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

Monthly demand charge = $15/kW × 500 kW = $7,500.

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

In an ESPC, the contractor is paid from the verified energy savings, directly aligning contractor incentives with actual performance outcomes.

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

MACRS is the IRS-approved depreciation system that determines how capital costs of energy equipment are deducted for tax purposes over specified recovery periods.

Question 4

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

Accepted Answer

The cost of the next unit of energy consumed

Answer

Marginal cost is the cost of consuming one additional unit of energy, which is critical for evaluating the economic benefit of incremental energy reductions.

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

Simple ROI = (Total savings − Investment) / Investment × 100 = ($250,000 − $100,000) / $100,000 × 100 = 150%.

CEM - Certified Energy Manager Practice Test

CEM - Certified Energy Manager Practice Test

CEM Energy Economics and Financial Analysis 2