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Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008
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Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Page 1: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

Utility Scale Solar Energy:Options and Competitiveness

Kevin B. Smith – Chief Operating Officer, SolarReserve LLC

Purdue UniversityOctober 2, 2008

Page 2: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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My Background Education:

Purdue University – BS Mechanical Engineering 1979 University of Chicago – MBA (Finance) 1985

Employment Highlights SolarReserve LLC (Santa Monica, CA): Large scale solar project

development Invenergy LLC (Chicago): Wind energy, natural gas turbine power projects -

development, construction, operation Rolls-Royce Power Ventures (London): natural gas & oil fired cogeneration

projects – international development, construction, operation Indeck Energy Services (Chicago): Natural gas fired cogeneration projects -

development, construction, operation Midwesco Energy Systems (Chicago): Biomass (wood), waste-to-energy,

natural gas - design and construction Sargent & Lundy Engineers (Chicago): Design of nuclear, fossil fueled power

projects

Page 3: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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SolarReserve Overview

A privately held LLC formed in December 2007: $140 million private equity funding (second

round) closed on Sept. 15, 2008. SR holds worldwide license for UTC technology

SolarReserve, LLC is a developer of Concentrated Solar Power (CSP) utilizing breakthrough Molten Salt Power Tower technology developed by United Technologies Corporation (UTC) – Rocketdyne Division.

What We Do

Who We Are

Page 4: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Market Leading Technology

SolarReserve is the first solar energy company that can deliver utility scale (100 Megawatts to 300 MW*) renewable energy with:

Energy Storage – ability to efficiently store energy, the storage system is integral to the overall design

World Class Technology Provider – technology provided and performance guaranteed by United Technologies Corporation

Base load or Dispatchable Configuration – provides power to meet the demand profile required by the utility

Proven technology – performance fully validated with Department of Energy demonstration project – Solar Two (1995 – 1999)

Financeable System – proven technology and UTC performance guarantees provide basis for conventional project finance

Cost Competitive – competitive with other solar technologies but with the added benefit of energy storage and dispatchability

* equivalent to 100,000 homes

Page 5: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Solar Power Tower with Energy Storage

Cold Salt Thermal Storage Tank

Hot Salt Thermal Storage Tank

SteamGenerator

Central Receiver

Conventional Steam Turbine Generator (With Reheat)

Condenser

~

Heliostat Field

Electricity(MW)

Process Flow Description1. Sunlight is concentrated and directed from a large field of heliostats to a receiver on a tall tower.2. Molten salt from the cold salt tank is pumped through the receiver where it is heated to 1050 oF (566 oC).3. The heated salt from the receiver is stored in the hot salt tank.4. Molten salt is pumped from the hot salt tank through a steam generator that creates steam, which drives a steam turbine, generating electricity.5. Cold salt at 525oF (288 oC) flows back to the cold salt tank.

1 2

3

4

5

Page 6: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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‘Solar Two’ Molten Salt Demonstration Plant

•Daggett, California•1926 heliostats•42 MWt receiver•10 MW turbine•3 hrs molten salt storage•300 ft tall tower

Page 7: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Technology Validated at Solar Two

Plant Performance Dispatchability Demonstrated electric power up to 24 hrs/day Power Output (10 MW nominal) Exceeded performance targets and test objectives

Receiver Performance Exceeded prediction (receiver efficiency 88%) Achieved design temperatures, flow rates &

pressures

Thermal Storage Performance Demonstrated low daily heat loss (97% efficiency) Pumps - Demonstrated full-flow at design

pressures

Collector System Performance Demonstrated sun tracking throughout the year

Page 8: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Worldwide Opportunity for Solar Energy

In the US alone, the existing Renewable Portfolio Standards (RPS) in just 29 states requires over 45,000 MW of new renewable energy projects by 2020

US market expected to require well over 100,000 MW of renewable energy by 2020 ($300 billion investment) – at least one third of this could be met with CSP projects

With escalating power demands throughout the world (including China and India), estimates are that the worldwide solar energy market could approach 400,000 MW or more - potential capital costs of well over $1.2 trillion

In addition to the US, worldwide opportunities exist in Southern Europe, Middle East, Africa, India, China, and South America

Page 9: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Markets Continue to Change Positively

Growing state regulatory requirements mandating Renewable Portfolio Standards (RPS) - 29 states to date

Federal RPS likely in next administration

Carbon legislation enacted internationally via Kyoto and likely in the US in the near-term Renewable Energy Credits (RECs) Carbon trading and/or caps

Substantial economic incentives including tax credits, grants, accelerated depreciation, property/sales tax incentives, and subsidized financing

Fossil fuels under increasing price, geopolitical, environmental, and security constraints

Customers increasingly willing to pay premium for secure and home-grown “green” power

Page 10: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Renewable Energy Options Wind Energy

Large scale applications Proven, competitive technology Out of phase with demand requirements

Solar Energy Large scale applications Technology advancements with some technology

risk Pricing higher than wind and conventional thermal

generation

Geothermal Smaller scale (<40MW), limited applications

Hydro Large scale hydro has limited applications (ocean

technologies next?)

Nuclear? Large scale, controversial, expensive

Page 11: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Wind is “Out-of-Phase” with Demand

WIND INTERMITTENCY LIMITS LONG-TERM VALUE

Wind Generation July

MW

SCE Average Load July

Page 12: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Market Precedent - Rapid Build of Wind Energy

Worldwide installed wind energy capacity almost 100,000 MW More than $300 billion invested in projects to date worldwide Almost 20,000 MW added worldwide in 2007 alone

Page 13: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Solar Energy Overview – Large Scale Photovoltaic

Proven technology Smaller scale applications (rooftop) plus

distributed generation (10MW to 40MW) Larger scale implementation in process?

Concentrated Photovoltaic Intended for large scale implementation and

distributed generation Technology in development to bring costs

competitive

Concentrated Solar Power – large scale applications

Trough technology Steam Power Tower Molten Salt Power Towers 30 MW to 300MW applications

Stirling Engine Commercially not competitive – reliability

issues

Page 14: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Global Solar Energy Market – 2008 Estimates

“From now until 2020, installed solar capacity will grow by roughly 30 to 35 percent per year, from 10 gigawatts today to about 200 to 400 gigawatts …..”

“Even if all the forecast growth occurs, solar energy will represent only 1.5 to 3 percent of output in 2020….”

The McKinsey Quarterly Report – August 1, 2008

(NOTE: 400 gigawatts equivalent to an investment of more than $1.2 trillion)

Page 15: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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US Market – Southwest will dominate• Strong support for Renewable Strong support for Renewable

Portfolios Standards (RPS)Portfolios Standards (RPS)

• More than 45,000 MW of More than 45,000 MW of renewable energy required to renewable energy required to be installed under current RPS be installed under current RPS requirements:requirements:

• CA - 33% by 2020CA - 33% by 2020• NV - 20% by 2015NV - 20% by 2015• NM - 20% by 2020NM - 20% by 2020• AZ - 15% by 2025AZ - 15% by 2025• CO – 20% by 2020CO – 20% by 2020• TX – 5,800 MW by 2015TX – 5,800 MW by 2015

• Wind can not address capacity Wind can not address capacity and time-of-day needsand time-of-day needs

Page 16: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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World Market – Unlimited Potential

Page 17: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Power Pricing Issues: NON-Renewables Overall market pricing for non-renewable electricity has been escalating dramatically over the last 5 years – both capital costs and fuel costs with added risk of “carbon trading” costs.

Power purchasers evaluate pricing based on 20 to 30 year ‘all in’ costs including cost of funds, fuel escalation expectations, O&M, decommissioning, etc.

“Clean Coal” Technology - Capital costs estimated at in excess of $3.0 Million per MW plus fuel, O&M, carbon trading costs.

Resulting new project ‘year 1’ wholesale costs well in excess of 11 cents/kWh with fuel and carbon escalation risk.

Natural Gas (base load) – Capital costs at $1.0 million per MW plus fuel, O&M, carbon. At $10.00/MMBtu for natural gas fuel costs alone are 8 cents/kWh (escalating) Resulting new project ‘year 1’ wholesale costs at 10 to 14 cents/kWh – could double as fuel prices increase over time.

Nuclear Costs – Capital Costs Estimated at $5.0 million to $7.0 million per MW plus fuel, O&M, spent fuel issues.

Resulting new project ‘year 1’ wholesale costs at 15 to 20 cents/kWh minimum

Overall generation mix driven not just by costs but by environmental factors, state & federal regulatory issues, security of supply, consumer demand fro green energy, etc.

Page 18: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Power Pricing Issues: Renewable Energy Wind Energy – most competitive form of renewable energy when ignoring time-of-day

issues. Wholesale Pricing currently in the 7 to 11 cents/kWh range including tax credits. Turbine costs rising, site availability and permitting issues in prime wind areas

growing increasingly difficult. 75% OFF PEAK - cannot take advantage of peak power pricing incentives.

Photovoltaic – currently priced in excess of 20 cents/kWh but becoming more competitive (includes tax credits) Dramatic spikes in output difficult for utilities to manage.

Concentrated Solar Power (CSP or Solar Thermal) ‘All in pricing’ in the 13 to 17 cent/kWh range including tax credits. No fuel escalation, no carbon trading risk. Cap costs $3.0 to $4.5 million per MW. Power delivered primarily during peak, storage enhances value.

Biomass and geothermal pricing is reasonably competitive but not utility scale Estimated in the 11 to 13 cents/kWh range including tax credits.

Page 19: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Power Pricing – Utility Views

Page 20: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

• Southern California Edison “Multipliers” in pricing reflect true marginal costs• Incentives provided to generators that can supply for peak production• Current “Market Referent Price” of 11 cents/kWh off peak X 3 = 33 cents/kWh Peak

Thermal Storage Creates Value

time January February March April May June July August September October November December0:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 1:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 2:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 3:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 4:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 5:00 0.61 0.61 0.61 0.61 0.61 0.75 0.75 0.75 0.75 0.61 0.61 0.61 6:00 0.83 0.83 0.83 0.83 0.83 0.75 0.75 0.75 0.75 0.83 0.83 0.83 7:00 0.83 0.83 0.83 0.83 0.83 0.75 0.75 0.75 0.75 0.83 0.83 0.83 8:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 9:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00

10:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 11:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 12:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 13:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 14:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 15:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 16:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 17:00 1.00 1.00 1.00 1.00 1.00 3.13 3.13 3.13 3.13 1.00 1.00 1.00 18:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 19:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 20:00 1.00 1.00 1.00 1.00 1.00 1.35 1.35 1.35 1.35 1.00 1.00 1.00 21:00 0.83 0.83 0.83 0.83 0.83 1.35 1.35 1.35 1.35 0.83 0.83 0.83 22:00 0.83 0.83 0.83 0.83 0.83 1.35 1.35 1.35 1.35 0.83 0.83 0.83 23:00 0.83 0.83 0.83 0.83 0.83 0.75 0.75 0.75 0.75 0.83 0.83 0.83

WinterSummerWinter

Page 21: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

2008E 11.55

2009E 12.09

2010E 12.66

2011E 13.26

2012E 13.88

2013E 14.53

2014E 15.21

2015E 15.93

U.S. Department of Energy: National Electricity Price Forecast

• Applying the same conservative 4.7% inflationary rate, average US electricity prices will reach 16 c/kWh by 2015• Rates in some states will be higher, with CT electricity prices forecast to reach 27 c/kWh in 2015 by the same logic

*Estimates

c/kWh

Solar is already cost competitive in some states today and will be in many more in coming years as energy prices increase nationwide

Solar is already cost competitive in some states today and will be in many more in coming years as energy prices increase nationwide

Year*

Page 22: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Power Pricing Issues: International Tariffs Europe has implemented “feed-in tariffs” to promote renewable energy

European tariffs in high solar areas: Spain – 26 to 28 €/kWh (38 to 41 US cents/kWh) Italy – 34€/kWh (49 US cents/kWh) Greece – 23 €/kWh (33 US cents/kWh) Additional tariffs being implemented in Cyprus and Portugal

Other international markets following suit with feed in tariffs, including:

India China Brazil, Chile

US tariffs to follow? California tariff under discussion. Federal Renewable Portfolio Standards likely under next administration.

Page 23: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Solar Energy Future- Summary

Increasing demand for renewable energy as a result of environmental awareness, security of energy supply, escalating fuel costs.

Worldwide demand for solar energy expected to grow to 400,000 MWs by 2020 – requires investment of more than $1.2 trillion.

Concentrated Solar Power with storage technology can replicate supply performance of conventional thermal power projects. On demand supply Peak supply and load following

Pricing for solar energy in the 13 to 17 cents/kWh is within ‘striking distance’ of conventional thermal power facilities which are in the 10 to 14 cents/kWh range.

Page 24: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Contact Information

SolarReserve LLC2425 Olympic Blvd., Suite 500ESanta Monica, California USA 90404Phone: 1.310.315.2200www.solar-reserve.com

Kevin B. [email protected]

Page 25: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Additional Slides

Page 26: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Solar Trough with Storage

Page 27: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Solar Energy Overview – Large Scale

Page 28: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Competitive Analysis

Direct Steam

(Troughs; Towers; CLFR)Solar One & PS-10

Issues •High Pressure Piping

– Thick Wall Tubing– Expensive– Safety

• Two-Phase Flow– Erratic Heat Transfer– High Stress– Water Droplet Damage– Turbine Failures

• May Require Natural Gas• No Inherent Storage• Low Quality Steam

No Energy Storage/Requires Nat. Gas/Reliability Issues

Oil

(Troughs)SEGS Plants

Issues•Miles of active piping

– One Mile per MW– Vacuum Tubes– Toxic Fluid– Material Availability

• Requires Natural Gas– Loses Energy at Night

• Requires Significant Water– Low Temperature Ops– Dry Cooling Difficult

• No Inherent Storage• Low Quality Steam

Molten Salt

(Towers)Advancements to Solar Two

AdvantagesPrimary Heat Transport• Feet – Not Miles• Inherent Storage• Dispatchable/On Demand• No Natural Gas Required• No Energy Loss at Night• High Quality Steam• Standard Steam Turbine

Issues• 50MW Minimum• Higher tower (630 ft.)

Page 29: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

Project Development Phase Timing

29

Phase 2 – Site Feasibility and Early Development

PreliminaryEnvironmental

studies

Power buyerdiscussions

Solar datacollection and

analysis

Interconnectionstudies

Economicanalysis

Secure landoptions

Phase 3 – Project Advanced Development

Site specific project design and capital cost pricing

Complete Environmental

permitting

Secure landrights

Secure local planning approval

Interconnectionagreement

Contract for Equipment

Supply & BOP

Typical Timing18 to 36 months

2 - 4 months

3 - 6 months

9 - 24 months

2 – 4 months

Fe

asi

bili

tyId

en

tific

ati

on

De

velo

pm

en

tPhase 1 - Potential site identification

Review ofenvironmental

issues

Grid connectionanalysis

Power market review

Opinion of local

government

Local PlanningReview

Initiate contact withlandowners

Solar resourceanalysis (regional)

Secure PPA or

Power Hedge

Proceed to financial close and start of construction

PreliminaryProject DesignSpecifications

Definitive Economic Analysis

Page 30: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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9 meter wide road

9 meter wide road

9 meter wide road

26 meter wide road

8500 Heliostats

Tower offset = 232.9 metersField diameter = 2620 meters

Inner field radius = 93.5 meters

Heliostat Layout and Footprint

Page 31: Utility Scale Solar Energy: Options and Competitiveness Kevin B. Smith – Chief Operating Officer, SolarReserve LLC Purdue University October 2, 2008.

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Pow

er (

MW

)

600

450

300

150

4 8 12 16 20 24 Full Power Operation (hours)

600 MW4 hrs/day

150 MW16 hrs/day

100 MW24 hrs/day

LargerTurbine

SmallerTurbine

Time ofDay

Pricing

IncreasedCapacity

Factor

300 MW8 hrs/day

200 MW12 hrs/day

Flexible Reference Solar Plant Design

500 GWh per year ~ 2 mi500 GWh per year ~ 2 mi22

200 GWh per year ~ 1 mi200 GWh per year ~ 1 mi22

Market Flexibility:System Sized to Client Needs