- Email: [email protected]
CSP at a crossroads
About: Dr. Andy Skumanich is the ceo and founder of SolarVision Consulting. He has previously worked for Innovalight and Applied Materials’ Solar Division.
Feature article
CSP at a crossroads The first solar electric power plants are still proving their worth after three decades, so why aren’t we seeing more CSP reach the development stage?
T
HE FIRST major concentrating solar power (CSP) plants were built in the Mojave Desert, U.S. in 1984 and have been producing over 330 MW since then. A well-publicised slump hit the industry in the nineties, but recently there has been a major upswing in installations, and an even bigger increase in project announcements.
However, before we break out the champagne, as another article in this issue points out (see ‘Smoke and mirrors’, page 42), announcements are one thing, what they are not is data: everything always takes longer than the optimistic announcements indicate, and Projects (and even Contracts), are often cancelled. There have been some recent notable examples of this. One tale of woe is that of a 92 MW CSP facility that El Paso Electric Co. had planned for Santa Teresa in New Mexico. The project collapsed because of difficulties with securing financing. The utility now plans to build a 20 MW PV facility instead. So the immediate challenge for CSP is to avoid another bust by turning the GWs announced into actual GWh of electricity. In other words, prove the technology’s bankability and capability.
52
January/February 2011 | Renewable Energy Focus
The origins The first CSP (parabolic trough) plant came online in 1985 as Solar Energy Generating System #1 (SEGS I) with a capacity of 13.8 MW. Eight other SEGS plants were subsequently built in the same region of the Mojave Desert, with the last one coming online in 1991. The total output of the collective set of parabolic trough plants is 354 MW. According to Hank Price, one of the original engineers working on the project, this early work offered the chance not just for technology evaluation, but also the opportunity to study costs and possibilities for cost reduction. Indeed the cost of wholesale solar thermal electricity from the SEGS plants has halved from its initial cost of US$0.24kWh. Indeed, the original project has been generating electricity for three decades and has provided 14 TWh of energy.
But it wasn’t until after SEGS III that the projects were finally able to attract investors - including multiple eastern U.S. utilities.
Boom and bust cycles Although successful by most metrics, the original company which developed the project – Luz – had to declare bankruptcy. Oil prices fell and remained low through the 1990’s – construction of new solar plants stalled. The regressive energy policy starting with the Reagan administration, along with the vagaries of property taxes, forced the company to close down. However, the investor groups continued to sell electricity to utilities. It wasn’t until the mid-noughties that new companies again began looking at innovative ways to generate large scale solar power, and a second cycle of CSP activity began in 2004. Luz Founder, Arnold Goldman, regrouped his old team, and founded BrightSource Energy. In addition, Silicon Valley venture capitalists gave some substantial funding to new comers such as Ausra and encouraged the renaissance in CSP.
What’s happening now? There are now almost 8 GW of CSP projects in the pipeline, compared with the 500 MW that will be installed by the end of 2010. This project pipeline sits in stark contrast
Feature article
to recent cancellations of CSP power plants. So why is so much of this planned capacity taking so long to develop? The CSP industry appears at a crucial turning point. The “potential” of CSP is an oftheard term, and it is true that there are some very attractive aspects of CSP – in principle. CSP has two key positive aspects: It can provide good energy dispatchability, and it has an ability for hybridisation. The two elements are interrelated. CSP can be configured to have thermal storage (at a price) and can provide up to 6 or even 8 hours of post-sun-down energy. And hybridisation allows the power plant to have both solar and standard energy for heating. In principle, this capability would allow for 100% capacity – where the power plant is providing electricity over the full 24 hour cycle, turning the plant into a tunable base load resource - the Holy Grail for renewables.
Storing CSP power Because of this, there is a significant amount of research going into CSP storage, and efforts are underway to find a low-cost and flexible solution. But in the near term at least, the market doesn’t provide a value for this storage. The ability of hybridisation is important too, because hybridisation improves the intermittency factor, the shaping of the electricity, and the capacity factor. Again there are some limitations, however. If solar is paired with a carbon-based power source it can have two negative effects: Solar projects in the U.S. are limited to 2% natural gas in order to remain designated as “renewable” - and hence qualify for support (the SEGS I - IX projects are limited to 25%.) Secondly, in some instances the use of a coal-fired plant being running at less than full capacity (during times of high renewable generation) can become substantially less efficient, and actually contribute to higher air pollution. Clearly, these issues are much intertwined. The good news for now is that the US Department of Energy (DoE) is ramping up its CSP research, development, and deployment efforts,
Silver bullet for CSP? Sopogy micro-CSP installation in Hawaii
leveraging both industry partners and the national laboratories. DoE’s goals include increasing the use of CSP in the U.S., making CSP competitive in the intermediate power market by 2015, and developing advanced technologies that will reduce systems and storage costs, enabling CSP to be competitive in the base load power arena by 2020. In addition, there are numerous support programs at the National Renewable Energy Laboratory (NREL) for storage projects.
Luz/BrightSource shines again More good news is that BrightSource has broken ground on another project in the desert at Ivanpah, 40 miles south west of Las Vegas, NE. The facility, scheduled to come online in 2012, will have a capacity of almost 400 MW, making it the world’s largest CSP plant currently under construction. The project is a combined effort between BrightSource and none other than Bechtel (the largest engineering company in the U.S., which built the Hoover Dam in 1933). A key element to this project’s success was securing a US$1 billion Loan Guarantee from DoE. One of the encouraging aspects to this project is that it was able to
balance various competing requirements from both an engineering, environmental impact, and advanced design perspective. Because of legitimate concerns about environmental disruption, the engineers designed a system which minimised impact by almost eliminating the need for extensive land grading and concrete foot pads. By placing individual mirrors on poles directly into the ground, the system allows vegetation to co-exist within the project and avoids impacting sensitive habitats. Also, to conserve scarce desert water, the tower uses air-cooling, which compared with conventional water-cooling results in 90% less water usage, although with some loss in overall efficiency. The water that is used is part of a closed loop system within the boiler segment. In this regards, the Ivanpah project is a good template for CSP developments as it includes multiple stakeholders such as the developers, utilities, and environmental groups.
Cost and bankability Despite the upsurge in the CSP pipeline, there are some warning signs that CSP still has the potential to hit another bust cycle. The issues are a perfect storm of three elements: The primary one is
Rather than wait for NRG to get funding, El Paso Electric switched to solar PV to meet the State’s renewable energy mandates. January/February 2011 | Renewable Energy Focus
53
Feature article
SEGS: CSP success story The SEGS plants (pictured) range in capacity from 13.8MW to 80 MW, and they were constructed to meet Southern California Edison Company’s periods of peak power demand. The plants operate for 80% of the summer mid-peak hours, and 66% of the winter mid-peak hours. A natural gas backup system supplements the solar capacity and contributes up to 25% of the plants’ annual output. Learning from the early SIGS plants has been extensive. During the 1990’s the SEGS’s technical team worked with the Department of Energy’s (DoE) Sandia National Lab to develop costreduction strategies for O&M planning optimisation; subsystem automation; mechanical and reliability improvements; and overall
performance improvements - in fact many of the cost reduction strategies that can now be applied to other CSP technologies and the industry in general. The combined efforts developed capabilities for reducing O&M costs by a third. O&M is a substantial part of CSP running costs, unlike fixed panel solar photovoltaics (PV), where the O&M costs are a small fraction. In addition, the plants were able to perform to exceptional standards and achieved a record output for single-day generation of over 2 GWh, and established a world record solar thermal-to-electric efficiency of 18%. The SEGS 1-9 configuration is a true success story in the annals of CSP (image courtesy of Warren Gretz – DoE/NREL).
rejected. Rather than wait for NRG to get funding, El Paso Electric switched to solar PV to meet the state’s renewable energy mandates. “We can get banks to finance a solar PV project now, but they’re not yet ready to finance a solar thermal project,” Knox says. “That’s why we need to rely on Loan Guarantees to do it, but we won’t get that in the time frame that El Paso Electric needs it.” Jason Marks of the New Mexico PUC says “the problem is not just timing – it’s an endemic situation facing the CSP industry”. In addition, there have been other recent cancellations of projects where the utilities switched from CSP to solar PV - citing costs. The learning curve of PV is much steeper and advanced than that of CSP, and storage complicates things further. This situation becomes a reinforcing cycle: Cheaper PV leads to more installations, which in turn leads to increasingly cheaper PV. This is the essence of the solar market, getting the cost down and moving along the learning curve as quickly as possible. Great for PV. Not so great for CSP. And Levelised Cost of Electricity (LCOE), which is often used to promote CSP, is becoming lower for PV and is projected to continue on this trajectory.
Small is beautiful
the ‘bad luck’ of the global economic squeeze, which has made access to capital very restricted. The second element is the increasing drop in the prices of solar PV and the ever-expanding track record for large-scale PV installations. The third element is that CSP projects are typically large-scale, and require major amounts of not just money; but time for building; and regulatory review. Although there is the ‘economies of scale’ positive benefit for larger builds, there are other costs and barriers which increase with size. Permitting is more complex, labour rates can go up, and the need for grid upgrade or transmission can be substantial.
54
January/February 2011 | Renewable Energy Focus
All this means there is a very significant question about bankability, which has become a common buzz word on the solar arena. This is a legitimate concern as investors don’t want to take on risk for lessthan-fully proven technologies. When you couple that uncertainty with the large investments needed for CSP, the result is major hesitation. The case of El Paso Electric illustrates perfectly this developing storm on the open desert planes. David Knox of NRG Energy Inc, which El Paso Electric contracted to develop the CSP plant, explains the situation in simple terms. NRG sought a Loan Guarantee from DoE to build the facility, but its request was
Despite the challenges, there are some developing trends which could provide a path to viability: Getting bigger by going smaller. There are emerging market opportunities in developing countries with a poor or non-existent grid and power infrastructure. In these countries, such as India, the need for local power is great, but the regional demand is only on the scale of a few MW’s. This application is a relatively hidden market but could be on a par with the nominal ‘grid-connected’ market. In some regards, this market is similar to the cell phone mode, where the landline infrastructure is not in place, but local service can be provided by towers. The demand here is great, and there is a need for viable energy which provides both immediate needs - as well as some storage.
It would be ironic if the iconic origins of terrestrial solar power, the SEGS plants, remain just an image of a CSP boom-bust cycle in the Mojave Desert… Conclusion The ability of CSP to provide both hybrid power (as well as storage) gives it an edge for the time being. However, there is a big caveat, which is the necessity for micro-CSP. Typical CSP installations need to be large-scale to amortise the balance of plant (BOP), and O&M costs. Therefore minimum sizes tend to be in the multiple 10s of MWs, much too large for micro-grid requirements. However, two companies are addressing this requirement: One is Aora, and the other is Sopogy. They are both striving to provide sub-MW CSP solutions. Sopogy is based in the U.S., has been around since 2002, and already has a 2MW project operating in Hawaii - with new micro-grid contracts underway. Aora is based in Israel, and is targeting a 100kW demonstration unit in Spain by mid-2011. CSP has gone through some boom and bust cycles in its 30-year history. It is poised to make a comeback but there are some significant clouds gathering on the horizon. For CSP there is the urgent need to prove its future capability (i.e. its potential) now. The CSP providers need to achieve significant momentum. In an unfortunate storm of market conditions, CSP is getting squeezed between tighter capital and the plummeting costs of PV. It would be ironic if the iconic origins of terrestrial solar power, the SEGS plants, remain just an image of a CSP boom-bust cycle in the Mojave Desert, still cranking away on a tumble weed-blown plane, but left behind because of market forces and the dynamics of technology. Of course one answer to averting a bust-cycle is simple: Deliver on some of the projects currently in the pipeline. There are some leaders in the CSP segment who recognise the urgency and are pushing for a re-focusing of energy into execution and co-operation. Stephen Mullinnex of US Renewables group, which is backing the CSP installer SolarReserve would say that his competition (e.g. BrightSource) is not really the competition – because the more CSP installed, the better for everyone in the industry. As he puts it: “It’s now more about MWh than about ‘bragga-watts’.” In other words, there is a need to act swiftly to execute projects in the pipeline rather than bringing more volume to the pipeline, because time may well catch up with the industry. First published in the November/December issue of Renewable Energy Focus U.S. magazine. See http://www.renewableenergyfocususa.com for more details. e: [email protected]
January/February 2011 | Renewable Energy Focus
55
Feature article
CSP at a crossroads The first solar electric power plants are still proving their worth after three decades, so why aren’t we seeing more CSP reach the development stage?
T
HE FIRST major concentrating solar power (CSP) plants were built in the Mojave Desert, U.S. in 1984 and have been producing over 330 MW since then. A well-publicised slump hit the industry in the nineties, but recently there has been a major upswing in installations, and an even bigger increase in project announcements.
However, before we break out the champagne, as another article in this issue points out (see ‘Smoke and mirrors’, page 42), announcements are one thing, what they are not is data: everything always takes longer than the optimistic announcements indicate, and Projects (and even Contracts), are often cancelled. There have been some recent notable examples of this. One tale of woe is that of a 92 MW CSP facility that El Paso Electric Co. had planned for Santa Teresa in New Mexico. The project collapsed because of difficulties with securing financing. The utility now plans to build a 20 MW PV facility instead. So the immediate challenge for CSP is to avoid another bust by turning the GWs announced into actual GWh of electricity. In other words, prove the technology’s bankability and capability.
52
January/February 2011 | Renewable Energy Focus
The origins The first CSP (parabolic trough) plant came online in 1985 as Solar Energy Generating System #1 (SEGS I) with a capacity of 13.8 MW. Eight other SEGS plants were subsequently built in the same region of the Mojave Desert, with the last one coming online in 1991. The total output of the collective set of parabolic trough plants is 354 MW. According to Hank Price, one of the original engineers working on the project, this early work offered the chance not just for technology evaluation, but also the opportunity to study costs and possibilities for cost reduction. Indeed the cost of wholesale solar thermal electricity from the SEGS plants has halved from its initial cost of US$0.24kWh. Indeed, the original project has been generating electricity for three decades and has provided 14 TWh of energy.
But it wasn’t until after SEGS III that the projects were finally able to attract investors - including multiple eastern U.S. utilities.
Boom and bust cycles Although successful by most metrics, the original company which developed the project – Luz – had to declare bankruptcy. Oil prices fell and remained low through the 1990’s – construction of new solar plants stalled. The regressive energy policy starting with the Reagan administration, along with the vagaries of property taxes, forced the company to close down. However, the investor groups continued to sell electricity to utilities. It wasn’t until the mid-noughties that new companies again began looking at innovative ways to generate large scale solar power, and a second cycle of CSP activity began in 2004. Luz Founder, Arnold Goldman, regrouped his old team, and founded BrightSource Energy. In addition, Silicon Valley venture capitalists gave some substantial funding to new comers such as Ausra and encouraged the renaissance in CSP.
What’s happening now? There are now almost 8 GW of CSP projects in the pipeline, compared with the 500 MW that will be installed by the end of 2010. This project pipeline sits in stark contrast
Feature article
to recent cancellations of CSP power plants. So why is so much of this planned capacity taking so long to develop? The CSP industry appears at a crucial turning point. The “potential” of CSP is an oftheard term, and it is true that there are some very attractive aspects of CSP – in principle. CSP has two key positive aspects: It can provide good energy dispatchability, and it has an ability for hybridisation. The two elements are interrelated. CSP can be configured to have thermal storage (at a price) and can provide up to 6 or even 8 hours of post-sun-down energy. And hybridisation allows the power plant to have both solar and standard energy for heating. In principle, this capability would allow for 100% capacity – where the power plant is providing electricity over the full 24 hour cycle, turning the plant into a tunable base load resource - the Holy Grail for renewables.
Storing CSP power Because of this, there is a significant amount of research going into CSP storage, and efforts are underway to find a low-cost and flexible solution. But in the near term at least, the market doesn’t provide a value for this storage. The ability of hybridisation is important too, because hybridisation improves the intermittency factor, the shaping of the electricity, and the capacity factor. Again there are some limitations, however. If solar is paired with a carbon-based power source it can have two negative effects: Solar projects in the U.S. are limited to 2% natural gas in order to remain designated as “renewable” - and hence qualify for support (the SEGS I - IX projects are limited to 25%.) Secondly, in some instances the use of a coal-fired plant being running at less than full capacity (during times of high renewable generation) can become substantially less efficient, and actually contribute to higher air pollution. Clearly, these issues are much intertwined. The good news for now is that the US Department of Energy (DoE) is ramping up its CSP research, development, and deployment efforts,
Silver bullet for CSP? Sopogy micro-CSP installation in Hawaii
leveraging both industry partners and the national laboratories. DoE’s goals include increasing the use of CSP in the U.S., making CSP competitive in the intermediate power market by 2015, and developing advanced technologies that will reduce systems and storage costs, enabling CSP to be competitive in the base load power arena by 2020. In addition, there are numerous support programs at the National Renewable Energy Laboratory (NREL) for storage projects.
Luz/BrightSource shines again More good news is that BrightSource has broken ground on another project in the desert at Ivanpah, 40 miles south west of Las Vegas, NE. The facility, scheduled to come online in 2012, will have a capacity of almost 400 MW, making it the world’s largest CSP plant currently under construction. The project is a combined effort between BrightSource and none other than Bechtel (the largest engineering company in the U.S., which built the Hoover Dam in 1933). A key element to this project’s success was securing a US$1 billion Loan Guarantee from DoE. One of the encouraging aspects to this project is that it was able to
balance various competing requirements from both an engineering, environmental impact, and advanced design perspective. Because of legitimate concerns about environmental disruption, the engineers designed a system which minimised impact by almost eliminating the need for extensive land grading and concrete foot pads. By placing individual mirrors on poles directly into the ground, the system allows vegetation to co-exist within the project and avoids impacting sensitive habitats. Also, to conserve scarce desert water, the tower uses air-cooling, which compared with conventional water-cooling results in 90% less water usage, although with some loss in overall efficiency. The water that is used is part of a closed loop system within the boiler segment. In this regards, the Ivanpah project is a good template for CSP developments as it includes multiple stakeholders such as the developers, utilities, and environmental groups.
Cost and bankability Despite the upsurge in the CSP pipeline, there are some warning signs that CSP still has the potential to hit another bust cycle. The issues are a perfect storm of three elements: The primary one is
Rather than wait for NRG to get funding, El Paso Electric switched to solar PV to meet the State’s renewable energy mandates. January/February 2011 | Renewable Energy Focus
53
Feature article
SEGS: CSP success story The SEGS plants (pictured) range in capacity from 13.8MW to 80 MW, and they were constructed to meet Southern California Edison Company’s periods of peak power demand. The plants operate for 80% of the summer mid-peak hours, and 66% of the winter mid-peak hours. A natural gas backup system supplements the solar capacity and contributes up to 25% of the plants’ annual output. Learning from the early SIGS plants has been extensive. During the 1990’s the SEGS’s technical team worked with the Department of Energy’s (DoE) Sandia National Lab to develop costreduction strategies for O&M planning optimisation; subsystem automation; mechanical and reliability improvements; and overall
performance improvements - in fact many of the cost reduction strategies that can now be applied to other CSP technologies and the industry in general. The combined efforts developed capabilities for reducing O&M costs by a third. O&M is a substantial part of CSP running costs, unlike fixed panel solar photovoltaics (PV), where the O&M costs are a small fraction. In addition, the plants were able to perform to exceptional standards and achieved a record output for single-day generation of over 2 GWh, and established a world record solar thermal-to-electric efficiency of 18%. The SEGS 1-9 configuration is a true success story in the annals of CSP (image courtesy of Warren Gretz – DoE/NREL).
rejected. Rather than wait for NRG to get funding, El Paso Electric switched to solar PV to meet the state’s renewable energy mandates. “We can get banks to finance a solar PV project now, but they’re not yet ready to finance a solar thermal project,” Knox says. “That’s why we need to rely on Loan Guarantees to do it, but we won’t get that in the time frame that El Paso Electric needs it.” Jason Marks of the New Mexico PUC says “the problem is not just timing – it’s an endemic situation facing the CSP industry”. In addition, there have been other recent cancellations of projects where the utilities switched from CSP to solar PV - citing costs. The learning curve of PV is much steeper and advanced than that of CSP, and storage complicates things further. This situation becomes a reinforcing cycle: Cheaper PV leads to more installations, which in turn leads to increasingly cheaper PV. This is the essence of the solar market, getting the cost down and moving along the learning curve as quickly as possible. Great for PV. Not so great for CSP. And Levelised Cost of Electricity (LCOE), which is often used to promote CSP, is becoming lower for PV and is projected to continue on this trajectory.
Small is beautiful
the ‘bad luck’ of the global economic squeeze, which has made access to capital very restricted. The second element is the increasing drop in the prices of solar PV and the ever-expanding track record for large-scale PV installations. The third element is that CSP projects are typically large-scale, and require major amounts of not just money; but time for building; and regulatory review. Although there is the ‘economies of scale’ positive benefit for larger builds, there are other costs and barriers which increase with size. Permitting is more complex, labour rates can go up, and the need for grid upgrade or transmission can be substantial.
54
January/February 2011 | Renewable Energy Focus
All this means there is a very significant question about bankability, which has become a common buzz word on the solar arena. This is a legitimate concern as investors don’t want to take on risk for lessthan-fully proven technologies. When you couple that uncertainty with the large investments needed for CSP, the result is major hesitation. The case of El Paso Electric illustrates perfectly this developing storm on the open desert planes. David Knox of NRG Energy Inc, which El Paso Electric contracted to develop the CSP plant, explains the situation in simple terms. NRG sought a Loan Guarantee from DoE to build the facility, but its request was
Despite the challenges, there are some developing trends which could provide a path to viability: Getting bigger by going smaller. There are emerging market opportunities in developing countries with a poor or non-existent grid and power infrastructure. In these countries, such as India, the need for local power is great, but the regional demand is only on the scale of a few MW’s. This application is a relatively hidden market but could be on a par with the nominal ‘grid-connected’ market. In some regards, this market is similar to the cell phone mode, where the landline infrastructure is not in place, but local service can be provided by towers. The demand here is great, and there is a need for viable energy which provides both immediate needs - as well as some storage.
It would be ironic if the iconic origins of terrestrial solar power, the SEGS plants, remain just an image of a CSP boom-bust cycle in the Mojave Desert… Conclusion The ability of CSP to provide both hybrid power (as well as storage) gives it an edge for the time being. However, there is a big caveat, which is the necessity for micro-CSP. Typical CSP installations need to be large-scale to amortise the balance of plant (BOP), and O&M costs. Therefore minimum sizes tend to be in the multiple 10s of MWs, much too large for micro-grid requirements. However, two companies are addressing this requirement: One is Aora, and the other is Sopogy. They are both striving to provide sub-MW CSP solutions. Sopogy is based in the U.S., has been around since 2002, and already has a 2MW project operating in Hawaii - with new micro-grid contracts underway. Aora is based in Israel, and is targeting a 100kW demonstration unit in Spain by mid-2011. CSP has gone through some boom and bust cycles in its 30-year history. It is poised to make a comeback but there are some significant clouds gathering on the horizon. For CSP there is the urgent need to prove its future capability (i.e. its potential) now. The CSP providers need to achieve significant momentum. In an unfortunate storm of market conditions, CSP is getting squeezed between tighter capital and the plummeting costs of PV. It would be ironic if the iconic origins of terrestrial solar power, the SEGS plants, remain just an image of a CSP boom-bust cycle in the Mojave Desert, still cranking away on a tumble weed-blown plane, but left behind because of market forces and the dynamics of technology. Of course one answer to averting a bust-cycle is simple: Deliver on some of the projects currently in the pipeline. There are some leaders in the CSP segment who recognise the urgency and are pushing for a re-focusing of energy into execution and co-operation. Stephen Mullinnex of US Renewables group, which is backing the CSP installer SolarReserve would say that his competition (e.g. BrightSource) is not really the competition – because the more CSP installed, the better for everyone in the industry. As he puts it: “It’s now more about MWh than about ‘bragga-watts’.” In other words, there is a need to act swiftly to execute projects in the pipeline rather than bringing more volume to the pipeline, because time may well catch up with the industry. First published in the November/December issue of Renewable Energy Focus U.S. magazine. See http://www.renewableenergyfocususa.com for more details. e: [email protected]
January/February 2011 | Renewable Energy Focus
55