Concentrating Solar Power (CSP) Financing and the Clean Technology Fund Presentation by Dana R. Younger Infrastructure Department Climate Investment Funds CTF Trust Fund Committee Washington, DC
Concentrating Solar Power (CSP)
Financing and the Clean Technology Fund
Presentation by Dana R. Younger
Infrastructure Department
Climate Investment Funds CTF Trust Fund Committee
Washington, DC
The Resource
Solar energy comes in two flavors – diffuse and
direct (beam)
Solar Photovoltaics (PV) can use both components
CSP can use only the “direct normal irradiation”
(DNI) because diffuse sunlight cannot be effectively
focused or concentrated
So where is the direct solar energy found?
Global Solar Radiation
China Solar Radiation Map
US Southwest Solar
Resource (Unfiltered Data)
Concentrating Solar Technologies can be used to “mine” this
resource.
Some technologies (CST) use curved mirrors to focus the
sun’s rays and to make steam, others directly produce
electricity (CPV).
Steam is used to produce electricity via conventional power
equipment.
In multi-Megawatt plants, CSP provides lower cost solar
electricity than ground-mount or rooftop solar PV.
Can also provide bulk and/or distributed generation.
How Do We Develop This
Resource?
Concentrating Solar Power Technologies
Parabolic Trough
Power Tower
Dish Engine Concentrating PV
Linear Fresnel
Trough Technology
― Trough collectors (single axis tracking)
― Heat-collection elements
― Heat-transfer Oil
(Therminol VP1)
― Oil-to-water steam
generator
― Oil-to-salt thermal
storage
― Conventional steam-
Rankine cycle power block
Power Tower Technology
― Heliostats (two-axis tracking)
― Air or molten-salt receiver
― Air or molten-salt working fluid
― Thermal storage
― Conventional steam- Rankine cycle
power block, or combustion turbine
― Several developers in the US and
several in Spain
Focus on
molten-salt plant
Dish Stirling Technology
― Dish (two-axis tracking)
― 10 and 25 kW Stirling engines
― Thermal receivers
― Distributed generation or bulk
power
― 8 Different system configurations
built and tested over the last 20
years
― Significant utility interest
Concentrating PV Technology
― 25- 35 kW CPV systems
― Two axis tracking structure
― 350 m2 concentrator
― 3M acrylic lens concentrator at
250X or parabolic dish with PV at
focal point
― Silicon solar cells
― Many companies are developing
new designs and sound business
plans
Why CSP and Why Now?
Necessity – utilities’ other options (coal, nuclear, natural gas)
have significant long term risks with cost implications
Uniqueness of thermal energy storage
Policies still unreliable, such as RPS and ITC both of which
are essential in the US and Feed-in tariffs in EU
Public opinion favors solar
Awareness of CSP
Utilities – Growing fast where good DNI and policies exist
Policy makers – Generally lagging as evidenced by inadequate
or unreliable policies at all levels of government
Investors – Growing fast as evidenced by press reports and
conferences but lagging wind and solar PV investments, held back by policy uncertainty and today’s financial market situation
CSP’s Positive Attributes for Utilities
Utilities are familiar with steam generation
Suitability for utility scale installations of 100MW or more
Stable, known and decreasing costs and zero carbon emissions provide hedge against NG price volatility and carbon caps
Other generation options have significant risks
Ability to provide firm dispatchable output which is of great value to utilities
HTF-SaltHeat Exchanger
Flow Diagram
― Averaged 80% on-
peak capacity factor
from solar
― Over 100% with
fossil backup
― Could approach
100% from solar with
the addition of
thermal energy
storage.
SCE Summer On-Peak
Weekdays: Jun - Sep
12 noon - 6 pm
0%
20%
40%
60%
80%
100%
120%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
On
-Pe
ak
Cap
ac
ity
(%
)
0
2
4
6
8
10
12
Ins
ola
tio
n (
kW
h/m
^2/d
ay)
Solar Contribution Boiler Contribution Direct Normal Radiation
Mount Pinatubo
Volcano
CA Energy
Crisis
CSP Track Record: 354MW at Kramer Junction, CA
Thermal Energy Storage
• USDOE Solar Two molten-salt power tower experience
• Indirect 2-tank molten-salt design forparabolic trough plants
• Uses oil to salt heat exchangersto transfer energy to/from storage
Cold Salt Tank Hot Salt Tank
Cold salt
pump
Hot salt
pump
Immersion heater
(typical of 4)
Immersion heater
(typical of 4)
Oil-to-salt heat
exchanger (typical of 6)
Distribution
ring header
Distribution
ring header
Cooing air pipes
(typical of 24)
Cooing air pipes
(typical of 24)
1.0 m
Isolation valve
(typical of 4)
Vent valve
(typical of 3) Nitrogen
transfer line
Nitrogen
storage tank
Nitrogen
compressor
Nitrogen
cooler
Pressure
control valve
Drain valve
(typical of 2)
Pump
maintenance
gantry crane
Thermal Energy Storage
• AC Cobra – Andasol 1 plant in Spain will be the first to use the indirect 2-tank molten-salt thermal energy storage.
• Plant should be operational before the end of the year.
Additional Utility Attributes
Large, multi-national corporations are now involved in every part of value chain― Project and Technology Developers
― Utilities and Independent Power Producers
― Engineering and Construction Companies
Quality counterparties reduce overall CSP project risk ― Large balance sheets
― Power and construction expertise
― Strategic technology deployment
Attributes of CSP for Policymakers
Very large domestic resource potential
Carbon free electricity
Potential for cost reduction
Economic benefits will result from its development
Increased public awareness and support of the benefits
of clean energy
CSP Attributes for Investors
Scalable
With a solid Power Purchase Agreement (PPA), the return on investment can be adequate to encourage mainstreamequity and favorable debt financing terms.
Once debt is paid, operates with no fuel – has potential to become financially attractive clean energy asset.
Global CSP Industry Today
Technologies – trough, tower, dish engine, linear Fresnel, and CPV, each of which have variations making the industry very robust
US SEIA CSP Division has ~40 current members
EU’s ESTIA has similar member numbers
Both Associations deal with policy/legislative/regulatory issues and have members who cover all CSP technologies, from consulting firms to multinationals
Over 400 MW in commercial operation, about 4,800 MW under development or contract in the US and about 3,500 MW under development in the rest of the world
Continued market growth is predicted
Select CSP Industry Participants
Trough – Abengoa Solar, Acciona, FPL Energy,
Solar Millennium, Solel, SkyFuel
Tower – Abengoa Solar, Bright Source Energy,
eSolar, Solar Reserve/UTC
Dish – SES, Infinia
Fresnel – Ausra, SkyFuel
Capital Flows for CSP
Abengoa Solar – financed PS10, PS20, Solnova ( 2 x 50MW) in Spain and Algeria & Morocco ISCCS with bank debt and same plan for APS Solana (280 MW) in US
Solar Millennium - financed Andasol 1 & 2 in Spain with bank debt
Acciona – financed Nevada Solar 1 (64MW) in US with bank debt
GEF provided $200M for ISCCS projects in Morocco (in construction), Egypt & Mexico - - India project was cancelled.
Trough companies didn’t anticipate major problems attracting tax equity investors/commercial debt as the ITCs were renewed last year but the global financial crisis has created new uncertainty and US projects are now being delayed
Ample equity available for start-ups as evidenced by: Ausra, SkyFuel, eSolar, Bright Source and Solar Reserve all conducting successful VC fund raises
CSP Activity in the US (as of July 2008)
CSP Activity in EU & ROW (as of July 2008)
* Natural gas/hybrid project; capacity shown is CSP portion only
Major Steps to Bring a CSP
Plant On-Line
Site control, PPA negotiation, regulatory approval, interconnection agreement and financial close (some in parallel) – 12-24 months
Permitting and engineering (in parallel) –
18 – 24 months
Construction – 18 – 24 months
Total time – 4-6 years
Nevada Solar One 64 MW
Abengoa Solar Power Tower Plants
Abengoa Solar US 280 MW Plant
Costs of CSP
There are many costs and they are must be carefully defined –nominal, real, constant dollars, first year, levelized and average
Capital costs and delivered energy costs are most important to the market
Cost is not a wish or a hope - it depends on many variables, all of which must be known to EPC contractors and investors
Costs change and that risk must be managed
The market will define the cost and the value of CSP
Financial parameters, plant size, market size and incentives all impact the cost of energy from CSP plants
Choice of Business Model Impacts Costs
Turnkey – Utility ownership
IPP
―Partnership
―Lease
Other structures
EPC
Contractor
Lender
Project
Sponsor
Equity
Construction Loan
Construction
Cost
STEP 1: Project Development
Utility/Utility
Consortium
Bond MarketCorporate
Equity
EquityLong-Term
Debt
Plant ValueDevelopment Fee
STEP 2: Utility Purchase
Project
Development
Company
Utility Ownership
Private Ownership - IPP
Project
Development
CompanyGovernment
Contractor
Lender
Output
Purchaser
Rules, Regulations,
& Incentives
Output
Revenue
Construction &
Term LoansDebt
Service
Project
Sponsors
Tax Incentive Monetization Payments
Cash Distributions &
Tax Incentives
EquityConstruction
Cost
Operator
Operations
Cost
Taxes
Financial Analysis Results
Private-Taxable Bond
Utility Purchase
70:30 Debt-to-Equity
Private-Commercial Debt
Public-Private Partnership
65:35 Debt-to-Equity
Private-Dev Bank Debt
Private-Tax Exempt Bond
75:25 Debt-to-Equity
PPA Price (cents/kWh)
Mo
dif
ied
In
tern
al
Ra
te o
f R
etu
rn (
MIR
R)
CSP Cost Reduction Predictions
Exist but could be Misleading
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0 1000 2000 3000 4000
Cumulative New Capacity by 2015 (MW)
Nom
inal LC
OE
($/k
wh)
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.10
0.11
0.12
Real LC
OE
(2005$/k
wh)
Assumes:
- Trough Technology w ith 6 hours of TES
- IPP Financing; 30-year PPA
- California Property Tax exemption
- Includes scale-up, R&D, learning effects
- Barstow , California site
Cost Reduction based on Plant Size
139%
115%
100% 90%
0%
20%
40%
60%
80%
100%
120%
140%
160%
25 MWe 50 MWe 100 MWe 250 Mwe
Parabolic Trough Plant, 6-hours Thermal
Energy Storage, IPP Financing, 10% ITC
2006 Nexant Study: Optimum Size
~250MWe For Current Technology
Effect of Plant Size
Effect of Deployment
100%93%
87%81%
0%
20%
40%
60%
80%
100%
120%
Current 1000MW 2000MW 4000MW
Based on Experience from Existing Plants (California)
Cost Reduction based on Market Size
Effect of Financial Incentives
100%
85%92%
75%
96%
0%
20%
40%
60%
80%
100%
120%
Base: 10%
ITC, 5-yr
MACRS
30% ITC, 5-yr
MACRS
Base + Prop
Tax Exclusion
Base + Sales
Tax Exclusion
All
Effect of Incentives (IPP Financing)
CSP Costs Today and Tomorrow
In the SW US with best conditions, LCOE is in the mid-high
teens in ¢/kWh for firm dispatchable power and could drop to
the low-mid teens with existing incentives
Commodity price rises and global financial crisis have
introduced market turmoil and utilities financial position is
weaker than one year ago.
Current cost gap is ~2 - 5 ¢/kWh in the US market
Several independent and credible studies project 8 ¢/kWh
(nominal) cost level after 4GW installed globally, removing the
cost gap and becoming competitive with natural gas
RPS, incentives and policies can close the cost gap between fossil and CSP-derived energy
Cost Gap will Close
Energ
y Cost
t
Current Cost Gap Commodity Prices,
Financial Markets, Equipment, etc.
Policies and Incentives
Carbon, Fuel Risk
CSP energy cost
Fossil energy cost
Needed Policies
Carbon valuation policies that reflect conventional power projects’ true externalities
Adequate Feed-in Tariffs
Land access policies
Transmission policies and investment
Investment tax credits and other financial incentives
Market Outlook
Carbon limits are likely & can help close the CSP cost gap
CSP can scale up fast without critical bottleneck in needed materials making it a good CC mitigation response option
Price for CSP power is near commercial range and costs will come down with increased capacity and could fall below costs for conventional generation in the next decade
Many available CSP technology options add certainty to cost reduction projections
US and EU R&D programs will continue to grow in size and value
Economic development and environmental benefits will drive political support
US CSP market has potential to grow to 2-4 GW per year and a comparable rate is possible in other suitable parts of the world
Conclusions
CSP is a Unique Renewable Technology
― Large resource in many countries
― Ability of CST to store energy to fit utility need
― Medim-term potential for cost competitiveness
Market is Rapidly Developing
― Interest in CSP growing in many CTF-eligible
regions/countries (MENA, SADCC, India, PRC, Mexico, Chile)
― Large, credible, financially stable developers
― Real (financeable, buildable and reliable) projects prepared
Policy Decisions Needed to Maintain Momentum
― Investment tax credits/adequate feed-in tariffs
― Supporting policies & financing (eg CTF and capital grants)
Projects:
120 projects in 40 emerging markets countries
21,733 MW private generating capacity
94 generation projects
7 transmission projects
19 distribution companies
Financing:
$ 5 billion committed in generation, T & D
$ 2.5 billion raised through syndication
$ 22 billion aggregate project values
Renewables:
19% of generation investments in hydropower
$0.9bn in 30 renewable energy projects
(20 hydro, 2 wind, 2 geothermal & 6 other)
Coal, $1,173 , 29%
Natural Gas, $879 , 22%Oil, $427 , 11%
Hydro, $738 , 19%
Wind, $58 , 1%
Geothermal, $65 , 2%
Other Renewables, $45 ,
1%
Generation (multiple
technologies), $601 , 15%
IFC’s Track Record in Power
Generation ,
$3,987 , 80%
Transmission,
$258 , 5%
Distribution, $770 ,
15%
US$5 billion
committed
in power
US$4 billion
committed
in
generation
Grid-Tied Solar Power Plant Projects
IFC mobilized $4 million in GEF grant financing for a
1 MWe Solar PV Power Plant erected in 2004 by a
utility client CEPALCO in the Philippines
IFC evaluating several possible 1-5 MWe Solar PV
power plant projects in India with private companies
under the new GoI support program
IFC in discussions with other solar firms concerning
possible solar power projects including CSP in
various countries in Africa, Asia & Latin America
For more information:
www.ifc.org
Key Contacts for IFC
Power/Renewable Energy
Mr. Darius Lilaoonwala <[email protected]> Sr Manager, Power/Renewables
Mr. Dana R. Younger < [email protected]> Sr Renewables Adviser
Clean Technology Fund
Ms. Lisa Da Silva <lisa da [email protected]> Program Manager