Economic Analysis of Projects Flashcards
7 cards from real Certified Energy Auditor Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Economic Analysis of Projects flashcards as text
Under MACRS, commercial energy efficiency equipment is typically assigned which depreciation life?
Answer: 7 years
Most commercial energy-efficiency equipment (HVAC, lighting, controls) qualifies as 7-year MACRS property under IRS asset class rules.
The federal Investment Tax Credit (ITC) for a solar PV system reduces project economics by:
Answer: Directly reducing the net capital cost in the first year
The ITC is a dollar-for-dollar reduction in federal tax liability equal to a percentage of installed cost, effectively reducing the net first-year capital outlay.
A utility offers a $50,000 rebate for an energy efficiency upgrade costing $200,000. How does the rebate affect the economic analysis?
Answer: It reduces the net installed cost to $150,000 for payback calculations
Utility rebates directly reduce the net first cost of the project, improving all economic metrics including payback, NPV, and IRR.
For a tax-paying entity, the after-tax annual savings from an energy project are calculated by:
Answer: Multiplying gross savings by (1 − marginal tax rate)
After-tax savings = Gross savings × (1 − tax rate), since energy cost savings increase taxable income and create a tax liability.
The depreciation tax shield in energy project analysis refers to:
Answer: The tax deduction created by annual depreciation expense
The depreciation tax shield is the annual tax reduction = depreciation expense × marginal tax rate, which improves after-tax cash flow.
Net metering economics for a solar PV installation are most accurately evaluated by:
Answer: Applying different rates: retail rate for avoided consumption, wholesale/avoided cost rate for exported kWh beyond consumption
Net metering economics are more accurate when retail rates apply to self-consumed kWh and the net export rate (which may be lower) applies to excess kWh sent to the grid.
A building's blended electricity rate is $0.12/kWh. The peak demand charge is $15/kW-month. An energy project reduces consumption by 50,000 kWh/yr and peak demand by 20 kW. What are total annual savings?
Answer: $9,600 — consumption plus demand savings
Annual savings = (50,000 kWh × $0.12) + (20 kW × $15/kW-month × 12 months) = $6,000 + $3,600 = $9,600.