SIST EN 17463:2021
(Main)Valuation of Energy Related Investments (VALERI)
Valuation of Energy Related Investments (VALERI)
This document specifies requirements for a valuation of energy related investments (VALERI). It provides a description on how to gather, calculate, evaluate and document information in order to create solid business cases based on Net Present Value calculations for ERIs. The standard is applicable for the valuation of any kind of energy related investment.
The document focusses mainly on the valuation and documentation of the economical impacts of ERIs. However, non-economical effects (e.g. noise reduction) that may occur through undertaking an investment are considered as well. Thus, qualitative effects (e.g. impact on the environment)– even if they are non-monetisable – are taken into consideration.
Bewertung von energiebezogenen Investitionen (VALERI)
Dieses Dokument legt Anforderungen für eine Bewertung von energiebezogenen Investitionen (ValERI) fest. Es enthält eine Beschreibung, wie Informationen gesammelt, berechnet, ausgewertet und dokumentiert werden, um solide Geschäftsfälle auf der Grundlage von Kapitalwertberechnungen für ERI zu erstellen. Die Norm gilt für die Bewertung von energiebezogenen Investitionen jeglicher Art.
Das Dokument befasst sich hauptsächlich mit der Bewertung und Dokumentation der wirtschaftlichen Auswirkungen von ERI. Es werden jedoch auch nichtwirtschaftliche Effekte (z. B. Lärmminderung) berücksichtigt, die durch eine Investition entstehen können. Somit werden qualitative Wirkungen (z. B. Auswirkungen auf die Umwelt) – auch wenn sie finanziell nicht bewertbar sind – berücksichtigt.
Évaluation des investissements liés à l'énergie (VALERI)
Le présent document spécifie les exigences relatives à l'évaluation des investissements liés à l'énergie (VALERI). Il décrit comment recueillir, calculer, évaluer et documenter les informations en vue de créer des études de cas solides fondées sur les calculs de la valeur actualisée nette pour les ERI. La norme s'applique à l'évaluation de tout type d'investissement lié à l'énergie.
Le document se concentre principalement sur l'évaluation et la documentation des impacts économiques des ERI. Toutefois, les effets non économiques (par exemple, la réduction du bruit) pouvant découler d'un investissement sont également pris en compte. Ainsi, les effets qualitatifs (par exemple, l'impact sur l'environnement) – même s'ils sont non monétisables – sont pris en considération.
Vrednotenje investicij v zvezi z energijo (VALERI)
General Information
Standards Content (Sample)
SLOVENSKI STANDARD
SIST EN 17463:2021
01-december-2021
Vrednotenje investicij v zvezi z energijo (VALERI)
Valuation of Energy Related Investments (VALERI)
Bewertung von energiebezogenen Investitionen (VALERI)
Évaluation des investissements liés à l'énergie (VALERI)
Ta slovenski standard je istoveten z: EN 17463:2021
ICS:
03.100.01 Organizacija in vodenje Company organization and
podjetja na splošno management in general
27.015 Energijska učinkovitost. Energy efficiency. Energy
Ohranjanje energije na conservation in general
splošno
SIST EN 17463:2021 en,fr,de
2003-01.Slovenski inštitut za standardizacijo. Razmnoževanje celote ali delov tega standarda ni dovoljeno.
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SIST EN 17463:2021
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SIST EN 17463:2021
EUROPEAN STANDARD
EN 17463
NORME EUROPÉENNE
EUROPÄISCHE NORM
October 2021
ICS 03.100.01; 27.015
English version
Valuation of Energy Related Investments (VALERI)
Évaluation des investissements liés à l'énergie Bewertung von energiebezogenen Investitionen
(VALERI) (VALERI)
This European Standard was approved by CEN on 2 August 2021.
CEN and CENELEC members are bound to comply with the CEN/CENELEC Internal Regulations which stipulate the conditions for
giving this European Standard the status of a national standard without any alteration. Up-to-date lists and bibliographical
references concerning such national standards may be obtained on application to the CEN-CENELEC Management Centre or to
any CEN and CENELEC member.
This European Standard exists in three official versions (English, French, German). A version in any other language made by
translation under the responsibility of a CEN and CENELEC member into its own language and notified to the CEN-CENELEC
Management Centre has the same status as the official versions.
CEN and CENELEC members are the national standards bodies and national electrotechnical committees of Austria, Belgium,
Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Republic of North Macedonia, Romania, Serbia,
Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey and United Kingdom.
CEN-CENELEC Management Centre:
Rue de la Science 23, B-1040 Brussels
© 2021 CEN/CENELEC All rights of exploitation in any form and by any means Ref. No. EN 17463:2021 E
reserved worldwide for CEN national Members and for
CENELEC Members.
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EN 17463:2021 (E)
Contents Page
European foreword . 4
Introduction . 5
1 Scope . 7
2 Normative references . 7
3 Terms and definitions . 7
4 Symbols, abbreviations and subscripts . 10
5 Valuation procedure . 11
6 Setting up a model (phase A) . 13
6.1 Determination and qualitative description of benefits and efforts . 13
6.2 Quantification of the benefits and efforts . 14
6.3 Monetisation, determination of the relevant points in time, consideration of price
variations and of degradation . 15
6.3.1 General. 15
6.3.2 Consideration of price variation effects . 16
6.3.3 Consideration of degradation . 16
6.4 Number of periods to be considered . 18
6.5 Consideration of risk . 18
6.6 Determination of the appropriate discount rate. 18
7 Calculation (phase B). 19
7.1 Determination of the NPV of the ERI (most-likely-case scenario) . 19
7.1.1 General. 19
7.1.2 Consideration of tax . 21
7.2 Performing a sensitivity analysis under variation of all parameters containing
considerable uncertainty . 21
7.3 Performing a scenario analysis (best-case, worst-case, and most-likely-case
scenario) . 23
8 Assessment (phase C) . 24
8.1 Interpretation of the results . 24
8.1.1 General. 24
8.1.2 Net Present Value (NPV) . 24
8.1.3 Scenario and sensitivity analyses . 25
8.2 Valuation of non-monetisable qualitative and quantitative effects on the decision . 25
9 Reporting (phase D) . 25
Annex A (informative) The NPV calculation table (basic version) with visible formulas . 28
Annex B (informative) Comprehensive version of the NPV calculation table. 29
Annex C (informative) Selection of the appropriate valuation method . 33
Annex D (informative) Case study: Application of the valuation procedure to the integration
of a cogeneration unit within an industrial organization . 41
Annex E (informative) Checklist for the Valuation Report . 51
Annex F (informative) Consideration of risk . 53
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Annex G (informative) Consideration of price variation . 56
Bibliography . 57
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European foreword
This document (EN 17463:2021) has been prepared by Technical Committee CEN/CLC/JTC 14 “Energy
efficiency and energy management in the framework of energy transition”, the secretariat of which is
held by UNI.
This European Standard shall be given the status of a national standard, either by publication of an
identical text or by endorsement, at the latest by April 2022, and conflicting national standards shall be
withdrawn at the latest by April 2022.
Attention is drawn to the possibility that some of the elements of this document may be the subject of
patent rights. CEN-CENELEC shall not be held responsible for identifying any or all such patent rights.
Any feedback and questions on this document should be directed to the users’ national standards
body/national committee. A complete listing of these bodies can be found on the CEN and CENELEC
websites.
According to the CEN-CENELEC Internal Regulations, the national standards organisations of the
following countries are bound to implement this European Standard: Austria, Belgium, Bulgaria,
Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Republic of
North Macedonia, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey and the
United Kingdom.
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SIST EN 17463:2021
EN 17463:2021 (E)
Introduction
In order to reach the energy related targets of the EU and its member states, energy related investments
(ERIs) have to increase. A possible lack of investments could not only result from a lack of the available
capital, but also from a lack of reliable financial evaluations of the benefits of ERIs.
Different investment ideas often compete for the available money within organisations. Therefore,
enhancement of the financeability of ERIs can be achieved by showing the full economical value that
they are able to generate. When this is done properly, priorities for budgets of ERIs should rise
automatically and thus more investments will be undertaken.
The state of the art of today’s energy related project valuation in practise reveals that in order to help
the user to undertake a firm and correct valuation it is necessary to avoid:
— incorrect results which are caused by neglecting relevant parameters and cash flows;
— unclear calculation models which are difficult to understand;
— models containing errors or models that are incomplete;
— use of calculated costs instead of cash flows;
— time value of money not being considered;
— discount rate being used in an unreflected manner;
— risks not being properly considered;
— missing sensitivity and scenario analyses;
— missing traceability;
— missing interpretation of results;
— price variation rates (very important for energy project valuation) not being appropriately
considered.
The objectives of this document are:
— to help proposers of energy related investments (ERIs) to evaluate their ideas economically and
qualitatively in a uniform, transparent and understandable way by generating all material
information that is relevant for a decision,
— to generate comparable results (for this it is important to ensure that the estimation of the cash
flows is done in a comparable way by using correct price variations, the use of marginal prices for
all cash flows etc.),
— to help the valuator to generate valuation results that can be easily understood by those who decide
upon them,
— to help the decision maker and possible financial institutions who decide on the basis of the
valuation results and expect the results to be correct and complete but also easy to understand,
retraceable and explicit (material),
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— to complement other standards or protocols that focus on the technical determination of energy
savings and
— to help those persons that decide upon ERIs.
In order to accomplish these objectives this document offers a valuation procedure, a calculation
methodology (just one), and a documentation structure that covers the following features:
— application of one calculation method only;
— correct and complete results (Net Present Value considering among other things also, all relevant
cash flows and their price variation rates over the whole project lifetime);
— unequivocal (one indicator at the end which can be directly used for decision-making);
— uniform (a standard);
— easy to use (table based, one uniform calculation table);
— retraceable and easy to reproduce (calculations are transparent and the assumptions made are
explained);
— as simple as possible;
— flexible (the user can adjust parameters and can customise the calculation table);
— undertaking of sensitivity and scenario analyses;
— the standard contains templates for reporting the calculation results and all additional qualitative
effects.
Transparent calculations including retraceable assumptions that show the full value of ERIs will help
organisations as well as households to identify the added value resulting from such ERIs. The proposed
methodology could also be used in energy reviews or audits (using EN 16247-1), when prioritising
energy performance improvement potentials.
An easy to use and standardized procedure would be helpful as energy management teams might not
always include personnel that are equipped to translate technical ideas into conclusive economical
results in order to ensure a solid basis for decision-making.
This document relates to standards regarding energy management and energy savings in general. It
proposes the use of “Net Present Value” (NPV) calculations and its result as a basis for decision-making
(see Annex C).
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EN 17463:2021 (E)
1 Scope
This document specifies requirements for a valuation of energy related investments (VALERI). It
provides a description on how to gather, calculate, evaluate and document information in order to
create solid business cases based on Net Present Value calculations for ERIs. The standard is applicable
for the valuation of any kind of energy related investment.
The document focusses mainly on the valuation and documentation of the economic impacts of ERIs.
However, non-economic effects (e.g. noise reduction) that can occur through undertaking an investment
are also considered. Thus, qualitative effects (e.g. impact on the environment) – even if they are non-
monetisable – are taken into consideration.
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 https://www.electropedia.org/
3.1
adjustment parameter
quantifiable parameter affecting the results of the valuation process
EXAMPLE energy savings (kWh), discount rate, project lifetime, energy price variation rates etc.
3.2
degradation
decrease in the performance characteristics or service life of a product
Note 1 to entry: The degradation rate is measured as performance decline per year (e.g. 1 %/a).
Note 2 to entry: For the purpose of this document deterioration (decline in the performance of an energy
performance improvement action) is included in the concept of degradation.
[SOURCE: EN 60194:2007-03, modified — Note 1 and Note 2 to entry added]
3.3
benefit
positive effect resulting from an investment
Note 1 to entry: A benefit can have a qualitative, quantitative, financial or fiscal nature.
Note 2 to entry: A benefit can be a direct or indirect effect.
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3.4
cash flow
movement of money
EXAMPLE Initial payment of an investment.
Note 1 to entry: Depreciation is not a cash flow.
Note 2 to entry: In this document cash flow is also referred to as payment (P).
Note 3 to entry: Energy savings are considered as cash flows into a business or project as they reduce the
payments for energy consumption.
3.5
discount factor q
multiplier (1+r) of a cash flow to calculate the Present Value (PV) depending on the discount rate (r)
and the period (t)
t t
Note 1 to entry: For each period (t) the cumulated discount factor is calculated with (1+r) or q .
3.6
discount rate r
interest rate that reflects the time value of money
Note 1 to entry: Abbreviated by r (r for required rate of return).
Note 2 to entry: The risk can also be taken into account when setting the value of the discount rate.
3.7
effort
negative effect resulting from an investment
Note 1 to entry: An effort can have a qualitative, quantitative, financial or fiscal nature.
Note 2 to entry: The negative effects occur in a direct or indirect way.
3.8
energy related investment (ERI)
any kind of investment in which energy consumption or energy generation plays a role irrespective
whether it is an energy performance improvement action or an energy supply system project
3.9
internal rate of return (IRR)
discount rate at which the Net Present Value (NPV) of all cash flows of a project equals zero for the
lifetime of the project
3.10
investment risk
volatility of the return of an investment, particularly the likelihood of occurrence of losses relative to
the expected return on any particular investment
Note 1 to entry: Investment risks can derive from credit risk, construction risks, operational and maintenance
risks, performance risks etc.
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3.11
lifetime of an investment
period during which the investment causes cash flows
Note 1 to entry: Guidance for the lifetime of energy related investments with regard to buildings can be found in
EN 15459-1.
3.12
monetisation
transformation of benefits and efforts into cash flows
Note 1 to entry: This is usually done by multiplying the quantified benefits and efforts with the specific monetary
value per unit.
3.13
Net Present Value
(NPV)
sum of discounted cash flows over the whole lifetime of an investment
3.14
non-energy effect
effect that results from an ERI but is not directly related to the energy consumption or generation
EXAMPLE motivation of employees, increased production capacity, less noise, better working conditions etc.
3.15
payback period
time required to recover the payments out of an investment
3.16
risk premium
compensation for investors accounting for the given risk compared to that of a risk-free asset
Note 1 to entry: Risk premium can be included in the interest rate or defined as an additional cash flow.
3.17
scenario analysis
procedure to calculate extreme but still realistic results
3.18
sensitivity analysis
procedure to assess the impact of changes of adjustment parameter settings on the NPV
3.19
valuation of energy related investments
(VALERI)
procedure of assessing and reporting financial and non-financial effects of an ERI in order to lay a
foundation for decision-making
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4 Symbols, abbreviations and subscripts
For the purposes of this document, the specific symbols, abbreviations and subscripts listed in Table 1
apply.
Table 1 — Symbols, abbreviations and subscripts
Symbol Name of quantity Unit
CAPEX Capital Expenditure €
C Debt capital €
debt
C Equity capital €
eq
C Total investment capital €
invest
CHP Combined Heat and Power system
ded Deduction to account for risk in period t (= ∑P ⋅ f ) €
risk, t t ded_risk
degrad Annual degradation
DPB or DPP Discounted Payback Period years
epr Annual price variation energy
E Annual energy savings for energy carrier “A” without considering kWh/year
savings, A
degradation
f Risk deduction factor (= p ⋅ R )
ded_risk loss loss
IRR Internal Rate of Return
it Income tax rate
NPV Net Present Value €
OPEX Operational Expenditure €
P Payment (payment in or payment out) €
p Probability of the occurrence of net return loss
loss
pr Annual price variation not energy
PV Present Value
q Discounting factor (= 1+r)
r Interest rate for debt capital
debt
bt
r Interest rate for debt capital (before taxes)
debt
at bt
r Interest rate for debt capital after taxes (= r ⋅ [1–it])
debt debt
r Interest rate for equity capital
eq
at at
r Expected return on equity after taxes (= r ⋅ [1–it])
eq eq
bt
r Expected return on equity before taxes (= r + β ⋅ [r – r ])
eq f m f
r Interest rate for a risk-free investment
f
R Risk expressed in a quantified return loss
loss
r Nominal discount rate
nominal
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Symbol Name of quantity Unit
r Real discount rate
real
r discount rate in period t
t
Sdebt Share of debt capital (= Cdebt/Cinvest)
S Share of equity capital (= C /C )
eq eq invest
SpecPrice Specific energy price (energy carrier A) in period t €/kWh
energy_A, t
SPP or SPB Simple Payback Period years
t period year
T Lifetime of the investment years
Ttax Depreciation period (only relevant if taxes are considered) years
VAT Value Added Tax
WACC Weighted Average Cost of Capital after taxes in first year
at
at at
(= S ⋅ r + S ⋅ r )
eq eq debt debt
WACC Weighted Average Cost of Capital before taxes in first year
bt
bt bt
(= S ⋅ r + S ⋅ r )
eq eq debt debt
5 Valuation procedure
For the valuation of an ERI the organization shall (as shown in Figure 1) complete the following tasks:
A. Setting up the model:
1. determine all benefits and efforts that result from the given ERI (including all relevant energy
flows);
2a. quantify the benefits and efforts of the potential investment;
2b. describe in a qualitative manner all those effects that can’t be quantified;
3a. monetise the benefits and efforts to payments out and payments in (the relevant cash flows) taking
into account the expected price variations for each cash flow, and estimated degradation;
3b. specify non-monetisable effects;
4. determine the number of periods that should be considered (regularly the lifetime of an
investment) and specify the points in time when the cash flows occur;
5. estimate all relevant risk factors, as appropriate;
6. determine the appropriate discount rate for discounting the cash flows;
B. Calculation:
7. calculate the Net Present Value of the ERI using the most-likely parameter settings, which will
result in the most-likely-case scenario;
8. perform a sensitivity analysis under variation of all adjustment parameters that are liable to
uncertainty, as appropriate;
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9. perform a scenario analysis including at a minimum a worst-case, and best-case scenario;
C. Assessment:
10. interpret the quantitative and the qualitative results;
D. Reporting:
11. present the calculation and its results in a transparent and retraceable manner.
Figure 1 — Valuation procedure
For explanation purposes the valuation procedure is outlined by using an example for an ERI (here:
exchange pumps for a cooling system).
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6 Setting up a model (phase A)
6.1 Determination and qualitative description of benefits and efforts
Initially, all benefits and efforts that result from an ERI shall be described as qualitative data. This
process requires thinking beyond the obvious financial effects in order to account for all benefits and
efforts which might be relevant for the investment decision.
The organization shall divide “benefits and efforts” into the sub-categories
— “energy flow effects” (expressed as energy and financial effects),
— “additional financial effects” (that go beyond the energy flow effects), and
— “miscellaneous effects”, if applicable,
as shown in Table 2.
Visualization of energy flow effects might improve the overall understanding. This could be done by
setting up an energy flow chart (see example in Annex D).
“Additional financial effects” and “miscellaneous effects” are considered as “non-energy effects” which
can have a strong influence on the profitability of an investment (e.g. subsidies, increase in productivity,
marketing effects etc.) and should therefore be included in the valuation.
Qualitative effects such as noise reduction, cleaner air, less pollution, less GHG emission etc. shall be
checked. All effects shall be listed and will be included later in the valuation report to show all financial
and other impacts of the investment.
When determining the benefits and efforts of the ERI indirect effects can occur that result from the
investment, including:
— cost reduction resulting from lower CO taxes and GHG emission allowances,
2
— other tax related incentives connected with energy related investments.
EXAMPLE An energy performance improvement action leads to a reduction in electricity use of 150 000 kWh
per year. Assuming an individual CO factor for electricity of 486 g/kWh the action leads to a CO reduction of
2 2
72,9 tons per year. Should the CO2-tax amount to 80 € per ton this would lead to an additional financial benefit of
5 832 € per year.
At this stage benefits and efforts are listed, but they are not quantified or monetised. At the end of this
step the results could look like Table 2.
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Table 2 — Benefits and efforts of the given example
Example: replacement of pumps in a cooling
Effects of the ERI
system in order to increase the energy efficiency
Initial investment for new pumps
additional financial effects
Efforts Designing a new pump system
miscellaneous effects Production losses during set up
energy flow effects Annual energy savings (electricity)
Less maintenance and repair costs
additional financial effects Scrap value of old pumps
Benefits Potential incentives (e.g. tax reductions)
Noise reduction
miscellaneous effects Enhancement of production reliability
New pumping system takes up less space
Sometimes energy performance improvement actions require additional energy flows in order to
generate a net energy efficiency advantage (e.g. CHP systems, see example in Annex D). These additional
energy flows shall also be considered at this stage (in section “efforts”).
6.2 Quantification of the benefits and efforts
In the second step, all effects that were gathered in step 1 shall be quantified, if possible.
The estimation of the
— expected energy savings through the energy performance improvement action or
— energy generated through the usage of new or improved energy supply systems
shall be based on relevant, reliable, traceable and transparent technical calculations. These calculations
can be conducted by the organization or an external service provider with adequate competences in
energy matters.
Calculations should also take into account information on possible degradation over time (see 6.3).
NOTE Guidance for calculations of energy savings can be found in e.g. EN 16212, ISO 17741 or, ISO 50046.
The methodology for such calculations however is not part of this standard.
Table 3 shows the data for the given example in which the quantified values reveal the most-likely-case.
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Table 3 — Quantification of benefits and efforts
Effects of the ERI Quantity
Initial investment for new pumps 5 pumps
additional
financial effects
Designing new pump system 100 h
Efforts
miscellaneous 15 h during the exchange of
Production losses during set up
effects the pumps
energy flow
Annual energy saving (electricity) 150 000 kWh/a
effects
Less maintenance and repair costs 5 h less every two years
additional
financial effects
Scrap value of old pumps 5 pumps
Benefits
Noise reduction reduction from 90 ⟶ 65 dB
miscellaneous Enhancement of production reliability not quantifiable
effects
New pumping system takes up less
2
10 m of space saving
space
Effects which cannot be quantified could also be relevant for the decision. Therefore, they shall be
described, weighted regarding their relevance and - if relevant for the decision - be assessed (see 8.1)
and considered in the valuation report (see Clause 9).
6.3 Monetisation, determination of the relevant p
...
SLOVENSKI STANDARD
oSIST prEN 17463:2020
01-marec-2020
Metodologija za vrednotenje investicij v zvezi z energijo (ValERI)
Methodology for the Valuation of Energy Related Investments (ValERI)
Methodik zur Bewertung von energiebezogenen Investitionen (ValERI)
Méthodologie pour l'évaluation des investissements liés à l'énergie (ValERI)
Ta slovenski standard je istoveten z: prEN 17463
ICS:
27.015 Energijska učinkovitost. Energy efficiency. Energy
Ohranjanje energije na conservation in general
splošno
oSIST prEN 17463:2020 en,fr,de
2003-01.Slovenski inštitut za standardizacijo. Razmnoževanje celote ali delov tega standarda ni dovoljeno.
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oSIST prEN 17463:2020
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oSIST prEN 17463:2020
EUROPEAN STANDARD
DRAFT
prEN 17463
NORME EUROPÉENNE
EUROPÄISCHE NORM
January 2020
ICS
English version
Methodology for the Valuation of Energy Related
Investments (ValERI)
Méthodologie pour l'évaluation des investissements Methodik zur Bewertung von energiebezogenen
liés à l'énergie (ValERI) Investitionen (ValERI)
This draft European Standard is submitted to CEN members for enquiry. It has been drawn up by the Technical Committee
CEN/CLC/JTC 14.
If this draft becomes a European Standard, CEN and CENELEC members are bound to comply with the CEN/CENELEC Internal
Regulations which stipulate the conditions for giving this European Standard the status of a national standard without any
alteration.
This draft European Standard was established by CEN and CENELEC in three official versions (English, French, German). A
version in any other language made by translation under the responsibility of a CEN and CENELEC member into its own
language and notified to the CEN-CENELEC Management Centre has the same status as the official versions.
CEN and CENELEC members are the national standards bodies and national electrotechnical committees of Austria, Belgium,
Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Republic of North Macedonia, Romania, Serbia,
Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey and United Kingdom.
Recipients of this draft are invited to submit, with their comments, notification of any relevant patent rights of which they are
aware and to provide supporting documentation.Recipients of this draft are invited to submit, with their comments, notification
of any relevant patent rights of which they are aware and to provide supporting documentation.
Warning : This document is not a European Standard. It is distributed for review and comments. It is subject to change without
notice and shall not be referred to as a European Standard.
CEN-CENELEC Management Centre:
Rue de la Science 23, B-1040 Brussels
© 2020 CEN/CENELEC All rights of exploitation in any form and by any means Ref. No. prEN 17463:2020 E
reserved worldwide for CEN national Members and for
CENELEC Members.
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oSIST prEN 17463:2020
prEN 17463:2020 (E)
Contents Page
European foreword . 3
Introduction. 4
1 Scope . 6
2 Normative references . 6
3 Terms and definitions. 6
4 Symbols, abbreviations and subscripts . 9
5 Valuation procedure . 10
6 A Setting up the model . 12
7 B Calculation . 18
8 C Assessment . 23
9 D Reporting . 24
Annex A (informative) The NPV calculation Table (basic version) with visible formulas . 26
Annex B (informative) Comprehensive version of the NPV calculation table . 28
Annex C (informative) Selection of the appropriate valuation method . 39
Annex D (informative) Case study: Application of the valuation procedure to the integration
of a cogeneration unit within an industry company . 49
Annex E (informative) Checklist for the Valuation Report . 57
Annex F Annex F (informative) Consideration of risk . 59
Annex G Annex G (informative) Consideration of price variation . 62
Bibliography . 63
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European foreword
This document (prEN 17463:2020) has been prepared by Technical Committee CEN/CLC/JTC 14
“Energy efficiency and energy management in the framework of energy transition”, the secretariat of
which is held by UNI.
This document is currently submitted to the CEN Enquiry.
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Introduction
In order to reach the energy related targets of the EU and its member states, energy related
investments (ERIs) have to increase. The current lack of investments may not only result from a lack
of the available capital but also from a lack of reliable financial evaluations of the benefits of ERIs.
Different investment ideas often compete for the available money within organisations. Therefore,
enhancement of the financeability of ERIs can be achieved by showing the full economical value that
they are able to generate. When this is done properly, priorities for budgets of ERIs should rise
automatically and thus more investments will be undertaken.
The state of the art of today’s energy related project valuation in practise reveals that in order to help
the user to undertake a firm and correct valuation it is necessary to avoid:
— incorrect results which result from the neglection of relevant parameters and cash flows;
— intransparent calculation models which are difficult to understand;
— models containing errors or that are incomplete;
— use of of calculated costs instead of cash flows;
— time value of money not beeing considered,
— discount rate beeing used in an unreflected manner;
— risks beeing not or not properly considered;
— missing sensitivity and scenario analyses;
— missing traceability;
— missing interpretation of results;
— price variation rates (very important for energy project valuation) beeing not appropriately
considered.
The objectives of this European Standard are
— to help proposers of energy related investments (ERIs) to valuate their ideas economically and
qualitatively in a uniform, transparent and understandable way by generating all material
information that is relevant for a decision;
— to generate comparable results (for this it is important to ensure that the estimation of the cash
flows is done in a comparable way by using correct price variations, the usage of marginal prices
for all cash flows etc.)
— to help the elaborator of the valuation to generate valuation results than can be easily understood
by those who decide upon them;
— to help the decision maker and possible financial institutions who decide on the basis of the
valuation results and expect the results to be correct and complete but also easy to understand,
retraceable and explicit (material);
— to complement other standards or protocols that focus on the technical determination of energy
savings and
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In order to accomplish these objectives this European Standard offers a valuation procedure, a
calculation methodology (just one), and a documentation structure that covers the following features:
— application of one calculation method only;
— correct and complete results (Net Present Value considering among other things also all relevant
cash flows and their price variation rates over the whole project lifetime);
— unequivocal (one indicator at the end which can be directly used for decision-making);
— uniform (a standard);
— easy to use (table based, one uniform calculation table);
— retraceable and easy to reproduce (calculations are transparent and the assumptions made are
explained);
— as simple as possible;
— flexible (the user can adjust parameters and can customise the calculation table);
— undertaking of sensitivity and scenario analyses;
— the standard contains templates for reporting the calculation results and all additional qualitative
effects.
Transparent calculations including retraceable assumptions that show the full value of ERIs will help
organisations as well as households to identify the added value resulting from such ERIs. The
proposed methodology could also be used in energy reviews/audits (according to EN 16247-1), when
prioritising energy improvement potentials.
An easy to use and standardized procedure would be helpful as energy management teams might not
always include personell that is equipped to translate technical ideas into conclusive economical
results in order to ensure a solid basis for decision-making.
This European standard relates to standards regarding energy in general. The most relevant
standards on the international and European level might be EN ISO 50001 and EN 16247-1,
EN 15900. Those standards state, that ERIs should be evaluated and prioritised but give no guidance
on the methodology and procedure.
This standard proposes the use of “Net Present Value” (NPV) calculations and its result as a basis for
decision-making.
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1 Scope
This document specifies requirements for a valuation of energy related investments (VALERI). It
provides a description on how to gather, calculate, evaluate and document information in order to
create solid business cases based on Net Present Value calculations for ERIs. The standard is
applicable for the valuation of any kind of energy related investment.
The document focusses mainly on the valuation and documentation of the economical impacts of ERIs.
However, non-economical effects (e.g. noise reduction) that may occur through undertaking an
investment are considered as well. Thus, qualitative effects (e.g. impact on the environment)– even if
they are non-monetisable – are taken into consideration.
2 Normative references
There are no normative references cited for 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:
• IEC Electropedia: available at http://www.electropedia.org/
• ISO Online browsing platform: available at http://www.iso.org/obp
3.1
adjustment parameter
quantifiable parameter affecting the results of the valuation process
Example: energy savings (kWh), discount rate, project lifetime, energy price variation rates etc
3.2
degradation
decrease in the performance characteristics or service life of a product
Note 1 to entry: The degradation rate is measured as performance decline per year (e.g. 1 %/a).
Note 2 to entry: For the purpose of this document deterioration (decline in the performance of an efficiency
measure) is included in the concept of degradation.
[SOURCE: EN 60194:2007-03 – NOTE added]
3.3
benefits
positive effects resulting from an investment
Note 1 to entry: Benefits can have a qualitative, quantitative, or a financial/fiscal nature.
Note 2 to entry: Benefits can be direct or indirect effects
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3.4
cash flow
movement of money
Example: Initial payment of an investment
Note 1 to entry: Depreciation is not a cash flow
Note 2 to entry: In this document cash flow is also refered to as payment (P).
Note 3 to entry: Energy savings are considered as cash flows into a business or project as they reduce the
payments for energy consumption.
3.5
discount factor “q”
multiplier (1+r) of a cash flow to calculate the present value (PV) depending on the discount rate (r)
and the period (t)
t t
Note to entry 1: For each period (t) the cumulated discount factor is calculated with (1+r) or q .
3.6
discount rate “r”
interest rate that reflects the time value of money
Note 1 to entry: Abbreviated by “r” (“r” for required rate of return).
Note 2 to entry: The risk may also be taken into account when setting the value of the discount rate.
3.7
efforts
negative effects resulting from an investment
Note 1 to entry: Efforts can have a qualitative, quantitative, or a financial/fiscal nature.
Note 2 to entry: The negative effects may occur in a direct or indirect way.
3.8
energy related investment (ERI)
any kind of investment in which energy consumption or energy generation plays a role irrespective
whether it is an energy efficiency measure or an energy supply system project
3.9
internal rate of return (IRR)
discount rate at which the net present value (NPV) of all cash flows of a project equals zero for the
lifetime of the project
3.10
investment risk
the volatility of the return of an investment, particularly the likelihood of occurrence of losses relative
to the expected return on any particular investment
Note 1 to entry: Investment risks may derive from credit risk, construction risks, operational and maintenance
risks, performance risks etc.
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3.11
lifetime of an investment
period during which the investment causes cash flows
3.12
monetisation
transformation of benefits and efforts into cash flows
Note 1 to entry: This is usually done by multiplying the quantitified benefits and efforts with the specific price
per unit.
3.13
net present value
(NPV)
sum of discounted cash flows over the whole lifetime of an investment
3.14
non-energy effects
effects that result from an ERI but are not directly related to the energy consumption or generation
Example: motivation of employees, increased production capcity, less noise, better working
conditions etc
3.15
payback period
time required to recover the outpayments of an investment
3.16
risk premium
compensation for investors accounting for the given risk compared to that of a risk-free asset
Note to entry 1: Risk premium can be included in the interest rate or defined as an additional cash flow.
3.17
scenario analysis
procedure to calculate extreme but still realistic results
3.18
sensitivity analysis
procedure to assess the impact of changes of adjustment parameter settings on the NPV
3.19
valuation of energy related investments
(VALERI)
procedure of assessing and reporting financial and non-financial effects of an ERI in order to lay a
foundation for decision-making
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4 Symbols, abbreviations and subscripts
For the purposes of this document, the specific symbols, abbreviations and subscripts listed in Table 1
apply.
Table 1 – Symbols, abbreviations and subscripts
Symbol / Name of quantity Unit
Abbriviation
AW Annual Worth (or Annuity) €
degrad Annual degradation
CHP Combined Heat and Power system
ded Deduction to account for risk in period t (=∑P × f ) €
risk, t t ded_risk
DPB or DPP Discounted Payback Period years
epr Annual price variation energy
E Annual energy savings for energy carrier “A” without considering kWh/year
savings, A
degradation
f Risk deduction factor (= p × R )
ded_risk loss loss
IRR Internal Rate of Return
it Income tax rate
LCC Life Cycle Cost €
NPV Net Present Value €
NS Net Savings €
P Payment (in payment or outpayment) €
PI Profitability Index
p Probability of the occurrence of the net return loss
loss
pr Annual price variation not energy
PW Present Worth or Present Value €
q Discounting factor (= 1+r)
r Interest rate for debt capital
debt
bt Interest rate for debt capital (before taxes)
rdebt
at bt
rdebt Interest rate for debt capital after taxes (= r × [1–it])
debt
r Interest rate for equity capital
eq
at bt
r Expected return on equity after taxes (= r × [1–it])
eq eq
bt Expected return on equity (before taxes) (= r + β × [r – r ])
r f m f
eq
r Interest rate for a risk-free investment
f
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Symbol / Name of quantity Unit
Abbriviation
R Risk expressed in a quantified return loss
loss
r Nominal discount rate
nominal
r Real discount rate
real
r discount rate in period t
t
Share Share of debt capital (= Debt capital/Total investment capital)
debt
Share Share of equity capital (= equity capital/total investment capital)
eq
SpecPrice Specific energy price (energy carrier A) in period t €/kWh
energy_A,
t
SPP or SPB Simple Payback Period years
SIR Saving Investment Ratio
SSIR Simple Savings to Investment Ratio
t period year
T Lifetime of the investment years
T Depreciation period (only relevant if taxes are considered) years
tax
VAT Value Added Tax
WACC Weighted Average Cost of Capital after taxes in first year
at
at at
(= Share × r + Share × r )
eq eq debt debt
WACC Weighted Average Cost of Capital before taxes in first year
bt
bt bt
(= Share × r + Share × r )
eq eq debt debt
5 Valuation procedure
For the valuation of an ERI the organization shall (as shown in Figure 1):
A. Setting up the model
1. determine all benefits and efforts that result from the given ERI (including all relevant
energy flows);
2. quantify the benefits and efforts of the potential investment, and describe in a qualitative
manner all those effects that can’t be quantified;
3. monetise the benefits and efforts to outpayments and inpayments (the relevant cash flows)
taking into account the expected price variations for each cash flow, and estimating price
variation effects and degradation; specify non-monetisable effects;
4. determine the number of periods that should be considered (regularly the lifetime/lifespan
of an investment) and specify the points in time when the cash flows occur;
5. estimate all relevant risk factors, as appropriate;
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6. determine the appropriate discount rate for discounting the cash flows;
B. Calculation
7. calculate the Net Present Value of the ERI using the most likely parameter-settings, which
will result in the most likely case scenario;
8. perform a sensitivity analysis under variation of all adjustment parameters that are fraught
to uncertainty, as apropriate;
9. perform a scenario analysis including at a minimum a worst-case, and best-case scenario;
C. Assessment
10. interpret the quantitative and the qualitative results;
D. Reporting
11. present the calculation and its results in a transparent and retraceable manner.
Figure 1 – Valuation procedure
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For explanation purposes the valuation procedure is outlined by using an example for an ERI (here:
exchange pumps for a cooling system).
6 A Setting up the model
6.1 Determination and qualitative description of benefits and efforts
In the beginning, all benefits and efforts that result from an ERI shall be described as qualitative data.
This process requires thinking beyond the obvious financial effects in order to account for all relevant
benefits and efforts which might be relevant for the investment decision.
The organization shall divide “benefits and efforts” into the sub-categories
— “energy flow effects” (expressed as energy and financial effects),
— “additional financial effects” (that go beyond the energy flow effects), and
— “miscellaneous effects”,
as shown in Table 2.
Visualization of energy flow effects might improve the overall understanding. This could be done by
setting up an energy flow chart (see example in Annex D).
“Additional financial effects” and “miscellaneous effects” are considered as “non-energy effects”
which may have a strong influence on the profitability of an investment (e.g. subsidies, increase in
productivity, marketing effects etc.) and should therefore be included in the valuation.
Qualitative effects such as noise reduction, cleaner air, less pollution, less GHG emission etc. shall be
checked. All effects shall be listed and later be included in the valuation report to show all finacial and
other impacts of the investment.
When determining the benefits and efforts of the ERI indirect effects may occur that result from the
investment, including:
— cost reduction resulting from lower CO taxes and GHG emission allowances,
2
— other tax related invcentives connected with energy related investments.
Example: A measure leads to a reduction in electricity use of 150 000 kWh per year. Assuming an
individual CO factor for electricity of 486 g/kWh the measure leads to a CO reduction of 72,9 tons
2 2
per year. Shoul the CO -tax amount to 80 € per ton this would lead to an aditional financial benefit of
2
5 832 € per year.
At this stage benefits and efforts are listed, but they are not quantified or monetised. At the end of this
step the results could look like Table 2.
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Table 2 – Benefits and efforts of the given example
here: replacement of pumps in a cooling system
Effects of the ERI
in order to increase the energy efficiency
Initial investment for new pumps
additional financial effects
Efforts Designing a new pump system
miscellaneous effects Production losses during set up
energy flow effects Annual energy savings (electricity)
Less maintenance and repair costs
additional financial effects Scrap value of old pumps
Benefits Potential incentives (e.g. tax reductions)
Noise reduction
miscellaneous effects Enhancement of production reliability
New pumping system takes up less space
The investment measure to be valued usually has a defined effect on a process section (n) in a longer
process chain. When determining the benefits and efforts of the planned measure, the effects on the
directly preceding (n-1) and downstream (n+1) processes or any other preceding or downstream
processes shall be taken into account. The efforts and benefits may have impact on different
processes.
Sometimes energy efficiency measures require additional energy flows in order to generate a net
energy efficiency advantage (e.g. CHP systems, see example in Annex D). These additional energy
flows shall also be considered at this stage (in section “efforts”).
6.2 Quantification of the benefits and efforts
In the second step all effects that were gathered in step 1 shall be quantified, if possible.
The estimation of the
— expected energy savings through the measure or
— energy generated through the usage of new or improved energy supply systems
shall be based on solid technical calculations. These calculations can be conducted by the organization
or an external service provider.
Calculations should also take into account information on possible degradation over time (see 6.3).
NOTE Guidance for calculations of energy savings can be found in e.g. EN 15459-1 or ISO 50046. The
methodology for such calculations however is not part of this standard.
Table 3 shows this data for the given example in which the quantified values reveal the most likely
case.
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Table 3 – Quantification of benefits and efforts
Effects of the ERI Quantity
Initial investment for new pumps 5 pumps
additional
financial effects
Designing new pump system 100 h
Efforts
miscellaneous 15 h during the exchange of
Production losses during set up
effects the pumps
energy flow
Annual energy saving (electricity) 150 000 kWh/a
effects
Less maintenance and repair costs 5 h less every two years
additional
financial effects
Scrap value of old pumps 5 pumps
Benefits
Noise reduction reduction from 90 — > 65 dB
miscellaneous Enhancement of production reliability not quantifiable
effects
New pumping system takes up less
2
10 m of space saving
space
Effects which cannot be quantified could also be relevant for the decision. Therefore, they shall be
described, weighted regarding their relevance and – if relevant for the decision – be assessed (see
8.1) and considered in the valuation report (see 9.1).
6.3 Monetisation, determination of the relevant points in time, consideration of price
variations and of degradation
Quantified benefits and efforts shall be transferred into cash flows, if possible. In order to do that, the
quantities are multiplied by the specific value for each unit whereas the multipliers reveal the most
likely case.
For each cash flow the organization shall determine:
— whether it is a regular or a single cash flow and when the cash flow will occur (point in time);
— what the expected price variation for each cash flow-series will be over the whole lifetime of the
investment; and
— the effect of the degradation.
Price variations may vary for different goods and services; therefore, differentiated price variation
rates shall be used, as appropriate. All assumptions for price variations shall be mentioned and
explained in the valuation report. The applied degradation rate shall be mentioned in the valuation
report as well as the source of information.
Quantifiable effects that cannot be monetised could also be relevant for the decision. Therefore, they
shall be described, weighted regarding their relevance and – if relevant for the decision – be assessed
(see 8.1) and considered in the valuation report (see 9.1).
Consideration of price variation effects:
In general, there are two options to consider price variation effects within the NPV calculation:
— One way is to calculate the NPV with inflation-adjusted cash flows (i.e. after removing the effects
of inflation), so with “real” values.
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— Another option is to use nominal values (i.e. revealing the price variation of the cash flows over
time).
For valuations of energy related investments only nominal values (not real values) as cash flow
streams shall be used (= option 2). Inflation adjustment should be avoided as long as models deal with
different price variation rates such as energy investments (see explanation in Annex G).
For the given example the price variation rates were set at 3 % per year for energy and 2 % per year
for maintenance (see Table 4).
The assumptions for the price variation rates shall be described in the valuation report.
Consideration of degradation:
Degradation is the decline of performance over time, differentiated in either
— an ongoing reduction of power supplied (energy supply systems) or
— a change in the performance of energy efficiency measures after implementation, leading to a
decrease in annual energy savings (also referred to as “deterioration”). It may be related to
system characteristics (e.g. by fouling of the heat exchanger in the boiler) or to behavioural
changes of people reverting back to their old habits/behaviour on energy use or even consuming
more energy as a reaction on reduced specific energy costs (rebound).
The degradation rate is measured as performance decline per year (e.g. 1 %/a).
For the given example the degradation is set to 0 %. The results for the given example are shown in
Table 4.
Table 4 – Overview of all effects, their characteristics and the time allocation of cash flows
Value
To be
Monet per
Point Price include
Effects of the isation unit Degrad
Quantity Amount in varia d in
ERI possib (specif a-tion
time tion final
le? ic
report?
costs)
Initial
investment 10 50
5 pumps yes year 0 – n.a.
for new 000 € 000 €/a
pumps
Designing
5
new pump 100 hours yes 50 €/h year 0 – n.a.
000 €/a
...
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