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
Which financial metric represents the ratio of annual energy cost savings to the total initial investment for an energy project?
Answer: Return on investment (ROI)
Return on investment (ROI) is calculated as annual savings divided by total investment, expressed as a percentage.
A lighting retrofit costs $50,000 and saves $12,500 per year in electricity. What is the simple payback period?
Answer: 4 years
Simple payback = Initial cost / Annual savings = $50,000 / $12,500 = 4 years.
Which discount rate concept is used in life-cycle cost analysis to account for the time value of money?
Answer: Discount rate
The discount rate converts future cash flows to present value, reflecting the time value of money in life-cycle cost analysis.
What does a positive Net Present Value (NPV) indicate about an energy project?
Answer: The project generates more value than its cost over the analysis period
A positive NPV means the discounted future savings exceed the initial investment, indicating the project adds financial value.
Which federal incentive allows businesses to deduct a percentage of the cost of qualifying energy-efficient commercial building improvements?
Answer: Section 179D deduction
Section 179D of the Internal Revenue Code provides a tax deduction for energy-efficient improvements to commercial buildings.
In energy project financing, what is a Power Purchase Agreement (PPA)?
Answer: A contract where a third party installs and owns equipment and sells energy output to the host
A PPA is a financial arrangement where a developer installs, owns, and operates energy equipment on a customer's site and sells the electricity to the customer at a contracted rate.