Commercial Custom Incremental Measure Cost Study

Transcription

1 Commercial Custom Incremental Measure Cost Study November 5, 2014 Submitted by: TRC Energy Services 505 Sansome Street Suite #1600 San Francisco, CA Phone: (415) Fax: (415) E mail: CSnaith@trcsolutions.com Submitted to: Mike Ting Principal Consultant Consulting & Analysis Group Itron, Inc 1111 Broadway, Suite 1800 Oakland, CA Phone: (510) Cost Analysis and Recommendations Report

2 Contents 1. Executive Summary... 1 Introduction... 1 Observations and Findings... 1 Recommendations CCMCS Background CCMCS Detailed Project Review Methodology... 3 Measure Group Selection... 4 Detailed Project Review... 6 Limitations Findings of the Detailed Project Reviews... 9 Interior Florescent Lighting: Reduced Wattage T HVAC Rooftop or Split System: Package Unit Other HVAC Controls: Install New DDC Measure Findings IOU Perspective on Commercial Custom Incremental Costs Pacific Gas & Electric IMCS Comments Southern California Edison IMCS Comments Southern California Gas IMCS Comments San Diego Gas & Electric IMCS Comments Professional Cost Estimator Perspective on Incremental Costs Conclusions and Recommendations Observations, Issues, & Recommendations for Existing Program Cost Reporting Recommended Options for Developing Incremental Costs Commercial Custom Incremental Measure Cost Study TRC Energy Services i

3 1. Executive Summary Introduction The California Public Utilities Commission (CPUC) seeks to identify a standardized baseline and incremental cost basis for common building retrofit measures. Ultimately, such information would enable transparent project costing among all involved parties and produce defensible ex ante measure cost estimates for use in the CPUC s ex ante activities. Itron, on behalf of the CPUC, contracted TRC Energy Services (TRC) formerly EMCOR Energy Services (TRC) to develop methods, analytic tools, and recommendations to support the standardization of exante baseline and incremental costs for calculated incentive measures in commercial custom retrofit projects. TRC s ultimate goal was to develop, if possible, a calculation methodology to estimate baseline and incremental costs for common California commercial retrofits projects. Ideally, the numerical cost results would be based on indicative project units (e.g. quantity of units, lamp type, motor size, tons, etc.) and qualitative project information (e.g. difficulty, comprehensiveness, market sector, etc.). Regardless of the success of a numerical result, a set of recommendations based on the research, observations, and findings would be provided for the CPUC and investor owned utilities (IOUs) to improve project reporting for future use and analysis. TRC has access to an internal database of more than 400 custom commercial retrofit projects, completed under California IOUs incentive programs, dating back to Records from the years 2010 through 2013 were used to form the basis of this study. To further our understanding of the challenges and opportunities surrounding incremental measure costs, TRC participated in interviews with staff from Pacific Gas & Electric, Southern California Edison, Sothern California Gas, and San Diego Gas & Electric. During these interviews, TRC gained valuable insight into how the IOUs have risen to the challenge of determining incremental costs. They also provided thoughts on long term solutions. The interviews revealed common concerns shared by the IOUs no doubt a result of their continual assessment of incremental costs coupled with regular communication amongst the IOUs. We tempered our intimate perspective on the commercial custom program by drawing in a professional cost estimating group with less direct experience with the CA IOU incentive programs. Through this interview we gained an insight into the use and determination of incremental cost in the broader construction market. Observations and Findings Review and analysis of the CPUC s Energy Division (ED) project database and the TRC internal project database revealed that the Interior Florescent Light: Reduced Wattage T8 measure is the highest frequency retrofit measure in the custom commercial incentive programs. HVAC Controls: New DDC measures and HVAC Rooftop: Package Unit measures followed closely. These three measures were included in the measure cost study based on their large contribution to statewide savings and their distinctly different approaches to energy conservation retrofits. IOU interviews corroborated these findings and reinforce the measure group selection. Detailed project file reviews were performed on 56 projects across the selected measure categories. Most significantly, it was discovered that most projects lacked sufficient cost detail to accurately derive Commercial Custom Incremental Measure Cost Study TRC Energy Services 1

4 individual measure costs let alone incremental costs. Rarely were costs split between material and labor and often projects consisted of multiple measures. It was assumed that the Florescent Lighting measure group would easily yield cost calculations and numerical cost results; however, the lack of detailed cost data provided by customers prevented such analysis. Although our analysis did not result in a cost calculation, it did reveal a significant issue with Custom Florescent Lighting projects; all of the custom projects included measures that could have been included in a deemed program. In an extreme case, nearly the entire project could have been considered deemed. As with Florescent Lighting, the lack of detailed cost data prevented isolation of specific costs associated with HVAC Rooftop: Package Unit measures. HVAC Rooftop projects were also found to contain varied individual measures and were frequently bundled to include multiple measure. Often the projects contained multiple HVAC (non package unit) measures. In fact, DDC measures were most commonly implemented in association with package unit measures. Control measures integrate so seamlessly with package unit measures that deriving distinct measure costs for material and, especially, labor was not possible. Surprisingly, the HVAC Controls: DDC measure group has excellent potential to produce numerical cost data. When the projects scope was limited strictly to DDC measures and the number of points were provided, reasonable cost numbers could be easily extracted. DDC projects, however as mentioned above, are often combined with other HVAC measures and it becomes difficult to isolate costs specific to the DDC portion of the project. Recommendations The lack of detailed cost data severely limited our ability to derive standardized baselines and incremental costs. In order to obtain better cost information, the incentive programs require a basic change. For existing and new programs, include a requirement that all incentive claims include measureby measure cost reporting on detailed invoices. It is critical that the requirement be made clear to the customer on applications and during the project application (PA) approval. Cost data requirements can be easily pushed down to the installation contactor, if costs are known prior to the customer retaining the installation contractor. A statement should be provided to customers during the PA approval that outlines exactly what is needed. That statement could/should get passed verbatim to the installation contractor. Additional recommendations to improve cost reporting for specific measures are provided in the Conclusions and Recommendations section. With clear invoices available to the reviewers, IOU, and ED, a number of options are available for the determination of incremental costs. This study identifies three primary options that require various level of reporting detail and an additional option to combine all into a flexible program with a sliding incentive scale: Establish Standard Incremental Costs Adjust Itemized Invoice to Develop Baseline Costs Require Bids with Baseline & Proposed Project Options Establish a Continuum of Incentives Based on Reporting Quality Commercial Custom Incremental Measure Cost Study TRC Energy Services 2

5 Figure 1: TRC Recommendations Recommendations Pro Con Establish Standard Incremental Costs Detailed invoice not required. Standard can be applied across the state regardless of location, market sector, or project complexity. Data not currently available for all equipment. Penalizes higher cost equipment. Does not adjust for variation in labor costs. Customer Burden None CPUC / IOU Burden Moderate Adjust Itemized Invoice to Develop Baseline Costs Adjusts for actual project equipment cost. Easy adjustments. Requires itemized invoices. Does not adjust for variation in labor costs. Minimal Minimal Require Bids with Baseline & Proposed Project Options Best way to obtain increment costs. Developed by contractor. Adjusts for variation in labor costs. Needs to be requested when bidding / negotiating Moderate None Establish a Continuum of Incentives Based on Reporting Quality Freedom to provide any level of documentation. Additional program administration Various High 2. CCMCS Background TRC was contracted to recommend best practices and standards for developing incremental costs for California commercial retrofits projects. Our ultimate goal was to develop, if possible, a calculation methodology to estimate baseline and incremental costs for common California commercial retrofit projects. As a technical review firm for both Pacific Gas and Electric (PG&E) and Southern California Edison (SCE), TRC has access to an internal database of more than 400 California commercial custom retrofit projects dating back to Our complete records include over 1,500 projects dating back to It was assumed that a detailed review of projects within an individual measure type would allow TRC to develop an associated baseline and incremental cost. Furthermore, it was assumed these numerical results could be scaled based on indicative project units (e.g. quantity of units, lamp type, motor size, tons, etc.) and qualitative project information (e.g. difficulty, comprehensiveness, market sector, etc.). The research used to develop numerical results for specific measures, provided a basis to develop a more general set of recommend best practices and standards for developing incremental costs in the custom project process. To further our understanding of the challenges and opportunities surrounding incremental measure costs, we performed interviews with the California Investor Owned Utilities (IOUs). These IOU interviews, combined with our own experiences interfacing with customers during the incentive process, provided an excellent overarching perspective on incremental cost. By drawing in professional cost estimating groups with less direct experience with the CA IOU incentive programs, we tempered our intimate perspective and gained a broader insight into the market. 3. CCMCS Detailed Project Review Methodology The first step in performing detailed project reviews was to identifying high frequency and high impact (HFI) commercial custom retrofit (CCR) measures. These measures are frequently installed by utility customers and generally represent a large portion of utility savings included in IOU incentive programs. Commercial Custom Incremental Measure Cost Study TRC Energy Services 3

6 After the HFI measures were identified, individual past projects that contained these measures were selected for detailed review so TRC could assess installed measure costs and installation specifics. Please note that the terms, measure groups, measures, and projects, are used throughout this study. These terms are related, however, there are differences between these three terms. Measures are specific technologies, measure groups are a collection of various related measures, and projects are submitted applications, which may have multiple measures. Measure Group Selection Two main data sources contributed to identifying high frequency and high impact commercial custom retrofit measures. The first source was an extract from the CPUC project tracking database, which was utilized to determine the overall HFI measure groups. The second source was our internal database of PG&E technical reviews of custom retrofit projects, which was utilized to generate a breakdown of technologies (specific measures) within the comprehensive IOU measure groups. CPUC Database The following methodology was used to identify HFI CCR measure groups in the CPUC database: 1. The data set was concentrated and refined to focus on applicable commercial retrofits. Therefore, sunset measures (T12 retrofits, Server Virtualizations, etc), new construction, residential, manufacturing facilities were filtered out and not included in the analysis. The program names, as well as the measure name and type of building, were used to identify noncommercial retrofits. 2. A pivot table was created to determine the frequency of the measure groups. Important measure group information in the pivot table included the number of times the measure group appeared in the CPUC database; the sum of incentive; the sum of measure cost; the sum of kw savings; the sum of kwh savings; and the sum of therm savings. 3. From the pivot table, the frequency of the various measure groups were sorted from highest to lowest and a graph of the frequency values were created to estimate a cut off point of measure groups to consider (see Figure 2). It was seen that measure groups with a frequency greater than 20 were a distinct high volume grouping, so the cut off point was selected to include these 27 measure groups Figure 2. Graph of frequency of the different measure groups Frequency Measure Groups Commercial Custom Incremental Measure Cost Study TRC Energy Services 4

7 4. These 27 measure groups were individually ranked based on frequency of occurrence, incentive amount, kwh savings, therm savings, BTU savings, effectiveness (measure cost/total kbtu of savings) kwh effectiveness (measure cost/kwh of savings), and therm effectiveness (measure cost/therms of savings). 5. The rankings were then placed into a summary table with weighting factors and scores generated for each measure group. Weight factors were assumed based on the reliability of the data and minimizing double counting. The generated scores were the sum of the products of the weight factors and individual rankings. Overall rankings were sorted from lowest (best) to highest (worst) based on the scores received (see Figure 3). Figure 3: Table of rankings to determine the top high frequency, high impact measure groups. Row Labels Rank Score Lighting Indoor Linear Fluorescent Freq Rank Incent Rank kwh Rank Therm Rank kbtu Eff Rank kwh Eff rank Therm Eff rank HVAC Controls EMS Lighting Indoor Other Process Other HVAC Rooftop or Split System Lighting Outdoor Linear Fluorescent HVAC Chiller Water Cooled Refrigeration Other HVAC Controls Other Lighting Outdoor HID HVAC Chiller Other HVAC Fan VFD HVAC Pump VFD Note: Grayed measure groups were removed from consideration since they overlapped with their industrial sector research. 6. Final selection of HFI CCR measure groups were based on a high level sensitivity analysis of six reasonable permutations of the weighting factors (see Figure 4). From this analysis, it was seen that the following measure groups always landed in the top measures: Lighting Indoor Linear Fluorescent Lighting Outdoor Linear Fluorescent Lighting Indoor Other HVAC Rooftop or Split System HVAC Chiller Water Cooled HVAC Controls EMS HVAC Controls Other Commercial Custom Incremental Measure Cost Study TRC Energy Services 5

8 Figure 4: Weighting factor permutations for sensitivity analysis Weighting Factors Freq Rank 100% 100% 100% 100% 100% 100% Incent Rank 100% 100% 100% 100% 100% 0% Effect Rank 100% 0% 0% 0% 0% 0% kwh eff rank 100% 100% 100% 50% 50% 50% therm eff rank 100% 100% 100% 50% 50% 50% kwh Rank 100% 100% 0% 0% 0% 0% therm Rank 100% 100% 0% 0% 100% 0% TRC Database Utilizing TRC s database of PG&E CCR projects, the following methodology was used to identify the individual measures (specific technologies) that comprise the HFI CCR measure groups: 1. The TRC internal database was filtered for measures pertaining to commercial custom retrofits. 2. Based on the structure of the TRC database, measure codes were easily accessible and were used to determine the individual measures within the measure groupings. 3. The individual measure occurrence in the market is assumed to match the occurrence in the TRC database. 4. To perform a high level comparison, totals from the IOU measure groups were distributed to the individual measures based solely on frequency in the TRC database. From the top HFI CCR measure groups and individual measures, the following measures were selected to receive detailed analyzes: Interior Florescent Lighting: Reduced Wattage T8, HVAC Rooftop: Package Units Other, and HVAC Controls: New DDC. The following lists a few reasons why these measures were selected: Lighting Indoor Linear Fluorescent: Reduced Wattage T8 There is a high prevalence of indoor fluorescent lighting in the TRC database compared to other measures which gives us confidence that this HFI CCR measure is the highest total energy saver with the greatest total cost. This measure is also often paired with the Lighting Indoor Other Occupancy Sensors measure, which allows us to streamline potential future work. HVAC Rooftop: Package Units Other This HFI CCR measure consistently appeared in the top 10 measures of the sensitivity analysis. This measure is one of the top HVAC energy savers with one of the highest total costs. HVAC Controls: New DDC This measure accounts for the most energy savings of all nonlighting measures, though with less cost than Package Units Other. It is distinctly different in its approach to energy savings. Detailed Project Review Interior Linear Fluorescent Lighting was the largest commercial custom retrofit measure group in terms measure cost, electricity savings, and IOU incentives. Within this measure group, the measure Reduced Wattage T8 was the most frequently installed technology. Given the density of the projects available, the most robust analysis was done for this group. The most common non lighting retrofits are DDC controls and Package Units. Commercial Custom Incremental Measure Cost Study TRC Energy Services 6

9 TRC performs technical due diligence reviews on behalf of PG&E and SCE. Preliminary review of TRC s internal database indicated a database sufficient to perform the analysis without additional files. However after a detailed evaluation, TRC found the majority of the projects concentrated in a single market sector and a single IOU. To supplement and diversify the custom analysis, a broad request for additional project files were requested through contract channels. At first, only interior lighting was requested since it was the primary area of study; once analysis began on the other HFI measures, an additional data request was issued. Only additional lighting projects were received. Only project records from the program years 2010 through 2013 were used to form the basis of this study. Detailed project file reviews were performed on 56 projects across the selected measure categories. These reviews covered 12% of our Reduced Wattage T8 measures, 50% of our Package Units Other measures, and 53% of our New DDC measures. For each project, we assigned a project ID to preserve the confidentiality of the customer, reviewed the due diligence files, and captured project details including: Electricity, demand, and therm savings Installed measure costs Incentive amounts Ex ante conditions Ex post conditions Magnitude and difficulty of the scope of work Project baseline scopes of work from which incentives would be judged Energy efficiency incentive applications are generally processed and categorized by the IOUs in two ways: 1) the savings and costs are well known, repeatable, and included in the deemed program; 2) the project savings and costs are variable and require custom design and/or analysis. However, there is also a middle ground where projects (or portions of a project) that could be deemed are processed through a custom analysis. Vice versa is never seen because of 1) the rigid deemed program rules and 2) the custom incentive is typically greater than the deemed rebate. Figure 5 below depicts the shared measures in project applications. Figure 5: Venn diagram depicting a generic overlap of shared measures in project applications. Deemed Projects Custom Projects Project scopes of work were analyzed to determine if the measure qualified for the deemed rebate program or the customized incentive program. Overlap was a non issue for the HVAC Rooftop and HVAC Controls measures. However, for lighting measures all reviewed projects were found to contain Commercial Custom Incremental Measure Cost Study TRC Energy Services 7

10 retrofit measures included in the deemed program. These projects were further assessed to identify the following: 1. Under what provisions were deemed eligible measures accepted into the custom program? 2. What segment (type) of individual projects qualified as deemed and what are the associated kw savings, kwh savings, therm savings, and incentives? 3. What percentages of the project (number of fixtures) were considered deemed and custom? 4. What are the actual kwh savings, kw savings, therm savings, and incentives if the project was split between custom and deemed? 5. Based on Itron s Deemed Measure Cost Study (performed in parallel with this study), what would be the associated cost of the deemed portion of the project scope? 6. What would be the associated cost of the custom portion of the project scope, if the assumed deemed costs was subtracted from the submitted total cost? 7. What was the baseline scope for the custom portion of the project? 8. What project cost data are available in the review files (what elements are provided)? Limitations Overall, the methodology outlined above worked well for general analysis. There were, however, obstacles hindering isolation of true custom incremental costs. The most basic issue was the limited detail of costing information in the datasets. Separating costs not just by technology (e.g. DDC upgrade vs Package unit replacement), but by measure type (e.g. 5 ton unit replacement vs 20 ton unit replacement) was rarely possible. TRC reasoned that analysis of additional records would not change the findings since the overwhelming trend was a lack of resolution in the cost data. Also, due to the overlap between the deemed and custom programs, there are significant barriers to obtaining the incremental cost of the truly custom eligible portion. Figure 6 illustrates the various components of the full project cost. Figure 6: Breakdown of costs in commercial customized retrofit project applications. Custom Materials Deemed Materials Custom Projects Custom Labor Deemed Labor Commercial Custom Incremental Measure Cost Study TRC Energy Services 8

11 4. Findings of the Detailed Project Reviews Interior Florescent Lighting: Reduced Wattage T8 Projects and Scopes Twelve project applications installed across different IOUs and market sectors were randomly selected and reviewed in detail as part of this study. All projects sampled contained a subset of measures that qualified for the deemed Program. Overall, approximately 50% of retrofitted fixtures were considered to be deemed measures. Individually, projects ranged from 33% to 99% of the measures qualifying for deemed rebates. The resources used to identify deemed measures were the PG&E Lighting Rebate Catalog 1, SCE Solutions Directory 2, and SDG&E Energy Efficiency Business Rebates Lighting Catalog 3. The specific resource used was dictated by the IOU s service territory where the project was implemented. It is worth noting that the deemed lighting measures were not the same across the IOUs and sometimes they had different stipulations for similar, eligible measures. TRC noticed that in some projects one measure code interior linear fluorescent in particular was selected for the review even though the project scope included exterior lighting, controls, and other lighting technologies. With the volume of line by line lighting audit calculations in some project applications, this simplification is understandable and the project sponsor and technical reviewer chose a single code that best fit a majority of the measures. This, however, severely hampered cost isolation because a single measure cost had been approved. Out of the reviewed project applications, the most common deemed measures were: Installation of a 1 lamp or 2 lamp high performance T5 or T8 linear fluorescent fixture or retrofit kit with advanced optical design and T5 ballast or high efficiency T8 ballast (PG&E Lighting Rebate Catalog 1 ). Installation of 4 foot low wattage T8 lamps that replace 32 watt T8 lamps. (PG&E Lighting Rebate Catalog 1 ). Many measures were not considered deemed due to one or more of the following reasons: The measure contained a different quantity of lamps in high performance T5/T8 new or retrofit kit installations than the specified amount in the deemed program. Three and four lamp fixtures were not included and were considered to be custom measures. For deemed lamp retrofits, the requisite lamp length was four feet. Many lamp retrofits were not. Although exterior photocells were considered deemed, interior photocells were not. 1 PG&E Lighting Rebate Catalog _final.pdf 2 SCE Solutions Directory 40af 4cd2 81a1 1abaf09e118b/Solutions%2BDirectory%2BQ1%2B2013a.pdf?MOD=AJPERES 3 SDG&E Energy Efficiency Business Rebates Lighting Catalog 20Catalog.pdf?nid=4006 Commercial Custom Incremental Measure Cost Study TRC Energy Services 9

12 For some deemed measures, existing lamps were required to be T8 technology. T12 existing technology did not qualify under some of the deemed retrofit measures 4. Existing high intensity discharge (HID) or metal halide (MH) technology switching to linear fluorescent technology measures were not included in the deemed program. Under the deemed program, there were strict requirements for compact fluorescent lights (CLF). CFLs that did not have a reflector and CFLs that were not screw in were not considered. While bi level dimming was included under the deemed program, the minimum lighting output setting requirement was 35%. Bi level dimming not set to 35% of the lighting output was not included. In some of the deemed programs, there were requirements for lamp wattages for HID or MH retrofits. Many of the lighting measures were outside of the requirement for lamp wattages in both existing and installed cases. To analyze the sample projects, two spreadsheets were created to capture the available relevant data. The first spreadsheet contained all of the project related information, such as savings and scope of the project. Qualitative information was also recorded, such as availability of cost information and potential reasons for the application being accepted into the Commercial Customized Retrofit Program. The second spreadsheet analyzed the assumed costs of the deemed portion of the scope and attempted to extract reasonable custom costs. The second spreadsheet is discussed in detail in the Results section. The details from the first spreadsheet are compiled in Figure 7 through Figure 11. Listed in Figure 7 (on the next page) are the reasons why some of the lighting measures for each sampled project required a custom application (i.e. did not fit into the deemed program). Note that the three top reasons the measures were custom include: Specific lamp lengths different than deemed. T12 existing technology not a deemed based condition. New/retrofit kits with 3 or 4 lamps are not listed in the deemed Program guides. 4 As of 12/31/2012, a T12 baseline no longer qualifies for incentives in any IOU program Commercial Custom Incremental Measure Cost Study TRC Energy Services 10

13 Figure 7: Reasons for the lighting measures to be classified as custom project. Representative Reason 2 for Reason 1 for Custom Project Custom PG&EL1 CFL no reflector CFL not screw in Bi level dimming for fixtures at Halogen to linear PG&EL2 50% lighting output fluorescent Reason 3 for Custom Interior photocell PG&EL3 Interior photocell Not 4 feet Sizes for kit/new PG&EL4 T12 existing Different Lamp CFL no lengths reflector PG&EL5 Not 4 feet T12 existing PG&EL6 Different Lamp lengths CFL not screw in T12 existing PG&EL7 Interior photocell PG&EL8 T12 existing Sizes Kits with 3 or 4 lamps PG&EL9 Kits/New with more than 2 lamps T12 existing Not 4 feet SDG&EL1 Different Lamp lengths T12 existing SDG&EL2 Different Lamp lengths SDG&EL3 Different Lamp lengths CFL not screw in T12 existing Reason 4 for Custom More than two lamps Lack of cost breakdown Not retrofit kits Reason 5 for Custom CFL screw in no reflector Figure 8 contains energy savings and project information. As mentioned before, there is a lack of detailed cost breakdown information for almost all projects. The total measure cost appears to directly correspond with the quantity of retrofitted fixtures; however, not all data points truly follow this trend, leading to a poor R 2 value. See Commercial Custom Incremental Measure Cost Study TRC Energy Services 11

14 Figure 9 on the next page. A majority of the projects are partnership projects in which case there would be no incentive for kw savings. Representative Project Figure 8: Energy savings and assessment of cost data from sampled lighting projects. Demand Savings [kw] Electricity Savings [kwh] Total Measure Cost Incentive for kw Incentive for kwh Quantity Type of Building Cost Breakdown Information PG&EL1 3 9,422 $7,344 $289 $ Bank Breakdown available but it doesn't add up PG&EL ,115 $180,329 $32, Office Internal labor documented; invoices/work orders unclear PG&EL3 7 22,770 $32,756 $5, Office No breakdown PG&EL ,265 $64,137 $26, Office Material & other breakdown available PG&EL ,961 $77,734 $20, Academic No breakdown PG&EL ,952 $150,634 $51, Academic No breakdown PG&EL ,245 $325,562 $195, Academic No breakdown PG&EL ,304 $616,853 $98, Healthcare Material & other breakdown available PG&EL ,989 $493,321 $167, Academic Internal labor documented; invoices/work orders unclear SDG&EL ,138 $178,954 $51, Research Breakdown per unit in spreadsheet SDG&EL ,984 No Cost $31, Retail No Cost Information SDG&EL ,075,804 $484,329 $19,658 $53, Healthcare Cost information from reports Commercial Custom Incremental Measure Cost Study TRC Energy Services 12

15 Figure 9: Correlation between retrofitted fixture quantity and total project cost. $700,000 $600,000 $500,000 $400,000 R² = $300,000 $200,000 $100,000 $ The scope of individual projects are detailed in Figure 10 below. The dominant existing, baseline, and installed technologies are documented along with the type of retrofit. Sometimes applications and the calculations were not descriptive enough to determine the type of retrofit, in which case engineering judgment was used to determine the type of retrofit. Representative Project Existing Technology Figure 10: Sampled lighting projects scopes of work. Baseline Technology Proposed Technology PG&EL1 T8 32W T8 NLO 28W T8 LBF PG&EL2 28W T8 NLO Ballast; 28WT8 VHLO 32W T8 NLO 25W T8 and bilevel ballast NBF PG&EL3 32W T8 32W T8 NLO 28W T8 LBF PG&EL4 40W T12 STD; 32W T8 STD; Incandescents Type of Retrofit Lamp and Ballast; Lamps; Fixtures Project Scope Difficulty Easy Project Magnitude Low Fixture Easy Low Lamp and Ballast; Lamps; Fixtures Easy Low 32W T8 NLO 25W T8 RLO; CF Lamp and Ballast Hard Low PG&EL5 32W T8 32W T8 NLO F32T8 25W Lamp and Ballast Tyipcal Medium PG&EL6 34W T12; 32W T8 32W T8 NLO F28T8 & RLO Lamp and Ballast; ballasts Fixtures Tyipcal Medium PG&EL7 32W T8 32W T8 NLO 28W T8 Lamp Easy Medium PG&EL8 32W T8 NLO; 34W 25W T8 LBF; 32W Lamp and Ballast; T12 Mag; 30W T12 32W T8 NLO Mag T8 LBF Fixtures Hard High 34W T12 Elec; 32W PG&EL9 T8 Elec; 30W T12 32W T8 NLO F28T8 RLO Lamp and Ballast Hard High Elec SDG&EL1 T8 Elec; T12 Mag 32W T8 NLO F28T8 LBF Lamp and Ballast; Fixtures Hard High SDG&EL2 T8 32W T8 NLO Fixture 2L F32T8 Fixtures Easy Medium SDG&EL3 32W T8; T12 Mag; Halogen; Incandescent 32W T8 NLO T8; CFL Lamp and Ballast; Lamps; Fixtures Hard High Commercial Custom Incremental Measure Cost Study TRC Energy Services 13

16 The project scope difficulty listed in Figure 10 was based on several factors including: quantity of retrofits, type of retrofits, building type due to access, and past engineering experiences. Project magnitude was based strictly on the quantity of fixtures being retrofitted. Anything below 1,000 fixtures was considered a low magnitude; in between 1,000 5,000 fixtures a medium magnitude; and above 5,000 fixtures high magnitude. Figure 11 is a frequency bin of the retrofitted quantity of fixtures. Figure 11: Frequency bin of the retrofitted quantity of fixtures. Frequency Magnitude 1 1,000 Low 1,001 5,000 Medium 5,001+ High Results About 70% the lighting projects included in the random sample were from PG&E. Over 80% of these PG&E sampled projects came through a partnership program, which incentivizes collective groups such as local government, universities, and colleges. Typical existing fixtures were 32 watt T8 with electronic ballasts with a few T12 fixtures. Most retrofits were lamp and ballast replacements, which were upgraded to 28 watt T8 with RLO ballasts. As previously mentioned, deemed measures accounted for 33% to 99% of the measures include the sampled custom projects. By applying deemed installation and labor costs to the deemed portions of these custom projects and then subtracting that cost from the total project cost, the goal was to identify reasonable costs for the custom portions of the projects. The deemed materials costs were taken from Itron s Deemed Measure Cost Study (performed in parallel with this study). The deemed labor costs were the difference between the total deemed Portion and the deemed Material costs. Unfortunately, using this methodology to back calculate the custom portion of the cost produced inconsistent results. Of note, some of the deemed labor values were suspect and 33% of the projects resulted in negative custom project costs. The results of the analysis are shown in Figure 12. Figure 12: Deemed and custom measure costs for each lighting project sampled. Project Total Cost Deemed Portion of Cost Deemed Materials Deemed Labor Custom Portion of Cost PG&EL1 $7, $12, $12, $ $(5,019.25) PG&EL2 $64, $38, $26, $12, $25, PG&EL3 $616, $289, $196, $92, $327, PG&EL4 $150, $79, $54, $24, $71, PG&EL5 $321, $138, $94, $43, $182, PG&EL6 $32, $41, $28, $13, $(8,571.01) PG&EL7 $77, $109, $74, $34, $(31,300.98) PG&EL8 $493, $60, $41, $19, $432, PG&EL9 $180, $27, $19, $8, $152, SDG&EL1 $178, $422, $169, $253, $(243,436.78) SDG&EL2 NO COST $128, $111, $17, N/A SDG&EL3 $484, $451, $308, $143, $32, Commercial Custom Incremental Measure Cost Study TRC Energy Services 14

17 We speculate there are two primary reasons for negative custom cost values: 1. Different bulk purchasing power of the host customers. Customers with strong vendor relationships, better procurement departments, or larger projects (possibly across multiple phases) may receive pricing better than the calculated deemed values. 2. The entire installed project cost may not have been reported during the project review. Obtaining invoices from customers is notoriously difficult. Historically, if invoices provided by the customer demonstrate that a project was not cost capped, there is no need for the reviewer to spend time trying to collect the entire project cost. HVAC Rooftop or Split System: Package Unit Other Projects and Scopes TRC evaluated 20 recent projects contained in its internal database though only 12 of could be included in the review. One was removed from the sample because it was never implemented, three others were excluded because there were no net savings, and another four projects did not contain measures that matched the scope of the review. The same review methodology as the lighting analysis was followed and a similar spreadsheet was used to organize project scope and cost data (see Figure 13). This spreadsheet facilitated extracting salient characteristics for analysis and observations. Unlike the lighting analysis, none of the package unit measures were eligible for a deemed program. It should be noted that package AC or heat pumps greater than 63.3 tons (or 760,000 Btu/hr) in PG&E and SDG&E service territories are included in an upstream program which buys down the purchased price of the units. Of the remaining projects, the actual measures implemented under the HVAC Rooftop: Package Unit Other measure are broad; a lot of measure types are grouped under this category. We separated our data into eight sub measure categories: Coils (CHW, DX) CAV to VAV Fan speed (VFDs, sheave replacement, etc.) New fan motors Fan wall Duct static pressure & controls (independent from DDC measures) Heat recovery New AHU The number of sub measures within the Package Unit Other measure group, combined with our limited data set, severely restricted our ability to draw comparisons similar to the lighting analysis, such as scope difficulty and relative magnitude. In retrospect another HVAC measure group, such as HVAC Chiller Water Cooled: Efficient Unit, may have provided more focused analysis, even though the data set was 25% smaller (18 projects vs 24 projects). Commercial Custom Incremental Measure Cost Study TRC Energy Services 15

18 Representative Project Figure 13: Sampled HVAC Rooftop projects scopes of work. Existing Technology Baseline Technology Proposed Technology Type of Retrofit PG&EPU1 Small duct Existing Larger duct Static pressure drop PG&EPU2 Chilled water system Existing N/A CHW coil; valves PG&EPU3 500 CFM FCU Existing 1000 CFM FCU New Fan coil PG&EPU4 CHW coils link to bldg chiller; 3 New CHW coils; decomissioned Existing way valve chiller; use campus plant New Package Units PG&EPU5 CAV; pneumatic controls; installed VAV with terminal reheat boxes; AHU has a functional economizer Existing supply and return fans static and operates from building pressure control; DDC occupany schedule Tighter control PG&EPU6 Defective Variable Frequency New VFDs, fan motors, Reduced fan speed in Existing Drives (VFDs), old components. transmission belts, sheaves. non occupied hours. PG&EPU7 2 old air handling units Existing New AHUs; run around heat exchanger coils in supply and exhaust ducts; water pump in run around loop. Heat exchanger CAV; high efficiency DC unit; PG&EPU8 Discharge dampers; ineffectual high efficiency furnace; more Upgrade equipment Existing equipment not optimized efficient Direct Expansion unit and convert to CAV (DX) PG&EPU9 DX unit Existing Chilled water coil Replace DX with CHW PG&EPU10 Evaporative cooler on AHUs Existing Heat recovery system that uses Heat recovery w/ runaround system heat from the exhaust air to pre condition the supply air PG&EPU11 PG&EPU12 AHU; a 40 ton reciprocating chiller; existing AHU has (1) 7.5 hp supply fan and (1) 7.5 hp return fan AHU with four supply fans, each fitted with VFD; four exhaust fans, each fitted with VFD; pneumatic control; zone level VAV boxes with reheat; cooling coil Existing Existing Higher capacity AHU and higher efficiency 100 ton screw chiller; AHU has (2) 25 hp supply fans and (1) 7.5 hp return fans equipped with variable frequency drives (VFDs) Premium efficiency motors on all the supply fans New air unit and chiller Supply VFDs Results Out of 12 implemented package unit projects, only two contained invoices with sufficient detail to enable measure cost isolation and calculation. Most of the remaining projects contained multiple HVAC (non package unit) measures. In fact, DDC measures were most commonly implemented in association with package unit measures. Control measures integrate so seamlessly with package unit measures that accurately deriving (or at all) distinct measure costs for material and (especially) labor was not possible. Overall, findings include: Most projects contain only lump sum cost data. Invoices do not provide enough detail to suggest full or partial invoices; overall, there is no complete invoicing picture. Many projects contain multiple measures, hindering measure cost isolation. Commercial Custom Incremental Measure Cost Study TRC Energy Services 16

19 Only two projects (a coil replacement and a heat recovery) had enough detail to perform any analysis. The two projects with cost breakdowns contained extremely detailed invoices for multiple project, but they lack distinction between measure categories (e.g. package unit replacement, EMS expansion, and lighting retrofit). Without explicitly indicating for which HVAC measure the costs applied, we were unable to isolate measure costs. Likely, many lines accounted for more than one measure. Ultimately, TRC did not attempt to extract individual measure costs because doing so would be a gross approximation and inconclusive. Generally, the incremental cost would be the gross measure cost or vice versa because the age of equipment and project completion date are governed by 2008 Title 24. Thus, the existing cases are the base cases. HVAC Controls: Install New DDC Measure Findings Projects and Scopes The final measure group reviewed was HVAC Controls: New DDC. The same analytical methodology was employed with the addition of other project criteria such as number of DDC points, building type, AHU quantity and type, and calculation methodology. Our primary focus was the number of defined DDC points (if available) and the associated unit cost. TRC also considered if some projects warranted the DDC measure code. Many projects did not seem to actually contain DDC measures based on project descriptions in the review, but obviously contained the measure code to be included in the dataset. TRC evaluated 60 recent projects listed in its database and reviewed 32 of them. Nine projects were removed from list due to multiple measures that could not be isolated or had unclear project costs. The remaining 23 projects had clear project costs and measure scopes from which DDC retrofits could be distinguished. Of these 23 projects, four had a well defined number of DDC points along with associated DDC conversion costs. Results The cost per DDC point could be calculated. Below are the results: Figure 14: Cost per DDC point Representative Project Project Cost DDC Points Cost per DDC Point PG&EDDC11 $ 73, $ 1, PG&EDDC14 $ 129, $ PG&EDDC15 $ 533, $ 1, PG&EDDC20 $ 111, $ These cost points pair into two groups approximately $700 or $1,150 per point. However, the small dataset once again limits conclusions. Review of project scopes suggest that the higher prices are associated with new DDC energy managements systems (EMS). The lower price point ostensibly does not include a new EMS, only DDC upgrades at the downstream component. This measure group is much simpler than the lighting and package unit measures because it is clearly not in the deemed program and the measure type is recognizable in project applications. Such clarity suggests that the DDC measure group is an example of a well defined standard. Short of requiring a cost per DDC point and more projects to analyze, the DDC measure group contained nearly all necessary information for cost analysis. Commercial Custom Incremental Measure Cost Study TRC Energy Services 17

20 5. IOU Perspective on Commercial Custom Incremental Costs To further our understanding of the challenges and opportunities surrounding incremental measure costs, TRC participated in interviews with staff from Pacific Gas & Electric, Southern California Edison, Sothern California Gas, and San Diego Gas & Electric. Interviews were conducted with 10 employees from the IOUs who: Were integral to either the program or engineering arm of their utility. Had responsibility for estimating, reviewing and/or approving appropriate project baselines and project costs for the various custom projects submitted through their programs. The minute interviews were based on an interview questionnaire provided in advance to each interviewee. The focus was to better understand cost estimating approaches for commercial custom energy efficiency measures. During these interviews, TRC gained valuable insight into how the IOUs have been rising to the challenge of determining baseline and incremental costs. Their ideas for long term solutions are deeply rooted in the programs they implement. Since they are judged upon the success of their programs, they have also identified a number of aspects that are believed to be critical to maintaining their successes. The continual assessment of issues surrounding incremental costs, as well as regular communication between the IOUs, provides the IOUs a common framework and (as expected) the interviews revealed common themes across all of the IOUs. The IOUs have a few common methods they currently use for developing incremental costs. All rely on 3rd parties and RS Means cost estimating guides to some degree. In some cases they also make use of the database for energy efficient resources (DEER) or similar past projects. Both SCE and SDG&E mentioned guidelines and (SCE in particular) mentioned developing typical multipliers to extract incremental costs from total project costs. Generally, the labor and miscellaneous material costs are the same for a code compliant project and an above code project. The driving factor in incremental costs is typically the cost of the major equipment. Developing entire baseline estimates from RS Means and DEER is reasonable for indicative pricing of typical projects, though issues arise as a custom project begins to deviate from the typical installation. As the complexity of a custom project grows beyond a typical project, the ratio of major equipment costs as compared to the rest of the project costs begin to shrink. This leads to an over estimation of incremental cost when comparing the actual cost of a complex project to an indicative baseline. Creating an indicative baseline estimate with average complexity would help level the incentive payments across a portfolio of projects, but this would have its own challenges. We were never provided a copy of the guidelines or the multipliers, so we cannot comment directly about them. However, the same argument about indicative baselines applies to multipliers. The larger the deviation from a typical project, the larger the over estimation of incremental cost. With a detailed invoice, a reasonable incremental cost can be estimated by adjusting only the cost of the major equipment from the above code condition to a code compliant condition. The single most important factor to the IOUs for an incremental cost solution, is to limit additional work required by the customer. It is often challenging to find basic information, so the IOUs try to limit Commercial Custom Incremental Measure Cost Study TRC Energy Services 18

21 contacting to the customer for additional information. Requiring additional information from customers may reduce their participation and increase the duration of the application cycle. Ideally the process would be seamless to the customer. IOUs strive for a simplified, automated process that provides a common customer experience; realizing that custom projects are not typically one size fits all. Education of participants (customers, partners, reviewers, IOU staff, etc.) on clear program requirements is another aspect that is critical to a successful program. During our interviews, a number of possible solutions for generating consistent incremental costs were provided by IOU staff. Require that in order to participate in the custom program, the customer must obtain two price bids prior to construction. The bids must each include a baseline code compliant option and the above code project. There would be no exceptions; everyone would need to follow this program rule. Eventually, the historical data could be reviewed to see how costs vary. Sensitive aspects of the project that drive the cost could then be identified and modeled. Develop a set of guidelines for determining baseline costs. An associated checklist would provide a procedure to get approved costs and if done correctly the results would be beyond dispute. A flowchart could guide participants and reduce turnaround time. The idea of a living database to capture and share cost information was presented at each of the interviews. All of the IOU staff generally accepted that it would be helpful for common measures, however, it would not realistically cover all measures. There were also concerns about it being kept up to date, entering a consistent basis for the costs (project boundaries), and level of detail provided before information is considered proprietary. Relevant excerpts from the interviews regarding commercial custom incremental costs are provided in the following sections. Pacific Gas & Electric IMCS Comments PG&E Background and Existing Process Most frequent measures included Lighting, Motors, VFDs and Chillers. If a deemed measure exists, the project must go deemed. It must be truly custom to take this path. IOUs share information regarding new measures and the calculation methodologies. Reviewers utilize their knowledge and established guidelines for estimating costs and reference DEER. Some vendors are partners so we have cost information. Reviewers work with the implementers to make sure they understand the costs. Invoices are the key component in verifying costs compare the invoices with the application. Commercial Custom Incremental Measure Cost Study TRC Energy Services 19

22 Would like more focus on proper segmentation of cost the key is drawing the correct boundary around the project. PG&E Process Recommendations Making is simpler for the customer should be a goal of the project. Going back to the customer for more information is not the answer. Customers already have issues simply providing invoices for their projects. Requiring additional information from customers may reduce their participation and increase the duration of the application cycle really need to make the process seamless for the customer. Like the idea of increasing incentive percentage (or stepping the percentage up) based on participating in multiple measures. A statewide database of measures could be beneficial. Southern California Edison IMCS Comments SCE Background and Existing Process Most significant custom measures include Lighting and HVAC (Controls) measures. Going back to customers for more cost information has not been productive. Use written customized guidelines and preferred methods for determining costs. Developed rough multipliers to estimate incremental cost from total project cost. SCE uses the guidelines they have developed for cost because they do not ask the customer for this information. They have not had luck trying to obtain cost information from the customer. Sometimes a third party might have a better relationship with the customer to obtain this information. Start with the invoices (actual cost) and evaluate cost from there. If cost does not make sense, they sometimes use a $/kwh reality check and if still out of range, need to dig deeper. They do not see too many issues overall with cost. It is challenging to get costs and it is even more challenging to get incremental cost information, especially since it does not really exist. Quantifying total cost is difficult. There is not a common process; processes vary by measure. Projects usually falls into a common kwh/$ range. Very few fall outside the range. SCE looks at each project individually to address cost variability. It would be nice to have a formula to work from. There is also not a lot of sharing of cost data or methodologies between the IOUs. They have to take the average industry cost for the measure hypothetical. RS Means is the starting point, then calling manufacturers (sometimes a contractor s verbal or a % difference if only option), DEER database, or the cheat factors they have developed per Commercial Custom Incremental Measure Cost Study TRC Energy Services 20

23 project type (which they share with PG&E) 10% Lighting, 25% Refrigeration, etc. for determining incremental costs. For full project costs they refer to invoices and/or internal labor costs. Invoices are not a problem to obtain from the customer, but incremental costs are the issue. SCE Process Recommendations Going back to customers is a large concern. SCE has do it right the first time with a clear process. SCE is trying to teach their customers what exact costs are required per project application SCE provided the interviewers a table of when to provide what type of cost. Limit the documentation required from the customer. SCE suggests to make process better, institute a rule that in order to participate in the program, the customer should obtain 2 price bids. Everyone needs to follow the rules of the program. Also, need to look at the historical data and see how costs vary. Then identify the sensitive pieces and inform others and model it. Tell the program staff what the sensitive factors are that are driving the costs. Program staff need to know what empirical data we need. A living database would be helpful for common measures, however, it would not realistically cover all measures. Future database concerns include it being kept up to date, missing certain measures, percentages based on climate zones (should be simpler), the loop of arguments based on ranges in costs, the basis for the costs, develop percent cost adders for things like M&V and design? Southern California Gas IMCS Comments SCG Background and Existing Process There is not a common methodology. It is all custom and it all varies. There is no one size fits all guideline or standard practice for all projects. There are challenges around what is the defined standard practice. Projects works better when there is a code. Industry standard does not necessarily hold well in the custom world. Custom projects are not one size fits all. Different companies, even in the same industry, are different. Standard practices are different. Having a standard does not mean much in the custom world. For a retrofit SCG looks at the total installed project cost. SCG works with consultants on some projects that rely heavily on RS Means. SCG may need to turn more to RS Means internally as well. SCG does not have solid database tracking to capture costs over time. If SCG needs cost and it is really complicated, we then hire a consultant. Commercial Custom Incremental Measure Cost Study TRC Energy Services 21

24 For calculating incremental cost, it really depends on project. For example, savings by design is different than other projects where they might just use total project cost. SCG Process Recommendations SCG has limitations to going back to customer. They need to be able to estimate cost and incremental costs internally with access to costs that they have. Costs can be loose at front end of a project. A real time database accessible across the state would be useful if it was centered around standardized models. It would also depend on level of detail provided. How much detail could be provided before information is considered proprietary? San Diego Gas & Electric IMCS Comments SDG&E Background and Existing Process Most significant custom commercial measures were Lighting, VFDs, Chillers and HVAC controls. SDG&E looks at Means Mechanical to help with incremental cost. For calculating incremental costs the only resource really is RS Means and it works to some degree. The concept of the process works well, in that it appeals to the customer not being pigeonholed into a catalog. Costs are now better apportioned to the applicable measures. When cost is not broken down by measure, they try to apportion the costs based on savings; however, sometimes it is also hard to breakout savings per measure. They then try to go into Means to gather cost per measure data. Sometimes it is too hard to separate out. Where they often need the most help is determining the code requirement to be used for baselines. SDG&E looks at other projects to determine what is appropriate. To deal with variability in costs, they look at other projects with same measure in a similar application and geographic location. SDG&E refers to RS Means and if and economic study is provided, they might use that cost info to come up with incremental cost info. SDG&E is in the process of coming up with a guideline for calculating incremental costs for high frequency custom measures for all of the IOUs to share; however, there is a question of whether it is business friendly. There is also a concern that it might prevent some customers from participating. They, need to consider fact that not all IOUs see the same measures (ie. SD does not have refineries) and want to promote consistency for the gas and electric clients. Each reviewer is different and you might get different results given the process each reviewer follows. SDG&E should be a one stop shop. How can we automate what we do? Our website is not up to that goal. Commercial Custom Incremental Measure Cost Study TRC Energy Services 22