A power company is considering whether to invest in $10,000,000 ($10M) in either of two renewable energy power plants (a) or (b).

It wishes to maximize its net profit.

Assumptions: A solar plant would only produce during the day: it will produce U megawatt-hours of energy (MWh), where U is uncertain (between 400,000 and 600,000 MWh over its lifetime). (U is uncertain because the location of the plant is not yet determined.) The price P that the company would receive for producing solar power depends on market conditions and US federal tax policy, and could be between $20 and $40 per MWh. Profit equals revenue (U*P - $10M)

A wind plant would produce at all times, and the utility is confident that it will produce V = 500,000 MWh. Wind power is less valuable than solar power because of when it is produced; so the price it receives is only 0.9P (90% of solars price).

The power company could also decide not to invest the $10M if the plant is not profitable. Then its profit is zero.

Draw a two-way sensitivity plot for the decision problem (considering the two uncertainties U and P). Can you make a conclusion about which power plant the power company should invest in?