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REMIPEG Report: Part 6 - Uncertain future for solar thermal power


l. Javier Herrera and Thomas Klinge

The World-Market Status special report – The solar thermal power market grew after a period of uncertainty during the global recession. Despite this growth, the future of solar thermal power is still unclear, unlike other alternatives (such as PV), which are gaining popularity thanks to continued cost reductions.

 The current market 

At the end of 2013, there was approximately 3.8 GW of installed CSP capacity globally and in 2014 the total capacity reached just 4.5 GW. The generation of solar thermal electricity from concentrating solar power (CSP) plants has grown steadily, but at a slower pace in recent years. Newly installed capacity increased by around 0.72 GW in 2012, roughly 1.17 GW in 2013, and 0.7 GW in 2014. This setback in newly installed capacity in 2014 can mainly be explained by the massive cost reduction on PV technology, which has been perceived by investors as a direct (and cheaper) competing technology. 

The most important markets in 2014 for the deployment of Solar Thermal Power have been the Moroccan, South African and United States markets.

The Moroccan Solar Plan is targeting 2 GW of installed solar energy capacity by 2020. In 2014 the Moroccan Agency for Solar Energy (MASEN) started construction of Noor Solar Complex, which is to total 460 MW of CSP plants. The South African program (the “Renewable Energy Independent Power Producer Procurement Program” or “REIPPPP”) started construction of 200 MW of CSP in 2013 and has awarded a further 400 MW of CSP capacity to start construction in 2015. 

The year 2014 saw the commissioning and operation of some of the largest CSP plants in the United States when the largest solar thermal power station in the word, Ivanpah (392 MW), entered into operation followed by Mojave (280 MW) and Genesis (250 MW). With these milestones, the United States became the leading market with the largest CSP power plants in the world.

In the Indian market, the development of the first CSP projects concluded when, after about 18 months of delay, the commissioning of the largest CSP plant on the continent (together with Shams 1) took place. Reliance Power completed the world’s largest linear Fresnel reflector project with a total installed capacity of 100 MW in the region of Rajasthan. In addition, the most recent CSP project to be commissioned under the National Solar Mission in India was Megha Solar Plant with a capacity of 50 MW.

In the Middle East, Saudi Arabia has presented a remarkable and ambitious plan of deploying 32 GW of solar energy by 2032, but without a clear statement of when and how this program will be realized.

Finally, in the South America market, Cerro Dominador Solar Plan, a 110MW tower with 18 hours storage in Chile, is the largest CSP facility announced in South America and will be the first to serve as a “base load power plant” with a capacity factor of around 80%, supplying electricity 24 hours a day, seven days a week thanks to its energy storage system. 

Region

Cumulated installed capacity 2014

Installed capacity 2014 

Estimated electricity generation 2014

 

[GW]

 [GW]

[TWh/y]

North American

1.8

0.6

3.6

South American

0.0

0.0

0.0

Europe

2.3

0.0

4.2

Asia

0.4

0.2

0.5

Oceania

0.0

0.0

0.0

Africa

0.1

0.0

0.1

World total

4.5

0.7

8.3

Largest national market

Spain |  2.3

USA  |  0.6

-


Figure 1.
Summary of installed electrical capacity in CSP plants in 2014. 

Capacity [GW]

Operation

Construction

Development

Planning

Parabolic Trough

3.97

0.60

 0.88

0.86

Tower

0.50

0.60

 0.44

1.29

Dish

0.00

0.003

 0.03

0.00

Fresnel

0.17

0.06

0.12

0.07


Figure 2.
Worldwide CSP landscape per technology.

Technology

Until 2015, Parabolic Trough plants (total capacity installed of 3.86 GW) accounted for 85% of the total installed CSP capacity in the world; meanwhile, tower technology accounted for 11%. These differences in deployment might reduce in the future as investors begin to perceive tower technology as a low risk investment with a high potential in storage and efficiency compared to parabolic trough. TechnologyFigure 2. Worldwide CSP landscape per technology.

On the other hand, massive cost reductions in PV technology in recent years have hindered the development of new CSP projects. Investors have traditionally seen PV technology as a direct competitor of CSP technology, although both technologies are ultimately complementary when comparing their core competitive advantages. 

Future deployment of CSP technology will likely capitalize on the integration of backup fuel or hybrid systems with a high degree of dispatchable energy and storage capabilities to increase the capacity factor and allow power generation in peak times. From a system perspective, CSP offers significant advantages over PV, mostly because of its built-in thermal storage capabilities. CSP plants with storage systems can continue to produce electricity even when clouds block the sun, after sundown, or in early morning when power demand increases. The value of the CSP technology will become more apparent as PV is deployed in large scales, which will reduce mid-day peaks and create and early morning peaks.

Recent CSP developments have utilized the storage advantage of the technology, thereby offering large hours of storage capacity. As an example, Redstone project in South Africa, with 12 hours of full-load energy storage, will be able to reliably deliver a stable electricity supply to more than 200,000 South African homes during peak demand periods, even well after the sun has set. The plant will provide dispatchable power on-demand, just like conventional power plants.

In general, future development of CSP plants will ultimately depend on the position of utilities regarding dispatchable needs. Appropriate regulatory frameworks and well-structured electricity markets will be critical to ensure the most effective deployment of CSP technology together with PV. 

Competitive tendering process and cost reduction

One of the most successful drivers to decrease technology costs has been the implementation of competitive tendering process and the IPP (independent power producer) development structure. In an IPP setup, companies compete against another in a bidding process to be allowed to build plants under a PPA (power purchase agreement). This increases competition in the market forces companies to minimize costs, whereas in the traditional feed-in tariff setup companies did not have such a strong incentive for further cost optimisation.

In South Africa and Morocco, the recent and competitive IPP tendering process programmes have received international acclaim for fairness and transparency. These programmes have been characterized by their focus to ensure that socio-economic benefits, such as job creation and local skills development, are brought to the project country. 

In addition to the development of a competitive tendering process, the LCOE (levelized cost of electricity) of CSP technology has been decreasing in recent years thanks to several factors: an increase in technology maturity; a decrease in financial costs due to a lower risk perceived from financial institutions; and more liquidity in financial markets. 

Future deployment of CSP technology

In industrialized countries (where mainly wind and PV have been deployed) non-dispatchable renewable technologies will contribute to savings of fossil fuels. Overcapacity in the systems might lead to operation restrictions for conventional plants. The main role of CSP plants in these countries will likely be in replacing conventional power plants being phased out.

In developing countries, substantial additional generation will be required in the next 10-20 years. This cannot be firmly supplied by non-dispatchable technologies, such as PV alone, and a considerable amount of backup has to be included. In this context CSP plants with storage or hybridization have the potential to play a major role. 

A competitive bidding system, a time based tariff (such as the two-tier tariff recently adopted in South Africa), and a storage system capable to provide energy within the peak hours should be the main drivers to increase the bankability of CSP plants. These drivers can improve the access to finance, thereby increasing the deployment of the CSP technology. 

ABOUT THE AUTHORS
 

l. Javier Herrera is CSP Expert at Lahmeyer International GmbH, Bad Vilbel.
Thomas Klinge is Head of Department Renewable Energies at Lahmeyer International GmbH, Bad Vilbel.

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