Market Estimation

Guessestimation Market sizing
Neue Antwort am 28. Sept. 2022
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Anonym A fragte am 21. Sept. 2022

How much renewable energy is produced in Germany?

Can someone help me to build a structure for this question?

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Ian
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antwortete am 22. Sept. 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

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Pedro
Experte
antwortete am 28. Sept. 2022
Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter

1. How much energy is produced in germany? -→ You need to segment between families (# families * average daily consumption * days) and business needs (this one is quite hard actually… I would suggest taking industrial GDP, considering a % of the industrial value add going to energy to estimate the energy cost, and then dividing the energy cost per price of kW).

Please note this gives you consumption, not production. For consumption you need to know whether germany imports or exports energy. 

2. How much (%) of the produced energy is from renewable sources?

This is just the first layer of the answer. You should be able to take it from here .

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Florian
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Content Creator
antwortete am 21. Sept. 2022
#1 rated McKinsey Case and PEI Coach | 5 years at McKinsey | Mentorship Approach | 120+ McK offers in 18 months

Hey there,

The short and honest answer would be: Not enough given the current situation.

All jokes aside, the rule of thumb here for market sizing/estimation questions is to first post your own approach and have others comment on it and improve it.

The benefit is twofold:

  1. You work on the problem yourself and have at least considered a couple of ideas before asking for help
  2. You will not only get an approach but also an evaluation of your answer that helps you understand what your answer was lacking (= bigger learning effect)

Cheers,

Florian

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Anonym B antwortete am 21. Sept. 2022

Hi there,

 

This is an interesting question! I have tried and calculated it to be 360 Terra watts per year (assumed it is asked for annually). My approach is as follows and would really appreciate it if any coaches could provide honest feedback: 

 

Total renewable energy produced in Germany = Total Energy required (assume supply = demand) x % of Renewable energy 

 

1. Total energy required = Energy for privates uses (assume the composition is 70% of total) +  Energy for public uses (assume the composition is 30% of total). Hence, Total energy required = Energy for private uses / 70%

 

Energy for private uses = Energy required per household x # of households

a. Energy required per household per year = 5,000 KWH (assumption) x 16 hours (assumption: 16 hours of activity) x 30 days x 12 months = ~ 32,000 MW (Simplified 30 days x 12 months to be 400 instead of 360. Hence, 5,000 x 16 x 400)

 

b. # of households = 100 M (Assumption: Population size)  / 2.5 (Assumption: average people in one household) = 40 M Households

 

Energy for private uses = 32,000 MW x 40 M = 1,280 Terra watts

 

Total energy required = 1,280 Terra watts / 70% = ~1,800 Terra watts

 

2. % of Renewable energy = 20% (Assumption: renewable energy makes up 20 % of total energy required in developed country)

 

Total renewable energy produced in Germany = 1,800 Terra watts x 20% = 360 Terra watts per year

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Ian

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