What am I missing in my analysis? Yes, Coal is the biggest cost driver, but it produces the best profit margin due to it's ability to create more energy per hour.
When I completed the case, I calculated the Cost per unit of Energy considering that a unit of Energy would sell at the same price, irrespective of the source.
For Coal cost per Gigawatt:
$110 * (20 * 350 / 1000) hours
= $770 per GwH produces 3.5GwH
= Thus $770 / 3.5 = Cost $220 to create 1Gigawat energy
For Gas cost per Gigawatt:
$85 * (20 * 350 / 1000) hours
= $595 per GwH produces 2GwH
= Thus $595 / 2 = Cost $297.5 to create 1Gigawat energy
Based on the calculation above I would conclude that Gas is a bigger cost to our company considering it has a lower profit margin than Coal due to a higher cost to produce 1Gigwat of Energy.
