The underpinning data (derived from: California Energy Commission, 2010; CSP Today, 2011b; Greentechmedia, 2011; Protermosolar, 2011; US Bureau of Land Management, 2011) indicate that 1.3 GW of Concentrated Solar Thermal Power were operational worldwide, 2.3 GW under construction, and 31.7 GW planned. Europe, and in particular Spain, has played an important role in the development of the early Concentrated Solar Power market, with the benefit that most of the companies involved in Concentrating Solar Power are based in Europe.
Current deployment of Concentrating Solar Power (and photovoltaic) has exploited only a tiny fraction of the available solar resource, which is estimated to be capable of supporting an annual Concentrated Solar Power output of 1800 TWh in Europe, mainly in Spain, Italy, Greece, Cyprus and Malta.
This figure only considers unused, unprotected flat land area with no hydrographical or geomorphologic exclusion criteria and a direct annual solar radiation above 1800 kWh/m2. The 1800 TWh/y above corresponds to around half the EU’s electricity consumption of 3400 TWh in 2008, is around three times the potential of hydropower, and is similar to Europe’s wind energy potential (on-shore and offshore wind power).
But it is dwarfed by the solar resource available in neighbouring countries in North Africa and the Middle East which could support Concentrating Solar Power capacity generating 100 times present electricity consumption in Europe and the MENA region.
In considering the potential role of CSP in Europe towards 2050, the EU’s objective of reducing greenhouse gas emissions by 80–95% by 2050 is a key parameter. Re-affirmed by the European Council in February 2011, this objective requires the EU’s electricity system to achieve essentially zero emissions of greenhouse gases by 2050.
The 2050 generating mix may include nuclear power and fossil-fired power stations incorporating carbon capture and storage. But ongoing public concerns about nuclear power, exacerbated by the Fukushima accident in Japan in March 2011, have led some countries such as Germany to exclude it from consideration.
Carbon capture and storage on fossil-fired power stations remains essentially unproven at commercial scale, with questions remaining as to whether sufficient safe storage sites, acceptable to the public and regulators, can be found. And it locks in Europe’s exposure to fossil fuel price escalation and volatility.
Variable renewable sources such as wind power, solar energy PV and marine energy will be required to play a major role in Europe’s 2050 electricity system, but their variability will bring challenges of balancing supply and demand. An integrated European grid and market, together with demand management may go some way to meeting these challenges, but additional system storage capacity may be needed, and controllable renewable sources will be at a premium.
Such sources include hydro and geothermal energy – but in both cases natural resources in Europe are limited – and Concentrating Solar Power with storage, for which natural resources far outstrip anticipated electricity demand when account is taken of CSP potential in the neighbouring MENA region.
Whereas many forecasts anticipate limited, or no, growth in European electricity demand to 2050, in the MENA region population growth and economic development are expected to result in a rapid increase in electricity demand, potentially reaching similar overall levels to the EU by 2050.
International initiatives to limit global warming emphasise that such development should follow a sustainable path, putting an onus on maximising the use of indigenous renewable resources: the solar resource, of course, being dominant in the MENA region. However, as such renewable capacity is currently significantly more expensive than the fossil alternative, and given their economic starting point, MENA countries will require foreign assistance to follow such a low-carbon path.
The final piece of the policy jigsaw derives from the proximity of countries in the MENA region to Europe which brings them within the ambit of the EU’s Neighbourhood Policy. This commits Europe to deepening relationships with neighbouring countries to strengthen security, stability and prosperity for all.
EU policies already state the intention to better integrate energy markets with neighbouring countries, and to step up energy relationships with North Africa. Initiatives such as the ‘Union for the Mediterranean’, and its associated ‘Mediterranean Solar Plan’, have recently been augmented by the G8 led ‘Deauville Partnership’ aimed at supporting democratic reforms in MENA countries, and developing an economic framework for sustainable and inclusive growth.
Key factors infl uencing the future contribution of Concentrated Solar Power
As discussed above, it is not a shortage of sunshine in Southern Europe and the MENA region which will constrain CSP’s contribution but other factors, particularly the following:
• CSP’s generating costs in relation to alternative technologies, and the values of CO2 mitigation and of Concentrating Solar Power generation compared with alternatives;
• physical constraints on the installation of CSP generating capacity due to the availability of land, water, manufacturing capacity, skilled labour, etc.;
• physical and operational constraints on the transmission of electricity across Europe and the MENA region to balance supply and demand; and
• considerations of security of supply, particularly the comparative vulnerabilities inherent in different energy vectors when imported from other countries.
Other factors beyond the scope of this report include the political issues associated with the provision of subsidies, and legal aspects concerning, for example, conditions and guarantees for foreign investments, particularly in MENA countries.
CSP with thermal storage may carry a premium in value in the bulk electricity market compared with variable renewable sources such as wind power and photovoltaic owing to its ability to provide dispatchable electricity and other grid services.
To reach cost competitiveness, incentives and subsidies will be required to trigger project development activities, construction of plants and the erection of additional manufacturing facilities for key-components, as well as to drive cost-targeted R&D. Other renewable technologies face a similar situation. Demonstration plants are a key stage in achieving the necessary scale-up and commercialisation of new technologies, and subsidy schemes need to ensure that they are funded.
The total amount of incentives that will be required is sensitive to the rate at which CSP costs reduce as installed capacity increases due to cost reductions from scaling up, volume production and technological innovation. For example, if today 60% of the CSP capital cost needs to be subsidised (assumed for simplicity as a grant) but only a 10% subsidy is needed when CSP generating costs are halved, then the cumulative subsidy to achieve a halving of costs is €6.5 billion for a learning rate of 20% (corresponding to an installed capacity of 9 GW), and €61 billion if it is only 10% (corresponding to an installed capacity of 100 GW).
Two recent estimates of the total incentive payments needed to achieve cost parity fall within this range of cumulative subsidies: Ummel and Wheeler (2008) estimate it at US$ 20 billion (corresponding to 20 GW of CSP), Williges et al (2010) at €43 billion for their baseline case (corresponding to 157 GW of CSP).
Although investments in this range are substantial, they are small compared with those required to be made in energy systems worldwide over coming years (IEA, 2010) and the €1 trillion investment estimated to be required in the EU’s energy system by 2020 (European Commission, 2010). And they would establish a cost competitive renewable option with favourable operating characteristics and essentially unlimited natural resources.
Incentive schemes need to send the right price signals and appropriately refl ect the time varying value of electricity. If they do, then the commercial optimisation of the CSP investor will lead to a configuration which is also optimal from the perspective of the entire electricity system. Some current subsidy schemes do not, resulting in inappropriately designed plants.
For example, in Spain the feed-in tariff varies by no more than 20% between peak and off-peak hours resulting in CSP plants incorporating an inefficiently high level of storage. The evaluation of alternative investment opportunities needs to be informed by the marginal system cost. The best proxy for this marginal system cost is the competitive cost of energy, and the design of markets, policies and subsidies to promote CSP generation should support the effective operation of the competitive pricing system.
Given its influence on the total amount of incentive payments that will be required for CSP to achieve cost parity with fossil-fired generation, it will be important to establish, and monitor, the learning rate of CSP. Subsidy schemes should ensure that the required cost data are made publicly available, but without compromising commercial incentives to innovate and reduce costs.
As discussed earlier, plenty of potentially suitable land exists, particularly in the MENA region, but land acquisition, planning permissions, etc. take time and might at some points constrain high rates of development of CSP, particularly in Southern Europe.
Achieving an essentially zero carbon electricity system in Europe by 2050, will require the replacement of much of the existing generating capacity over the intervening period. Similarly, meeting the MENA region’s anticipated expansion in electricity supply will require large and sustained investments in new generating capacity. The availability of the required manufacturing capacity for a major expansion of CSP is appropriately considered in this context, particularly as many of the plant components such as turbines, heat exchangers, piping, etc. are common to many of the candidate technologies.
Significant increases in, and shifts of, manufacturing capacity will be required whichever generating mix is chosen. The analysis has indicated that CSP is more material intensive in its construction that fossil-fired plants, primarily in commonplace materials such as steel, glass and concrete. Given the levels of production of these materials in the economy more generally, it seems unlikely that their availability will prove to be an insurmountable constraint on CSP expansion.
However, costs of these materials are rising and there is burgeoning demand in rapidly developing economies such as China and India. Further studies could usefully therefore be undertaken to examine potential manufacturing constraints to a major expansion of CSP which should look, in particular, at possible bottlenecks, for example manufacturing capacity for receivers and the availability of salts for thermal storage.
Growth of CSP will require the development of an associated workforce with the skills necessary to support equipment manufacture, plant design and construction, and plant operation. For example, a typical 50 MW trough CSP plant in Spain employs 40 people as permanent staff, and several hundred on the site over more than one year in the construction phase.
In addition, an increased workforce is needed in the component supplier industry. In a high-growth (60% per annum) scenario examined by the World Bank (2011) 14.5 GW of installed CSP capacity in 2025 in the MENA region is estimated to correspond to 65,000–79,000 permanent jobs in the region (around 75% in manufacturing and construction and 25% to support operation).
Although a sustained and rapid growth of CSP in Europe and the MENA region would require co-ordinated efforts to enable the associated re-deployment and re-skilling of a substantial workforce, it is instructive to note that in a five-year period the renewable energy industry in Europe increased its workforce from 230,000 to 550,000.
More generally, in countries with favourable policies towards wind energy and PV, annual growth rates of 60% have been sustained over a decade until growth has slowed as markets have matured.
In the scenario where the EU’s demand for renewable electricity remains strong, CSP capacity may be built in the MENA region which exports electricity to Europe. Grid connections will need to be built between Europe and the MENA region to enable the transmission of the CSP electricity. At present, active connections between the MENA region and Europe are limited to two undersea cables between Morocco and Spain (each 700 MVA, 400kV AC lines).
Interconnections between MENA countries are generally rather limited, the area comprising Morocco, Algeria and Tunisia being the main interconnected area.
In a scenario for 2050 in which Europe imports 750 TWh per annum of CSP electricity from North Africa (around 20% of current EU electricity use), emphasise the need to construct a large number of cross-Mediterranean HVDC links, each fully integrated into the overlay grid, ensuring redundancy of import/export lines and reducing vulnerability to interruptions in supply. Similarly, DLR 2006 consider a scenario for 2050 in which 15% of EU electricity demand is met by solar inputs from the MENA region transmitted by 20 power lines each of 5 GW.
It is generally considered that a high-voltage direct current (HVDC) grid needs to be built as a ‘back bone’ or ‘super-highway’ across Europe and the MENA region to augment existing high voltage alternating current (HVAC) transmission and distribution systems. Modern HVDC lines can limit transmission losses over 3000 km to around 10%. Transfer of electrical power over such distances is an impractical proposition for HVAC lines where the losses would be nearer to 50%.
In addition, HVAC grids will need to be reinforced and ‘smart’ grid technologies will be widely deployed. The current limitations of Europe’s electricity grid, and developments needed to meet the EU’s policy aims for a reliable and well-integrated electricity market supporting a substantially increased share of renewable energy sources, have been discussed in a previous EASAC report on the European grid which also considered potential technological developments in transmission technologies.
These transmission limitations are well recognised in the EU’s energy strategy which aims to secure the grid reinforcements necessary for the effective functioning of the EU market and the trans-national transfers of bulk electricity associated with geographical diversity as a mechanism for matching supply and demand for renewable energy sources.
Transmission enhancement projects in Europe face long delays: the time from the start of planning to the issuing of the building permit for a Trans-European Energy Networks (TEN-E) priority electricity transmission project is on average seven years, with 25% of projects requiring more than twice this time.
The EU’s energy strategy aims to address this problem, streamlining permit procedures for projects of ‘European interest’ through rationalising regulatory arrangements and enhancing public acceptance through better engagement processes.
Increasing security of supply of energy is a key concern of EU energy policy. To the extent that CSP capacity is located in Southern Europe, it contributes positively to increasing supply security as it reduces the need for energy imports (currently standing at over 50% of the EU’s energy use, mainly for fossil fuels).
The security of supply issues associated with Europe importing CSP electricity from the MENA region are not so clear cut, and political upheaval in some countries in the MENA region during this study has provided a challenging backdrop to any consideration of security issues.
More generally, security considerations arising from the import of CSP electricity from the MENA region include the following:
• Interruptions of power supplies can cause significant economic harm present a figure of 8 €/kWh lost) and a short power disruption causes major disturbance, whereas a short interruption to gas or oil supplies can easily be managed. However, diversification of supply sources and routes can help to mitigate the risks of supply interruptions due to terrorism or political interference, and currently there is a substantial reserve of fossil-fired capacity.
• Unlike fossil fuels and uranium, an interruption in the supply of electricity would represent an unrecoverable loss of revenue for supply countries, because electricity cannot be stored, and would likely harm exporting countries more than the supply interruption would harm Europe.
• Import of CSP electricity would enable reduction of the imports of fossil fuels which constitute a major risk to Europe due to the possibility of supply interruptions, and the economic consequences of price volatility and potential sustained future price rises if the world does not take co-ordinated action to reduce fossil fuel dependence).
Integration of energy markets with neighbouring countries is a particular EU initiative which should help to mitigate risks from CSP imports. Also, in a scenario in which there is a lot of excess CSP capacity in the MENA region, some of it may be used to generate hydrogen or syngas for export to Europe so helping to mitigate the immediacy of supply disruptions if just electricity were exported. However, there may be significant energy losses associated with this option.