Hedging bets: Why the utilities can't afford to ignore Concentrated Solar Power

CSP Today talks to Dr Fred Morse, Chairman, Utility-Scale Solar Power Division, U.S. Solar Energy Industries Association and speaker at the upcoming 4th Concentrated Solar Power Summit USA this June 24-25, about current constraints on CSP in the US market.

A pioneer in solar energy, Dr Fred Morse has been a prominent actor in the field of solar energy since the 1960s, when he served as Executive Director of the White House Assessment of Solar Energy as a National Energy Resource. He later became a senior executive at the U.S. Department of Energy, where he identified and managed solar R&D and market development programs.

Today, Morse acts as co-Chairman of the Western Governors' Association Solar Task Force and Chairman of the CSP Division of the U.S. Solar Energy Industries Association.

As senior advisor of US operations for Abengoa Solar Inc, Morse has been instrumental in guiding the Spanish solar technology provider through the gauntlet of US regulation. Abengoa recently signed a power purchase agreement for its Mojave Solar Project near Harper Dry Lake, with electric utility PG&E.

Fred Morse takes the 4th Concentrated Solar Power Summit organizers, CSP Today though some of the key issues constraining the CSP market in the US, as well as some of the factors that are likely to set CSP on a winning streak, with utilities and project financiers alike.

CSPToday: In your view, what policies need to be in place to support the continuing development of CSP in the US?

Fred Morse: There are a variety of policies needed to support the continued development of CSP in the US, including financial incentives, siting & permitting, transmission planning, and a cap on greenhouse gas emissions.

Perhaps the most important is access to long-term, low-interest financing, which is what built our hydro resources many decades ago, to the long-term benefit of the country. The U.S. Treasury Grant Program and the DOE Federal Loan Guarantee Program were among the clean energy financing programs created earlier this year in the American Recovery and Reinvestment Act, but these programs must work faster and be extended to meet the intent of the stimulus legislation.

CSP projects are ideal in the arid, sunny Southwest, where much of the land is public and managed by the federal government. But to date, no public land has been approved for solar project development, despite a long history of fossil fuel development in these areas. SEIA is working with the Bureau of Land Management and other agencies to ensure there is a clear and thorough review process for these lands.

Transmission is another key issue. Connecting renewable resources to the power grid involves meticulous preparations and reviews that can easily be delayed by state and local jurisdictions. Making progress on our national energy goals will require a truly national strategy to address the planning and costs of new transmission.

Finally, setting a price on carbon will be important for utilities and consumers to realize the long-term value of solar and other clean, renewable energy resources.

CSP Today: What is likely to kick-start project financing in the US? Does the loan guarantee program hold any promise for CSP?

Fred Morse: There was a meltdown in the financial markets. The banks are now recovering and there is some capital now available, but this generally tends to be for smaller projects. You may only need US$100-200 million. You can get it, -but it will be expensive, and the terms may be short.

But when you speak about a CSP plant in the hundreds of megawatts, you are talking about US$1 billion - and you cannot find that in commercial banks today at acceptable terms.

So the U.S. Congress included a federal loan guarantee in the stimulus bill, which for most project developers, is very important. It gives them access to the kind of financing they need.

But this process is lengthy and costly. A developer must first be deemed eligible, often having to prove that its CSP technology is innovative, past the R&D stage, but not yet commercially available. Once eligible, a very rigorous due diligence process begins where DOE seeks to make sure that the developer will repay that debt.

Despite this difficult process, most CSP developers believe this federal loan guarantee program is one of the keys to getting CSP projects built in the U.S.

CSP Today: What challenges exist in the US, in terms of transmission, and what solutions are emerging?

Fred Morse: Our power grid is out-dated and requires new lines to connect solar-rich areas to growing population centers that need electricity. Many states require their utilities to provide a certain amount of their energy from green resources, but there are no requirements to build the transmission that is needed to move that energy to the load centers.
Just as our highway system was constructed through a national planning effort, we need to plan for our transmission needs on a regional and interconnection-wide basis.

Additionally, spreading the costs of new transmission across an entire interconnection or region will make it much easier to finance these capital-intensive improvements. When new lines are built, everyone benefits from increased reliability and decreased congestion. Our method of allocating transmission costs should reflect this reality.
Finally, the Federal Energy Regulatory Commission should have back-stop authority to approve the siting of new transmission facilities, if states fail to do so in a timely fashion.

CSPToday: Is thermal storage likely to become a re-requisite in US CSP projects?

Fred Morse: Thermal storage is profoundly valuable to the utilities. The projects currently operating in the U.S. do not have thermal storage, though we had some experimental projects in the U.S.- in particular, a 10 MW tower called Solar Two about a decade ago.

Most of the projects that have signed power purchase agreements (PPAs) do not have thermal storage. Abengoa Solar's project in Arizona does incorporate thermal storage. But it would not have been selected without it; the utility (Arizona Public Service) required it.

I believe we will see an increasing number of utilities requiring thermal storage in the future. It is a powerful attribute, providing utilities with a supply of electricity whenever the utility needs it, not just when the sun provides it.

For example, solar energy peaks at noon. During Arizona summers, the electricity required to meet demand peaks in the late afternoon when the energy from the sun is already winding down. During Arizona winters, however, there is a morning peak and an evening peak - so a solar resource during the daytime is of little value to the utility in terms of managing peak loads. They need energy during the morning and evening peaks - when there is little or no sun. Thermal energy storage allows a CSP plant to meet that demand.

CSP Today: What is the ceiling for CSP in the US? What will its overall share of the electricity generated be and how central will it be to energy strategy?

Fred Morse: The amount of CSP that is developed will be dependent on many factors, many of which I touched on earlier. Today, there are about 8,000 MW of CSP projects with signed PPAs. That means the utilities who signed those PPAs accepted the price for electricity generated by those CSP plants and those prices are fixed over the life of the contract.

This fixed price is of great value to the utilities as a hedge against natural gas price volatility and increases. It is also a hedge against the future price of carbon.

So if CSP is already competitive enough to get PPAs for 8,000 megawatts signed, I believe that CSP will continue to capture a growing part of the future electricity demand in the Southwest and, with adequate new transmission, begin to meet electricity demand across the United States.

4th Concentrated Solar Power Summit USA

Fred Morse will discuss all this and more along with 50 other world leading expert CSP speakers at this years 4th Annual Concentrated Solar Power Summit USA, taking place June 24-25, San Francisco.

Firmly established as North America's premier CSP event, attracting over 650 delegates and 35 + exhibitors annually. Brand new features not to be missed this year include and exclusive CSP site visit and the 1st US CSP Industry Awards.

For more information please visit

To register visit https://secure.firstconf.com/csptoday/usa2010/register.php

Or contact the summit organizer

Joshua Bull
VP - North America
CSP Today
+44 (0)20 7375 7227

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