CEP Financial Analysis & Energy Budgeting Flashcards

Net Present Value (NPV) in energy project evaluation accounts for which key factor that simple payback does not?

Answer: Time value of money

NPV discounts future cash flows back to present value, recognizing that a dollar saved today is worth more than a dollar saved in the future.

An energy manager is evaluating two projects with identical NPVs. Project A has a 2-year payback; Project B has a 5-year payback. Which selection criterion would favor Project A?

Answer: Shorter capital recovery period

A shorter capital recovery period reduces financial risk and frees capital sooner, making Project A preferable when payback period is the selection criterion.

What does a 'fuel adjustment clause' (FAC) on an electricity bill represent?

Answer: A variable charge that passes fuel cost changes from the utility to the customer

A fuel adjustment clause allows utilities to pass through fluctuations in their fuel procurement costs directly to customers, adjusting bills up or down accordingly.

In energy budget forecasting, which method uses historical energy use per unit of output (e.g., kWh/sq ft) to project future consumption?

Answer: Top-down intensity benchmarking

Top-down intensity benchmarking applies historical energy intensity ratios to forecasted production or floor area to estimate future energy use.

Which of the following best describes a 'variance analysis' in energy budget management?

Answer: Comparison of actual energy spend to budgeted energy spend to identify deviations

Variance analysis compares actual expenditures to budgeted amounts, helping managers identify and explain deviations so corrective action can be taken.

A building uses 1,200,000 kWh annually and has 120,000 sq ft of floor space. What is its energy use intensity (EUI) in kBtu/sq ft/year? (1 kWh = 3.412 kBtu)

Answer: 34.1 kBtu/sq ft/yr

EUI = (1,200,000 kWh × 3.412 kBtu/kWh) / 120,000 sq ft = 4,094,400 / 120,000 ≈ 34.1 kBtu/sq ft/yr.