Case Study

October 30, 2020
Diseases of the gastrointestinal system and diseases of the urinary system
October 30, 2020


In August 2019, La Trobe University announced an ambitious strategy to be the first major

university in Victoria to become carbon neutral through a number of investments and initiatives

representing part of an overall Net Zero Project. A major component of this wider strategic

initiative is the proposed installation of a network of 7,000 solar panels on the rooftops of 27

buildings at the Melbourne (Bundoora) campus to provide a renewable source of electricity

generation for meeting part of the operating requirements of the campus. Solar panels operate

by absorbing sunlight through photovoltaic cells and generating direct current (DC) energy and

then converting this into usable alternating current (AC) energy using inverter technology. This

planned solar panel system installation will be supported by the connection of inverter and

transmission network infrastructure to convert the DC electricity generated by the solar panels

to AC electricity for distribution across the campus as required for operational purposes, as

well as a solar battery storage system to allow for the consumption of solar-generated electrical

power during periods of no solar energy generation (such as at night). The proposed solar power

generation system will not generate sufficient electricity to fully offset the university campus’

electricity usage requirements, however, savings will be achieved in terms of a proportion of

the university’s energy requirements not having to be purchased under commercial provision

terms from retail providers predominantly via the national electricity grid. The construction

and operation timetable for the solar panel generation system at the Melbourne campus of the

university is outlined in Table 1 below:

Table 1: Project Construction and Operation Summary

Date Project Activity

August 1st2019 Installation of the solar panel arrays and transmission network

infrastructure commences

September 1st2019 Initial generation and usage of solar panel electricity commences

(30% of full system electricity generation capacity is anticipated to be

realised in the 2019 calendar year)

December 31st2020 Full installation of the solar panel arrays and transmission and storage

network infrastructure is completed (70% of the full system electricity

generation capacity is anticipated to be realised in the 2020 calendar


From January 1st

2021 onward

Full capacity operation of the solar panel arrays and transmission and

storage network infrastructure

December 31st2060 The indicated 40-year useful full-operating life of the solar panel and

transmission and storage network infrastructure is reached. The

proposed project ends and ongoing feasibility will be assessed relative

to technology advancements and financing capability.

The following specifications, parameter estimates and forecasts for the solar power electricity

generation project have been developed as part of project planning:


? The solar panel array network will involve the installation of 7,000 individual solar panels

each with maximum electricity generating capacity of 400 watts (0.40 of a kilowatt hour

(kWh)) per hour

? The solar panels will cost $500 per panel to purchase (in real terms)

? Weather analysis and modelling of historical sunrise and sunset data suggests that there

will be an average of 11 hours of sunshine during the Summer season, 8 hours of sunshine

during the Winter Season, and 9 hours of sunshine during both the Autumn and Spring


? The Summer, Autumn and Spring seasons will have 91 days, on average, and the Winter

season will have an average of 92 days.

? There is expected to be an average daily 10% loss of solar power generating capacity due

to cloudy conditions, rain and bad weather.

? Even with the planned ongoing solar panel and inverter and transmission network

maintenance schedule, the solar panels are expected to decline in generating efficiency by

0.5% per year after the first year of solar energy generation in 2019.

? Annual operating and maintenance expenditure supporting the operation of the project is

estimated to be $650,000 (in real terms) during years of full project operation, with prorata

adjustment in 2019 and 2020 based on projected capacity usage. This expenditure is

primarily associated with salary costs for staff from the Sustainability Division of the

Infrastructure and Operations (I&O) Unit of the university who will be responsible for

managing the project, proportional salary costs for staff from the Department of Accounting

and Data Analytics in the La Trobe Business School responsible for monitoring and

analysing the electricity generation and usage information associated with the project, and

staff and supply costs associated with the maintenance program established for the project.

? The university can claim straight-line depreciation deductions against the usage of the solar

panel, inverter and transmission and storage infrastructure across the 40-year estimated

full-operation useful life period (from 2021-2060) based on the installed cost of the project.

? The university is required to pay taxation expense (in terms of an efficiency dividend) to

the Federal Government of 20% on profits from its individual projects and overall


? If the solar energy generation project is discontinued at the end of the 40-year useful life in

2060, there will be a $500,000 cost incurred in 2061 for dismantling the solar panel arrays

and inverter and transmission network infrastructure, which are assumed to have no re-sale

value at this time.

? Based on La Trobe University’s AA credit rating, they have a 4.50% per annum (in real

terms) required return on investment projects and funding allocations.

? The inflation rate is estimated to average 2.00% per annum in the future, within the Reserve

Bank of Australia’s targeted range of 1.50-2.50%.

? Preliminary electricity usage analysis by Data Analytics academic staff indicated that the

Melbourne campus uses an average of 100,000 kWh of electricity per day.

? The university has a long-term wholesale electricity supply agreement with AGL Energy

Limited providing it access to electricity from the national grid at a fixed rate of $0.25 per

kWh (in real terms), with no daily supply charges payable.

? AGL Energy Limited has also offered the university a $0.18 per kWh (in real terms) feedin

tariff for any excess electricity generated by the university’s solar energy network system

that is returned to the national electricity grid for alternative usage.


? All monetary figures are expressed in December 31, 2018 real dollars.

? All information is as at December 31, 2018 and assume that the project evaluation is being

undertaken as at this date, which is when initial consideration of the project commenced.

? For terminology purposes, 1,000 watts represent 1 Kilowatt (kWh) hour

Estimated equipment and installation cost components for the solar panel energy generation

project at the Melbourne campus are as follows:

Table 2: Forecast Project Capital Investment Costs

Cost Component Amount (in real terms)

Solar Panels $3,500,000

Panel Mounting, Inverter and Transmission

Network Equipment


Tesla PowerPack Lithium Ion Battery Bank $1,500,000

Contracted Installation Cost $1,250,000

Note that 30% of the project capital expenditure and installation costs are expected to be

incurred by the end of 2019 with the remaining 70% incurred at the completion of the

construction phase at the end of 2020.

The Academic Council of La Trobe University has requested the Finance and Procurement

Division, under the direction of Mr. Mark Smith (the Chief Financial and Operations Officer

of La Trobe University), to prepare a feasibility assessment of the proposed solar energy

generation project.


This case study requires the completion of the following tasks as part of an integrated

report to be submitted to the Academic Council of La Trobe University:

? The development of a spreadsheet model representing the cash flows associated with

the solar energy generation project, and the assessment of the project using a range

of capital budgeting evaluating techniques.

? The completion and provision of a quantitative risk assessment of the project based

on conducting appropriate sensitivity and/or scenario analyses of the project

valuation focusing on key parameters impacting on the project’s operation, feasibility

and cash flows.

? Based on the project modelling and associated risk assessment processes conducted,

provision of a justified recommendation as to the feasibility of the project.

? The preparation of a concise business case proposal summarising the potential

contribution of the project to the financial and strategic objectives of La Trobe



The due date for submission of this Case Study task is no later than Monday 23rdMarch,

2020 at 5.00pm. This Case Study will represent 25% of the final assessment for this

subject and is to be submitted using the upload facility provided on the subject LMS site.

This Case Study is an individual assessment task, and should be a maximum of 1,000-

1,500 words, excluding any calculations, tables, spreadsheets or other exhibits. The Case

Study report should be prepared in a professional manner and include relevant, accurate

and logical information to justify any decision-making and conclusions drawn or

recommendations provided. The Case Study report submission should be accompanied

by the provision of a spreadsheet model developed for the solar power generation project.

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