The determination of energy savings requires both accurate measurement and replicable methodology, known as a measurement and verification protocol. The long-term success of energy and water management projects is often hampered by the inability of project partners to agree on an accurate, successful M&V Plan. This M&V Protocol discusses procedures that, when implemented, help buyers, sellers and financiers of energy and water projects to agree on an M&V Plan and quantify savings from Energy Conservation Measure (ECM) and Water Conservation Measure (WCM). Simply put, the purpose of the M&V is to increase investment in energy efficiency and renewable energy.
All types of financial investments have a common goal - making money or a "return" on investment. Rate of return is measured by various financial yardsticks such as simple payback, return on investment (ROI) or internal rate of return (IRR). The expected rate of return is governed by the risk associated with the investment. Typically, the higher the project risk, the greater the return demanded. Risk takes a variety of forms in efficiency projects. Most risks can be measured; it is the accuracy of the measurement (tolerance) that is important. Many risks associated with investing in energy or water efficiency project can be measured using tools common to the finance industry, such as internal rate of return or customer credit-worthiness. M&V, is primarily focused on risks that affect the measurement or determination of savings from energy or water efficiency programs. These risks are defined in the terms of the contracts between the participants.