CEP Renewable Energy Technologies & Integration 2 — Questions and Answers
Question 1: Which metric best measures the long-term cost competitiveness of a renewable energy project compared to other generation technologies?
- Net present value (NPV)
- Internal rate of return (IRR)
- Levelized Cost of Energy (LCOE) (Correct answer)
- Debt service coverage ratio (DSCR)
Correct answer: Levelized Cost of Energy (LCOE)
LCOE expresses the average cost per unit of electricity over a project's lifetime, enabling apples-to-apples comparison across different generation technologies.
Question 2: What is a Renewable Energy Certificate (REC) and what does it represent?
- A government-issued operating permit for renewable plants
- A market instrument representing the environmental attributes of one megawatt-hour of renewable electricity generation (Correct answer)
- A credit used to offset renewable project construction costs
- An interconnection approval from the regional grid operator
Correct answer: A market instrument representing the environmental attributes of one megawatt-hour of renewable electricity generation
A REC represents the environmental attributes of one MWh of electricity generated from a qualifying renewable source and can be bought and sold separately from the physical electricity.
Question 3: Which interconnection standard governs how small renewable generators (≤20 MW) connect to the distribution grid in most U.S. states?
- NERC Reliability Standard FAC-001
- IEEE 1547 (Correct answer)
- FERC Order 2003
- UL 1741
Correct answer: IEEE 1547
IEEE 1547 is the national standard that sets technical requirements for interconnecting distributed energy resources, including small renewable generators, to the electric power system.
Question 4: A corporate energy buyer procures a solar PPA with a 'as-generated' shape. What basis risk does this create?
- The risk that the PPA price will exceed market prices over time
- The risk that the solar generation profile will not match the buyer's actual load profile, creating residual energy imbalances (Correct answer)
- The risk that the project will fail to achieve commercial operation
- The risk that transmission congestion will prevent energy delivery
Correct answer: The risk that the solar generation profile will not match the buyer's actual load profile, creating residual energy imbalances
Basis risk from profile mismatch arises when the renewable generator's output pattern differs from the buyer's consumption pattern, leaving the buyer with net-short or net-long positions in the market.
Question 5: What is the function of a Renewable Portfolio Standard (RPS) in the energy market?
- It sets a national price floor for renewable electricity
- It requires retail electricity suppliers to source a minimum percentage of their sales from eligible renewable resources (Correct answer)
- It provides direct cash grants to renewable developers
- It mandates interconnection timelines for renewable projects
Correct answer: It requires retail electricity suppliers to source a minimum percentage of their sales from eligible renewable resources
An RPS (also called a Renewable Energy Standard) legally requires utilities or retail suppliers to procure or generate a specified share of their electricity from qualifying renewable sources.
Question 6: Which factor most significantly determines the capacity factor of a wind energy project?
- The turbine manufacturer's warranty terms
- The average wind speed and distribution at the project site (Correct answer)
- The availability of federal tax credits
- The distance from the project to the nearest substation
Correct answer: The average wind speed and distribution at the project site
Capacity factor is primarily driven by the wind resource at the site—specifically the average wind speed and its statistical distribution—since power output scales with the cube of wind speed.
Question 7: In evaluating a solar-plus-storage project for procurement, what is the primary advantage of co-locating battery storage with a solar array?
- Eliminating the need for grid interconnection
- Allowing the solar project to shift generation to higher-value hours and provide grid services such as frequency regulation (Correct answer)
- Reducing the federal ITC basis eligible for credit
- Qualifying the project for a different NERC reliability standard
Correct answer: Allowing the solar project to shift generation to higher-value hours and provide grid services such as frequency regulation
Co-located storage allows the project to store excess solar generation during midday and discharge during evening peak hours when prices are higher, improving project economics and grid value.
CEP Renewable Energy Technologies & Integration 2
Which metric best measures the long-term cost competitiveness of a renewable energy project compared to other generation technologies?