Lessons learned from international CST deployments
History (past and recent) tell us that:
- Time improves performance and will reduce costs;
- Long-term, consistent commitment to the right market frameworks, tariffs and incentives to trigger and sustain industry creation are critical;
- In modern, industrialised countries, industries with substantial capabilities, experience, and expertise in civil, mechanical, thermal and industrial engineering can easily be redirected to address the need of the CST industry and to design, manufacture, and commercialise many components of a CST system for both local and export markets;
- The macroeconomic benefits of a local market skilled in the design, development and deployment of CST technologies (i.e. local industry) by far-and-away compensates for any Government subsides required to kick-start that modern industry (as evidenced in Spain); and
- Morocco, South Africa, China, and Chile all offer lessons in varied deployments and applications of CST technology and rationale for them.
Proven CST operation – time improves performance
In the 20th century, the first large commercial deployment of CST technology took place in California, USA. In the 1980s special legislation was enacted by the State of California providing tax breaks and other economic incentives to the deployment of renewable energy technologies. This elicited the interest of the industry and a series of solar power plants were constructed and started operation in that decade.
A paradigmatic example of such types of solar power plants is the series of Solar Energy Generating Systems (SEGS) at Kramer Junction (California, USA). They were part of a larger operation that totalled a combined capacity of 354 MW at three different locations: Daggett (SEGS I and II, 44 MW in total), Kramer Junction (SEGS III to VIII, 150 MW in total), and Harper Lake (SEGS VIII and IX, 160 MW in total). The Kramer Junction SEGS plants are 5 plants of 30 MW of installed capacity each, which were constructed between 1987 and 1989, and that has been operating ever since.
In their more than 30 years of operation the Kramer Junction SEGS plants have demonstrated that:
- CST plants are very reliable;
- They operate beyond their originally estimated operational life; and
- They improve their performance and reduce their operational cost with time, as the team that operates and maintains them gets more experienced in carrying out these activities.
What happened in Spain? – the origin of the modern CST industry
The commercial deployment that took place in California in the 1980s with the SEGS plants ended when the legislative support that favoured that approach ended. From then until 2006, little had happened around the world related to the commercial deployment of CST technologies.
In 2006, the Feed-in Tariff legislation enacted by The Kingdom of Spain to provide incentives for the deployment of renewable energy electricity generation technologies in the country, triggered the most important commercial deployment of CST technologies that has taken place in the world thus far. It gave rise to the emergence of a global CST industry, which is currently deploying these technologies in many other countries: United States, China, India, South Africa, Chile, Morocco, United Arab Emirates, etc.
In addition to this country’s notable achievement in terms of market penetration, Spain is of interest to Australian analysts because of the somewhat unexpected similarities between the two countries and the lessons that history provides – both positive and negative around R&D investment and CST deployment (see next section.)
Within the six years that the Feed-in Tariff legislation was applicable in Spain, a total of 50 plants were built totalling 2.3 GW of installed capacity. Most of these plants:
- Are of Parabolic Trough technology, although some plants were of linear Fresnel and tower technology;
- Have between 4 to 15 hours of thermal energy storage at nominal plant capacity, based on the use of nitrate molten salts; and
- Have a high proportion of local content, i.e., most of the work and goods needed to design, operate, and maintain the plants were provided by local Spanish companies.
The prominence of Parabolic Trough technology is explained because most, if not all, commercial CST projects in Spain at the time where funded by project financing, and for the banks, parabolic trough technology was the only relatively low risk technology due to the outstanding operational record of the California SEGS plants.
The widespread integration of thermal energy storage makes sense because in Spain the price of electricity varies with the time of the day. It makes economic sense for the commercial CST plants to serve the early morning and evening peaks, and, in general, to increase the dispatchability and the capacity factor of the plants.
The high proportion of local content (contribution to the design, build and operation of plants) can be attributed to the long tradition of CST research in the country and the relatively technical accessibility of CST technologies. Over the last 40 years, the active commitment to the development of CST technologies of the largest National Energy Public Research Organization (CIEMAT) and of the Engineering School of the University of Seville, one of the prominent engineering schools in the country, resulted in the development, over the years, of a large number of engineers and technicians that were well acquainted with CST technologies, permeated most of the energy related companies in Spain, and were internationally connected with the rest of the countries that for a long time have been at the forefront of these technologies (USA, Germany, and Israel).
This strong human capability on CST technologies, highly distributed among the companies of the Spanish energy sector, provided the fertile ground for the development of the Spanish CST industry as soon as the proper incentive for the creation of the industry (feed-in tariff or FIT) was set in place.
For a modern and industrialised country, with the appropriate human capabilities in CST to adapt its engineering, power, construction, metal, automotive and glass industries (among others), to the requirements of the emerging CST industry, was relatively easy. While in 2007 the first commercial CST plants installed in Spain had a local content of 60%, in 2012 the last CST plants installed in Spain had a local content of more than 80%. The benefits for the Spanish economy arising due to macroeconomic effects of this high local content cannot be overemphasised. According to a study conducted by Deloitte, the macroeconomic benefits associated with the development of the CST market in Spain compensated by far the Government subsides that supported the kick-off of the modern CST industry in the country.
The commercial deployment of CST power plants in Spain was abruptly ended in 2012, when the newly elected conservative government, encouraged by the incumbent traditional electric utilities, decided to introduce very aggressive retroactive legislation designed to stop the deployment of renewable energy technologies in the country. This legislation retrospectively erased the economic benefits established by the former feed-in tariff legislation and replaced it with a very complex procedure designed to guarantee that all CST plants that were operating under the feed-in tariff provisions will not have a return on investment (ROI) greater than 4%.
The official justification of the Spanish government for introducing these drastic and exceptional retroactive measures is that the country cannot afford the economic expense that the feed-in tariff legislation implies. However, the credibility of this justification is weakened when one considers that, under the rules of the Spanish spot market (rules that the Spanish government did not consider necessary to change against the advice of its own technical services), the electricity produced by large, old and fully amortised hydro and nuclear plants is paid at the price of the electricity provided by the most modern wind turbine, with the result than the Spanish electric utilities with hydro and nuclear plants are making windfall profits of more than 500% return on their investments. According to the official information of the Spanish National Electricity Commission, just in 2010 alone, the money paid by the Spanish Government to the electric utilities for the electricity generated by the large hydro and nuclear plants exceeded all the Feed-in Tariff support for renewable energy electricity generation provided by the government that year.
After Spain, many other countries established support measures to facilitate the commercial deployment of CST power plants. While the measures are different from one country to another, they all have the two-fold purpose of accelerating the market penetration of CST technologies by:
- Compensating for the externalities and other hiding subsidies benefitting the deployment of conventional fossil fuel generation technologies; and
- Addressing the fact that to increase the cost competitiveness of CST technologies, markets have to be established with the correct price signals to the CST industry in order to promote substantial cost reductions and performance improvements.
Thanks to these incentives, the commercial deployment of CST is occurring in many countries. Currently, after Spain, the USA is the country with the largest number of CST commercial power plants. The USA is also the country were the largest commercial CST power plants thus far have entered into operation. The Solana power plant in Arizona is a classic example of the type of large scale CST plants that are under development in the USA. It boasts an installed capacity of 250 MW and a thermal storage of 6 hours at full nominal capacity. The size of its parabolic trough solar field is approximately the size of the island of Manhattan.
The plant is owned by the Arizona Public Service Corporation (APS) who financed the project via a Power Purchasing Agreement that it awarded in an open bid. In this bidding, the proposal of the Solana CST power plant competed against gas combined cycle and other fossil fuel and renewable energy generation proposals. According to APS the contract was awarded to the Solana CST project not because it was the proposal that promised the lowest annualised price of electricity, but because it was the proposal that promised the best “overall value” per unit price to the Arizona electricity grid. Among other things valued by APS, the dispatchability and flexibility of operation provided by the plant, thanks to its 6 hours thermal storage system, and the ancillary services provided to the grid, thanks to its conventional steam turbine power block, ranked the highest.
As in Spain, in the USA the development of a national CST industry have been fuelled by the human capability development carried out during the last 40 years on leading national laboratories, specifically in the National Renewable Energy Laboratory (NREL) in Golden, Colorado, and Sandia National Laboratories in Albuquerque, New Mexico.
Morocco, South Africa, China, and Chile are also other countries were the commercial deployment of CST technologies is taking place.
Morocco is determined to base its energy sector substantially in renewable energies with CST plants playing an important role. Very recently it has closed power purchase agreements (PPAs) at $160/MWh for two CST plants: A 200 MW parabolic trough and a 150 MW tower.
In 2011, South Africa established the South Africa Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) to foster the deployment of renewable energy power plants in the country. This program has been very successful in terms of attracting the best international Independent Power Producers (IPPs) and financiers to invest, develop and expand the energy sector in the country to deploy CST power plants and, thereby, to improve the country’s generation mix and achieve its ambitious clean energy goals.
One of the main lessons learned from the South Africa REIPPPP CST is that through a well-thought-out incentives program, a country can elicit substantial price reductions from industry in a relatively short time. Since 2011 the REIPPP has issued four procurement rounds, each of them with slightly different rules, designed to incentivise increases in local content and cost reductions and to correct the unexpected side effects or loop holes of the previous round. In the first round of procurement the CST solar electricity was purchased at 2.85 ZAR/kWh, in the second round it was purchased at 2.51 ZAR/kWh, in the third round it was purchased at 1.46 ZAR/kWh.
China has decided that its next revolution is going to be the renewable energy revolution. China is determined to reduce drastically greenhouse emissions and to decarbonise its energy sector through deployment of renewable energy and nuclear power plants. Among the renewable energy technologies that China is considering to deploy, CST technologies are expected to play a substantial role. Like the USA, China has a strategy of promoting the development of a national CST industry and of fostering the commercial deployment of CST plants in the country. Since the year 2010, China has been supporting five 5 year research programs in CST every year. It has also started to incentivise the deployment of commercial CST plants in the country. In September 2015, it issued a call for proposals to deploy up to 1 GW of installed CST capacity in the country by 2017.
Chile constitutes an alternative model for CST development. In stark contrast to Morocco, South Africa, and China, where the decision to establish policies and programs that facilitate the deployment of CST power plants is taken by the government based on an explicit analysis of the value proposition of CST technologies and how the deployment CST power plants can benefit the country at a macroeconomic level, Chile has a completely neoliberal approach to guide the development of its energy sector. The country just awards PPAs mainly based upon the lowest generation cost, without much consideration for many of the advantages that the value proposition of CST technologies provides to a country at the macroeconomic level. Curiously, even under these circumstances, which are far from providing an even playing fieldfor the deployment of renewable energy technologies, a strong deployment of CST plants is expected to happen in the country, mainly at the Atacama Desert. This is a location with one of the highest direct solar irradiance in the world, relatively inaccessible, and where many mine operations are taking place. Currently, most of the energy needs of the mines are served by diesel generation at relatively high price per kWh. In these circumstances, power plants based on the current state of the art technology are proven to be a competitive alternative. Very recently, Chile has just closed a PPA at $110/MWh for a 110 MW CST plant with 17.5 hours of storage partly hybridised with PV. This PPA has been awarded in open competition with all other generation technologies including Gas Combined Cycle.