CMVP Financial Analysis & Energy Performance Contracting 2

Question 1

What is a Power Purchase Agreement (PPA) in the context of on-site energy generation?

Accepted Answer

An agreement where a third party owns and operates generation equipment and sells the output to the host site at an agreed rate

Answer

A contract where a client purchases energy equipment at a fixed price

Answer

A utility tariff structure for large commercial customers

Answer

A financing instrument for energy storage systems only

Question 2

In financial analysis of energy projects, 'cost avoidance' differs from 'cost savings' in that:

Accepted Answer

Cost avoidance represents the value of not incurring costs that would have been incurred without the project

Answer

Cost avoidance refers only to maintenance cost reductions

Answer

Cost savings are always larger than cost avoidance

Answer

Cost avoidance applies only to utility incentive programs

Question 3

When establishing the financial baseline for an EPC, which factor is most critical to document accurately?

Accepted Answer

Pre-retrofit energy consumption and cost data reflecting normal operations

Answer

The ESCO's overhead and profit margin

Answer

The client's current credit rating

Answer

Future energy prices over the contract term

Question 4

What is the typical role of an independent third-party M&V agent in an EPC?

Accepted Answer

To provide unbiased verification of savings calculations, protecting both the client and ESCO

Answer

To negotiate energy tariffs with the local utility on behalf of the ESCO

Answer

To assume financial liability for any shortfall in guaranteed savings

Answer

To manage day-to-day operations of the installed energy equipment

Question 5

Life Cycle Cost Analysis (LCCA) in energy project evaluation considers:

Accepted Answer

All costs and savings over the project's life, including capital, operations, maintenance, and energy

Answer

Only the initial capital cost of the energy efficiency measures

Answer

Only the energy cost savings over the payback period

Answer

The resale value of energy equipment at project end

Question 6

In EPC financial modeling, what is the purpose of a sensitivity analysis?

Accepted Answer

To assess how changes in key assumptions (energy prices, savings rates) affect project financial outcomes

Answer

To determine which M&V option under IPMVP is most appropriate

Answer

To identify equipment components sensitive to voltage fluctuations

Answer

To satisfy regulatory filing requirements for energy projects

Question 7

An adjustment clause in an EPC is used to:

Accepted Answer

Modify the baseline or savings calculations to account for changes in operating conditions from the baseline period

Answer

Allow the ESCO to renegotiate the guarantee if the client is unhappy

Answer

Increase contract duration when savings underperform

Answer

Reduce the M&V reporting frequency after the first year