WEEK 4 · 2026 · BEFORE CLASS
A fictional utility is planning for a 300 megawatt (MW) coal unit retiring in 2029. Compare a new gas plant with wind generation and battery storage, then consider what evidence the board needs before investing.
In class, each group will receive a scenario that changes one variable. Your instructor will distribute the worksheet and group scenarios then. Bring a calculator.
01 · STARTING ASSUMPTIONS
Both proposals have the same generator rating, but they can produce different amounts of electricity at different times. MW measures power: how fast equipment produces or delivers electricity. A megawatt-hour (MWh) measures energy.
| Input | Gas plant | Wind plus battery |
|---|---|---|
| Generator rating | 300 MW | 300 MW wind |
| Annual capacity factor | 60% | 35% wind |
| Battery power and usable energy | None | 150 MW / 600 MWh |
| Fuel needed per MWh | 6.6 gigajoules (GJ) | No gas fuel |
| Equipment life | 30 years | Wind: 30 years; battery: 15 years |
Capacity factor is actual annual generation divided by generation at full power all year. It does not guarantee availability at a particular time. A GJ is a unit of energy used here to measure fuel.
The battery completes 300 full charge/discharge cycles per year, with all charging supplied by the wind farm. Its usable energy is electricity delivered at the grid connection. Round-trip efficiency is electricity discharged divided by electricity used to charge; the base assumption is 88%.
| Input | Base value | Meaning |
|---|---|---|
| Financing cost | 7.09% real | Weighted average cost of capital (WACC): the blended return required by lenders and owners |
| Gas price | CAD $6/GJ | Price of fuel energy |
| Carbon price | CAD $125/tonne of CO₂ | Assumed charge on direct gas emissions; CO₂ means carbon dioxide |
| Study period | 30 years | Compare costs over the same period |
| Price basis | Constant Canadian dollars (CAD) | Exclude inflation from prices and financing rates |
These are teaching assumptions. A real financing rate excludes inflation. Charging carbon on all direct gas emissions simplifies the exercise; Ontario’s actual industrial carbon rules differ.
02 · THE METHOD
03 · SEPARATE ILLUSTRATIONS
These examples use separate assumptions. They are not the scenarios that will be assigned in class. All prices below are in Canadian dollars.
An illustrative gas plant needs 7 GJ of fuel per MWh of electricity. Its fuel price rises from $5.00 to $6.50/GJ.
Before: 7 × $5.00 = $35.00/MWh
After: 7 × $6.50 = $45.50/MWh
Fuel cost rises by $10.50/MWh. Total cost rises by the same amount if other costs stay fixed.
An illustrative plant emits 0.35 tonnes of CO₂ per MWh. The assumed carbon price rises from $80 to $100/tonne.
Before: 0.35 × $80 = $28.00/MWh
After: 0.35 × $100 = $35.00/MWh
The assumed carbon charge rises by $7.00/MWh. A higher emissions rate would make the same price change matter more.
An illustrative project delivers 200,000 MWh a year. Its supplied annualized cost is $12 million with lower financing costs and $14 million with higher financing costs. Output stays fixed.
Lower financing costs: $12,000,000 ÷ 200,000 = $60/MWh
Higher financing costs: $14,000,000 ÷ 200,000 = $70/MWh
The cost rises by $10/MWh. Financing matters more when upfront investment is a larger share of costs. These annual costs are supplied illustrations, not a calculation from specific financing rates.
04 · YOUR TASK