Advantage of loan leveraging in commercial solar process heat applications
Conference
·
OSTI ID:5718050
In a majority of the solar/thermal studies to date, a utility economic methodology has been used to assess the potential of solar power systems. The utility sector is precluded from taking advantage of loan leveraging because the effective rate of return is artificially set. Utilities are regulated by public commissions and thus must finance new capital investments according to a prescribed set of rules on after tax cost of capital and fixed charge rates. Commercial ventures have no such externally imposed constraints and make decisions for capital expenditures which include the effect of loan leveraging. The relevant parameters for a commercial institution are interest rate on debt, a discount rate which accounts for risk, and the effect of favorable tax incentives. An expression is developed for a capital cost factor which contains these parameters. Results are shown for various downpayments and discount rates. It will be shown that the effect of loan leveraging can be substantial in affecting the penetration of solar process heat into the commercial energy market. In addition, the relation between loan leveraging and risk is investigated.
- Research Organization:
- Sandia Labs., Albuquerque, NM (USA)
- DOE Contract Number:
- EY-76-C-04-0789
- OSTI ID:
- 5718050
- Report Number(s):
- SAND-79-1292C; CONF-791024-6
- Country of Publication:
- United States
- Language:
- English
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