Introduction
This simulation activity engages students in systems thinking by placing them in the role of an energy company managing the construction and operation of a coal-burning power plant. Students make decisions about plant size and pollution controls, then analyze how those choices affect financial outcomes, emissions, and societal impacts. The activity promotes critical thinking around environmental trade-offs and helps students understand the complex balance between economic decisions and environmental responsibility in energy production.
Student Objectives
Students will be able to
- Analyze how power plant size and pollution control technologies affect financial and environmental outcomes.
- Calculate revenue, costs, emission penalties, and externalities using real-world formulas.
- Evaluate the trade-offs between economic profit and environmental impact in energy production decisions.
- Justify their energy choices using quantitative data and reflect on the societal consequences of pollution.
Materials
Procedure
- Consider allowing students to work in groups (and compare their results for the Final Analysis).
- Provide students with the Student Handout. Students will work through Student Handout to complete the economic trade-off simulation for a coal power plant.
- Use the Calculations Spreadsheet below to evaluate the different scenarios that students can choose to evaluate.
Important: While in the real world, utilities don’t usually pay Health and Environmental Impact Costs directly, students will be including them in their costs to see the full impact of their choices on society. Once students complete their calculations, consider showing them the full spreadsheet for analysis and discussion.
Calculations Spreadsheet
| Plant Size | Scenario | Annualized Base Cost ($/year) | Annualized Scrubber Cost ($/year) | Operating Cost | Adjusted SO2 Emissions (tons) | Annual Emission Penalties ($) | Health and Env. Impact Cost ($) | Initial Profit ($)(OR GROSS PROFIT) | Annual Net Income ($) |
|---|---|---|---|---|---|---|---|---|---|
| small | no scrubber | 4000000 | 0 | 2275000 | 5000 | 500000 | 2000000 | 6500000 | -2275000 |
| small | half-scrubber | 4000000 | 375000 | 2275000 | 2500 | 250000 | 1000000 | 6500000 | -1400000 |
| small | full scrubber | 4000000 | 750000 | 2275000 | 0 | 0 | 0 | 6500000 | -525000 |
| medium | no scrubber | 9600000 | 0 | 4875000 | 15000 | 15000000 | 6000000 | 19500000 | -15975000 |
| medium | half-scrubber | 9600000 | 720000 | 4875000 | 7500 | 7500000 | 3000000 | 19500000 | -6195000 |
| medium | full scrubber | 9600000 | 1440000 | 4875000 | 0 | 0 | 0 | 19500000 | 3585000 |
| large | no scrubber | 24000000 | 0 | 7800000 | 40000 | 40000000 | 16000000 | 52000000 | -35800000 |
| large | half-scrubber | 24000000 | 1500000 | 7800000 | 20000 | 20000000 | 8000000 | 52000000 | -9300000 |
| large | full scrubber | 24000000 | 3000000 | 7800000 | 0 | 0 | 0 | 52000000 | 17200000 |
Answer Key
Step 8 Final Analysis Answer Key
The Student Guide contains the Economic Trade-Offs Simulation – Student questions.
Question 1: Answers will vary based on specific plant size and scenario calculations. (Example: At first, after paying for just the capital and operating costs, my plant was making a good profit. But once I added the penalties for sulfur dioxide emissions, the profit dropped. After including the health and environmental cost, I had no profit at all and lost a lot of money.)
Question 2: Answers will vary based on specific plant size and scenario calculations. (Example: My plant wasn’t financially successful, because of the health and environmental cost. If I didn’t have to pay that cost, then my plant could have made a profit. In the real world, I could say that my plant would be financially successful, because the plant wouldn’t have to pay that cost and would pass the health and environmental cost to society.)
Question 3: Answers will vary based on specific plant size and scenario calculations. (Example: One trade-off was between installing a full scrubber (which was better for the environment) and paying a higher cost upfront. Another trade-off was with the plant size. A large plant made more electricity and money, but without proper scrubbers, it also caused more pollution and damage to the environment.)
Question 4: Answers will vary based on specific plant size and scenario calculations. (Example: Yes, I would evaluate a large plant with a full scrubber. Even though it costs a lot at first, it also avoids most penalties and health costs. Over time, it might be the best choice both for profit and the environment.)
Question 5: Answers will vary.
Question 6: Scrubbers reduce sulfur dioxide emissions by cleaning the exhaust gases. Full scrubbers remove almost all of the pollution, but they are very expensive. Partial scrubbers are cheaper, but don’t clean as much. Using scrubbers lowers the penalties and health costs, but increases the upfront costs.
Question 7: Answers will vary. (Example: A power plant might choose a partial scrubber because it still reduces pollution, but costs less than a full one. It helps avoid some penalties and health costs while still saving money compared to the most expensive option.)
Question 8: Answers will vary. (Example: Large plants make more electricity and money, and so they might be better able to afford full scrubbers. Small plants don’t make as much money and have higher operating costs, so installing expensive scrubbers is harder for them.)