OVERVIEW You have been asked by the government owned company. Ontario Power Generation (OPG). to prepare a report evaluating alternate methods for expanding its electricity generation portfolio in Ontario. They would like to install about 400 MW of new capacity. and are considering two options: a wind farm or a natural gas power plant. Local residents have complained about the planned wind turbines disturbing the natural landscape. while environmental groups have launched a series of attack ads against the continued use of fossil fuels like natural gas. There is also some concern that the wind farm will require installation of additional power lines. which could require several (~3) months of disruption to a busy 400-series highway while the new lines are being buried. The delays would add about an hour of daily travel time to the 80.000 daily commuters along this road. Over the last few years. electricity could be generally be sold in Ontario for about 120 SfMWh. The corporate tax rate is approximately 27%. OPG has provided you with the following financial data for your base-case analysis. You will likely have to make some additional assumptions to complete your analysis. Option 1: Wind Power 0 Construction start: End of year. 2022 Construction period: 3 years Operating life: 30 years Capital cost: $1.41 1.000 f MW installed capacity Annual xed 0&M costs: 527.570 / MW installed capacity Fuel costs: none Expected capacity factor: 45%1 Option 2: Natural gas plant 0 Construction start: End of year. 2022 Construction period: 3 years Operating life: 40 years Capital cost: $1.201.000 / MW installed capacity Annual fixed 0&M costs: 514.760 / MW installed capacity Fuel use: 185 m3/MW11 Fuel cost: You will need to look up or estimate natural gas prices in Ontario. Expected capacity factor: 60%1 QUESTIONS You are being asked to prepare a report to help OPG evaluate its options. The main body of your report should address the following tasks/questions. 1. Base case: Using the base case parameters above, which investment do you recommend (on purely financial/economics grounds)? a. Prepare a spreadsheet that provides a detailed breakdown of costs and revenues b. Explain your calculations, and clearly state and justify any additional assumptions you have made beyond those provided above. c. Using appropriate charts and/or tables, summarize the breakdown of costs and revenues. d. Calculate at least 2 different metrics for comparing the projects (based on financial metrics covered in lecture). e. Make a clear final recommendation, supported by your calculations. 2. Sensitivity: All of the variables that enter your model have some uncertainty associated with them (e.g., construction time may be longer than expected, capital cost overruns may occur, operating life may be longer than expected, etc.). a. Identify (at least) 3 inputs from your base-case model that have a substantial impact on the final results, and explore how your model results and/or recommendations would change if these parameters turn out to be higher or lower than expected. Does this affect your recommendations from the base case? b. In the base-case, you compared the options for a fixed value of installed capacity (i.e., 400 MW of new capacity). How might your analysis differ if instead you considered other ways to compare the technologies, such as fixed amount of electricity, or fixed initial budget (i.e., capital cost)? c. What is the minimum selling price of electricity that would make each of the options break even? 3. Other considerations: Discuss (quantitatively and/or qualitatively) any factors that OPG should consider beyond purely financial aspects. How might these other factors influence your final recommendation? You are welcome to consult other sources of information to help you answer this question, provided that they are cited appropriately