CEM Strategic Planning and Management 4 — Questions and Answers
Question 1: A hospital's energy manager is asked to quantify avoided energy costs from a recent retrofit. The correct approach is to compare actual post-retrofit consumption to:
- The industry average for similar-sized hospitals nationwide
- An adjusted baseline that accounts for changes in weather, occupancy, and production (Correct answer)
- The theoretical minimum energy use for the building type
- Last year's utility budget as approved by the CFO
Correct answer: An adjusted baseline that accounts for changes in weather, occupancy, and production
Savings must be measured against a weather- and production-adjusted baseline (M&V protocol) to isolate the retrofit's actual impact from external variables.
Question 2: Which IPMVP Option (International Performance Measurement and Verification Protocol) involves stipulating certain parameters rather than measuring them, to reduce M&V costs?
- Option A – Partially Measured Retrofit Isolation (Correct answer)
- Option B – Retrofit Isolation with full measurement
- Option C – Whole Facility measurement
- Option D – Calibrated Simulation
Correct answer: Option A – Partially Measured Retrofit Isolation
Option A stipulates (assumes) certain parameters such as operating hours while measuring others, balancing accuracy with reduced monitoring costs.
Question 3: What is the role of an Energy Service Company (ESCO) in a performance contract?
- To purchase the facility's energy from the utility on the owner's behalf
- To guarantee that energy savings will meet or exceed the project costs over the contract term (Correct answer)
- To provide regulatory compliance audits required by state energy offices
- To design and enforce the organization's ISO 50001 certification process
Correct answer: To guarantee that energy savings will meet or exceed the project costs over the contract term
In an energy performance contract, the ESCO guarantees measurable savings that service the project debt, transferring financial risk from the facility owner.
Question 4: An energy manager is building a business case for a $2M energy project. To calculate net present value (NPV), which discount rate is most appropriate to use?
- The current prime lending rate plus 10%
- The organization's weighted average cost of capital (WACC) or minimum acceptable rate of return (MARR) (Correct answer)
- The average annual inflation rate for energy commodities
- The utility's avoided cost rate published in its tariff schedule
Correct answer: The organization's weighted average cost of capital (WACC) or minimum acceptable rate of return (MARR)
NPV analysis uses the organization's WACC or MARR to reflect the opportunity cost of capital and the required financial hurdle rate for investments.
Question 5: A strategic energy management review reveals that compressed air leaks account for 30% of compressed air energy use. The best strategic classification for this finding is:
- Capital improvement requiring board approval
- Low-cost/no-cost operational improvement with rapid payback (Correct answer)
- Regulatory compliance gap requiring immediate shutdown
- Demand response opportunity requiring utility coordination
Correct answer: Low-cost/no-cost operational improvement with rapid payback
Compressed air leak repairs typically require minimal capital and return savings quickly, making them a high-priority, low-cost operational improvement.
Question 6: In developing an organization-wide energy strategy, identifying 'significant energy uses' (SEUs) is important because:
- SEUs are equipment categories exempt from utility demand charges
- SEUs account for the majority of energy consumption and offer the greatest savings opportunities (Correct answer)
- SEUs are regulated by OSHA and require mandatory reporting
- SEUs determine the depreciation schedule for tax purposes
Correct answer: SEUs account for the majority of energy consumption and offer the greatest savings opportunities
ISO 50001 requires organizations to identify SEUs—those consuming the most energy or offering the greatest improvement potential—to focus management attention effectively.
Question 7: An energy manager is negotiating with a utility for a green tariff. The primary strategic benefit of a green tariff for a large commercial customer is:
- Guaranteeing lower electricity rates than standard tariffs
- Enabling direct procurement of renewable energy while remaining on the utility's grid (Correct answer)
- Exempting the facility from demand charges during peak periods
- Providing backup power generation during grid outages
Correct answer: Enabling direct procurement of renewable energy while remaining on the utility's grid
Green tariffs allow large customers to source renewable electricity through the utility, supporting sustainability goals without owning generation assets.
CEM Strategic Planning and Management 4
A hospital's energy manager is asked to quantify avoided energy costs from a recent retrofit.
The correct approach is to compare actual post-retrofit consumption to: