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Early Replacement
Measures Study
Update #2
Framework and Priority Measures
Presentation to the EWR Collaborative
Feb 2024
©2024 Guidehouse Inc. All rights reserved. Proprietary and competition sensitive.
Progress Update
2
01
Literature Review Summary
3
02
ER Framework
6
03
Priority ER Measures
16
04
Timeline and Next Steps
18
Background
3
• In the January 2024 EWR Collaborative, Guidehouse presented literature review results
for the Early Replacement (ER) Measures Study. The purpose of the study is to develop
a framework which identifies the key considerations for developing workpapers to claim
savings for measures that are replaced before the end of the equipment’s useful life.
• With the ER framework, workpapers will be developed for Priority ER measures for
inclusion in the 2025 Michigan Energy Measures Database (MEMD). Priority ER
measures were identified using stakeholder interviews and inputs from utility
Implementation Contractors.
Literature Review Findings
4
ER Parameters Summary of Findings Key Differentiations
Eligibility
•
Most jurisdictions define Early
Replacement (ER) as
replacement of existing
equipment which is in working
condition.
•
Some utilities have additional
eligibility criteria based on
equipment age.
•
The equipment age criterion is defined differently across the jurisdictions:
o New York
1
, Vermont, New Orleans, Minnesota, Ohio – before the end of
EUL/expected life/useful life;
o Mid Atlantic – before the natural end of life;
o Illinois – in working condition or in need of minor repairs even if beyond EUL.
•
Vermont requires ER projects to provide evidence of prior contact with the customer
replacing functioning equipment for energy savings purpose.
•
Mid-Atlantic TRM only offer certain measures such as ER of Room AC and
Refrigerators through Low Income or Home Performance Program (direct install).
•
Certain measure types in the MA and PA TRMs require the existing equipment be
retired or recycled and permanently removed from the grid.
Measure Effective
Useful Life (EUL)
•
ER measures use the same
measure life (EUL) as replace on
burnout (ROB).
•
Common parameter for both ER and ROB. No differentiation identified.
Remaining Useful
Life (RUL)
•
Typically, set at 1/3 of measure’s
EUL; however, it is
recommended RUL in future
TRMs to be informed from
program data
2
•
New York TRM requires the RUL data to be collected by the program administrator.
•
IL TRM uses RUL= 1/2 EUL for Income Qualified (IQ) Room AC measure and
RUL=1/3 EUL for non-IQ customers.
1. New York offers a semi-custom analysis to calculate savings for replacement of equipment well past its EUL and with a history of significant repair and high energy consumption.
2. Based on California Public Utilities Commission 2008 Database for Energy Efficiency Resources (DEER).
Literature Review Findings
5
ER Parameters Summary of Findings Key Differentiations
Existing Efficiency
Actual value. Most jurisdiction use one of the following
sources to determine deemed value:
•
Program data from past evaluation, OR
•
Market research characterizing equipment age,
efficiency, etc., OR
•
Past federal minimum efficiency standards.
•
Mid Atlantic and VT TRMs provide deemed savings values
instead of deemed efficiency values for equipment. e.g.,
refrigerator measure.
Annual Hours of Use
(HOU)
Use current measure HOU for all replacement types
(ER or ROB).
Common parameter for both ER and ROB. No differentiation
identified.
Incremental Cost
Standardized approach
1
to determine incremental
cost for ER measures is the new high efficiency
equipment cost subtract the Present Value (PV) of the
cost that is avoided in the future for a code minimum
standard efficiency equipment.
•
Massachusetts, New Hampshire – ER cost is not specified.
•
Pennsylvania – ER cost is defined as the full cost of
equipment replacement.
•
Minnesota – Certain measures use full cost as ER cost.
1. Understanding Cost-Effectiveness of Energy Efficiency Programs, DOE 2008.
Early Replacement Framework
ER Framework Structure
7
Sections Contents Description
1
- ER Key Concepts
1.1 Early Replacement Definition
1.2 EWR Measure Replacement Types
Definitions of ER, Replace on Burnout (ROB)
and New Construction (NC) and other terms
used in the framework
2
- ER Measure
Categorization
2.1 Eligibility Criteria
2.2 Algorithm
2.2.1 First Year Savings
2.2.2 Midlife Adjusted Savings
2.2.3 Lifetime Savings
2.3 Key Parameters
2.3.1 Existing Equipment Efficiency
2.3.2 Effective Useful Life
2.3.3 Remaining Useful Life
2.3.4 Annual Hours of Use
2.4 Incremental Cost
Detailed measure categorization to go over ER
eligibility, algorithm, key parameters and
incremental cost
3
- Maintenance & Update
Process
3.1 New and Modified ER Measure Submission
3.2 MEMD Review
Brief introduction to the process and timeline of
ER workpaper maintenance and update
February 20, 2024
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REPLACEMENT TYPE DEFINITION
Replace on Burnout (ROB)
For measures which are replacements due to the failure or burn
-out of the existing
equipment with high efficiency equipment.
Early Replacement (ER)
For measures which are replacements of existing equipment which is in working condition
with high efficiency equipment.
New Construction (NC)
For measures installed at the time of a new facility construction, or as part of a major
renovation, e.g. a facility capacity expansion.
The main difference between the ER and ROB replacements is the baseline efficiency. The ER energy
savings is calculated based on the existing equipment efficiency whereas the ROB energy savings is
calculated based on the applicable code minimum efficiency level at the time of replacement. NC
projects have the same baseline of applicable code minimum efficiency as ROB projects.
ER measures encourage the replacement of old and inefficient equipment before the end of their useful
life. This leads to additional first year energy savings and lifetime savings compared to ROB.
ER Key Concepts
Early Replacement Definition
EWR Measure Replacement Types
ER Definition and Replacement Types
Eligibility Criteria
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Early Replacement measures offered to Residential Single Family, Multi-Family and C&I customers
should meet following eligibility criteria:
o The existing equipment is in working condition.
Utilities to work with their Program Implementers and Evaluators to determine appropriate
documentation required to verify ER measure eligibility based on measure type, complexity, and
feasibility.
ER Measure Categorization
Eligibility Criteria
Example Documentation for Equipment
in Working Condition
•
Customer interviews/surveys conducted by
evaluator
•
Maintenance logs
•
For equipment of a large capacity, a video
showing operational status of equipment
before the replacement
Algorithm
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A dual-baseline methodology will be applied when quantifying savings for all early replacement measures.
First Year Savings = Existing Equipment Consumption – High Eff Equipment Consumption
Midlife Adjusted Savings = Code Min Eff Equipment Consumption – High Eff Equipment Consumption
Lifetime Savings = First Year Savings*Adjusted EUL
An Adjusted EUL will be determined to
simplify the calculation of the Lifetime
Savings per MEMD Framework.
Existing Equipment
Code Compliant
Minimum Efficiency Equipment
Installed Equipment
Energy Consumption
RUL
EUL
Present
Energy Savings
Energy Savings
ER Measure Categorization
Algorithm
Existing Equipment Efficiency
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For MEMD ER workpapers, deemed efficiency can
be identified using one of following approaches:
(1) Program participant data
1
of ER project existing
equipment efficiency;
(2) Market research results
2
of the existing
equipment efficiency which characterizes
equipment age, size, efficiency group, etc.;
(3) Past federal minimum efficiency standards in
effect at the estimated manufacture date of the
existing equipment
3
.
For custom projects, the actual efficiency of the
existing equipment should be used when
determining the First Year Energy Savings.
1. At least one year of program participant data from Michigan utilities for programs offering the specific measure should be used for this purpose.
2. Market research results for Michigan is preferred, if not available, other jurisdiction’s results is acceptable.
3. The estimated manufacture date of the existing equipment can be calculated to be at 2/3 of measure life ago.
ER Measure Categorization
Key Parameters
Existing Equipment Efficiency - Example
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ER Measure Categorization
Key Parameters
Gas Furnace Early Replacement
For MEMD ER workpapers, assuming no past
program data or market research is available to
identify the efficiency of the existing equipment,
deemed efficiency can be determined using the
following approach:
Gas furnace measure life = 20 Years
1
.
Assuming RUL for ER = 6 years or 1/3
rd
of measure life,
average year of manufacture of ER gas furnace is 2010
(i.e., 2024-(20-6)).
Therefore, a baseline efficiency of 78% AFUE can be
assumed based on the federal minimum efficiency
standards in effect in 2010 which is the estimated
manufacture date of the existing equipment.
Furthermore, since DOE updated the gas furnace
standard in 2015 to 80% AFUE
2
, this measure’s existing
equipment efficiency would need to be updated for the
2029 MEMD.
1. The current MEMD gas furnace measure life is 15 years. The gas furnace measure life is 20 years in DOE’s Technical Supporting Document, Nov 2022.
2. Code of Federal Regulations, effective November 2015.
RUL, EUL, and HOU
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ER Parameters Proposed Approach
Effective Useful Life (EUL)
ER measures use the same EUL/measure life as replace on burnout (ROB),
which is available in the MEMD for the purpose of determining ER measure RUL
when preparing the MEMD workpapers.
Adjusted Effective Useful Life (AEUL)
AEUL is a theoretical number of years during which the First Years Savings can
be consistently applied to achieve the same Lifetime Savings
.
Remaining Useful Life (RUL)
It is recommended to use program data to determine RUL:
If program data is not available, use 1/3 of measure’s EUL:
Annual Hours of Use (HOU)
Use current measure HOU from MEMD for all replacement types (ER and ROB).
For custom projects, the actual HOU of existing equipment should be used.
The ER framework also presents details of the EUL, AEUL, RUL and HOU to be used in ER measures.
ER Measure Categorization
Key Parameters
Incremental Cost
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ER measures result in increased energy savings with higher incremental costs compared to Replace
on Burnout (ROB). Incremental Cost for ER measures can be calculated using following formula:
ER Measure Categorization
Incremental Cost
Incremental
Cost
Future cost of code
compliant equipment
Or
Time-value adjustment associated
with early replacement
Or
Present Cost (PC)
Inflation Rate (IR)
Discount Rate (DR)
•
Existing MEMD workpapers
•
If MEMD workpaper references are
missing or outdated, following sources can
be used:
̵ DOE’s Technical Supporting Documents
̵ Technical Reference Manuals (TRM) of
other jurisdictions, and/or
̵ Industry Studies/Reports
•
Consumer Price Index (CPI), CPI Home:
U.S. Bureau of Labor Statistics (bls.gov)
•
Federal Reserve System’s discount
window website,
www.frbdiscountwindow.org
References for Incremental Cost Parameters for ER Measures
Present cost of
new equipment
Or
New and Modified ER Measure Submission
February 20, 2024
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After MEMD workpaper drafts are developed according to this ER Framework, the next steps are the
submission of the draft workpapers for review and the inclusion into the MEMD.
The maintenance and update process and timelines of ER workpapers will be consistent with existing MEMD
measure maintenance and update process as outlined in the MEMD Overview & Maintenance Process Manual.
Workpaper
Description
Guidance
Submission Timeline
New ER Measure
ER measures not already
available in MEMD will be
considered as “
New
Measure
” workpapers.
Measure sponsors/authors
are required to draft a
workpaper using the
MEMD
Workpaper Temperate
and
the ER Framework.
April 1
st
Modified ER Measure
Modifications to existing
ER measures in the
MEMD.
Measure sponsors/authors
are required to update the
existing ER Workpaper.
May 1
st
Maintenance & Update Process
New and Modified ER Measure Submission
MEMD Review
Workpaper reviews and revisions happen from the submission time through August.
The final MEMD will be published on the Michigan Public Service Commission (MPSC) in October.
Priority ER Measures
Priority Measures
February 20, 2024
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Guidehouse collected feedback on the priority measures from various program implementation contractors
and plan to continues collecting additional responses from stakeholders.
Proposed Priority Measure Workpapers for 2025 MEMD:
• Boiler (Res, C&I, MF)
• Central AC (Res, C&I, MF)
• Furnace (Res, C&I, MF)
• Water Heater (Res, MF)
Timeline and Next Steps
Early Replacement Framework: Proposed Schedule
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• Present the draft ER Framework to the EWR Collaborative to collect feedback (today).
• After we get alignment/address comments Guidehouse propose to:
o Begin drafting the up to 12 workpapers on priority measures and
o Integrate the Framework into a redline version of the MEMD Manual which will be submitted to the MPSC.
Milestone
Framework
(PowerPoint)
ER Workpapers
(Up to 12 Priority
Measures)
Framework
Incorporated into
MEMD Manual
Present to EWR Collaborative
2/20/24
EWR Collaborative comments provided to Guidehouse
3/1/24
Submit finalized framework slide deck to MPSC
3/15/24
Submit workpaper drafts to MPSC
4/1/24
Proposed
- Framework incorporation into MEMD Manual draft 5/1/24
Proposed
- MPSC post updated MEMD Manual on website 6/1/24
©2023 Guidehouse Inc. All rights reserved. Proprietary and competition sensitive.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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Your Guides
Hang Zhang
Managing Consultant
hzhang@guidehouse.com
(734) 492
-0246
Sahil Popli
Associate Director
sahil.popli@guidehouse.com
(646) 227
-4236
