A power plant currently uses coal from Source A but must swi

A power plant currently uses coal from Source A but must switch to Source B. Given the following data about the coal sources, how much will the cost of generation per kWh increase or decrease because of the switch. If the switch increases generation cost, give your answer as a positive number. If the switch decreases generation cost, give your answer as a negative number. Express your answer in cents/kWh to the nearest 1/100th cent.

Solution

Coal cost of source A = $34 per ton of coal

EPA cost of source A = $140 per ton of coal

Total cost of using a ton of coal in source A = Coal cost per ton + EPA cost per ton

                                                                 = $34 + $140

                                                                 = $174

Total power generated by source A from 1 ton of coal = 7,200 kWh

Calculate cost per kWh -

Cost = Total cost/Total power generated = $174/7,200 = $0.0241/kWh

$1 is equal to 100 cents. So, $0.0241 is equal to 2.41 cents.

Thus, cost of generating 1kWh of power from Source A is 2.41 cents.

Coal cost of source B = $69 per ton of coal

EPA cost of source B = $80 per ton of coal

Total cost of using a ton of coal in source B = Coal cost per ton + EPA cost per ton

                                                                 = $69 + $80

                                                                 = $149

Total power generated by source B from 1 ton of coal = 7,700 kWh

Calculate cost per kWh -

Cost = Total cost/Total power generated = $149/7,700 = $0.0193/kWh

$1 is equal to 100 cents. So, $0.0193 is equal to 1.93 cents.

Thus, cost of generating 1kWh of power from Source B is 1.93 cents.

Therefore, the cost of generation per kWh decreases by - 48 cents (1.93 cents - 2.41 cents) because of the switch.