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

In a PPA, a third-party developer owns, operates, and maintains the generation system (e.g., solar) and sells the electricity produced to the host customer at a predetermined rate, often below retail utility rates.

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 is the value of expenditures prevented by an efficiency measure (e.g., avoiding a rate increase), while cost savings are reductions in actual expenditures compared to the established baseline.

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 pre-retrofit baseline must accurately capture normal operational energy use and costs so that savings can be measured against a defensible reference point throughout the contract.

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

An independent M&V agent provides objective, unbiased verification of savings, which protects both parties by ensuring that reported savings are accurate and agreed measurement protocols are followed.

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

LCCA evaluates the total cost of ownership over a project's lifespan, encompassing initial investment, ongoing O&M costs, energy savings, and residual value to determine overall cost-effectiveness.

CMVP - Certified Measurement and Verification Professional Practice Test

CMVP - Certified Measurement and Verification Professional Practice Test

CMVP Financial Analysis & Energy Performance Contracting 2