² These kWh calculations assume an 18% capacity factor, fixed interest rate of 7.5%, a 20-year term, no tax benefits assumed.
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³ Bruce Henderson, The Logic of Business Strategy (Cambridge, Mass.: Balinger Publishing Co., 1984), p. 54.
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⁴ Boston Consulting Group, " Experience Curve Background Data," internal study, Boston, undated.
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⁵ Confidential communications with PV industry executives.
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⁶ R.G. Little and M.J. Nowlan (of the Spire Corporation, Princeton, N..J.), "Crystalline Silicon Photovoltaics: The Hurdle for Thin Films," Progress in Photovoltaics: Research and Applications, Vol. 5, 309-315, June 1997; and "Summary Proposal: 2.5 MW a-Si Photovoltaic Module Manufacturing Plant," Spire Corporation, Princeton, N.J., June 1998.
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⁷ It is beyond the scope of this paper to attempt to determine what size manufacturing will yield appropriate price reductions to enable a project financing. This will be determined by entrepreneurs and engineers as part of their business plan.
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⁸ President of Siemens Solar, as quoted in Renewable Energy Policy Project (REPP) scoping paper, Action Recommendations for a Project to Expand Markets for Photovoltaics (Washington, D.C.: REPP, 1998).
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⁹ Rockefeller Brothers Fund, Selling Solar: Financing Household Solar Energy in the Developing World, Pocantico Paper No. 2 (New York 1996).
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¹⁰ B.C. Farhar and J. Buhrmann, "Public Responses to Residential Grid-Tied PV Systems in Colorado: A Qualitative Market Assessment," National Renewable Energy Laboratory, Golden, Colo., July 1998.
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¹¹ F.J. Fabozzi and P. Nevitt, Project Financing: Sixth Edition (New York: Euromoney, 1986), p. 9.
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¹² H. Chen, J.W. Kensinger, and J.D. Martin, "Project Financing as a Means of Preserving Financial Flexibility," working paper, University of Texas, Austin, Tex., 1989.
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¹³ There is a distinction between risks of project development/completion and operating risk. The clearest example of the distinction between development and operating financing is in commercial real estate, where construction lenders are generally wholly different entities from permanent lenders (e.g., banks v. insurance companies). The analogy for tolling is the special case of hotel development, where the operator (e.g., Hilton) generally does not own the real estate.
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¹⁴ The following discussion about risks is based on J.D. Finnerty, Project Financing: Asset-Based Financial Engineering (New York: John Wiley & Sons, 1996).
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¹⁵ J.D. Finnerty, Project Financing: Asset-Based Financial Engineering (New York: John Wiley & Sons, 1996), pp. 40-1.
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¹⁶ J.D. Finnerty, Project Financing: Asset-Based Financial Engineering (New York: John Wiley & Sons, 1996), pp. 383-90.
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¹⁷ F.J. Fabozzi and P. Nevitt, Project Financing: Sixth Edition (New York: Euromoney, 1986), pp. 35-38.
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¹⁸ Dwight B. Crane, et al., The Global Financial System: A Functional Perspective (Boston: Harvard Business School Press, 1995), p. 20.
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¹⁹ S. Mason et al., Cases in Financial Engineering: Applied Studies of Financial Innovation (Upper Saddle River, N.J.: Prentice Hall, 1995), p. 17.
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²⁰ The downside of having to deliver on forward contracts would be limited to the futures premium plus the difference between bid at time of delivery and the future strike price.
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