UNIVERSITY NET ZERO SOLAR POWER INSTALLATION PROJECT
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
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
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
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
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.