[ExI] Step at a time was economic parable
hkhenson at rogers.com
Thu Oct 9 21:57:22 UTC 2008
At 10:32 AM 10/9/2008, you wrote:
>On Thu, Oct 9, 2008 at 4:13 PM, hkhenson wrote:
> > So a penny a kWh would generate $800 income over ten years--paying for the
> > capital equipment.
> > It is worth considering what power cost as you raise the lift cost.
> > For example, at the current cost to GEO of about $20,000/kg, an
> installed kW
> > would cost about $80,000 and the cost per kWh would be a dollar to pay this
> > off in ten years.
> > Zero lift cost only cuts the price of power in half compared to $100/kg.
>This sounds a tad simplistic to me.
>You have to include the cost of the capital invested.
>i.e. pay interest on the money borrowed to invest in this venture.
>or a share in the profits of the business to the investors.
Of course. I have seen full analysis using borrowed money as well as
capital and assuming such things as 30 year paybacks.
For a rough analysis you can assume a ten year payback and get
essentially the same results.
>The returns generated have to be discounted for inflation.
>Though the price of the power sold will possibly increase in line with
>inflation, depending on demand and competing alternatives.
The model assumes a very steep deflation in what is charged for
power. The reasons is that in any business you want to hit the max
profit sweet spot on the price elasticity curve. Down around a penny
a kWh (bulk, off peak or dedicated) there is a huge demand for energy
to make synthetic gasoline and other liquid fuels. World energy
demand at present is about 15 TW, most of that in fossil fuels. One
of the people at the recent conference proposes installing a TW/year
for the next 30 years.
>I doubt if many venture investors will be happy to suffer losses for
>ten years before turning a profit. They could be dead by then, or the
>company might go bust.
The current time to develop a major oil find is in that range, 7-10
years. But the point is well taken. The faster this can be done the
more likely it is to attract capital. We have been talking about a
scheme similar to that Germany used on PV installations to jump start
building power sats. I.e., pass a law requiring utilities to buy a
limited amount of power from space at a rather high price, then a
much larger amount at a considerably lower price.
>I probably wouldn't invest in solar panels for my house until the
>payoff period was under five years.
It depends to some extent what the payoff is. If you can make space
based solar power for a penny a kWh and sell it for a dollar, the
profit should quickly repay a considerable up front cost.
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