ISO/TS 50044:2019

Energy saving projects (EnSPs) — Guidelines for economic and financial evaluation

This document gives guidelines for how to compare and prioritize energy saving projects (EnSPs) before implementation, using economic and financial evaluation. It includes a common set of principles. This document is applicable to all EnSPs and energy performance improvement actions (EPIAs) that are developed by stakeholders and organizations for improving energy performance, irrespective of the type and size of an organization and its energy use and consumption. The methodology for quantification methods for predicted energy savings and measurement and verification (M&V) of the energy savings are not in the scope of this document. NOTE The methodology for the estimation of the energy savings is critical when determining cost savings. The methodology of the scenario generation (building) for future energy saving measures and actions is not covered by this document. General rules and methodologies within this document can be used either independently or in conjunction with other standards and protocols.

Projets d'économies d'énergie — Lignes directrices pour l'évaluation économique et financière

General Information

• Status: Published
• Publication Date: 03-Nov-2019
• ICS: 27.015 - Energy efficiency. Energy conservation in general
• Technical Committee: ISO/TC 301 - Energy management and energy savings
• Drafting Committee: ISO/TC 301 - Energy management and energy savings
• Current Stage: 9093 - International Standard confirmed
• Completion Date: 11-Apr-2023

Standards Content (Sample)

TECHNICAL ISO/TS
SPECIFICATION 50044
First edition
2019-11
Energy saving projects (EnSPs) —
Guidelines for economic and financial
evaluation
Projets d'économies d'énergie — Lignes directrices pour l'évaluation
économique et financière
Reference number
ISO/TS 50044:2019(E)
©
ISO 2019

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ISO/TS 50044:2019(E)

COPYRIGHT PROTECTED DOCUMENT
© ISO 2019
All rights reserved. Unless otherwise specified, or required in the context of its implementation, no part of this publication may
be reproduced or utilized otherwise in any form or by any means, electronic or mechanical, including photocopying, or posting
on the internet or an intranet, without prior written permission. Permission can be requested from either ISO at the address
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Website: www.iso.org
Published in Switzerland
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ISO/TS 50044:2019(E)

Contents Page
Foreword .v
Introduction .vi
1 Scope . 1
2 Normative references . 1
3 Terms and definitions . 1
4 Symbols and abbreviated terms . 5
5 Planning an economic and financial evaluation of an EnSP . 6
5.1 General . 6
5.2 Description of an EnSP and associated lifetime . 7
5.3 Identification and definition of the boundaries . 7
5.3.1 General. 7
5.3.2 Examples of EnSP boundaries . 7
5.4 Data collection . 8
5.5 Evaluation objectives and required accuracy . 9
6 Estimation and calculation of energy and non-energy effects . 9
6.1 Prediction and estimation of energy savings . 9
6.2 Energy savings calculation . 9
6.3 Estimation of non-energy effects .10
6.4 Conversion of EnSP effects into economic value .10
6.4.1 General.10
6.4.2 Revenues .10
6.4.3 Estimation of external costs and benefits .10
7 Identification and calculation of costs and cash flows .10
7.1 General .10
7.2 Cost characteristics .11
7.2.1 General.11
7.2.2 Variable cost.11
7.2.3 Fixed costs .12
7.2.4 Total capital investment .12
7.3 Cash flows description .13
7.3.1 General.13
7.3.2 Accounting for future cash flows .14
7.3.3 Rates of time preference or comparison .14
7.3.4 Choosing a rate of time preference or comparison .14
8 Analysis and assessment .15
8.1 Economic and financial indicators .15
8.1.1 General.15
8.1.2 Present value .16
8.1.3 Net present value . .16
8.1.4 Internal rate of return .17
8.1.5 Payback period .17
8.1.6 Life cycle cost analysis .18
8.1.7 Profitability index .19
8.2 Assessment .20
8.2.1 General.20
8.2.2 Sensitivity analysis .20
8.2.3 Uncertainty and risk assessment.20
8.3 Analysis.22
8.3.1 Energy data quality . .22
8.3.2 Social cost benefit analysis .22
8.4 Decision-making .24
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8.4.1 General.24
8.4.2 Selection of an EnSP based on indicators .24
9 Reporting .25
Annex A (informative) Energy savings calculation steps.26
Annex B (informative) Example of cost characteristics .28
Annex C (informative) Examples of payback period calculation .29
Annex D (informative) Example of net present value calculation .31
Annex E (informative) Examples of internal rate of return calculation .33
Annex F (informative) Example of life cycle cost analysis .37
Bibliography .40
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ISO/TS 50044:2019(E)

Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards
bodies (ISO member bodies). The work of preparing International Standards is normally carried out
through ISO technical committees. Each member body interested in a subject for which a technical
committee has been established has the right to be represented on that committee. International
organizations, governmental and non-governmental, in liaison with ISO, also take part in the work.
ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of
electrotechnical standardization.
The procedures used to develop this document and those intended for its further maintenance are
described in the ISO/IEC Directives, Part 1. In particular, the different approval criteria needed for the
different types of ISO documents should be noted. This document was drafted in accordance with the
editorial rules of the ISO/IEC Directives, Part 2 (see www .iso .org/ directives).
Attention is drawn to the possibility that some of the elements of this document may be the subject of
patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of
any patent rights identified during the development of the document will be in the Introduction and/or
on the ISO list of patent declarations received (see www .iso .org/ patents).
Any trade name used in this document is information given for the convenience of users and does not
constitute an endorsement.
For an explanation of the voluntary nature of standards, the meaning of ISO specific terms and
expressions related to conformity assessment, as well as information about ISO’s adherence to the
World Trade Organization (WTO) principles in the Technical Barriers to Trade (TBT) see www .iso .org/
iso/ foreword .html.
This document was prepared by Technical Committee ISO/TC 301, Energy management and energy
savings.
Any feedback or questions on this document should be directed to the user’s national standards body. A
complete listing of these bodies can be found at www .iso .org/ members .html.
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ISO/TS 50044:2019(E)

Introduction
A complete assessment of an investment in an energy saving project (EnSP) requires analysis of all
costs and benefits over the lifetime of the investment. This assessment can be used to prioritize the
EnSPs. However, it is important to consider the aim and scope at the outset because this will prescribe
the course to be followed. The basic criterion for evaluating an investment decision in an EnSP is that
the benefits resulting from the EnSP should be greater than the costs incurred within a defined time
period for the return on the investment.
This document provides guidance on a methodological framework for the calculation, evaluation and
reporting of economic status by defining economic indicators to facilitate the selection of energy
performance improvement actions (EPIAs), EnSPs or opportunities. It provides examples and concepts
to demonstrate the financial value of the activities related to energy savings to ensure the business
connection to the organization.
This document is intended to help EnSP investment evaluators to determine an appropriate approach
or type of analysis at an appropriate level of detail and to assist energy savings evaluators in completing
consistent analyses using documented assumptions and reasoning. This document includes analytical
techniques that are commonly required for an economic evaluation of an EnSP.
Where possible, the financial evaluation of an EnSP should follow the approved method of the
organization making the investment, and the detailed approach outlined in this document should be
adjusted based on guidance from the organization.
The aim of an economic and financial evaluation is to provide the information needed to make a
judgement or a decision in relation to EnSPs.
The perspective of analysis is important, as it often dictates the approach to be used. Also, the ultimate
use of the results of an analysis will influence the level of detail required. The decision-making criteria
of the potential investor should also be considered.
This analysis approach provides a significantly better evaluation of the long-term implications of an
investment than methods that focus on first cost or short-term results. In this document, evaluation
methods can be applied to virtually any public or private business sector investment decision as
well as EnSPs decisions. Such decisions include the evaluation of alternative solutions with different
initial costs, operating and maintenance costs, and the evaluation of investments to improve energy
performance.
The process approach and steps used for EnSPs economic and financial evaluation, which are used
throughout this document, are illustrated in Figure 1.
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Figure 1 — Economic and financial evaluation approach
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This document includes:
a) terms and definitions;
b) the types of costs that should be taken into account for the calculation of the economic and financial
evaluation of EnSPs;
c) the data needed for the determination and calculation of costs related to the EnSP under
consideration;
d) the calculation and assessment of economic and financial indicators (EFIs);
e) a general framework and rules for the economic priorities of EnSPs;
f) the principle of reporting and expression of results for the economic and financial evaluations
of EnSPs.
This document provides indicators for the financial evaluation of all types of EnSPs. Those indicators
include the internal rate of return (IRR), net present value (NPV), payback period (PP) and life cycle
cost analysis (LCCA).
This document can be used by any organization during the important phases of an energy management
system, such as energy review, design, procurement and management review, to prioritize and record
energy performance opportunities accurately, consistent with ISO 50001.
This document also can be used by any stakeholder (e.g. policy makers, decision-makers, organizations,
NGOs) that aims to quantify the cost of EnSPs over a specific period. Annex A provides guidance on
the steps for an energy savings calculation. Annexes B to F provide an overview of the economic and
financial evaluations with practical examples.
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TECHNICAL SPECIFICATION ISO/TS 50044:2019(E)
Energy saving projects (EnSPs) — Guidelines for economic
and financial evaluation
1 Scope
This document gives guidelines for how to compare and prioritize energy saving projects (EnSPs)
before implementation, using economic and financial evaluation. It includes a common set of principles.
This document is applicable to all EnSPs and energy performance improvement actions (EPIAs) that are
developed by stakeholders and organizations for improving energy performance, irrespective of the
type and size of an organization and its energy use and consumption.
The methodology for quantification methods for predicted energy savings and measurement and
verification (M&V) of the energy savings are not in the scope of this document.
NOTE The methodology for the estimation of the energy savings is critical when determining cost savings.
The methodology of the scenario generation (building) for future energy saving measures and actions
is not covered by this document.
General rules and methodologies within this document can be used either independently or in
conjunction with other standards and protocols.
2 Normative references
There are no normative references in this document.
3 Terms and definitions
For the purposes of this document, the following terms and definitions apply.
ISO and IEC maintain terminological databases for use in standardization at the following addresses:
— ISO Online browsing platform: available at https:// www .iso .org/ obp
— IEC Electropedia: available at http:// www .electropedia .org/
3.1
annual cost
sum of running costs and periodic costs or replacement costs paid on the year n
Note 1 to entry: The running cost is the money that needs to be spent regularly to run an energy saving project
(3.11) or an energy performance improvement action (3.10), e.g. cost of maintenance, labour costs.
3.2
capital cost
initial construction costs and costs of initial adaptation where these are treated as capital
expenditure (3.3)
[SOURCE: ISO 15686-5:2017, 3.1.2, modified — Note 1 to entry has been deleted.]
3.3
expenditure
money used to purchase, install and commission a capital asset
[SOURCE: ISO 15663-1:2000, 2.1.6, modified — “capital” has been deleted from the term.]
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3.4
cash flow
CF
movement of money into (cash inflow) or out of (cash outflow) a business, project (3.24) or financial
product
Note 1 to entry: Cash flow is usually measured for a specified period.
3.5
discount rate
factor or rate reflecting the time value of money that is used to convert cash flows (3.4) occurring at
different times to a common time
[SOURCE: ISO 15686-5:2017, 3.3.1]
3.6
direct cost
expense that can be traced directly to an energy saving project (3.11)
3.7
energy
electricity, fuels, steam, heat, compressed air and other similar media
Note 1 to entry: For the purposes of this document, energy refers to the various forms of energy, including
renewable, which can be purchased, stored, treated, used in an equipment or in a process, and recovered.
[SOURCE: ISO 50001:2018, 3.5.1]
3.8
energy consumption
quantity of energy (3.7) applied
[SOURCE: ISO 50001:2018, 3.5.2]
3.9
energy performance
measurable result(s) related to energy efficiency, energy use and energy consumption (3.8)
[SOURCE: ISO 50001:2018, 3.4.3, modified — Notes 1 and 2 have been deleted.]
3.10
energy performance improvement action
EPIA
action or measure or group of actions or measures implemented or planned within an organization
intended to achieve energy performance (3.9) improvement through technological, managerial,
behavioural, economical, or other changes
[SOURCE: ISO 50015:2014, 3.5, modified — “or operational” has been deleted.]
3.11
energy saving project
EnSP
activity that is intended to contribute to a measurable reduction in energy consumption (3.8)
Note 1 to entry: An EnSP can also be intended to contribute to a reduction in greenhouse gas emissions.
Note 2 to entry: An EnSP includes at least one energy performance improvement action (3.10).
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3.12
energy savings
reduction of energy consumption (3.8) following the implementation of an energy performance
improvement action (3.10)
[SOURCE: ISO/IEC 13273-1:2015, 3.3.9]
3.13
hurdle rate
minimum rate of return on a project (3.24) or investment required by a manager or investor
3.14
indirect cost
expense that cannot be traced directly to an energy saving project (3.11)
3.15
inflation
sustained increase in the general price level
Note 1 to entry: Inflation can be measured monthly, quarterly or annually against a known index.
[SOURCE: ISO 15686-5:2017, 3.3.3, modified — “deflation” has been deleted.]
3.16
internal rate of return
IRR
discount rate (3.5) that gives a net present value (3.22) equal to zero
Note 1 to entry: IRR is also known as the discounted cash flow (3.4) rate of return.
Note 2 to entry: In the context of savings and loans, IRR is also known as the economic rate of return.
[SOURCE: ISO 26382:2010, 3.8]
3.17
interactive effect
significant energy (3.7) result occurring beyond the project boundary as a consequence of action(s)
within the project boundary
Note 1 to entry: Correctly identifying and accounting for consequential effects mitigates the risk (3.27) of double
counting when the results of various energy performance improvement actions (3.10) are combined.
Note 2 to entry: The consequential effect is limited to the boundaries of the authority of the management of the
energy-using system.
EXAMPLE Changing the lighting system to be more efficient will have a consequential effect on the HVAC
system. If the measurement boundary is the lighting system only, the consequential effect on the HVAC system
should be described.
[SOURCE: ISO 17741:2016, 3.13, modified — Notes 1 and 2 have been replaced and the example has
been slightly amended.]
3.18
life cycle cost
LCC
discounted cumulative total of all costs incurred by an energy performance improvement action (EPIA)
(3.10) over its life cycle
Note 1 to entry: For an energy saving project (3.11), the discounted life cycle cost is the sum of all discounted costs
of the constituent EPIAs, taking into consideration their respective lifetimes.
[SOURCE: ISO 15663-3:2001, 2.1.9, modified — “an energy performance improvement action” has
replaced “a specified function or item of equipment” and Note 1 to entry has been added.]
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3.19
life cycle cost analysis
LCCA
methodology for the systematic economic evaluation of life cycle costs (3.18) over a period of analysis,
as defined in the agreed scope
3.20
maintenance cost
total of necessarily incurred labour, material and other related costs incurred to retain equipment, a
process or its parts in a state in which it can perform its required functions in an energy saving project
(EnSP) (3.11)
Note 1 to entry: Maintenance includes conducting corrective, responsive and preventative maintenance on
EnSPs, or their parts, and includes all associated management, cleaning, servicing, repairing and replacing of
parts, where needed, to allow the EnSP and its parts to be used for its intended purposes.
[SOURCE: ISO 15686-5:2017, 3.1.9, modified — In the definition, “equipment, a process” has replaced “a
building”. In the note, “ENSPs” has replaced “constructed assets” and “repainting” has been deleted.]
3.21
minimum attractive rate of return
MARR
hurdle rate (3.13) for a project (3.24) within an organization
Note 1 to entry: MARR is used to determine the net present value (3.22).
Note 2 to entry: In capital budgeting, the discount rate (3.5) used is known the hurdle rate and is usually equal to
the incremental cost of capital.
3.22
net present value
NPV
sum of the discounted future cash flows (3.4)
Note 1 to entry: NPV converts future cash flows using a given discount rate (3.5).
[SOURCE: ISO 15686-5:2017, 3.2.2, modified — Notes 1 and 2 to entry have replaced the Note 1 to entry.]
3.23
new project
project involving an energy using system that has not been installed or commissioned, such that the
project cannot be considered and treated as a retrofit
[SOURCE: ISO 17741:2016, 3.16, Note 4 to entry]
3.24
project
unique process consisting of a set of coordinated and controlled activities with start and finish dates,
undertaken to achieve an objective conforming to specific requirements including constraints of time,
cost and resources
Note 1 to entry: An individual project may form part of a larger project structure and may consist of two or more
energy performance improvement actions (3.10).
Note 2 to entry: The complexity of the interactions among project activities is not necessarily related to the
project size.
Note 3 to entry: Energy savings (3.12) is the quantitative result as the project activities bring about reduction in
the energy consumption (3.8) of energy-using systems within the project boundary.
Note 4 to entry: Retrofit project is a project conducted on an already existing energy-using system.
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[SOURCE: ISO 17741:2016, 3.16, modified — Note 4 to entry has been deleted and Note 5 to entry
renumbered accordingly.]
3.25
payback period
PP
period after which the initial capital invested has been paid back by the accumulated net revenue earned
[SOURCE: ISO 26382:2010, 3.13, modified — Note 1 to entry has been deleted.]
3.26
present value
PV
present worth
value of the project (3.24) cash flow (3.4) excluding the initial investment outlay
[SOURCE: ISO 15663-2:2001, 2.1.2, modified — “present worth” has been added as the admitted term.]
3.27
risk
effect of uncertainty on objectives
Note 1 to entry: An effect is a deviation from the expected. It can be positive, negative or both, and can address,
create or result in opportunities and threats.
Note 2 to entry: Objectives can have different aspects and categories, and can be applied at different levels.
Note 3 to entry: Risk is usually expressed in terms of risk sources, potential events, their consequences and their
likelihood.
[SOURCE: ISO 31000:2018, 3.1]
3.28
sensitivity analysis
test of the outcome of an analysis by altering one or more parameters from initial value(s)
[SOURCE: ISO 15686-5:2017, 3.2.5]
3.29
useful life
estimation of the median number of years of equipment life
...