The Investor Confidence Project (ICP) recently responded to an request for information from the Federal Energy Management Program (FEMP) to recommend ways that the program could be adapted to become more competitive and allow for private innovation.

By leveraging the Investor Confidence Project’s Energy Performance Protocols, the Federal Energy Management Program (FEMP) can streamline federal contracting, by standardizing engineering requirements and documentation, resulting in reduced administrative burden when developing opportunities and evaluating proposals, as well as allowing for better benchmarking and transparency.  Standardization will create a more competitive and innovative market and ensure that the federal government is receiving the greatest return on its energy efficiency investments.

Because the Investor Confidence Project Protocols are being adopted in the private sector, FEMP’s public investment will also build a track record and actuarial data that will support the growth of a private market for energy efficiency.  Larger markets will amplify federal investments and help hit broader federal objectives that include dramatic reductions in building energy use across all categories of buildings.

The ICP can help FEMP accomplish many of its stated goals:

Increase the speed at which projects can be awarded
Utilizing the Investor Confidence Project protocols will vastly simplify underwriting.  Projects that are developed following standard protocols will be much easier to assess and understand, which will reduce the time and expense of often redundant re-engineering cycles.  It will also reduce cost of sale as RFPs become consistent, and project developers will be able to evaluate projects and deploy consistent services.

Improve the certainty of savings persistence
By standardizing on a full lifecycle approach to the engineering and measurement process for energy efficiency retrofits, FEMP will reduce performance risk and variance by requiring best practice standards that include baseline, auditing and prediction, commissioning, operation and maintenance, ongoing commissioning and measurement and verification.  By reducing variation in the engineering process, FEMP will drive more reliable results and data, which will in turn result in lower costs for performance guarantees and capital.

Encourage innovation in project finances and risk management
Currently the FEMP rules favor an integrated approach to the ESCO market where only large companies that can serve the entire project and have substantial balance sheets are able to participate.  ICP will enable a more open market where a broader field of qualified providers will create more competition and innovation. The same core functions of a traditional integrated ESCO can be accomplished in a distributed model where companies team up to provide services on a single project. This environment will be conducive to teams of smaller and more specialized companies, allowing new ideas and business models to be developed, tested, and deployed to the market.   Through collaboration, companies can more effectively find new solutions, create new products, and manage risk for building owners.

Enable FEMP to streamline ENABLE Program for Smaller Facilities
Standard engineering and project workflow will reduce transaction costs for both buyers and sellers.  With everyone speaking the same language, more fluid teams will emerge to service this market and reduce upfront costs and risk associated with the complexity of contracting in the Federal arena.  This will address current challenges that limit providers to only those large companies who provide full services and can afford the high transaction costs associated with gaining access to Federal contracts by standardizing the approach and engineering process.

Contribute to the development of private markets and commercial building retrofits
FEMP has an opportunity to align standards in the public and private markets in a way that will create synergies in both arenas and help drive a larger and more sustainable national marketplace, increase transparency, build consistent actuarial data on performance, and increase energy efficiency in all sectors.

The ICP team wanted to clear up some marketplace confusion about how the U.S. Department Of Energy’s Uniform Methods Project and the Environmental Defense Fund’s Investor Confidence Project relate to each other, how they should be used, and by whom.  The good news is that we believe there is in fact tremendous synergies between the two projects, and that while they are similar in some key respects, each has been developed specifically for the needs of different users and with different goals in mind.

The Uniform Methods Project (UMP), establishes an approach based, on industry-accepted methods for calculation and verification of savings pertaining to energy efficiency measures and programs.  The UMP provides a valuable step-by-step set of calculation methods and M&V approaches, as well as best practices for the components involved in each.  The UMP protocols increase the transparency of savings estimates, which provides for better management of various types of uncertainties associated with energy efficiency programs.  Furthermore, they provide a stable framework on which to build successful portions of an energy efficiency program, addressing the components that typically provide the most uncertainty and risk.

The Unified Methods Project and the Environmental Defense Fund’s (EDF) Investor Confidence Project (ICP) are very synergistic and related, but serve different purposes for a different audience.  The ICP Protocols are designed to provide for more stable, predictable and reliable savings outcomes and most importantly to enable investors to make informed, cost effective, forward looking underwriting decisions, while UMP is primarily focused on supporting the historical M&V required by most Public Utility Commissions and Utilities.

While UMP is primarily focused on Measurement and Verification, the ICP Protocols provides a comprehensive framework that defines specific required elements, procedures and documentation pertaining to each of these critical components involved in an energy efficiency project.  The ICP Protocols define the full lifecycle of a project including baseline development, calculations, design, construction and commissioning, operations, maintenance and monitoring, and M&V.  

We believe that future iterations of the ICP Protocols can be supplemented by the specific details pertaining to calculation and M&V methods and best-practices defined by the UMP.  The synergies between the two protocols will encourage deal flow and market efficiencies by enabling networks of project originators, such as engineering firms, facility managers, contractors, energy service companies and portfolio owners, to develop investment quality energy efficiency projects and bring those projects to a marketplace of energy service companies, insurers, financial institutions, and utility programs without requiring repetitive and expensive additional engineering steps, while minimizing risk and uncertainty.

ICP is fundamentally focused on delivering solutions to investors that make forward-looking investment decisions rather than evaluations of what happened in the past.  Unlike Public Utility Commissions, who have the luxury of assessing performance historically, investors must evaluate an investment and make an underwriting decision in advance.  To enable underwriting it is essential to correlate M&V with a taxonomy that describes attributes of a conforming type of project so that investors can associate M&V results with project attributes that enable them to determine if a given project, or pool of projects, is in fact the same as past projects where data exists and therefore they can assume similar performance and returns.  

The Investor Confidence Project looks forward to leveraging the important clarity that UMP brings to M&V in our full Energy Performance Protocols to deliver even more clear and reliable results to drive investment in the energy efficiency market.  We intend to begin integrating sections of the UMP into future protocols which we believe will both improve the reliability of the ICP protocols, and extend UMP to support the investment necessary to achieve the potential of retrofitting the built environment.

The EDF Investor Confidence Project (ICP) is a multi-year initiative to help spur growth in the commercial energy efficiency retrofit market by reducing transaction costs and engineering overhead, and increasing the reliability and consistency of savings. EDF has worked with a cross-functional team of industry experts to assemble existing technical standards and best practices into a straightforward Energy Performance Protocol (EPP) that defines a standard investment quality energy efficiency project to enable deal-flow and investment.

In November of 2012, we released the initial version of the Energy Performance Protocol for Large Commercial (EPP-LC). We received encouraging reviews from industry allies and many industry leaders have committed to join our growing ICP Ally program, a broad based network of organizations that helps us develop, test, and implement the ICP Protocols.

New Release: Large Commercial – Version 1.1

Building on our initial success and market feedback, ICP is now releasing a new and updated version 1.1 of the EPP-LC, which incorporates a wide array of important improvements that will streamline the project development process and improve results.

Our ICP team is incredibly grateful to all individuals that contributed their time and energy to this process resulting in a more streamlined protocol, especially our committed team of experts who dedicated untold hours and contributed a wide array of industry, research, and public sector experience.

Upcoming Standard Commercial and Multifamily Protocols

In an effort to increase efficiency across the range of projects in the market, we have focused our attention on delivering protocols for both Standard Commercial (projects that typically cost under $1MM) and Multifamily projects. Combined with our existing protocols, this combination will enable us to serve the majority of the energy efficiency market.

We are also working with a range of public programs focused on driving demand and overcoming barriers, such as Commercial PACE, On-Bill Repayment, and Benchmarking Programs.  ICP plays a key role connecting these programs to the wide array of investors needed to achieve our energy efficiency goals.

The protocols are designed to add value to the various participants in the energy efficiency ecosystem. Project developers benefit from better access to capital resources, standardized origination processes, and the ability to benchmark projects. Building owners and managers will see a more competitive bidding process and get better rates and terms for their projects. Investors will be able to underwrite deals more efficiently by having reduced transaction costs and consistent yields. Once consistent protocols are adopted, the entire industry will benefit from smaller transaction costs, more consistent project performance, and increased access to capital.

If you are interested in learning more, or getting involved, visit our ICP website for more details and to sign up for our Ally program, or contact us about implementing the ICP Energy Performance Protocols.