Certified Energy Auditor Certification Certified Energy Auditor Economic Analysis and Financing Questions and Answers 2 — Questions and Answers
Question 1: An energy auditor calculates that a lighting retrofit will save $12,000 annually and costs $48,000 to install. What is the simple payback period?
- 2 years
- 3 years
- 4 years (Correct answer)
- 5 years
Correct answer: 4 years
Simple payback period is calculated by dividing the initial cost ($48,000) by the annual savings ($12,000), which equals 4 years.
Question 2: Which financial metric accounts for the time value of money when evaluating energy conservation measures?
- Simple payback period
- Net present value (Correct answer)
- Return on investment percentage
- Annual energy cost savings
Correct answer: Net present value
Net present value (NPV) discounts future cash flows to their present value, explicitly accounting for the time value of money.
Question 3: What does a savings-to-investment ratio (SIR) greater than 1.0 indicate about an energy project?
- The project will lose money over its lifetime
- The project breaks even exactly
- The project's discounted savings exceed its discounted costs (Correct answer)
- The project requires additional financing to be viable
Correct answer: The project's discounted savings exceed its discounted costs
An SIR greater than 1.0 means the present value of energy savings exceeds the present value of the investment costs, indicating a financially beneficial project.
Question 4: In an energy performance contract (EPC), who typically assumes the risk that projected energy savings will not be achieved?
- The building owner
- The utility company
- The energy service company (ESCO) (Correct answer)
- The equipment manufacturer
Correct answer: The energy service company (ESCO)
In an EPC, the ESCO guarantees a certain level of energy savings and assumes the financial risk if those savings are not realized.
Question 5: Which financing mechanism allows a building owner to fund energy improvements through an additional charge on their property tax bill?
- On-bill financing
- Property Assessed Clean Energy (PACE) (Correct answer)
- Power purchase agreement
- Equipment lease financing
Correct answer: Property Assessed Clean Energy (PACE)
PACE financing enables property owners to fund energy upgrades through a voluntary assessment added to their property tax bill, repaid over 10-25 years.
Question 6: When performing a life-cycle cost analysis for competing HVAC systems, which cost category is typically the largest over a 20-year analysis period?
- Initial equipment purchase price
- Installation labor costs
- Energy and maintenance costs (Correct answer)
- Disposal and decommissioning costs
Correct answer: Energy and maintenance costs
Over a 20-year period, cumulative energy consumption and ongoing maintenance costs typically far exceed the initial capital expenditure for HVAC systems.
