs/5295e.pdf
 Prototype Carbon Fund. 2000.  Baseline Methodologies for PCF
 Projects, PCF Implementation Note Number 3, Version of April 21,
 2000. Prepared for Carbon Offsets Unit, Environment Department,
 World Bank.
http: //carbonfinance. org/R
outer.cfm?Page=DocLib&
CatalogID=5 623 &zrzs= 1
 Schiller, S. 2006. Energy Efficiency as a Climate Change Mitigation
 Strategy. Prepared for ACEEE Summer Study.
http://www.schiller.eom/i
mages/schiller EE GHG
ACEEE.pdf
 Turner, W. C. and S. Doty. 2006. Energy Management Handbook, Sixth
 Edition. Fairmont Press.
 UNFCCC-CDM. 2005. Simplified Modalities and Procedures for Small-
 Scale COM Project Activities. Clean Development Mechanism
 Methodologies Panel.
http: //cdm .unfccc. int/Refer
ence/COPMOP/08a01.pdf
#page=43
 UNFCCC-CDM. 2006a. Approved methodology ACM0002:
 Consolidated methodology for grid-connected electricity generation
 from renewable sources.
http://cdm.unfccc.int/User
Management/File Storage/
CDMWF AM  BW759ID
5 8 ST5 YEEV6WUCN5 744
MN763
 UNFCCC-CDM. 2006b. Procedures for the Submission and
 Consideration of a Proposed New Methodology (Version 11). Clean
 Development Mechanism Methodologies Panel.
http: //cdm. unfccc. int/EB/
025/eb25 repanl7.pdf
                                          A-7

-------
UNFCCC-CDM. 2007. United Nations Framework Convention on
Climate Change - Clean Development Mechanism Web site.
http://cdm.unfccc.int
Vine, E. and J. Sathaye. 1999. Guidelines for the Monitoring,
Evaluation, Reporting, Verification, and Certification of Energy-
Efficiency Projects for Climate Change Mitigation. LBNL-41543.
Lawrence Berkeley National Laboratory.
http://ies.lbl.gOv/iespubs/4
1877.pdf
Vine, E., et al. 2003. International Greenhouse Gas Trading Programs: A
Discussion of Measurement and Accounting Issues. Energy Policy 31:
211-224.
Violette, D. 1998. Evaluating Greenhouse Gas Mitigation through DSM
Projects: Lessons Learned from DSM Evaluation in the United States.
Prepared for Carbon Offsets Unit, Environment Department, World
Bank.
Violette, D., C. Mudd, and M. Keneipp. 2000. An Initial View on
Methodologies for Emission Baseline- Case Study on Energy Efficiency.
Prepared for the International Energy Agency and the Organisation for
Economic Co-operation and Development.
http: //www .iea. org/textbas
e/papers/2000/eneffpdf
WRI and WBCSD. 2003. The Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard.
http://www.ghgprotocol.or
g/DocRoot/7e9ttsv 1 gVKe
kh7BFhqo/ghg-protocol-
revised.pdf
WRI and WBCSD. 2005 GHG Protocol For Project Accounting Web
site.
http: //www. ghgprotocol .or
g/templates/GHG5/layout.
asp?type=p&MenuId=OT
Ay&doQpen= 1 &ClickMe
nu=No
WRI and WBCSD. 2005b. Measurement and Estimation Uncertainty for
GHG Emissions.
http: //www. ghgprotocol .or
g/templates/GHG5/layout.
asp?tvpe=p&MenuId=OT
Ax&doOpen= 1 &ClickMe
nu=No
                                          A-8

-------
A.7 GENERAL ENERGY EFFICIENCY AND RENEWABLE ENERGY RESOURCES
Title/Description
American Council for an Energy-Efficient Economy
Consortium for Energy Efficiency
Department of Energy Efficiency and Renewable Energy
Best Practices Benchmarking for Energy Efficiency Programs
URL Address
http://www.aceee.org

http://www.cee 1 .org/
http://www.eere.energy.gov/

http ://www.eebestpractices .c
om/
Environmental Protection Agency & Department of Energy
ENERGY STAR
ENERGY STAR Portfolio Manager
Clean Energy Programs
http ://www.energystar. gov/
http://www.energystar.gOv/i
ndex. cfm ?c=e valuate_perfor
mance .bus_portfoliomanage
r
http://www.epa.gov/cleanen
ergv/index.htm

National Laboratories Energy Efficiency and Renewable Energy Programs
Lawrence Berkeley National Laboratory
National Renewable Energy Laboratory
Oak Ridge National Laboratory
http://eetd.lbl.gov/

http ://www .nrel . gov/
http://www.ornl.gov/sci/eere
/
                                 A-9

-------
A.8 REFERENCES
Title/Description
ASHRAE. 2002. Guideline 14-2002: Measurement of Energy and
Demand Savings.
California. 2000. Non-Residential Standard Performance Contract
Program Procedures Manual. Section III: Measurement and Verification
Guidelines.
California Measurement Advisory Council. 2007. CALifornia
Measurement Advisory Council (CALMAC) Database Web site.
California Public Utilities Commission. 2006. California Energy
Efficiency Evaluation Protocols: Technical, Methodological, and
Reporting Requirements for Evaluation Professionals.
California PUC - Database for Energy Efficient Resources (DEER)
Consortium for Energy Efficiency. 2007. Market Assessment and
Program Evaluation (MAPE) Clearinghouse.
EVO. 2007. International Performance Measurement and Verification
Protocol Web site.
ENERGY STAR. 2007. Portfolio Manager Overview Web site.
F-Chart. 2005. F-Chart Software Web site.
Hawaii. 1998. Guide to Energy Performance Contracting. Department of
Business, Economic Development, and Tourism.
ICLEI. 2003. The Cities for Climate Protection Greenhouse Gas
Emissions Software.
Inter-laboratory Working Group. 2000. Scenarios for a Clean Energy
URL Address

http://www.pge.com/docs/
pdfs/biz/rebate s/spc contr
acts/2000 on_peak incent
ive/III-m&v.pdf

http://www.calmac.org

http://www.calmac.org/eve
nts/EvaluatorsProtocols Fi
nal AdoptedviaRuling 06
-19-2006.pdf

http://eega.cpuc.ca.gov/de
er/
http://www.cee 1 .org/eval/c
learinghouse .php3
http://www.evo-
world.org/index.php?optio
n=com content&task=vie
w&id=61&Itemid=80
http://www.energystar.gov
/index.cfm?c=evaluate_per
formance .bus_portfolioma
nager
http : //www . fchart . com/
http://www.hawaii.gov/db
edt/info/energy/efficiencv/
state/performance/epc.pdf
http://www.cacpsoftware.o
rg/
http://www.ornl.gov/sci/ee
                                    A-10

-------
Future. Oak Ridge National Laboratory and Lawrence Berkeley National
Laboratory. ORNL/CON-476 and LBNL-44029.
IPMVP. 2002. Concepts and Options for Determining Energy and Water
Savings, Volume I, Revised. DOE/GO-102002-1554.
IPMVP. 2003. Concepts and Practices for Determining Energy Savings
in Renewable Energy Technologies Applications, Volume III.
IPMVP. 2006. Concepts and Options for Determining Energy Savings in
New Construction, Volume III, Part 1 .
ISO-NE. 2007. ISO - New England Web site.
Jacobson, D., et al. 2006. Final Report on the Clean Energy/Air Quality
Integration Initiative Pilot Project of the U.S. Department of Energy's
Mid-Atlantic Regional Office. Prepared for U.S. DOE, DOE/GO-
102006-2354.
Keith, G. and B. Biewald. 2005. Methods for Estimating Emissions
Avoided by Renewable Energy and Energy Efficiency, Final Draft.
Synapse Energy Economics. Prepared for U.S. EPA. NREL/TR710-
37721.
Keith, G., D. White, and M. Ramiro. 2003. The OTC Emission
Reduction Workbook 2.1: Description and User's Manual. Synapse
Energy Economics.
NYSERDA. 2003. New York State Energy Research and Development
Authority (NYSERDA) Standard Performance Contracting Program
Measurement and Verification Guideline.
Oncor. 2003 . Measurement and Verification Guidelines.
Texas SECO. 2007. LoanSTAR Technical Guidelines Web site.
U.S. DOE. 2000a. FEMP M&V Requirements Checklist. Draft.
U.S. DOE. 2000b. Measurement and Verification for Federal Energy
Projects, Version 2.2. DOE/GO-102000-0960.
U.S. DOE. 2002. Detailed Guidelines for FEMP M&V Option A.
U.S. DOE. 2003. Measurement & Verification Resources and Training
Opportunities, Revision 5.
re/cef/
http://www.nrel.gOv/docs/f
v02osti/3 15 05.pdf


http://www.iso-ne.com

http://www.eere.energy.go
v/wip/clean_energy_initiat
ive.html
http://www. synapse-
energy . com/Downloads/Sy
napseReport.2005-
07.POA-EPA.DisDlaced-
Emissions-Renewables-
and-Efficiencv-EPA.04-
55.pdf
http://www.cec.org/pubs d
ocs/documents/index.cfm?
varlan=english&ID= 1 240

http://www.nyserda.org/pr
ograms/Commercial Indus
trial/cipp.asp?i=PON

http://www.oncorgroup.co
m/electricitv/teem/default.
asp
http://www.seco.cpa.state.t
x.us/ls guideline.htm

http://ateam.lbl.gov/mv/do
cs/checklist.pdf
http://ateam.lbl.gov/mv/do
cs/26265.pdf
http://ateam.lbl.gov/mv/do
cs/OptionADetailedGuidel
ines.pdf
http://ateam.lbl.gov/mv/do
cs/OptionADetailedGuidel
A-11

-------
U.S. DOE. 2007. DOE-2.1E Software Web site.
http://simulationresearch.^
bl.gov/
U.S. EPA. 1995. Conservation Verification Protocols, Version 2.0. EPA
430/B-95-012.
U.S. EPA. 1999. Guidance on Establishing an Energy Efficiency and
Renewable Energy (EE/RE) Set-Aside in the NOX Budget Trading
Program, Volume 1.
http://www.epa.gov/cleane
nergy/pdf/ee-re_set-
asides voll.pdf
U.S. EPA. 2004. Guidance on State Implementation Plan (SIP) Credits
for Emission Reductions from Electric-sector Energy Efficiency and
Renewable Energy Measures.
http ://www. epa. gov/ttn/oar
pg/tl/memoranda/ereseere
m gd.pdf
U.S. EPA. 2005. State Set-Aside Programs for Energy Efficiency and
Renewable Energy Projects Under the NOX Budget Trading Program: A
Review of Programs in Indiana, Maryland, Massachusetts, Missouri,
New Jersey, New York, and Ohio. Draft Report.
http://www.epa.gov/cleane
nergy/pdf/eere  rpt.pdf
U.S. EPA. 2007. eGRID Web site.
http://www.epa.gov/cleane
nergy/egrid.htm#about
Vine, E. and J. Sathaye. 1999. Guidelines for the Monitoring,
Evaluation, Reporting, Verification, and Certification of Energy-
Efficiency Projects for Climate Change Mitigation. LBNL-41543.
Lawrence Berkeley National Laboratory.
http://ies.lbl.gOv/iespubs/4
1877.pdf
WRI and WBCSD. 2005a. GHG Protocol For Project Accounting Web
site.
http ://www. ghgprotocol. or
g/templates/GHG5/layout.
asp?tvpe=p&MenuId=OT
Ay&doQpen= 1 &ClickMe
nu=No
WRI and WBCSD. 2005b. Measurement and Estimation Uncertainty for
GHG Emissions.
http ://www. ghgprotocol. or
g/templates/GHG5/layout.
asp?type=p&MenuId=OT
Ax&doQpen= 1 &ClickMe
nu=No
                                          A-12

-------
A-13

-------