Johnson’s Energy Club Competes in Renewable Energy Case Competition
by Duncan Cooper, MBA ‘13 (3/22/12)
Student team makes recommendations to Detroit Edison (the local utility operator in Detroit) about the most cost effective way to build renewable energy generation capacity.
Johnson’s Energy Club travelled to Ann Arbor, Michigan in February to compete in the third annual Renewable Energy Case Competition at the Ross School of Business. Johnson competed against teams from 15 other top business schools including Wharton, Duke, and Yale. The team was asked to make a recommendation to Detroit Edison (the local utility operator in Detroit) about the most cost effective way to build renewable energy generation capacity. In the coming years, Detroit Edison will spend hundreds of millions of dollars in order to comply with Michigan’s Renewable Portfolio Standards (RPS). The RPS requires that 10% of the electricity generated in Michigan come from renewable sources by 2015.
Team members Duncan Cooper, Mandy Chu, and Konstantin Damm, all MBA ’13, and Abhi Mukunda, MBA ’12, calculated the levelized cost of energy from a variety of different electricity generation technologies including coal, natural gas, wind, solar, and others. In order to make well-founded decisions regarding which renewable energy technologies to invest in, utility companies like Detroit Edison must be able to make apples to apples comparisons between the levelized costs of both renewable and conventional energy sources. Unlike conventional sources of electricity, renewables are both non-dispatchable and intermittent, which reduces the value of the electricity they create.
Most conventional energy sources are dispatchable, meaning that they can be turned on or off according to the demand for electricity. The amount of electricity they produce can also be turned up or down so that supply of electricity matches the amount demanded by users. By contrast, most renewable energy sources are non-dispatchable, for example solar panels make electricity when the sun shines and the amount of energy being generated cannot be increased or decreased on demand.
Renewable energy sources are also intermittent; the electricity they produce varies from moment to moment, from day to day, and even from season to season. For instance, wind power will be generated when the wind is blowing, but not all times of days or days of the year will have the same wind resource. As a result, the amount of electricity coming from wind farms is hard to predict in advance. If the demand and supply are not well matched, the true value of the electricity generated is much lower.
After a busy week of preparation, the team presented their findings to a panel of judges who were representatives of the corporate sponsors of the event. The team demonstrated that the most cost effective way to meet the Michigan RPS is to build wind turbines backed up with combined-cycle gas generation to “firm up” the generation capacity of the wind turbines. The team also calculated the lost economic value attributed to wind power’s non-dispatchability and intermittency to provide an accurate comparison to conventional energy sources.
Although the Johnson team did not make it to the final round of competition, they were commended by representatives of Detroit Edison for the accuracy and rigor of their presentation. Addressing the competitors as a group, Detroit Edison complimented the creativity and hard work of all the teams.
The team was able to attend the event thanks in part to the support of the SGE Club. The Johnson Energy Club educates club members about the latest trends in the energy industry, hosts energy-focused events, builds strong relationships with energy companies, and helps place our members in leadership positions at top-tier energy companies.