The water power situation, including its financial aspect

Abstract

The endeavor of this paper is to present, from the point of view of the engineer, certain aspects of the attitude of capital towards water powers. Actual and threatened laws, popular prejudices, and some cases of unprofitable developments in the past, have retarded the development of water powers, but there are also physical and natural difficulties which handicap hydroelectric as compared with steam-electric plants, and make it essential that a reasonable profit in promotion be offered, in order to induce investment. The cost of water power is rising, on account of the increasing cost of labor and materials and increasing taxation, and the efficiency of the utilization of water power has practically reached its maximum. On the other hand, the cost of steam-electric power is falling, in spite of a steady rise in the cost of coal, because continual improvements are being made in the efficiency of conversion of heat energy into mechanical power, and still further progress is to be looked for. To offset this disadvantage there is the possibility of utilizing large amounts of secondary power from hydroelectric plants for industries and process purposes that do not necessarily require continuous power. The hydroelectric plant usually requires about three times the capital investment needed for a steam-electric plant of equal capacity, and the activity of capital in a hydroelectric plant is very low, much lower than in a steam station and in almost all other branches of industry. State regulatory bodies have hampered water powers by not recognizing the distinction between bond interest as a compulsory expense paid as the rent for money loaned, and dividends as an earned reward for the risk of the business and skill in management. Another factor that must be more clearly determined in order that the hampering effect of uncertainty may be removed, is the length of time a permit or franchise may run before recapture clauses can take effect, and the question whether these provisions should not cover the power development in its entirety. Water power should be developed as a matter of conservation, to save our coal supply that is being so steadily depleted. This purpose cannot be served unless the attitude toward water power development is changed and some of the present restrictive factors ameliorated so that investors in water power bonds will be satisfied with five per cent interest instead of requiring seven per cent because of the risks they incur at present.