yellow bulb - idea
A proper answer to this seemingly simple question is nothing but simple.

Proper measurement and verification of achieved savings is a key factor when calculating payback period, IRR for an investment into energy efficiency project and any other in-company ratio. Effectively, M&V may mean a difference between energy efficiency project being named a financial winner or a loser, a new funds being allocated to energy efficiency work or not, purchase of new equipment approved or not, incentives granted or not, even annual bonus and promotion … or not; you name it, if it deals with energy efficiency – it depends on M&V.

Measurement and Verification of energy savings is a difficult process. Mainly because business operational conditions change all the time: occupancy, production level, shipment schedule, operation schedule, SKU, outside temperature, humidity – all these factors may affect energy consumption and therefore – visible results of implemented changes.

There is no one-size-fits-all solution for M&V. To deal with the complicacy international community of energy engineers and energy managers have developed a set of rules and recommendations aimed to practically determine savings – International Performance Measurement and Verification Protocol, IPMVP.

Below I have presented what is probably the shortest and drastically simplified version this protocol you will ever see. The full version is about 100 pages; it is available at

 Energy Saving Measurement and Verification

To properly account for energy savings achieved through implementation of an efficiency measure one should:

Before changes are implemented:
  1. Understand what drives energy consumption. Is it a need for light, for fresh air, for cooling, for baking, for moving? Several drivers may affect consumption.
  2. Figure out what is the minimal full cycle of this driver(s) – a shift, a day, a week, a production cycle, a season, a year?Record any other operational conditions that are considered constant, but that affect energy consumption, such as number of shifts, number of employees, operation hours and schedule, truck loading procedure.
  3. Figure out how fast this driver changes through the cycle and how fast these changes affect consumption. If frequent changes do not affect consumption, then less measurements is required.
  4. Using 2 and 3 determine min number of measurements of both (!) energy use and driver(s). Driver may be measured in degrees, sqft, kg, liters
  5. Collect data determined in 4 “before” change through a cycle determined in 2.
  6. Determine the baseline consumption model through regression analysis of data collected in
  7. Ensure that model is statistically valid.
When “after” comes:
  1. Verify if conditions established in 2 are still valid; if they have changed – figure out how to modify your baseline energy consumption model
  2. Collect data exactly like in 5
  3. Forecast “after” consumption using the baseline consumption model
  4. The difference between forecast and actual consumption is the achieved energy savings.

Calculation of the financial value of achieved energy savings is a whole new story, which we partly discussed in this post.