Concentrated Solar Power – A Reality or the End?

By Sun-Young

As illustrated by the BrightSource case, solar energy is not an easy endeavor both from the technological and economic perspectives. There is a real limitation of solar energy with the everlasting search for a solution to energy storage as well as the limited opportunity for cost reduction coupled with the impending fall-off of the 30% Investment Tax Credit (ITC)in 2016. However, even if all 40GW of planned solar projects are completed despite these challenges, solar energy would still only make up 2% of US electric generation by 2016. Today, almost 8% of electricity generation in Italy is from solar.

Previously, we saw the collapse of PV solar panels due to the Chinese government’s investment in solar through subsidies. Consequently, we saw a steady decline in PPA prices for solar. However, the June 2014 imposition of US tariffs on Chinese and Taiwanese panels have helped to stabilize the decline in solar PPA prices.

 

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Yet, the cost of solar is still higher than wind and natural gas and this will continue to deter developers to build solar energy projects as well as decline in PPA prices. Recently, firms such as Siemens, Sopogy and Areva have exited the CSP business. Similarly, BrightSource has seen its CSP pipeline diminish as a result of the regulatory process over the past few years. Previously, in 2012, the California Public Utilities Commission had approved revised PPAs between BrightSource and Southern California Edison for electricity generated by one 250-megawatt unit of BrightSource’s proposed 500-megawatt Rio Mesa solar power tower project and one 250-megawatt unit of its proposed Sonoran West tower project. The CPUC also rejected three proposed BrightSource-Southern California Edison PPAs. The revised Sonoran West PPA stipulated for a “a few hours” of storage.

On top of the economic deterrent, CSP faces challenges aside from financial ones. As we saw with BrightSource, developers are constantly at odds with environmentalists. Despite efforts from both private developers as well as the federal government, it seems as though short of government mandates, developing CSP in any area will face difficulty with respect to permitting and wildlife habitats. When the Palen Project was first approved, it was on one of the 17 “solar energy zones” (SZEs) signed off by Interior Secretary Ken Salazar for fast-track project approvals characterized by excellent solar resources, good energy transmission potential, and relatively low conflict with biological, cultural and historic resources. While the program opened up 285,000 acres for “facilitating permitting, encouraging solar development on suitable adjacent nonfederal lands, and providing economic incentives for development for SEZs”, the Palen Project was withdrawn at the end of October.

This may be partly due to the fact that the project is unlikely to be completed by December 2016 to qualify for the 30% ITC subsidy and construction was projected to last 28 months, or completion in 2017. But, the Palen Project faced extreme challenges with environmentalists as the project poses a greater risk to bird life than the Ivanpah project due to the flux of the solar towers of the 750 foot plant. Therefore, it seems to suggest that despite government legislation, nothing short of enforcing mandates, will help to incentivize and help CSP develop as a long-term solution for solar energy in the United States.

BP Statistical Review of World Energy. 2013

EIA annual energy outlook reports

Lawrence Berkeley National Laboratory. 2014.

http://docketpublic.energy.ca.gov/PublicDocuments/09-AFC-07C/TN201434_20131213T150623_Presiding_Member’s_Proposed_Decision.pdf

http://www.energy.ca.gov/sitingcases/palen/

http://www.doi.gov/news/pressreleases/Obama-Administration-Approves-Roadmap-for-Utility-Scale-Solar-Energy-Development-on-Public-Lands.cfm

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

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