EC - Changing One's Baseline Year within Cost Avoidance
Posted by Joel Brickell on 26 March 2018 08:40 AM
Advancing the Baseline Year
Cost avoidance reports and charts show the avoided cost and use for the “performance” period vs. the “wasteful” baseline year. The performance period is the months and years following the implementation of energy (and perhaps water) conservation measures and is often called the performance period because cost avoidance is being calculated and reported to measure the performance of a conservation plan, initiative, contract, retrofit project or management directive. These are commonly called “ECMs - energy conservations measures” or “EPIAs – energy performance improvement actions”; we’ll use the ECMs terminology.
ECMs typically have a defined contract period, project life, or amortization period. For example, a contractor may be hired for a five-year conservation program, a lighting retrofit may be installed that has a seven-year amortization, and a governor’s executive order may mandate a 2% reduction over 10 years. In all of these cases, the “wasteful” baseline year would normally be set to the 12 -month period immediately preceding the initiative go-live date (the “savings start date”) and the performance period is defined as the five, seven or ten years following the savings start date.
But what happens at the end of the performance period? You would certainly run “final” cost avoidance reports to document the total ECM cost and use avoidance over the entire performance period, but now what? Continue forward as is, using the same baseline period, or advance the baseline to a more recent year? Here are the considerations for each case:
Yes – Advance the Baseline
- The baseline year was 6, 8 or even 10+ years ago. A lot has changed in the buildings since then – HVAC equipment, occupancy, hours, plug loads. A baseline update will give us a better idea going forward of how well we are maintaining our current level of efficiency and hopefully even gaining deeper savings.
- By advancing the baseline to a recent year, many of the Special Adjustments we’ve created to adjust the old baseline to current conditions can be deleted because they will no longer apply. Calculations will be simplified and easier to validate.
- Cost avoidance reports will be more relevant because they will answer the question “what have you done for me lately?”
No – Retain the Original Baseline
- Cost avoidance reports and on-screen charts have no mechanism to add the avoidance from a prior “closed” performance period to a new current performance period, so the savings from the original performance period will not be shown in EnergyCAP. The school board or state energy office or sustainability council is used to seeing cumulative cost avoidance reports of $5 million. When we advance the baseline, this will drop to zero initially and may take the focus off of our long-term energy conservation successes. We can get around that in a few ways (adding an ancillary slide or report to our presentations that shows prior period savings or adding a textbox widget in an EnergyCAP dashboard that shows prior period savings) but each approach has some drawbacks.
- Because the ECMs are now stable, we can say we’re in a maintenance mode, maintaining the current level of performance but without a lot of opportunities to go deeper. That means that today vs. a recent baseline will show small additional savings at best, maybe even slight losses. It’s useful to spot losses and address any slipups, but as mentioned above, management is used to seeing savings of 20% or more. Now they’ll see savings of maybe 2%, and perhaps less or even negative, which we’ll have to constantly explain and justify.
- The meter-by-meter weather model (Use vs. Weather) “tuning” (selecting the most appropriate degree day balance point temperature, manually deleting non-representative data points, sometimes adding one or two prior years for a better statistical model) was done by an experienced M&V practitioner. If we advance the base year to a different year, each meter’s weather model will change and, for best results, should be re-tuned. We lack the expertise to accomplish this accurately.
- The Special Adjustments in EnergyCAP were created by a highly experienced mechanical engineer consultant using sophisticated building analysis and simulation tools. That’s way above our skill level and capability, so we have no way to know which Special Adjustments should be left as is, which need to be modified and which can be deleted, all issues that a baseline advancement will require. We prefer not to touch these.
The bottom line – you need to decide which case above most closely fits your particular situation. As a general recommendation, advancing the baseline is recommended after eight to ten years when: (1) an experienced M&V practitioner** is available to perform the high skill tasks of tuning meter weather models and resetting all Special Adjustments for every meter, and (2) both upper management and the entire cost avoidance report “audience” understand that prior performance period use and cost avoidance have been captured as a snapshot and now all reports are reset to a new baseline, resulting in starting over again from zero for the new performance period.
**Note: Routine technical support services do not include M&V practitioner services.**
Written by Steve Heinz, CEO/Founder of EnergyCAP, Inc.