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.
Certified Energy Auditor Certification Certified Energy Auditor Economic Analysis and Financing Questions and Answers 2
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?