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Renewable energy assignment: Project by Infigen Energy

Question

Task:

PART A
The report should begin with a short executive summary and conclude with several, short general recommendations. The content you include in the report should link the project management principles detailed below with the practices of the renewable energy company you have been allocated

The topics on which students need to make recommendations in their report include:

  1. Project selection – How should the company you select determine what projects to undertake and what ones to avoid? What tools, measures, and practices are available to project analysts in this industry?
  2. Cost management – What is the role of project cost management for your chosen company? Why is it important? What strategies or approaches should the company you have chosen adopt in order to effectively manage project costs?
  3. Funding – What funding measures or options are generally available to assist companies like the one you have chosen to fund proposed new projects? The report should include reference to any implications associated with different funding types or models.
  4. Implementation and winding up – Are there any particular issues associated with commencing a project that your company must consider? Why are they important? Who do they impact or affect? What happens when the project finishes? How are projects wound up? Do they just end or are there resource or infrastructure considerations? Are there environmental issues associated with the end of a project?

Where possible, students should relate each section back to the renewable energy company they have been allocated. The executive summary should bring together general recommendations for the student’s chosen company relating to i)-iv).

PART B

Consider the following three sources and answer the following questions directly. You do not need to write a lot for each question and for some you will need to use excel calculations. Submit you excel spreadsheet together with your report in the separate submission inbox on the assessment table.

Source 1: Tilt Renewables Snowtown North Solar Energy Farm
https://www.tiltrenewables.com/assets-and-projects/Snowtown-North-Solar-Energy-Farm/

Source 2: Tilt Renewables (TLT.NZ) Yahoo Finance
https://au.finance.yahoo.com/quote/TLT.NZ/

Source 3: Tilt Renewables Financials
https://au.finance.yahoo.com/quote/TLT.NZ/financials?p=TLT.NZ

You have been employed as a project manager by Tilt Renewables and asked to evaluate a solar farm project at Snowtown run by Tilt Energy (See Source 1).

You have been asked to evaluate whether Tilt Renewables should undertake the Snowtown North Solar Energy Farm based on the above sources. Assume this project has not yet been approved.

  • Assume this is a twenty-five-year project.
  • Consult source 1 for the estimated initial outlay/investment today (year 0)
  • The investment will be depreciated on a straight-line basis over twenty five years to 0 book value. It is estimated that the solar farm can be sold at the end of year 25 for $10 million.
  • The solar farm will sell $10,000,000 worth of electricity each year into the grid from year 1-25
  • Operating expenses for 25 years are $5 per solar panel per year (see number of solar panels from Source 1)
  • The tax rate is 30%. All cash flows are annual and are received at the end of the year. The discount rate is 10%.

a) Based on the above information calculate the FCFs of the project. (10 marks)

b) Calculate the NPV for the solar farm. Should Tilt Renewables undertake this project? (5 marks)

Does the NPV take into account the CO2 emission reductions that the project will lead to (See Source 1)? Should it take this into account? Why or why not? (2 marks)

d) What is the debt to equity ratio in 2019 of Tilt Renewables according to source 3? How does this compare to other utility companies? What is the current share price according to Source 2 and when were shares first issued? (3 marks)

Answer

Executive summary
The following renewable energy assignment has developed a project of generating renewable solar energy by the company named Infigen energy. Renewable energy included the generation of electricity power using natural resources such as sun and wind. It has been harmless and less polluted which helped the environment to be less polluted. The company produces clean energy and provides services to the different Australian businesses. The aim of this company examined in the segments of renewable energy assignment has been to create an effective and long-term shared value with the customers and provide them the best service.

Introduction
The following renewable energy assignment intends to develop a project of generating renewable solar energy by the company named Infigen energy. According to the words of Costa, Diniz and Kazmerski (2016) considered in this renewable energy assignment, renewable energy includes the generation of electricity power using natural resources such as sun and wind. It is harmless and less polluted which helps the environment to be less polluted. The company produces clean energy and provides the services to the different Australian businesses. The aim of this company is to create an effective and long-term shared value with the customers and provide them the best service. It is evident that the company considers its stakeholders as the major key component and involves them in the decision making process. The company has ensured the factor that more than 95% electricity is renewable and the target of the company is to reach Net Zero by FY25. The company focuses on fulfilling the needs and preferences of the customers and maintaining a good relationship by hiring some effective customer relationship managers. Customers from different fields such as “manufacturers, telecommunication providers, universities, local councils as well as building and construction companies” are availing the services of this company. The company has been able to provide the best service regarding the renewable energy aligned with the best and affordable prices in the volatile electricity market. Infigen used to receive the customer feedback and help them to solve the raised issues related to the energy generation. It has helped the company to be one of the best Australian energy supply firms “with a total of 670MW of nameplate capacity” and make positive improvements in the customer base.

The following study developed within this renewable energy assignment would be helpful for identifying the project selection tools and which tool has supported the company objectives. Along with that, cost management would be analyzed aligned in the context of renewable energy assignment with the role and responsibility of a cost manager and how the company manages its funding. Along with that, the process of implementing the energy generating system aligned with some risk factors would also be a part of this discussion.

Project selection
The renewable energy assignment examined the readings of Haughey (2018) that project selection is a process through which the project management tools help a project manager to identify which project would be suitable for overcoming the proposed issue. It has two categories such as “benefits measurements methods” and “constrained optimization methods”. Mission, outcomes, process as well as implementation work as a sub-category under the method of project selection.

Benefit Measurement Methods (BMM): It is an effective technique of project selection which helps in identifying the determined cash inflow as well as outflow’s current value. It includes techniques such as “economic model, payback period, opportunity cost, cost ratio, scoring model, NPV or Net Present Value and IRR or Internal Rate of Return” (Leyman and Vanhoucke, 2016). These techniques noted herein renewable energy assignment provide the facility of calculating the cost and then compare to the other projects for identifying the best price.

Constrained Optimization Methods (COM): It is known as mathematical model which helps in project selection by proving the solution of large mathematical calculations. It involves techniques such as “linear programming, dynamic programming, multiple objective programming, integer programming and nonlinear programming” (Leyman and Vanhoucke, 2016).

The following section of renewable energy assignment can be helpful for identifying the suitable project selection techniques that can support the deliverables of the proposed study of generating renewable energy.

Selection methods

Techniques

Effectiveness

BMM

NPV

NPV or Net Present Value is helpful for determining the present value of the project by identifying the differences among the cash outflow as well as cash outflow (Leyman and Vanhoucke, 2016). It is responsible for determining the money’s future value over the effective and involved payback period. It can provide the opportunity to the present project of generating renewable energy that the company can calculate the overall invested cost and makes a capital budgeting. It can also provide the benefit of calculating the carbon emission and calculate the overall expected profit.

BMM

Economic model

It is one of the performance metrics that helps in calculating the net profit once the tax as well as the capital expenditures are deducted. Hence, it can be said that it can provide the facility to Infigen to have a clear metric through which the company can calculate the percentage of profit apart from the expenses.

BMM

Cost ratio

It is helpful for determining the ratio among the invested cost and the returned cost. It helps in calculating the ultimate cost-profit ratio by calculating the costs. Infigen can use this technique for analysing the actual cost-benefit ratio from the invested money.

The project selected in the context of renewable energy assignment has been used in some large Australian projects such as “Renovation of the Taunton Warehouse” and “NSW Sydney Metro construction”. Implementation of these techniques can lead the project of Infigen energy towards experiencing success.

What is the role of cost management in regards to the case scenario of renewable energy assignment?
According to Heinze (2017), a project manager is responsible for leading the project towards experiencing success by fulfilling all the required fields and managing the employees. Cost is the most effective factor of any project which is required to be maintained and a project is required to be completed within the provided budget from the end of the project authority. A cost manager is responsible for managing all the engaged expenditures related to the project and identifying the cost related potential risks for mitigating them. He plays the most immersive role in a project as the maintenance of a good bonding between the stakeholders and a project party depends on him. An effective budget plan is made by a cost manager and he is responsible for ensuring the business operations in a cost-effective way. He is also responsible for creating a streamlined operation model using the cost related information and helps in making an effective and relevant budget schedule. The entire project completes its life-cycle using the estimated budget created by the cost manager and is successful.

According to Diefenbach, Wald and Gleich (2018), cost management strategies refer to those effective strategies which are beneficial for reducing the overall cost of any project and helps the business to be improved by gaining a strategic position in the competitive market (Srbinoska et al. 2020). In other terms, cost management is referred to as a technique through which a project manager can plan and manage the overall cost of the business and helps in earning profit. Cost management techniques are helpful for leading the business towards being streamlined. It includes “time management, inventory management, outsourcing, updated market sense and control of headcount” (Tonchia, 2018). The advantages of using cost management techniques are discussed in the next segment of renewable energy assignment,

  • It can control the project related specific cost or the actual business cost.
  • It is capable of predicting the future expenses based on the workflow and the present cost.
  • It provides the opportunity to the project manager for aligning the business resources with the operations for gaining the predetermined goals (Elsheikh et al. 2018).
  • It is helpful for analyzing the position of the business based on the invested money and earned output.

The following section of renewable energy assignment can be helpful for selecting the suitable cost management techniques that are helpful for supporting the project deliverables.

Time management:
It can be helpful as a cost management technique for this particular project. It suggests making the employees understand the value of time and lead them towards completing the project within the estimated time and aligned with the predetermined budget. It can have a positive impact that it can reduce the extra labor cost by motivating the employees towards delivering the project on time. Since Infigen deals with the deliverance of renewable energy to the customers, they need the support of the employees as well as they need to implement the solar system to the required business fields within the estimated time. Hence, time management can be helpful for aligning the business objectives of Infigen with the estimated cost.

Inventory management:It deals with generating revenues using the effective estimated budget though inventory techniques. It calculates the quality costs, vendor costs, check the required quantity and list the required resources. Then it helps in reducing the unnecessary resources which ultimately affects the estimated budget positively. Then it helps in deploying the capital and helps in completing the project in a sustainable budget. The present study deals with the provision of renewable energy to the firms using natural resources. Inventory management can help in identifying the required resources and eliminate the unnecessary resources. It can help the company to make an estimated budget and be successful.

Funding
The research on renewable energy assignment has shown that Infigen energy gets its funding from different sponsors for improving the business and providing the best services to the customers. The following section of renewable energy assignment can be helpful for identifying the sponsors who have invested in this company.

Sponsors

Invested amount

Alinta Wind Farm Community Fund

$15,000 each year

Bodangora Wind farm Community Fund

$50,000 each year

Cherry Tree Wind Farm Community Fund

$25,000 each year

Apart from these community funds, Infigen energy receives a fund from the local government. Since the company generates renewable solar energy using natural resources, it is having an extreme positive impact on the national economy such as the electricity cost is being reduced. Along with that, the environment is being less polluted since it is using natural resources. Hence, the government provides a certain amount of funds to the company
It has been identified in the renewable energy assignment that Infigen energy also provides funds to the community funds for improving the community. The company contributes $42,000 to the “capital wind farm community fund” each year and $45,000 to the “Lake Bonney Wind Farm Community Farm” each year. It helps the company to maintain an immersive strong bond with the sponsors and investors and it gets monetary help from the farms whenever needed.

Implementation and winding up
The research on renewable energy assignment has evaluated the factor that Infigen energy is a major electricity retailer in Australia and provides generated renewable solar energy to the customers. It has been identified to be one of the biggest solar energy firms in the Australian volatile electricity market which provides the best services within an affordable range. The company not only provides renewable energy to the customers but also helps in carbon solutions. It provides the opportunity of using carbon free electricity in the businesses by reducing the percentage of carbon emission gases. The other purpose of this company is to make a green team which means make the environment green by using natural resources for generating the energy.

The entire process of generating renewable energy explored in this renewable energy assignment depends on the wind blow and power of the sun. It means that the system captures the wind blow and aligns it with the power of the sun and then enrate natural energy (Janji?, Karapavlovi? and Damjanovi?, 2017). There might be a risk factor when the sun is not high or the wind is not blowing properly. It can have a negative impact on the energy generating process. As a solution, Infigen energy has invented a system which is capable of providing “diversified fleet of renewable energy assets aligned with flexibility”. It is capable of storing the wind flow and supports the process when the wind is not blowing.

After completing a project, Infigen authority installs the system to the required fields and receives the feedback after a certain time. It makes the company more reliable to the customers. The entire process helps in generating renewable electricity energy at a low price using the natural resources.

Conclusion
The overall study prepared in the renewable energy assignment has dealt with the company named Infigen energy which has provided renewable solar energy to the Australian businesses. The renewable energy assignment had been helpful for identifying the project selection tools and which tool could support the company objectives. Along with that, cost management had been analyzed aligned with the role and responsibility of a cost manager and how the company managed its funding. Along with that, the process of implementing the energy generating system aligned with some risk factors and solutions had also been a part of this discussion.

Recommendation
It is evident in the renewable energy assignment that the process depends on the wind blow and sun power which means that the slow wind blow or less-hit of the sun can ruin the effectiveness of the system. Infigen energy can think about innovating a system which would be capable of storing the wind as well as the sun-power in a flexible way and serve it when the sun is down or the wind is not blowing.

Part B

a.FCFs of Project

renewable-energy-assignment-project-infigen-energy

b. NPV of solar farm

renewable-energy-assignment-project-infigen-energy-1

c. Consideration of CO2 emission
No, the NPV estimation has not considered the CO2 emission. Yes, the NPV estimation should consider the CO2 emission. The emission of CO2 for the project is 85,000 tonnes production using coal electric.

d. Debt to Equity Ratio

Total liabilities

$847,194.0

Total assets

$1,415,994.00

Equity Ratio (Total liabilities/ Total assets)

0.598

The method used in this renewable energy assignment ensures the identification of the debt equity ratio for other competitors aligning the identification of other utilities company. The information is applicable for comparison with other companies having higher or lower value.

The current share price of Tilt Renewables Limited (TLT.NZ) is 3.4300 and it is issued in NZD as present in Australian Finance Yahoo Page.

Reference list

Costa, S.C., Diniz, A.S.A. and Kazmerski, L.L., 2016. Dust and soiling issues and impacts relating to solar energy systems: Literature review update for 2012–2015. Renewable energy assignment Renewable and Sustainable Energy Reviews, 63, pp.33-61.

Diefenbach, U., Wald, A. and Gleich, R., 2018. Between cost and benefit: investigating effects of cost management control systems on cost efficiency and organisational performance. Journal of Management Control, 29(1), pp.63-89.

Elsheikh, A.H., Sharshir, S.W., Mostafa, M.E., Essa, F.A. and Ali, M.K.A., 2018. Applications of nanofluids in solar energy: a review of recent advances. Renewable and Sustainable Energy Reviews, 82, pp.3483-3502.

Haughey, D., 2018. The role of the project manager. Project Smart, faculty. northseattle. edu.

Heinze, K., 2017. Cost management of capital projects. Routledge.

Janji?, V., Karapavlovi?, N. and Damjanovi?, J., 2017. Techniques of strategic cost management–the case of Serbia. Teme, pp.441-455.

Leyman, P. and Vanhoucke, M., 2016. Capital constraints and net present value optimization in project scheduling. In 15th International Conference on Project Management and Scheduling (pp. 98-101).

Srbinoska, D.S., Stojanova, M., Hristova, S. and Mrsik, J., 2020. The impact of organizational characteristics on the adoption of contemporary cost management techniques by the textile industry in North Macedonia. Journal of Accounting and Management Information Systems, 19(1), pp.65-88.

Tonchia, S., 2018. Project Cost Management and Finance. In Industrial Project Management (pp. 153-170). Renewable energy assignment Springer, Berlin, Heidelberg.

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