CRD Economic Analysis & Project Management Flashcards

How does the Net Present Value (NPV) method improve on simple payback when evaluating a geothermal investment?

Answer: NPV accounts for the time value of money by discounting future energy savings to their present-day worth

NPV discounts future cash flows at an assumed rate of return, providing a more accurate picture of true economic value than simple payback alone.

When preparing a geothermal project proposal for a homeowner, what energy cost escalation assumption is commonly used in long-term savings projections?

Answer: An annual energy cost escalation rate of 2–5% reflecting historical utility price trends

Historical US energy price data supports using a 2–5% annual escalation rate in projections, which gives realistic long-term savings estimates.

What is the typical useful life assumption used for a residential geothermal heat pump unit when calculating lifecycle costs?

Answer: 20–25 years for the heat pump unit and 50+ years for the ground loop

Geothermal heat pump units typically last 20–25 years while the HDPE ground loop piping can last 50 years or more, significantly improving lifecycle economics.

A residential geothermal designer is comparing two loop configurations with different installed costs. Which analysis method should be used to determine which provides better long-term value?

Answer: Lifecycle cost analysis comparing total costs including installation, operation, and maintenance over the project life

Lifecycle cost analysis is the proper tool for comparing alternatives because a higher upfront cost can yield lower total cost through reduced energy consumption.

What documentation is typically required by a lender when a homeowner finances a geothermal system through a green energy loan program?

Answer: A signed contractor proposal, permit documentation, and evidence of system qualification such as ENERGY STAR certification

Green energy lenders require contractor proposals, permits, and certification evidence to confirm the system qualifies for the program's favorable terms.

How does increasing the upfront investment in a larger, more efficient ground loop typically affect a residential geothermal system's long-term economics?

Answer: It reduces annual operating costs through higher system efficiency, improving total lifecycle economics despite the higher initial cost

A larger loop provides higher entering water temperatures in heating and lower temperatures in cooling, boosting COP and reducing annual energy costs to offset the added upfront expense.