CEM Energy Economics and Financial Analysis 2

Question 1

A facility's monthly electricity bill shows a demand charge of $15/kW for a peak demand of 500 kW. What is the monthly demand charge?

Accepted Answer

$7,500

Answer

$3,500

Answer

$5,000

Answer

$10,000

Question 2

In an Energy Savings Performance Contract (ESPC), the contractor's payment is primarily based on:

Accepted Answer

Verified energy savings achieved after implementation

Answer

Total hours worked on the project

Answer

The number of energy conservation measures installed

Answer

The capital cost of equipment installed

Question 3

The Modified Accelerated Cost Recovery System (MACRS) is used in energy project financial analysis to:

Accepted Answer

Determine tax depreciation deductions over the asset's recovery period

Answer

Calculate the escalation rate for energy costs

Answer

Estimate the salvage value of equipment

Answer

Calculate the present value of energy savings

Question 4

In energy economics, the marginal cost of energy refers to:

Accepted Answer

The cost of the next unit of energy consumed

Answer

The average cost across all energy consumption

Answer

The fixed monthly service charge from the utility

Answer

The minimum bill amount charged by the utility

Question 5

An energy project requires a $100,000 investment and generates $25,000 in annual savings over a 10-year life. What is the simple Return on Investment (ROI)?

Accepted Answer

150%

Answer

25%

Answer

250%

Answer

25% per year

Question 6

The 'avoided cost' of energy is most accurately described as:

Accepted Answer

The cost savings that result from not consuming a unit of energy

Answer

The cost of energy already consumed

Answer

The penalty for exceeding contracted energy demand

Answer

The cost of renewable energy certificates

Question 7

The concept of 'time value of money' in energy project analysis implies that:

Accepted Answer

A dollar of savings today is worth more than a dollar of savings in the future

Answer

Energy costs increase over time due to inflation

Answer

Energy projects should only consider costs within the first year

Answer

Future maintenance costs can be ignored in the analysis