By Asif Ansari, CEO, eSolar
Changing energy economics in the concentrated solar power (CSP) industry will continue to accelerate record-breaking adoption of CSP in domestic and international markets, both in 2009 and for the foreseeable future.
Across 96 companies, second-quarter investments in clean tech alone cleared $2 billion, with CSP and bio-fuel companies drawing down the lion’s share of venture capital and catapulting the 58 percent increase in investments over a year ago. The emergence of solar thermal companies that have seized industry challenges as opportunities to forge transformative, disruptive solutions is helping drive the market expansion we are witnessing today.
Recent consumer polls including the SCHOTT Solar Barometer Survey, which indicated in June that 94 percent of Americans believe the U.S. should develop and use solar power, are telling. Consumer attitudes, coupled with the growing reluctance to finance coal plants on Wall Street, have sent a powerful signal conveying the need to diversify energy portfolios in lieu of the financial impacts carbon tax regulation will have on emitters. Indeed, natural gas market volatility, rising capital costs for conventional generation and the more than 60 coal plants that have been cancelled, delayed or otherwise derailed since 2006 only add to the need for utility-scale solar power alternatives.
CSP is already the least expensive and most efficient form of solar power for utility-scale providers in areas with favorable incentives and ample solar resources of at least 2,000 kWh of annual direct normal irradiation per square meter. In the solar- rich U.S. Southwest, on an area of 63,000 square miles more than 1,100 quadrillion British thermal units of solar radiation reach the earth each year. The conversion of only 10 percent of that solar supply would have met America’s electricity needs in 2006. Because of CSP’s unmatched potential to convert solar radiation into electricity in areas of high insolation, solar thermal companies are lining up to offer turnkey solutions at competitive rates.
Since the extension of the federal investment tax credit in 2006 and the proliferation of renewable portfolio standards in 26 states, a growing number of investor- and publicly-owned utilities are issuing dozens of requests for proposals to capitalize on the 200 GW of CSP potential in the Southwest. Southern California Edison currently leads investor-owned utilities in terms of solar capacity with its long-term contracts with the prodigious SEGS facilities and new power purchase agreements. Other top utilities moving rapidly into CSP expansion include Nevada Power/Sierra Pacific Co., Xcel Energy and Arizona Public Service Co. These companies ranked #2, #3 and #4, respectively, in a recent Solar Energy Power Association survey.
However, four central challenges face the industry that we at eSolar believe will ultimately distinguish companies that can effectively deliver value to customers from those that cannot. Those key levers are price, speed of deployment, scalability and grid impact. Leading solar thermal companies understand this and are moving to address these obstacles, thereby advancing the industry as a whole.
One of the approaches to overcome the challenges involves developing prefabricated modular units to cater both to large and small power producers. Unlike some traditional CSP designs that incur burdensome construction costs, requiring heavy civil works and thousands of costly foundations on large tracts of land, modular plants reduce costs and enable more compact installations. With smaller generating units that can be replicated to scale comes the ability to better customize generating systems for power producers. This uniformity in designwhen it can be scalednot only creates competitive advantages in terms of price, scalability and speed, but also facilitates grid integration. Companies that are able to innovate around these key determinants of success will be best positioned to serve power producers by offering the most economical power rates.
Another pressing issue facing the sector is one affecting the entire distribution business: the need for new power lines, particularly within the Western interconnection. Transmission lines are needed to move electricity from the point of generation in the desert to cities. The substantial investment required to build transmission lines could curtail CSP growth if not addressed over the long term. Efforts such as the Western Renewable Energy Zones, an initiative sponsored by the Western Governors’ Association and the U.S. Department of Energy, are critical to develop a robust, region-wide energy infrastructure that can meet swelling peak demand.
In spite of these challenges, there’s no question that the opportune time for new, cost-effective business development between traditional power producers and CSP companies is upon us. CSP capacity is expected to double every 16 months through 2012, ushering in 14 times our current capacity. As we confront price volatility and supply constraints in natural gas markets, rising plant costs and policy trends such as national carbon control legislation, solar thermal will increasingly become an essential component of electricity portfolios and a leading reliable and economical choice for wholesale electricity markets.