State and local governments, businesses, and electricity system planners are using a range of energy efficiency (EE) policies and initiatives to lower electricity use while also achieving important objectives, such as:

• Saving money on electricity bills
• Decreasing stress on the electricity system
• Stimulating local economic development and new jobs
• Reducing air pollutants (e.g., NOx, SO2, PM) and greenhouse gases (GHGs)

Comprehensive evaluation, measurement, and verification (EM&V) helps ensure these objectives are achieved. EM&V refers to the procedures, methods, and analytic approaches used to quantify and verify electricity savings from EE.

This web page and accompanying paper describe the status of EE policies and initiatives, identify associated EE objectives, and provide discussion and examples of how EM&V is typically tailored to those policies or initiatives.

This information is intended as a primer for representatives of jurisdictions, businesses, electricity planning organizations, and other entities that are using or considering using EE to achieve their goals.

Energy Efficiency Policies and Initiatives

Every U.S. state currently administers some type of EE program, and more than half of them have adopted statewide EE policies such as energy efficiency resource standards (EERS) and goals to achieve “all cost-effective EE.” These policies and goals are achieved through EE programs for homeowners, businesses, and other electricity customers.

• Nationally, ACEEE estimates that customers are saving $90 billion annually on electricity bills from EE programs for a total of nearly $790 billion in cumulative savings since 1990
• The Lawrence Berkeley National Laboratory has identified additional untapped potential for EE programs in every state over the next 5, 10, and 15 years

Many states and cities have also adopted initiatives to promote EE improvements in their own facilities (often via performance contracts with private companies) and may further adopt building energy codes and equipment standards that exceed federal minimum efficiency requirements.

In addition, two electricity transmission system operators—ISO New England (ISO-NE) and PJM Interconnection—have established forward capacity markets (FCMs) that compensate EE on par with power plant generation for purposes of meeting regional capacity requirements and ensuring system reliability.

Each of these EE policies and initiatives is helping states meet a range of environmental, energy, and economic objectives. As the electricity savings from EE has grown in recent years, state and local governments, businesses, and electricity system planners are increasingly turning to EE as a strategy to achieve these diverse objectives.

EM&V Basics

The procedures, methods, and analytic approaches used to quantify and verify EE savings is referred to as evaluation, measurement, and verification (EM&V). EM&V compares measured electricity usage with an EE project or EE measure in place with the best estimate of the likely energy usage in the absence of the project or measure (the “counterfactual” scenario or baseline). MWh of electricity savings are quantified relative to this counterfactual baseline.

Specifying the baseline for a particular EE activity is a key challenge with EM&V. If the condition prior to the installation of an EE project or EE measure were always the baseline, this determination would be relatively straightforward. However, most EE take place in a context of ongoing changes in markets, technology, policy, and operations. Specifying a baseline requires consideration of this context.

For example, when the EE activity is a new equipment installation that would happen regardless of the efficiency level, the baseline can be defined in terms of the new (less efficient) equipment that would otherwise be installed. When this new EE equipment installation happens in the context of other EE activities, such as in a market affected by building codes or equipment standards, these other EE activities must be considered in determining the baseline for the new equipment.

Comparison of Total kWh Reduction vs. EE Savings Using a Hypothetical Baseline for the Installation of New Equipment

Other components of a comprehensive EM&V approach for an EE project or EE measure include:

• Determining the effective useful life (EULEULEUL is the duration of time an EE project or EE measure is anticipated to remain in place and operable with the potential to save electricity.) of the project or measure
• Selecting an appropriate EM&V method
• Verifying that the EE project or EE measure is installed and operating properly
• Accounting for interactive effects and independent variables that affect electricity use

EM&V for EE Policies and Initiatives

• Ratepayer-Funded EE Programs
• Organization-Led Building EE Initiatives
• Forward Capacity Markets
• Air Pollution Reductions in State/Tribal Implementation Plans

Despite a core set of standardized approaches and resources, EM&V is routinely and appropriately tailored to particular EE policies or initiatives. This is intended to help:

• Make EM&V information and outputs responsive to the associated objectives and quantification metrics
• Give EE providers, oversight entities, and other stakeholders the information they need to plan for and deploy EE in a way that maximizes the intended benefits
• Identify challenges and barriers to the effectiveness of the EE, allowing EE implementers to make necessary changes in real time
• Quantify savings with appropriate accuracy, rigor, and overall cost and with consideration of the full range of EE benefits and costs (e.g., to compare EE to other electricity resource options, including both demand- and supply-side resources)
• Compare EE to other electricity resource options, including both demand- and supply-side resources

Examples of how state and local agencies, businesses, and electricity system planners may tailor their EM&V for different policies and initiatives is provided below. One implication of this tailoring is that the EM&V protocols, metrics, and assumptions that apply in one case may not be appropriate for use in another. 

This table shows examples of how EM&V approaches may differ by EE policy and initiatives.

One implication of tailoring EM&V to EE policies and initiatives is that the protocols, metrics, and assumptions that apply in one context may not be appropriate for use in another. For example, an EM&V approach designed to support the quantification of capacity (MW) savings during a limited number of “peak” hours in a future year may not be appropriate to use in conjunction with EE policies focused on achieving energy (MWh) savings in the current year.

Ratepayer-Funded EE Programs

What are they?

• Organized efforts, typically overseen by a state public utility commission (PUC) and delivered by a utility, to promote the adoption of EE projects or EE measures in homes and businesses
• Approaches include providing financial incentives (e.g., rebates and loans), technical services (e.g., audits, direct installation, training and assistance for architects, engineers, and building owners), information intended to change customer behavior (e.g., feedback on electricity usage), and educational campaigns about the benefits of EE improvements.

What are the goals for EE?

• Lower customer energy bills, reduce pollution, create local jobs and avoid the need for new power plants
• Serve as an “electricity system resource”—on par with power plant generation—that states, utilities, and system planners can use to:
  • Deliver annual EE savings equal to a specified percentage of total electricity sales
  • Meet forecasted electricity demand over a defined geographic area (i.e., a utility service territory) within a specified timeframe

What are typical EM&V objectives?

• Help ensure that public spending on EE is prudent and cost-effective
• Quantify costs and benefits, including electricity savings (MWh), demand savings (MW), and non-energy benefits (e.g., avoided emissions, job creation)
• Improve EE programs for customers and guide future investment decisions
• Determine whether utilities receive performance-related incentives or penalties

Select Resources

• General Information:
  • U.S. EPA Energy and Environment Guide to Action
  • U.S. DOE Ratepayer-Funded Energy Efficiency Website
  • State and Local Energy Efficiency Action Network (SEE Action) Website

• EM&V Related:
  • M&V Guidelines: Measurement & Verification for Performance-Based Contracts, Version 4.0, U.S. DOE Federal Energy Management Program (FEMP)
  • DOE Uniform Methods Project (UMP)
  • SEE Action Energy Efficiency Program Impact Evaluation Guide
  • International Performance Measurement and Verification Protocol (IPMVP), Efficiency Valuation Organization (EVO)
  • California Energy Efficiency Evaluation Protocols: Technical, Methodological, and Reporting Requirements for Evaluation Professionals (2006)

Organization-Led Building EE Initiatives

What are they?

• Actions that organizations take to improve efficiency and reduce energy costs in a single building or a portfolio of buildings
• Typically includes adopting an energy management program that involves setting goals for energy performance, creating a plan to achieve them, and taking action
• Many organizations partner with energy service companies (ESCOs) to help them achieve their energy performance goals
  • “Performance-based contracts” commit ESCOs to installing new EE equipment and reducing customer energy usage by an agreed-upon percentage

What are the goals for EE?

• Reduce energy waste (a typical commercial building in the United States wastes 30% of its overall energy use) ¹
• Significantly improve the efficiency of buildings and save on energy bills
• Benchmark energy use to help prioritize cost-effective EE investments within and across buildings
  • Custom databases or publicly available tools such as the EPA’s ENERGY STAR Portfolio Manager are typically used

What are typical EM&V objectives?

• Support organizational goals for energy management and financial savings
• For ESCOs, bolster performance-based contracts and reconcile differences between actual and guaranteed savings

Select resources

• General Information:
  • EPA ENERGY STAR
  • ENERGY STAR Guidelines for Energy Management
  • U.S. DOE Energy Service Companies Website
  • ENERGY STAR Portfolio Manager
• EM&V Related:
  • M&V Guidelines: Measurement & Verification for Performance-Based Contracts, Version 4.0, U.S. DOE Federal Energy Management Program (FEMP)
  • International Performance Measurement and Verification Protocol (IPMVP), Efficiency Valuation Organization (EVO)

 

Forward Capacity Markets

What are they?

• Markets established and overseen by an independent system operator (ISO) or regional transmission operator (RTO) to ensure long-term grid reliability by procuring enough electricity to meet forecasted demand during peak periods and in the case of a grid emergency
• Market mechanism is an auction that:
  • Sets prices at levels that help ensure capacity resources will be available when needed on a “forward” (future) basis
  • Signals that investors will be adequately compensated for investments in construction, permitting, and maintenance of capacity resources

What are the goals for EE?

• Compete directly with traditional electric power suppliers, demand response (DR) providers, transmission companies, and other entities to provide capacity
• Provide unique value to the grid compared to other capacity resources. EE can be:
  • Implemented without extended siting, environmental, and regulatory analyses
  • Targeted to locations where needed
  • A source of significant peak load reductions (e.g., efficient air conditioners in summer peaking regions)

What are typical EM&V objectives?

• Quantify the portion of total savings from a demand-side EE resource that occurs during the relevant peak hours
• Determine associated capacity payments to EE providers
• Establish consistent, minimum requirements for quantifying savings across EE activities (e.g., ratepayer-funded EE programs and organization-led building EE initiatives) and jurisdictions

Select resources

• General Information:
  • ISO New England Forward Capacity Market Website
  • PJM Learning Center Capacity Market Website

• EM&V Related:
  • SEE Action Energy Efficiency Program Impact Evaluation Guide
  • ISO New England Measurement and Verification of Demand Reduction Value from Demand Resources Manual
  • PJM Manual 18B: Energy Efficiency Measurement & Verification

Air Pollution Reductions in State/Tribal Implementation Plans

What are they?

• State or tribal implementation plans (SIPs) describe the emission control strategies, technical documentation, and agreements a state or tribe will use to attain the National Ambient Air Quality Standards (NAAQS) for six common air pollutants
• EPA guidance describes an overall approach and set of acceptable quantification options that states and tribes can use to include EE policies and programs in SIPs
  • Guidance on State Implementation Plan (SIP) Credits for Emission Reductions from Electric-Sector Energy Efficiency and Renewable Energy Measures
  • Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and Tribal Implementation Plans (EE/RE SIP Roadmap)
• States have found that strong partnerships between their air and energy officials are critical for success
  • Such collaborations help all parties understand EE details, forecast electricity savings over time, and quantify the magnitude of expected emission reductions

What is the role for EE?

• Reduce power plant emissions, improve air quality, and contribute to meeting the NAAQS
  • EE policies and programs have the advantage of addressing multiple air pollutants simultaneously, whereas most pollution control devices are designed to address only one pollutant
• Provide an alternative emission reduction option that states and tribes can use for including EE in SIPs

What are typical EM&V objectives?

• Confirm, on a retrospective basis over the NAAQS planning horizon, that emission reductions resulting from EE are quantifiable, permanent, enforceable, and surplus  ²Surplus Surplus means that reductions from EE are “additional” or “incremental” to the baseline identified in the SIP. For example, a state using the “baseline emissions projection pathway” must document assumptions about which EE policies are already included—and which are incremental to—the electricity use forecast submitted as part of the SIP.
• Establish consistent, minimum requirements for quantifying savings across EE activities (e.g., ratepayer-funded EE programs and organization-led building EE initiatives) and jurisdictions
• Help ensure that jurisdictions apply equivalent EM&V approaches for determining the amount of SIP credit they may claim

Select resources

• General Information:
  • Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and Tribal Implementation Plans (EE/RE SIP Roadmap)
  • U.S. EPA Guidance on State Implementation Plan (SIP) Credits for Emission Reductions from Electric-Sector Energy Efficiency and Renewable Energy Measures

• EM&V Related:
  • Avoided Emissions and Generation Tool (AVERT)
  • Emissions & Generation Resource Integrated Database (eGRID)
  • Annual Energy Outlook (AEO), U.S. Energy Information Administration (EIA)
  • Northeast Energy Efficiency Partnerships’ Regional Energy Efficiency Database (REED)
  • Utility integrated resource plans (IRPs)
  • EE potential studies
  • EM&V reports

  1. See: https://www.energystar.gov/buildings/about-us/how-can-we-help-you/improve-building-and-plant-performance/improve-energy-use-commercial

  2. Surplus means that reductions from EE are “additional” or “incremental” to the baseline identified in the SIP. For example, a state using the “baseline emissions projection pathway” must document assumptions about which EE policies are already included—and which are incremental to—the electricity use forecast submitted as part of the SIP. Given that electricity load forecasting may occur at a single- or multi-state level, coordination between agencies, EE providers, and entities conducting EM&V can help identify which EE savings are included in the baseline forecast and which are not.

Related Paper

This paper describes the status of EE policies and initiatives, identifies associated EE objectives, and provides discussion and examples of how EM&V may be tailored to each policy or initiative. 

Additional Detail on EM&V Approaches 

The following table provides additional detail on EM&V approaches by EE policy and strategy. It is illustrative and does not represent how EM&V is planned and implemented in all cases. 

Additional Detail on EM&V Approaches