CEA Financial Analysis & Energy Project Economics Flashcards
6 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CEA Financial Analysis & Energy Project Economics flashcards as text
What is 'fuel escalation rate' and why is it important in energy economic analysis?
Answer: The projected annual percentage increase in energy prices used to forecast future savings
The fuel escalation rate is the assumed annual energy price increase applied to future savings projections, significantly affecting long-term project economics.
In the context of energy project financing, what is 'on-bill financing'?
Answer: Paying for energy equipment via monthly installments added to the utility bill
On-bill financing allows customers to repay energy efficiency loans through their utility bills, with repayments ideally offset by energy savings.
What is the primary purpose of a sensitivity analysis in energy project financial modeling?
Answer: To assess how changes in key assumptions (energy prices, costs) affect project outcomes
Sensitivity analysis tests how project financials change when critical variables like energy prices, interest rates, or savings estimates vary from baseline assumptions.
Which of the following is a primary benefit of using operating leases for energy equipment?
Answer: Payments are typically off-balance-sheet and treated as operating expenses
Operating leases keep equipment off the balance sheet, with payments recorded as operating expenses, which can be advantageous for organizations with capital budget constraints.
How is the Savings-to-Investment Ratio (SIR) interpreted when evaluating multiple energy measures?
Answer: Measures should be ranked by SIR from highest to lowest when prioritizing limited budgets
When budget constraints exist, ranking measures by SIR from highest to lowest ensures the most cost-effective measures are implemented first.
What is 'demand charge management' as a financial strategy in energy project economics?
Answer: Implementing measures that lower peak demand (kW) to reduce demand-based utility charges
Demand charge management focuses on reducing peak power draw (kW) because demand charges can represent 30–70% of commercial utility bills.