2023_110.pdf odf T10.pdf (66.3 KB) Question 2: Investment in wind capacity There is a small mountainous island where all of the electricity produced comes from hydro power. It costs $10/MWh to produce power from hydro. The mainland has no hydro resources, and relies exclusively on natural gas for it's power. It costs $55/MWh to produce power from natural gas. Assume that for every MWh of gas-fired electricity, 0.5 tons of CO2 is released into the atmosphere. The electricity grids of the Island and mainland are not connected to each other. Investors are considering building a wind farm. The island is very windy, and it is estimated that a wind farm built there would operate most of the time, generating 400,000 MWh per year. If the same wind farm were built on the mainland, It would only generate 100,000 MWh per year. MacBook Air 900 0DO F4 F5 F6 14 F7 % &mic in onma UPF Identificacio in Moodle ESN Mr Chat hookgame ask. C Chegg 23_T10.pdf O.pdf (66.3 KB) 1. Consider a financing plan where building the wind farm would cont the investor $20 million per year for the lifetime of the project. What is the long run cost per MWh of wind produced on the hiand? On the mainland? 2. If a wind farm is built in each location, what would be the price of cloctricity? Would firms invest in a wind farm in either of the locations? (Assume that demand for electricity in each location is greater than the generation by the wind farm.) 3. The government is considering implementing a carbon tax to reduce emissions, What tax rate down Is need to set for a wind farm to be funded in each location? Assuming that at most one wind farm can be built in each location, how much CO2 would be reduced? Anaction 4: Marit ardor affect MacBook Air 412 14 FT FB & * % A 8 9 O 5 6