Page 269 - Solar Power in Building Design The Engineer's Complete Design Resource

ELECTRIC ENERGY COST INCREASE 239

Lease payments are structured to provide a permanent reduction in utility costs
when used for the acquisition of renewable energy or cogeneration systems. A flexi-
ble leasing structure allows the municipal borrower to level out capital expenditures
from year to year. Competitive leasing rates of up to 100 percent financing are avail-
able with structured payments to meet revenues that could allow the municipality to
acquire the equipment without having current fund appropriation.
The advantages of a municipal lease program include

■ Enhanced cash flow financing allows municipalities or districts to spread the cost
of an acquisition over several fiscal periods leaving more cash on hand.
■ A lease program is a hedge against inflation since the cost of purchased equipment
is figured at the time of the lease and the equipment can be acquired at current
prices.
■ Flexible lease terms structured over the useful life span of the equipment can allow
financing of as much as 100 percent of the acquisition.
■ Low-rate interest on a municipal lease contract is exempt from federal taxation,
there are no fees, and rates are often comparable to bond rates.
■ Full ownership at the end of the lease most often includes an optional purchase
clause of $1.00 for complete ownership.

Because of budgetary shortfalls, leasing is becoming a standard way for cities,
counties, states, schools, and other municipal entities to get the equipment they need
today without spending their entire annual budget to acquire it.
Municipal leases are different from standard commercial leases because of the
mandatory nonappropriation clause, which states that the entity is only committing to
funds through the end of the current fiscal year, even if the entity is signing a multi-
year contract.

Electric Energy Cost Increase

In the past several decades the steadily increasing cost of electric energy production
has been an issue that has dominated global economics and geopolitical politics,
affected our public policies, become a significant factor in the gross national product
equation, created numerous international conflicts, and made more headlines in
newsprint and television than any other subject. Electric energy production not only
affects the vitality of international economics, but it is one of the principal factors that
determines standards of living, health, and general well-being of the countries that
produce it in abundance.
Every facet of our economy one way or another is connected to the cost of electric
energy production. Since a large portion of global electric energy production is based
on fossil-fuel-fired electric turbines, the price of energy production is therefore deter-
mined by the cost of coal, crude oil, or natural gas commodities. As discussed in
Chapter 1, the consequences of burning fossil fuel have significantly contributed to