Energy One: Transition from Fossil Fuels to Renewables

Context

Energy One currently has a total technical maximum output of 8.8 million MWh/year. Regulators are capping the company’s fossil generation at 5.0 million MWh/year, creating a 3.8 million MWh/year gap that must be covered via renewables and/or market strategies. Provide data-driven recommendations with clear metrics, assumptions, thresholds, and risks.

Tasks

1. Prioritize the top 6 factors to evaluate before executing the transition. For each factor, specify:
   • A concrete metric (e.g., $/MWh LCOE, capacity factor, WACC, carbon price exposure, interconnection queue time, regulatory incentives).
   • How you would estimate it (data, models, benchmarks).
   • Go/No‑Go thresholds.
2. Given the fossil cap at 5.0 million MWh/year and total technical maximum output of 8.8 million MWh/year, propose two renewable supply mixes that offset the 3.8 million MWh/year gap. For each mix, include:
   • Annual MWh by resource and expected capacity factors.
   • Ramping/firming strategy (e.g., storage, demand response, PPAs) with any capacity credit assumptions.
   • Incremental transmission/interconnection considerations.
   • A simple pro‑forma at an assumed market price of $40/MWh, showing revenue, variable/fixed O&M, and gross margin.
3. If adding new generation is not permitted for the next 12 months, outline three concrete actions to maintain profitability (e.g., price optimization with demand elasticity, fuel hedging, O&M cost reductions, contract renegotiations). For each action, quantify the expected impact on unit contribution margin ($/MWh), total annual impact (given the 5.0 million MWh fossil cap), and identify key risks and leading indicators.