Has CSP lost its shine?
Two hours northeast of Los Angeles, along a desolate stretch of road that inspires little beyond the urge to lean harder on the accelerator, lies the world's largest concentrating solar power (CSP) project.
This 354MW mass of parabolic troughs — known as Solar Energy Generating Systems — is a relic, built between 1984 and 1991.
It was supposed to usher in the dawn of a new era, but when its developer, Luz Industries, went bankrupt in 1991, CSP entered its Dark Ages.
No other commercial CSP plant would be built until 2007, when Spain's Acciona opened a 64MW plant in Nevada. Then, suddenly, a newfound hunger for CSP emerged, helped along by surging energy prices and concern over climate change. Major corporations poured money into the sector, including Siemens, which paid a staggering $418m for tiny Israeli manufacturer Solel in 2009 — beating rival bids by Areva and Alstom. It seemed like a renaissance for the industry.
But then, unexpectedly, PV prices plummeted dramatically. Even CSP specialist Solar Millennium tried to switch its fully permitted 500MW Blythe project in California to cheaper PV panels (shortly before going bankrupt). And then last year, Siemens dropped out of the sector altogether, writing off millions of euros.
So with PV still at rock-bottom prices, what does the future hold for CSP?
Masdar, which will shortly commission its 100MW Shams 1 parabolic-trough project in the United Arab Emirates, believes in the long-term future of the sector, and holds a minority stake in Spanish CSP power-tower company Torresol. Yet after Shams 1 is complete, the company's focus will be on PV for the foreseeable future, says Ron Heyselaar, head of projects.
"At the moment, CSP is quite uncompetitive compared to PV," Heyselaar tells Recharge. "If you see where the PV price sits versus CSP, you have to take advantage of that as an owner-operator."
Even some of the CSP industry's biggest cheerleaders acknowledge that expectations have dimmed over the past few years.
"The PV price reduction is putting a lot of pressure on CSP," says Patrick Markschläger, managing director of Schott Solar CSP, which, along with Siemens, has supplied nearly all the receiver tubes installed at parabolic-trough plants globally.
"At the end of the day, what counts is the cost per kWh produced, and with the introduction of energy-storage systems, CSP has made tremendous improvements on this," says Markschläger, who also oversees Schott's thin-film PV unit. "But there's no doubt that there's still a gap with PV. And I think this gap will be very difficult to close."
Another problem for CSP is that its two core markets — Spain and the US — are in danger of evaporating.
Debt-stricken Madrid intends to impose a tax on energy generation that would hit renewables hard, particularly CSP. Meanwhile, many of the sunny southwest US states, including California, are rapidly closing in on their most imminent renewable portfolio standard (RPS) targets.
"When they [the utilities] do need to pick up additional capacity, they're going to do it with smaller installations," says Carolyn Campbell, a solar analyst at GTM Research. "And if they don't need a lot of capacity in the near term, why would they choose CSP when PV is a substantially cheaper option?"
Given the challenges presented by cheaper PV — to say nothing of the natural-gas boom threatening to spill from the US around the world — it would be easy to conclude that CSP is heading for a second dip into oblivion.
But for a number of reasons, CSP is in an incomparably better position than it was when Luz Industries fizzled out. The momentum the sector amassed during the flush years of 2007-11 is critical.
One of the downsides of the Spanish boom was that its engine — the country's feed-in tariff — capped projects at 50MW, making it difficult for developers to bring costs down via economies of scale.
Yet the CSP projects set to come on line in the US over the next two years — which were mostly initiated before the PV price crash — are far larger. Projects such as BrightSource Energy's 377MW Ivanpah, Abengoa's 250MW Solana and NextEra's 250MW Genesis will set an entirely new benchmark for the industry.
Importantly, they will allow the financial community to judge CSP on a scale where its costs will appear far more attractive. New technologies, such as molten-salt storage, will help even more in the future.
Another reason for optimism is the very thing that has curbed CSP's upward trajectory — the boom of intermittent renewable sources such as PV.
Even CSP's detractors acknowledge that it boasts a vast advantage over PV in the realm of energy storage, and will for the foreseeable future.
"If you're a utility, and you have an RPS to fulfil — and there's a lot of PV coming on line — then you need something to counterbalance it in terms of grid stability and dispatchability," says Jim Ivany, who heads the renewables unit at US construction giant Bechtel. "The more PV you see in places like California, the more that bodes well for CSP."
Joe Desmond, senior vice-president at CSP developer BrightSource, says that better storage technologies fundamentally alter the economics of CSP, in a way that the energy industry is finally beginning to grasp.
In many hot places, power prices can be three times higher between noon and 8pm than at other times of day. But wind farms tend to be most productive at night, and PV output peaks at around noon before trailing off.
With storage, however, the owner of a CSP plant can maximise production during daylight hours and then sell the electricity when it fetches the highest price — often three or four hours later.
"While the capital cost of a plant or the levelised cost of energy are useful tools, they don't really reflect this attribute," Desmond says. "It's
the difference between what it costs to produce a megawatt hour and what it costs to keep the lights on."
Emerging markets boost
Perhaps the most promising sign for CSP is the red-carpet treatment it has received in emerging economies over the past few years — exactly when it was supposedly losing ground to PV.
Morocco recently handed a $1bn order to a Saudi construction firm for a 160MW CSP plant, and South Africa has awarded three CSP projects totalling 200MW in the past year. After seeing off-take contracts for several projects rejected by California's regulator in October, BrightSource turned around and clinched a 120MW concession in Israel.
India has carved out a special place for CSP in its National Solar Mission; China's CSP market is tipped to take off; many Middle Eastern countries are setting vast solar-energy targets that include CSP; and a slew of other appetising markets, such as South America and Southeast Asia, have projects breaking ground.
In nearly all these cases, governments are pursuing CSP with an eye towards fostering a domestic supply chain. While that tactic may inflate project costs in the short term, it will ultimately lead to a big improvement over the current situation, in which key segments of the supply chain are dominated by a tiny handful of manufacturers.
These emerging economies benefit from the lessons learned in the US and Spain, says Anjali Jaiswal, a senior attorney with the US-based Natural Resources Defense Council, who is an expert on India's solar-energy programme.
While CSP may not be the cheapest option in the immediate term, the Indian government possesses a nuanced view of the technology, and is playing the long game, she says.
"CSP offers unique attributes compared to PV — baseload power, peak-load power and ensuring grid stability," says Jaiswal. "The notion of picking between PV and CSP represents a false choice, and the Indian government understands this."
Saudi Arabia's claim in 2012 that it will build 25GW of CSP over the next two decades is the sort of announcement — slightly vague but immensely promising — that leaves Schott more than willing to wait a bit longer for the sector's renaissance, says Markschläger.
"There are a lot of governments and regions still committed to CSP, and they're coming up with these programmes to support it now, not three years ago [before PV prices plummeted]," he says.
"We're going to see huge growth for CSP. It's just that there might not be quite as much in the medium term as I would have told you three years ago."