Johnson Team Captures First Place at Renewable Energy Case Competition
by Duncan Cooper, MBA '13 (2/12/13)
Innovative finance model and proposal for distributed solar energy put Johnson MBA students in front
Students from the Samuel Curtis Johnson Graduate School of Management at Cornell University traveled to Ann Arbor, Michigan last week to participate in the University of Michigan's fourth annual Renewable Energy Case Competition (RECC). The RECC, hosted by the Ross Energy Club, brings together energy-minded MBAs from the nation’s top business schools including Sloan, Haas, Columbia, and Tuck.
This year, the case required teams to assess the potential to develop solar electric projects in Texas, from the perspective of solar developer, SunEdison, the competition’s primary sponsor. Teams had to quantify the market opportunity for SunEdison, given the regulatory environment put forth by the Electric Reliability Council of Texas (ERCOT), which operates the electric grid for 75 percent of the state.
Teams also considered the electricity generation potential and financial opportunities for future solar generation in ERCOT. This required students to make appropriate assumptions on load growth, future prices, the share of solar in new generation builds, and SunEdison’s market share across the three SunEdison business units (residential, distributed generation, and utility.)
Teams were also asked to provide a detailed market-entry strategy for SunEdison that considered target investors, ownership structure and financing. Successful teams identified key priorities for SunEdison, provided risk mitigation strategies, and offered a roadmap for implementing their recommended strategy. All of this was to be covered in a 20 minute presentation!
Johnson’s team consisted of members of the Johnson Energy Club, who were selected from a pool of interested applicants and included: Hanson Boyd (MBA ’14), Duncan Cooper (MBA ’13), Travis Distaso (JD/MBA ’14), Jaime Martinez (AMBA ’13), and Bryson Saez (MBA ’14). The team’s solution identified commercial-scale distributed solar generation as the most attractive market segment for SunEdison. These systems (ranging in size from 100 kW to 500 kW) are large enough to benefit from economies of scale, are easiest to target with a lean sales force, and have attractive levelized costs, because they generate power on the customer’s side of the meter. Operating on the customer’s side of the utility meter allows customers to avoid purchasing electricity from the grid, making the marginal value of solar electricity much higher than it would be in a wholesale market.
“Strong strategy, marketing and finance skills gave us the gold in RECC,” said team member Jaime Martinez. “I truly believe that it was due to the knowledge acquired at Johnson that we presented the best solution to SunEdison."
The team also recommended SunEdison pursue an innovative financing model that secures financing through a diversified IPP, with long-term power purchasing agreements. Although this arrangement is common for utility-scale projects, it is not typically seen at the commercial scale. Using reasonable assumptions, the team forecasts that SunEdison could generate close to $500 million in revenue over the next 10 years.
During a 10-minute question- and-answer period, team members enthusiastically fielded questions from SunEdison, executives who were on hand to judge the competition. The judges praised Johnson team members for their solution, and also for their strong presentation skills and visible team unity.
“Bringing our work together and confidently presenting as a team, under the scrutiny of industry professionals who have been working at the case problem for months and even years, was a real challenge,” said team member Bryson Saez. “It is, without question, going to be remembered as one of the highlights of my business-school experience.” Teammate Travis Distaso added, ““Presenting our real-world strategy ideas to the current business leaders was a phenomenal experience.”
Participation in the trip was made possible with support from the Johnson Energy Club and Johnson Student Council’s “Title Town” program. The team received support on the case from faculty advisors Mark Milstein, director of the Center for Sustainable Global Enterprise, and Risa Mish, faculty director of the Accelerated MBA Program.
— Duncan Cooper, MBA ‘14