Mini-course 1 Decision Analysis (Dr. Mariya Sodenkamp) / Class 4 / Welth and Duke

Welth & Duke

Welth & Duke is considering an opportunity to build a small wind farm near a mid-size town. The expected operating period of this farm is 20 years. The alternative types of windmills for the wind farm and their characteristics are given below:

1) Type A windmills

The first option is to establish seven A-type windmills.

Finances:

Price of one such unit is 1,500,000 $.

The total cost of installation is 1,700,000 $.

Sound emissions: wind turbine of this mill is placed at the height of 20

m (to put that in context, the average air conditioner can reach 50 decibels of noise, and most refrigerators run at around 40 decibels). For this farm the noise level

would be 48 decibels

Effect on the bird colonies. The number of birds that would be threatened by the windmills within the whole operating period depends on the quantity of wind on that side. In case of low quantity of wind about 250 birds would die, in case of the average quantity of wind 350 birds can die, and if the quantity of wind will be on the highest level 450 birds will die.

2) Type B windmills

The second option is to establish six A-type windmills.

Finances:

Price of one such unit is 2,100,000 $.

The total cost of installation is 1,950,000 $.

Sound emissions: wind turbine of this mill is placed at the height of 30 m and has a nose level of 25 decibels

Effect on the bird colonies. The number of birds that would be threatened by the windmills within the whole operating period depends on the quantity of wind on that side. In case of the lowest forecasted quantity of wind about 500 birds would die, in case of the average quantity of wind

700 birds can die, and if the quantity of wind will be on the highest level 900 birds will die.

Along with a number of renewable energy parks, Welth & Duke owns a network of golf clubs, popular stores selling fitness equipment, sport apparel and recreation supplies, as well as organic food all around the world. Welth & Duke has always emphasized the importance of healthy lifestyle and its conscious attitude to the environment. On the one hand, the company management is aimed at extracting financial benefits from this investment. On the other hand, the ethical and environmental issues must be taken into account and the good image should be not damaged. Priority set for the profit is 55%. Importance of the inhabitants’ satisfaction associated with sound emissions is 20%. Finally, safety of birds has importance of 25%.

Yearly income depends on the quantity of wind and produced energy. In case of the low quantity of wind, one A-type unit produces about 1,800,000 kw of energy per year, whereas a B-type unit is expected to produce 2,500,000 kw of energy yearly. If quantity of wind will be average during the operating period, each A-type and B-type unit will produce 2,500,000 kw and 3,000,000 kw respectively. Finally, if wind will be on the maximum expected level, the A- and B-type mills will produce 3,200,000 kw and 3,500,000 kw each.

The windmills can be installed not earlier than in six months. Currently, price for 1 kw is 9,1 cent. However, if an opposing political party will be elected in three months, the price for 1 kw can fall to 6,5 cent.

Does it make sense for Welth & Duke to invest money in one of the windmill farms or would it better to withdraw? Identify the alternatives, criteria and scenarios. For the aggregation of multiple parameters apply the method of weighed additive aggregation. Choose the best option using decision methods under uncertainty (optimist, pessimist, Hurwitz criterion and Laplace method).

Assuming that the chance of the opposing party to win the election is 60%, what is the right decision?