Reference no: EM13879968

The accompanying spreadsheet lists six different means of generating electricity in the United States. Row 6 lists the estimated megawatt hours produced in 2010 by power plants of each kind. In turn, row 7 lists the maximum capacity for each, while row 9 shows the proportion of the US total (3.8 billion MWh) for each source. (For instance, coal-burning facilities account for 46 percent of electricity generation.)

As discussed earlier in the chapter, the different energy sources vary with respect to average cost per megawatt, carbon dioxide emissions, and environmental and health consequences. (This last category combines diverse impacts: environmental damage from strip mining or damming rivers, the nsequences of securely storing nuclear waste, worker and residential safety risks, and so on.) These costs and impacts-expressed per megawatt hour of electricity-are shown in rows 12, 13, and 14. Finally, cells H12, H13, and H14 show the cost, carbon emissions, and environmental/health impact associated with total U.S. electricity production averaged across all U.S. facilities. (Note that computing the average cost in cell H12 uses the formula: = B9*B12 + C9*C12 + ... G9*G12.) a. Re-create the spreadsheet. Ignoring the carbon and environmental impacts, what proportions of the energy sources would minimize the nation's average cost per megawatt hour (cell H12) while generating 3.8 billion MWh in total? Explain.

	A	B	C	D	E	F	G	H	I
1
2	Options for US Electricity Generation
3
4		Coal	Clean Coal	Nat Gas	Nuclear	Hydro	Renewable	Total	Goal
5
6	Output (MWh)	1.75	0	0.87	0.75	0.26	0.17	3.80	3.80
7	Maximum	2.6	0.5	1.9	0.75	0.44	0.25
8
9	Proportion	46.1%	0.0%	22.9%	19.7%	6.8%	4.5%	100%
10
11							Cost inc tax:	$66.12
12	Cost	$40	$60	$50	$115	$100	$150	$66.12
13	CO2	1.1	0.5	0.62	0	0	0	0.65	.50
14	Environ./Health	100	50	80	65	15	15	78.89	65
15
16	Carbon Tax
17	$0	$0	$0	$0	$0	$0	$0	$0	$0
18

b. Answer the question in part (a) with the added constraint that carbon emissions should be no greater than .5 ton per MWh of electricity generated-that is, cell H13 must be smaller or equal to cell I13.What roles do clean-coal and renewable energy sources play? Is it possible to reduce carbon emissions below .35 ton per MWh? Explain.

c. Suppose that government regulations dictate that twin goals-.4 ton of CO2 per MWh (cell I13) and an environmental/health score no greater than 65 (cell I14)-must both be met. Determine the cost- minimizing mix of energy sources. Proponents of nuclear power argue that this source could provide a total capacity of 1.25 MWh of electricity if enough new plants were built over the next 30 years. Is such a nuclear expansion warranted?

d. An alternative to a CO2 emission standard is a carbon tax. Policy makers have proposed a tax of $80 per ton of CO2 emissions to reflect the expected cost of increased global warming. Such a tax would raise the total cost per MWh of the first three energy sources. For instance, an $80 tax (inserted in cell A17) would imply an added (80)(1.1) =
$88 cost per MWh for coal-fired electricity (in cell B17). Under the
$80 tax, what mix of generating plants minimizes the average cost of electricity? (Hint: In cell H17, compute the average tax per MWh; then minimize cell H11, computed as the sum of cells H12 and H17.) How high would the carbon tax have to be to spur expansion of renewable energy sources?