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Investor Confidence Project – Inoculation Against Hucksters

By September 6, 2016November 7th, 2021Energy Rant

Led by the Environmental Defense Fund, the Investor Confidence Project (ICP) provides a platform of quality assurance checks and balances for energy efficiency project developers, quality assurance providers, investors (lending companies), and building owners. It could be the greatest mechanism for deep and wide energy savings since the T8 light bulb.

I was first introduced to the Investor Confidence Project as I was reviewing abstracts for AESP’s 2016 Spring Conference in Philadelphia. The following snippets are from the abstract summary.

There are many investors and tons of capital waiting to be poured into energy efficiency projects. The problem is that projects are not underwritten based on performance, due to lack of confidence in savings projects and savings realization. This presentation will provide an overview of what is wrong with energy efficiency retrofit projects, and how the Environmental Defense Fund’s Investor Confidence Project is trying to bring standardization to energy efficiency project development, to increase confidence in energy savings that are actually realized and persist over time.

I know the man behind this abstract and presentation, Tracy Phillips. He is one of the wisest guys I know in the categories of understanding how buildings work and use energy, and where and how projects go in the ditch and fail. Although I didn’t need to, I was ready to fight to the death to get this presentation into the conference. Thank you, committee comrades for sparing me any wounds.

What is Wrong with Energy Efficiency Retrofit Projects?

Lighting is pretty hard to screw up. Back in my day of energy efficiency feasibility studies, the standard T12 lighting fixture would be retrofitted with T8 lamps and electronic ballasts, reducing fixture input Wattage from 72 to 51 Watts[1]. Customers are going to see the energy savings and demand savings in nearly all cases. Slam dunk. However, retrofitting an entire facility’s lighting might cut bills by only 10%, tops.

Practically everything else, probably 20-30% savings potential, has been stranded and is ready to be harvested. The problem is vendors and contractors are in business to sell stuff and move on to the next project. They don’t understand systemic energy use, the impacts of wasteful control sequences, and interactions with other systems. It isn’t their problem.

Unfortunately, it is the owner’s problem, and they don’t know it. Nobody follows up. Nobody sees that utility bills have shrunk by 12% (for example), as predicted. The result is financing energy efficiency projects is the same as financing an IT infrastructure project. It costs a lot to install and once installed, is worth 10 cents on the dollar because it’s of little value to anyone else. Thus, lending costs are high.

For additional snafus associated with performance contracts, which advertise measurement and verification, see Performance Contracting – Getting it Right. It just so happens that the Investor Confidence Project obviates the issues discussed in that post.

The other big thing that is wrong with large commercial and industrial efficiency projects is that project details are all stuffed behind the curtain of the great huckster. Contracts typically say here are your annual savings and here are your payments. Sign here. What costs, loadings, interest rates are in those numbers? Probably the maximum amount the savings will carry, if it’s a large performance contract.

Project Development Specification

The ICP provides a 67 page Project Development Specification, which I like very much because it documents the way we develop projects anyway. It reminds me of when the International Performance Measurement and Verification Protocol (IPMVP if that rings a bell) rolled onto the scene some twenty years ago. Thank you for documenting protocols for verifying and measuring energy impacts!

Note that protocols and doing things right are not synonymous. For example, it is quite easy to claim and document a partially measured retrofit isolation, whole building analysis, or complete energy simulation. It is not easy to do them right, and that is where the next piece, Performance Verification, enters.

Performance Verification

Perhaps as important as the Project Development Specification, ICP requires independent post implementation performance verification, documentation for operations and maintenance, and of course, measurement and verification via IPMVP.

I can’t help but point out that this entire method is the same as Michaels’ methodology for retro-commissioning programs, developed in 2008, six years before ICP. The ultimate metrics of performance include billing analysis and persistence. Do the energy bills decline as projected, and do they stay low? Steps:

  • Develop (study)
  • Specify (specifications and control sequences)
  • Implement
  • Test
  • Provide O&M documents and train customer staff
  • Watch the savings pile up

And Finally, Confidence

The final benefit of ICP is in the three words of the title itself, and it is just that. In this case, investors include lending institutions, and borrowing facility owners and managers. The ICP process delivers Investor Ready Energy EfficiencyTM projects for lending institutions to provide favorable financing.

  • Faster underwriting
  • Performance-enhanced investment structures
  • Lower fees
  • Better rates and terms

For the ultimate investors (building owners/managers), ICP delivers:

  • Sound protocols and processes they don’t need to learn
  • Credentialed providers (licensed Professional Engineers) for both project development and verification
  • Independent review, like I had back in my early days doing investment-grade studies
  • Lower cost via lower fees and rates

[1] See this if you need a refresher on tubular fluorescent lighting.

Jeff Ihnen

Author Jeff Ihnen

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Join the discussion One Comment

  • Alright Jeff, that’s twice now that I’ve read through your entire blog and really, really liked it!

    FYI we’re involved in adapting ICP for Canada. A great enabler, indeed.

    Keep up the great work and infectious dedication!

    – Philippe

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