CEP CEP Financial Analysis & Energy Budgeting 1

Question 1

Which financial metric measures the ratio of annual energy cost savings to the total investment required for an energy project?

Accepted Answer

Return on investment (ROI)

Answer

Return on investment (ROI) is calculated as annual savings divided by total investment cost, expressed as a percentage.

Question 2

In energy budgeting, what does a 'load factor' represent?

Accepted Answer

The ratio of average demand to peak demand over a period

Answer

Load factor is the ratio of average load to peak load over a billing period, indicating how efficiently capacity is being used.

Question 3

Which cost component in an electricity bill is typically based on the highest 15- or 30-minute interval of demand recorded during the billing period?

Accepted Answer

Demand charge

Answer

Demand charges are assessed on the peak demand recorded during the billing period, incentivizing customers to reduce peak consumption.

Question 4

A company pays $0.08/kWh for energy and $12/kW for demand. If monthly usage is 500,000 kWh and peak demand is 1,200 kW, what is the total monthly bill?

Accepted Answer

$54,400

Answer

Total = (500,000 × $0.08) + (1,200 × $12) = $40,000 + $14,400 = $54,400.

Question 5

What is 'avoided cost' in the context of energy procurement financial analysis?

Accepted Answer

The cost of energy that was not purchased due to efficiency improvements

Answer

Avoided cost refers to savings realized by not having to purchase energy or capacity that demand reduction or generation measures eliminate.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP CEP Financial Analysis & Energy Budgeting 1