T H E INFLUENCE O F CHEAP ELECTRICITY ON ELECTROLYTIC AND ELECTROTHERMAL INDUSTRIES. BY E. A. ASHCROFT, A.M.I.C.E., M.I.E.E., &c. ( A Pajer to be read before the Faraday Society.) The industries of electrometallurgy and electrochemistry became com- mercial only with the invention of the dynamo in 1867. And to-day we are standing on the verge of greater developments, fore- shadowed by the recent rapid increase in the production of such metals as aluminium and sodium in America and Europe, experiments in the electric smelting of iron, developments in steel refining, the success of the lime nitrogen works at Notodden, Norway ; the extensive growth of the carbide and, later, of the cyanamide industries in Norway, Italy, and Switzerland, the introduction of a successful lead-refining process, sulphide ore experiments, lead and copper smelting experiments, zinc distillation, and many other promising operations just emerging from the experimental stage.It is becoming clearer every year that the extent of these developments in the near future will depend on the limits to which the cost of electric energy can be reduced at suitable sites. For this reason the special influence of cheap energy on electrolytic and electrotherrnal industries, although not strictly a scientific question, becomes a matter of great interest to this Society. The large developments at Niagara Falls have familiarised the world with the possibilities of water-power ; but they have also brought certain well- defined limitations to light ; for it now becomes evident that at Niagara Falls the price of energy to the consumer is not low enough, and never can be low enough, to satisfy the rigid economical demands of many, technically possible, industrial processes which would soon become commercially possible with sufficiently cheap energy.But if Niagara power is too dear, what chances have the steam, gas, and oil engines’ motors which one hears so much about nowadays ? As main generators of energy for the purposes above stated, the answer is that they have no chance at all. For even if absolutely free and regular supplies of fuel were available for such engines (which is certainly not the case) the capital charges, and the upkeep would still bring the cost of the unit of electricity somewhere about the level of the Niagara prices, and still far above the “low-grade limit” which will be inexorably demanded by the coming new industries as a root condition of their being.I should be inclined to suggest for this “low-grade limit” about LGZ per kilowatt year (;GI 10s. per horse-power year) and we may at once quite safely assume that no means of producing energy at present known or thought of can touch this limit except one, and that I have designatcd water-power of Class I.” In some exceptional cases already the price of energy by water-power * That is to say, those water-powers in which favourable natural conditions enable the development of the power at a very low expenditure of capital, 1.34T H E INFLUENCE OF CHEAP ELECTRICITY, ETC. 135 ITEM. has been reduced below that limit.In fixing this limit I, of course, assume that some profit is to be made on the large industries considered as well as on the water-power, not merely the covering of working expenses and capital charges. STEAM ENGINES. ____ _--- -- -- , TABLE I. RELATIVE COSTS OF ELECTRICITY PRODUCED FROM STEAM, GAS, OIL, WATER (2) AND WATER (I) FOR CONTINUOUS LOADS. , & s. d. s. d. l - - 0 8 0 0 6 0 4 2 0 3 2 0 0 3 0 0 2 0 0 1 3 0 1 0 1 0 0 Fuel . . . . . . . . . . . . . . . . . . . . . Labour . . . . . . . . . . . . . . . . . . . . . Capital charges . . . . . . . . . . . . . . . Royalties on rights . . . . . . . . . . . . . . . Upkeep . . . . . . . . . . . . . . . . . . '':L s. d. ~ A s. d. 4 2 6 ' 3 3 0 O I I o ' o 8 o 0 1 3 o 1 0 1 0 0 3 0 0 2 8 6 I - - 8 6 6 1 6 9 6 1 GAS ENGIKES.1 OIL EXGINES. ITEM. 1 Per Kw. Year. Fuel . . . . . . . . . Labour . . . . . . . . . Upkeep . . . . . . Capital charges ... Royalties on rights ... +E s. d. 2 8 0 0 8 0 o 16 o 3 6 0 - I 6 1 8 o Per H.-P. Year. Per Kw. Year. Per H.-P. Year. I I _. :k;G s. d. I 14 o 0 6 0 2 13 6 0 I 2 0 - ' E S. d. 4 0 0 0 7 0 o 16 o 2 1 0 - 6 s. d. 3 0 0 0 5 0 0 I 2 0 I I 1 0 - * Varies greatly according to value of bye-products obtained. WATER, CLASS 11. ITEM. Per Kw. Year. Per H.-P. Year. Fuel . . . . . . . . . Labour . . . . . . Upkeep . . . . . . Capital charges ... Royalties on rights ... WATER, CLASS I. Per Kw. Year. 1 Per H -P. year. I A s. d. s. d. 0 8 0 0 6 0 0 1 3 0 , 0 I 0 0 - 070 I 0 4 0 0 I 0 0 2 0 0 1 I 1 0 0136 THE INFLUENCE OF CHEAP ELECTRICITY ON The undeveloped water-power of the world is still very large; and as a consequence no regular market value has yet been placed upon water rights in public estimation, (except in special circumstances where their market value is at once apparent).I have treated the possibilities of royalty payments as a contingent item in the comparison of costs. This item will, however, find its natural commercial level as industry extends, and the demand for such water-power increases. The accompanying Table I. of comparative costs of the various available meansof producing energyis prepared from manyrecords, and it aims at striking a useful average. Of course it follows without saying that no ‘‘ average price ” can be accurate for all countries, but nevertheless the difference in these figures in different situations is not in fact so great as might at first appear likely, when the division of water-powers into two classes is adopted.The principal difference is a fundamental and striking advantage peculiar to water powers of Class I. It is not proposed to discuss either steam, gas, or oil engines here, for a glance a t the table shows that they are quite out of court in this larger con- nection which we are considering. The best practical source of energy “in bulk ” to-day is the favourably- placed waterfall, and the second best is a waterfall of Class II., which may also sometimes have the advantage of being obtainable nearer home. A growing demand for large gas and oil motors, however, is indicated by the state of the markets to-day, a circumstance which is explained by the fact that many operations consuming energy are absolutely bound to be carried out at spots where no waterfall can be obtained.Moreover, in the particular industries which I am considering here quite a large demand may yet arise for gas and oil engines; for there are indications of a tendency to devise apparatus wherein a combined use is made of electrothermal (or electrolytic) and of direct combustion principles. Thus it has been suggested that a charge of iron ore, carbide materials, or similar raw materials, might be heated up by ordinary fuel combustion to nearly the required temperature and made thus to imbibe a large number of necessary heat units at a cheap rate, and then finished off by raising it to final temperature, with the aid of the more expensive electric heat.Such operations could, of course, be carried on economically at sites even nearer to the markets than the cheap water-power sites of which I shall speak presently, and an advantage of some importance might be thus obtained in respect of freights. Also, it is to be noted that in such countries as England and Germany, where there are few or no water-powers of Class I., there will be found a great desire to keep industrial operations as much as possible within the respective countries. For these reasons the gas engine has every chance of encouragement. But the fundamental, unalterable, natural economic conditions of any industry should not be wholly obscured by such considerations. I am convinced that much larger developments will take place during the next few decades at the first-class water-power sites.Such developments, in fact, are already taking place, and will be limited only by the comparative scarcity of this class of power in the world, and I may add by the false patriotic ideals which sometimes actuate the peoples of the few naturally favoured lands where such powers exist.::: * In Norway at the present time an absolutely unparalleled opportunity is offered to the country for a prosperous era of commercial development such as few countries have ever seen, but the people, though highly intelligent in other respects have not the power to appreciate it, in virtue of their national selfishness. Instead 0; rising as one man to meet this grcat opportunity, they are hampering the develop-ELECTROLYTIC & ELECTROTHERMAL INDUSTRIES 137 It is therefore probable that when such causes are removed there will be a reversal of the present exclusive policies, and then foreign capital will be welcomed, even subsidised and encouraged to develop the natural resources of the country.When this takes place I predict for these industries, and for that fortunate land which possesses the water-powers of such exceptional qualities, an immense access of prosperity. In support of this the following significant figures may be cited : Although electrically produced heat can probably never compete in cost, unit for unit, with heat produced from coal burned direct, yet the ratio of cost between the two is much lower than is usually supposed, whilst the ratio of efficiency brings the two still more nearly on a level, turning the balance in many cases in favour of greater economy for electric heating.One pound of an ordinary quality of coal will generate, if burned in a producer and supplied to a modern gas engine, about one electrical horse- power hour, and it will cost at the pit's mouth (at 8s. per ton) 'ogd. This amount of electric energy (one electrical horse-power hour) is equal to 644,544 gram calories of heat energy. Burned directly to generate heat, one pound of coal will produce approxi- mately 3,000,000 gram calories. Therefore by burning coal, for &I we may procure a theoretical combustion heat of approximately ~ ~ , o o o , o o ~ , o ~ ~ c a 1 or i e s . The same &I employed in purchasing electric energy at the cheapest rate (Class I., water) yields one electrical horse-power for 5,840 hours, and is therefore equivalent to 3,764,136,960 calories.This is just about one-quarter of the yield from direct combustion of an equivalent value of coal. I t may be assumed that the labour and wear and tear of the furnace will, taken together, be about equal in each case. The heat produced electrically can, however, be much more usefully employed, so that a true comparison of the cost of heating processes by the two methods can only be made in the full light of experimental data deter- mining the efficiency of each furnace or apparatus. When it is remembered that the efficiency of many non-electric furnaces is barely 10 per cent. of the theoretical and very few will exceed 25 per cent., whilst the efficiency of electric appliances sometimes reaches 75 per cent.and is often 50 per cent., it will be seen how closely this cheap power of to-day is competing with fuel combustion, even as a mere source of heat for metal- lurgical or chemical reductions. In the case of different water-powers a great deal of variability exists as to the possibilities of economy. The cost of labour and upkeep for a modern generating plant, actuated by water-power, with good machinery and untroubled by any irregularities of working may be easily reduced to a perfectly nominal sum (about 4s. per horse-power-year is sufficient in such cases for any fair-sized plant, and with very large plants it may be brought down to half that sum).The gross cost of the power to the consumer then becomes practically dependent on the amount of capital charges (and valuable private rights) involved. These items will vary enormously according to inent in every possible way by short-sighted anti-foreign legislation aimed especially at the exclusion of foreign capital-a policy which (like most selfish policies in the sphere of world-politics) a inore advanced order of intelligence would see hurts far inore the nation adopting it than it can ever hurt the foreign capitalist who has other fields for his energies to choose from if he is excluded from this one. It is my opinion, after studying this question a good deal from all sides? that short of carrying the waterfalls themselves out of the country (which, of course, is impossible), there is no possible way in which the free admission of foreign capital can do anything else than benefit Norway.138 THE INFLUENCE OF CHEAP ELECTRICITY ON whether the flow of water is naturally even all the year round, or whether expensive dams must be constructed to regulate it, whether the pipe is long or short, the fall high or low, whether much valuable property is submerged by damming, and other conditions.By designating the various water-powers Class I. and Class II., I distinguish in a rough, practical way between thosepowers where a high cost of regulation or of development has been necessary to bring the water to the place of con- sumption and to insure an even supply all the year round, on the one hand (Class II.), and those cases where these essential objects have been provided more or less completely by natural conditions (Class I.), thus rendering the total capital employed much lower.In general it may be stated that a capital expenditure of A7 0s. od. per e.h.p. capacity is sufficient for the development of powers of Class I., in- cluding all necessaries up to the dynamo terminals ; whilst some few powers which exist in Western Norway can be developed still more cheaply. On the other hand, water-powers have been developed in England and in other countries which have cost upwards of A60 0s. od. per electrical horse-power for harnessing equipment and compensations. The total equipment at Niagara Falls cannot have cost less than A30 0s. od. per horse-power in spite of the very large scale of operations.It is needless to say that unless it be undertaken for some very good and exceptional reason such an expenditure as A60 per horse-power in the light of our modern understanding of this subject is quite prohibitive and ought not to be seriously proposed. In considering the various water-powers available throughout the world there are, of course, many intermediate stages between these two extremes, and in some of these stages it may be possible to set some royalty value on the water rights. In general, however, it may be assumed that only powers which are strictly of Class I. will be able to successfully demand royalty values, and that powers of Class 11. (and intermediate stages) will only be developed in future when some public object is to be served by their employment.The grants for such powers will mostly be free, or nominal royalties only will be charged. The powers of Class I. (especially the best ones) are not very numerous, and their enormous natural advantages will to some extent be neutralised by the high prices which will naturally be placed on the water rights by owners, when their true values become known and when a ready market is opened for them. Nevertheless, I believe it is almost exclusively to powers of this type that we must look for the future of such gigantic possible developments as are suggested to-day by the looming processes of electrolytic iron, nitrate production, and the complete treatment of complex sulphide ores-three fields of enterprise, any one of which, if successfully developed, must rapidly exceed in magnitude the entire industry of electrometallurgy as it exists to-day.As this class of water-power seems destined to play so important a 7o"Ee in the near future, it will be of special interest here to give a concrete instance of such a water property and the method employed in Norway for arriving at the capitalised value of the water-right. The example is drawn from one of the most favourably situated of the many favourably placed of the small powers in western Norway, where the existence of these sources of energy on the verge of deep water and ice-free harbours suitable for any kind of shipping, is probably unique, offering advantages to industry found nowhere else in the world in such happy combinations.ELECTROLYTIC & ELECTROTHERMAL INDUSTRIES 139 The property was acquired about eight years ago from the former Norwegian owner.The purchaser left some mortgages standing, so that the capital stood as noted below when he succeeded in obtaining title (a royal concession under the Foreigners’ Exclusion Acts) to own the property. Extensive surveys had been made, the statistics of rainfall, &c., obtained, and the engineers had pronounced the waterfall (which had a fall of 1,000 feet, with a very short distance for tunnel and for pipe line from the outlet of the last lake to the lowest level) to be good for about 7,500 kw. (10,000 e.h.p.), and capable of development for less than -& (kr. 90) per h.-p., which sum was to include also some payments to farmers for fullest damming rights.It also included the cost of damming the principal lakes at a very favourable spot, whereby, for the comparatively small sum of -&,ooo, enough water could be stored in the large lakes to completely equalise the fall all the year round, and so use nearly every drop of water that falls on the watershed. Though the total area of the watershed was small, viz., about 40 square kilometres, the annual rainfall is the highest in Norway, reaching 3,600 mm. per year. There was therefore enough water to secure 3.8 cub. m. per second all the year round after liberal deductions for evaporation and loss. The lake basin was large enough to secure complete equalisation of the supply. Also the intervals of drought are never very protracted when compared with such periods in countries like England.All these circumstances are most favour- able for cheapest development. TABLE 11. SHOWING INFLUENCE OF THE COST OF DEVELOPING A SMALL WATERFALL WATER RIGHT AND FREEHOLD. SHOWING ALSO METHOD OF CALCU- LATING RETURN ON CAPITAL INVESTED. (AND INSTALLING MACHINERY) ON THE CAPITALISED VALUE OF THE The fall has a capacity of ca. 7,500 kw. It is supposed that a contract (with suitable guarantees) has been obtained for renting 6,000 kw. at an inclusive charge of A 2 10s. per kw. delivered at switchboard (= &I 17s. 6d. per e.h.p.). According to latest estimates and all existing contracts the expenditure required will be as follows, viz. :- Earthworks- A s. d. E s. d. Tunnel 300 m. long @ A4 8s. 3d. ... 1,323 5 0 . . . . .. . . . Intake, masonry, &c. 555 0 0 Pipe track levelling 555 0 0 Dam at Rorvik lake and cuts *.* 5,555 0 0 . . . . . . . . . . . . ... 7,988 5 0 -- (N.B., equal to &I 6s. 6d. per kw.) Buildings- One power station, two valve houses, sundry observation boxes, telephone posts, and sluiceman’s house 2,666 o o . . . . . . (N.B., equal to 9s. per kw.) Ironworks- One pipe line of 800 m. length with all sundries . . . . . . . . . . . . . . . 6,222 o o . . . . . . Sluices for dam, intake, and cuts 555 0 0 6,777 0 0 -- (N.B., equal to -&I 2s. 6d. per kw.) VOL. IV-T8140 T H E INFLUENCE OF CHEAP ELECTRICITY ON Mach in ery- Pelton wheel turbines, dynamos, and regulators . . . . . . . . . . . . . . . 12,777 o o Transformers and 2-kilo line . . . . . . 7,222 o o Electrical outfit .. . . . . . . . . . . 1,110 o o 21,109 0 0 -- (N.B., equal to A3 10s. per kw.) Special Charges and Allowaiaces- Extra compensation to farmers, payable on exercise of damming rights as per contracts . . . . . . . . . . . . . . . 2,220 o o Special tax demanded by Herredsstyrer 1,387 o o Contingencies on building estimates ... 2,277 o o Total development cost as estimated ... 44,424 5 o General margin for contingencies ... 5,555 o o 5,884 0 0 ---- (N.B., equal, say, to &I per kw.) 491979 5 0 -- This expenditure can be provided for by the issue of &33,333 preference shares and A16,665 by bank loan on mortgage or debentures. The water right can be paid for by the issue of A50,000 in ordinary or deferred shares. The complete scheme of capitalisation will then be as follows :- ;E s.d. A s. d. Existing mortgages . . . . . . . . . 13,888 o o Bank loans . . . . . . . . . . . . . . . 16,665 o o Preference shares, 8 per cent. . . . . . . 33,330 o o Ordinary shares to owners of water rights . . . . . . . . . . . . . . . 50,ooo o o --- 113,883 o o - The apportionment of revenue will be as follows :- Working Expenses- Wages, materials, taxes, and administra- tion . . . . . . . . . . . . . . . . . . Amortisation of plant and renewals- Buildings, 10 per cent. on &2,665 ... Ironworks, 5 per cent. on ;E13,000 ... Machinery, 5 per cent. on A13,888 ... Earthworks, 2+ per cent. on A8,ooo C q i t a l Charges. Mortgages- Interest at 5 per cent. on E13,888 ... Redemption fund 10 per cent. on ;G5,555 2+ per cent.on E8,332 . . . . . . . . . Bank loan- Interest 6 per cent. on ;G16,665 . . . . . . Redemption fund 5 per cent. on... ... The share capital- Preference shares ;G33,330 at 8 per cent. Ordinary shares &o,ooo at 8 per cent. ... 1,665 o o 267 o o 650 o o 694 0 0 200 0 0 3,476 0 0 --- 1,000 0 0 833 o o 1,833 0 0 --- 2,666 o o 4,000 o o -- - 6,666 o oELECTROLYTIC SE ELECTROTHERMAL INDUSTRIES 141 Revenue- 6,000 kw. sold at E2 10s. per kw. . . . . . . . . . . . . 15,000 o o --- Margin + 1,568 o o -~ This fall costs only A7 8s. per kw. to develop and equip. I t is therefore possible to place a considerable value on the water-rights. If the same revenue is obtained froin another waterfall (B) which, owing to less favourable natural conditions, will cost &8 5s.per kw. to develop and equip (an average cost in Western Norway), or from a third fall (C) costing AII 2s. per kw., then, omitting the ordinary shares altogether in the case of (C), and valuing the water-right at A25,ooo in ordinary shares in the case of (B), the account will stand as follows :- Total cost of development with B. margin in same proportion as s. d. . . . . . . . . . . . . before ..- 58,333 0 0 Schemes of Capitalisation- Existing mortgages before for the sake of comparison . . . . . . 13,888 o o Bank loans . . . . . . . . . . . . 22,220 o o Preference shares 8 per cent. ... 36,105 o o Ordinary shares for water right ... 25,000 o o Total capitalisation . . . . . . . . . Apportionment of revenue as follows :- Working Expenses- Wages, materials, taxes, and adminis- tration as before .. . . . . . . . Amortisation of plant . . . . . . . . . Capital Charges- Mortgages as before . . . . . . . . . Bank loans, 6 per cent. and 5 per cent. Preference shares, 8 per cent. ... Ordinary shares, 8 per cent. . . . . . . 1,665 o o 2,316 o o 1,488 o o 2,444 0 0 2,888 o 4 2,000 0 0 Revenue as before . . . . . . . . . 12,771 0 0 15,000 o o C. & s. d. 77,777 0 O 13,888 o o 27,775 0 0 49,995 0 O 91,658 o o - 1,665 0 0 3,088 o o 1,458 0 0 3,055 0 0 4,000 o o 13,266 o o 15,000 o o - ~~ Margin . . . . . . . . . . . . . . . 2,229 o o The &o,ooo ordinary shares in the case of Fall (A), and the &25,000 ordinary shares in the case of (B), and nothing (by comparison) in the case of (C), therefore represents the fair valuation of the water right, and when it is considered that the returns on these deferred shares rank after the preference shares and mortgages, and the revenue will gradually rise to 12 per cent. on all shares during the currency of the long contract by reason of the accumu- lation of the sinking funds for extinction of the loans, it must be allowed that the valuation is not excessive.There have been cases in Norway where the price of electric energy is said to be still lower than the figure I have selected as a probable minimum, * Without any dividend for ordinary shares.142 THE INFLUENCE OF CHEAP ELECTRICITY, ETC. viz., ;G2 10s. per kw. ; for instance, at Meraker, near Trondhjem, the power 3,000 h.p. has been sold at -&I 5s. 6d. per h.-p. on a seven years’ contract, and at Notodden I believe the price was &I 8s.for 3,000 e.h.p. It is not easy, in the absence of exact statements such as I have given above showing what allowances are set aside for interest on capital, sinking fund, &c., in stating such prices to make a comparison with the figures I have stated from my own experience. It may well be that when such investments become more popular lower returns on capital will be accepted, in which case the sale price may become proportionally lower without reducing the value of the water-right. For example, if for the development of the above-quoted waterfall supplies of capital could be obtained at a uniform rate of 5 per cent. (including interest and sinking funds), then, leaving all other items of expense the same (including depreciation on the works and plant), the price of the energy might be reduced to &z per kw. and the value of the water- right remain as above stated. It is by no means certain that there exist a very large number of powers which can be developed at even so low a cost as to permit of the sale of the energy at ;G2 per e.h.p. year (& 10s. per kw. year) either in Norway or anywhere else ; the value of such water rights may therefore very likely rise much above the value indicated by these estimates. For instance, if the current price of energy in the next few years finds a level at ;G3 per kw. year, the capitalised value of the undeveloped fall (A) in question would be about twice that shown in the table. It may be added that although the above valuation is self-evidently a just one, yet so little attention has been drawn to those remarkably favourable opportunities of producing cheap electrical energy with low capital expendi- ture and low working costs and under highly favourable conditions for its utilisation, that such values as those indicated by the above figures are not always attached to these properties as yet. How long this opportunity of reaping a large increment on capital combined with intelligence will remain open is a matter for the intelligent foreign capitalist and the Norwegian Government to decide between them. My belief that this subject has not received nearly enough attention, and that its great importance to the early expansion of electrolytic and electro- thermal industries, which it is this Society’s special mission to foster, has been somewhat overlooked, must be my excuse, if excuse is needed, for this special advocacy of a single class of motive power and for the simple nature and the purely commercial treatment of the subject chosen for this paper.