In an attempt to gather the industry’s feedback with regards to the developments in these areas within the next 12 months, CSP Today spoke with executives from Abengoa, ACS Cobra, SolarReserve, Sun & Life and Protermosolar, who revealed their opinions.  

By Ángela Castillo

Bidding at record-low prices

Last December, the market saw a consortium led by ACWA Power and SolarReserve being awarded preferred bidder status under Window 3.5 of the South African government’s REIPPP programme, with their Redstone CSP project. Sources indicate that a record low tariff was offered: US $12.4 c/kWh for the first year and $15 c/kWh for the remaining period.

In Morocco, the ACWA Power-led consortium was awarded the contract to develop the Noor II and III projects. It presented the lowest combined bid, with a price of MAD 1.36 p/kWh (approximately $14 c/kWh) in peak hours for Noor II, and MAD 1.42 p/kWh (approximately $15c/kWh) in peak hours for Noor III.

So what is the industry aiming for in terms of tariffs? Luis Crespo, General Secretary of Protermosolar, believes prices will remain between $13 c/kWh and $14 c/kWh in places with excellent solar resources and forecasts that the industry will achieve a $10 c/kWh tariff for CSP plants with storage in 2020.

Kevin Smith, SolarReserve CEO, believes the industry will break the $ 10 c/kWh barrier within the next three to four years for CSP plants with integrated molten salt storage: “In places with high DNI and 150 MW CSP plants with eight to twelve hours of storage, I am confident we will be able to achieve that target.”

The cost of financing

For Alexandre Allegue, General Manager at Sun & Life, a subsidiary of ACWA Power, the massive drop in prices is a clear indication that “the game is changing and the cost of financing is crucial and so is optimizing the value chain.” Furthermore, he adds: “it is a matter of setting an aggressive goal and working towards achieving it, and ultimately, a necessity for the CSP industry to remain competitive.”

José Alfonso Nebrera, CEO at ACS Cobra, agrees when he says that future prices will depend on developments in the financial markets. “Although construction costs have declined substantially, the main reason we are seeing such low tariffs is that some investors’ internal rate of return expectations have shrunk dramatically.”

Nebrera also points out local investors’ perceptions of “low risk” associated with investments in the MENA region as opposed to their European and American counterparts’ and the low profit margins resulting from the latest offers. “Most Western companies are not willing to invest for such a low return on investment,” he says.

“What made the difference in the Noor II project bid, for instance, was the price of money. Ours was a very aggressive offer from the standpoint of the material investment though,” Nebrera adds.

On top of that, Nebrera notes that Saudi Arabia’s massive oil revenues, the lack of other secure investment alternatives and the opportunity cost derived of choosing solar over burning oil, are all factors contributing to the Kingdom’s investment in CSP.

In order to address the situation, CSP companies have been implementing different strategies to gain access to cheaper financing means. For instance, Abengoa’s Director of Strategy, Elisa Prieto, points at Abengoa Yield’s launch last summer.

“It has been extremely helpful in reducing the cost of capital thanks to a portfolio of operating assets. Besides, it has been beneficial for Abengoa because it allows us to recycle our own equity while providing a long-term project pipeline,” she adds.

Similarly, ACS followed suit and grouped its renewable energy assets (16 wind farms and three CSP plants) into a new entity, Saeta Yield. The company made its debut in the Spanish stock exchanges on 16 February 2015.

Competitiveness

According to the interviewees, the key to remain competitive lies on their ability to develop cutting-edge technologies and, in most cases, their capacity to build partnerships with strategic organisations.

“There are two factors that will set the tone in the next two years: on the one hand, CSP companies’ ability to innovate and, on the other, EPCs’ capacity to join forces with investors with a low perception of risk with respect to the place where the investment is being made,” says Nebrera.

For Smith, “it’s all about the technology, that’s our edge. SolarReserve develops power projects as well as advanced molten salt power tower technology.” He adds: “ACWA Power doesn’t have the technology so it has to join forces with leading technology companies to develop molten salt power tower CSP projects with integrated energy storage.”

Allegue, however, believes the ACWA Power holding has been investing heavily in technological improvements through the acquisition of strategic players in the sector. “Our sister company Flabeg has been developing a trough with a new collector design that allows up to 25% of cost reductions in the solar field,” he says.

All things considered, Prieto believes that the arrival of relatively new players in the market (GDF Suez, for example, in South Africa) and the aggressive tariffs presented by other companies is a sign that “the industry is alive and that it is able to gain traction among international players.” This, she says, will have a positive impact on the development of the supply chain and, ultimately, in reducing production costs.

Technological breakthroughs

Regarding specific research findings to be released within the next year, Nebrera refers to two new developments. The first is a parabolic trough loop in which the thermal fluid is molten salt instead of thermal oil. Molten salt is currently the most widely used form of thermal energy storage in trough plants.

Nebrera explains that tests are being carried out with ternary salts, which register a lower melting point compared to the salts currently used to store energy, resulting in significant reductions of the kWh price.

The second is the HYSOL concept, a hybrid project “based on the addition of a gas turbine to a regular thermal solar plant, to secure residual heat recovery in molten salts,” Nebrera explains. “The pre-commercial prototype is partially financed by the European Union and is well advanced,” he adds.

Prieto, for her part, explains Abengoa has developed a design called “Smart Solar Plant”, which “combines production from solar-thermal and photovoltaic plants with thermal energy storage”, ensuring round-the-clock supply. It will be used in the Atacama solar platform, a project the company is building in northern Chile.

Saudi Arabia

Most sources consulted believe 2015 will be a sort of “transitional year” for Saudi Arabia, as many external factors are contributing to the delay in the implementation of its CSP programme.

Interestingly, however, Crespo notes that a better avenue for CSP deployment in the Kingdom might be through utility-scale plants as opposed to integrated solar combined cycles (ISCC), such as the Duba 1 and Waad Al Shamal plants. “My main concern is that ISCC plants have little traction and integration problems can arise,” he says.

Latin America: The Promised Land

According to most executives, the Latin American region holds the promise of great opportunities for the CSP industry. A step in this direction came with the announcement made by the Chilean National Energy Commission in December 2014, where it released the results of a tender for distribution companies to supply energy to the Central Interconnected System.

Abengoa was awarded a contract for the provision of 950 GWh per year during 15 years, at a cost of almost $115 dollars per MWh. The company announced it will meet the demand through two separate sites, Atacama 1 and Atacama 2, comprised by a 110 MW CSP tower plant and a 100 MW PV plant each. Atacama 1’s CSP plant will have 17.5 hours of thermal storage, whereas Atacama 2’s CSP plant will have 15 hours of thermal storage.

Similarly, SolarReserve has announced three CSP projects in Chile that combine CSP with storage along with PV. According to Smith “combining the advantages of both technologies can provide a 24 hour power supply that is the least cost alternative for Chile”. He adds the company is currently negotiating long-term power contracts for two of their projects in the country.

Additionally, the experts forecast important developments in Mexico, as a result of the energy reform undertaken by the government in 2014.

Forward-looking outlook

Most executives concur on the need to implement further cost reductions in order to compete with base-load solutions in the coming years as well as adapting to clients’ particular needs as the industry’s ultimate goals. The next 12 months will be a good test to see interesting findings with regards to research and technological advancements that move the industry forward in this direction.