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You are a quality manager working on the Fox Island Wind Project. The project is now at the testing phase and will be handed over to operations soon. As a quality manager, you want to ensure that the electric power generation process is in control. For ten consecutive days, 5 times a day, you read the meter at specific times throughout the day to measure the output of the power plant. These data are stored in the attached Minitab worksheet. You will use the data and a Word document to answer the following questions:1. What is the appropriate control chart to study the process variability (within sample variation)? Why? 2. What is the appropriate control chart to study the process mean (between samples variation)? Why?3. Use the data provided in the Minitab worksheet to display the charts. Copy and paste the charts to the Word document and look for any evidence of assignable-cause variation 4. Is the electricity production in statistical control? Please explain. 5. What is a rational subgroup? And why is it important when collecting data for process analysis? 6. What advice do you have for the Fox Island Wind Power Project to maintain customer satisfaction? Write a short report containing the answers to these questions. Successful reports will include:Evidence of research from academia and other reputable sources (Wikipedia is NOT a reliable source).References are correctly cited within the body of the paper. APA format is required for in-text citation.Examples of personal experience (work, life) that supports the research.All references cited correctly at the end of the paper (Reference page). APA format is required for reference pages.Use APA style for in text citations and your reference page (double spacing not required). Your paper should be no more than 3 pages (single-spaced, 12-point font)
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Output (MW)
Day
4.3
4.1
4.4
4.25
4.3
4.22
4.09
4.35
4.05
4.06
4.45
4
4.065
3.987
4.0255
3.99
3.985
4
4.154
3.89
4.411
4.139
4.126
3.988
4.321
4.19
4.369
3.965
4.135
4.214
3.897
3.859
4
4.254
3.968
4.055
4.111
4.254
4.098
4.089
4.159
3.789
4.025
3.978
3.987
4.369
11/2
11/2
11/2
11/2
11/2
11/3
11/3
11/3
11/3
11/3
11/4
11/4
11/4
11/4
11/4
11/5
11/5
11/5
11/5
11/5
11/6
11/6
11/6
11/6
11/6
11/7
11/7
11/7
11/7
11/7
11/8
11/8
11/8
11/8
11/8
11/9
11/9
11/9
11/9
11/9
11/10
11/10
11/10
11/10
11/10
11/11
4.245
4.099
4.35
3.897
11/11
11/11
11/11
11/11
9-810-129
REV: FEBRUARY 15, 2011
JOSEPH B. LASSITER III
JAMES CORCORAN
MAX GAZOR
DYLAN HOGARTY
ALEXANDER H. SOMERS, JR.
The Fox Islands Wind Projectt (A)
On
n an unseason
nably warm November
N
affternoon in his Houston, Texas
T
home, energy
e
investtment
bankeer and peak oil author Matthew
M
R. Simmons
S
(HB
BS ’67), foun
nder of Simm
mons & Com
mpany
Intern
national, relatted to a seco
ond-year MBA
A student att Harvard Bu
usiness Schoo
ol the news of
o the
openiing of a new wind energy
y project in co
oastal Maine, the developm
ment of which he had folllowed
closelly as a trusteee of the Island
d Institute.1 Th
he Fox Island
ds Wind project, Simmons said,
s
represen
nted a
majorr achievementt, both because of the challlenges that th
he team, led by
b George Baaker (HBS ’84), had
overcome and beca
ause the deveelopment pottentially offerred a templatee for the deveelopment of future
f
comm
munity-based sustainable wind
w
projects..
Th
he Fox Island
ds of North Haven
H
and Vinalhaven
V
a two of 155 remaining year-round island
are
i
comm
munities on th
he coast of Maine
M
that are not connecteed by a bridg
ge to the main
nland. By virttue of
their separation
s
fro
om the mainlland, the marrket for electrricity on the islands
i
is uniique and costtly for
resideents. In 2008
8, residents paid
p
approxiimately $0.299/kWh, but after the wiind project prices
p
declin
ned to $0.24/
/kWh, a decrrease of 17%.. Historically
y, electricity prices
p
on thee islands had been
water
three times the national averag
ge because of the high cost of importin
ng electricity via
v an underw
cable and maintain
ning the disttribution netw
work on the islands. Bakeer, who main
ntained a hom
me on
milar commu
unity 15 milees away, beccame interestted in energy
y issues durring a
Frenchboro, a sim
sabbaatical from hiss teaching po
osition at Harv
vard Business School. Upo
on delving in
nto the issues faced
by islland residentts further, he decided to work
w
to mak
ke alternative sources of energy
e
availab
ble in
order to lower costts for island residents.
Am
mong the cha
allenges that the Fox Islaands team haad to overcom
me were iden
ntifying a loccation
wheree such a project made sense from a technologiical standpoiint, building support forr and
underrstanding abo
out the impaccts and changes to the hostt community, and raising sufficient
s
finaancing
for th
he project. In
n 2009, afterr approximattely eight yeears of reseaarch and plaanning by vaarious
stakeh
holders and approximately
a
y 18 months of
o active project work, the Fox Islands Wind
W
project came
1 The Island Institute iss a nonprofit org
ganization that seerves as a voice for the balanced
d future of the isllands and waterss of the
Gulf off Maine. The prrimary goals of the
t Island Institu
ute are supportin
ng Maine’s year–round island co
ommunities, consserving
Maine’s island and ma
arine biodiversitty and developin
ng model solutions that balancee the needs of th
he coast’s culturral and
naturall communities.
______________________
__________________________________________________________________________________________________
Professo
or Joseph B. Lassiteer III and James Co
orcoran, Max Gazorr, Dylan Hogarty and
a Alexander H. Somers,
S
Jr. (all MBA
A 2010) prepared th
his case.
HBS casses are developed solely as the basis for class discussio
on. Cases are not in
ntended to serve as
a endorsements, so
ources of primary data, or
illustrations of effective or ineffective manageement.
ght © 2010, 2011 Prresident and Fellow
ws of Harvard Colleege. To order copiies or request perm
mission to reproducce materials, call 1-8800-545Copyrig
7685, wrrite Harvard Busin
ness School Publish
hing, Boston, MA 02163, or go to ww
ww.hbsp.harvard.eedu/educators. Th
his publication may
y not be
digitized
d, photocopied, or otherwise reprodu
uced, posted, or tran
nsmitted, without the
t permission of Harvard
H
Business School.
S
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800-988-0886 for additional copies.
810-129
The Fox Islands Wind Project (A)
online with three 1.5MW GE turbines capable of generating approximately 11,600 MWh per year.2
With the Fox Islands Wind project complete, Baker began to consider whether to pursue similar
projects elsewhere in Maine and the United States more broadly.
The Fox Islands
In 1603, Captain Martin Pring of Bristol, England named two islands off the coast of what is now
Maine the Fox Islands for the silver-grey foxes he observed there. The one mile-wide straight that
separates the islands is still known as the Fox Islands Thoroughfare; however, the northern island is
known today as North Haven and the southern island as Vinalhaven. The islands are approximately
12 miles east of Rockland, Maine in Penobscot Bay (see Exhibit 1 for a map of the Fox Islands).3
Today, North Haven is still best known for its sizable summer colony of prominent business and
political leaders from Boston, New York, and other major cities. The economy of Vinalhaven today is
most dependent on the lobster industry while North Haven is dominated by maintaining its summer
resort community.4 According to the 2000 U.S. Census, North Haven and Vinalhaven had 381 and
1,235 inhabitants, respectively, with a total combined land area of 37 square miles (23,648 acres).5
With no bridge connection to the mainland, residents rely on the approximately one hour and fifteen
minute ferry rides from Rockland as the primary method to transport goods and people to the island.
The Energy Challenge on Fox Islands
In 2008, the residents of the Fox Islands faced some of the highest electricity prices in the U.S. with
recent prices three times the national average. In addition to other economic and social factors, the
high cost of electricity threatened the sustainability of the year-round community on the island. In
Maine, year-round island communities had declined from over 200 to just 15 in 2008. Solving the Fox
Islands’ electricity problems was a crucial step in bolstering the sustainability of the community.
The total electrical costs on the Fox Islands were approximately $0.29/kWh in 2008. This price was
determined by two components, an energy charge and a delivery charge. The energy charge
represented the cost of electricity generation and was variable. Energy charges over the past five
years on the Fox Islands were approximately $0.11/kWh. Energy charges varied across the U.S.
depending on the fuel source used to generate electricity; for example, Kentucky and West Virginia
had low energy charges because electricity was generated using inexpensive coal (see Exhibit 2 for a
comparison of energy charges across the U.S.). In regions that relied on gas or nuclear power, energy
charges were higher. The second electricity price component, delivery charge, is a cost to consumers
that covers the cost of electricity transmission and distribution (T&D). Recent delivery charges on the
Fox Islands were approximately $0.18/kWh. The high delivery charges were the result of the few
(approximately 2,000) customers on the islands relative to the high fixed cost of the necessary T&D
equipment, which included a 10-mile umbilical cable from the mainland, power lines on the island
and maintenance and repair costs. With only 2,000 customers to cover these fixed expenses T&D costs
represented a significant component of electricity prices.
2 11,600 MWh per year calculated assuming three 1.5MW turbines and average yearly utilization of 29% (3 x 1.5MW x 8760
hours per year x 29%) = 11,600 MWh per year. George Baker’s utilization estimate was based on seasonal wind conditions and
equipment scheduled maintenance requirements as well as the ability to sell excess power to the grid.
3 Town of North Haven, Maine, “A Brief History of North Haven,”
http://www.northhavenmaine.org/content/4099/Brief_History/, accessed April 2010.
4 Ibid. and Vinalhaven Chamber of Commerce. “History,” http://vinalhaven.org/history, accessed April 2010.
5 U.S. Census Bureau website, “Census 2000 Data for the State of Maine,”
http://factfinder.census.gov/servlet/GCTTable?_bm=y&-geo_id=04000US23&-_box_head_nbr=GCT-PH1&ds_name=DEC_2000_SF1_U&-format=ST-7, accessed March 2010.
2
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800-988-0886 for additional copies.
The Fox Islands Wind Project (A)
810-129
Consumers on the islands purchased electricity from Fox Islands Electric Cooperative (FIEC, the
Coop), a community owned T&D co-op established in 1974 with the purchase of Vinalhaven Light
and Power. In 1976, with the help of a loan from the Rural Electrification Administration (REA), the
new co-op laid a 10-mile submarine electric cable between North Haven and Central Maine Power
Company’s lines at Rockport, on the mainland. The cable was energized in 1977. As a T&D company,
FIEC did not generate electricity, but only engaged in transmission as a regulated monopoly.
Historically, T&D and generation had been separated and regulated by government mandate in
Maine with fixed prices set by the government. In 2000, to increase competition and keep electricity
prices low for consumers, the industry was deregulated to allow competition set prices for
generation. In 2005, the old submarine cable was replaced with a new one. The co-op purchased all of
its electricity directly from the New England Grid.
Another unique feature of electricity on the Fox Islands was the seasonality of demand, with
consumption spiking in the summer months of July and August (see Exhibit 3 for energy usage
patterns on the island). Electricity in the summer was not driven by air conditioning usage, as few
people on the Fox Islands used air conditioning, but rather by summer residents who arrived and
began using electricity. Seasonal residents and year-round residents typically had different
viewpoints on the electricity challenge on Fox Islands. For seasonal residents, the high cost of
electricity was not a major concern as they were typically wealthy and only used electricity for a
couple months a year. Year-round residents on the other hand had to bear the costs of high electricity
all year and were typically more sensitive to prices than their wealthier seasonal neighbors.
The Genesis of the Fox Islands Wind Project
The wind project on the Fox Islands was the result of nearly eight years of research and planning
(see Exhibit 4 for a timeline of events). Dave Folce, the General Manager of the Fox Islands Electric
Cooperative began exploring the idea of wind power on the island in 2001 as a potential method of
mitigating high energy prices for island residents. Later that year, he also persuaded the University of
Massachusetts Renewable Energy Research Laboratory to begin a three-year study measuring wind
speeds near an abandoned quarry on Vinalhaven. Over the course of the three-year study,
comprehensive data was gathered on the average wind speed, direction, and frequency of wind from
a 40 meter high tower 40 located at the quarry site.
The UMass study confirmed that the quarry site on Vinalhaven would serve as a “good, but not
great” site for windmill placement and three years of data was very helpful for moving the project
forward. However, in 2005, the submarine electric cable connecting the Fox Islands with the
mainland failed and made the future of wind energy on the islands uncertain. FIEC was forced to
borrow $4.0 million to replace the cable to make the necessary improvements to establish a good
connection with the mainland grid. While this event put the wind project on hold, ultimately it would
serve as a critical catalyst for the project. A secure and reliable connection with the mainland grid was
essential for a wind project on the island as the project would require power to be imported from and
exported to the grid.
By 2007, the overall increase in global energy prices coupled with a pro-wind political climate in
Maine paved the way for the development of the Fox Islands Wind project. In early 2008, the Fox
Islands Electric Cooperative formally requested assistance with the project from the Island Institute
and George Baker was introduced to the project.
George Baker
George Baker became involved in the Fox Islands Wind project through the Island Institute, where
he served as the Vice President for Community Wind. Baker had taken sabbatical from teaching at
Harvard Business School during which he studied the potential for wind projects. In 2008, Baker
3
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800-988-0886 for additional copies.
810-129
The Fox Islands Wind Project (A)
went on leave from HBS to become CEO of Fox Islands Wind LLC and pursue the project full-time. In
addition to his duties at Fox Islands Wind, he serves on the Maine Governor’s Task Force on Ocean
Energy, and is a member of the Advisory Board of Neptune Wind, an offshore wind development
company (see Exhibit 5 for biographies of Baker and other key stakeholders).
Building Community Support for the Project
In addition to evaluating the economic viability of wind energy, Baker needed to determine
whether the community would support the construction of three large wind turbines on the island
and build enthusiasm for doing so. As Baker evaluated the situation, he believed that strong
community support would be critical to the success of the project. Without support from the
community, opponents of the project would have a series of levers at their disposal to delay or
potentially halt the project. For instance, critics of the project could pressure public officials to block
the project or deter potential investors by causing them to think it would not succeed.
Risk of Concern from the Community
Unfortunately, problems launching several other notable wind energy development projects
suggested to Baker that community support might be difficult to obtain. Most famously, the Cape
Wind project, an offshore wind development off of Cape Cod, had drawn strong criticism from
people and groups in the Cape Cod area. These groups had banded together and, with the help of
powerful political connections, sought to stymie the project. Residents claimed, for example, that the
wind turbines would obstruct their views of Nantucket Sound, that bird species would be harmed by
the rotors of the wind turbines, that the turbines would interfere with airport activity and that fishing
would be harmed. Opponents of Cape Wind had delayed the construction of the wind turbines for
nearly a decade, despite the project’s being supported by most of the key decision makers in the state
government. The delays had imposed huge costs on the developers of Cape Wind.6
News reports also suggested that community concerns about wind turbines were becoming more
significant. Robert Bryce, an energy journalist wrote: “Lawsuits that focus on noise pollution are now
pending in Maine, Pennsylvania, and New Zealand. In New Zealand, more than 750 complaints have
been lodged against a large wind project near Makara since it began operating last April. The
European Platform Against Windfarms lists 388 groups in 20 European countries. Canada has more
than two-dozen anti-wind groups. In the U.S. there are about 100 such groups, and state legislators in
Vermont recently introduced a bill that will require wind turbines be located no closer than 1.25 miles
from any residence.”7
Baker hoped to avoid a situation similar to Cape Wind on the Fox Islands. On the contrary, he
wanted to move forward with widespread community support. As he assessed the situation, Baker
believed there were two distinct groups to whom he needed to appeal. The first group was full-time
residents of the islands. For many in this group, their electric bill was a significant expenditure, and
they were involved in the life of the islands throughout the year. Many would likely be focused on
finding ways to reduce their electric bill and would perceive this as largely an economic issue. The
second group was summer residents of the islands. This group was likely to be less concerned with
their electric bill as it was a relatively smaller expenditure for them. On the other hand, Baker
believed, many in this group would find the sustainability element of the project appealing.
6 Richard Vietor, “Cape Wind: Offshore Wind Energy in the USA,” HBS No. 9-708-022 (Boston: Harvard Business School
Publishing, 2008).
7 Robert Bryce, “The Brewing Tempest Over Wind Power,” Wall Street Journal, March 1, 2010.
4
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800-988-0886 for additional copies.
The Fox Islands Wind Project (A)
810-129
Initial Steps to Build Support
From the time that the project was in the initial planning stages (spring 2008), Baker focused on
developing community support from both groups. The primary means by which he planned to do
this was through frequent and open communication with the island residents. In Baker’s view, it was
vitally important that he, as the team leader, and others be accessible to island residents, especially
those who had concerns about the project. In other developments that had run into problems with
local communities, a key issue had often been that the island residents viewed the developers of the
project as outsiders coming in to exploit the resources (in this case wind) that the area offered. Baker
resolved not to allow this to happen in the Fox Islands development.
From the outset, the project had the support of several key “opinion leaders” in the community.
One was State Representative Hannah Pingree of North Haven. In 2007, she had voiced strong
support for the project in meetings with other community leaders and advocated for it in the
statehouse to the extent that state support was needed. In particular, Pingree convened a meeting of
island electric cooperatives and addressed an element of the state’s electricity deregulation law that
prohibited a T&D company such as FIEC from engaging in generation activity as contemplated in the
Fox Islands plan. Eventually, a special law was passed to permit the FIEC to operate wind turbines.
Baker’s principal means of building support in the community more broadly was through hosting
town hall meetings on the subject with both year-round and summer residents to communicate
directly with them and to ensure that the nature and details of the project were effectively presented.
Baker held more than a dozen town hall meetings beginning in the spring of 2008. By the time the
summer residents arrived that year, the backing of the year-round residents had been secured.
During the course of these meetings, residents expressed several concerns. One was that the
project was financially risky. With the cooperative already heavily indebted, some residents thought
that the debt needed to develop the wind project would be more than the cooperative could support
and lead to higher el …
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