Capacity vs. Output?

E.ON Inhouse Consulting case: Robinson
Edited on Jan 05, 2021
2 Answers
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Jackson asked on Jan 03, 2021

I know very little about the power generation industry, which is perhaps why I'm confused, but I have a question about the capacity and output math.

Once you calculate running hours I would expect you would need to know the output per hour. Then total output/capacity would be running hours * output per hour. Then I'd expect to compare the total annual output capacity to Mr. Friday's needs (5 KWh) to see if either method (offshore/onshore) meets his power needs. For example, if this were a case about widgets, I'd calculate Ms. Robinson's capacity by multiplying the number of widgets per hour she could manufacture * the number of hours she worked per year. Then I'd compare that capacity against Mr. Friday's widget needs.

Is there something about power generation I don't understand?

Thanks!

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Ian
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updated an answer on Jan 05, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi Jackson,

If you can be patient for a couple of days I've actually just created a new case for electrical utilities/power companies that should help you with this :)

That said, yes, utility assets are measured by Mwh/Gwh (megawatt hours and gigawatt hours). This is how much they produce per hour (at peak output). Multiplying this by hours per day and days per year will get you the annual demand that needs to be met!

Edit: I have just published a new case on the electricity generation market. Take a look here! https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/cutting-carbs-divestiture-in-the-electrical-power-market-228

(edited)

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Luis Peñaloza on Feb 01, 2021

Dear Ian, I took a look into the case, and at the end I quite don't understand the calculation of the NPV of Operating Costs ($2.695B / 10%), could you guide me better where this comes from? Thanks

Clara
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replied on Jan 04, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

In general, capacity refers to the total output you can generate in an ideal scenario. Output, however, is what you indeed generate.

Hence, capacity >= actual output

Best regards,

Clara

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Ian

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