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The State College Power Company plans to build a new renewable power plant from three technologies that will run for 30 years: wind, solar, and
The State College Power Company plans to build a new renewable power plant from three technologies that will run for 30 years: wind, solar, and geothermal. The company is worried that climate change will alter local weather patterns, which may increase the number of sunny days and reduce the number of windy days if it happens, thereby affecting the energy output from solar and wind. On the other hand, geothermal is expected to be minimally influenced by climate change. The NPVs (in million $) of three options under no climate change and climate change are given below: Climate change No climate change Solar 2.28 1.22 Wind 1.49 2.27 Geothermal 1.86 1.96 Conduct a sensitivity analysis of the three options with the probability of climate change and determine the threshold probabilities that the Company may change its decision. Use these results to make a recommendation on power plant options for the Company
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