Energy cases are electrons, molecules, and contracts. Capacity is MW. Energy is MWh. A plant that is “150 MW” is not a 150 MW × 8,760 h revenue story unless the load factor is 100%.
Last full pass: 24 August 2026.
McKinsey, BCG, Bain, and energy boutiques (and plenty of Big Four deals) will give you a generation, midstream, or offtake prompt because the units punish sloppy candidates. Upstream E&P, a gas-fired peaker, a renewable PPA, and an LNG offtake are different businesses that share one habit: confusing capacity with energy, and treating a take-or-pay as optional volume. Manufacturing-style cost-out still matters (see operations and supply chain), but it is not the opening tree. For firm landscape, top oil and gas consulting firms is the map; this page is the case.
What you are deciding
- Build / delay / kill a plant or a field given a PPA, merchant curve, or oil price deck (state it as a case assumption).
- Contract vs merchant. A corporate PPA at $42/MWh vs captured merchant $31/MWh is a spread, not a green slogan.
- Take-or-pay / ship-or-pay. You pay for capacity you do not use. That is a fixed cost with a legal logo on it.
- Dispatch. A peaker with a 8% load factor has a completely different $/MWh cost than a combined-cycle at 55%.
Clarify commodity (power, gas, oil, LNG, hydrogen), regulated vs merchant, and whether the number on the page is nameplate MW, available MW, or MWh.
Exhibits you should expect
| Exhibit | Read |
|---|---|
| Nameplate MW and capacity factor | Annual MWh ≈ MW × 8,760 × capacity factor. |
| Heat rate / fuel cost | Variable cost of a thermal plant. |
| PPA price vs merchant / capture rate | Renewables often under-capture baseload prices (cannibalization). |
| Take-or-pay volume vs actual offtake | Pay for the contracted mmbtu/tonnes even if you do not lift. |
| Grid connection / curtailment | MWh you cannot deliver is not MWh you can sell. |
Units that trip people
MW vs MWh. MW is a rate (power). MWh is energy (power × time). Revenue is almost always on MWh (or on a capacity payment in $/MW-year, which is a different line).
Load factor / capacity factor. 80 MW × 8,760 × 0.24 = 168,192 MWh, not 80 × 8,760.
mmbtu vs mcf vs MWh. Do not convert unless you state a heat rate.
Take-or-pay. Volume you must pay for. It belongs in the fixed-cost bucket, not in “variable COGS if we run.”
Practice an energy-units case
Run a scored case where MW, MWh, and a take-or-pay have to be handled as different objects.
Worked mini-case: nameplate is not a revenue forecast
Prompt. Sunridge is an 80 MW solar project. Interview-style case inputs: capacity factor 24%, operating cost $7/MWh, corporate PPA offered at $42/MWh for 12 years, expected merchant capture $31/MWh (afternoon cannibalization). A separate LNG desk wants the company to sign take-or-pay for 2.0 mtpa at a fee that works out to $48m/year, while internal use is 1.1 mtpa. Two questions: PPA or merchant for the solar? Sign the LNG?
Solar math. MWh/year = 80 × 8,760 × 0.24 = 168,192. PPA revenue = 168,192 × $42 ≈ $7.06m. Merchant = 168,192 × $31 ≈ $5.21m. Opex = 168,192 × $7 ≈ $1.18m. Contribution PPA ≈ $5.88m vs merchant $4.03m. Unless you have a strong view that capture rises (case would need a price-shape exhibit), take the PPA. The trap is quoting 80 MW × 8,760 × $42 = $29m — that assumes a 100% capacity factor.
LNG. You would pay $48m for 2.0 mtpa and use 1.1. Unless you can divert or trade the spare 0.9 mtpa at a positive netback (ask for a netback exhibit), the spare is a $22m-class deadweight (0.9/2.0 × 48, if the fee is purely volumetric take-or-pay). Do not sign as a “strategic option” without a diversion case.
Recommendation. Execute the solar PPA; reject the LNG take-or-pay until there is a committed offtake or a trading book with limits. Risk: PPA counterparty credit; ask for a parent guarantee. Next exhibit: hourly capture vs PPA shape, and LNG diversion netbacks.
What a generic profitability tree misses here
- Capacity ≠ energy. Price × “volume” fails if volume was MW.
- Contracts create fixed costs (take-or-pay, ship-or-pay, capacity payments).
- Dispatch and shape determine captured price, not the annual average pool price.
- Fuel and carbon are variable for thermal; they are almost absent for solar (until you add storage).
- Grid and curtailment are volume leaks a factory model does not have.
If you treat Sunridge like a factory at 100% utilization, you will triple the revenue and sign a take-or-pay for molecules you cannot use.
See where you stand on an energy case
Practice MW vs MWh and take-or-pay so-whats.
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CoachNed is independent and unaffiliated with McKinsey, BCG, Bain, or other firms named for interview-style practice. Cases on CoachNed are AI-simulated.