The capital cost component of unit costs presents two critical problems: (1) The selection of a discount (or cost of capital) factor with which to compute the required payment. (2) The determination of whether or not the "interest" costs during construction are to be added to the capital cost in determining the amount to be amortized over the 30-year system life, and, if so, the length and the cost distribution during the construction period. The choice of discount rate (interest factor) can make a substantial difference in the apparent unit cost. For example, as shown in Exhibit 54, the annual capital charge for a 10-Gigawatt (2 5-Gigawatt) system as proposed by ECONis $1314 million using a 7.5 percent discount rate. This cost increases by $158 million per year if instead of the ECON 7.5 percent rate, the JPL 10.5 percent rate is used. The increased annual capital charge produces, in turn, an increase of 1.9 mills in total cost per kWh, or about 7 percent. The addition of interest during construction can also significantly affect total cost. If, for example, a specific system costs $10,100 million and requires five years to complete in equal cost increments, the additional interest cost at 10.5 percent would be approximately $2,355 million, bringing the total cost to be amortized to $12,455 million. This increases the annual capital charge by $260 million and the cost per kWh by 3 mills or about 10 percent. Clearly, the appropriate choice of a discount rate and the application of that rate consistently to all estimates of energy costs is critical if valid comparisons are to be made. Similarly, a determination of whether or not inflation effects are to be included and, if so, at what rate is critical. If the discount or inflation assumptions are inconsistent with assumptions used to price terrestrially generated power, then the cost of such energy sources must be recalculated using the stated assumptions. For exarrple, the ECON study (Ref. All) suggests that the industry practice in projecting generation costs is to apply a 10 percent discount
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