Tom Konrad CFA
The Once Bright Future of CSP
|Solúcar PS10 solar tower. Photo by afloresm via Flickr|
Since before I started writing about investing in clean energy in 2006, I’ve been fascinated by Concentrating Solar Thermal Power (CSP.) CSP held the promise of much cheaper energy than was then available from photovoltiac (PV) solar, combined with thermal storage, which eliminated the variability problems of PV. Unlike other renewable energy able to produce baseload power (geothermal, biomass, and hydro), CSP is scaleable: The solar resource in areas appropriate for CSP is large enough to easily meet the world’s energy needs.
Moderately priced, carbon-free, scaleable power with integrated storage? CSP seemed likely to become a core clean energy solution.
The Darker Present
Today, things don’t look as good for CSP. Large, central CSP power plants take years to permit and connect to the grid. They work best in areas with low cloud cover, mostly deserts. The least expensive CSP plants also require water for cooling (air cooling is possible, but reduces efficiency and so increases the cost of power.)
The large scale of CSP projects also makes it harder and slower to arrange financing. The loss of the US Department of Energy loan guarantees last year dealt a harsh blow to the industry. Once-successful CSP developer Solar Millennium, which had been granted a conditional commitment under the program, declared bankruptcy when they could not finance a project within the DOE-imposed deadline.
Slow permitting and financing means that only a few CSP plants have yet been built. Meanwhile, distributed PV installations have been growing rapidly, giving manufacturers and installers valuable experience, leading to rapid cost cutting. As a result, the world will install 27 GW of PV in 2012. Total installed CSP capacity is about 3 GW.
The accelerated learning curve has allowed PV shoot past CSP in cost per kilowatt of power generated. While CSP was plodding down the cost curve, PV dove off the cost cliff. As I wrote in November, many planned CSP projects are being displaced by PV or being canceled.
Friend or Foe?
All is not lost for CSP. While PV is ahead on price, CSP still has one valuable asset PV can’t match: cheap storage. Micheal Whalen, CFO of CSP company Solar Reserve, said the idea of integrating CSP with PV was “of interest” at the Renewable Energy Finance Forum- Wall Street in response to an audience question. This might make sense for large scale solar farms, since the integration of PV would allow the overall price of power to be lower than CSP alone, while CSP would be able to compensate for the rapid output changes from PV that occur whenever a cloud passes over, as well as producing power at night, or shifting it ot peak afternoon periods.
CSP/PV hybrid farms might be particularly appropriate in places like Saudi Arabia, which has recently committed itself to large solar investments. While the low water use and cost of PV will appeal in the desert kingdom, the fact that solar will be displacing power generated from oil means that even CSP based power will produce cost reductions. Large solar installations like what Saudi Arabia is contemplating could easily destabilize the grid if they were to consist entirely of variable PV. Mixing in dispatchable CSP power would help maintain the stability of the whole system.
As Mr. Whalen said, “There is a place for CSP even when PV is cheap, if it differentiates itself [with storage].” The best markets for CSP will be places like Saudi Arabia and South Africa where “they do not have robust grid connections.” Without robust grid connections, PV’s variability can easily destabilize the grid, giving CSP a role in grid stabilization.
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