EMP Energy Economics & Financial Analysis Flashcards

Which federal incentive program provides tax credits to businesses that invest in energy-efficient commercial buildings in the US?

Answer: Section 179D deduction

Section 179D of the Internal Revenue Code provides a tax deduction for energy-efficient commercial buildings that meet specific efficiency improvements.

What is the primary purpose of an energy baseline in financial analysis?

Answer: To establish a reference point for measuring actual energy savings

An energy baseline documents historical consumption before efficiency improvements, enabling accurate quantification of savings achieved by new measures.

What financial analysis method accounts for varying cash flows over time and the time value of money to evaluate energy projects?

Answer: Net Present Value (NPV)

NPV discounts all projected future cash inflows and outflows to present value, providing a more accurate long-term project evaluation than simple payback.

A demand charge on a utility bill is typically based on:

Answer: The highest 15-minute average power demand recorded during the billing period

Demand charges are assessed based on the highest peak power demand (kW) recorded, often measured as the greatest 15-minute interval average during the billing period.

What is the Internal Rate of Return (IRR) in energy project analysis?

Answer: The discount rate at which the NPV of a project equals zero

IRR is the discount rate that makes the net present value of all cash flows from an energy project equal zero, representing the project's effective rate of return.

Which financing mechanism allows organizations to fund energy upgrades using future energy cost savings rather than upfront capital?

Answer: Energy Performance Contracting (EPC)

Energy Performance Contracting finances upfront project costs through guaranteed energy savings, allowing organizations to upgrade without capital expenditure.