Business Case Studies & Business Publications

Intrinergy: Carbon Offsets (B)

Bodily, Samuel E.,...

Case

Intrinergy: Carbon Offsets (B)

Bodily, Samuel E.; Ogilvie, Brandon

QA-0738 | Published January 14, 2009 | 3 pages Case

Collection: Darden School of Business

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The B case brings Intrinergy’s point of view into play. Intrinergy has two options for obtaining the biomass to produce steam for the industrial plant. They can use wood chips or sawdust. The wood chips are available at woodlands, essentially for free, although a capital investment in trucks is needed to bring the chips to the plant, and there is variable cost to chip the waste wood and transporting it to the steam plant. Sawdust is delivered to the plant at a price that follows a random walk. Once again, a Monte Carlo simulation is needed to compare the alternatives. How Intrinergy fuels the steam plant does not matter to BurMills and will not change BurMills decision. On the other hand, it will matter to Intrinergy which option BurMills takes, since it affects the level and risk of the revenue to Intrinergy from the project. (A student spreadsheet is available for use with the case: UVA-QA-0738X.)