The relation of load-factor to the evaluation of hydroelectric plants

The value of any water-power plant is due primarily to its earnings, with earnings dependent on the market for its output, and secondarily to the type and quality of the apparatus installed and of the development as a whole. In the case of plants that are in process of development, or that are only partly loaded, the value is, of course, more or less of a speculative nature, and is estimated on the basis of possible and probable income. Prospective earnings as well as actual earnings necessarily rely on selling an amount of power equal to the maximum or the ultimate capacity of the development; and the number of hours per day during which the maximum capacity can be utilized is a definite factor in deciding the price at which the power is sold. This is equivalent to saying that earnings depend on the load-factor, where that is considered as the ratio between the average output of the station and its rated capacity. Carried to the extreme, zero load-factor means no market for the power and consequently no value to the plant. The type or class of installation, whether good, bad, or indifferent, does not affect such valuation, for the reason that the plant represents nothing as to earning power.