Introduction
When coal is burned in power plants to produce electricity, it releases sulfur dioxide, a gas that can harm both human health and the environment. Breathing in sulfur dioxide can irritate the lungs and airways, especially for children, older adults, and people with asthma or other respiratory issues. In the atmosphere, sulfur dioxide can combine with water vapor in the air to form acid rain. This acid rain can damage forests, harm aquatic life in rivers and lakes, and wear away stone and metal structures. It can also contribute to haze and reduced air quality across large areas.
To reduce sulfur dioxide emissions, many coal power plants use a pollution control device called a scrubber. A scrubber sprays a mixture, often made of water and crushed limestone, into the exhaust gases to chemically remove sulfur dioxide before it is released into the atmosphere. Scrubbers vary in cost as well as how much pollution they remove. A full scrubber removes nearly all of the sulfur dioxide emissions but is expensive to install. A partial scrubber removes about half of the emissions and costs less, making it a more affordable option but with less environmental benefit.In this activity, you will take on the role of an energy company deciding how to build and operate a coal-burning power plant. Your goal is to make a profit while considering the financial and environmental impacts of your choices.
Step 1: Choose Your Plant Set-Up
Begin by choosing the size of your coal-burning power plant. Place a check on your choice.
_______ Small
_______ Medium
_______ Large
Next, study the table below showing the scrubber options for your power plant. Each option has different costs and affects how much sulfur dioxide your plant releases into the air.
| Scenario | Description | Scrubber Cost Factor | Emissions Reduction |
|---|---|---|---|
| No scrubber | Full emissions; no pollution control | 0 | 0% |
| Partial scrubber | Reduces emissions by half; half the cost of full scrubber | 0.5 | 50% |
| Full scrubber | Removes nearly all sulfur dioxide emissions; full scrubber cost | 1 | 90-100% |
Decide whether you will install no scrubber, a partial scrubber or a full scrubber in your power plant. Place a check on your choice.
_______ No scrubber
_______ Partial scrubber
_______ Full scrubber
Based on your first two decisions, fill out the Plant Size (small, medium, or large) and Scenario (full scrubber, partial scrubber, no scrubber) columns in the Calculations Table below.
Coal Power Plant Calculations Table
| Step 1 | Step 1 | Step 4 | Step 4 | Step 5 | Step 6 |
| Plant Size | Scenario | Annualized Base Cost ($/year) | Annualized Scrubber Cost ($/year) | Operating Cost ($) | Adjusted SO2 Emissions (tons) |
| Step 6 | Step 7 | Step 7 | Step 3 | Step 7 |
| Penalties ($) | Health and Env. Impact Cost ($) | Total Annual Cost ($) | Gross Profit ($) | Annual Net Income ($) |
Step 2: Review the Data
You will be using the data table below to calculate the revenue, costs and penalties of your power plant, based on your plant size and scrubber installation choices
Coal Power Plant Mock Budgets and Environmental Costs
| Plant Size | Annual Generation (MWh) | Estimated Price per MWh ($) | Base Installation Cost ($) | Scrubber Installation Cost (Million $) | Operating Cost (% of Annual Revenue) | Annual SO2 Emissions No Scrubber (Tons) | Annual Emission Penalties ($ per ton) | Health/Env. Impact Cost ($ per ton) |
|---|---|---|---|---|---|---|---|---|
| Small | 100,000 | 65 | 40,000,000 | 7,500,000 | 35 | 5,000 | 100 | 400 |
| Medium | 300,000 | 65 | 96,000,000 | 14,400,000 | 25 | 15,000 | 100 | 400 |
| Large | 800,000 | 65 | 240,000,000 | 30,000,000 | 15 | 40,000 | 100 | 400 |
Terms:
- Annual Generation: The total electricity a plant produces in one year, measured in MWh (megawatt-hours).
- Estimated Price per MWh: The average amount of money a power plant expects to earn for each MWh (megawatt-hour) of electricity it sells over the course of a year.
- Base Installation Cost: The estimated cost to build the power plant.
- Scrubber Installation Cost: The cost to install technology that reduces SO2 emissions.
- Operating Cost: The estimated annual cost to operate the power plant, including staff, equipment and maintenance costs.
- Annual SO2 Emissions: The amount of sulfur dioxide gas the plant releases each year without scrubbers.
- Annual Emission Penalties: Fines or taxes the plant pays based on how many tons of SO2 it emits.
- Health/Environmental Impact Cost: Estimated yearly cost related to health problems and environmental damage caused by the emissions without a scrubber.
Note: In the real world, energy companies don’t write a check for Health and Environmental Impact Costs, but these costs are very real. They show up in the form of increased healthcare expenses, environmental damage, reduced labor productivity, and other burdens that society pays for, even if the company doesn’t. Including them in this simulation allows for a more comprehensive analysis of the true societal cost of energy production decisions.
Step 3: Calculate Gross Profit
Use the size of your plant and the market price of electricity to calculate how much money your plant earns each year from selling electricity.
Note: Round all dollar amounts to the nearest whole number unless otherwise instructed.
| Formula: Gross Profit = Annual Generation (MWh) x Price per MWh Show your work in the space below. Once you have calculated the Annual Revenue for your power plant, fill in the Gross Profit ($) column in the Coal Power Plant Calculations Table under Step 1. Then, subtract these annualized capital costs from your revenue to get your Initial Profit: ____________________ Formula: Initial Profit = Annual Revenue – (Annualized Base Cost + Annualized Scrubber Cost) |
Step 5: Deduct Operating Costs
Smaller power plants tend to have higher operating costs because they do not benefit from economies of scale. This means they produce less electricity while still needing many of the same staff, equipment, and maintenance as larger plants. As a result, the cost to operate each unit of electricity is higher in small plants compared to large ones that can spread their expenses over more output.
Next, subtract operating costs to reflect expenses like fuel, maintenance, and labor. Use the percentages below to calculate your operating cost:
- Small plant: 35% of revenue (0.35)
- Medium plant: 25% of revenue (0.25)
- Large plant: 15% of revenue (0.15)
| Formula: Operating Cost = Gross Profit x Operating Cost (%) Show your work in the space below. Once you have calculated the Operating Cost for your power plant, fill in the Operating Cost ($) column in the Coal Power Plant Calculations Table under Step 1. Then, subtract the Operating Cost from your Initial Profit under Step 4 to find the Step 5 Profit: ____________________ Formula: Step 5 Profit = Initial Profit – Operating Cost |
Step 6: Deduct Emission Penalties
Sulfur dioxide (SO2) is a harmful pollutant that can cause serious health problems and environmental damage. To reduce these impacts, governments may place penalties on sulfur dioxide emissions to encourage power plants to limit their pollution. These penalties create a financial reason for companies to install pollution control technologies or find cleaner ways to produce electricity. If your plant releases sulfur dioxide, you must pay penalties based on how much pollution it produces. Scrubbers reduce your emissions.
| Formula: Adjusted SO2 Emissions = Annual SO2 Emissions x (1 – Scrubber Cost Factor)Penalties = Adjusted SO2 Emissions x $100 per ton Show your work in the space below. Once you have calculated the Penalties for your power plant, fill in the Adjusted SO2 Emissions (tons) and Penalties ($) column in the Coal Power Plant Calculations Table under Step 1. Then, subtract the Penalties from your Step 5 Profit to find the Step 6 Profit: ____________________ Formula: Step 6 Profit = Step 5 Profit – Penalties |
Step 7: Deduct Health and Environmental Costs (Externalities)
Externalities are costs or benefits that affect people who are not directly involved in an activity. In the case of power plants, health and environmental externalities refer to the negative effects of pollution, such as increased asthma, acid rain, or damage to ecosystems, that are not paid for by the company producing the electricity. These costs are often passed on to the public through medical expenses, environmental cleanup efforts, or long-term harm to natural resources.
Although utilities don’t usually pay these costs directly, include them to see the full impact of your choices on society.
| Formula: Health and Env. Impact Cost = Adjusted Emissions x $400 per ton Show your work in the space below Once you have calculated the External Cost for your power plant, fill in the Health and Env. Impact Cost ($) column in the Coal Power Plant Calculations Table under Step 1. Then, subtract the Health and Env. Impact Cost from your Step 6 Profit to find your Final Profit (Net Income) after all the impacts: ____________________ Formula: Final Profit = Step 6 Profit – Health and Env. Impact Cost |
| Return to the Coal Power Plant Calculations Table under Step 1. Add all of your costs and fill in the Total Annual Cost ($) column. Then, subtract your Total Annual Cost from the Revenue. This equals your Net Income, and should equal the Final Profit you just calculated. Fill in the Net Income ($) column in the Coal Power Plant Calculations Table under Step 1. |
Step 8: Final Analysis
A. At the end of the simulation, compare your plant’s:
- Profit after capital and operating costs.
- Profit after emissions penalties.
- Profit after health and environmental costs.
Briefly summarize the comparisons below.
B. Then, reflect. Was your plant financially successful? If yes, what factors do you think most contributed to its financial success? If not, what factors do you think most contributed to its loss?
C. Describe two trade-offs between environmental benefits and financial cost.
D. Would you recommend or try a different set-up if you did it again? If not, why? If so, what would your plant size and scenario be?
E. Should power plant owners and operators be held responsible for health and environmental costs? Why or why not? Consider fairness, responsibility, and economic impacts in your response.
F. Explain how scrubbers affect emissions and overall costs for a power plant.
G. Explain why a power plant might choose partial scrubbers instead of full scrubbers.
H. Describe how plant size impacts the feasibility of installing scrubbers.