After a dazzling comeback, the US concentrated solar power market risks fading into the background unless US politicians get behind the only base load energy alternative that can deliver a clean, green future.
By Dan McCue, US correspondent
With Federal support for clean energy alternatives on shaky ground in the US and utilities largely satiated in their short-term need for renewables, proponents of concentrated solar power are looking to emerging economies and alternative applications to advance the technology.
Those familiar with the US concentrated solar power (CSP) sector fully expect projects that have already received federal loan guarantees to come to fruition. Onlookers note, however, that there is a scarcity of new projects in the early stages of development.
"There's no question that CSP is in a bit of a tough spot," said Thomas Maslin, Associate Director of Solar Research at IHS, the technology research company.
"On the one hand there are a pipeline of projects out there that will be built and by virtue of that, will create a bit of a boom in the US CSP market in the new few years. But the question is: what comes after that?"
Maslin cautions that with the timeline for a CSP project being so long, “if you are not signing a power purchase agreement in the immediate near term or starting construction on a project within the next few years, you may not complete it by the time federal Investment Tax Credit expires in 2017".
At this point, few things are certain about the upcoming presidential election and the political brinksmanship that will follow on its heels. What does remain clear is that the fight over the investment tax credit extension will be long and contentious.
Consequently, according to Maslin, rather than an extensive build out to follow the first 1.3 GW of CSP projects in the American Southwest, concentrated solar power promoters are instead looking to India, parts of the Middle East and other emerging markets to build future projects.
"Along with all this, the other thing that we're seeing more and more of is CSP professionals looking at utilising their technologies in other applications," Maslin said. This includes using CSP technologies to provide steam for existing and future coal and gas plants; for industrial processes; and for enhanced oil recovery, an option that is particularly geared to heavy oil regions like Venezuela and other parts of South America.
"To some degree, this is an indicator that CSP's attractiveness and ability to compete in a pure power space has diminished slightly, but some of these alternatives are actually pretty viable," he said.
While current projects in the US can still rely on some support from banks and the venture capital community, those looking for a better situation in emerging markets are also seeking support from alternative channels for funding such as the World Bank, the International Finance Corporation, and even local governments in these regions that are less affected by the ongoing Eurozone crisis.
Christopher Neal, Senior Communications Officer for the World Bank’s Sustainable Energy Department confirms Maslin's contention of a growing interest among CSP developers in emerging markets. He says the World Bank, among others, is keen to play role.
"[The World Bank] does provide lending for solar projects, including concentrated solar power. Probably the highest profile of the latter that we've done to date is the Ouarzazate Concentrated Solar Power Plant Project in Morocco, for which we approved US$297 million in loans last year, in conjunction with support provided by the Global Environment Facility," Neal said.
This year, the World Bank is considering an additional tranche of loans for Morocco, as well as a first time, solar power-related loan to Jordan.
The World Bank is not like other institutions that bear the bank moniker; its loans go not to private companies, but to governments supporting such projects.
"We have the name, 'bank,' the 'World Bank' or the 'International Bank for Reconstruction and Development,' but what we really are is an international organization owned by 188 governments, who serve as our shareholders," he said. "In short, the capital subscription they provide us with is a form of collateral against which we raise money on financial markets by selling bonds."
Once those bonds are sold, the World Bank Group -- which besides the bank itself, also includes the International Bank for Reconstruction and Development and the International Development Association -- lends the money to developing countries, using its triple A rating to provide the borrowers with very low interest rates.
The World Bank’s private sector lending arm, the International Finance Corporation, provides financial support for developing countries through the World Bank Group. The Bank also provides policy support and policy advice to governments in developing regions that are investing in solar and other renewable technologies.
The World Bank also manages two climate investment funds that are instrumental in scaling up the implementation of clean technology through a mechanism called the Renewable Energy for Low Income Countries program. Neal said currently about US$7 billion has been pledged for that program from donor countries.
"We have that source of finance, we have our straight up lending and we also have our global environmental facility. Those are a few different pots of money that we use to support solar and other renewable technologies in developing countries," He said.
"The World Bank’s lending is intended to promote social and economic development. The idea is to get developing countries out of poverty and onto a track where they no longer need to borrow from the World Bank."
Right now, Neal said, North Africa is the hot spot for the World Bank's solar power related activities, and also Bangladesh.
PV’s stellar performance on cost reductions in recent years has somewhat overshadowed CSP. From an investment perspective, this does not augur well. "PV is shining a little bit brighter than CSP at the moment", concedes Maslin.
"Unfortunately for the CSP sector, we don’t see it going away in the near term," he said. "[PV] costs continue to come down and CSP costs have not moved all that much. [PV] projects are also smaller, so that makes them a little bit easier to finance. We’ve seen quite a bit of activity from traditional power players like the MidAmerican Energy Company, Enbridge Inc., NRG Energy, and others, coming in, buying these projects, and providing equity investment; PV is generally seen as a safe asset to invest in, so we’ve seen some institutional investors, insurance companies and others, getting into the space.”
A key factor holding back the flood of investment, is that CSP encompasses a much wider variety of technologies, many of which have yet to be considered a commodity, explains Maslin. Among the challenges CSP must overcome is its more fragmented market; a more fragmented supply chain and its associated costs; and the necessary scale of the projects.
“To achieve any kind of economy of scale, CSP still needs plants that are 200 MW or larger, and if you're talking about $5 a watt, that's a billion dollar project. All of these things make for a difficult financing climate for CSP going forward," he added.
Asked if the CSP's ability to be coupled with storage will ultimately help tip the balance in its favor, Maslin said it depends on the timeframe.
"Storage s definitely an attractive option, but it is also an added cost, and in most markets, there’s not really a defined market benefit to storage," he said. "So the economics don't quite work yet. In the US, at least, you don't really see the proper structure in place to monetize all the benefits that can be realised from storage in a way that would make economic sense."
"Longer term, molten salt storage does make CSP attractive. But in an energy market where alternatives like gas are so cheap, it's more of a niche play at the moment," he added.
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