Operations Management: A Sample Project Proposal

What follows is a sample project proposal for constructing and operating a concentrated solar power plant in the fictional country of Magrebia in North Africa. Concentrated solar plants use specialized parabolic mirrors to focus reflected sunlight onto a central receiver tube that runs the length of the mirror.

The tube contains thermal oil that can be heated to several hundred degrees. Pumps circulate the heated fluid from thousands of such mirrors to a central generation plant, where the heat is used to drive turbines that create electricity. The cooled fluid then circulates back to the tubes in the mirrors for reheating.

Note that university research has demonstrated that it’s relatively costless to use waste heat from the plant to remove the salt from ocean water. Selling desalinated water can be quite profitable in North Africa. However, this process has never been operated on a commercial-level scale. Also note that chain of command is peculiar to each project, and we’ve omitted it from this proposal.

  • Purpose: Because of rising oil prices and generous subsidies from the European Union (EU), green energy generated from concentrated solar power has become profitable and is likely to remain so in the future. At this time, the players in this market are quite small.

    Atlantic Energy Company (AEC) will leverage its expertise in large-scale energy projects in remote locations to build a commercial-scale concentrated solar power (CSP) plant in the Magrebian desert and sell the energy to customers in the EU. Potential benefits include

    • Gaining the experience to become a leading developer of CSP projects

    • Gaining access to natural gas markets in Magrebia

    • Obtaining favorable press and public relations from investment in green technologies

    • Determining whether commercial-level water desalination is profitable

    • Realizing economic profit over the operating lifetime of the project

    Though AEC’s primary goal for this project is not profit, the project is to be structured in such a way that it at least breaks even over its lifetime.

  • Included scope:

    • Installing CSP mirrors and plumbing

    • Building the generation plant

    • Piloting the desalination facility (to be expanded if profitable)

    • Operating the CSP facility

  • Excluded scope:

    • Building transmission lines from the facility (which is best situated in the desert) over the mountains to the inhabited coastal region

    • Hooking up transmission lines to the North African grid (which is already connected to the EU grid)

    • Acquiring AEC-approved property to build the facility on

  • Final deliverables other than scope: A workforce that can manage future CSP projects

  • Stakeholders:

    • AEC renewables division, project team, and those teams’ managers

    • Suppliers (particularly those for mirrors and the generation plant)

    • Magrebian government and opposition

    • Magrebian tribes

    • Nongovernmental organizations for environmental responsibility

  • Assumptions:

    • The EU maintains its CSP subsidy. If it doesn’t, the project will lose money, and the market for future CSP projects will dry up, rendering any gain of expertise pointless. Depending on when this happens, the project will need to be terminated or sold off at a loss.

    • The Magrebian government builds the transmission lines to the facility and hooks up those lines with the North African grid. Otherwise, AEC will have to build these at considerable expense because it isn’t our core competence. This could cause the project to fail to break even.

    • The Magrebian government does acquire the property for the facility (as well as rights of way for the transmission lines). Though AEC could do this, it would be prohibitively costly. It would also leave us open to the possibility of litigation because multiple tribes often claim the same territory. Hence, the project would need to be terminated.

    • The Magrebian government remains stable. Our sponsor, the minister of the interior, is the brother of the current president. There is, however, an active opposition. If the regime changes, AEC may need to renegotiate the entire project, potentially holding it up for several years.

    • The project doesn’t harm the environment or threaten an endangered animal. Otherwise, any good publicity from being “green” will be wiped out.

    • The suppliers can provide the quantity and quality of mirrors as needed. Currently, the EU has only two providers easily accessible from Magrebia. If either of these fails, the timeline of the project may be potentially doubled.

    • If the pilot desalination process proves profitable, the Magrebian government will fund AEC’s building of water pipelines to and from the coastal region, where the majority of the population lives. Otherwise, this portion of the project must be abandoned.

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