REP Project Planning & Financial Analysis 3

Question 1

Which contract structure transfers the most construction risk from the project owner to the contractor in a renewable energy project?

Accepted Answer

Fixed-price, date-certain, full-wrap EPC contract

Answer

A fixed-price, date-certain, full-wrap EPC contract holds the single contractor responsible for all cost overruns, delays, and performance shortfalls.

Question 2

An independent engineer (IE) is engaged during renewable energy project financing primarily to:

Accepted Answer

Provide lenders with an independent assessment of technical and financial assumptions

Answer

The IE gives lenders confidence that energy yield estimates, technology performance assumptions, and cost projections are technically sound.

Question 3

A renewable energy developer uses a 'sensitivity analysis' in their financial model primarily to:

Accepted Answer

Assess how changes in key assumptions affect project returns and viability

Answer

Sensitivity analysis varies one or more input assumptions (e.g., energy price, capacity factor, O&M costs) to quantify their impact on IRR or NPV.

Question 4

Which federal tax incentive allows renewable energy project owners to depreciate most of the project's cost in the first year of operation under current US tax law?

Accepted Answer

Bonus Depreciation under MACRS

Answer

Bonus depreciation under MACRS allows immediate expensing of a large percentage of qualifying renewable energy asset costs in the placed-in-service year.

Question 5

A solar project has a total installed cost of $2,000,000 and generates 500,000 kWh annually over a 25-year life with zero residual value and no discount rate applied. What is the simplified LCOE?

Accepted Answer

$0.16/kWh

Answer

LCOE = $2,000,000 ÷ (500,000 kWh × 25 years) = $2,000,000 ÷ 12,500,000 kWh = $0.16/kWh.

(REP) Certified Renewable Energy Professional Practice Test

(REP) Certified Renewable Energy Professional Practice Test

REP Project Planning & Financial Analysis 3