Certified Energy Auditor Economic Analysis and Financing Questions and Answers

Question 1

An energy auditor is evaluating two mutually exclusive projects for a client.
Project A has a higher Net Present Value (NPV) but a lower Internal Rate of Return (IRR) than Project B.
The client's primary goal is to maximize the absolute value added to the company.
Which project should the auditor recommend and why?

Accepted Answer

Project A, because NPV is a direct measure of the total value a project is expected to add.

Answer

Project B, because its higher IRR indicates a more efficient use of capital.

Answer

Either project, as NPV and IRR are equally valid for this type of decision.

Answer

Neither project, until the payback period for both has been calculated.

Question 2

A school district lacks the upfront capital for a comprehensive lighting and HVAC retrofit but wants to proceed with the project and pay for it using the energy savings generated. A third-party company offers to design, install, and finance the project, guaranteeing that the annual savings will cover the debt service payments. This financing arrangement is best described as:

Accepted Answer

An Energy Savings Performance Contract (ESPC)

Answer

A power purchase agreement (PPA)

Answer

On-bill financing

Answer

A capital lease

Question 3

Which of the following is typically EXCLUDED from a standard Life-Cycle Cost Analysis (LCCA) for an energy efficiency measure?

Accepted Answer

Costs related to loss of employee productivity during installation

Answer

Initial purchase and installation cost

Answer

Projected annual energy costs

Answer

Future replacement costs of the equipment

Question 4

A facility manager implemented a large-scale chiller plant optimization project and needs to verify the savings for an ESPC. The project involves multiple interactive system changes, making it difficult to isolate the impact of any single measure. According to the International Performance Measurement and Verification Protocol (IPMVP), which option would be most appropriate for this scenario?

Accepted Answer

Option C: Whole Facility

Answer

Option A: Retrofit Isolation - Key Parameter Measurement

Answer

Option B: Retrofit Isolation - All Parameter Measurement

Answer

Option D: Calibrated Simulation

Question 5

A utility company offers a program allowing its residential customers to finance energy efficiency upgrades, such as new insulation or a heat pump, with no upfront cost. The customer repays the loan over time through a line item added to their regular monthly utility statement. This financing model is known as:

Accepted Answer

On-Bill Financing

Answer

Property Assessed Clean Energy (PACE)

Answer

Green Revolving Fund

Answer

Energy Savings Performance Contract (ESPC)

Question 6

When presenting the financial viability of an energy project, an auditor calculates the discount rate at which the Net Present Value (NPV) of all cash flows (both positive and negative) from the project equals zero. What financial metric has the auditor calculated?

Accepted Answer

Internal Rate of Return (IRR)

Answer

Simple Payback Period

Answer

Savings-to-Investment Ratio (SIR)

Answer

Return on Investment (ROI)