Economic Analysis and Financing Flashcards
7 cards from real Certified Energy Auditor Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Economic Analysis and Financing flashcards as text
A facility manager is comparing two energy upgrades. Project A has an NPV of $45,000 and Project B has an NPV of $38,000 with a lower initial cost. Which project should be selected if the goal is to maximize value?
Answer: Project A, because it has the higher NPV
NPV directly measures the dollar value added to the organization, so the project with the highest NPV maximizes value.
What does a benefit-cost ratio (BCR) of 1.5 indicate about an energy project?
Answer: The project generates $1.50 in benefits for every $1.00 spent
A BCR of 1.5 means that for each dollar of cost, the project delivers $1.50 in benefits, indicating a positive return.
An energy auditor calculates a Savings-to-Investment Ratio (SIR) of 0.85 for a proposed HVAC upgrade. What does this indicate?
Answer: The project does not recover its full investment and may not be economically justified
An SIR below 1.0 means the present value of savings is less than the investment cost, indicating the project is not cost-effective on a standalone basis.
Which financing mechanism allows a building owner to repay energy efficiency project costs through property tax assessments over time?
Answer: Property Assessed Clean Energy (PACE)
PACE financing is repaid through property tax bills, allowing owners to spread costs over long terms without upfront capital.
What is the primary advantage of using levelized cost of energy (LCOE) when comparing different energy systems?
Answer: It normalizes lifetime costs to a per-unit-of-energy basis for fair comparison
LCOE converts all lifetime costs — capital, O&M, fuel — into a single $/kWh figure, enabling apples-to-apples comparison across technologies.
In an Energy Savings Performance Contract (ESPC), who bears the financial risk if the projected energy savings are not achieved?
Answer: The Energy Service Company (ESCO)
In an ESPC, the ESCO guarantees the savings and bears the financial risk if savings fall short of projections.
A $100,000 energy project saves $18,000 per year. Using simple payback, how long will it take to recover the investment?
Answer: 5.6 years
Simple payback = $100,000 ÷ $18,000/year ≈ 5.6 years.