I am doing a final paper for my sustainability business class, ONLY DO PART II not Part I.

I am doing a final paper for my sustainability business class, ONLY DO PART II not Part I. I am including both parts so you understand the assignment better and part I is optional.

 

OVERVIEW

 

Development Finance Institutions (DFIs) are government-supported institutions that invest in sustainable private sector projects while spurring development in developing countries and remaining financially viable. They tend to occupy the space between foreign aid and private investment and target countries or regions where access to private sector funding is limited.

 

Examples of DFIs

 

Development Finance Corporation (United States, successor to Overseas Private Investment Corporation, https://www.dfc.gov/ FinDev Canada – https://www.findevcanada.ca/enFMO: Entrepreneurial Development Bank – Netherlands, https://www.fmo.nl/ British International Investment – United Kingdom, https://www.bii.co.uk/en/

CASE STUDY

 

Power Sector Development in Africa

 

Reliable power is a critical component of economic development in Africa. Expanding and upgrading the region’s power sector demands large public and private investments in coming years.

 

According to the International Energy Agency, approximately 43 percent of Africans (600 million people) lack reliable access to electricity. IEA estimates that the region will require $25 billion annual investment by 2030.

 

The chart below shows the energy mix and energy-related CO2 emissions of Africa in 2021. This data indicates the heavy share of fossil fuels (coal, oil, natural gas) in the region’s energy portfolio.

 

NOW LOOK AT ATTACHED IMAGE 1 BELOW

 

Advances in renewable energy create an opportunity for Africa to accelerate the transition from fossil fuels, reducing greenhouse gas emissions and raising the health, well-being, and standard of living of citizens across the continent.

 

PROMPT

 

You are a renewable energy analyst at consulting firm specializing in international development. Your client is a major Development Finance Institution that is evaluating potential power sector projects in Africa. The DFI aims to optimize its power sector investments in the region across various renewable energy sources (geothermal, hydropower, solar, wind).

 

You have been tasked to analyze a wind energy project under consideration by your client. Drawing on your analysis, you will deliver actionable recommendations to guide the client’s decisions on this project.

 

In formulating these recommendations, you must assess the tradeoffs between the (1) the Reliability of Power Supplies afforded by the DFI’s energy investment; (2) the Costs and Revenues of the DFI’s project; and (3) the Greenhouse Gas Emissions avoided with expansion of renewable energy capacity.

 

The assignment prompt comprises two parts.

 

PART I

 

OPTIONAL

 

Part I is optional and will not be included in the scoring of the final examination. Students are encouraged to complete this part of the assignment prompt, the results of which will be useful to the MSSM Program Directors and Kogod Dean’s Office.

 

The African wind project under consideration entails the following assumptions:

 

Wind Power Facility

 

5 wind turbines

 

2 megawatts (MW) of power generation capacity per turbine

 

Capacity Factor

 

30 percent (share of total capacity that actually generates electricity)

 

Initial Investment Cost

 

$1.75 million per megawatt (MW)

 

Annual Maintenance Cost

 

$35,000 per megawatt (MW) per year

 

Government Subsidies

 

$0.03 per kilowatt hour (MWh) for the life of the project

 

Fuel Cost Savings

 

$0.09 per kilowatt hour (kWh) for the life of the project

 

Discount Rate

 

5 percent per year

 

Annual Energy Requirements

 

20,000 megawatt hours (MWh) per year

 

CO2 Emissions of Wind Turbines

 

11 grams of CO2 per kilowatt hour (kWh)

 

CO2 Emissions Threshold

 

Less than 20,000 metric tons (MT) of CO2 across the life of the project

 

Return on Investment

 

Positive Net Present Value (NPV) in 20 years

 

The graphic below shows the results of an analysis of a hypothetical case in which all of the DFI’s requirements are meet across the three performance criteria (Reliability of Power Supplies, Costs and Revenues, Greenhouse Gas Emissions).

 

NOW LOOK AT IMAGE 2 ATTACHED BELOW

 

Your assignment in Part I is to show how this analysis arrived at the numbers indicated above. Based on the assumptions listed earlier, what calculations led to the determination that this hypothetical wind project meets all three DFI criteria?

 

In your answer, be sure to show each of the calculations leading to the results indicated in the chart.

 

To calculate Net Present Value of the project, feel free to reference an online NPV calculator using this link:

 

https://www.calculatorsoup.com/calculators/financi…

 

PART II (DO THIS PART ONLY) 50 Points

 

While all of the performance criteria were fulfilled in the hypothetical case described in Part I, the actual African power sector projects your client is considering involve tradeoffs between the three pillars (Reliability, Costs/Revenues, GHG Emissions).

 

The chart (IMAGE 3) below describes power sector projects under consideration in three African countries:

 

LOOK AT IMAGE 3 ATTACHED BELOW

 

In evaluating these alternative projects, the DFI must address certain tradeoffs. Country A generates sufficient power to meet local energy requirements, but with a longer payback period and higher GHG emissions than Country B, whose power generation falls short of demand. Power generation in Country C surpasses demand, but entails a longer payback period and higher GHG emissions than either Country A or Country B.

 

Your assignment in Part II is to write a short brief (4-5 pages, double spaced) addressing each of the following questions:

 

How would you assess the tradeoffs between the three projects?

How would you prioritize the projects given available resources and expected outcomes?

What other factors would help the DFI to choose a project that would maximize its return on investment in power sector development in Africa?

Grading Rubric: Memos will be reviewed for research, innovative thinking and accuracy in analysis as well as for completeness and professional presentation. Sloppy, typo-laden or incomplete memos will not meet the foregoing standard and will be rejected as incomplete and will not be graded. Each memo is required to include the following sections: Executive Summary; Relevant Background Facts; Issue Statement; Trade-Off Criteria; Analysis; and Conclusion.

I am doing a final paper for my sustainability business class, ONLY DO PART II not Part I.

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