MSc in Sustainable Energy Systems

Course Information Package

Course Unit TitleENERGY ECONOMICS
Course Unit CodeMES510
Course Unit DetailsMSc Sustainable Energy Systems (Electives Courses) - MSc Energy Systems and the Built Environment (Required Courses) -
Number of ECTS credits allocated7
Learning Outcomes of the course unitBy the end of the course, the students should be able to:
  1. To understand the fundamentals of energy systems’ economics and to able to evaluate alternative modes of energy supply, taking into account the challenges and the constraints of renewable and non renewable energy systems by appreciating the economic framework within which decisions are made.
  2. To address the issues of developing renewable energy systems in a period of profound and rapid change of national and international energy markets driven by processes of privatisation and liberalisation.
  3. Differentiating between profit and cash and the impact on business and operational activities
  4. Reading and interpreting financial reports, including published accounts
  5. Understanding the principles and management implications of alternative costing methodologies
  6. Planning, budgetary control accountability and responsibility for financial performance
  7. Applying the appraisal techniques for engineering and energy related investments
  8. Understand alternative methods of financing and their effect on valuation
  9. Understanding the element of risk/uncertainty in the range of engineering and energy related decisions a company faces, and how to measure its effect
Mode of DeliveryFace-to-face
PrerequisitesNONECo-requisitesNONE
Recommended optional program componentsNONE
Course Contents

·         Introduction to Business Finance

·         Understanding Financial statements

·         Profit vs. Cash control of cash flow and its implications

·         Interpretation of Accounts

·         Costing Techniques to ascertain, recover and control costs

·         Marginal Costing and Contribution Analysis

·         Absorption and Activity Based Costing

·         Evaluating Business and Engineering Assets:

-       Present-Worth Analysis

-       Rate of Return Analysis

·         Project Cash Flow Analysis

-       Project Cost Elements

-       Project cash flow activities

-       Effect of inflation

·         Mean-variance optimization and efficient frontiers

·         Cost of Capital and the capital asset pricing model (CAPM)

·         Project financing

-       Debt versus equity

-       Cost of capital with different sources of financing

-       Capital budgeting with different sources of financing

·         Handling Project Cash Flow Risk

-       Methods of describing Risk (Sensitivity Analysis, Scenario Analysis)

-       Including Risk in Investment evaluation (Probabilistic approach)

-       Investment strategies under Uncertainty (Real Options)

·         Rate of Return Analysis: Use Microsoft Excel® to formulate investment decisions and evaluate their rate of return.

·         Project Cash Flow Analysis: Use Microsoft Excel® to structure Project Cash Flows and estimate their Rate of Return.

·         Mean-variance optimization in Microsoft Excel®   and construction of efficient frontiers 

·         Project Uncertainty: Use Microsoft Excel® to conduct sensitivity analysis and scenario evaluation of particular projects’ cash flows.

·         Use Microsoft Excel® to build scenario trees for investment decisions under uncertainty and valuation of options

Recommended and/or required reading:
Textbooks
  • Murray Barrie, Power Markets and Economics: Energy Costs, Trading, Emissions, Wiley Publishers, 2009.
  • Bhattacharyya, Subhes C., Energy Economics: Concepts, Issues, Markets and Governance, Springer Academic Publishers, 2011.
  • Conkling, Roger, L., Energy Pricing: Economics and Principles, Springer Academic Publishers, 2011.
  • Creating markets for energy technologies, International Energy Agency, Organisation for Economic Co-operation and Development, 2003
  • The Future for Renewable Energy 2, European Renewable Energy Council, James & James (Science Publishers) Ltd, 2002
  • Blank L., Tarquin, A., Engineering Economy, 7th Edition, McGraw-Hill, 2012.
  • Park, C.S., Fundamentals of Engineering Economics, 2nd Edition, Pearson Education, 2009.
  • Capital Budgeting: Financial Appraisal of Investment Projects, Don Dayananda , Richard Irons, Steve Harrison, John Herbohn, Patrick Rowland, Cambridge University Press, 2003
  • H. Campbell and R. Brown, Benefit-Cost Analysis: Financial and Economic Appraisal Using Spreadsheets, Cambridge University Press, 2003
  • Fundamentals of engineering Economics (International Edition), by Park Chan, Prentice Hall, 2nd edition 2009.
  • Engineering Economy , by William Sullivan, Elin Wicks, and Patrick Koelling, 14th edition, 2009
  • Principles of Corporate Finance, 9th edition, by Brealey A. R., Myers C. S. I
References
  • Charging Ahead: The Business of Renewable Energy and What It Means for America John J. Berger
  • Renewable Energy in Europe - Building markets and capacity, European Renewable Energy Council, Earthscan, 2004
  • How to Sell Technical Equipment and Services, James Hutton, Pennwell Books, 2002
  • Power Plant Construction Management: A Survival Guide, Peter Hessler, Pennwell Books, 2005
  • Economic Analysis of Investment Operations, P. Belli, J.R. Anderson, H.N. Barnum, J.A. Dixon and Jee-Peng Tan, World Bank Institute, 2001
  • D. Potts, Project Planning and Analysis for Development, Lynne Reinner Publishers, 2002
  • Park Chan, Fundamentals of Engineering Economics, Prentice Hall, 2004
  • Financial Theory and Corporate Policy, by Copeland T. E., Weston J. F., Shastri K.4th edition
  • Park Chan, Contemporary Engineering Economics, Prentice Hall, 3rd Edition, 2002
  • Stephen A. Ross, Randolph W Westerfield, Bradford D Jordan, Fundamentals of Corporate Finance Alternate Edition + S&P card + Student CD, McGraw-Hill 7th Edition, 2006
  • James C. Van Horne, John M Wachowicz, Fundamentals of Financial Management, 12/E, Prentice Hall 12th Edition 2005
Planned learning activities and teaching methods
Assessment methods and criteria
Individual or small group exercises20%
Project20%
Readings10%
Final Exam50%
Language of instructionEnglish
Work placement(s)NO