Certified Energy Auditor Certification Economic Analysis of Projects 5

Question 1

In a sensitivity analysis for an energy retrofit project, which variable typically has the greatest impact on project NPV?

Accepted Answer

Energy price escalation rate

Answer

Energy price escalation rate has a compounding effect over the project life and often dominates sensitivity analysis results for energy projects.

Question 2

A performance contract (ESPC) shifts the financial risk of energy savings shortfalls to the:

Accepted Answer

Energy Service Company (ESCO)

Answer

In an Energy Savings Performance Contract, the ESCO guarantees the projected savings and absorbs the financial risk if actual savings fall short.

Question 3

When evaluating a portfolio of energy projects with limited capital, the economically optimal strategy is to:

Accepted Answer

Rank projects by SIR and fund the highest-SIR projects first

Answer

Ranking by SIR maximizes total present-value savings per dollar invested when capital is constrained, following FEMP and ASTM guidelines.

Question 4

The economic life of equipment used in LCC analysis is best defined as:

Accepted Answer

The period over which the equipment provides net positive savings versus the next-best alternative

Answer

Economic life ends when operating, maintenance, and replacement costs make retaining the equipment less favorable than replacing it with a better alternative.

Question 5

Measurement and Verification (M&V) costs should be included in a project's economic analysis because:

Accepted Answer

They are a real project cost that reduces net savings and affects all economic metrics

Answer

M&V costs are legitimate project expenses that reduce net savings and must be included in NPV, IRR, and payback calculations for accurate economic assessment.

Certified Energy Auditor Certification Practice Test

Certified Energy Auditor Certification Practice Test

Certified Energy Auditor Certification Economic Analysis of Projects 5