Probabilistic risk assessment of the energy saving shortfall in energy performance contracting projects–A case study

Abstract

Lack of a proper assessment method on performance risks in Energy PerformanceContracting (EPC) projects is one of the reasons hindering the further development of Energy Service Companies (ESCOs) market. This paper proposes a simulation-based method to evaluate the probability of energy saving shortfall taking into account the variations in the influential parameters, including weather conditions, occupancy, operating hours, thermostat set-point, etc., during the contract period. The proposed method involves the use of a detailed building energy simulation programme, sensitivity analysis and Monte Carlo simulation techniques. Empirical data is also used to develop the probability distribution functions for the identified parameters to simulate the actual yearly variations in the post-retrofit conditions. A real case study This is the Pre-Published Version.2 of replacement of heat rejection system for a central chiller plant in Hong Kong is used to demonstrate the application of this probabilistic method. The result shows that the possible energy savings after a 1-year retrofit period ranges from 393,000 kWh (2.86%) to 1,098,000 kWh (10.8%) with 90% statistical significance.

Suspended timber ground floors: measured heat loss compared with models

“…Where possible, input data from the case study site survey were used to inform model inputs to increase the accuracy of the model, as recommended by Park, Norrefeldt, Stratbuecker, Jang, and Grun (2013) and Lee, Lam, Yik, and Chan (2013). Estimates of inputs that could not be obtained from a survey were based on typical assumptions (listed in Table 1).…”

Making optimal investment decisions for energy service companies under uncertainty: A case study

“…Multiple uncertainties have thus been added in, such as performance of energy conservation measures, fluctuation of energy market price [23], weather conditions, varied human operations, and random occupancies [24,25]. Even though the ESCO could better manage the performance risks by ensuring system efficiency, optimization control, and regular maintenance, the actual energy savings revenue was still uncertain [26,27]. In real practice, the energy efficiency savings were frequently found to be less than the estimation in private buildings, and the shortfall was discussed under the heading of "rebound effect" [28,29].…”

Risks in Energy Performance Contracting (EPC) projects

“…Other associated risks such as uncertainties in weather and occupancy conditions would also affect the actual energy savings [15]. Although an adjustment mechanism is usually incorporated in EPC contracts to address the impact arising from changes in baseline, it is rather difficult to determine these impacts, resulting in uncertainties in actual savings.…”

“…Mathew et al [13] adopted the actuarial pricing approach to quantify the risks associated with EE projects. Jackson [14] and Lee et al [15] proposed using the Monte Carlo technique for evaluating the probability of energy saving shortfall in EPC projects. In practice, risk allocation in EPC projects is often made through contractual procedures, for example, in the Federal EPC projects, completion of "Risk, Responsibility and Performance matrix" is a mandatory requirement to address the ESCO's responsibilities on several key issues, including changes in interest rates and construction costs, M&V procedures, changes in operating patterns and load, as well as O&M [16].…”