Executive Viewpoint
It's rocket science: How SolarReserve is conquering new frontiers
15 January 2010
SolarReserve has engineered a killer recipe that is proving all too tempting for utilities. But could an uneven playing field sour its secret ingredients?
By Rikki Stancich in Paris
The brainchild of rocket scientists and a private equity group specialized in renewable energies, SolarReserve, the solar energy development company, is primed to be a winner in the concentrated solar power sector.
United Technology subsidiary, Pratt & Whitney Rocketdyne, has combined its liquid rocket engine heat transfer technology and molten salt handling expertise to develop a unique tower receiver technology with thermal storage capabilities - for which SolarReserve is the exclusive license holder.
Another key ingredient is SolarReserve’s founding partner - the US Renewables Group, a US$575 million private equity firm exclusively focused on renewable power and clean fuel projects.
And finally: the team. SolarReserve’s blend of professionals from the energy, technology and finance industries are proving to be a knockout combination.
It is little wonder, then, that SolarReserve ushered in the New Year with two power purchase agreements for its flagship US solar tower projects and the crucial environmental permit needed to greenlight its Spanish project.
In November, the company secured the necessary environmental permit for its 50MW Alcázar Solar Thermal Power Project.
The following month, SolarReserve signed two separate PPAs: one with NV Energy for the 100 MW Crescent Dunes facility located near Tonopah, Nevada; and another with Pacific Gas & Electric for SolarReserve’s 150 MW Rice Solar Energy project in Riverside County, California.
But dry cooling requirements on CSP developers like SolarReserve are placing an upward pressure on the cost of solar power generation – a factor that other power generators are as yet unaffected by.
CSP Today catches up with SolarReserve CEO, Kevin Smith, to discover the secret to securing the right price with a utility and to explore whether CSP developers are being penalized when it comes to dry cooling requirements.
CSP Today: What was the key factor that led to the successful negotiation of the 2 separate PPAs?
Kevin Smith: There were two main factors. The first was our technology offering to the utilities – a renewable energy with a storage solution – in other words, a continuous supply of power during peak demand periods.
The second key factor was the advanced stage of both projects. We had secured land and other project requirements and the permitting was well advanced, so the utilities perceived both the Rice and Tonopah projects as “real” projects.
CSP Today: In the past, projects have fallen through – or didn’t get off the ground – due to the purchase price in the PPAs being set too low. Are you confident that the price is ‘right’ this time?
Kevin Smith: Our approach is to fully understand the economics of the project before entering into PPA negotiations which means we’re engaging in these agreements toward the end of the development process, rather than at the early or mid-stages. Making PPA commitments during the early stages can lead to project failures.
By negotiating the price at the advanced-stage of the project, we understand the costs and economics more fully, so we are confident that the price reflects the cost.
CSP Today: The efficiency conferred by molten salt technology is significant, in terms of its heat storage capacity and because it handles much higher temperatures as a heat transfer fluid. What is the comparative advantage in terms of LEC of SolarReserve’s tower technology, compared to trough technology that uses synthetic oils, with no storage capacity?
Kevin Smith: Utilising molten salt allows us to operate at much higher temperatures – in excess of 1000 degrees Fahrenheit. In other words, we operate at temperatures more typical of a utility steam cycle.
Operating at a higher temperature also enables more efficient storage because the difference in temperature between the hot and cold salt has a wide range.
The efficiency of inherent storage is central to our value proposition. Utilities like that our technology provides energy during peak periods, even if it’s in the evening. By being able to service peak periods, we are able to benefit from premiums utilities pay for this energy.
Can our electricity compete on price? Generally renewable energy, including solar and wind, is capital intensive. But there is no fuel cost; therefore, the long-term pricing is competitive because it is not exposed to fluctuating fossil fuel prices.
Making these comparisons between early investment in renewable energy versus the unpredictability of fossil fuel prices point again to the fact that, at the end of the day, we need an energy security policy that takes account these longer-term price fluctuations.
CSP Today: Given that SolarReserve’s technology enables steam generation at much higher temperatures (in line with existing coal and gas fired plants), is SolarReserve considering hybrid projects – bolting on the technology to existing power stations?
Kevin Smith: We have looked at bolting on the technology to existing facilities but the potential applications are limited by a number of factors, such as geography.
The current development focus is on stand-alone facilities. We do have a small number of hybrid applications that we are looking at.
CSP Today: What are the environmental and economic pros and cons of using dry cooling?
Kevin Smith: The environmental benefit is obviously lower water use. The economic drawback is that it is more costly – it increases the cost of generating electricity by up to 10 percent, which is significant.
CSP Today: Will dry cooling likely be a given in future large scale CSP projects – or all power generation facilities, for that matter - in the future?
Kevin Smith: Having worked across a range of power generation sectors, what is frustrating for me is that when it comes to dry cooling, the focus seems to be on large-scale CSP rather than on the complete power sector including conventional fuel-burning facilities.
Why is it that the CSP sector in particular should be limited to dry cooling, when all the other energy projects out there – nuclear, coal, gas – could also be retrofitted to use dry cooling and save orders of magnitude of water over just targeting new CSP facilities?
It’s difficult to try and resolve everything with solar energy projects, in terms of addressing energy security issues, providing low or zero emission renewable energy, limiting our water use and maintaining competitiveness to other power generation forms.
But there is no reason why dry cooling should be mandated for CSP and not for other energy projects. There are hundreds of thousands of megawatts of coal and gas and other energy projects that use wet cooling, and yet nobody is looking at retrofitting existing facilities that currently use a tremendous amount of water.
Ninety-nine percent of the energy from fossil fuel powered or nuclear facilities use wet cooling and yet somehow these energy producers are sliding beneath the radar on water consumption. We ought to look at recapturing water use from these facilities as well.
If utilities stipulated that all new projects use dry-cooling, then there would at least be a level playing field for CSP projects.
CSP Today: Both the Alcazar and Rice solar energy projects will use dry cooling technology, but the Tonopah project will not. What dictates whether or not SolarReserve opts for dry cooling for a given project?
Kevin Smith: We are using low water technology for the Tonopah project, but not full dry cooling. The Nevada Tonopah project is on federal (BLM) land, but because we secured a private source of water the project proposed to use a hybrid-low water system.
In reality, the project will dry most of the year. Only during peak periods will the Tonopah facility use wet cooling in order to maintain output.
What dictates whether or not dry cooling is used is the market price that we are meeting with the utilities; the ability to secure water; and permitting requirements in the region.
In some areas it is very difficult to find a twenty-year water supply – these kinds of issues affect costs and can render a project uncompetitive.
CSP Today: Aside from the US and Spain, what other markets is SolarReserve looking at?
Kevin Smith: We have activities in Italy and Greece. We are also looking at proposals in Morocco and Algeria, South Africa and some in the Middle East.
India and China represent fairly long-term markets for us, but we are monitoring them with interest.
But the US and Southern Europe are really the key focus for us at this stage.
To comment on this article, write to:
Rikki Stancich: rstancich@gmail.com
