Engineering Economics and Decision Making: Ontario Power Generation (OPG) case study
The OPG case study is a team project for the Engineering Economics and Decision-Making course. This course provides an overview of engineering economics and fundamental concepts, such as the time value of money and inflation, which allow us to evaluate various projects and make fair decisions systematically.
In this case study, we were asked to evaluate whether building natural gas plant is more choice-worthy than building wind power plant in Ontario, by comparing the economic and environmental considerations. Specifically, we evaluated the present worth (PW), annual worth (AW) and internal rate of return (IRR) for the economic impact. And we performed cost-effective analysis and benefit-cost analysis for the environmental impact.
To determine the PW, AW and IRR, our team researched the costs and regulations for both projects (e.g. carbon tax, capital cost allowance, property tax, decommissioning cost, and salvage value). Then, we developed an Excel model to compute the cash flow and analyzed the economic performance. For the environmental aspect, we considered the social cost of traffic obstruction and the environmental cost of carbon emission from wind power plant construction and natural gas plant operation. After that, we determined the cost-effectiveness and benefit-cost ratios. In the end, we concluded that the environmental considerations outweigh the economic considerations. And therefore, we should build wind power plants since wind turbines have significantly lower carbon emission in their life cycle and it has greater long-term overall environmental and social benefits.
My responsibilities were to research and compute the amount of carbon tax applied to the natural gas plant project, determine how varying construction costs impact both options and the break-even electricity prices. I learned to use Excel functions, such as data table, forecast and conditionally formatting, to analyze the performance and visualize the results effectively.