CSP Today Report 2014 dus Report titleMarkets liscient temporercia Subtitle sita investment exerovit eoswith et in-depth analysis Plan yourheading businesssitaquisquia strategy for CSP of global CSP market conditions. Special focus on South Africa, Saudi Arabia, Morocco, the USA, India, Chile, China and the UAE. Understanding the Local CSP Ecosystem Market size Markets forecast to 2024 Indepth analysis of local supply and KEY LEARNING 1 value chains, government policies Feris dus sit lam and incentives. Find out who the quatist ipistem key government players are in Enistores atiuntem ressequi each market as wellillias as the major adion nosantor sequis et aut EPCS, financing bodies, developers, fugiam reet ommos dignati component supplierseos and service nonsequosam, officiur? providers. Detailed project pipelines for over KEY LEARNING 2 27 markets as well as indepth Dolor iorem assessment of alternative industrial delentiusdam applications for CSP in eight Voluptaectae icitatiae volum major markets,nihicip including mining, ipistem iur, apide dolenis etoil ide desalination and enhanced quid minis molenda prepele recovery. strunt eaquam debit maximusdae Find out projected installed CSP KEY LEARNING 3 capacity in eight major markets Od molor aliqui within the next ten years to position dolendae your business ahead of the curve. Es preptasin re, officia explan dam eaquam debit maximus dae volora doluptur? Quia nosapit lias aut acepudam asitat. AUTHOR CSP Today Markets Report 2014 Plan your business strategy for CSP investment with in-depth analysis of global CSP market conditions. Special focus on South Africa, Saudi Arabia, Morocco, USA, India, Chile, China and the UAE. Disclaimer Authors The information and opinions in this report were prepared by CSP Today (FC Business Jennifer Muirhead Intelligence Ltd) and its partners. FC Business Intelligence Ltd has no obligation to tell you Research Manager and Editor when opinions or information in this report change. CSP Today (FC Business Intelligence Alan Brent Ltd) makes every eп¬Ђort to use reliable, comprehensive information, but we make no Professor and Associate Director of the Centre for Renewable and Sustainable Energy Studies (CRSES), Stellenbosch University representation that it is accurate or complete. In no event shall CSP Today (FC Business Intelligence Ltd) and its partners be liable for any damages, losses, expenses, loss of data, loss of opportunity, or proп¬Ѓt caused by the use of the material or contents of this report. No part of this document may be distributed, resold, copied or adapted without CSP Today’s prior written permission. FC Business Intelligence Ltd В® 2013 Cayetano HernГЎndez China Country Manager of Sun to Market Solutions Heba Hashem Freelance Journalist Marco Poliafico MEng GradEI Energy Consultant and Analyst Groupe Reaction Inc Groupe RГ©action Independent Engineering and Renewable Energy Consultancy www.csptoday.com CSP Today Markets Report 2014 | 2 About csp today About CSP Today CSP Today is the reference point for CSP professionals and a cornerstone for communications within the industry. We have been a leading provider in this global market for the past 6 years. We provide the industry with focused news, events, online up-to-the minute data, analysis, reports, updates and information for the Concentrated Solar Thermal Power industry. CSP Today’s mission is to be the hub of the CSP community enabling dialogue throughout the industry ad driving CSP forwards and to provide its clients with the most accurate and timely project and plant intelligence, based on the highest quality research. CSP Today experts are on the phone everyday collecting and verifying global industry data and information direct from EPCs, developers, suppliers, utilities and government bodies for you to have at your fingertips. www.csptoday.com CSP Today Markets Report 2014 | 3 WELCOME Welcome The global CSP industry has experienced a significant shift over the past few years. Despite the setbacks of the latest legislative developments in Spain, more and more markets are emerging on a global level providing new opportunities for CSP market growth and development. CSP stakeholders are now redefining their business strategies to identify new areas of investment. The CSP Today Markets Report 2014 aims to provide you with the information you need to make a qualified assessment of both established (USA) and emerging (South Africa, Saudi Arabia, Morocco, India, Chile, China and the UAE) market opportunities. By drawing on local expertise and experience in the eight major markets, CSP Today provides unique insight into each market both in the immediate term and in the long-term outlook. The Markets Digest at the end of this report provides a succinct overview of nineteen markets that are not as prevalent as the eight major markets, but still worth keeping tabs on for existing and increasing CSP activity. I hope you find the insight provided by this report helpful. Do not hesitate to get in touch if you have any questions. With very best wishes, Jennifer Muirhead Research Manager and Editor | CSP Today www.csptoday.com | +44 (0) 207 3757 166 | http://uk.linkedin.com/in/jmuirhead www.csptoday.com CSP Today Markets Report 2014 | 4 THOUGHT LEADERSHIP Thought leadership – CSP Today’s Business Intelligence Portfolio: CSP Today Global Tracker Access current CSP market, policy, and project and supplier data at your fingertips. CSP plants at every single stage across the globe – Announced, planning, development, construction, commissioned and in operation In-depth CSP plant data – Access all the plants’ details including technology choice, technical specification, stakeholders, suppliers, incentives and finance Country-by-country policy - Understand each CSP market with data on market size, policies and incentives, energy market structure and up-to-date information on EPCs and developers operating in the market Global CSP supplier list – The most comprehensive component supplier list serving every part of a CSP plant from heliostats to pumps and valves CSP Today Quarterly Update The CSP Today Quarterly Update serves as a companion to the Global Tracker, highlighting major trends in the industry and collating information making it easily available for you to read at a glance. The Quarterly Update provides detailed analysis of the biggest developments in the global CSP market on a quarterly basis, providing readers with country-by-country breakdowns of key government players, game changing events and changes to project pipelines. CSP Today Technology Reports: Parabolic Trough Report 2014: Cost, Performance and Thermal Storage and Tower Report 2014: Cost, Performance and Thermal Storage Critical Market Specific Cost Data: Receive the most up-to-date, industry validated cost data breakdowns from CAPEX to OPEX in defined optimal Parabolic Trough and Tower plants across 8 markets (Chile, India, Morocco, Saudi Arabia, South Africa, UAE, Spain and US). Realistic LCOE Models: Determine the LCOE of Parabolic Trough and Tower technology by market, benchmark emerging CSP markets against the traditional key markets and identify the longitudinal trend with market specific LCOE forecasts. Energy Yield and Performance Output Data & Analysis:В Identify and benchmark the market specific energy yield and performance characteristics, including solar field thermal output, online parasitics, net energy, total operating hours, solar-to-electricity efficiency and water consumption. The Evolution of Thermal Storage (TES):В Use the global project pipelines to understand how and to what extent TES is being increasingly incorporated into Parabolic Trough and Tower plants, and gain insight into the latest R&D initatives in TES tipped to reduce cost and optimize performance. Market Share: Strategize your investment in and gauge your profit from Parabolic Trough or Tower the most widely deployed CSP technology - by understanding the long-term market share, growth and viability of this technology, including market-by-market pipelines and key comparisons with other CSP technologies. www.csptoday.com CSP Today Markets Report 2014 | 5 ACKNOWLEDGEMENTS Acknowledgements CSP Today would like to provide their thanks to the following people who have shared their expertise and insight to make this Markets Report a success. It should be noted that many others have contributed to the quality of this report, but due to confidentiality cannot be listed below. Arnold Leitner | President, Arnold Leitner & Partners LLC (ALNP) Geetanjali Patil Choori | CEO, Energy GuruВ® Gianleo Frisari | Analyst, Climate Policy Initiative Gopal Somani | CSP expert and former Technical Director of RRECL Manoj Divakaran | Managing Director - Empereal-KGDS Renewable Energy Pvt. Ltd Marc Norman | Project Finance Lawyer, Chadbourne & Parke | Director of Marketing & Communications, Middle East Solar Industry Association Rodrigo Escobar | Profesor Asociado Escuela de IngenierГa, Pontificia Universidad CatГіlica de Chile Philip Moss | Managing Partner, Mana Ventures www.csptoday.com CSP Today Markets Report 2014 | 6 CONTENTS Contents About CSP Today 3 Welcome4 Thought Leadership CSP Today’s Business Intelligence Portfolio 5 Acknowledgements6 Table of Contents 7 List of Figures and Tables 14 Status Definitions 20 Methodology21 Executive Summary 23 1: Current status of the CSP Industry By Heba Hashem Introduction Chapter Summary 1.1. CSP Industry in Review 1.1.1. The Collapse of the Spanish CSP Market 1.1.2. First Large-Scale Projects Come On-Line: USA and UAE 1.1.3. Saudi Arabia Launches White Paper 1.1.4. Chilean Government Releases Details for CSP Tender Process 1.1.5. Delays in South African and Indian Bidding Rounds 1.1.6. Morocco Launches RFQ for Phase Two of Ouarzazate 1.1.7. Kuwait Makes its Presence Felt 1.1.8. China CSP Progress and FiT 1.2. CSP Industry Outlook References 29 Chapter 2: CSP Forecast and Markets Scorecard By Groupe Reaction Chapter Summary 2.1. Market Scorecard 2.2. CSP Today Global Markets Forecast 2.3. Survey Results 47 Chapter 3: South Africa By Alan Brent Chapter Summary Country Overview 3.1. Electricity Market 3.1.1. Electricity Consumption 3.1.2. Electricity Demand 3.1.3. Grid Transmission 3.1.4. Market Structure Diagram 3.2. CSP Market 3.2.1. CSP-Specific Policy 3.2.2. CSP Project Profiles 3.2.3. Local Content Requirements 3.3. Local CSP Ecosystem 58 www.csptoday.com 30 30 30 30 32 34 35 36 37 37 38 38 46 48 48 50 54 60 60 62 62 62 62 65 65 65 68 68 72 CSP Today Markets Report 2014 | 7 CONTENTS 3.3.1. Key Government Agencies 3.3.2. Permitting Agencies 3.3.3. Local Consultants and R&D bodies 3.3.4. Financing Organizations 3.3.5. Developers and EPC Firms 3.4. Local Component Supply 3.4.1. Pipes 3.4.2. Pumps 3.4.3. Tracking Devices 3.4.4. Receivers 3.4.5. Power Blocks 3.4.6. Heat Exchangers 3.4.7. Raw Material Availability 3.4.7.1. Glass 3.4.7.2. Steel 3.4.7.3. Molten Salt 3.5. Alternative CSP Markets 3.6. Markets Forecast Conclusion References Acronyms Chapter 4: Kingdom of Saudi Arabia By Marco Poliafico Chapter Summary Country Overview 4.1. Electricity Market 4.1.1. Electricity Consumption 4.1.2. Grid Transmission 4.1.3. Electricity Demand 4.1.4. Market Structure Diagram 4.2. CSP Market 4.2.1. Local Content Requirements 4.2.2. Solar Resource Forecasting 4.2.3. CSP Project Profiles and Time Frames 4.3.1. Local CSP Ecosystem 4.3.1. Key Government Agencies 4.3.2. Independent Water and Power Producers (IWPP) 4.3.3. Permitting Agencies 4.3.4. Local Consultants and R&D bodies 4.3.5. Financing Organizations 4.3.6. Utilities and Transmission Grid Operators 4.3.7. Developers and EPC and Engineering Companies 4.4.1. Supply of Local Components 4.4.2. Raw Material Availability 4.5. Alternative CSP Markets 4.5.1. Desalination 4.5.2. Enhanced Oil Recovery 4.6. Market Forecast Conclusion References Acronyms www.csptoday.com 72 74 74 75 76 77 77 78 78 78 78 78 78 78 78 79 79 82 84 85 86 87 89 89 91 91 92 93 95 95 100 101 101 102 103 104 105 106 107 108 109 111 113 114 114 115 115 117 118 121 CSP Today Markets Report 2014 | 8 CONTENTS Chapter 5: Morocco By Marco Poliafico, Peer reviewed by Gianleo Frisari Chapter Summary Country Overview 5.1. Electricity Market 5.1.1. Electricity Consumption 5.1.2. Electricity Demand 5.1.3. Grid Transmission 5.1.4. Market Structure Diagram 5.2. CSP Market 5.2.1. CSP-Specific Policy 5.2.2. CSP Project Profiles 5.2.3. Noor CSP: Next Program 5.2.4. Future Developments 5.2.5. Local Content Requirements 5.3. Local CSP Ecosystem 5.3.1. Key Government Agencies 5.3.2. Utilities and Independent Power Producers 5.3.3. Permitting Agencies and Feasibility Study Providers 5.3.4. Local Consultants and R&D Bodies 5.3.5. Financing Organizations 5.3.6. Developers and EPC Firms 5.4.1. Local Component Supply 5.4.2. Raw Material Availability 5.5. Alternative CSP Markets 5.6. Market Forecast Conclusion References Acronyms 123 Chapter 6: U.S.A. By Marco Poliafico, Peer Reviewed Arnold Leitner Chapter Summary Country Overview 6.1. Electricity Market 6.1.1. Federal and State Regulators 6.1.2. Buying and Selling Electricity 6.1.3. Electricity Consumption 6.1.4. Grid Transmission 6.1.5. Electricity Demand and Consumption 6.1.6. Market Structure Diagram 6.2. CSP Market 6.2.1. Loan Guarantees 6.2.2. Federal Policy Incentives 6.2.3. State-level Incentives 6.2.4. Renewable Portfolio Standards 6.2.5. Solar Energy Zones 6.2.6. Research and Development 6.2.7. Local Content Requirements 6.2.8. CSP Project Profiles 6.2.9. Challenges Facing the Development of CSP in the USA 154 www.csptoday.com 125 125 127 128 128 129 129 130 130 131 133 134 134 134 135 136 137 139 140 143 146 147 148 148 149 150 152 156 156 158 158 158 160 161 161 162 163 163 163 164 164 165 165 166 166 170 CSP Today Markets Report 2014 | 9 CONTENTS 6.2.9.1. Shale Gas 6.2.9.2. High Cost 6.2.9.3. Need for Policy Review 6.3. Local CSP Ecosystem 6.3.1. Key Government Agencies 6.3.2. Utilities and Independent Power Producers 6.3.3. Permitting Agencies 6.3.4. Local Consultants and R&D Bodies 6.3.5. Financing Organizations 6.3.6. Developers and EPC Firms 6.4.1. Local Component Supply 6.4.2. Raw Material Availability 6.5. Alternative CSP Markets 6.5.1. Hybridization 6.5.2. Enhanced Oil Recovery 6.6. Market Forecast Conclusion References Acronyms Chapter 7: India By Marco Poliafico, Peer reviewed by Geetanjali Patil Choori Chapter Summary Country Overview 7.1. Electricity Market 7.1.1. Electricity Consumption 7.1.2. Electricity Demand 7.1.3. Grid Transmission 7.1.4. Market Structure Diagram 7.2. CSP Market 7.2.1. The Jawaharlal Nehru National Solar Mission 7.2.2. Delays and Extensions 7.2.3. Hybrid Program 7.2.4. Renewable Purchase Obligations and Renewable Energy Certificates 7.2.5. Current CSP Projects 7.2.6. Local Content Requirements 7.3. Local CSP Ecosystem 7.3.1. Indian CSP ecosystem 7.3.2. Manufacturing Capability and Local Supplies 7.3.3. Steep Learning Curve 7.3.4. Key Government Agencies 7.3.5. Independent Water and Power Producers and Utilities 7.3.6. Permitting Agencies and Feasibility Study Providers 7.3.7. Local Consultants and R&D Bodies 7.3.8. Financing Organizations 7.3.9. Developers and EPC firms 7.4.1. Supply of Local Components 7.4.2. Raw Material Availability 7.5. Alternative CSP Markets 7.5.1. Process Steam Applications of Concentrating Solar Thermal 7.5.2. UNDP- GEF project www.csptoday.com 170 170 170 171 172 173 174 175 176 177 178 179 180 180 180 182 183 184 186 188 190 190 192 192 193 194 194 195 195 196 197 198 199 201 202 202 202 203 203 205 206 208 209 212 215 219 220 220 221 CSP Today Markets Report 2014 | 10 CONTENTS 7.5.3. Biomass Solar Thermal Hybrid Projects 7.5.4. Desalination 7.6. Market Forecast Conclusion References Acronyms 221 221 223 225 226 228 Chapter 8: Chile 230 By Marco Poliafico Chapter Summary 232 Country Overview 232 8.1. Electricity Market 234 8.1.1. Electricity Consumption 236 8.1.2. Electricity Demand 236 8.1.3. Grid Transmission 236 8.1.4. Market Structure Diagram 238 8.2. CSP Market 239 8.2.1. National Energy Strategy: 2012-2030 239 8.2.2. CSP Suitability: Highest DNI in the World 240 8.2.3. Energy Demand Profile 240 8.2.4. First CSP Tender 241 8.2.5. Local Content Requirements 242 8.2.6. CSP Project Profiles243 8.3. Local CSP Ecosystem 244 8.3.1. Key Government Agencies 245 8.3.2. Utilities and Independent Power Producers 246 8.3.3. Permitting Agencies and Feasibility Study Providers 246 8.3.4. Local Consultants and R&D Bodies 246 8.3.5. Financing Organizations 248 8.3.6. Developers and EPC Firms 249 8.4. Local Component Supply 250 8.5. Alternative CSP Markets 250 8.5.1. Case Study: Minera El Tesoro, Chile 251 8.6. Market Forecast 252 Conclusion 253 References 254 Acronyms 256 Chapter 9: China By Cayetano Hernandez Chapter Summary Country Overview 9.1. Electricity Market 9.1.1. Electricity Consumption 9.1.2. Electricity Demand 9.1.3. Grid Transmission 9.1.4. Market Structure Diagram 9.2. CSP Market 9.2.1. CSP-Specific Policy 9.2.2. CSP Project Profiles 9.2.3. Local Content Requirements www.csptoday.com 257 260 260 262 263 264 264 266 266 266 269 272 CSP Today Markets Report 2014 | 11 CONTENTS 9.2.3.1. Investing 9.2.3.2. Equipment 9.3. Local CSP Ecosystem 9.3.1. Key Government Agencies 9.3.2. Permitting Agencies 9.3.3. Financing Organizations 9.3.4. Transmission Grid Operators 9.3.5. Developers, EPC Firms and Utilities 9.4. Local Component Supply 9.4.1. Steam Generators 9.4.2. Turbines 9.4.3. Pumps 9.4.4. Valves 9.4.5. Receiver Tubes 9.4.6. Heat Transfer Fluid (HTF) 9.4.7. Collector Frames 9.4.8. Raw Material Availability 9.4.8.1. Steel 9.4.8.2. Glass 9.4.8.3. Concrete 9.4.8.4. Molten Salt 9.5. Alternative CSP Markets 9.5.1. Coal - ISCC 9.5.2. Desalination 9.5.3. Enhanced Oil Recovery 9.6. Market Forecast Conclusion References Acronyms Chapter 10: United Arab Emirates By Marco Poliafico Chapter Summary Country Overview 10.1. Electricity Market 10.1.1. Electricity Consumption and Demand 10.1.2. Grid Transmission 10.1.3. Market Structure Diagram 10.2. CSP Market 10.2.1. Masdar 10.2.2. CSP Project Profiles 10.2.3. Local Content Requirements 10.3. Local CSP Ecosystem 10.3.1. Key Government Agencies 10.3.2. Independent Water and Power Producers 10.3.3. Local Utilities and Transmission Grid Operators 10.3.4. Permitting Agencies 10.3.5. Local Consultants and R&D Bodies 10.3.6. Financial Organizations 10.3.7. Developers, EPCs and Engineering companies 10.4.1. Supply of Local Components www.csptoday.com 272 273 274 274 275 275 277 277 279 279 280 280 281 282 283 283 284 284 286 286 287 288 288 290 291 294 296 297 297 299 301 301 303 304 305 306 306 307 308 311 311 312 313 315 316 317 318 319 322 CSP Today Markets Report 2014 | 12 CONTENTS 10.4.2. Raw Material Availability 10.5. Alternative CSP Markets 10.5.1. Desalination 10.5.2. Enhanced Oil Recovery 10.6. Market Forecast Conclusion References Acronyms 324 324 324 325 326 327 328 329 Chapter 11: Rest of the World - CSP Today Markets Digest (19 Countries) Contents List of Tables 11.1 Algeria 11.2 Australia 11.3 Brazil 11.4 Egypt 11.5 Greece 11.6 Israel 11.7 Italy 11.8 Jordan 11.9 Kenya 11.10 Kuwait 11.12 Mexico 11.13 Namibia 11.14 Oman 11.15 Portugal 11.16 Qatar 11.17 Spain 11.18 Thailand 11.19 Tunisia 11.20 Turkey Acronyms 331 331 331 333 335 337 339 341 343 344 346 347 348 349 350 351 352 353 354 358 359 361 363 Appendix A: Markets Scorecard Methodology Appendix B: Forecast Methodology Appendix C: Alternative Applications for CSP 365 370 380 www.csptoday.com CSP Today Markets Report 2014 | 13 Figures & tables List of Tables and Figures Chapter 1: Current status of the CSP Industry List of Figures Figure 1(1): Spain CSP Market Growth 2013 Figure 2(1): USA CSP Market Growth 2013 Figure 3(1): UAE CSP Market Growth 2013 Figure 4(1): Chile CSP Market Growth 2013 Figure 5(1): South Africa CSP Market Growth 2013 Figure 6(1): India CSP Market Growth 2013 Figure 7(1): Morocco CSP Market Growth 2013 Figure 8(1): Kuwait CSP Market Growth 2013 Figure 9(1): China CSP Market Growth 2013 Figure 10(1): Parabolic Trough Technology - Project Pipelines 2013 (excludes projects in operation) Figure 11(1): Fresnel Technology - Project Pipelines 2013 (excludes projects in operation) Figure 12(1): Dish Technology - Project Pipelines 2013 (excludes projects in operation) Figure 13(1): Tower Technology - Project Pipelines 2013 (excludes projects in operation) 39 39 39 40 40 40 40 41 41 42 43 44 45 List of Tables Table 1(1): Spain’s Popular Party Government - Major Legislative Changes Affecting CSP (2012-2013) Table 2(1): UAE’s First CSP Project Table 3(1): Large-scale CSP Projects Underway in the USA Table 4(1): Chile’s Tender Process Table 5(1): Moroccan Solar Plan: Key Dates Table 6(1): Shagaya Project Phase One - Key Specifications 31 32 33 35 37 38 Chapter 2: CSP Markets Scorecard and Forecast List of Figures Figure 1(2): CSP Market Capacity Forecast Until 2024 Figure 2(2): LCOE Forecast Until 2024 Figure 3(2): Optimistic Country-Wise Global CSP Capacity Until 2024 (MW) Figure 4(2): Conservative Country-Wise Global CSP Capacity Until 2024 (MW) Figure 5(2): Pessimistic Country-Wise Global CSP Capacity Until 2024 (MW) Figure 6(2): Cumulative CSP Plant Capacity by 2018 Figure 7(2): Cumulative CSP Plant Capacity by 2023 Figure 8(2): Most promising CSP markets Until 2018 Figure 9(2): Most promising CSP markets Until 2023 51 52 53 53 54 55 55 56 56 List of Tables Table 1(2): CSP Market Scorecard as of 2013 Table 2(2): Market Forecast Summary Table 3(2): CSP Market Forecast Comparison 2012-2013 Table 4(2): Limiting and Enabling Factors for CSP Market Growth 49 50 52 57 Chapter 3: South Africa List of Figures Figure 1(3): Direct Normal Irradiation in South Africa, Lesotho and Swaziland Figure 2(3): Transmission Development Plan 2011 – 2020 Figure 3(3): Demand Forecast Comparisons 61 63 64 www.csptoday.com CSP Today Markets Report 2014 | 14 Figures & tables Figure 4(3): Linkages Between Various Plans to Address the Integration of Distributed Electricity Generation from IPPs Figure 5(3): Maximum Allocations in Round 3 of the REIPPPP Figure 6(3): First Stage Qualification Criteria for Selection in the Second Stage Figure 7(3): Barriers to Entry of CSP in the South African Market Figure 8(3): Short-term Priority Actions to Address CSP Challenges Figure 9(3): Illustration of the Current and Projected Market Structures Figure 10(3): Typical Project Structure in the South African Context Figure 11(3): Consumption Mix in South Africa (Energy) Figure 12(3): Consumption Mix in South Africa (Electricity) Figure 13(3): Consumption Mix in Industrial Sector (Energy) Figure 14(3): Consumption Mix in Industrial Sector (Electricity) Figure 15(3): Displacement of Fossil Fuel (left) and Solar Boosting (right) Figure 16(3): Installed CSP Capacity in South Africa Until 2024 (MW) Figure 17(3): CSP Cumulative Energy Production in South Africa Until 2024 (TWh) 66 66 67 70 71 73 75 79 80 80 81 82 83 83 List of Tables Table 1(3): Drivers and Barriers Table 2(3): CSP Projects in South Africa Table 3(3): Key Government Agencies in South Africa Table 4(3): Permitting Agencies in South Africa Table 5(3): Local Consultants and R&D Bodies Table 6(3): Financing Organizations Operating in South Africa Table 7(3): Developers and EPCs With Interests in the South African Market 62 69 72 74 74 75 76 Chapter 4: Kingdom of Saudi Arabia List of Figures Figure 1(4): Direct Normal Irradiation in Saudi Arabia Figure 2(4): The GCC Grid Interconnection Project Figure 3(4): Electricity Demand in Saudi Arabia by Sector Figure 4(4): Saudi Arabia’s Oil Balance on a Business-as-Usual Trajectory Figure 5(4): Current Indications for CSP and PV Allocations in Saudi Arabia Figure 6(4): Installed CSP Capacity in Saudi Arabia Until 2024 (MW) Figure 7(4): CSP Cumulative Energy Production in Saudi Arabia Until 2024 (TWh) 90 93 94 96 98 116 117 List of Tables Table 1(4): Drivers and Barriers Table 2(4): Competitive Procurement Process Requirements Table 3(4): Local Content Requirements Outlined for the Introductory Round of the CPP Table 4(4): Ministries and Government Agencies in Saudi Arabia Table 5(4): Utility Companies in Saudi Arabia Table 6(4): Permitting and Environmental Assessment Agencies Operative in Saudi Arabia Table 7(4): Consultants and R&D Bodies Operative in Saudi Arabia Table 8(4): Main Funding Institutions and Banks Operative in Saudi Arabia Table 9(4): Utility Companies in Saudi Arabia Table 10(4): Developers, EPCs and Engineering Companies Operating in Saudi Arabia Table 11(4): Locally Available CSP Components Available Locally in Saudi Arabia Table 12(4): CSP Raw Material Suppliers in Saudi Arabia 90 99 100 103 104 106 106 107 108 109 111 114 www.csptoday.com CSP Today Markets Report 2014 | 15 Figures & tables Chapter 5: Morocco List of Figures Figure 1(5): Direct Normal Irradiation in Morocco Figure 2(5): Key Stakeholders in the Noor I CSP Project Figure 3(5): Installed CSP Capacity in Morocco Until 2024 (MW) Figure 4(5): CSP Cumulative Energy Production in Morocco until 2024 (TWh) 126 132 149 149 List of Tables Table 1(5): CSP Drivers and Barriers in Morocco Table 2(5): Morocco CSP Projects Table 3(5): Ministries and Government Agencies in Morocco Table 4(5): Major Utilities and Independent Water and Power Producers in Morocco Table 5(5): Permitting Agencies and Environmental Assessment Agencies in Morocco Table 6(5): Consultants and R&D Bodies in Morocco Table 7(5): Main Funding Institutions and Banks in Morocco Table 8(5): Developers and EPC Firms in Morocco Table 9(5): CSP Components and Suppliers Available Locally in Morocco Table 10(5): Raw material available locally in Morocco and suppliers 127 131 135 136 138 139 141 144 146 147 Chapter 6: U.S.A. List of Figures Figure 1(6): Direct Normal Irradiation in the United States Figure 2(6): California Summer Daily Demand Curve Figure 3(6): Parabolic Trough and Tower CSP Pipelines in the United States Figure 4(6): BrightSource Coalinga CSP Plant For EOR Figure 5(6): Installed CSP capacity in the USA until 2024 (MW) Figure 6(6): CSP Cumulative Energy Production in the USA until 2024 (TWh) 157 161 171 181 183 183 List of Tables Table 1(6): Drivers and Barriers in the United States Table 2(6): Overview of the Power Markets in the United States Table 3(6): Main Fiscal Incentives Available in the U.S. for CSP Technology Table 4(6): List of CSP Projects in the USA (those highlighted in yellow have secured a PPA) Table 5(6): Key Government Agencies in the United States Table 6(6): Utilities and IPPs Operative in the United States Table 7(6): Permitting and Environmental Assessment Agencies in the United States Table 8(6): Consultants and R&D bodies in the United States Table 9(6): Main Funding Institutions and Banks Operative in the United States Table 10(6): Developers and EPC Firms Operative in the United States Table 11(6): Components and Suppliers Available in the United States Table 12(6): Raw Material Suppliers in the USA 157 159 163 166 172 173 174 176 176 177 178 180 Chapter 7: India List of Figures Figure 1(7): Direct Normal Irradiation in India Figure 2(7): Installed CSP Capacity in India Until 2024 (MW) Figure 3(7): CSP Cumulative Energy Production in India until 2024 (TWh) 191 224 225 List of Tables Table 1(7): Drivers and Barriers in India Table 2(7): Growth of Renewable Energy Share in India’s Electricity Mix 192 193 www.csptoday.com CSP Today Markets Report 2014 | 16 Figures & tables Table 3(7): Selection Criteria for the Tender Process of CSP projects in India Table 4(7): India NSM – Achievements and Lessons Learnt from JNNSM Phase 1 Table 5(7): CSP Hybrid Pilot Program - Project Configuration Table 6(7): India Solar Program Tariffs Table 7(7): India Solar Thermal Cost – Benchmark Table 8(7): India Solar Thermal Tariffs – Benchmark Table 9(7): Current CSP Projects in India Table 10(7): Indian CSP Ecosystem Table 11(7): Ministries and Government Agencies in India Table 12(7): Independent Water and Power Producers and Utilities in India Table 13(7): Permitting Agencies and Environmental Assessment Agencies in India Table 14(7): Consultants and R&D Bodies in India Table 15(7): Main Funding Institutions and Banks Operative in India Table 16(7): Developers and EPC Firms Operative in India Table 17(7): Components Available Locally in India Table 18(7): Raw Material Availability and Suppliers Table 19(7): The World’s First Linear Fresnel Desalination Plant Table 20(7): LFR Desalination Plant Specifications 195 197 197 198 199 199 199 202 203 206 207 208 210 213 215 220 221 222 Chapter 8: Chile List of Figures Figure 1(8): Direct Normal Irradiation in Chile Figure 2(8): Load Profile of the SIC System on 10 June 2013 Figure 3(8): Installed CSP Capacity in Chile Until 2024 (MW) Figure 4(8): Cumulative CSP Energy Production in Chile to 2024 (TWh) 233 241 252 253 List of Tables Table 1(8): Chile CSP Development: Drivers and Barriers Table 2(8): Transmission Power Systems of Chile Table 3(8): Criteria of the Tender Process for CSP Plants in Chile (February 2013) Table 4(8): CSP Projects in Chile Table 5(8): Ministries and Government Agencies in Chile Table 6(8): Utilities and Independent Power Producers in Chile Table 7(8): Permitting Agencies and Environmental Assessment Agencies Operative in Chile Table 8(8): Consultants and R&D Bodies Operative in Chile Table 9(8): Main Funding Institutions and Banks Operative in Chile Table 10(8): Developers, EPCs and Engineering Companies Operative in Chile Table 11(8): Techno-Economic Data of Mineral El Tesoro CSP Plant 234 237 241 243 246 246 246 247 249 249 251 Chapter 9: China List of Figures Figure 1(9): Direct Normal Irradiation in China (DNI Map) Figure 2(9): Electricity Production in China by Source of Generation Figure 3(9): Installed Capacity Distribution in China Figure 4(9): China’s Current Power Network Figure 5(9): Map of Wind Feed-In-Tariff Figure 6(9): Flow Diagram of Approval Stages in China Figure 7(9): Power Grid Companies in China Figure 8(9): Non-metallic Mineral Resources in China Figure 9(9): Map of Coal Resources in China Figure 10(9): DNI Resources in China 261 263 264 265 267 275 277 287 289 289 www.csptoday.com CSP Today Markets Report 2014 | 17 Figures & tables Figure 11(9): Desalination Capacity in Coastal Cities (m3/day) in China (2010) Figure 12(9): China’s Oil Production and Consumption 1990-2013 Figure 13(9): Location of China’s Major Oil Fields Figure 14(9): Locations of Known CSP Projects in China Figure 15(9): Installed CSP Capacity in China Until 2024 (MW) Figure 16(9): Cumulative Energy Production in China Until 2024 (TWh) 291 292 293 293 295 295 List of Tables Table 1(9): Drivers and Barriers Table 2(9): Erdos Solar Plant Parameters (First CSP FiT) Table 3(9): List of CSP Projects in China Table 4(9): Foreign Investment Categories Table 5(9): Key Government Agencies in China Table 6(9): Permitting Agencies in China Table 7(9): Financing Organizations in China Table 8(9): Renewable Energy Projects Co-financed by Development Banks Table 9(9): Transmission Grid Operators in China Table 10(9): Electric utilities in China Table 11(9): Main Steam Generator Manufacturers in China Table 12(9): Turbine Manufacturers in China Table 13(9): Pump Manufacturers in China Table 14(9): Valve Manufacturers in China by Industry Table 15(9): Receiver Manufacturers in China Table 16(9): Heat Transfer Fluid Providers in China Table 17(9): Collector Frame Manufacturers in China Table 18(9): China Steel Exports and Imports (2012) Table 19(9): Main Steel Companies in China by Production (2012) Table 20(9): Top 10 Chinese Glass Manufacturers (2012-2013) Table 21(9): CSP Mirror Manufacturers in China Table 22(9): Concrete Producers in China by Production Table 23(9): Molten Salt Producers in China Table 24(9): China’s Oil Production, Consumption, and Import (2011) Table 25(9): EOR Projects Implemented in China 262 268 269 272 274 275 276 276 277 278 279 280 281 281 282 283 284 284 285 286 286 287 288 291 294 Chapter 10: United Arab Emirates List of Figures Figure 1(10): Direct Normal Irradiation in the UAE Figure 2(10): Masdar’s Integrated Business Units Figure 3(10): Location of North East Bab Field, UAE Figure 4(10): DNI Conditions in the UAE Figure 5(10): Installed CSP Capacity in the UAE 2006-2024 (MW) Figure 6(10): CSP Cumulative Energy Production in UAE Until 2024 (TWh) 302 308 325 325 327 327 List of Tables Table 1(10): Drivers and Barriers Table 2(10): UAE CSP Project Portfolio, 2013 Table 3(10): Shams 1 Project Overview Table 4(10): Shams 1 Project Details Table 5(10): Ministries and Government Agencies in the UAE Table 6(10): Independent Water and Power Producers in the UAE Table 7(10): Utility Companies in the UAE 303 309 309 309 312 314 315 www.csptoday.com CSP Today Markets Report 2014 | 18 Figures & tables Table 8(10): Permitting Agencies and Environmental Assessment Agencies in the UAE Table 9(10): Consultants and R&D Bodies Operative in the UAE Table 10(10): Main Financing Institutions and Banks in the UAE Table 11(10): Developers, EPCs and Engineering Companies Operative in the UAE Table 12(10): CSP Components Available Locally in the UAE Table 13(10): CSP Raw Material Suppliers Available in the UAE Chapter 11: Rest of the World - CSP Today Markets Digest (19 Countries) List of Tables Table 1(11):Current CSP Projects in Algeria Table 2(11): Current CSP Projects in Australia Table 3(11): Current CSP Projects in Brazil Table 4(11): Current CSP Projects in Egypt Table 5(11): Current CSP Projects in Greece Table 6(11): Current CSP Projects in Israel Table 7(11): Current CSP Projects in Italy Table 8(11): Current CSP Projects in Jordan Table 9(11): Current CSP Projects in Kenya Table 10(11): Current CSP Projects in Kuwait Table 11(11): Current CSP Projects in Mexico Table 12(11): Current CSP Projects in Oman Table 13(11): Current CSP Projects in Portugal Table 14(11): Current CSP Projects in Qatar Table 15(11): Current CSP Projects in Spain Table 16(11): Current CSP Projects in Thailand Table 17(11): Current CSP Projects in Tunisia Table 18(11): Current CSP Projects in Turkey Appendix A: Markets Scorecard Methodology List of Figures Figure 1(A): CSP Market Indicators and Influential Factors List of Tables Table 1(A): Survey Based Indicator Weights 316 318 319 320 322 324 333 335 337 339 341 343 345 346 347 348 349 351 352 353 354 358 359 361 366 367 Appendix B: Forecast Methodology List of Figures Figure 1(B): Forecast Influential Parameters Figure 2(B): Technology Diffusion Lifecycle 371 373 List of Tables Table 1(B): Influencing Factors and Weights for CSP Development Table 2(B): High Impact Decision Points Table 3(B): Factor Ranking System Table 4(B): Optimistic Deployment of Plant in Construction and Development Table 5(B): Conservative Deployment of Plant in Construction and Development Table 6(B): Pessimistic Deployment of Plant in Construction and Development 372 376 376 377 378 378 Appendix C: Alternative Applications for CSP List of Figures Figure 1(C): Technical Concepts for Integrating CSP into Desalination Plants 384 List of Tables Table 1 (C): Desalination Technologies Table 2 (C): Key Parameters of Desalination Technologies 383 383 www.csptoday.com CSP Today Markets Report 2014 | 19 Status Definitions Status Definitions Announced: A project is announced when it has appeared in the press but there is no other evidence of progress made towards the construction and operation of the project. Construction: Once a project has obtained a Notice to Proceed, it could be considered as “Under Construction”. In essence, any construction activity would indicate the project is being built. Some indicators of early activity include: land grading, hiring construction or specialized contractors and building access roads. Anything beyond this point would definitely show the project is being built. The final stages of construction include building the connection to the grid, installation of electric tracing and inclusion of molten salts. Planning: A project is under planning when feasibility or pre-feasibility studies are being carried out. This includes land siting studies, Solar Resource Assessment and pre-feasibility. Commissioning: Once a plant is built there is a period of time reserved for testing and calibrating equipment. This is known as commissioning. Development: This means that there is evidence that the developer is actively trying to find the capital, permits and contractors to build the project. A project is under development when it has one or more of the following: environmental impact permit, land having been purchased, water permit, an EPC on-board, financing obtained or procurement having started. Operation: This indicates when the project has started feeding electricity into the grid or is providing thermal energy. www.csptoday.com CSP Today Markets Report 2014 | 20 Methodology Methodology CSP Today’s Markets Report 2014 responds to the most critical needs of the CSP industry, representing six months of research (primary and secondary) and culminating in 385 pages of high-quality data and analysis, including 90 figures and 150 tables. Identifying Industry Needs: Based on 25+ research calls with industry executives and survey responses from 300 + CSP players, CSP Today uncovered: Methodological Approach: Project pipelines: Making use of the CSP Today Global Tracker, all project data is is industry validated and taken from August 2013, providing detailed information of projects announced, planned, in development, construction and operation. Local CSP ecosystem: Building upon the knowledge of local authors and peer reviewers, each market has either been written or reviewed by on-the-ground players active in the local CSP market. The markets most attractive to developers, EPCS, suppliers and financing bodies Information gaps and needs within those markets Results: Eight major markets stood out: South Africa, Saudi Arabia, Morocco, USA, India, Chile, China and the United Arab Emirates. Within these markets, respondents wanted to know: CSP project pipelines Who the main players are in each market, how much support there is from the government for future deployment, who the main financing firms are active in that market and how robust the local supply chain is in each market The potential for alternative CSP applications within these markets A long-term outlook of what can be expected from these markets within the next five to ten years www.csptoday.com Markets forecast: Key influencing factors were identified and weighted to analyse their impact on the future growth of the market until 2024. For a detailed explanation of the markets forecast see Appendix B. Expert Analysis: This report has been researched and written by a team of highly-qualified and impartial industry experts ensuring that only the highest quality, most relevant and digestible analysis is published. All information is accurate as from August 2013. CSP Today Markets Report 2014 | 21 Methodology CSP Today Market Enabling Factors and Forecast Strategy direct Factor Indirect Factor decision Points Market Expansion Environmental Measures International Agreements Global Global Technology Maturity Global Energy Demand Global Economic Stability Unconventional Fossil Fuel Reserves PV Price Ease of Financing Market Saturation National CSP Targets Local Energy Demand Permitting Incentives Grid Coverage Water Availability DNI www.csptoday.com Community/Local Specific Community/Local Specific Conventional Power Cost Political Stability Population/Economic Growth High Cost of Energy Presence of Supporting Industries and Local Expertise CSP Today Markets Report 2014 | 22 executive summary Executive Summary: Chapter 1: Current status of the CSP Industry The past few years have witnessed momentous developments in the global CSP industry; from the collapse of the Spanish CSP market, to the termination of the U.S. Department of Energy’s loan-guarantee program. Unexpected delays were also encountered in the South African and Indian CSP bidding rounds. This chapter also ranks markets according to which offers the best opportunities for investors under today’s industry scenarios. Comprehensive research was undertaken, based on a detailed methodology, in order to generate a country-specific scorecard that ranks countries according to the existing CSP activity in each of them. On the positive side, the UAE’s first, 100-MW CSP plant came online in March, while the United States will see five plants totaling around 1.3 GW being commissioned over the next year. February 2013 in particular was an eventful month, with the launch of a CSP tender process in Saudi Arabia and Chile. Kuwait and Morocco also released Requests for Proposals; the former for Phase One of the Shagaya Multi-Technology Renewable Energy Park, and the latter for Phase Two of Ouarzazate. Finally, China is targeting a CSP capacity of 1 GW by 2015 and 3 GW by 2020, and is revising feed-in-tariffs for CSP. The ranking takes into account various CSP-related parameters, including technical and economic factors, with an aim of showing the current attractiveness of different countries for CSP deployment. As outlined in this introductory chapter, the volume of operating capacity worldwide – around 2.8 GW – is set to dramatically increase with the connection of more than 670 MW to the grid in the USA and with the substantial pipeline of CSP projects under construction. Chapter 2: Markets Forecast and Scorecard This chapter provides detailed analysis of the projected growth of CSP markets, including optimistic, conservative and pessimistic forecasts for cumulative installed CSP capacity by market until 2024. Using available data from industry experts and the consolidation of complementary technology-diffusion models, future pitfalls and opportunities in each market, the future capacity of CSP technology expected in the ten years up to 2024 was identified, both on a global and on a country-by-country basis (country forecasts are included in the relevant country chapters) . www.csptoday.com Chapter 3: South Africa South Africa was ranked number one in the CSP Today 2013 Markets Scorecard. With a potential CSP capacity of 262 GW to 311 GW in the short and medium term, according to the University of Stellenbosch’s Center for Renewable and Sustainable Energy, and with DNI levels exceeding 2,900kWh/m2 per year, the South African CSP market promises a significant contribution to the country’s coal-dominated energy mix. The growth of the South African CSP industry will be further supported by the increase of tariff by 14.6% to 19% per year over the next five years, from April 2013 to March 2018. The time-of-day tariff introduced this year will also help promote CSP with storage for generating energy during peak hours. In addition, the commitment shown by the government toward CSP, the strong manufacturing industry and land availability are all encouraging factors for the development of CSP. Despite the country’s small target of 1,200 MW of CSP by 2030, with the national Integrated Resource Plan (IRP) due to undergo some changes, it is very likely that CSP will gain a larger foothold in the local energy market. At the time of writing this report, South Africa had three CSP projects under construction, totaling 200 CSP Today Markets Report 2014 | 23 executive summary MW: two under development (200 MW) and three in planning (250 MW), according to the CSP Today Global Tracker. One of the biggest barriers for CSP development in South Africa is the uncertainty regarding future megawatt allocations, given that several changes have repeatedly occurred in the government’s IRP. Whilst the first window placed a local content stipulation of 21% on CSP projects, this was raised to 35% in the second window for no-storage CSP and 25% for CSP with storage. For the third window, this has been raised to 45% for no-storage CSP and 40% for CSP with storage. The third bid window announced in May 2013 introduced a new time-of-day tariff. Under the country’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP), tariffs have been capped for each technology, and according to the Request for Proposal, CSP has a base tariff of R 1.65/kWh. A bidder supplying energy during the peak time will get 270% of the base tariff whilst there is no payment for supplying energy beyond the peak time at night. Although there is no specific policy driving solar applications in South Africa, there is potential for CSP usage in agricultural and industrial sectors. In addition, the existence of a substantial, well-established construction industry can provide the civil works required for a CSP plant. Chapter 4: Saudi Arabia Based on the CSP Today 2013 Markets Scorecard, Saudi Arabia is ranked as the second most-promising CSP market for future development, only after South Africa. With a CSP target of 25 GW by 2032, the kingdom will need to deploy at least 1.35 GW of CSP capacity per year to meet its objective. Saudi Arabia has the highest per-capita oil consumption in the world, and in 2011, less than 1% of the energy generated was sourced from renewable technologies. In 2010, the King Abdullah City of Atomic and Renewable Energy (K.A.CARE) was established to lead the development of the kingdom’s renewable energy strategy. In May 2012, Saudi Arabia announced a national energy target of 25 GW installed CSP capacity by 2032, becoming one of the most ambitious players in the CSP arena, and in February 2013, the Competitive Procurement Process (CPP) was launched by K.A.CARE. Although there is no CSP-specific framework or renewable energy legislation currently in place, it is www.csptoday.com expected that a decision will be made following the second procurement round, which is likely to take place in early 2015 – with feedback that the initial timeframe outlined by K.A.CARE has been delayed. The first round of the CPP has allocated 900 MW to CSP, and the second round 1.2 GW. However, these figures may be revised as the program progresses. Saudi Arabia’s ambitious renewable energy program represents an attractive opportunity for international CSP players and is likely to have a positive effect on the industry in general. The target set by the kingdom potentially opens the doors for scaling up the production of components and identifying solutions along the whole value chain. The particular context in which projects will be developed features very challenging environmental factors like dust and temperature that will require ad-hoc solutions to optimize the technical performance of many components. On the other hand, the lack of a stable regulatory framework represents a serious risk factor for developers. CSP can provide a good source of energy for seawater desalination in Saudi Arabia, considering the intensive energy consumption of the process. The kingdom has already announced it would be investing US$ 11 billion in desalination over the next eight years, which will include building solar-powered stations. In addition, enhanced oil recovery represents another promising application for CSP in Saudi Arabia, considering the forecasted increase in global oil and gas consumption. Chapter 5: Morocco According the CSP Today 2013 Markets Scorecard, Morocco is ranked as the third most promising CSP market, with an optimistic forecast of 5,275 MW of installed CSP capacity by 2024, and a pessimistic forecast of 845 MW by 2024. Morocco is one of the world’s most energy-deprived countries and depends on external sources for nearly 97.5% of its energy needs. As the largest energy importer in North Africa, the country suffers great economic pressure due to the volatility of fuel prices. However, Morocco also has one of the best solar resources in North Africa, and thanks to its strategic geographic position, it aims to become the heart of the Mediterranean interconnection between the Maghreb region and Europe, acting as the a regional crossroads for power exchange. CSP Today Markets Report 2014 | 24 executive summary Morocco’s national energy strategy was launched in 2009 alongside the Moroccan Solar Plan. Furthermore, the government has made visible efforts in recent years to improve the regulatory framework, and has set an ambitious target of 2 GW of solar power by 2020. Although no specific policy regarding local content requirements has been introduced at the time of writing this report, the Noor I project used a stringent local content requirement of 30% in its bidding process. Local CSP projects like Noor I are already triggering the development of domestic manufacturing expertise and of training and R&D activities. For example, Moroccan stakeholders and policy makers have expressed a clear interest in developing research and training activities through collaboration with European institutions. Despite the financial challenges typically associated with CSP projects, Morocco’s renewable energy initiative received strong financial backing by international bodies, such as the Clean Technology Fund, which is managed by the African Development Bank and the World Bank. Amongst the alternative CSP markets, seawater desalination is a very promising application for CSP technology in Morocco. At the time of writing this report, Morocco had one operational CSP plant with an installed capacity of 20 MW; one under construction (160 MW); two under planning (100 MW and 200 MW); and one announced (20 MW), according to the CSP Today Global Tracker. Chapter 6: United States of America With an average DNI of 2,700 kWh/m2 per year in the CSP-friendly states of the country, and with the daily peaks in the south-western states, the United States has a potential CSP capacity varying between 14 GW to 33 GW. While there is currently no announced future capacity for the country, there are 1,323 MW under construction, in addition to the 571 MW already in operation. A large volume of capacity is also under planning - around 1,865 MW - while 600 MW is under development. A global pioneer in CSP development, the U.S. is one of the world’s largest consumers of electricity and energy, with one of the most developed power markets. Various incentives have been put in place for CSP development, including but not limited to Renewable Portfolio Standards Research and Development Numerous projects have also been carried out by worldleading U.S. research organizations like the National www.csptoday.com Renewable Energy Laboratory and the U.S. Department of Energy within the ambitious SunShot Initiative that aims to achieve grid parity for CSP-generated electricity by 2020. This equates to a levelized cost of energy of approximately US$ 0.06/kWh, which in turn requires costs to be cut by around 75%. According to industry experts, the outlook for CSP under the current U.S. market conditions is not as promising as it was a few years ago, although the potential remains tremendous, particularly in south-western states. High costs and increasing exploitation of shale gas are amongst the main threatening factors to the deployment of CSP, followed by lengthy permitting processes. The United States has a comprehensive supply chain for CSP components and sub-components. As a consequence, all the main parts are easily available in the market. Beyond the electricity market, hybridization is one of the most promising CSP applications for the United States, while another interesting field of deployment is the use of CSP in enhanced oil recovery operations. Chapter 7: India According to the 2013 CSP Today Markets forecast, India is ranked as the fifth most promising CSP market globally. With an average DNI of 2,100 kWh/m2 per year, and a sustained ecosystem promoting the development of utility-scale solar projects, the Indian CSP industry is poised for growth in the short and medium term. As the fourth largest consumer of energy in the world, India consumes an estimated 794 TWh of electricity annually, and by 2020, the country is expected to require 2,000 TWh of electricity per year. In response to the rising domestic demand for electricity, in 2010, the Government of India launched the National Solar Mission (NSM) to deploy 20 GW of grid-connected solar power, with the aim of reducing the cost of solar power in the country. As of August 2013, a CSP capacity of 50 MW had been realized under the NSM Phase 1, and 430 MW remains in the phase 1 pipeline. Phase 2, which is expected to begin in 2014, targets a CSP capacity of 1,080 MW, representing 30% of the overall target solar capacity. A new CSP hybrid program will be incorporated into Phase 2 to support the construction of four CSP hybrid plants. In addition, the Renewable Purchase Obligations mechanism will be employed to support the implementation of solar projects. Besides the NSM, other states, such as Gujarat and Rajasthan, also have their own guidelines and incentives. CSP Today Markets Report 2014 | 25 executive summary At the time of publishing this report, India had 56.5 MW of operational CSP plants; five CSP plants under construction totaling 254 MW; three under development totaling 210 MW; four under planning 156 MW; and five announced 155 MW, according to the CSP Today Global Tracker. The domestic content requirement is a critical aspect in India’s NSM. In Phase 1, this constituted 30% of required components excluding land, although some developers are targeting up to 50% local content to be price competitive. The local CSP ecosystem in India is characterized by a growing market with tremendous opportunities for both grid-connected and off-grid projects. For this reason, hybridization of the current fossil fuel-based capacity represents one of the most promising applications for India’s CSP industry. To facilitate a greater understanding of India’s CSP ecosystem, a comprehensive list of government bodies, permitting agencies and utilities, as well as local feasibility study providers, EPC firms, and financing organizations, is outlined in this chapter. While there are materials and sub components that are easily available on the Indian market, such as steel, glass, and concrete, other components are less easy to find, or are even rare, such as molten salts. When it comes to the alternative applications market, process steam applications, hybrid biomass CSP, and desalination are the areas with the largest potential for CSP in India. The Ministry of New and Renewable Energy in India is already implementing a project promoting CSP-based process heat applications and another for the hybridization of CSP and biomass. Among the main drivers for CSP deployment in India are the energy generation targets established by the government, the growing manufacturing sector, and the environmental impact of fossil fuel electricity generation, while low feed-in-tariffs, unreliable DNI data, and the complexity of land acquisitions, are considered to be some of the fundamental challenges hindering the development of the local CSP market. Chapter 8: Chile Recently moving into the CSP spotlight owing to its excellent DNI that ranges from 2,445 kWh/m2 to 3,832 kWh/m2 per year, Chile benefits from a clearness index which justifies the country’s growing interest in CSP generation. With a potential of up to 2,636 GW of CSP, the country’s wheels are in motion to exploit CSP technologies, and a parabolic trough plant of 14 MW is already in operation. In addition, there are currently www.csptoday.com 1,080 MW in planning and a further 5 MW that has been announced. Chile is ranked as the sixth most promising CSP market. Chile is the second-least energy self-sufficient country in the Latin American and Caribbean (LAC) region and experiences the second highest electricity prices within the same area. The country is now considering more seriously the shift toward indigenous energy sources, given the abundance of wind and hydro resources, particularly in the south, while in the north region, Atacama Desert has one of the world’s highest levels of solar irradiation. The current largest user of energy in Chile and the engine of the economy is the mining sector, as well as the industrial (together accounting for 36%), followed by the transport sector (35%). Chile’s economy is expected to continue growing at a rate of 4% to 5% over the next fifteen years. A particular aspect of importance in the energy market is the transmission grid, which is spread unevenly throughout the country, due in particular to the challenges related to its physical geography. The current energy policy in Chile is based on the “National Energy Strategy: 2012-2030: Energy for the Future” announced in 2012. Through this strategy, the government reaffirmed its commitment to achieve a 10% target of generation from renewable technologies by 2024. For the time being, there is no Feed-In-Tariff scheme or specific policy for the deployment of solar energy. However, CSP is considered the most appropriate technology to exploit the extraordinary amount of solar resources. Given the high electricity prices, Chile could even become the first solar power market to be independent of subsidies or tax benefits, and to reach grid parity based on local costs. Chapter 9: China The CSP Today 2013 Markets Scorecard has ranked China as the seventh most-promising CSP market. With a population of more than 1.3 billion, far exceeding all other emerging CSP market demographics, China faces rapid energy demand growth. To meet future demand, China will need to have added over 1,300 GW to its grid between 2005 and 2030. China has an optimistic target of reaching 3,000 MW of CSP power by the end of the decade. The aim of this is to address China’s desire to refocus its energy portfolio on more environmentallyfriendly technologies. CSP Today Markets Report 2014 | 26 executive summary With DNIs ranging from 1,800 to 2,500 kWh/m2 per year, China may not be a country benefiting from the best solar resource, but considering its population and the availability of land for CSP projects, the country could potentially have 5,821 to 8,105 GW of CSP capacity. development, materials and components including mirrors, receivers, support structures, control systems, molten salt/heat storage, heat transfer fluids, steam generators, power blocks, pumps and system integration. Despite holding great promise for future CSP deployment, China’s CSP industry is challenged by numerous barriers to its development in the short to mid-term, including the lower cost of Chinese PV energy, the difficulty of transmitting electricity from western to the eastern areas, and the long periods of water scarcity, heavy brown clouding and sandstorms. Chapter 10: The United Arab Emirates The United Arab Emirates (UAE) enjoys one of the highest levels of income per capita in the world, and unlike other countries in the Middle East and North Africa, this market is shaped through privately structured, government-supported organizations and is open to the entry of new developers. The UAE is ranked as the eighth most promising CSP market. China’s total installed power capacity at the end of 2011 reached 1,060 GW, where coal was the dominant source of electricity. China is currently implementing its 12th Five Year Plan (2011-2015) on Renewable Energy Development, and has targeted an installed capacity for solar thermal electricity power plants of 1 GW by 2015 and 3 GW by 2020. At present, CSP Feed-in-Tariffs (FiT) are under study in China. The bidding process of the first project resulted with three companies submitting a FiT of 2.25, 0.98 and 0.94 RMB/kWh. China Datang was awarded the contract with the lowest price at 0.94 RMB/kWh. Around 350 MW are now under development, largely in the provinces of Qinghai, Gansu, Tibet, Inner Mongolia and Ningxia, where parabolic trough and 50 MW are the main characteristics - following the Spanish example. Regarding finance, the Asian Development Bank and the World Bank are participating in three CSP projects. China is the largest producer of coal, gold, and some of the rarest minerals in the world. It is also the largest consumer of other mining products, especially thermal coal, with around 49% of total global consumption, and iron ore, accounting for around 58% of total global consumption. Seawater desalination is quickly developing in China, where in its 12th Five-Year Plan, the government announced a target of 2.2-2.6 million m3/day of online seawater-converted capacity by 2015. Several Enhanced Oil Recovery (EOR) pilot projects have also been implemented in China, and in the coming years, two projects are going to be constructed in the Dagang and Daqing Oil Basins. An entire Chinese supply chain CSP industry is in the process of being created, covering project www.csptoday.com The UAE announced investments of more than US$ 102.3 billion in renewable energy projects to be developed by 2020 and has the economic potential to develop more than 20 GW of solar power generation by 2030. The two largest emirates by area, Abu Dhabi and Dubai, set an overall generation target from renewables of 7% by 2020 and 5% by 2030 respectively. The UAE flagship project is the multi-billion dollar investment for the development of Masdar, the sustainable city launched in 2006. Amongst other projects, Masdar Institute announced a pilot program for developing and testing solar desalination technologies in 2013. At present, the UAE does not have a tailored policy framework and lacks a specific incentive scheme for renewable energy projects. However, there are discussions around the possible introduction of a feed-in-tariff program. No specific local content requirements have been announced for CSP projects, but an important business requirement is that 51% of any new company must be owned by UAE nationals – with the exception of free zone companies that can be 100% owned by foreign investors. Furthermore, lower-than-expected DNI conditions and the potentially damaging impact of dust on CSP operations could be a strong deterrent against the market. Considering the level of water scarcity in the UAE, CSP technology would be ideal for solar desalination applications, as up to 90% of the freshwater in the entire Gulf region is supplied through desalinated seawater. Not only could solar thermal power provide the electricity for the process, but waste heat could also be usable for thermal desalination. Another potential area for the deployment of CSP technology is the provision of heating and cooling for buildings and industrial applications. In addition, enhanced oil recovery (EOR) CSP Today Markets Report 2014 | 27 executive summary represents a promising avenue for CSP developments due to the existing EOR activities being undertaken in this market. Chapter 11: Markets Digest The Markets Digest provides a comprehensive overview of the remaining CSP markets, providing insight into CSP project profiles and pipelines as well as CSP-specific policies and incentives. These markets are: Algeria Australia Brazil Egypt Greece Israel Italy Jordan Kenya Kuwait Mexico Namibia Oman Portugal Qatar Spain Thailand Tunisia Turkey www.csptoday.com CSP Today Markets Report 2014 | 28 Current status of the CSP Industry 1 Current status of the CSP Industry Heba Hashem Contents List of Figures List of Tables Introduction 1.1. CSP Industry in Review 1.1.1. The collapse of the Spanish CSP market 1.1.2. First large-scale projects come on-line: USA and UAE 1.1.3. Saudi Arabia launches White Paper 1.1.4. Chilean Government releases details for CSP tender process 1.1.5. Delays in South African and Indian bidding rounds 1.1.6. Morocco launches RFQ for Phase Two of Ouarzazate 1.1.7. Kuwait Makes its Presence Felt 1.1.8. China CSP progress and FiT 1.2. CSP Industry Outlook References 29 29 30 30 30 32 34 35 36 37 37 38 38 46 List of Figures Figure 1(1): Spain CSP Market Growth 2013 Figure 2(1): USA CSP Market Growth 2013 Figure 3(1): UAE CSP Market Growth 2013 Figure 4(1): Chile CSP Market Growth 2013 Figure 5(1): South Africa CSP Market Growth 2013 Figure 6(1): India CSP Market Growth 2013 Figure 7(1): Morocco CSP Market Growth 2013 Figure 8(1): Kuwait CSP Market Growth 2013 Figure 9(1): China CSP Market Growth 2013 Figure 10(1): Parabolic Trough Technology - Project Pipelines 2013 (excludes projects in operation) Figure 11(1): Fresnel Technology - Project Pipelines 2013 (excludes projects in operation) Figure 12(1): Dish Technology - Project Pipelines 2013 (excludes projects in operation) Figure 13(1): Tower Technology - Project Pipelines 2013 (excludes projects in operation) 39 39 39 40 40 40 40 41 41 42 43 44 45 List of Tables Table 1(1): Spain’s Popular Party Government - Major Legislative Changes Affecting CSP (2012-2013) Table 2(1): UAE’s First CSP Project Table 3(1): Large-scale CSP Projects Underway in the USA Table 4(1): Chile’s Tender Process Table 5(1): Moroccan Solar Plan: Key Dates Table 6(1): Shagaya Project Phase One - Key Specifications 31 32 33 35 37 38 www.csptoday.com CSP Today Markets Report 2014 | 29 Current status of the CSP Industry Chapter Summary The past few years have witnessed momentous developments in the global CSP industry; from the collapse of the Spanish CSP market, to the termination of the U.S. Department of Energy’s loan-guarantee program. Unexpected delays were also encountered in the South African and Indian CSP bidding rounds. On the positive side, the UAE’s first, 100-MW CSP plant came online in March, while the United States will see five plants totaling around 1.3 GW being commissioned over the next year. February 2013 in particular was an eventful month, with the launch of the CSP tender process in each of Saudi Arabia and Chile. Kuwait and Morocco also released Requests for Proposals; the former for Phase One of the Shagaya Multi-Technology Renewable Energy Park, and the latter for Phase Two of Ouarzazate. Finally, China is targeting a CSP capacity of 1 GW by 2015 and 3 GW by 2020, and is revising feed-intariffs for CSP. As outlined in this introductory chapter, the volume of operating capacity worldwide – around 2.8 GW – is set to dramatically increase with the connection of more than 1,000 MW to the grid in the USA and with the substantial pipeline of CSP projects under construction. Introduction The CSP world market continues to grow, despite recent difficulties in traditional markets. While a number of projects are approaching completion in mature markets such as Spain and the USA, new projects are being tendered in emerging CSP markets, as governments and funding institutions recognize the economic advantages of local CSP development. According to the CSP Today Global Tracker, there are 17 GW of CSP at various stages of development worldwide. Most interesting is the amount of operating capacity, which is almost 2.8 GW, partly due to recent plant connections in Spain. This volume is set to increase dramatically with the connection of more than 1,000 MW to the grid in the USA when Ivanpah, Solana, Mojave, Crescent Dune and Genesis Solar stations come online. 1.1. CSP Industry in Review 1.1.1. The collapse of the Spanish CSP market Spain maintained its leadership in the CSP industry in 2012, during which it added 802.5 MW of CSP capacity to reach a total of 1,953.9 MW. Today, the country has over 2,000 MW of CSP in operation, and another 250 www.csptoday.com MW is scheduled to come online before the end of 2013. This would bring the country’s total installed CSP capacity to 2,300 MW. Spain was the first European country to introduce a Feed-in Tariff (FIT) system for CSP, in 2002, and in 2007, FIT regulations were refined, improving remuneration options for CSP plants. However, in January 2012, FITs were cancelled for new applications, and would not be awarded to CSP plants beyond the 2,355 MW approved in 2009 to become operational by 2014. Instead, renewable energy firms would receive a fixed investment supplement to ensure economic viability of their plants. The latest development in terms of the FIT came in July 2013. FITs are to be removed and replaced with a new scheme of investment supplements. Under the new law, both renewables and cogeneration plants will receive payment for their investment, instead of the former FIT. This has been established at a 7.5% rate, before tax. However, this rate will not be applied to the CAPEX of the plant, but rather to what the Spanish Government deems a вЂ�reasonable cost’ for a CSP plant. Struggling to contain a €25 billion gap between electricity costs and revenues amid a severe financial crises, the Spanish Government went further and imposed significant taxes on renewable energy production. As a result of these legislative changes, the CSP industry is incurring nearly 37% revenue losses, and a large number of developers are working with financial institutions in an attempt to restructure debts. Leading CSP developers in Spain, such as Abengoa and Acciona, have taken legal action against the government and are implementing workforce reduction. And, while Acciona announced it would cut investments in the local energy sector by 50%, Abengoa, Spain’s largest CSP developer, said it would not make new investments in Spain. The majority of Spanish CSP plant owners are expected to default on the bank loans they used to build the plants in the first place, and the projects may need to be refinanced many times over to save some yield out of them, potentially triggering a flurry of ownership changes. For projects where funding is subject to a material adverse change clause, which could include most of those recently completed, the banks may demand their CSP Today Markets Report 2014 | 30 Current status of the CSP Industry money back, or they could choose to seize the project assets. Another possibility is that the banks could demand plant owners increase their capital to help cover the debt. In this case, however, owners will have to find partners willing to invest into what has become an unprofitable venture under the current legislation. In addition to the latest legislative changes, the Spanish CSP market has a number of other barriers against future growth. Firstly, electricity generation capacity is more than double the peak demand (Red Electrica De EspaГ±a, 2012). Secondly, there has been a 5% decline in electricity demand since 2007 (Red Electrica De EspaГ±a, 2012). Thirdly, Spain is fairly isolated with few interconnections with other markets and a similar situation of oversupply is happening in other European markets making the export of electricity unlikely (The Economist, 2013). Despite the troubles in Spain’s CSP industry, 2013 began well, with a number of plants coming on line. However, given the unstable regulatory framework, Spanish CSP firms are now turning to overseas CSP markets. Abengoa is currently building two CSP plants in South Africa, as it continues work on its projects in Spain, Mexico and USA, while Acciona has secured business with Morocco’s Noor I project as an EPC member of the Acwa Power-led consortium. Table 1(1): Spain’s Popular Party Government - Major Legislative Changes Affecting CSP (2012-2013) Regulation Changes Royal Decree Law 1/2012, of 27 January Financial incentives suspended for new electricity production installations using co-generation, renewable energy sources and waste. Act 15/2012, of 27 December 7% tax applied on the income of all electricity generators. Reduction of 12-15% in the FIT proportional to the natural gas a plant consumes. Royal Decree Law 29/2012, of 28 December Measure taken to withdraw rights to premiums if the deadlines to start operations are not met. Royal Decree Law 2/2013, of 1 February The End of the Feed in Tariff Elimination of the “market price plus premium” option, which allowed plants to sell electricity and receive the price that the market set plus a reference premium, which was fixed in 2012 at 28.1894 cents per Euro for kWh. Stipulates that, as of January 2013, CSP plants can only apply the FIT method, which will automatically be applied to all plants previously applying the “market price plus premium”. During 2013, the FIT will remain fixed at 29.8957 Euro cents per kWh. CSP plants will not be rewarded for selling at peak demand times and will instead receive the same amount regardless of the time they sell the energy. FIT will no longer be updated according to the Consumer Price Index, but with a new index known as the “core inflation index” that will exclude more volatile elements in its rate calculations, such as energy products. The latest legislation has seen the FIT (which was meant to last for 25 years) removed and replaced with a supplementary investment of 7.5% for the next six years. Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 31 Current status of the CSP Industry 1.1.2. First large-scale projects come on-line: USA and UAE The year 2013 saw the UAE’s first CSP project come online. Shams 1 was launched in the capital city Abu Dhabi in March 2013, and at 100 MW, it became the world’s largest CSP plant. Meanwhile, the United States, which currently has an installed CSP capacity of 571 MW, will see five new plants totaling around 1.3 GW being commissioned over the next 12 months. Table 2(1): UAE’s First CSP Project Title Shams 1 MWe Capacity 100 Developers Masdar, Total, Abengoa Solar Owners Masdar (60%); Abengoa Solar (20%); Total (20%) EPC Contractor Abener –Teyma Generation Offtaker ADWEC Technology Parabolic trough; natural gas or diesel as fossil backup; dry cooling Financing US$ 600m loan funded by BNP Paribas; Natixi; Societe Generale; Mitsui; Sumitomo Mitsui Banking Corporation; Bank of Tokyo-Mitsubishi; National bank of Abu Dhabi; KfW; Union National Bank; and West LB. Completion date March 2013 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 32 Current status of the CSP Industry Table 3(1): Large-scale CSP Projects Underway in the USA Title MW Developer Mojave Solar 280 Owner EPC Contractor Generation Technology Offtaker Financing Completion date Mojave Solar, Mojave Solar, LLC; Abengoa LLC Solar, Inc. Abener – Teyma Pacific Gas & Parabolic Electric trough; two 140-MWe turbines; wet cooling US$ 1.2bn DOE-loan guarantee Q1 2014 Solana 280 Generating Station Abengoa Solar Abengoa Solar Arizona Public Service 392 Ivanpah Solar Electric Generating System BrightSource NRG Energy; Energy BrightSource Energy; Google Bechtel Pacific Gas Engineering & Electric; Southern California Edison Power tower; dry cooling; natural gas as fossil backup Q4 2013 US$ 1.375bn DOE-loan; $168m from Google; $300m from NRG Energy (towards project cost of $2.2bn) Genesis Solar Energy Project 250 Genesis Solar, Genesis Solar, LLC; NextEra LLC Energy Resources, LLC Pacific Gas & Electric (PG&E) Parabolic trough; Two 125-MWe turbines. steam rankine for output, and dry cooling US$ 935m in project bonds from Credit Suisse, facilitated by an 80% DOE-loan guarantee Q1 2014 Crescent Dunes Solar Energy Project 110 Solar Reserve’s Tonopah Solar Energy, LLC NV Energy Power tower; six hour- molten salt thermal energy storage US$ 737m DOE loan; private financing from Solar Reserve, ACS Cobra and Santander Q1 2014 Abengoa Solar SolarReserve’s ACS Cobra Tonopah Solar Energy, LLC US$ 1.45bn Parabolic DOE-loan trough; two guarantee 140-MWe turbines; wet cooling; six hour- molten salt thermal energy storage Q4 2013 Source: CSP Today Global Tracker, August 2013 The above-outlined projects benefitted from the now-on-hold U.S. Department of Energy’s (DOE) loan-guarantee program, receiving a total of US$ 4,235 million in loan guarantees. Future projects, however, will no longer benefit from this support mechanism, since the program was terminated in late 2012. www.csptoday.com The U.S. CSP sector is now obliged to raise project finance from other sources, such as federal level Investment Tax Credits – a 30% tax credit system that has been extended through December 21, 2016. Other initiatives are also pushing the growth of CSP, such as the SunShot program. CSP Today Markets Report 2014 | 33 Current status of the CSP Industry SunShot – a DOE target for CSP technologies to achieve cost parity with other forms of energy by 2020 – calls for at least a 75% reduction in costs in order to achieve a levelized cost of electricity of US$ 0.06/kWh electric or less, without subsidy. The program has played a major role in the growth of CSP, investing more than US$ 130 million since October 2011 in new funding initiatives for the development and demonstration of CSP technologies, including four initiatives introduced in 2013: CSP HIBRED, SolarMat, PREDICTS and CSP: ELEMENTS. The United States’ five underway projects, along with the UAE’s commissioned CSP plant, are expected to prove the reliability and dispatchability of CSP, increasing the confidence of utilities, financiers, grid operators and regulators in the technology. 1.1.3. Saudi Arabia launches White Paper Saudi Arabia launched the Competitive Procurement Process (CPP) for its renewable energy program in February 2013. Announced by King Abdullah City for Atomic and Renewable Energy (K.A.CARE), the CPP invited developer feedback on the White Paper by April 5, 2013. A period of six months has been given for proposals in the introductory round, although in subsequent procurements, a shorter period will be allotted. K.A.CARE will initially establish the framework for the CPP, identifying targets, capacities and eligible technologies for each round. Following that, a standalone government entity, named as the Sustainable Energy Procurement Company (SEPC), will take over the responsibility of administering the procurement and executing the Power Purchase Agreements (PPAs). The initial time frame which was proposed by K.A.CARE in the draft White Paper has been delayed. The Request for Proposals (RFP) for the introductory round, which will see 800 MW split between CSP, PV and wind, was initially expected to be released mid-2013. It is now expected that the RFP will not be released until 2014, although there is a chance that a draft version of the RFP will be released for public comment before the end of 2013. The introductory round of the CPP will comprise of five to seven projects of varying technologies at pre-packaged sites, which will be offered to bidders at locations that can be easily connected to the grid. After this 9-12 month process, culminating in the selection of the introductory round winners, the first full-scale procurement round will commence. www.csptoday.com The first bidding phase will target 900 MW of CSP, and the second 1,200 MW. For any project to be eligible, a minimum capacity of 5 MW per round will be required, although smaller projects that aggregate up to 5 MW or more will be eligible to participate, provided they have a single, common metering point. As for financial parameters, K.A.CARE requires participants to have one of the following: an investment-grade credit rating, a net worth with a minimum of US$107,000 per MW of the total contract capacity at the end of the last two fiscal years, or a net revenue of no less than US$ 53,000 per MW of the total contract capacity at the end of the last fiscal years. Externally financed projects, on the other hand, will be evaluated based on the strength of commitment and past experience in financing projects. To satisfy experience requirements, developers must have constructed at least one renewable energy facility similar to the one being proposed, with Saudi experience earning additional points. An ability to achieve commercial operation within two years from executing the PPA is another prerequisite, although for pre-packaged sites, the deadline for commercial operation will be 18 months. In terms of CSP-specific requirements, at least one month’s worth of radiation data using terrestrial measurements or three months of satellite-based radiation data will have to be shown to meet the resource-assessment criteria. Alternatively, CSP developers may rely upon data from a tower site with similar meteorological conditions, but they must confirm so in writing by a qualified meteorologist. This would not be required if the developer were utilizing one of the pre-packaged sites. Additionally, during the introductory round, CSP plants should provide a minimum of four hours of storage, and this may increase in subsequent rounds. CSP proposals with higher storage capacity will be favored over other proposals that are priced equivalently, while developers integrating local content provisions into proposals will also be given preference during evaluation. Competition in Saudi Arabia’s upcoming bids is expected to be intense, given that the program has generated tremendous interest from CSP companies worldwide since its announcement in 2011. CSP Today Markets Report 2014 | 34 Current status of the CSP Industry 1.1.4. Chilean Government releases details for CSP tender process Chile enjoys one of the highest solar radiation levels in the world, especially in the Atacama Desert, where radiation potential is as high as 3,400 kWh/mВІ annually. The good DNI conditions are focused in the North of the country, whilst DNI conditions in the South of the country are considerably lower. Spanning 4,000 square kilometers, the Atacama Desert is home to Chile’s world-leading copper industry, which together with other mining activities absorbs roughly 80% of the nation’s energy. Chilean mining companies are becoming increasingly eager to capitalize on CSP’s potential for cheap power to fulfill the industry’s 24/7 power demands. CSP activity has already started in Chile. Spanish CSP giant Abengoa recently commissioned a 14 MW CSP plant for the Mineral El Tesoro mine, currently the largest in South America, while the National Copper Corporation of Chile will implement a thermal solar plant for the purpose of copper separation, a project that has been awarded to Chile’s Energia Llaima SpA and Denmark’s Sunmark A/S. Chile’s power sector is heavily dominated by coalpowered electricity, and as mining demand grows, the sector’s energy consumption is projected to rise by at least 5% per year over the next decade. In an effort to reduce Chile’s dependence on imported fossil fuels, the National Energy Strategy 2012-2030 was launched in March 2012 with the aim of producing 10% of electricity from renewable sources by 2024. In February 2013, the Chilean Economic Development Agency (CORFO) launched the first international CSP tender process. Companies, joint ventures, and consortia were invited to submit project proposals that would be bankable under commercial banks’ criteria. Chile’s Ministry of Energy operating through CORFO will provide a subsidy of up to US$ 20 million to the selected project, with a limit of a 50% of project total cost. It will also optionally facilitate access to land for the plant. Table 4(1): Chile’s Tender Process Tender Specification Description Financing The government negotiated a consortium of financing sources that exceeds US$ 350 million in soft loans, including: A subsidy of US$ 18.6 million from the European Union. US$ 66 million in loans and up to 25% of the total project costs from the Inter-American Development Bank. Loans worth US$ 132.7 million from the German Development Bank (KfW), channeled through CORFO and local banks. Project Size Any scale above a minimum of 10 MWe. Grid Connection Projects will be connected to either SIC or SING (Centre and Great North grid respectively). CSP Technology Proposed plants can be of any CSP technology. Thermal Energy Storage The plant must have a minimum of 3 hours storage at 85% load. In the case of a tie with all other metrics being equal, the committee will choose the plant with the largest amount of storage. Back-up Fuel Back-up fuel is not allowed, other than to maintain thermal fluids and/or molten salts at the right temperature to avoid freezing. Amount of back-up fuel cannot exceed 6% of the annual electricity generated by the plant. DNI Each project must include a year’s worth of meteorological data. www.csptoday.com CSP Today Markets Report 2014 | 35 Current status of the CSP Industry Deadline for submission of proposals August 22, 2013 (note: the deadline is said to have been extended by to October 22, 2013, due to requests from applicants claiming to face difficulties regarding the permits for installing electricity lines to evacuate the energy produced by the plant. Electricity Sale Developers must demonstrate they have arranged either a PPA or MoU for the purchase of electricity. They could also sell in the SPOT market although financing could be complicated in this case. Source: CSP Today Global Tracker, August 2013 1.1.5. Delays in South African and Indian bidding rounds South Africa’s Integrated Resource Plan (IRP) 2010-2030 envisages the generation of an additional 56,500 MW by 2030, compared with current capacity of about 38,000 MW, most of which is produced by Eskom coal-fuelled power stations. Of the new capacity, 21,534 MW, or 38%, is planned to be generated through renewable energy, with 1,200 MW allocated to CSP (SASTELA, 2012). Consequently, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was established as a competitive bid scheme to kick-start the process of reaching the IRP 2010 targets. Eskom will be the buyer of the power produced by signing the PPA, acting through its Single Buyer Office (SBO), and the Government will provide guarantee for the PPA payment obligations through the National Treasury. However, South Africa’s renewable energy program has been characterized by numerous delays, which first began when the financial closure for Window 1 projects was postponed multiple times: from June 2012 to the end of September, then again to the end of October, and finally to November. Financial closure for Window 2 was also postponed from December 2012 to March 2013, while the submission date for Window 3, originally scheduled for October 2012, was pushed twice and ultimately occurred on 19 August 2013, where 200 MW was made available to bidders. An additional 200 MW has been made available for March 2014 to allow for developers who missed the August 2013 deadline due to submit their proposals. The reason for this is that the criteria for projects bidding in Window 3 changed dramatically with the introduction of a new Time of Day (TOD) tariff. The rationale behind the first financial closure delay was described as a way of allowing the government time to finalize a support framework for Eskom. As for the postponement of the third bid submission date, it was www.csptoday.com meant to give the country’s Department of Energy time to reconsider aspects of the Request for Proposals and integrate lessons learnt in the first and second bidding rounds into the third round. Minimum local content requirements for CSP projects also underwent changes, rising from 21% in the first window, to 35% in the second window for no-storage CSP, and 25% for CSP with storage. For the third window, this has been raised to 45% for no-storage CSP and 40% for CSP with storage. Similarly, the site of the country’s first solar park – the 3 GW Northern Cape solar corridor – was moved from Upington to Prieska. The series of changes in stipulations and deadline dates may have created a degree of uncertainty among the global CSP community, although experts said that in a new CSP market, delays were expected. Indeed, a number of CSP projects are currently underway in the country, including the 50 MW Khi Solar One, the 100 MW Kaxu Solar One under construction by Abengoa, and the 50 MW Bokopoort project under development by ACWA Solafrica. Like South Africa, India’s National Solar Mission also encountered delays. Firstly, phase two bidding round for CSP projects was postponed from 2013 to 2014-2015, with the objective of incorporating sufficient learnings from phase one into phase two. This was followed by four of five CSP projects missing their scheduled commissioning date of May 10, 2013, prompting the government to extend the deadline to March 10, 2014, allowing developers 10 additional months. The decision was well-received by stakeholders and solar communities worldwide, as local officials confirmed that they witnessed seriousness and commitment to deliver by the developers. The delays in executing India’s CSP projects was blamed on various factors, including the short construction timelines, the CSP Today Markets Report 2014 | 36 Current status of the CSP Industry involvement of multiple lenders, the lack of essential components such as heat transfer fluid, and the large gap between predicted and actual annual DNI. Of the seven projects, one has already been commissioned. Godawari Green Energy’s 50 MW CSP plant was connected to the grid in June 2013. 1.1.6. Morocco launches RFQ for Phase Two of Ouarzazate The Moroccan Solar Plan (MSP) was launched in 2009 to achieve 2 GW of installed solar energy capacity by 2020, which would supply around 14% of the country’s electricity demand. This capacity will be deployed in five sites across the country: 500 MW in Laayoune; 100 MW in Boujdour; 500 MW in Tarfaya; 400 MW in Ain Beni Mathar; and 500 MW in Ouarzazate. MASEN is responsible for managing the procurement of the projects through tendering and financing activities, and acts as a single buyer of the electricity produced by CSP plants through Power Purchase Agreements (PPAs). MASEN’s selected procedure is an international public competitive bidding process where the bidder offers a lower tariff that meets certain technical specifications on a Build, Own, Operate, and Transfer basis for 25 years. 1.1.7. Kuwait Makes its presence felt As an oil-producing country, Kuwait will highly benefit from investing in alternative energy to diversify its resources, where the saved oil and gas could be shifted from up-steam consumption to more profitable downstream industries. Driven by this reality, Kuwait now aims to generate 15% of its electricity from renewable energy resources by 2030. In June 2013, Kuwait Institute for Scientific Research (KISR) announced the release of the Request for Proposals (RFP) of Phase One of the Shagaya MultiTechnology Renewable Energy Park. The 70 MW project will comprise 50 MW CSP, 10 MW PV, and 10 MW wind energy, and will be completed in the first half of 2016. The main specifications of the CSP portion are highlighted in Table 6(1) Table 5(1): Moroccan Solar Plan: Key Dates May 2010 472 MW Ain Beni Mathar ISCC plant with 20 MW of CSP commissioned. September 2012 First phase of Ouarzazate (Noor I) awarded to Saudi Arabia’s ACWA for a value of US$ 820 million. ACWA, which will build and operate the 160 MW solar plant, submitted a 28.8% lower tariff than that of the second bidder, according to a research carried out by CSP Today. January 2013 MASEN launched a Request for Qualification process to select developers of Ouarzazate Phase Two, consisting of 300 MW. The bid includes two projects: a 200 MW parabolic trough plant (Noor II) and a 100 MW central tower plant (Noor III). Both projects need to be equipped with storage, and MASEN will provide the land and buy the electricity through a 25-year long PPA. In May 2013, the two projects jointly received $218m from the Clean Technology Fund. August 2013 MASEN announces seven shortlisted pre-qualified bidders for Noor II and Noor III projects. The RFP launch is expected to take place in the fourth quarter of 2013. 2016 400 MW to be commissioned in Ain Beni Mathar. 2017 500 MW to be commissioned in Foum Al Ouad. 2018 500 MW to be commissioned in Boujdour. 2019 100 MW to be commissioned in Sebkha Tah. 2020 MASEN’s target year for achieving 2 GW of solar power. Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 37 Current status of the CSP Industry Table 6(1): Shagaya Project Phase One - Key Specifications Thermal Energy Storage (TES) 10 hours of molten salt TES. Must be capable of being fully dispatched in all specified load ranges up to 100% of the contracted power capacity. Back-up fossil fuel Usage of back-up fossil fuel will only be allowed for operational purposes (less than 1%) in the form of light fuel oil. Dry cooling The project must be designed based on the concept of limited water consumption for cleaning and for the steam-turbine closed cycle. Land KISR will provide the ready site for the selected contractor. Meteorological data KISR will provide information on solar and wind resources, a soil and ground investigation, and a topographic survey data. Source: CSP Today Global Tracker, August 2013 Out of 107 consortia who participated in the qualification process, 37 were approved by KISR, eight of which were CSP consortia. The winning consortium will be required to design, build and operate the plants for six years, including two years as warranty period starting after the project’s commercial operation date. The Shagaya project is the first of a three-phased master plan proposed by KISR. The second phase will expand the plant’s capacity by 930 MW to bring it up to 1,000 MW, and the third by another 1,000 MW to ultimately reach a capacity of 2,000 MW by 2030. All power output from the Shagaya project will be evacuated by KISR to the Ministry of Electricity and Water – Kuwait’s single electricity producer and distributor, and which will jointly own the plants with KISR. Another project being developed in Kuwait is the Abdaliya Solar Plant, a 280 MW ISCC plant integrating a 60 MW parabolic trough collector with a gas turbine. In 2012, proposals were called for and technical assistance was assigned by the Partnership Technical Bureau (PTB) and Ministry of Electricity and Water (MEW) - the joint developers of the project. The ISCC project is being set up as a Special Purpose Vehicle which will design, build, finance, operate and maintain the power generation facility for a fixed duration of time. The SPV will also sign an Energy Conversion and Purchase Power Agreement with the MEW. According to PTB, expressions of interest, requests for qualifications and the tender to build the facility – estimated to cost US$ 720 million – are all planned to be issued in 2013. In addition, Chevron is said to be exploring the use of solar energy in enhanced oil recovery in its Saudi Arabia oilfield that borders Kuwait. www.csptoday.com 1.1.8. China CSP progress and FiT China is currently implementing its 12th Five Year Plan (2011-2015) for Renewable Energy, and has targeted an installed capacity for solar thermal power of 1 GW by 2015, and 3 GW by 2020. The country has 3.5 MW of operational CSP plants, and 2,400 MW of CSP have been announced, in planning are under development, or being constructed. China’s bidding process for the first CSP project resulted in three companies submitting a Feed-in Tariff (FIT) of 2.25, 0.98, and 0.94 RMB/kWh, and China Datang was awarded with the lowest price at 0.94 RMB/kWh. The project, for which bidding was opened in January 2011, will see the construction of a 50 MW parabolic trough CSP plant in Erdos, Inner Mongolia by 2014. However, since this FIT is too low to develop a project at the moment, the Chinese Government is revising the FIT based on the cost of the projects, which could lead to higher incentive values. 1.2. CSP Industry Outlook According to the results of the CSP Today Markets Survey July 2013, whose participants included CSP component suppliers, developers, consultants, government bodies, and EPC firms, CSP companies are currently generating most of their revenue from the USA and Spain. In the next 10 years, however, CSP revenue is mainly expected to be drawn from, South Africa, Saudi Arabia, UAE, China, India and the USA, according to the survey responses. Below is a breakdown of CSP projects under development, construction, or planning across eight markets: Spain, USA, UAE, Chile, South Africa, Morocco, Kuwait, and China. CSP Today Markets Report 2014 | 38 Current status of the CSP Industry Figure 1(1): Spain CSP Market Growth 2013 Figure 3 (1): UAE CSP Market Growth, 2013* 2,500 пЂј Operation пЂј Construction пЂј Development 2,055 900 пЂј Planning пЂј Operation 800 800 2,000 700 600 1,500 500 400 1,000 *The question mark indicates that the initial amount allocated to CSP may be revised. Initially CSP Today was told that 800 MW of the 1 GW Mohammed Bin Rashid Al Maktoum Solar Park would be allocated to CSP. It has since emerged that this amount is under revision. 300 200 500 100 250 100 50 0 0 Q3 2013 Q3 2013 Source: CSP Today Global Tracker, August 2013 Source: CSP Today Global Tracker, August 2013 Figure 2(1): USA CSP Market Growth 2013 2,000 1,865 пЂј пЂј пЂј пЂј 1,800 1,600 1,400 Planning Development Construction Operation 1,323 1,200 1,000 800 600 600 571.16 400 200 0 Q3 2013 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 39 Current status of the CSP Industry Figure 4 (1): Chile CSP Market Growth, 2013 Figure 6 (1): India CSP Market Growth, 2013 1,200 300 пЂј Operation пЂј Planning пЂј Announced 1,080 1,100 254 1,000 250 пЂј пЂј пЂј пЂј пЂј Announced Planning Development Construction Operation 900 210 800 200 700 155 600 156 150 500 400 100 300 56.6 200 50 100 14 5 0 0 Q3 2013 Q3 2013 Source: CSP Today Global Tracker, August 2013 Source: CSP Today Global Tracker, August 2013 Figure 5 (1): South Africa CSP Market Growth, 2013 * Figure 7 (1): Morocco CSP Market Growth, 2013 300 350 пЂј пЂј пЂј пЂј 250 Announced Planning Development Construction 250 200 200 пЂј пЂј пЂј пЂј 300 300 Announced Planning Construction Operation *This graph does not reflect the announced 5 GW solar park as the divide between CSP and PV has not been decided. 250 200 200 150 160 150 120 100 100 50 50 20 0 0 Q3 2013 Source: CSP Today Global Tracker, August 2013 www.csptoday.com 20 Q3 2013 Source: CSP Today Global Tracker, August 2013 CSP Today Markets Report 2014 | 40 Current status of the CSP Industry Figure 8 (1): Kuwait CSP Market Growth, 2013 62 Figure 9 (1): China CSP Market Growth 2013 1,800 пЂј Planning пЂј Development 60 1,700 60 1,600 58 1,400 56 1,200 54 1,000 52 800 пЂј пЂј пЂј пЂј пЂј Announced Planning Development Construction Operation 50 50 600 48 400 352.5 286 46 200 60 44 Q3 2013 Source: CSP Today Global Tracker, August 2013 www.csptoday.com 3.68 0 Q3 2013 Source: CSP Today Global Tracker, August 2013 CSP Today Markets Report 2014 | 41 Current status of the CSP Industry Figure 10 (1): Parabolic Trough Technology - Project Pipelines 2013 (excludes projects in operation) 3,000 пЂј Parabolic Trough Announced пЂј Parabolic Trough Planning 2,500 пЂј Parabolic Trough Development пЂј Parabolic Trough Construction 2,000 1,500 1,000 500 0 South Tunisia Africa Algeria Argentina Brazil Chile China Egypt India Israel Italy 0 0 50 0 1,700 0 35 0 0 0 0 0 100 0 0 210 0 0 694 284 30 38 0 0 60 0 200 100 150 325 пЂј Parabolic Trough Development 0 20 0 0 0 100 200 290 30 50 0 0 0 0 100 пЂј Parabolic Trough Construction 0 0 0 0 60 0 129 0 0 0 12 160 150 0 815 пЂј Parabolic Trough Announced пЂј Parabolic Trough Planning Kuwait Mexico Morocco USA Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 42 Current status of the CSP Industry Figure 11 (1): Fresnel Technology - Project Pipelines 2013 (excludes projects in operation) 300 пЃ® 250 Fresnel Planning пЃ® Fresnel Development пЃ® Fresnel Construction 200 150 100 50 0 Australia Chile China France India South Africa USA пЃ® Fresnel Planning 30 5 0 0 145 150 0 пЃ® Fresnel Development 0 0 100 12 0 0 0 пЃ® Fresnel Construction 44 0 0 0 125 0 5 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 43 Current status of the CSP Industry Figure 12(1): Dish Technology - Project Pipelines 2013 (excludes projects in operation) 160 140 пЃ® Dish Announced пЃ® Dish Planning пЃ® Dish Development пЃ® Dish Construction 120 100 80 60 40 20 0 Australia China Cyprus Greece India Israel South Africa пЃ® Dish Announced 0 130 0 0 0 0 20 пЃ® Dish Planning 0 0 0 0 0 0 0 пЃ® Dish Development 43.5 0 50 75 10 12.5 0 пЃ® Dish Construction 0 13.2 0 0 0 0 0 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 44 Current status of the CSP Industry Figure 13 (1): Tower Technology - Project Pipelines 2013 (excludes projects in operation) 3,000 2,500 пЃ® Tower Announced пЃ® Tower Planning пЃ® Tower Development пЃ® Tower Construction 2,000 1,500 1,000 500 0 Algeria Chile China Egypt Greece Israel Morocco South Africa Spain Tunisia Turkey USA 0 0 0 0 0 0 0 0 0 2,000 0 0 307 400 0 250 0 0 100 0 0 0 0 1,540 пЃ® Tower Announced пЃ® Tower Planning пЃ® Tower Development 0 0 10 0 50 121 0 200 50 0 50 500 пЃ® Tower Construction 0 0 50 0 0 0 0 50 0 0 0 502 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 45 Current status of the CSP Industry References The Economist, 2013. How to lose half a trillion euros. Available through: http://www.economist.com/news/ briefing/21587782-europes-electricity-providers-face-existential-threat-how-lose-half-trillion-euros?frsc=dg|b [Accessed October 2013]. Red Electrica De EspaГ±a, 2012. The Spanish Electricity System in 2012. Available through: http://www.ree.es/ingles/ sistema_electrico/pdf/infosis/Electricity_system2012_TheSpanishElectricitySystem.pdf [Accessed October 2013]. Red Electrica De EspaГ±a, 2012. The Spanish Electricity System Summary. Available through: http://www.ree.es/ ingles/sistema_electrico/pdf/infosis/sintesis_REE_2012_eng.pdf [Accessed October 2013]. Southern Africa Solar Thermal and Electricity Association, 2012. CSP in South Africa. Available through: <http://www.sastela.org/csp-in-south-africa.html> [Accessed 03 August 2013] www.csptoday.com CSP Today Markets Report 2014 | 46 Scorecard and Forecast 2 CSP Markets Scorecard and Forecast By Groupe Reaction Contents List of Figures 47 List of Tables 47 Chapter Summary 48 2.1. Market Scorecard 48 2.2. CSP Today Global Markets Forecast 50 2.3. Survey Results 54 List of Figures Figure 1(2): CSP Market Capacity Forecast Until 2024 51 Figure 2(2): LCOE Forecast Until 2024 52 Figure 3(2): Optimistic Country-Wise Global CSP Capacity Until 2024 (MW) 53 Figure 4(2): Conservative Country-Wise Global CSP Capacity Until 2024 (MW) 53 Figure 5(2): Pessimistic Country-Wise Global CSP Capacity Until 2024 (MW) 54 Figure 6(2): Cumulative CSP Plant Capacity by 2018 55 Figure 7(2): Cumulative CSP Plant Capacity by 2023 55 Figure 8(2): Most promising CSP markets Until 2018 56 Figure 9(2): Most promising CSP markets Until 2023 56 List of Tables Table 1(2): CSP Market Scorecard as of 2013 49 Table 2(2): Market Forecast Summary 50 Table 3(2): CSP Market Forecast Comparison 2012-2013 52 Table 4(2): Limiting and Enabling Factors for CSP Market Growth 57 www.csptoday.com CSP Today Markets Report 2014 | 47 Scorecard and Forecast Chapter Summary This chapter provides detailed analysis of the projected growth of CSP markets, including optimistic, conservative and pessimistic forecasts for cumulative installed CSP capacity by market until 2024. Using available data from industry experts and the consolidation of complementary technology-diffusion models, future pitfalls and opportunities in each market, the future capacity of CSP technology expected in the 10 years up to 2024 was identified, both on a global and on a country-by-country basis (country forecasts are included in the relevant country chapters) . This chapter also ranks markets according to which offers the best opportunities for investors under today’s industry scenarios. Comprehensive research was undertaken, based on a detailed methodology, in order to generate a country-specific scorecard that ranks countries according to the existing CSP activity in each of them. The ranking takes into account various CSP-related parameters, including technical and economic factors, with an aim of showing the current attractiveness of different countries for CSP deployment. 2.1. Market Scorecard Comprehensive research was undertaken, according to a detailed methodology in order to generate a country-specific scorecard that ranks countries according to the existing CSP activity in each of them. The objective of this scorecard is to identify the markets where CSP offers the best opportunities for investors under today’s industry scenario. The ranking takes into account different CSP-related parameters, including technical and economic factors, and aims to show the current attractiveness of different countries for CSP deployment. This scorecard does not account for future developments, which could change these markets’ attractiveness to CSP industry players. A survey was utilized to identify the key driving parameters of the industry, in order to determine the metrics reflecting the current state of the individual markets, with respect to these factors. With updated data pertaining to the various market growth indicators, this year’s scorecard shows an industry and a market that is in perpetual state of change, evolution and adaptation. In other words, new markets are strengthening their position in the future of CSP, by committing www.csptoday.com to very ambitious initiatives that will result, by the end of the decade, and by 2030, in a new scale of capacity worldwide. Table 1(2) shows the results of the scorecard model for 2013, where the top three countries that offer great attractiveness for CSP development were found to be South Africa, Saudi Arabia and Morocco. Of those three countries, South Africa and Morocco currently have the most intense CSP activity, with several hundreds of MWs in ongoing tendering processes and more expected to come soon. Even though Saudi Arabia does not have any CSP plants in operation or under construction, it is ranked as the second best CSP market. A combination of large 2032 CSP targets, ambitious goals to use solar desalination and the need to displace domestic oil consumption with alternative energy sources have all helped promote Saudi Arabia’s ranking. The current ecosystem promotes CSP development and activity in the country and provides sufficient grounds for investors to consider this country despite the current absence of CSP plants. In the first rounds of the tendering processes, several hundred MWs are expected to be awarded. It should also be noted that the final score for these three countries is quite similar, and therefore, a multitude of opportunities exists across all of the markets considered. The USA appears in fourth position, following the top three countries mentioned above. With the largest MW capacity under construction and several large plants under development, the USA is remains a strong CSP market. Despite the expected halt in CSP deployment after projects currently under construction are finished (through 2014), development activity in the USA is showing positive signals that this market will remain amongst the leading future CSP markets. After the USA, the scorecard ranking shows three promising countries that have been the subject of much debate and discussion in the industry over the last two years: India, Chile and China. For these three countries, there is huge CSP potential. However, reality shows that their ambitious deployment plans are being delayed and that CSP industry players do not see these markets as ready for a boost of CSP activity. In the case of India, the continuous delays and hard times that most projects have faced, in terms of financing and execution, raised doubts over the future CSP tender processes, and only one of the awarded plants has been commissioned so far. CSP Today Markets Report 2014 | 48 Scorecard and Forecast Of the remaining countries, Spain appears at the lowest position due to the absolute lack of political support and the latest retroactive measures passed on by the government that not only discourage any sign of CSP development activity, but have also put currently operating plants at real financial risk. Indeed, the FiT moratorium adopted almost two years ago has dramatically affected the Spanish CSP sector and the possibility of attracting investors has consequently been reduced considerably. A final observation with respect of the forecast model and this year’s scorecard is that all of the markets considered in the forecast are ranked within the top eight CSP markets. Table 1(2): CSP Market Scorecard as of 2013 Maximum points for each parameter Permitting Industry Readiness Political and Economic Indicators Energy Sector 9 National CSP Targets 8 Ease of Financing 6 Renewable Energy Support 4 Technical Market Potential 17 Score (%) 20 Country 25 Ranking 11 1 South Africa 77.6 9.6 25.0 15.0 12.2 3.1 4.3 2.0 6.4 2 Saudi Arabia 77.3 10.3 20.8 11.7 17.0 3.4 5.1 4.8 4.2 3 Morocco 75.6 9.2 25.0 13.5 13.4 3.0 3.3 2.2 6.0 4 USA 72.0 11.0 14.6 17.6 6.4 2.3 6.0 7.8 6.3 5 India 70.1 4.0 22.9 13.0 12.7 1.8 5.0 3.1 7.7 6 Chile 69.7 9.6 18.8 16.7 5.3 3.5 4.7 5.6 5.6 7 China 65.3 5.2 14.6 12.5 13.5 1.5 4.8 4.2 9.0 8 UAE 58.9 2.0 10.4 20.0 7.8 4.0 5.0 7.1 2.6 9 Australia 52.5 5.5 8.3 15.5 2.7 3.8 5.5 8.0 3.2 10 Israel 47.9 3.0 10.4 16.7 2.3 0.0 5.2 5.0 5.3 11 Egypt 42.5 5.2 8.3 10.3 6.9 1.1 3.0 1.3 6.3 12 Tunisia 41.9 2.2 8.3 9.1 11.8 1.5 0.6 2.7 5.7 13 Algeria 34.0 5.6 10.4 6.9 5.0 0.3 1.5 0.2 4.0 14 Jordan 33.3 3.7 4.2 9.1 3.1 1.2 2.1 3.1 6.9 15 Spain 33.2 3.5 2.1 9.4 0.0 3.2 5.6 4.3 5.2 www.csptoday.com CSP Today Markets Report 2014 | 49 Scorecard and Forecast Please see Appendix A for a detailed description of the parameters that were used in to capture the different factors influencing the attractiveness of each market for CSP project development. 2.2. CSP Today Global Markets Forecast Using available data from industry experts and the consolidation of complementary technology-diffusion models, future pitfalls and opportunities in each market, the future capacity of CSP technology expected in the 10 years (by 2024) was identified, both on a global and on a country-by-country basis. Each country forecast is attached to the chapter relating to that country. CSP Today, to which a total of 243 experts contributed, was used to calibrate the influence of the parameters considered and compare the forecast results with the capacity expected by the surveyed pool within the time horizon considered. Several emerging and established markets were analyzed for this market forecast, and the findings respective to each of them follow in this section. With an average year-over-year new added capacity of 42% from 2008 to 2013, and forecasted to grow by seven, four and two and a half times the current installed capacity over the next decadeconservative and pessimistic scenarios considered, the industry is poised for tremendous growth across the world, as demonstrated in Table 2(2). The global CSP forecast is outlined below. CSP plants (of all types) in operation, under construction, announced, as well as those under development or planning (as of Q2 2013) were considered in the model as the initial capacity. A survey carried out by The capacity forecast, at both a national and global level, was analyzed under optimistic, conservative and pessimistic outlooks to provide a range of future capacities. The cumulative installed capacity, as predicted by the three devised scenarios, is shown in Figure 1(2). Table 2(2): Market Forecast Summary Cumulative Capacity by 2024 (MW) Markets Current Optimistic Conservative Pessimistic Spain* 2,080 2,300 2,300 2,300 USA 571 8,772 5,127 3,047 UAE 100 1,217 522 210 India 55.5 3,666 1,390 697 Rest of the World 53.3 1,068 463 260 Rest of MENA 27 1,028 397 180 Morocco 20 5,275 1,987 845 Chile 14 1,916 797 348 China 3.5 3,614 1,390 634 Saudi Arabia 0 6,283 3,350 2,001 South Africa 0 5,248 2,219 930 *Spain’s capacity has been capped at 2,300 MW. See section 1.1.1. www.csptoday.com CSP Today Markets Report 2014 | 50 Scorecard and Forecast An interesting takeaway from this year’s forecast, as compared with last year’s, is the narrower band of expected capacity, resultant in part from the fact that the capacity to be installed up to 2017 is subject to a lower uncertainty, and also due to the fact that some major markets are seeing a hiatus which slows down future capacity to be installed within the next decade. In the USA, this is because of the economic conjuncture; in Spain, because of the FIT moratorium; in Saudi Arabia as well as Morocco and South Africa, because of deployment delays, and in India because of problems faced during the first round of CSP projects currently under construction. Because of these factors, even though some countries, such as China, have tremendous potential, the high uncertainty in the market has forced a revision of forecasts which resulted in the optimistic scenario being relatively further away than the conservative outlook, and its pessimistic counterpart, as shown in Table 2(2). This year’s IEA Medium-Term Renewable Energy Market Report (2013) reveals a similar outlook to 2018, with a forecasted 12 GW of capacity worldwide for CSP, very similar to the optimistic outlook estimated in this forecast. Due to the current market conditions in Spain which have brought the industry to a halt (see section 1.1.1. ), CSP Today is of the opinion that future growth of the Spanish market is unlikely. For this reason growth in the market has been capped at a maximum of 2,300 MW, which is the sum of the current project pipeline. Figure 1(2): CSP Market Capacity Forecast Until 2024 50000 IEA 2013 Forecast 45000 Optimistic 40000 40,386 Conservative Pessimistic 35000 31,635 30000 25000 19,938 20000 16,876 15000 12,373 10,263 11,451 10000 5000 0 2014 www.csptoday.com 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CSP Today Markets Report 2014 | 51 Scorecard and Forecast Table 3(2): CSP Market Forecast Comparison 2012-2013 2012 Report 2013 Report 2013 vs. 2012 52,616 MW 24,974 MW -53% Conservative 24,498 MW up to 2022 14,389 MW -37% 9,282 MW -23% Optimistic up to 2022 Pessimistic up to 2022 12,509 MW For the market-specific energy production forecast, a capacity factor of 0.3 is assumed until 2008, and a capacity factor of 0.7 is assumed afterwards, under the assumption than thermal storage is implemented in the majority of the projects constructed. The LCOE resulting from the forecasted CSP cumulative capacity is shown in Figure 2(2). While only a fixed number of countries have been considered for both the forecast and the scorecard, additional countries are expected to pursue CSP technologies as good track records are demonstrated throughout an increasing number of developed and developing countries. In this year’s IEA Medium-Term Renewable Energy Market Report, the increase in CSP popularity is depicted in both OECD and non-OECD countries, with a total contingent of countries pushing towards 20 by 2018. This year’s forecast reveals a tightening outlook between the optimistic and pessimistic scenarios, with a prospective capacity by 2024 of 11 GW to 40 GW, distributed amongst new markets for which a forecast is difficult to perform. Many countries are also exploring CSP in their renewable energy initiatives in the future, and may contribute further to supporting the global deployment of CSP technologies: Figure 2(2): LCOE Forecast Until 2024 0.25 Pessimistic LCOE (UL) Conservative LCOE (UL) Optimistic LCOE (UL) Pessimistic LCOE (LL) Conservative LCOE (LL) Optimistic LCOE (LL) 0.20 LCOE (€/kWh) Upper 0.15 0.103 0.095 0.087 0.10 Lower limits 0.05 0.041 0.037 0.032 0.00 2012 www.csptoday.com 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CSP Today Markets Report 2014 | 52 Scorecard and Forecast Americas Rwanda Tanzania Brazil Mexico Argentina Uruguay Western Asia Kuwait Qatar Oman Africa Ethiopia Kenya Malawi Mozambique Namibia Asia-Pacific Peru Thailand Figure 3(2): Optimistic Country-Wise Global CSP Capacity Until 2024 (MW) 10,000 9,000 USA 8,000 7,000 Saudi Arabia 6,000 Morocco South Africa 5,000 4,000 India China 3,000 Spain Chile UAE Rest of World Rest of MENA 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 *Spain’s capacity has been capped at 2,300 MW. See section 1.1.1. Figure 4(2): Conservative Country-Wise Global CSP Capacity Until 2024 (MW) 6000 USA Installed Capacity (MW) 5000 4000 Saudi Arabia 3000 Spain South Africa Morocco 2000 India China 1000 Chile UAE Rest of World Rest of MENA 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 *Spain’s capacity has been capped at 2,300 MW. See section 1.1.1. www.csptoday.com CSP Today Markets Report 2014 | 53 Scorecard and Forecast Figure 5(2): Pessimistic Country-Wise Global CSP Capacity Until 2024 (MW) 4000 3500 USA 3000 2500 Spain 2000 1500 Saudi Arabia South Africa Morocco India China Chile UAE Rest of World Rest of MENA 1000 500 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 *Spain’s capacity has been capped at 2,300 MW. See section 1.1.1. 2.3. Survey Results This year’s CSP Market Survey received responses from 243 experts, from various sectors of the industry, including EPCs, technology providers, suppliers, NGOs, authorities and financiers. An extensive set of data was compiled, providing insightful information on both the development of the forecast and the scorecard models. Regarding future installed capacity, the survey demonstrated that the majority of industry experts anticipate 6 to 10 GW of CSP power plants to be in operation by 2018. With respect of the results of the forecast shown in this report, this is in line with the pessimistic and conservative scenarios with an estimated 6.8 GW and 8.6 GW respectively, meaning the results of the forecast www.csptoday.com are concordant with industry expert estimations. In the longer term, the next decade reveals a scattered opinion in the surveyed pool of experts; with evenly shared opinion from 6 to 20 GW, a feeling which again lies within the pessimistic and conservative scenarios presented in this report, with a forecasted 10.7 GW and 18.2 GW respectively by 2023. Therefore, the industry expert opinion for future CSP installed capacity for the next 5 and 10 years is mostly in line with the conservative to pessimistic range estimated by the forecast presented in this report, which is a good measure of the accuracy of the forecast results. CSP Today Markets Report 2014 | 54 Scorecard and Forecast Figure 6(2): Cumulative CSP Plant Capacity by 2018 > 50 GW - 2% 31 to 50 GW - 3% 2.8 GW - 2% 21 to 30 GW - 5% 3 to 5 GW - 24% 16 to 20 GW - 11% 11 to 15 GW - 11% 6 to 10 GW - 42% Figure 7(2): Cumulative CSP Plant Capacity by 2023 2.8 GW - 0% 3 to 5 GW - 6% > 50 GW - 18% 6 to 10 GW - 20% 31 to 50 GW - 8% 21 to 30 GW - 12% 11 to 15 GW - 19% 16 to 20 GW - 17% As for the distribution of this future capacity, the survey questioned experts on the three most promising markets in the world over the next 5 and 10 years. For the next 5 years, the survey reveals a strong agreement that the CSP hotspots will be Saudi Arabia, USA, China, India, Morocco, South Africa and Spain. This is www.csptoday.com in accordance with the scorecard, which features all these countries but Spain in the top 7. The reason Spain has not been included is because the latest legislative developments have for all intents and purposes led to the Spanish CSP market being brought to a halt. CSP Today Markets Report 2014 | 55 Scorecard and Forecast Figure 8(2): Most promising CSP markets Until 2018 70 пЃ® Highest Installed Capacity пЃ® Second Installed Capacity пЃ® Third Installed Capacity 60 Survey Responses 50 40 30 20 10 Tunisia Turkey UAE Tunisia Turkey UAE USA Thailand Spain South Africa Saudi Arabia Qatar Portugal Oman Namibia Morocco Mexico Kuwait Kenya Jordan Thailand On the longer term - that is, in the next decade to 2023 - a similar outlook is revealed, with a slightly higher distribution of expert opinions. Indeed, countries such Italy Israel India Greece Germany France Egypt China Chile Brazil Australia Argentina Algeria 0 as Australia and Chile are seen to gain further share in the market, while China and India are thought to become more prominent actors of the industry. Figure 9(2): Most promising CSP markets Until 2023 60 пЃ® Highest Installed Capacity пЃ® Second Installed Capacity пЃ® Third Installed Capacity 50 Survey Responses 40 30 20 10 www.csptoday.com CSP Today Markets Report 2014 USA Spain South Africa Saudi Arabia Qatar Portugal Oman Namibia Morocco Mexico Kuwait Kenya Jordan Italy Israel India Greece Germany France Egypt China Chile Brazil Australia Argentina Algeria 0 | 56 Scorecard and Forecast The rest of the survey results were primarily used in aligning the weights given to the most influential limiting and enabling CSP capacity growth factors. These weighted factors were then used, over the forecast time horizon, to scale or abate the power of a given market’s exponential growth, on both a local and global basis. Table 4(2): Limiting and Enabling Factors for CSP Market Growth Limiting Factors Enabling Factors Political and economic instability High solar resources (DNI) Lack of definitive CSP incentive structure Government support Water scarcity Increasing energy demand Difficulty in financing Ease of financing Competition with PV National CSP targets Complexity of administrative permits procedures Ease of permitting Poor grid infrastructure Local supply of components and materials Competition with fossil fuels Stable political and economic environment Lack of local know-how High dependence on energy imports High cost of technology Low labor cost Good grid availability www.csptoday.com CSP Today Markets Report 2014 | 57 South Africa 3 South Africa By Alan Brent Contents List of Figures 58 List of Tables 58 Chapter Summary 60 Country Overview 60 3.1. Electricity Market 62 3.1.1. Electricity Consumption 62 3.1.2. Electricity Demand 62 3.1.3. Grid Transmission 62 3.1.4. Market Structure Diagram 85 3.2. CSP Market 65 3.2.1. CSP-Specific Policy 65 3.2.2. CSP Project Profiles 68 3.2.3. Local Content Requirements 68 3.3. Local CSP Ecosystem 68 3.3.1. Key Government Agencies 72 3.3.2. Permitting Agencies 72 3.3.3. Local Consultants and R&D bodies 74 3.3.4. Financing Organizations 74 3.3.5. Developers and EPC Firms 75 3.4. Local Component Supply 76 3.4.1. Pipes 77 3.4.2. Pumps 77 3.4.3. Tracking Devices 78 3.4.4. Receivers 78 3.4.5. Power Blocks 78 3.4.6. Heat Exchangers 78 3.4.7. Raw Material Availability 78 3.4.7.1. Glass 78 3.4.7.2. Steel 78 3.4.7.3. Molten Salt 79 3.5. Alternative CSP Markets www.csptoday.com 79 CSP Today Markets Report 2014 | 58 South Africa 3.6. Markets Forecast 82 Conclusion 84 References 85 Acronyms 86 List of Figures Figure 1(3): Direct Normal Irradiation in South Africa, Lesotho and Swaziland 61 Figure 2(3): Transmission Development Plan 2011 – 2020 63 Figure 3(3): Demand Forecast Comparisons 64 Figure 4(3): Linkages between various plans to address the integration of distributed electricity generation from IPPs 66 Figure 5(3): Maximum Allocations in Round 3 of the REIPPPP 66 Figure 6(3): First Stage Qualification Criteria for Selection in the Second Stage 67 Figure 7(3): Barriers to Entry of CSP in the South African Market 70 Figure 8(3): Short-term Priority Actions to Address CSP Challenges 71 Figure 9(3): Illustration of the Current and Projected Market Structures 73 Figure 10(3): Typical Project Structure in the South African Context 75 Figure 11(3): Consumption Mix in South Africa (Energy) 79 Figure 12(3): Consumption Mix in South Africa (Electricity) 80 Figure 13(3): Consumption Mix in Industrial Sector (Energy) 80 Figure 14(3): Consumption Mix in Industrial Sector (Electricity) 81 Figure 15(3): Displacement of Fossil Fuel (left) and Solar Boosting (right) 82 Figure 16(3): Installed CSP Capacity in South Africa Until 2024 (MW) 83 Figure 17(3): CSP Cumulative Energy Production in South Africa Until 2024 (TWh) 83 List of Tables Table 1(3): Drivers and Barriers 62 Table 2(3): CSP Projects in South Africa 69 Table 3(3): Key Government Agencies in South Africa 72 Table 4(3): Permitting Agencies in South Africa 74 Table 5(3): Local Consultants and R&D Bodies 74 Table 6(3): Financing Organizations Operating in South Africa 75 Table 7(3): Developers and EPCs With Interests in the South African Market 76 www.csptoday.com CSP Today Markets Report 2014 | 59 South Africa Chapter Summary South Africa was ranked number one in the CSP Today 2013 Markets Scorecard. With a potential CSP capacity of 262 GW to 311 GW in the short and medium term, according to the University of Stellenbosch’s Centre for Renewable and Sustainable Energy, and with DNI levels exceeding 2,900kWh/m2 per year, the South African CSP market promises a significant contribution to the country’s coal-dominated energy mix. The growth of the South African CSP industry will be further supported by the increase of tariff by 14.6% to 19% per year over the next five years, from April 2013 to March 2018. The time-of-day tariff introduced this year will also help promote CSP with storage for generating energy during peak hours. In addition, the commitment shown by the government toward CSP, the strong manufacturing industry and land availability are all encouraging factors for the development of CSP. Despite the country’s small target of 1,200 MW of CSP by 2030, with the national Integrated Resource Plan (IRP) due to undergo some changes, it is very likely that CSP will gain a larger foothold in the local energy market. At the time of writing this report, South Africa had three CSP projects under construction, totaling 200 MW: two under development (200 MW) and three in planning (250 MW), according to the CSP Today Global Tracker. One of the biggest barriers for CSP development in South Africa is the uncertainty regarding future megawatt allocations, given that several changes have repeatedly occurred in the government’s IRP. Whilst the first window placed a local content stipulation of 21% on CSP projects, this was raised to 35% in the second window for no-storage CSP and 25% for CSP with storage. For the third window, this has been raised to 45% for no-storage CSP and 40% for CSP with storage. The third bid window announced in May 2013 introduced a new time-of-day tariff. Under the country’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP), tariffs have been capped for each technology, and according to the Request for Proposal, CSP has a base tariff of R 1.65/kWh. A bidder supplying energy during the peak time will get 270% of the base tariff whilst there is no payment for supplying energy beyond the peak time at night. Country Overview South Africa Solar Resource (average annual sum of DNI): 2,800 kWh/m2/year Size: 1,220,813 kmВІ Population (2012): 51.19 million GDP per capita (2012): US$ 7,507 Installed power capacity: 44,145 GW Annual electricity consumption: 241.9 TWh Expected annual electricity demand in 2020: 300 TWh/y (2011) Electricity Mix by Installed Capacity (2012) Coal 85.5% Natural Gas 5.5% Nuclear 4.3% Hydro & Pumped Storage 4.7% Combustible, Renewables and Waste <0.01 Known Energy Resources Coal, Nuclear, Gas, Biomass, Solar, Wind, Hydro, Ocean Potential Markets for Industrial CSP Applications Utility-Scale Electricity Generation (> 50 MW) Industrial and Commercial Electricity Generation (> 2 MW) Process Heat (< 500ВєC) Small-Scale Process Heat Applications such as absorption chillers and desalination (< 250ВєC) Industrial Thermochemistry and Fuels (> 750ВєC) www.csptoday.com CSP Today Markets Report 2014 | 60 South Africa Although there is no specific policy driving solar applications in South Africa, there is potential for CSP usage in agricultural and industrial sectors. In addition, the existence of a substantial, well-established construction industry can provide the civil works required for a CSP plant. Figure 1(3): Direct Normal Irradiation in South Africa, Lesotho and Swaziland Source: SolarGIS В© 2013 GeoModel Solar s.r.o. www.csptoday.com CSP Today Markets Report 2014 | 61 South Africa Table 1(3): Drivers and Barriers Drivers Excellent solar resource (up to 2900 kWh/m2/annum) Land availability Low slopes (1% in places with high DNI) Large automotive industry Electricity export capability Specific commitment from government towards CSP in the IRP Good CSP + TES match to demand curve High dependency on fossil fuels Large hybridization potential Planned increase in consumers’ electricity tariff will drive the mining industry to look for other options such as solar energy Huge appetite from lending institutions to finance renewable energy projects in South Africa Increasing commitment from the national government, and its financing institutions, to support CSP development; specifically along the new вЂ�solar corridor’. Changes in the bidding pricing structure of the REIPPPP mark an attempt to favor CSP with large storage. CSP is seen as cost-competitive with current peaking power stations, specifically open-cycle gas turbine plants. Local content possibility of CSP projects are perceived to be good, and the government target – of 60% – is deemed possible in the context of the country’s strong manufacturing capacity. Other applications of CSP technologies are actively been investigated, especially ones that can boost coal-fired power stations, desalination, and thermochemistry. 3.1 Electricity Market South Africa’s electricity supply industry is dominated by the state-owned utility Eskom (Eskom, 2013), which generates about 95% of the country’s electricity, mainly using coal-fired power plants. Eskom has a total generation capacity of approximately 44,145 MW, of which 85.5% comprises coal-fired facilities. Just over 4% of the country’s generating capacity is supplied by the Koeberg Nuclear Power Station. South Africa also exports electricity to neighboring countries through the Southern African Power Pool (SAPP, 2013). The domestic energy sector is critical to the economy, as the country relies heavily on its large-scale, energy-intensive mining industry – what is termed the mineral-energy complex. South Africa only has small deposits of conventional oil and natural gas and uses its large coal deposits for most www.csptoday.com Barriers Water scarcity Grid connectivity and insufficient capacity Lengthy permitting process Strict qualification criteria for REIPPPP Fossil fuel lobby and competition CSP high capital cost cannot compete with cheap coal costs Monopoly of Eskom Cap of only 1,200 MW of CSP by 2030 as per the IRP Natural gas discoveries off the east coast of Africa of its energy needs. As a result, carbon emission and intensity levels are relatively high; per capita, among the highest in the world. The South African electricity sector falls under the auspices of the National Energy Regulator of South Africa (NERSA), which replaced the National Electricity Regulator in 2005. Eskom is responsible for the transmission and generation of almost all of South Africa’s electricity. NERSA is promoting private sector participation by encouraging investments from Independent Power Producers (IPPs), who already account for a small share of the country’s electricity generation, as well as by promoting off-grid technologies to meet rural energy needs. CSP Today Markets Report 2014 | 62 South Africa 3.1.1. Electricity Consumption Statistics reported by South Africa in April 2012 reveal that the country’s electricity consumption grew year-on-year by 1.8% in February (2011-2012), while output rose by 0.5%. The increases were reported in seven of the nine provinces, with the largest percentage growth recorded in the Eastern Cape Province (11.2%), followed by the Northern Cape (8.3%) and Limpopo (5.4%) provinces. 3.1.2. Electricity Demand The daily electricity demand in South Africa has a morning and a more pronounced evening peak (between 18:00 and 21:00), both in summer and winter. This characteristic makes CSP with storage a very attractive technology for generating electricity on a large scale to supply to the national grid. To meet generation targets and as a demand-side measure, electricity rates have increased significantly – 170% over the last five years – for all sectors, causing concern among the more energy-intensive industries as well as low-income households. Eskom applied to NERSA for a further increase of 16% in the beginning of 2013, with a further 48% over the next five years, in order to finance its ZAR 340 billion capacity expansion program. In the end, and after much stakeholder consultation, NERSA granted an 8% increase in the tariff, which, according to Eskom, will place real constraints on its ability to undertake construction projects of its own. However, there is much speculation as to whether large-scale, base-load builds are indeed necessary, as the economy has slowed down to a GDP growth of around 2%, which opens the market for a greater diversity of electricity generating facilities. 3.1.3. Grid Transmission The South African power grid is not well developed to accommodate distributed power generation, and instead relies on centralized power generation at coalfields. Eskom is therefore revising its Strategic Grid Plan (SGP) and associated Transmission Development Plan (TDP) to embrace the transformation of the electricity market, and especially to accommodate independent power producers. Of particular importance for CSP is the strengthening of the northwest section of the grid, as well as the northern part to increase the evacuation capacity from 1 GW to 5 GW in the medium term, in what has been now termed the Solar Corridor (Eskom, 2011). Figure 2(3): Transmission Development Plan 2011 – 2020 Source: Eskom, 2011 www.csptoday.com CSP Today Markets Report 2014 | 63 South Africa Figure 3(3): Demand Forecast Comparisons Demand Forecasts (Comparisons) 70,000 2009 TDP Based on Eskom Position Forecast 65,000 2010 TDP Eskom Assumed Forecast (reduced due to impact of Economic downturn 60,000 6.0 2010 IRP Range of Demand Forecasts 5.5 5.0 4.5 55,000 4.0 50,000 3.5 45,000 3.0 40,000 – – 2.5 35,000 2.0 30,000 1.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 IRP High Demand (MW) 39,216 40,629 42,027 43,839 45,255 47,124 48,479 51,090 53,276 55,573 57,649 2010 IRP Low Demand (MW) 38,587 39,319 40,002 42,040 41,669 42,666 43,157 44,710 45,815 46,952 47,848 4.0 4.7 3.8 2.6 3.0 3.1 4.5 2.9 3.5 2.3 пЂј 2010 TDP Growth (%) пЂј 2009 TDP Demand (MW) 41,333 43,007 44,862 46,427 48,055 51,015 53,344 55,534 57,685 60,155 62,471 пЂј 2010 TDP Demand (MW) 38,893 40,447 42,357 43,974 45,134 46,439 47,957 50,123 51,571 53,356 54,600 пЂј 2010 IRP Moderate Demand (MW) 38,885 39,956 40,995 42,416 43,436 44,865 45,786 47,870 49,516 51,233 52,719 Source: Source: Eskom, 2011. www.csptoday.com CSP Today Markets Report 2014 | 64 South Africa 3.1.4. Market Structure Diagram Electricity IPP (CSP project) Generation license NERSA PPA Regulates national tariffs Electricity Single buyer office (ESKOM) Money Consumers Source: CSP Today Markets Report, 2012-2013 3.2. CSP Market 3.2.1. CSP-Specific Policy The Single Buyer Office (SBO), housed within the System Market Operator Division of the national utility Eskom, was established in 2007. The SBO is currently preparing itself to execute the mandate of the Independent Power Producer (IPP) procurement process envisaged in the new generation regulations. Currently, the SBO consists of a core team, with support from Eskom staff providing the necessary expertise and complemented by advisors as required. The SBO deals with all IPP programs, including historical, formal and unsolicited. Regional import IPP programs are also being considered within the scope of inter-governmental memoranda of understanding. Moreover, the national function of the SBO is expected to be transferred to the Independent System and Market Operator (ISMO), and the bill is now under discussion with various stakeholders. www.csptoday.com The following programs fall within the accountability of the SBO: Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which requires up to 3,725 MW of renewable energy capacity as specified in the Integrated Source Plan (IRP) 2010. Medium-Term Power Purchase Programme, with power purchase agreements for approximately 400 MW of cogeneration and generation capacity, which have been approved and concluded. Municipality electricity generation and short-term contracts for security of supply. Small Renewable IPP Programme, which the DoE has initiated by releasing a request for information (RFI) in order to test market appetite for small projects and assess the readiness of onshore wind, solar PV, biomass, biogas, or landfill gas projects within the 1 to 5 MW capacity band. CSP Today Markets Report 2014 | 65 South Africa The utility-scale CSP market segment is regulated by the IRP and the REIPPPP; these in turn inform the national Transmission Development Plan (TDP) and the Strategic Grid Plan (SGP). This means that the uptake of utility-scale CSP will be prescribed by the national government through bid window allocations in accordance with the capacity of the national grid to uptake power generation from CSP over time. Figure 4(3): Linkages Between Various Plans to Address the Integration of Distributed Electricity Generation from IPPs IRP – Integrated Resource Plan TDP – Transmission Development Plan SGP – Strategic Grid Plan Source: Eskom, 2011 Figure 5(3): Maximum Allocations in Round 3 of the REIPPPP Landfill gas - 25 MW Small hydro - 120.7 MW Biogas - 12.5 MW Biomas - 60 MW CSP - 200 MW Onshore wind - 653.6 MW Solar PV - 401.3 MW Source: CSP Today Quarterly Update, June 2013 www.csptoday.com CSP Today Markets Report 2014 | 66 South Africa The announcement of the third bid window of the REIPPPP in May 2013 introduced a new time-of-day tariff. Under the REIPPPP, tariffs have been capped for each technology. According to the Request for Proposal (RFP), CSP has a base tariff of R 1.65/kWh. If a bidder bids a lower tariff, that tariff will be regarded as the new base tariff for that particular bidder. However, the tariff must not exceed the RFP base tariff. The bid will be non-compliant and automatically rejected during the qualification phase if the price cap is exceeded or if the bid does not meet the gate-keeping qualification criteria stipulated in the RFP document issued within the REIPPPP. The base tariff only applies during the day and a higher tariff will be applied for supplying energy during the peak time –in the evening or morning. According to the RFP, a bidder supplying energy during the peak time will get 240% of the base tariff, whilst there is no payment for supplying energy at night. This means that the likely allocation for CSP will be ZAR 1.65/ kWh during standard times – from 05h00 until 17h00 and from 21h00 to 22h00 – and ZAR 3.96/kWh during peak times – from 17h00 to 21h00 – and ZAR 0/kWh for all other times. peak times. It should be noted that CSP has a potential to provide energy during the peak time, but incentives are critical to promote such behavior. Under the previous windows of the REIPPPP, bidders for CSP projects had to offer a tariff below the ZAR 2.85/ kWh cap, with actual average tariffs offered at ZAR 2.69/ kWh for Round 1, and ZAR 2.51/kWh for Round 2. The selection of projects by the government is pursued using two main criteria, namely price (70%) and economic development (30%); besides all the other qualification criteria that form part of a first stage screening (see Figure 6(3)). The location of projects with respect to resource potential and site-specific attributes directly impacts the price; however, as shown by Bid Window 1 and Bid Window 2, having a site with the best resource profile does not imply that the project will receive approval. Financing structures and bankability of projects have significant impact on projects price levels, which means that projects with the best resource profile might be outranked by projects with a better financing structures, but a lower energy-generation potential. The intention for this provision of the RFP is to encourage CSP with storage to generate energy during Figure 6(3): First Stage Qualification Criteria for Selection in the Second Stage • Project participants: equity participants, Structure of the Project Legal Criteria and Evaluation Land Acquisition and Land Use Criteria and Evaluation Environmental Consent Criteria and Evaluation lenders, contractors, equipment suppliers, black enterprises and local community members • Fully developed shareholders agreement, acceptance of project agreements (i.e. PPA, Implementation Agreement, Direct Agreement etc), Statements by Members, Key subcontracts • Title deeds, notarial leases, land use consents including consents for connection works • Environmental consents namely a positive Record of Decision from the Department of Environmental Affairs Financial Criteria and Evaluation Technical Criteria and Evaluation Economic development Criteria and Evaluation Submission of bid Guarantee • Price (full indexation and partial indexation), financial standing of project sponsors, robustness and deliverability of funding proposal, robustness of financial models • Wind max 140MW, PV 75 MW, CSP 100MW. Proven technology, energy resource availability, generation forecast, project schedule, cost and timing of grid connection, deliverability of project, water consumption • 40% SA entity participation: Job creation, local content, black ownership including local communities, preferential procurement, enterprise development, socio-economic development • Bid submission: R100,000 per MW, Preferred Bidder status: R200,000 per MW, Development fee: 1% of total project cost Source: Standard Bank, 2013 www.csptoday.com CSP Today Markets Report 2014 | 67 South Africa All of the above means that the distribution of utility-scale renewable energy projects throughout the country cannot be predicted on an annual basis with any great certainty. In other words, if the IRP2010 schedule is strictly followed, it is unknown how many of the various technologies’ installed capacities will be allocated on an annual basis. The potential for developing local capabilities that require significant capital investments, however, is highly dependent on the investors’ expectations from the future development of the market and more specifically on the size of the market and market certainty. It will also depend on whether the government is providing assurance of sustainable procurement of certain installed capacities on an annual basis. 3.2.2. CSP Project Profiles At the time of writing this report, South Africa had three CSP projects under construction, totaling 200 MW: two under development (200 MW), and three in planning (250 MW), according to the CSP Today Global Tracker. Table 2(3) showcases all CSP projects in South Africa at various stages of development. www.csptoday.com CSP Today Markets Report 2014 | 68 South Africa Table 2(3): CSP Projects in South Africa* Title MWe Technology Status State/Region Developer/s Storage Capacity (hours) South Africa 5 GW Solar Park (Phase i) В 5,000 В TBA (will include PV and CSP) Announced Northern Cape Province Central Energy Fund В Illangalethu В 100 Parabolic Trough Announced Northern Cape Province Emvelo TBC Ennex Dish Stirling 20 Dish Announced Northern Cape Province Ennex В Kumba CSP 100 Parabolic Trough Planning Northern Cape Province Anglo-American/ Kumba TBC Metsimatala Solar Farm 50 Fresnel Planning Northern Cape Province Afri-Devo TBC !Xun Khwe Solar Farm 100 Fresnel Planning Northern Cape Province Afri-Devo / Ample Solar TBC Eskom 100 Tower Development Upington Eskom Yes (hours TBC) Humansrus CSP Project 100 Tower Development Upington SolarReserve 3 Khi Solar One 50 Tower Construction Upington Abengoa/ Industrial Development Corporation 2 KaXu Solar One 100 Parabolic Trough Construction Bokpoort Abengoa/Industrial Development Corporation 3 Bokpoort Parabolic Trough Construction Northern Cape Province ACWA/ Solafrica 9 50 *Projects qualified under the REIPPPP are highlighted in yellow Source: CSP Today Global Tracker, August 2013 The three non-Eskom CSP projects that are in construction are required to be fully operational (certificate of delivery) before the end of 2018, although commissioning of the first 150 MW is expected in 2017. The storage capacities range from 2 hours (Khi) and 3 hours (KaXu) to 9 hours (Bokpoort). www.csptoday.com 3.2.3. Local Content Requirements Whilst the first window placed a local content stipulation of 21% on CSP projects, this was raised to 35% in the second window for no-storage CSP, and 25% for CSP with storage. For the third window, this has been raised to 45% and 40%, respectively. In terms of local content, or economic development requirements, the most important barriers to entry as determined from various CSP Today Markets Report 2014 | 69 South Africa stakeholders are the following: Uncertainty of rollout in MW capacity allocated to CSP – with changes in the IRP due. The market size for CSP is too small. Inability to compete with the experience of international manufacturers. Raw material costs are too high. Figure 7(3): Barriers to Entry of CSP in the South African Market Uncertainty CSP (18) SADC market size (17) SA market size (17) R&D support (16) Skilled labour (17) No capital access (17) Lack of CSP info. (16) Int. relationships (17) Int. experience (17) Labour (15) Raw material (16) пЃ® Not important пЃ® Minor importance пЃ® Quite important пЃ® Important пЃ® Very important Source: Ernst & Young, enolcon, 2013 www.csptoday.com CSP Today Markets Report 2014 | 70 South Africa The short-term priority actions needed to address these challenges are outlined below. Figure 8(3): Short-term Priority Actions to Address CSP Challenges Stakeholder Area Key implementation initiative Priority doE Eskom National Treasury пЂґ RCIPP procurement programme пЂґ Review of MW allocation for CSP with storage in the context of affordability of peak power and job creation potential and considering its value proposition пЂґ Consider a two tier tariff with a premium being paid for energy at peak time 1 doE dTI National Treasury пЂґ RCIPP procurement programme пЂґ Review of impact on tariff price of increasing local content requirements and assess associated long term socio-economic benefits 1 dTI IdC пЂґ CSP framework пЂґ Confirm CSP component focus areas (e.g. mounting structures, piping, flat mirrors) 2 National Treasury doE dST пЂґ R&D пЂґ Review feasibility of a long term R&D funding profile and dedicated R&D funding for the CSP component focus areas SANEdI пЂґ R&D пЂґ Establish R&D specific industry platform to identify and achieve common goals between industry and research institutes 2 SASTELA пЂґ Marketing пЂґ Focus international outreach and promotion, including international cooperation structures 2 Industry dHET SETA пЂґ Education and training пЂґ Establish CSP specific practical training programmes for workers currently trained in coal fired power plants (e.g. welders from Kusile and Medupi) 2 2 Source: Ernst & Young, enolcon, 2013 www.csptoday.com CSP Today Markets Report 2014 | 71 South Africa 3.3. Local CSP Ecosystem 3.3.1. Key Government Agencies Table 3(3): Key Government Agencies in South Africa Name Roles and Responsibilities Department of Energy (DoE) Formulates national policies and related legislation National Energy Regulator of South Africa (NERSA) Regulates and enforces laws pertaining to the energy sector Department of Public Enterprises (DPE) Responsible for state-owned assets, including the national utility, Eskom Department of Finance Formulates fiscal policy and allocations to state-funded developments National Treasury Management of state funds Department of Trade and Industry (DTI) Develops local industries, and control imports and exports Other national departments, such as Transport, Land Affairs, Mineral Resources, etc. Develops appropriate infrastructure for economic development, allocation of land, etc. Presidential Infrastructure Coordinating Commission Formulation and implementation of the 17 Strategic Integrated Projects, especially SIPs 8, 9 and 10 in terms of green energy and electricity transmission and distribution for all Eskom Electric power transmission and distribution at a national level www.csptoday.com CSP Today Markets Report 2014 | 72 South Africa Figure 9(3): Illustration of the Current and Projected Market Structures ESKOM HOLDINGS SOC LTD PRODUCTION TRANSMISSION RETAIL KSACS Wires Gn1... DX Gn2... Imports MUNICS System Operator National Control Wholesaler IPP’s Single Buyer RE-IPP ESKOM Generation ESKOM TX Transmission вЂ�wires’ ESKOM DX Distribution DX Gn1... Gn2... Imports ISMO-TX agreement ISMO SOC System Operator KSACS National Control Wholesaler MUNICS IPP’s Single Buyer RE-IPP Wholesale tariff Source: SAPVIA, 2013 www.csptoday.com CSP Today Markets Report 2014 | 73 South Africa 3.3.2. Permitting Agencies Table 4(3): Permitting Agencies in South Africa Name Role Department of Environmental Affairs (DEA) Strategic Environmental Assessments, authorization of EIAs, determination of water allocations Provincial Governments Approvals of economic developments, especially infrastructure and land rezoning District and local municipalities Approvals of economic developments, especially infrastructure and land rezoning, and distribution of the electricity 3.3.3. Local Consultants and R&D bodies Table 5(3): Local Consultants and R&D Bodies Name Role Sastela Industry lobby group GeoSun Solar resource measurements South African National Energy Development Institute (SANEDI) Coordination and cooperation of CSP R&D Technology Innovation Agency (TIA) Commercialization of CSP R&D/Technology Council for Scientific and Industrial Research (CSIR) Contract R&D Universities, such as Stellenbosch University, through the Centre for Renewable and Sustainable Energy Studies (CRSES) and the Solar Thermal Energy Research Group (STERG) Contract R&D, pre-feasibility studies and skills development South African Renewable Energy Technology Centre (SARETEC) Skill development EPC companies and project developers such as Emvelo, Kathu Solar Consortium and Solafrica Thermal Energy Plant construction, commissioning and operation Consultants, such as Ernst & Young, enolcon, aurecon, and others Feasibility studies www.csptoday.com CSP Today Markets Report 2014 | 74 South Africa 3.3.4. Financing Organizations Table 6(3): Financing Organizations Operating in South Africa Name Role Previous Renewable Energy Projects Industrial Development Corporation (IDC) State-owned funding agency All current CSP projects Development Bank of Southern Africa (DBSA) State-owned funding agency All current CSP projects Private banks, such as Investec and Rand Merchant Bank Provides debt-funding for projects Bokpoort, KaXu The typical project structures, within the South African financial governance framework, are summarized below, as well as the typical project headline terms. Local banks have also introduced the issuing of debt capital market bonds as a means to finance utility-scale projects. Figure 10(3): Typical Project Structure in the South African Context Key Sponsor 30-60% Secondary Sponsor BEE Entity 12-40% 0-25% Community Trust 2.5-5% Investment Holdco Offtaker Lenders Shoreholder Agreement Eskom ProjectCo NERSA EPC Contractor Subcontracts Regulation O&M Contractor Insurance Subcontract Turbine/Panel suppliers Construction Companies Turbine Supplier lease Agreement Source: Standard Bank, 2013 www.csptoday.com CSP Today Markets Report 2014 | 75 South Africa BEE refers to a Black Economic Empowerment entity, which manifests in a black-owned investment entity. For example, for the Bokpoort CSP IPP, the Lereko Group was instrumental in raising the necessary funding. Lereko raises the necessary capital from a network of black-owned enterprises. In the case of Bokpoort, the community trust is in the form of Solafrica Community Investment Company, which manages the shareholding of the community that inhabits the land around the developed project. 3.3.5. Developers and EPC Firms There is a substantial, well-established construction industry in South Africa, which is able to provide the civil works required for a CSP plant. The similarities in construction between power projects being built in South Africa – Medupi and Kusile – and CSP projects provide the evidence for this. Major local construction companies include Murray & Roberts, Group 5, Aveng Group, Basil Read, Crowie and WBHO. Often, the construction companies have local partners or subcontractors which they use if unable to provide the entire service themselves. Several construction companies view CSP as a good business opportunity and often as more valuable compared with alternative renewable energy technologies. This is because CSP provides a larger amount of civil works due to the significant amount of concrete and steel structures required for a CSP plant, compared with an onshore wind or solar PV plant. Table 7(3): Developers and EPCs With Interests in the South African Market Previous Renewable Energy Projects in South Africa Company Roles and Responsibilities Abengoa Solar Subsidiary of Abengoa. The company designs, finances, constructs, and operates solar power stations. Khi (100 MW) and Kaxu (50 MW) CSP projects ACWA ACWA Power is a Saudi Arabiabased developer. Owner and operator of independent water & power projects structured on a concession or utility outsourcing contract model. Bokpoort CSP (50 MW) Afri-Devo Afri-Devo Pty (Ltd) is a fully blackowned construction and property development company based in Kimberley, Northern Cape. !Xun Khwe Solar Farm and Metsimatala Solar Farm Areva Solar power technology developer focusing on Linear Fresnel !Xun Khwe Solar Farm and Metsimatala Solar Farm BrightSource American company that designs, builds, finances and operates utility-scale solar power plants. В Crowie Concessions South African construction and development company Bokpoort (50 MW) www.csptoday.com CSP Today Markets Report 2014 | 76 South Africa Emvelo Independent solar power company. Illangalethu CSP project (100 MW) Develops, owns, operates and maintains utility scale concentrating solar thermal power plantsВ Ennex Technology developer focusing on Dish Stirling Ennex Dish Stirling project (20 MW) Industrial Development Corporation Government-owned institution that promotes economic growth and industrial development in South Africa Khi (100 MW) and Kaxu (50 MW) CSP projects Kumba Iron Ore South Africa’s largest iron ore mining company. Operator and developer of Kumba Solar Park. Kumba Solar Park (100 MW) Ripasso Technology developer focusing on dish Stirling 30 kW Stirling dish modules in Upington Solafrica Thermal Energy South African energy development company and independent power producer; Co-developer of the Bokpoort CSP project Bokpoort (50 MW) SolarReserve Developer, EPC, owner of solar projects Humansrus CSP project (100 MW) Source: CSP Today Global Tracker, August 2013 3.4. Local Component Supply An overview of CSP components available locally in South Africa is provided below. The current potential capabilities and capacities for supplying the CSP industry have been considered in terms of: Piping industry Construction industry Pump suppliers Tracking device suppliers Heat exchange suppliers Molten salt suppliers Receiver suppliers Power block component suppliers Glass Steel Molten salt 3.4.1. Pipes Piping in South Africa is mainly supplied to the mining, logistics, petrochemical, building and construction, engineering, manufacturing, energy and power, water and automotive industries. The piping in CSP plants consists of both low and high pressure pipes. The high performance alloy material required for the high pressure pumps can be supplied by only three companies globally. The type of piping required for CSP projects will depend on the design of the plant and could be: Spiral welded pipes – used for example on parabolic troughs; or Seamless pipes. A number of local companies focus only on spiral pipes, for example, for use in the transportation of water. The specifications for these pipes are different to that of CSP. These companies typically secure large infrastructure www.csptoday.com CSP Today Markets Report 2014 | 77 South Africa contracts which tie up capacity and the products are charged at a premium as heavier tubing and additional processes are required post welding. There is currently a high demand for these products; therefore, there is less incentive to supply the CSP market, which requires bespoke piping products. The thin-walled piping (center pipe/torque tube) required in parabolic troughs is an unusual product in the South African market and requires special engineering to meet the high tolerances required in CSP designs. 3.4.2. Pumps Large pumps are mainly used across the petrochemical, gas and mine industries. Feed water pumps are not currently produced in South Africa due, in part, to the importance of reliability of the pumps, which adds complexity. The feed water pumps for the currently constructed coal-fired power stations – Medupi and Kusile – are imported. In CSP, specialized pumps that are capable of pumping high temperature and corrosive fluids are necessary, which, in turn, are fabricated with highly specialized materials. Thus, in summary, no capacity currently exists, and it is unlikely to be established in future, due to the technical complexity of the pumps. 3.4.3. Tracking Devices Tracking devices allow the mirrors to track the sun. Reutech is a South African defense company that supplies tracking devices to other industries. The trackers were developed in Australia and are now produced locally by Reutech, which has built up its expertise in tracking devices through the supply of trackers to the mining industry, where accuracy is essential. Reutech has won a contract to supply CSP trackers for the first bidding round. These trackers were qualified by an independent engineering firm. 3.4.4. Receivers There is currently no local capability for the production of receivers, as it is a high proprietary technology. The receiver would thus have to be imported and the local content would include logistics and installation. 3.4.5. Power Blocks There are similarities between the power block components of the Medupi and Kusile power plants and the power block components in a CSP plant. Alstrom, in conjunction with Actom and Hitachi, are providing the power block turbines and boilers for the Medupi and Kusile power stations. A 50% local content of the turbine island – turbine, generator and housing – was achieved, and the same is possible for CSP projects. www.csptoday.com Hitachi Power Africa is currently building twelve steam generators for Eskom using the design and specifications provided by Hitachi Power Europe. Siemens no longer provides turnkey EPC services, but still supplies components to the CSP industry. The majority of components would thus have to be imported. 3.4.6. Heat Exchangers Heat exchangers are currently sourced internationally. The localization of heat exchangers can be achieved through logistics, installation, insulation and after-sales support. 3.4.7. Raw Material Availability 3.4.7.1. Glass Local glass companies produce glass for the building and automotive industries. Demand for locally produced glass has reduced due to an economic slowdown, which has affected these industries, and prompted an increase in the volume of competitively priced imported glass. This has resulted in significant local spare capacity for the production of low-iron glass and mirrors. Nevertheless, it is a challenge for local companies to supply low-iron glass at a competitive price, particularly with the volatility in the exchange rate. The high iron content of raw materials found in South Africa requires additional iron extraction costs, which international players may not be subject to. A further reason for the high price of supply in South Africa is the lack of demand in the local market, resulting in the inability to benefit from economies of scale. Specifically, there is no local capability to bend glass and silver bent glass to the specifications required for parabolic troughs due to a lack of local demand. PFG is the only local company with the ability to produce low-iron float glass and silver flat mirrors for the power tower and linear Fresnel applications on a commercial scale. It has some experience in the successful manufacture of low-iron glass for the PV and solar water heater industries. 3.4.7.2. Steel Steel is produced locally by Arcelor-Mittal and Evraz Highveld Steel, and these players sell 80% to 90% of steel produced to the local market. The demand for steel in South Africa is expected to track the current economic trend of a slow but modest recovery. The current lack of demand has resulted in overcapacity in the industry. EPC contractors typically source the majority of their steel requirements from local steel merchants fabricated to the required specifications. CSP Today Markets Report 2014 | 78 South Africa 3.4.7.3 Molten Salt For molten salt, the only local aspect is providing the logical solution for delivery of the salt to sites. The logistics are complex as it requires 400 tons daily of salt delivery. better solar resource than Europe and the industries described exist in South Africa, the penetration of solar process heat technologies into these industries in South Africa can be expected to be comparable or better with suitable support-initiatives. 3.5. Alternative CSP Markets Food, wine and beverage, paper, textile and automotive industries all exist in South Africa. They can be targeted for solar process heat in the same way as Europe. Unfortunately, though, these sectors form a much smaller fraction of energy demand in South Africa than in Europe. Figures 11(3), 12(3), 13(3) and 14(3) show that the industrial sector comprises 41% of energy use, compared with the 30% of European energy use. Within the industrial sector, however, mining, iron and steel, non-ferrous metals and non-metal minerals together consume 59% of energy and 66% of electricity. Although policy has not driven solar resource applications in agricultural and industrial sectors, these sectors have seen the benefits of applying the resource. For example, in space heating for factories; steam generation for production processes; drying applications; and desalination. Vannoni et al. (2008) have concluded that solar thermal could provide the industrial sector with 3% to 4% of its heat demand in Europe. Given that South Africa has a Figure 11(3): Consumption Mix in South Africa (Energy) Total Energy Non-specific (Other) - 3.55% Residential - 18.58% Industry Sector - 41.34% Commerce and Public Services - 7.35% Agriculture - 2.67% Transport Sector - 26.51% www.csptoday.com CSP Today Markets Report 2014 | 79 South Africa Figure 12(3): Consumption Mix in South Africa (Electricity) Electricty Non-specific (Other) - 12.26% Residential - 17.24% Industry Sector - 52.70% Commerce and Public Services - 12.64% Agriculture - 2.57% Transport Sector - 2.59% Figure 13(3): Consumption Mix in Industrial Sector (Energy) Total Energy in Industrial Sector Non-Ferrous Metals - 6.05% Chemical and Petrochemical - 12.79% Non-Metallic Minerals - 6.75% Machinery - 0.21% Transport Equipment - 0.03% Mining and Quarrying - 18.46% Food and Tobacco - 0.34% Paper Pulp and Print - 0.78% Wood and Wood Products - 0.10% Construction - 1.49% Iron and Steel - 27.56% Textile and Leather - 0.17% Non-specific (Industry) - 25.28% Source: Department of Minerals and Energy, 2006 www.csptoday.com CSP Today Markets Report 2014 | 80 South Africa Figure 14(3): Consumption Mix in Industrial Sector (Electricity) Electricty Non-Ferrous Metals - 16.49% Non-Metallic Minerals - 2.30% Transport Equipment - 0.08% Machinery - 0.04% Mining and Quarrying - 27.88% Chemical and Petrochemical - 8.92% Food and Tobacco - 0.67% Paper Pulp and Print - 1.55% Iron and Steel - 18.88% Wood and Wood Products - 0.26% Construction - 0.05% Textile and Leather - 0.46% Non-specific (Industry) - 22.42% Source: Department of Minerals and Energy, 2006 Here, the greatest contribution that could be made by solar industrial process heat would probably be provided by parabolic troughs - firstly, by driving double effect absorption chillers for mining ventilation, and secondly, by providing process steam in the chemical and petrochemical industries, as well as other industries. Air conditioning of commercial buildings may require single-effect absorption chillers with stationary collectors, as the roof may not be ideal for parabolic troughs. A small linear Fresnel would be ideal, however, driving a double effect absorption chiller. The use of solar collectors to drive large-scale thermal desalination plants, such as multi-effect desalination or multi-stage flash, would provide a solution to both mine acid drainage and fresh water at mines. A growing interest has also been shown towards the steam augmentation of conventional fossil fuel fired thermal power stations, and other industrial coal boilers. Solar steam augmentation can be used to increase a conventional plant’s electricity production or it can be used to reduce the amount of fossil fuel required (see Figure 15(3)). Either way would lead to the reduction in the carbon footprint of the cumulative production of electricity. www.csptoday.com CSP Today Markets Report 2014 | 81 South Africa Figure 15(3): Displacement of Fossil Fuel (left) and Solar Boosting (right) Source: Rojas et al., 2011 Solar steam augmentation is supported by two economic benefits. As the power block and infrastructure of conventional power stations are already in place, the capital costs are drastically reduced. This, and the accompanying reduced risk, lead to lower barriers for capital acquisition. Therefore, steam augmentation plants can reach economic feasibility earlier than standalone CSP systems (Turchi et al., 2011). It is worth noting that the manufacture and installation of collectors for solar industrial process heat is an industry in its own right; one that meets government imperatives of labor-intensive employment, climate change mitigation and energy security. 3.6. Market Forecast With a potential CSP capacity of 262 GW to 311 GW in the short and medium term, according to the University of Stellenbosch’s Center for Renewable and Sustainable Energy, and with DNI levels exceeding 2,900kWh/m2/ year (average 2,800 kWh/km2/year), the South African CSP market promises a great contribution to the country’s coal-dominated energy mix. The growth of the domestic CSP industry will be further supported by the increase of tariff by 14.6% to 19% per year over the next five years, from April 2013 to March 2018. The time-of-day tariff introduced this year will also help promote CSP with storage, for generating energy during peak hours. energy is principally produced from conventional power, mostly oil (19%), and coal (67%), of which the country has large deposits (EIA, 2013). In light of the relatively high emissions per capita of the country, the following new CSP capacity has been, or will be, allocated: 200 MW in Window 3 of the REIPPP 100 MW to Eskom Tower (tender to be released by end of 2013) A target of 1,200 MW of CSP is expected by 2030 The pessimistic scenario shown below highlights this situation, where in the case of no major changes in the CSP-related conjuncture, reaching the target of 1,200 MW of CSP will not occur prior to 2030. Under more favorable conditions, however, the local factors associated with this market suggest that the capacity could easily exceed targets, be it supported by policy makers or new allocations. With South Africa’s 5 GW Solar Park in focus, and its 1000 MW of solar power capacity expected by 2018 (shared between PV and CSP), the optimistic scenario presented below may very well be realized. The scenario is relatively close to Ernst & Young’s Enolcon cumulative installed capacity outlook to 2025, which reveals a possible 6 GW of capacity, relatively close to the 5.2 GW predicted by 2024 (if the optimistic scenario is extrapolated to 2025). Energy is a critical aspect of South Africa’s industry, and consequently to the economy. Unfortunately, this www.csptoday.com CSP Today Markets Report 2014 | 82 South Africa Figure 16(3): Installed CSP Capacity in South Africa Until 2024 (MW) 6,000 5,248 Optimistic 5,000 Conservative Pessimistic 4,000 3,000 2,215 2,000 930 1,000 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Figure 17(3): CSP Cumulative Energy Production in South Africa Until 2024 (TWh) 140 122.7 Optimistic 120 Conservative Pessimistic 100 80 65.6 60 40 34.2 20 0 2006 2008 www.csptoday.com 2010 2012 2014 2016 2018 2020 2022 2024 CSP Today Markets Report 2014 | 83 South Africa Conclusion South Africa is regarded as one of the most promising CSP markets. Although the country’s CSP target of 1,200 MW by 2030 is not as grand as targets in markets such as Morocco and Saudi Arabia, the growing number of projects currently in construction, excellent solar resources, urgent need for new energy sources and strong supportive local industry all promote favorable development conditions for CSP. The primary barriers which need to be addressed when entering this market is the uncertainty of the rollout in MW capacity allocated to CSP – with changes in the IRP due and the relatively small market size of CSP. However, with the IRP due to undergo some changes, there is a chance that CSP will gain a larger foothold in the South African energy market. www.csptoday.com CSP Today Markets Report 2014 | 84 South Africa References CSP Today, 2013. CSP Today Quarterly Update: June 2013 Edition. Available through: <http://social.csptoday.com/ tracker/quarterly-updates> [Accessed 27 July 2013]. Ernst & Young, 2013. Assessment of the localisation, industrialisation and job creation potential of CSP infrastructure projects in South Africa. Prepared for SASTELA, GIZ and the DTI. Pretoria, South Africa. Eskom, 2013. Company Information. Available through: <http://www.eskom.co.za/c/article/223/company-information/> [Accessed 24 July 2013]. Eskom, 2011. Transmission Grid. Transmission Development Plan 2011-2020 & Generation Connection Capacity Assessment. Available through: <http://www.eskom.co.za/content/2011_20TDP1.pdf> [Accessed 27 July 2013]. South African Photovoltaic Industry Association, 2013. Policy of Solar PV in South Africa. Renewable Energy Policy Module. Stellenbosch University. South African Power Pool, 2013. Vision and Objectives. Available through: <http://www.sapp.co.zw/>. [Accessed 24 July 2013]. Standard Bank, 2013. South Africa Renewable Energy. IPP Procurement Programme Renewable Energy Policy Module. Stellenbosch University. Turchi, C., Burkhardt, J., Heath, G., 2010. Life Cycle Assessment of a Parabolic Trough Concentrating Solar Power Plant and the Impacts of Key Design Alternatives. Environmental Science & Technology. Available through: <http://pubs. acs.org/doi/abs/10.1021/es1033266>. [Accessed 24 July 2013]. Vannoni, C., Battisti, R., and Drigo, S., 2008. Potential for Solar Heat in Industrial Processes. Booklet IEA SHC Task 33 and SolarPACES. CIEMAT, Madrid, Spain. www.csptoday.com CSP Today Markets Report 2014 | 85 South Africa Acronyms ACRONYM DEFINITION CSIR Council for Scientific and Industrial Research CRSES Centre for Renewable and Sustainable Energy Studies DBSA Development Bank of Southern Africa DEA Department of Environmental Affairs DPE Department of Public Enterprises DTI Department of Trade and Industry ISMO Independent System and Market Operator NERSA National Energy Regulator of South Africa REIPPPP Renewable Energy Independent Power Producer Procurement Programme RFI Request for Information SANEDI South Africa National Energy Development Institute SARETEC South African Renewable Energy Technology Centre SAPP South African Power Pool SAPVIA South African Photovoltaic Industry Association SBO Single Buyer Office SGP Strategic Grid Plan STERG Solar Thermal Energy Research Group TDP Transmission Development Plan TIA Technology Innovation Agency www.csptoday.com CSP Today Markets Report 2014 | 86 Saudi Arabia 4 Kingdom of Saudi Arabia By Marco Poliafico Contents List of Figures 87 List of Tables 87 Chapter Summary 89 Country Overview 89 4.1. Electricity Market 91 4.1.1. Electricity Consumption 91 4.1.2. Grid Transmission 92 4.1.3. Electricity Demand 93 4.1.4. Market Structure Diagram 95 4.2. CSP Market 95 4.2.1. Local Content Requirements 100 4.2.2. Solar Resource Forecasting 101 4.2.3. CSP Project Profiles and Time Frames 101 4.3.1. Local CSP Ecosystem 102 4.3.1. Key Government Agencies 103 4.3.2. Independent Water and Power Producers (IWPP) 104 4.3.3. Permitting Agencies 105 4.3.4. Local Consultants and R&D bodies 106 4.3.5. Financing Organizations 107 4.3.6. Utilities and Transmission Grid Operators 108 4.3.7. Developers and EPC and Engineering Companies 109 4.4.1. Supply of Local Components 114 4.4.2. Raw Material Availability 113 4.5. Alternative CSP Markets 114 4.5.1. Desalination 114 4.5.2. Enhanced Oil Recovery 115 4.6. Market Forecast 115 Conclusion 117 References 118 Acronyms 121 www.csptoday.com CSP Today Markets Report 2014 | 87 Saudi Arabia List of Figures Figure 1(4): Direct Normal Irradiation in Saudi Arabia 90 Figure 2(4): The GCC Grid Interconnection Project 93 Figure 3(4): Electricity Demand in Saudi Arabia by Sector 94 Figure 4(4): Saudi Arabia’s Oil Balance on a Business-as-Usual Trajectory 96 Figure 5(4): Current Indications for CSP and PV Allocations in Saudi Arabia 98 Figure 6(4): Installed CSP Capacity in Saudi Arabia Until 2024 (MW) 116 Figure 7(4): CSP Cumulative Energy Production in Saudi Arabia Until 2024 (TWh) 117 List of Tables Table 1(4): Drivers and Barriers 90 Table 2(4): Competitive Procurement Process Requirements 99 Table 3(4): Local Content Requirements Outlined for the Introductory Round of the CPP 100 Table 4(4): Ministries and Government Agencies in Saudi Arabia 103 Table 5(4): Utility Companies in Saudi Arabia 104 Table 6(4): Permitting and Environmental Assessment Agencies Operative in Saudi Arabia 106 Table 7(4): Consultants and R&D Bodies Operative in Saudi Arabia 106 Table 8(4): Main Funding Institutions and Banks Operative in Saudi Arabia 107 Table 9(4): Utility Companies in Saudi Arabia 108 Table 10(4): Developers, EPCs and Engineering Companies Operating in Saudi Arabia 109 Table 11(4): Locally Available CSP Components Available Locally in Saudi Arabia 111 Table 12(4): CSP Raw Material Suppliers in Saudi Arabia 114 www.csptoday.com CSP Today Markets Report 2014 | 88 Saudi Arabia Chapter Summary Based on the CSP Today 2013 Markets Scorecard, Saudi Arabia is ranked as the second most-promising CSP market for future development, only after South Africa. With a CSP target of 25 GW by 2032, the kingdom will need to deploy at least 1.35 GW of CSP capacity per year to meet its objective. Saudi Arabia has the highest per-capita oil consumption in the world, and in 2011, less than 1% of the energy generated was sourced from renewable technologies. In 2010, the King Abdullah City of Atomic and Renewable Energy (K.A.CARE) was established to lead the development of the kingdom’s renewable energy strategy. In May 2012, Saudi Arabia announced a national energy target of 25 GW installed CSP capacity by 2032, becoming one of the most ambitious players in the CSP arena, and in February 2013, the Competitive Procurement Process (CPP) was launched by K.A.CARE. Although there is no CSP-specific framework or renewable energy legislation currently in place, it is expected that a decision will be made following the second procurement round, which is likely to take place in early 2015 – with feedback that the initial timeframe outlined by K.A.CARE has been delayed. The first round of the CPP has allocated 900 MW to CSP, and the second round 1.2 GW. However, these figures may be revised as the program progresses. Saudi Arabia’s ambitious renewable energy program represents an attractive opportunity for international CSP players and is likely to have a positive effect on the industry in general. The target set by the kingdom potentially opens the doors for scaling up the production of components and identifying solutions along the whole value chain.The particular context in which projects will be developed features very challenging environmental factors like dust and temperature that will require ad-hoc solutions to optimize the technical performance of many components. On the other hand, the lack of a stable regulatory framework represents a serious risk factor for developers.CSP can provide a good source of energy for seawater desalination in Saudi Arabia, considering the intensive energy consumption of the process. The kingdom has already announced it would be investing US$ 11 billion in desalination over the next eight years, which will include building solar-powered stations. In addition, enhanced oil recovery represents another promising application for CSP in Saudi Arabia, considering the forecasted increase in global oil and gas consumption. Country Overview Saudi Arabia Solar Resource (average annual sum of DNI): 2,400 kWh/mВІ/year Size:2,149,690 kmВІ Population (2012): 28.29 million GDP per capita (2012): US$ 20,777 Installed power capacity: 51.2 GW Annual electricity consumption: 231 TWh Expected annual electricity demand in 2020: 383 TWh Electricity Mix by Installed Capacity (2012) Oil 65% Natural Gas 35% Known Energy Resources Oil, Gas, Solar, Nuclear Potential Markets for Industrial CSP Applications Desalination, Enhanced Oil Recovery Cooling Load for Air-Conditioning Process Heat www.csptoday.com CSP Today Markets Report 2014 | 89 Saudi Arabia Figure 1(4): Direct Normal Irradiation in Saudi Arabia Source: SolarGIS В© 2013 GeoModel Solar s.r.o. Table 1(4): Drivers and Barriers Drivers Barriers Urgent need to displace fossil fuels burnt for domestic consumption with alternative energy sources to save indigenous oil and natural gas for higher value applications and export Lack of knowledge of solar energy and renewable energy in general among most people (misperceptions) “Hunger” for industrialization and development of local manufacturing expertise Lack of policy framework (although it is being set up) and incentives High DNI levels Water scarcity www.csptoday.com CSP Today Markets Report 2014 | 90 Saudi Arabia Academic research efforts such as the Developer Environmental conditions: sand and very high temperResearch Advisory Council (DRAC) and the King atures might negatively impact plant performance and Abdullah University of Science and Technology (KAUST) O&M costs Diversification of the energy mix and reduction in the reliance on fossil fuels Shortage of specialized skills and technical know-how in the operation of CSP plants High potential for seawater desalination: KACST launched an initiative which aims to make all desalination plants run on solar power by 2019, and the National Water Company plans to spend US$ 11 billion on new desalination plants over the next eight years. Subsidized fuel and electricity prices make CSP plants less competitive from a financial point of view Clear funding arrangements are required to achieve the Strong potential for hybrid fossil-CSP, given the significant solar resources, the large national gas and oil ambitious target set by K.A.CARE’s White Paper electricity generation base that exists, and the fossil fuel reserves The need for additional installed power capacities due to soaring power consumption, forecasted to grow at an annual rate of 8% over the next few years. 4.1 Electricity Market The electricity market in Saudi Arabia is dominated by the vertically integrated Saudi Electricity Company (SEC) set up in 1998 with the Saudi government as a major stakeholder. The SEC owns most of the generation capacity as well as transmission and distribution infrastructures. Another government entity is the Electricity and Co-Generation Regulatory Agency (ECRA), acting as the market regulatory body. Plans for deregulation began in 2007 when SEC opened the market to Independent Power Producers (IPP). There are long-term unbundling plans in place to further deregulate the market by separating the three main functions (generation, transmission and distribution) and allowing the operation of private competitors. Within the overall plan, ECRA will continue working with the relevant government bodies to promote the participation of IPPs and Independent Water and Power Producers (IWPPs). It was only recently that a generation capacity was provided by private producers who serve isolated loads or sell directly to the SEC. Furthermore, several large consumers produce captive generation on their own. As part of deregulation plans, the generation sector is likely to be moved under the control of four different companies, all started as spin-offs of the www.csptoday.com Decision makers’ sensitivity: CSP industry development could be perceived as a threat to the role of oil and gas SEC. It is envisaged that the most common business model implemented for privatization of the generation segment is the BOO (Build-Own-Operate) one, which is regulated by 20-year contracts currently awarded by SEC. Saudi Arabia’s energy use is almost entirely from fossil fuels. In 2011, less than 1% of the energy generated was sourced from renewable technologies whilst 65% came from oil and 27% from natural gas. Saudi Arabia’s oil and gas industry is dominated by the government-owned Saudi Aramco, which is the world’s largest oil company, both in terms of oil reserves and production. 4.1.1. Electricity Consumption The power generation capacity in Saudi Arabia has risen by approximately 7% on average in the last ten years. However, consumption rates grew at a higher pace (approximately 8%) and this is one of the most important drivers for the development of new, renewable generation capacity. The current annual rate of electricity consumption is 231 TWh. Saudi Arabia has the highest per capita oil consumption in the world approximately five times greater than the analogous figure in the USA and ten times that of Japan. CSP Today Markets Report 2014 | 91 Saudi Arabia 4.1.2. Grid Transmission The transmission network of Saudi Arabia suffers from above-average transmission losses (approximately 11%), and for this reason, various investments have been put in place since 2000 to improve it alongside the distribution network. The overall plan envisages the development of an interconnected regional transmission system with the other five Gulf Cooperation Council (GCC) countries (UAE, Bahrain, Oman, Qatar and Kuwait). Commissioned by the Gulf Cooperation Council Interconnection Authority (GCCIA), the GCC Interconnection Grid project was agreed at the end of 2001. The first phase, which was the largest of all three phases, entailed the development of the North Grid across Kuwait, Saudi Arabia, Bahrain and Qatar and was completed in 2009. The second phase involved the internal connection among the southern systems (United Arab Emirates and Oman) and was completed in 2011. Meanwhile, the third phase of the project entails the interconnection of the GCC north and south grids and is still under development. With the completion of the third phase, the interconnection of the six Gulf States would be accomplished.During the first two years of operation, the GCC interconnection contributed significantly to the continuity of power flow to the power systems of the member states. Between July 2009 and the end of 2010, there were about 250 incidents of sudden loss of generation units connected to the networks in various member states, but because of the GCC interconnection, the systems managed to avoid supply interruptions (Ebrahim, 2012).Numerous benefits are anticipated with the achievement of a common GCC electricity market, such as increased energy security and reliability, greater renewable energy penetration, reduced cost of supply for consumers, and promotion of regional integration and trade.Equally important is that the GCC Interconnection Grid will allow private investors to develop larger projects with access to a wider market, including not only the GCC, but also other pools, such as the EJILST (Egypt, Jordan, Iraq, Lebanon, Syria, and Turkey) and the UCTE (Europe). The availability of a common market will thus provide opportunity for the establishment of power plants close to resources, giving freedom for IPPs and IWPPs to select strategic locations in a much larger market. www.csptoday.com CSP Today Markets Report 2014 | 92 Saudi Arabia Figure 2(4): The GCC Grid Interconnection Project KUWAIT ALZOUR 400 KV SAUDI ARABIA SEGERB 1200 MW 310 km AL FADHILL 400 KV HVDC BACK-TO-BACK 600 MW 112 km BAHRAIN 1200 MW 90 km JASRA 400 KV GHUNAN 400 KV 290 km 750 MW 100 km QATAR DOHA SOUTH SUPER 400 KV SALWA 400 KV 150 km 900 MW 400 MW SHUWAIHAT 400KV EMIRATES NATIONAL GRID UAE AL OUHAH 220 KV 52 km OMAN OMAN NORTHERN GRID AL WASSET 220 KV Source: The GCC Interconnection Authority (GCCIA) A number of concrete steps have been taken to improve Saudi Arabia’s transmission network. Most recently, in November 2012, ABB won an award to expand the kingdom’s power grid. The contract, worth around US$ 170 million, will see a number of projects executed for SEC. The aim of this project is to alleviate the increased demand for electricity in and round the central pilgrimage area of Makkah. In addition, ABB will build four other transmission and distribution GIS (gas-insulated switchgear substations) in the western and southern regions of the country. This project is scheduled for completion by 2014. www.csptoday.com 4.1.3. Electricity Demand Electricity demand is increasing rapidly due to the combined effect of population growth and growing electricity consumption per capita. The former entails not only a higher direct consumption of energy, but also increased demand for desalinated water, which is a very intensive energy process. The latter is determined more by the highly subsidized retail price for electricity rather than by an effective rate of industrialization. The average trend of electricity consumption from 1990 onward has been 6.2% per year, but this rate has increased to 8% in the last decade: the population growth rate between 2000 and 2003 was over 3%. However it decreased to approximately 1.52% in 2012. CSP Today Markets Report 2014 | 93 Saudi Arabia Finally, the water demand growth is approximately 7% per year. Government policy in relation to subsidies recently started changing, and the final cost to consumers has risen. However, environmental costs associated with conventional generation technologies are not internalized within the energy tariff and, generally speaking, consumers have little incentive to save energy. Retail prices are essential in forming a comprehensive overview of the electricity sector because residential load still represents approximately 82% of overall demand (Figure 3(4)). It is estimated that approximately 85% of residential consumption is associated with cooling load. This aspect is further confirmed by a large seasonal variation in electricity consumption which peaks during the hot summer season. Figure 3(4): Electricity Demand in Saudi Arabia by Sector Electricty Demand by Sector Government buildings - 3% Other (agriculture, construction) - 2% Commercial - 13% Residential - 82% Source: Alamoud, 2010 www.csptoday.com CSP Today Markets Report 2014 | 94 Saudi Arabia A large portion of Saudi Arabia’s electricity consumption goes to air-conditioning. According to a simulation study for solar adsorption air-conditioning in Saudi Arabia released in 2013, the annual consumption of electricity per capita in Saudi Arabia is 7,700 kWh, compared with an average world consumption of 2,500 kWh per capita. Air conditioning accounts for nearly 52% of this consumption, which means that over 4,000 kWh (per person per year) is consumed by the cooling load. 4.2 CSP Market The Saudi energy economy is dominated by oil. According to a Citigroup report published in September 2012, the increasing internal energy demand, combined with a growing population could represent a threat to the long-term capability of the kingdom to export oil, which currently provides over 80% of economic resources. Such forecasts have been the main driver for a major policy shift towards renewable energy generation sources. The latest forecast, as reported in “Energy Efficiency Initiatives for Saudi Arabia on Supply and Demand Sides”, carried out by the Energy Research Institute, indicates that power demand in the kingdom will grow between 8% and 9% on an annual basis for the next ten years. 4.1.4. Market Structure Diagram Electricity and Cogeneration Regulatory Authority (ECRA) Independent Water and Power Producer (IWPP) Independent Power Producer (IPP) Saudi Electricity Company (SEC) (Directly or through its wholly or partially owned subsidaries) Generation Transmission Distribution Customers www.csptoday.com CSP Today Markets Report 2014 | 95 Saudi Arabia Figure 4(4): Saudi Arabia’s Oil Balance on a Business-as-Usual Trajectory Source: Chatham House, 2010 Figure 5(4), obtained from a 2010 Chatham House report, has been quoted in numerous publications relating to the forecasted dire straits faced by the Saudi Government if they do not find an alternative source of energy for domestic consumption. Admittedly, the above graph was published in 2010, before the shale gas boom and the potential implications this may have had on international oil and gas prices and exports in markets such as the USA. Saudi Arabia does not import any natural gas or oil and therefore relies entirely on internal production for consumption. According to the EIA (2013), Saudi Arabia’s subsidization of natural gas is the greatest in the Persian Gulf. It goes without saying that the potential earnings from exporting oil and natural gas far outweigh any earnings from local consumption.For example, Saudi Arabia accounted for 16% of the USA’s crude oil imports in the first ten months of 2012. The average US-landed costs per barrel of Saudi Arabian Light Crude Oil in 2010 were US$ 79.67. In 2012, this value increased to an average of US$ 108.80 (EIA 2013). In essence, there are two major drivers behind the Saudi Government’s decision to diversify its energy supply. The first is financial. Saudi Arabia stands to profit greatly from exporting oil to countries in the Middle East and USA. The second is meeting the demand of increased domestic consumption. Chatham House’s forecast www.csptoday.com that consumption will outweigh production after 2040 implies that the country will ultimately have to import energy resources. With this in mind, it is not surprising that the announcement by Saudi Arabia that 50% of energy production is to come from renewable sources by 2020 has spurred major initiatives in the global renewables sector. In Saudi Aramco’s 2012 annual review, Shaping Tomorrow, the company reconfirmed commitment to a renewable energy future stating, “We are exploring renewable and alternative energies, including wind and solar, which will help create even more opportunities for the company and the kingdom”. A representative from Saudi Aramco told CSP Today that the major goal for Aramco is to employ renewables within its premises as much as possible, using the power generated by renewables in upstream and downstream oil and gas production, and for internal power consumption. Aramco has already implemented a number of smallscale solar initiatives. Furthermore, the Arriyadh Development Authority, which is building the Riyadh Metro, has mandated 20% of the metro’s electricity demand come from solar energy – although the technology to be adopted has not been announced yet. Since the overall power demand of the railway project will be 468 MW, 20% will CSP Today Markets Report 2014 | 96 Saudi Arabia equate to as much as 94 MW. The six-line Riyadh Metro system is a US$ 22 billion project on which construction isВ set to commence next year, to be completed by 2019. However, the big excitement for the CSP industry rests primarily in the hands of the King Abdullah City of Atomic and Renewable Energy (K.A.CARE). In 2010, K.A.CARE was established to lead the development of the new renewable energy strategy, and in May 2012, Saudi Arabia announced its new national energy target of 25 GW installed capacity from CSP by 2032, becoming the most ambitious player in the CSP arena. This value is part of an overall target of installing 54.1 GW of renewable energy capacity, comprising 25 GW of CSP, 16 GW of PV, and 13 GW of wind energy, geothermal and waste-to-energy power plants. 300 MW), recent feedback from industry leaders has suggested that PV may gain a larger portion in the introductory round than CSP. The first round of the CPP includes 900 MW of CSP installed capacity alongside 1.1 GW of PV, 650 MW of wind technology and a further 200 MW from other applications (geothermal and waste-to- energy). The second phase will include the development of a further 1.2 GW of CSP, as well as 1.3 GW of PV, 1.05 GW of wind power and a residual 250 MW of other renewable energy generation technologies. The white paper announcing a Competitive Procurement Process (CPP) was launched in February 2013. The plan is to develop a variety of projects through Independent Power Producers (IPPs) with 20-year Power Purchase Agreements (PPAs). This involves establishing a central procurement agency that could be ECRA, along with the potential introduction of purchase obligations to ensure that all energy generated by renewable sources is effectively used. For the time being, there is no CSP-specific policy, framework or any other renewable energy legislation in place but it is expected that a decision will be made following the second full-scale procurement round, which is scheduled to take place in late 2014 or early 2015. The mechanism proposed by ECRA is to set up the value of the FIT for the first three years according to the lowest bid – similar to the process used in South Africa and India. The introductory round of the plan started after the white paper was issued and should be completed within twelve months. It will consist of a few projects (five to seven) utilizing different technologies, to be developed in already-identified sites. Following rounds would start only when the previous ones are completed, but it is envisaged that each procurement stage will last between six and ten months (with the exception of the introductory phase which will be longer). It is expected that the introductory round will only cover an overall installed capacity of up to 500-800 MW to be shared between CSP, PV and onshore wind. Although it was initially suggested that there would be a fifty-fifty split between CSP and PV (each receiving www.csptoday.com CSP Today Markets Report 2014 | 97 Saudi Arabia Figure 5(4): Current Indications for CSP and PV Allocations in Saudi Arabia 1,400 1,300 пЂј CSP пЂј PV 1,200 1,200 1,200 1,000 900 800 *It should be noted that the 300 MW estimation for CSP and PV in the Introductory Round is based on the estimate that 600 MW is allocated to solar and that it is split equally. 600 400 300 300 200 0 Introductory Round First Round Second Round Source: Saudi Sustainable Energy Symposium Saudi Arabia is going against international trends by favoring CSP over PV. Whether the end goal of 25 GW of CSP will remain the same throughout the various rounds remains to be seen. As illustrated by Figure 5(4), PV is already dominating the first and second rounds. That said, there is no doubt that many international companies within the CSP industry have a strong interest in playing a role within this very ambitious www.csptoday.com plan. How successful the program will be ultimately depends on the availability of funding. At the moment, one of the strongest elements of risk from an investor’s perspective is the lack of regulation. This could bring both complications and uncertainty. The CPP includes specific requirements and constraints, as outlined in Table 2(4). CSP Today Markets Report 2014 | 98 Saudi Arabia Table 2(4): Competitive Procurement Process Requirements Requirement Type Requirement Parameter Minimum Size 5 MW Smaller projects will qualify only if they have a single common metering point and their joint capacity is higher than 5 MW Minimum Storage 4 Hours Applicable to the introductory round. This may be increased in the following rounds based on K.A. CARE evaluations Investment in Training 1% of gross revenue Sum payable to a Sustainable Energy Trading Fund (SETF) which in turn will be used to provide training for locals Research and Development 1% of gross revenue Sum payable to be invested through the Developer Research Advisory Council (DRAC), an agency set up by K.A.CARE Job Localization Plan To be defined in the At the commercial operation date plus two years, a developer will relevant RFP/PPA be required to issue a compliance report to SEPC (the off-taker), stating total number of employees, total number of Saudi employees, total wages paid, and total wages paid to Saudis. Developers will be benchmarked, by technology class, on this basis. If a developer does not meet the statutory minimum threshold, it will be disqualified from bidding on competitive procurements in the subsequent year. Developers in the bottom 20% of job localization within their technology class will have to pay a fine. Developers in the top five percent of job localization in their technology class in any one year will be awarded a bonus Notes Source: CSP Today Global Tracker, August 2013 In preparation for the new CSP capacities that will need to be integrated into the electricity distribution network, K.A.CARE is currently carrying out an engineering and technical study on renewable energy impact on the power grid. Fortunately, the nature of CSP electricity generation makes it easy to connect to the grid, since CSP can be considered a base-load source of energy being similar to a conventional power plant with a standard power block.Moreover, the load profile of Saudi Arabia indicates there are two peaks, one in the daytime and one in the evening. Therefore, economically and technologically, CSP, with four hours of storage, as mandated by K.A.CARE for the introductory procurement round, will be the optimal choice to meet both the daytime and evening peak demands.“ The requirements for integrating new solar plants with existing distribution networks should not be any different from those for interconnecting larger fossil-fuelled generators to the transmission system, except that renewables are often variable www.csptoday.com and geographically dispersed,” explains Dr. Mahmoud Zayan, specialist in Saudi Aramco’s Consulting Services Department, in the company’s quarterly Journal of Technology.The Grid Impact Study involves active participation of various key stakeholders, such as the Saudi Electricity Company, National Grid Saudi Arabia, Ministry of Water and Electricity, Electricity and Co-Generation Regulatory Authority, and others. The study is crucial to understanding the main technical requirements and dealing with the challenges of integrating renewable energy sources into the grid. CSP Today Markets Report 2014 | 99 Saudi Arabia 4.2.1. Local Content Requirements Table 3(4): Local Content Requirements Outlined for the Introductory Round of the CPP Cost Category Equipment or Service Local Content Factor Engineering Service 50% Legal Service 50% Other Professional Services Service 50% Construction Labor and Management – Saudi Service 50% Construction Labor and Management - Other Service 0% Collector Equipment 50% Mirrors Equipment 50% Absorber Equipment 50% Molten Salts Equipment 100% Steam Turbine and Generator Equipment 100% Storage Tank Equipment 100% Balance of Plant Equipment 25% Engineering Service 50% Legal Service 50% Other Professional Services Service 50% Construction Labor and Management – Saudi Service 50% Construction Labor and Management – Other Service 0% Heliostat Equipment 50% Mirrors Equipment 50% Receiver Equipment 100% Molten Salts Equipment 100% Steam Turbine and Generator Equipment 100% Storage Tank Equipment 100% Balance of Plant Equipment 25% Parabolic Trough Power Tower Source: K.A.CARE, 2013 According to the CPP white paper, local content will be evaluated based on the amount of money spent on goods and services and will be reviewed by a certification body to be established by K.A.CARE. The values reported in the table above might well be increased in subsequent procurement rounds. www.csptoday.com The high local content demands reflect the country’s ambition to develop a strong local manufacturing industry supporting the entire CSP value chain. In line with this expectation, it is likely that Saudi Arabia is prioritizing CSP technology over PV because it cannot compete with the manufacturing know-how already CSP Today Markets Report 2014 | 100 Saudi Arabia developed in other countries, such as China. From a developer’s perspective, they will need to ensure that they achieve the right balance of experience and know-how whilst still complying with the strict requirements imposed by the CPP in order to be successful. It is envisaged that partnerships with local companies could be the best strategy to pursue. Certainly, the requirements listed above demonstrate the need to secure some resources exclusively from within the kingdom and developers will need to give due consideration to this constraint. The obligation to provide training might also become a critical factor in guaranteeing an appropriate level of know-how and the employment of local workers. As such, the development of CSP in Saudi Arabia will initially be characterized by a strong trend of domestic and foreign partnerships until the local skills base and expertise level has been built up. K.A.CARE has already been working closely with the U.S. National Renewable Energy Laboratory (NREL) for training and expertise on Renewable Resource Monitoring and Mapping (RRMM) program, which involves establishing accurate meteorological data for CSP project developers and financiers. 4.2.2. Solar Resource Forecasting In April 2013, nine Saudi engineers spent nine days at the NREL, studying and discussing theoretical and practical topics, ranging from waste-to-energy to solar resource forecasting. NREL and its partner Battelle are supporting the installation of the renewable resource monitoring stations – helping officials decide where to put the large stations and where to distribute the smaller ones – while training local engineers on operating these instruments.As part of the RRMM program, K.A.CARE has started collecting solar radiation data at several sites throughout the kingdom, with an aim of establishing 75 monitoring locations by the last quarter of 2013. “The new monitoring stations monitor Global Horizontal Irradiance (GHI), and Direct Normal Irradiance (DNI), plus meteorological and other parameters at the more complex stations,” states K.A.CARE’s summary on the RRMM. Among other parameters that will be measured are Diffuse Horizontal Irradiance (DHI), Aerosol Optical Depth and dust deposition. At present, preliminary measurements are available for the GHI, DNI, and DHI, although K.A.CARE notes that “initial data sets may have limited value for some applications until a greater period of record is compiled”. www.csptoday.com Once complete, all collected solar resource data will be disseminated through an online, interactive Renewable Resource Atlas (www.rratlas.gov.sa) from late 2013. The Atlas will include radiation, solar spectrum, temperature, dust levels, humid and wind speeds, as they pertain to energy project development. The Atlas will enable users to easily compare resource characteristics for various locations, and data from it can be mapped or graphed, and in some cases downloaded for import into other programs that support plant siting and pre-feasibility studies. This data will assist developers in evaluating proposed project sites in the kingdom, and will also benefit universities, research institutes, project developers, project financers, and semi-governmental organizations.Ultimately, the RRMM will create a reliable pool of data that represents the climatological and geographical diversity of the kingdom. Priority locations for the stations will be areas with the highest level of solar resources; places with complex terrain or strong resource gradient; and areas near the electric grid and load centers. And while data from the stations will be available as daily total irradiance in the form of line graphs, the satellite-based model data – benchmarked against historical data from the kingdom – will be available as monthly and annual average values.Once the entire network is installed, the solar monitoring network data will be integrated with the satellite-based models, possibly in 2014. The satellite-based estimates in particular will integrate cloud, dust deposition, and solar spectral data. Although instrumentation will vary depending on the processing algorithms and models used, all measurements will include full metadata to provide users with vital information for an informed analysis. 4.2.3. CSP Project Profiles and Time Frames In 2011, German company Solar Tower Systems GmbH started the construction of a 300 kW solar tower demonstration plant for a high-temperature solar gas turbine in Riyadh Techno Valley on the campus of King Saud University. In 2013, King Saud University also launched a Point Focus Fresnel collector, which was reported as being able to raise heat transfer fluid temperature above 500ЛљC. On the SEC website, two Independent Power Producer (IPP) projects are listed: Dhuba 1 and Dhuba 2. The 550 MW Dhuba 1 is expected to include a CSP component, believed to be about 20 to 30 MW in capacity. The technology choice is yet to be confirmed, but the CSP Today Markets Report 2014 | 101 Saudi Arabia expected commercial operation date of the project, which has been under study for at least two years, is 2016. Dhuba 2 is expected to reach completion in 2017. An industry insider told CSP Today that several imminent projects are likely to come from the SEC and Saudi Aramco, which has a dedicated renewable energy team under its power system department, whilst K.A.CARE leads the country’s large-scale, national solar initiative towards the government’s targets. 4.3. Local CSP Ecosystem There is no doubt that the ambitious program launched by Saudi Arabia represents an extremely interesting opportunity for any international industrial player and will likely have a positive effect on the CSP industry in general. The target set by the kingdom potentially opens the doors for scaling up the production of components and identifying solutions along the value chain. According to Philip Moss, managing Partner at Mana Ventures, an international clean energy investment firm headquartered in Masdar City but operative in the Saudi market as well, one of the biggest challenges for any renewable energy player approaching the Saudi local market is the lack of a cohesive and comprehensive framework that can support the development of renewable energy projects. For new market entrants, this requires a great amount of commitment for the identification of suitable partners and engagement at government level.A further concern is the potential competition of the CSP industry with PV technology, due to the lower CAPEX and relatively shorter lead-up time needed for PV installations. According to Moss, the MENA region in general is now being seen as a significant market by distressed PV manufacturers. However, an artificially deflated environment for PV in the region could be created, as PV companies are looking to ship volume. Ultimately, this would make it even harder for CSP to compete against low-cost PV. That said, Saudi Arabia offers a very particular context in which the projects will be developed. From one side, the technical performance of many components will be challenged by local environmental factors such as the dust and climate of the desert that can expose plant components to temperature up to 54В°C. These aspects could require ad-hoc solutions that will guarantee suitable performance of the plants. Thus, whilst the CPP White Paper calls for experienced CSP developers, it is clear that CSP initiatives will need to be specifically tailored to the unique Saudi conditions. On the other side, the dominant role of oil and gas might become a hurdle for the development of new solar technologies that could be seen as a threatening factor to the conventional industry. The undefined nature of the current regulation – partially revised by the Competitive Procurement Process – in Saudi Arabia would encourage any industry player aiming to achieve a meaningful role within the local value chain to adopt a cautious and considered approach, maximizing the use of due-diligence tools in order to mitigate any potential risk. Meanwhile, establishing alliances with the local industry will likely be imperative, as the proposed local content requirements outlined within the CPP make identification of local partners essential for international players. www.csptoday.com CSP Today Markets Report 2014 | 102 Saudi Arabia 4.3.1. Key Government Agencies Table 4 provides an overview of the key government agencies and authorities within Saudi Arabia that will directly or indirectly be involved with CSP projects. Table 4(4): Ministries and Government Agencies in Saudi Arabia Previous renewable energy programs (if applicable) Name Roles and Responsibilities Council of Saudi Chambers of Commerce and Industry Promotes the interests of the 22 regional Saudi В Chambers, acting as a voice for them on a national and international level. Monitors and solves issues affecting private sector. Develops foreign investment through trade missions. Electricity and Cogeneration Regulatory Authority (ECRA) Regulates electricity and water desalination industries. Plays an indirect role by issuing generation and grid connection licenses in addition to managing grid code matters. ECRA is assisting in KSA’s transition to nuclear & renewable energy over the next ten years. It is currently determining its responsibilities as a regulator of renewable projects. King Abdulaziz City for Science and Technology (KACST) Produces energy-related technologies and national databases of renewable energy resources. Presents solutions to reduce energy waste in all sectors. Studies the environmental impact of different energy sources. Serves as the Saudi Arabian national science agency and as its national laboratory. Locally, KASCT has been involved with PV tunnel lighting, PV grid connected systems, Sadus desalination plant, and solar dryers. Internationally, KASCT is involved with the Saudi-US Solar Programme-SOLERAS; and the Saudi-German joint R&D program, Solar Dishes HYSOLAR. KACST launched the Solar Water Desalination initiative which aims to have all desalination plants in the kingdom run on solar by 2019. King Abdullah City for Atomic and Renewable Energy (K.A.CARE) Defining, facilitating, implementing and regulating the national atomic and renewable energy program. Launched a competitive procurement process for a targeted 25 MW of CSP and 16 GW of PV by 2032. Ministry of Commerce and Industry (MCI) Enhances industry and trade sectors’ capacities. Develops and implements policies and mechanisms to diversify productivity. Regulates internal markets and develops external commercial relations. Studies requests of foreign companies, and assists in registrations, office set-ups and business incorporation. В www.csptoday.com CSP Today Markets Report 2014 | 103 Saudi Arabia Riyadh Chamber of Commerce and Industry (RCCI) Liaises between the public and private sectors. В Collects and disseminates business information. Identifies investments areas inside and outside the kingdom. Develops the material and labor resources of Riyadh. Saudi Arabian General Manages the investment environment in Investment Authority (SAGIA) Saudi Arabia. Issues trade licenses for foreign companies. Monitors and benchmarks the country’s attractiveness to investors. Provides business support to investors. В Saudi Aramco Piloting a number of solar projects. Completed a 500kW solar farm on Farasan Island in the Red Sea, in collaboration with SEC and Solar Frontier. Set up the Solar Technology Park at its site, which hosts more than 30 technology vendors. Deployed a 10 MW solar canopy project in Dharan. Developing a 1 MW CPV project in the northwestern Tabuk region. A national oil and natural gas company owned by the Saudi Government. 4.3.2. Independent Water and Power Producers (IWPP) Table 5(4) shows a list of IPPs and IWPPs operating in Saudi Arabia. Table 5(4): Utility Companies in Saudi Arabia Name Notes Air Liquide Arabia Ltd. A partnership between Air Liquide M.E. (55%), TAQA (25%) and Al-Rushaid Petroleum Investment Co. (20%). The parent company of Air Liquide Middle East is Air Liquide S.A., a French global leader in industrial gases founded in 1902. Al-Jomaih Energy & Water Company Founded in 1936, Aljomaih Holding Company, an industrial conglomerate, operates in manufacturing, power generation, beverages, real estate, investment, automotive services, and heavy plant equipment industries primarily in Saudi Arabia. Al-Jubail Gas Plant Company Ltd. Manufactures, supplies and distributes a wide variety of industrial, medical, specialty gas products and bulk gases. Dhuruma Electricity Company (DEC) A project company set up to build the PP11 IPP Combined Cycle Gas Turbine plant close to Dhuruma, Saudi Arabia. Hajr Project Company Owner of the Qurayyah IPP, a greenfield project that is being developed on a BOO basis, located on the eastern coast of Saudi Arabia with a net generation capacity of 3,927 MW. The production capacity will make it once completed the largest IPP combined cycle gas-fired power plant in the world. www.csptoday.com CSP Today Markets Report 2014 | 104 Saudi Arabia International Barges Company for Desalinated Water (Bowarege) Owner of the Barge IWP, the world’s first barges mounted, self-contained desalination plants with onboard power generators and staff accommodation. Both barges are fitted with 25,000m3/day capacity reverse osmosis desalination plants. Marafiq Supplies water and power to Jubail Industrial City and partially to the Eastern province cities. Owned by Jubail Water & Electricity Co., Marafiq is the largest power and water desalination facility in the world. With natural gas as a fuel, it utilizes Combined Cycle Power Plant technology with Multi-Effect Distillation. National Industrial Gases GAS is 70% owned by the Saudi Basic Industries Corporation (SABIC) and 30% by Company (GAS) a number of Saudi private sectors operating in the field of industrial gases. GAS is responsible for producing, distributing and marketing industrial gases to SABIC affiliates and other private companies and operates in three locations: GAS Jubail, Gulf Guard Jubail and GAS Yanbu. Natural Gas Distribution Co. Ltd. (NGDC) Private Saudi company distributing natural gas to the industries located in second Industrial City Riyadh. Rabigh Arabian Water & Electricity Company (RAWEC) Owner of the first IPP in Saudi Arabia.В The project is being developed as a new power plant with a net capacity of approximately 1,204 MW at Reference Site Conditions and associated facilities in Rabigh. Power will be sold to Saudi Electricity Corporation under a 20-year PPA. Rabigh Electricity Company (RABEC) Owner of the Rabigh Independent Water Steam Power Producer (IWSPP), which provides water, power and steam to Petro Rabigh Co. The plant utilizes Heavy Fuel Oil to generate electricity, and Reverse Osmosis for desalination. Shuaibah Water & Electricity Company (SWEC) Owner of the Shuaibah IWPP facility with ACWA Power being its major shareholder. Arabian Heavy Crude Oil is used to produce steam for power generation and desalinated water production using Multi-Stage Flash technology. Shuaibah Expansion Project Company (SEPCO) Controls Shuaibah independent Water Producer.В The expansion comprises a desalination plant utilizing Reverse Osmosis to augment water supply in parts of the kingdom’s western region. Shuqaiq Water & Electricity Company (SqWEC) Owns and operates Shuqaiq IWPP, the second phase of Shuqaiq complex, which produces water and power for Assir region and the city of Jizan. The project included the construction and commissioning of three 340 MW oil fired power units combined with Reverse Osmosis desalination and potabilization facilities. Water & Electricity Co. (WEC) A limited liability company responsible for the sale and purchase of water and electricity and all ancillary activities. WEC is the counterparty under the Power & Water Purchase Agreement, buys the project’s water and electricity, and sells them on to SWCC and SEC, respectively. 4.3.3. Permitting Agencies A particular aspect of importance related to one of the permitting agencies – Sustainable Energy Procurement Company (see Table 6(4)) – is the Power Purchase Agreements (PPAs). According to the white paper, these will be subject to the Saudi common law. As a matter of fact, many international players may not be familiar www.csptoday.com with it being based on Islamic law (conversely from the governing law of the PPAs used for conventional IPPs, which is based on English law). The single buyer of the electricity produced by CSP plants will be the SEPC, which again is not very known by international stakeholders because it has yet to be established. CSP Today Markets Report 2014 | 105 Saudi Arabia Table 6(4): Permitting and Environmental Assessment Agencies Operative in Saudi Arabia Previous renewable energy programs (if applicable) Name Roles and Responsibilities Sustainable Energy Procurement Company (SEPC) To be established. SEPC will administer procurement, execution and management of power purchase agreements. It will coordinate with SEC on permitting and licensing, local content, grid connection, prepackaged sites, tendering projects, and renewable resources. Sustainable Energy Service Centre (SESC) SESC will provide support to developers throughout the renewable procurement program, including on local content issues. To be established. Presidency of Meteorology and Environment (PME) Established the Environmental Protection Standards. Carries out auditing and environmental impact assessment for industrial and development projects, including solar power plants. Developing a national strategy for environmental awareness that will support environmental legislation in the country. Any company looking to do business in the Saudi environmental market must obtain a license from PME. 4.3.4. Local Consultants and R&D bodies Local consultancy services may hold even greater importance due to the lack of a CSP-specific policy or framework and due to the need to activate the right communication channels with potential stakeholders of a CSP plant, including local authorities. Table 7(4) provides an overview of the relevant consultancies and research bodies operating in Saudi Arabia. Table 7(4): Consultants and R&D Bodies Operative in Saudi Arabia Name Roles and Responsibilities Previous CSP Projects Centre of Excellence in Renewable Energy (at King Fahd University of Petroleum & Minerals) Conducts R&D that links local and international research, education, business and government resources for technology transfer and advancement of renewable energy in Saudi Arabia. Set up under UNESCO and ISESCO. Currently pursuing three R&D programs in Solar Cell, Solar Cooling & Heating, and PV module/system reliability. Developer Research Advisory Part of SESC. Focuses on R&D in the kingdom, Council (DRAC) making recommendations on how to contribute to its intellectual capital. DRAC will sponsor an annual Sustainable Energy Research Conference and run a prize competition. To be established. Developer Trainer Advisory Council To be established. www.csptoday.com Focuses on training programs. Ensures that developers’ programs are adequate. CSP Today Markets Report 2014 | 106 Saudi Arabia King Abdullah University of Science & Technology (KAUST) KAUST’s Solar Engineering Research Centre conducts R&D in renewable energy science and engineering, and transfers outcome to industry members to contribute to the progress of technology advancement. Houses a 2 MW solar park generating 3.3 MWh of energy annually, and the Solar Engineering Research Centre. Saudi Arabia Solar Industry Association (SASIA) Provides solar professionals with the opportunity to meet through workshops, conferences and lectures. Publishes research reports on solar policies, standards and product certifications. Assists international solar companies that are establishing or contemplating the establishment of representative offices in Saudi Arabia. 4.3.5. Financing Organizations Funding is, generally speaking, a relevant issue for capital-intensive projects like CSP plants. As CSP is still regarded by many as being a more expensive and high-risk energy source than its competitors, it requires government support to make it competitive under current market conditions. Table 8(4): Main Funding Institutions and Banks Operative in Saudi Arabia Previous Renewable Energy Projects Name Roles and Responsibilities Sanabil Al-Saudia Sovereign investment fund owned by Saudi Arabian Investment Company. Saudi Industrial Development Fund (SIDF) Potential financer of renewable SIDF plays a pivotal role in executing programs devised for the industrialization of Saudi Arabia, by energy projects. providing short-term loans to investors, as well as technical, administrative, financial and marketing advice. Sustainable Energy Research Fund (SERF) A fund that will receive 1% of gross revenues from developers, to be allocated to research applications that have potential for commercialization. Administered by SESC. To be established. Sustainable Energy Training Fund (SETF) A fund that will receive 1% of gross revenues from developers, to be allocated to a sustainable energy training program. Administered by SESC. To be established. www.csptoday.com Acquired 13% of ACWA Power International – a company that invests in power and water in the kingdom and regionally, including solar energy. May become a strategic investor for power production. CSP Today Markets Report 2014 | 107 Saudi Arabia 4.3.6. Utilities and Transmission Grid Operators The state-owned Saudi Electricity Company (SEC) currently controls Saudi Arabia’s generation, transmission and distribution network, and the National Water Company (NWC) similarly manages the majority of the country’s water sector. However, the government has established a regulator – Electricity and Co-Generation Regulatory Agency – and new licensing rules that will pave the way for reform and open up the sector to private investors. This will help attract investment and promote innovation.The reform process, which involves unbundling the SEC and privatizing the major components of the kingdom’s electricity and water sectors, should be completed by 2014. Until then, government-owned utility companies will continue to have the upper hand within the energy sector. Table 9(4) shows an overview of the key utility companies in Saudi Arabia.Table 9(4): Utility Companies in Saudi Arabia Table 9(4): Utility Companies in Saudi Arabia Previous renewable energy programs (if applicable) Name Roles and Responsibilities National Grid Company (NGC) Wholly owned by the Saudi Electricity Company. Responsible for all operation and maintenance activities of the transmission grid within the Kingdom. В National Water Company (NWC) Provides water and wastewater services, such as bulk water supply, and preservation of natural water resources. Manages the country’s water sector except in Al Madina. NWC initiated two sewage treatment plants with combined heat & power generation. The first, on Al Kharj Road, produces 2.2 to 2.5 MW of renewable energy, and the second is Jeddah Airport 2. Saudi Electricity Company (SEC) Responsible for generating, transmitting and distributing electricity throughout the kingdom either directly, or through its wholly or partially owned subsidiaries. Dhuba 1 550 MW IPP, which will be the first Saudi ISCC, is expected to be tendered in 2013 and will have a solar thermal component of up to 20 MW. Completion is set for 2017. Saline Water Conversion Corporation (SWCC) The second largest electric power producer in the kingdom. Responsible for desalinating seawater. Currently establishing three solar-powered desalination plants. www.csptoday.com CSP Today Markets Report 2014 | 108 Saudi Arabia 4.3.7. Developers and EPC and Engineering Companies The scope for localizing manufacturing and EPC work largely depends on the existing local capacity and availability of materials. As a matter of fact, this is one of the primary challenges related to the local Saudi CSP market. Whilst local job creation is one of the key aspects promoted by the overall policy program, it is unlikely that the required skills and experience are readily available locally; at least, not in the short term. Therefore, it is expected that investors and developers will need to factor in the cost of sourcing foreign skills and ultimately, training.Companies will be much more competitive if they team up with entities within Saudi Arabia. According to Marc Norman, a project finance lawyer at Chadbourne, and Parke Power, a Director of Marketing and Communications at the Emirates Solar Industries Association, there is currently a great deal of activity among international renewable energy players trying to find local partners, because this will be the key to success. The white paper sets a high bar in terms of combining local knowledge with international experience and financial strength to the point that is very hard for any single company to match all the requirements, except for ACWA Power.There are several EPC and engineering companies based in Saudi Arabia, as well as companies with strong presence in the region. Table 10(4) provides an overview of them. Table 10(4): Developers, EPCs and Engineering Companies Operating in Saudi Arabia Name Roles and Responsibilities Previous Renewable Energy Projects ACWA Power Saudi Arabia-based developer, owner and operator of independent water and power projects structured on a concession or utility-outsourcing contract model. Developed the 160 MWe Noor 1 CSP IPP in Morocco, and has about 300 MW renewable energy projects in the pipeline. Currently bidding for Mecca’s first solar power plant. Al-Fanar Construction Company Manufacturing and construction company involved in manufacturing electrical construction products, civil engineering construction, and allied engineering services. В Bechtel Corporation One of the largest construction, engineering and project management companies in the U.S. with two offices in Saudi Arabia. Managed the Jubail project in the Eastern Province of the Kingdom since it began operations there in the mid-1970s. Performing project management, EPC, and startup services for the 400 MW Ivanpah CSP facility in southeastern California. Built the 143 MW Catalina Solar thin film project on behalf of EDF Renewable Energy. Provided engineering, procurement and construction management services for Solar Two 10 MW CSP plant in California’s Mojave Desert. Potential CSP developer in KSA. Byrne Looby Partners International consulting engineering company working for asset owners, developers, contractors, and government agencies. Provides assistance for civil engineering projects including water, infrastructure, marine, building, and energy projects. Operates in the kingdom through an office in Jeddah. Designed the solar panel frames and foundations for a range of solar farms on agricultural land throughout the UK, with capacities ranging from 5 MW to 20 MW. Performed operations assessments of possible foundation and framing solutions to determine the most economical solution. Potential CSP developer in KSA. www.csptoday.com CSP Today Markets Report 2014 | 109 Saudi Arabia EGPHIL Solar Solutions Solar solutions provider active in Saudi Arabia and Egypt, serving industrial and commercial establishments, as well as residences. В Gratton Arabia Ltd. В Energy management and electrical safety company offering engineering, analysis, design, installation, field services, manufacturing and supply services. Gratton Arabia is a joint venture between Gratton Infrared Services Inc., AMAD Technical Consultation & Laboratories, and Droobtech Consultation. Millennium Energy Jordan-based turnkey solar solutions provider Industries with an office in Riyadh. Engineered and implemented a 25 MW thermal solar district heating plant in Riyadh, which is the world’s largest solar heating system. National Solar Systems Ltd. Built a 2 MW solar PV system on top of KAUST building, which was completed in 2010. Implemented the grid-connected 864kW solar facility in the Red Sea island of Farasan. Potential CSP developer in KSA. Saudi company with a full in-house capability to engineer, supply, install and support various types of solar systems, from small off-grid systems to large utility-scale grid-connected installations. Provides feasibility studies, engineering & design services, material supply, installation services, and operations & maintenance. Saudi company specialized in the turnkey Saudi Services for Electro-Mechanical execution of large construction projects and Works development of electricity power plants. Subsidiary of Al-Rashid Group. Potential CSP developer in KSA. Solar Arabia Ltd. Potential CSP developer in KSA. Riyadh-based turnkey solar solutions provider, involved in development, design, engineering, system sizing, supply, installation, testing, and commissioning of projects. Originally formed in 1989 as a joint venture with BP Solar Ltd, but today is an independent business, equally owned by two private enterprises from the Gulf region: Ahmed Hamad Algosaibi & Bros. and Olayan Financing Company – the Middle East arm of The Olayan Group. Total - Saudi Arabia A French multinational integrated oil and gas company with growing focus on alternative energy projects. In 2008, Total and Saudi Aramco created the Saudi Aramco Total Refining and Petrochemical Company (SATORP) joint venture to build and operate a refinery in Jubail. In 2009, Total began building its biggest refinery in partnership with Saudi Aramco. www.csptoday.com Owns 20% in the UAE’s Shams 1 CSP Plant, as part of a joint venture that constructed, developed, designed, and will operate and maintain the power plant. Potential CSP developer in KSA. CSP Today Markets Report 2014 | 110 Saudi Arabia Tractebel Engineering Tractebel’s Renewable division provides turnkey solutions, from pre-design to commissioning, including renewable resources assessment, permitting, engineering studies, procurement, to the follow-up of construction and management. Leading a consortium with Astrom Technical Advisors and PD Naidoo & Associates Ltd., to perform the Engineering and Project Management for ESKOM’s 100 MWe CSP demonstration plant in Upington, South Africa (20122014). Potential CSP developer in KSA. Wasath Al-Madar Contracting Establishment Saudi contractor operating in construction, commissioning, operations, maintenance and shutdown, and turnaround of industrial sectors, such as solar, oil & gas, petrochemicals, hydrocarbons, power, water desalination and other industrial infrastructures and production sectors. Potential CSP developer in KSA. WorleyParsons Large Australian provider of project delivery and consulting services to the energy sectors and complex process industries. Provides engineering services and project management consultancy through its seven offices in KSA. Provided engineering support to the 400 MW Ivanpah CSP project in California during the Evaluate and Define phases. Potential CSP developer in KSA. 4.4.1. Local Component Supply As a general observation, the collector assembly is usually the easiest component to localize because it can be manufactured on site through a temporary facility. Similarly, civil works necessary for the construction of a plant can be carried out by a local company. Saudi Arabia is not a highly industrialized country; however, the country has already developed a very strong oil and gas industry. This means that many international players are already operative in the area and provide a wide selection of components, particularly those related to the power block and mechanical services. Table 11(4) offers an overview of CSP components available locally in Saudi Arabia. Table 11(4): Locally Available CSP Components Available Locally in Saudi Arabia Component Name of Supplier(s) Website Turbines Alstom Power - Saudi Arabia www.alstom.com General Electric - Saudi Arabia www.ge.com/sa/index.html MAN Diesel & Turbo - Saudi Arabia www.mandieselturbo.com Mitsubishi Heavy Industries Compressor Corporation - Saudi Arabia www.mhi-global.com Siemens Saudi Arabia www.siemens.com/answers/sa/en/ WorleyParsons Saudi Arabia www.worleyparsons.com www.csptoday.com CSP Today Markets Report 2014 | 111 Saudi Arabia Steam Generators Pumps Valves Alstom Power - Saudi Arabia www.alstom.com Doosan - Saudi Arabia www.doosan.com/en/main.do Foster Wheeler Arabia Ltd. - Saudi Arabia www.fwc.com/contact/ec.cfm#SaudiArabia Alfa Laval - Saudi Arabia www.alfalaval.com Al Hayat Solar Energy www.alhayatsolar.com KSB Pumps Arabia www.abunayyangroup.com Mitsubishi Heavy Industries Compressor Corporation - Saudi Arabia www.mhi-global.com Saudi Gulf Hydraulics Company Ltd. www.saudigulfhydraulics.com/products.php Saudi Pump Factory www.saudi-pump.com/references.html Alfa Laval - Saudi Arabia www.alfalaval.com Dresser Al-Rushaid Valve & Instrument Co. Ltd (DARVICO) www.darvico.com HAQ Trading Establishment http://haq.com.sa/product1.php John Crane (supplied through Dome www.johncrane.com Trading & Contracting, Saudi Arabia). Heat Exchangers MAC Valves (supplied through Technical Industrial Automation) www.macvalves.com Pan Gulf Valves www.pangulfvalves.com Saudi Gulf Hydraulics Company Ltd. www.saudigulfhydraulics.com/products.php Saudi Pump Factory www.saudi-pump.com/references.html Sufaian Mahmood Sayed Establishment Can be found through this link: www.indianembassy.org. sa/Content.aspx?ID=699 Alfa Laval - Saudi Arabia www.alfalaval.com GEA Saudi Arabia LLC www.gea-heatexchangers.com Sondex Saudi Arabia www.gulfsondex.com Tranter (available through their Saudi Arabia Representative Zameel Group Holding Company) www.tranter.com www.csptoday.com www.tia-automation.com CSP Today Markets Report 2014 | 112 Saudi Arabia Receiver Tubes / Solar Collectors Commercial suppliers currently unavailable in Saudi Arabia. But the King Saud University has developed, engineered & constructed a new concentrating collector - Point Focus Fresnel Collector - in March 2013, which has been endorsed by DESERTEC Foundation and may eventually be commercialized. http://arabianindustry.com/utilities/news/2013/mar/12/ king-saud-uni-develops-new-solar-collectors-4238026/#. UZmGmZGDTIU Heat Transfer Fluid Alfa Laval - Saudi Arabia www.alfalaval.com Dow Chemical Company - Saudi Arabia www.dow.com/middleeast/locations/saudiarabia/ contact.htm Air-Cooled Condenser/ Wet Cooling Tower/Indirect cooling systems GEA Saudi Arabia LLC www.gea-heatexchangers.com/ Tracking System Currently unavailable in Saudi Arabia. 4.4.2. Raw Material Availability The need for three different sub-parts (solar field, power block, heat transfer and storage - although the storage is not strictly necessary) entails a certain complexity both in terms of the number of components and in terms of their integration. Amongst the raw materials employed at the construction stage, the solar field will make large use of steel (mounting frames) and glass (solar collectors). The storage system will need molten salts, whilst concrete will be necessary for all the wide range of civil works. While there are materials and sub-components that are easily available, like steel and concrete, others are less easy to find on the local market (such as glass) or even rare (such as molten salts). Table 12(4) lists some of the suppliers available in Saudi Arabia for each of the raw materials considered. www.csptoday.com CSP Today Markets Report 2014 | 113 Saudi Arabia Table 12(4): CSP Raw Material Suppliers in Saudi Arabia Material Supplier Steel Yanbu Steel Saudi Iron & Steel Company Solb Steel Rajhi Steel Jeddah National Steel Factory Taybah Gulf Steel Factory Glass Saudi Arabian Glass Company Obeikan Glass Company Saudi Guardian International Float Glass Company (Gulf Guard) Molten Salt BASF Construction Chemicals Concrete Jubail Concrete Products Mastour Ready Mix Saudi Concrete Products (SACEP) AlRashid-Abetong Nagadi Preformed Concrete Factory. 4.5. Alternative CSP Markets 4.5.1. Desalination As previously stated, one of the most promising fields of application for CSP technology in Saudi Arabia other than electricity generation is seawater desalination. Saudi Arabia’s geography is dominated by the Arabian Desert, with many valleys but no permanent rivers or lakes and very little rainfall, thus water is scarce and extremely valuable.To obtain water, the kingdom has relied on underground reservoirs for more than 40 years to the point that now these are being quickly depleted. The processes currently used for desalination being the second major source of water are Multi-stage Flash Distillation and Reverse Osmosis. The National Water Company plans to spend US$ 66.4 billion over the next eight years on water and wastewater projects, of which US$ 11 billion will be spent on more desalination plants over the next eight years. Earlier this year, the Minister of Water and Electricity Abdullah Al-Hussayen announced that US$ 105 million of water and sanitation works have been approved across the kingdom (Almashabi, 2013). www.csptoday.com Saudi Arabia, currently burns approximately 1.5 million barrels of crude oil per day for desalination. The Saline Water Conversion Corporation (SWCC) of Saudi Arabia currently operates 30 desalination stations that produce 3.5 million mВі of potable water daily, providing more than 70% of the water used in cities and a sizeable portion of industrial needs. SWCC has already carried out a number of demonstration projects, and currently operates two solar powered desalination plants in Al Khafji and Jubail (AMEInfo, 2012). Furthermore, in 2010, KACST, in collaboration with the US multi-national company IBM, launched a national research program on solar desalination. As a whole, the kingdom is the world’s largest producer of desalinated water, owns 30% of the world’s desalination capacity and produces at least 17% of the total world output. The desalinated water is heavily subsidized by the government and possibly for this reason the per capita water consumption is 94% higher than the global average, according to a report produced by SWCC. According to the company’s Annual Report of Operation and Maintenance 2010, various types of CSP Today Markets Report 2014 | 114 Saudi Arabia fuel are currently used for the purpose of desalination in Saudi Arabia: natural gas (over 55%), heavy fuel oil (approximately 25%), crude oil and diesel (approximately 10% each). The production costs of this energy-intensive process that every year provides over 1 million mВі of water to the country are relatively high. Taking into account the fact that fuel prices are subsidized, it is easy to identify a rationale for change. Analyzing these two key factors, it becomes clear that the employment of CSP technology is very promising for the Saudi market. The ambitious Competitive Procurement Process launched in 2013 includes the construction of a 30 MW solar-powered desalination plant at Al-Khafji, near the border with Kuwait, using concentrated solar photovoltaic (CPV) technology developed by IBM and Saudi scientists. This plant will be able to provide 30,000 m3/day of desalinated water during the introductory procurement round, and will become the world’s largest of its kind upon completion. A similar objective is set up for the following rounds to encourage a wide application of solar desalination within the Kingdom. Between 2013 and 2015, a second solar-powered desalination plant with a production capacity of 300,000mВі per day will be built, and from 2016 to 2018, several more will be constructed across the kingdom. King Abdulaziz City for Science and Technology launched an initiative to gradually make all desalination plants in the country run on solar power by 2019. Some concerns have been raised regarding the cost-effectiveness of CSP for desalination in Saudi Arabia, particularly as the Saudi coasts are both highly saline and have a high aerosol load in addition to humidity and dust – all of which have an impact on increasing operation and maintenance costs. This leads credence to the argument that it will be challenging to make CSP technology cost-effective for the desalination market because of the factors mentioned above. In fact, their joint effect is a reduction of the DNI due to significant forward scattering (deflection by diffraction). A representative from Saudi Aramco told CSP Today that the low temperature required by the desalination process (in the range of 80 to 120 ВєC) would be a further issue because CSP systems are designed to work at a temperature range between 300 and 550ЛљC. This is the reason the representative sees as a more suitable option the use of waste heat from the CSP plant to feed the desalination loop. www.csptoday.com 4. 5.2. Enhanced Oil Recovery The potential for utilizing CSP to produce steam for enhanced oil recovery (EOR) in Saudi Arabia stems from the country’s desire to save domestic natural gas for higher value applications, and from the need to extract the large volumes of non-recovered oil in ageing oilfields. Using CSP for thermal EOR can reduce the gas consumption of EOR projects by up to 80%, while boosting oil production and reducing carbon dioxide emissions (GlassPoint, 2013). In an attempt to produce the steam needed to pump heavy crude from Chevron Technology Ventures’ Saudi Arabia oilfield, the company launched a demonstration project in 2011 to determine the feasibility of using solar power for oil production. A final investment decision is expected this year, with the aim of producing as much as 600,000 barrels per day of heavy oil from 2017. US-based Chevron has operated four oilfields in the onshore Partitioned Zone (PZ) that lies between Saudi Arabia and Kuwait since 1949, and has 50% operational interest in the kingdom’s petroleum resources. The company’s EOR project would use solar power in conjunction with burning natural gas for the steam flood development at the Wafra field in the neutral PZ, which Kuwait and Saudi Arabia share. While Kuwait manages its part, Chevron operates Saudi Arabia’s interest. Every barrel of oil would require about five barrels of steam, according to Yasser Dib, regional vice president of BrightSource Energy – the solar technology company that supplied Chevron’s CSP plant in southern California.Although Saudi Arabia has the world’s fifth largest natural gas reserves, its natural gas production remains limited (EIA, 2013). Therefore, the potential for reducing the amount of natural gas burned for thermal EOR, and utilizing it in higher-value applications, such as electricity generation, desalination, industrial development or even export as LNG, will remain appealing. These advantages may eventually encourage Saudi Arabia to copy the successful model of its neighboring country Oman, where GlassPoint constructed a 7 MW enclosed trough CSP-EOR system for Petroleum Development Oman. The system has been in regular operation since May 2013, and recently passed its first performance acceptance test, exceeding contracted steam output by 10% (GlassPoint, 2013). 4.6. Market Forecast According to the 2013 Markets Scorecard, Saudi Arabia is ranked as the second most promising CSP market for future development only after South Africa.While Saudi Arabia does not have CSP capacity installed today, CSP Today Markets Report 2014 | 115 Saudi Arabia the country has set ambitious targets for 2032. With a potential of 125,000 TWh/y of solar power (14,269 GW) owing to its average DNI of 2,400 kWh/m2/year, it is worth mentioning that once the projects come to fruition, the country’s CSP market will be one of considerable size. That being said, in order to meet its target, Saudi Arabia will need to deploy on average over 1.4 GW of CSP capacity per year starting in 2014, a feat which it has yet to demonstrate it is committed to by announcing the rollout of its first plants. Since the forecast model utilized throughout this exercise is based on a capacity-history within a market, the forecasting of Saudi Arabia’s future capacity was not performed. That being said, while the 25 GW K.A. CARE initiative is set in motion, and until the Dhuba ISCC project is confirmed, along with other initiatives such as by SEC and Saudi Aramco, it is fair to say that CSP is gaining momentum within the country and fulfillment should be expected by the end of the decade.This situation is represented in Figure 7(4), which shows that Saudi Arabia will require, on an average basis, the deployment of at least 1.35 GW of capacity per year to meet its 2032 target of 25 GW, assuming that the first round deploys 900 MW of CSP and the second round deploys the 1,200 MW. The situation depicted below therefore shows the urgency of execution that will result in an increasing rate of deployment as time elapses, in order to meet the 25 GW by 2032. Figure 6(4): Installed CSP Capacity in Saudi Arabia Until 2024 (MW) 7,000 6,283 Optimistic 6,000 Conservative Pessimistic 5,000 4,000 3,350 3,000 2,001 2,000 1,000 0 2006 2008 www.csptoday.com 2010 2012 2014 2016 2018 2020 2022 2024 CSP Today Markets Report 2014 | 116 Saudi Arabia Figure 7(4): CSP Cumulative Energy Production in Saudi Arabia Until 2024 (TWh) 160 148.9 Optimistic 140 Conservative Pessimistic 120 100 80 65.8 60 36.6 40 20 0 2006 2008 2010 2012 2014 The model used for Saudi Arabia is based on a pure exponential function, set to meet the 2032 target according to different escalating constants. Conclusion KSA only recently opened the generation segment of its energy and water markets to private producers. In 2011, less than 1% of the energy generated was sourced from renewable technologies whilst 65% was derived from oil and 27% from natural gas. At the moment, the country seems to be going against international trends by favoring CSP over PV. Whether the overall goal of 25 GW of CSP will remain the same throughout the various rounds of the procurement process remains to be seen. That target is part of an overall 54.1 GW generation capacity target that includes 16 GW of PV, and 13 GW of wind energy, geothermal and waste-to-energy power plants. It is a fact, though, that in a country where power demand is forecasted to grow between 8% and 9% on an annual basis for the next ten years, and where the internal energy demand is soaring, the potential revenue from greater oil exports calls for the development of new renewable energy capacities. There is no doubt that many international companies from the CSP industry have a strong interest in playing a role within this very ambitious plan. The first demonstration projects were launched in 2011 by the German company Solar Tower Systems Gmbh, who started the construction of a 300 kW solar tower demonstration plant, and in 2013 by the King Saud University, who www.csptoday.com 2016 2018 2020 2022 2024 launched a Point Focus Fresnel collector. As a result of these government-driven initiatives, the local market is currently gaining momentum and it is expected that the procurement process will prompt the development of a domestic supply chain through the collaboration with many international players. CSP Today Markets Report 2014 | 117 Saudi Arabia References Alamoud, A. M., 2010. Potential Solar Application and Research Activities in Saudi Arabia. Technical presentation. Professor of microelectronics and solar energy, King Saud University (KSU). Riyadh, Saudi Arabia. Almashabi, D., 2013. Saudis OK $105 million of water, desalination and sewer work. Bloomberg. Available through: <www.bloomberg.com/news/2013-08-20/saudis-ok-105-million-of-water-desalination-sewer-work.html> [Accessed 10 September 2013]. Al-Mogbel, A., Ruch, P., Al-Rihaili, A., Al-Ajlan, S., Gantenbein, P., and Michel, B., 2013. A Simulation Study for Solar Adsorption Air-Conditioning. Technical presentation at the Saudi HVAC Confex. Available through: <www.saudihvacconfex.com/uploadedFiles/day2/A_simulation_study_for_Solar_Adsorption_Air-Conditioning-Final.pdf>. [Accessed 17 September 2013]. Al-Saud, M., 2010. Water Sector of Saudi Arabia. Technical Presentation at a Conference in Tunisia by Deputy Minister of Water & Electricity. Saudi Arabia. Available through: <http://www.jccme.or.jp/english/jaef2_overview/meeting/ session3/workshop2/18_w2.pdf>. [Accessed 17 September 2013]. Alyousef, Y. and Abu-ebid, M., 2012. Energy Efficiency Initiatives for Saudi Arabia on Supply and Demand Sides. InTech, Energy Research Institute, King Abdulaziz City for Science and Technology, Riyadh, Saudi Arabia, AEA Technology PLC, Didcot, United Kingdom. Available through: <www.intechopen.com/books/energy-efficiency-abridge-to-low-carbon-economy/energy-efficiency-initiatives-for-saudi-arabia-on-supply-and-demand-sides>. [Accessed 17 September 2013]. AMEInfo, 2012. SWCC to build 3 solar-powered desalination plants. <www.ameinfo.com/swcc-build-3-solar-powered-desalination-plants-314154> [Accessed 10 September 2013]. Baras, A., Bamhair, W., AlKhoshi, Y., Alodan, M., and Engel-Cox, J., 2012. Opportunities and Challenges of Solar Energy in Saudi Arabia Technical Paper. King Abdullah City for Atomic and Renewable Energy, Saudi Arabia, Battelle Memorial Institute, USA. Available through: <http://ases.conference-services.net/resources/252/2859/pdf/ SOLAR2012_0648_full%20paper.pdf>. [Accessed 17 September 2013]. Beides, H., 2013. Pan-Arab Interconnection and Development of Arab Power Markets. GCCIA Power Trade 2nd Forum. Available through: <www.gccia.com.sa/publications/2013/session1/Husam%20Beides%20-%20 Pan-Arab%20Interconnection%20and%20Development%20of%20Arab%20Power%20Markets.pdf> [Accessed 10 September 2013]. Lahn, G. and Stevens, P. Burning Oil to Keep Cool. The Hidden Energy Crisis in Saudi Arabia. Chatham House. Available through: http://www.chathamhouse.org/sites/default/files/public/Research/Energy,%20Environment%20 and%20Development/1211pr_lahn_stevens.pdf [Accessed 20 August 2013]. Connor, K., 2012. Energy & Utilities, Annual Review. Financier Worldwide. Squire Sanders. Available through: <www. financierworldwide.com/AnnualReviews/AR_Energy_420jwn.pdf>. [Accessed 10 September 2013]. Ebrahim, A., 2012. Super Grid increases system stability. Transmission & Distribution World. Available through: <http://tdworld.com/overhead-transmission/super-grid-increases-system-stability> [Accessed 10 September 2013]. Energy Information Administration, 2013. International Energy Outlook 2013. Available through: <www.eia.gov/ forecasts/ieo/> [Accessed 10 September 2013]. www.csptoday.com CSP Today Markets Report 2014 | 118 Saudi Arabia Energy Information Administration, 2013. Saudi Arabia Country Analysis Brief Overview. Available through: <www. eia.gov/countries/country-data.cfm?fips=SA> [Accessed 10 September 2013]. GlassPoint Official Website, 2013. Solar Enhanced Oil Recovery: FAQs. Available through: <www.glasspoint.com/ faqs/> [Accessed 10 September 2013]. King Abdullah City for Atomic and Renewable Energy, 2013. Proposed Competitive Procurement Process for the Renewable Energy Program (Document Under Development). Available through: <www.kacare.gov.sa>. Smith, G., 2013. OPEC maintains estimate for global oil demand growth in 2014. Bloomberg.<www.bloomberg. com/news/2013-08-09/opec-maintains-estimate-for-global-oil-demand-growth-in-2014.html>. [Accessed 10 September 2013]. Steyn, C. and Norman, M., 2012. Saudi Arabia: the Future Solar Leader. Infrastructure Journal. Chadbourne & Parke. Available through: <www.chadbourne.com/files/Publication/ff11568b-5854-4f7d-b7dc-ab04252784ee/ Presentation/PublicationAttachment/3a257684-4205-4bd4-ada2-b1e64a76ca09/SaudiArabiaSolarLeader_ Steyn-Norman_Nov12_2.pdf>. [Accessed 17 September 2013].VV.AA. and Marquez, C., 2012. CSP Market Report 2012-13. FC Business Intelligence, Groupe Reaction Inc, Research Manager. CSP Today. VV.AA. and Muirhead, J., 2013. CSP Today Quarterly Update. CSP Today. VV.AA, 2013. Saudi Arabian Renewable Energy Program: Ready, Set. Chadbourne & Parke. Available through: <http://www.chadbourne.com/files/Publication/f3e36502-22ac-4c0c-a640-87f2b2989ad4/Presentation/ PublicationAttachment/a572223c-d56a-42e7-beb4-88168125c2c5/SaudiSolar_Apr13.pdf>. [Accessed 17 September 2013]. VV.AA, 2012. Information and data. Available through: <http://blog.trade.gov>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.erranet.org>. [Accessed 10 September 2013]. VV.AA, 2013. Global Tracker Database. CSP Today. Available through: < http://social.csptoday.com/tracker/ projects>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.arabnews.com>. VV.AA, 2013. Information and data. Available through: <www.gccia.com.sa>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.ameinfo.com>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <http://chenected.aiche.org>. [Accessed 10 September 2013]. VV.AA, 2013. Business intelligence information and data. Available through: <www.csptoday.com>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.tradingeconomics.com>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.indexmundi.com>. [Accessed 10 September 2013]. VV.AA, 2013. Information and data. Available through: <www.populationdata.net>. [Accessed 10 September 2013]. Zayan, M., 2013. Solar Power Integration Challenges: Intermittency and Voltage Regulation Issues. Saudi Aramco www.csptoday.com CSP Today Markets Report 2014 | 119 Saudi Arabia Journal of Technology Spring 2013. Available through: <http://www.saudiaramco.com/content/dam/Publications/ Journal%20of%20Technology/Spring2013/Article_13.pdf>. [Accessed 10 September 2013]. (VV.AA: Various Authors) www.csptoday.com CSP Today Markets Report 2014 | 120 Saudi Arabia Acronyms ACRONYM DEFINITION BOO Build-Own-Operate CPP Competitive Procurement Process DEC Dhuruma Electricity Company DRAC Developer Research Advisory Council DNI Direct Normal Irradiance ECRA Electricity and Co-Generation Regulatory Agency EIA Energy Information Administration GCC Gulf Cooperation Council GCCIA Gulf Cooperation Council Interconnection Authority GIS Gas Insulated Switchgear IPP Independent Power Producer ISESCO Islamic Educational, Scientific and Cultural Organization IWPP Independent Water and Power Producer K.A.CARE King Abdullah City of Atomic and Renewable Energy KACST King Abdulaziz City for Science and Technology KAUST King Abdullah University of Science and Technology KSA Kingdom of Saudi Arabia MCI Ministry of Commerce and Industry NGC National Grid Company NGDC Natural Gas Distribution Company NREL National Renewable Energy Laboratory NWC National Water Company PME Presidency of Meteorology and Environment PPA Power Purchase Agreement RABEC Rabigh Electricity Company RAWEC Rabigh Arabian Water and Electricity Company RFP Request for Proposal RCI Riyadh Chamber of Commerce and Industry RRMM Renewable Resource Monitoring and Mapping SAGIA Saudi Arabian General Investment Authority www.csptoday.com CSP Today Markets Report 2014 | 121 Saudi Arabia SASIA Saudi Arabia Solar Industries Association SEC Saudi Electricity Company SEPCO Shuaibah Expansion Project Company SEPC Sustainable Energy Procurement Company SERF Sustainable Energy Research Fund SETF Sustainable Energy Training Fund SESC Sustainable Energy Service Centre SIDF Saudi Industrial Development Fund SQWEC Shuqaiq Water and Electricity Company SWEC Shuaibah Water and Electricity Company SWCC Saline Water Conversion Corporation WEC Water and Electricity Company www.csptoday.com CSP Today Markets Report 2014 | 122 Morocco 5 Morocco By Marco Poliafico Peer reviewed by Gianleo Frisari Contents List of Figures 123 List of Tables 123 Chapter Summary 125 Country Overview 125 5.1. Electricity Market 127 5.1.1. Electricity Consumption 128 5.1.2. Electricity Demand 128 5.1.3. Grid Transmission 129 5.1.4. Market Structure Diagram 129 5.2. CSP Market 130 5.2.1. CSP-Specific Policy 130 5.2.2. CSP Project Profiles 131 5.2.3. Noor CSP: Next Program 133 5.2.4. Future Developments 134 5.2.5. Local Content Requirements 134 5.3. Local CSP Ecosystem 134 5.3.1. Key Government Agencies 135 5.3.2. Utilities and Independent Power Producers 136 5.3.3. Permitting Agencies and Feasibility Study Providers 137 5.3.4. Local Consultants and R&D Bodies 139 5.3.5. Financing Organizations 140 5.3.6. Developers and EPC Firms 143 5.4.1. Local Component Supply 146 5.4.2. Raw Material Availability 147 5.5. Alternative CSP Markets 148 5.6. Market Forecast 148 Conclusion 149 References 150 Acronyms 152 www.csptoday.com CSP Today Markets Report 2014 | 123 Morocco List of Figures Figure 1(5): Direct Normal Irradiation in Morocco 126 Figure 2(5): Key Stakeholders in the Noor I CSP Project 132 Figure 3(5): Installed CSP Capacity in Morocco Until 2024 (MW) 149 Figure 4(5): CSP Cumulative Energy Production in Morocco until 2024 (TWh) 149 List of Tables Table 1(5): CSP Drivers and Barriers in Morocco 127 Table 2(5): Morocco CSP Projects 131 Table 3(5): Ministries and Government Agencies in Morocco 135 Table 4(5): Major Utilities and Independent Water and Power Producers in Morocco 136 Table 5(5): Permitting Agencies and Environmental Assessment Agencies in Morocco 138 Table 6(5): Consultants and R&D Bodies in Morocco 139 Table 7(5): Main Funding Institutions and Banks in Morocco 141 Table 8(5): Developers and EPC Firms in Morocco 144 Table 9(5): CSP Components and Suppliers Available Locally in Morocco 146 Table 10(5): Raw material available locally in Morocco and suppliers 147 www.csptoday.com CSP Today Markets Report 2014 | 124 Morocco Chapter Summary According the CSP Today 2013 Markets Scorecard, Morocco is ranked as the third most promising CSP market, with an optimistic forecast of 5,275 MW of installed CSP capacity by 2024, and a pessimistic forecast of 845 MW by 2024. Morocco is one of the world’s most energy-deprived countries and depends on external sources for nearly 97.5% of its energy needs. As the largest energy importer in North Africa, the country suffers great economic pressure due to the volatility of fuel prices. However, Morocco also has one of the best solar resources in North Africa, and thanks to its strategic geographic position, it aims to become the heart of the Mediterranean interconnection between the Maghreb region and Europe, acting as the a regional crossroads for power exchange. Morocco’s national energy strategy was launched in 2009 alongside the Moroccan Solar Plan. Furthermore, the government has made visible efforts in recent years to improve the regulatory framework, and has set an ambitious target of 2 GW of solar power by 2020. Although no specific policy regarding local content requirements has been introduced at the time of writing this report, the Noor I project used a stringent local content requirement of 30% in its bidding process. Local CSP projects like Noor I are already triggering the development of domestic manufacturing expertise and of training and R&D activities. For example, Moroccan stakeholders and policy makers have expressed a clear interest in developing research and training activities through collaboration with European institutions. Despite the financial challenges typically associated with CSP projects, Morocco’s renewable energy initiative received strong financial backing by international bodies, such as the Clean Technology Fund, which is managed by the African Development Bank and the World Bank. Amongst the alternative CSP markets, seawater desalination is a very promising application for CSP technology in Morocco. At the time of writing this report, Morocco had one operational CSP plant with an installed capacity of 20 MW; one under construction (160 MW); two under planning (100 MW and 200 MW); and one announced (20 MW), according to the CSP Today Global Tracker. Country Overview Morocco Solar Resource (average annual sum of DNI): 2,500 kWh/mВІ/year Size: 710,850 kmВІ Population (2012): 32.59 million GDP per capita (2012): US$ 2,925 Installed power capacity: 6.3 GW Annual electricity consumption: 31 TWh Expected annual electricity demand in 2020: 52 TWh Electricity Mix by Installed Capacity (2012) Coal 34% Oil 25% Natural gas 11% Electricity Imports 15% Hydro 11% Other renewables 4% Known Energy Resources Coal, Natural Gas (98% imported), Hydro, Wind, Solar Potential Markets for Industrial CSP Applications Desalination Cooling Load www.csptoday.com CSP Today Markets Report 2014 | 125 Morocco Figure 1(5): Direct Normal Irradiation in Morocco Source: SolarGIS В© 2013 GeoModel Solar s.r.o. www.csptoday.com CSP Today Markets Report 2014 | 126 Morocco Table 1(5): CSP Drivers and Barriers in Morocco Drivers Barriers Strong policy oriented toward the development of renewable energy Geopolitical factors increase the perceived risk for investors Existing industries for metal structures, through which electric and electronic equipment can support the value chain The institutional, fiscal and legal framework needs to be improved. in particular with relation to tailored feed-in-tariff schemes to make investment more attractive Low labor cost The necessary infrastructures are not fully developed Excellent solar resources Lack of skilled work-force and limited know-how in CSP technology Land availability Technical weakness of the transmission grid to support the implementation of renewable power plants Growing electricity demand Water scarcity Funding support from international institutions Lack of strong manufacturing supply chain and local CSP industry, although this is progressively developing Potential for exporting electricity to Europe Good potential for hybridization 5.1. Electricity Market Morocco is one of the world’s most energy deprived countries and depends on external sources for up to 97.5% of its energy needs, according to the African Development Bank (2012). This aspect places the country under great economic pressure due to the volatility of fuel prices. It is the largest energy importer in North Africa and, according to the Moroccan Ministry of Energy and Mining, the total installed capacity of renewable energy not including hydropower was approximately 300 MW in 2011. However, according to the information provided by the Renewable Energy and Energy Efficiency Partnership (REEEP) policy database and the web site www.reegle.info, the country has more than 15% of the world reserves of oil shale. Currently, the exploitation of these deposits has not been undertaken due to technical and economic unfeasibility. Looking at the generation side of the energy market, electricity supply is strongly dominated by conventional electricity generation whilst hydro power is highly variable from year to year, although its installed capacity www.csptoday.com only increased by 2.4% in the last ten years. Since 2002, imports have gained major importance to effectively cover the country’s demand peaking at a total of 18.9% of electricity generation in 2009. The Ministry of Energy, Mining, Water and Environment (MEMEE) is in charge of the functionality of the market, ensuring energy security and implementing overall strategy. Two subsidiaries of the MEMEE with relevant roles within the energy market are the Directorate for Electricity and Renewable Energies (DEER) and the Moroccan Center for Renewable Energy Development (CDER). Both of them are active in the dissemination of knowledge regarding, and development of, the renewable energy sector. An industrial lobby specifically active in solar energy is “L’Association Marocaine des Industries Solaires et Eoliennes” (AMISOLE), or The Association of Solar and Wind Power Enterprises, which acts as an umbrella organization representing the interests of companies and individuals with professional involvement in renewable energies. CSP Today Markets Report 2014 | 127 Morocco Morocco does not have an agency for the regulation of the electricity market yet. The government is planning legislation for the establishment of an independent regulatory body for the energy sector, but the electricity market is still largely unregulated. There is limited regulation applied to the low-voltage residential market, primarily overseen by the DEER. The same agency is responsible for the demand-side management activities, promotion of energy efficiency and monitoring development programs in the electricity sector. The tariff rates are fixed by the government directly. The main player in the energy market of Morocco is the Office National d’Electricite (ONE) founded as a legally and financially autonomous public entity in 1963, working closely with the MEMEE. The private sector can access the generation and distribution segments through PPAs signed with ONE (also due to the absence of any other regulatory body). Although the market has been open to private players since 1994, the pace of this process picked up since 2008, when it became clear that growing energy demand was a threat to the long term security and reliability of electricity supply. Today, Morocco is one of the most deregulated markets in the whole of the Middle East and North Africa (MENA) region and is planning to move towards an electricity market which should be divided into an open segment and a regulated one. Customers will be able to access one of the two segments according to a specific set of technical criteria which are yet to be identified. Other than ONE (approximately 35%), the generation sector is nowadays populated by independent producers (approximately 50% of the installed capacity) and auto-producers (less than 1%), although imports have a relevant role in the overall energy mix (varying around 15%). The national company has coal, hydro and fuel oil within its power plants and controls the market, while independent suppliers (mainly JLEC, ThГ©olia and EET) have extended their activity towards gas and renewable energy generation technologies. Private businesses can build power plants with a capacity of up to 50 MW. However, if the capacity installed is larger, the project is subject to an open tendering process and all of the power produced needs to be sold to ONE. ONE operates as the single buyer for any electricity produced by the private sector. Auto producers = typically generate their own needs, and access to the grid is not guaranteed by the Transmission System Operator (TSO) unless renewable energy technologies www.csptoday.com are employed (in which case access must be granted). The TSO charges a transportation fee for any electricity sent to the grid. However, if the electricity comes from renewable energy, it is rewarded with a 20% premium on top of the normal high-voltage grid price paid by the TSO through an incentive package under the EnergiePro Scheme. Research and scientific capacity in the renewable energy sector remains low, and policies still need to be developed further. Legal and economic issues need to be addressed more thoroughly, for instance, planning and permitting procedures, incentives and support schemes, technology assessments and grid infrastructure planning. 5.1.1. Electricity Consumption Electricity consumption in Morocco has considerably grown over the last few years, imposing challenges on the country’s energy sector. The growth trend has been irregular: between 2007 and 2010, electricity consumption increased by 3.7% to 5.8% per year according to an academic research carried out in collaboration with a local university and the Germanybased Fraunhofer Institute for Wind Energy and Energy System Technology (IWES), while between 2003 and 2006, it was more moderate, increasing by 6.6% to 11.5%). In 2011, consumption grew by more than 8.4% in terms of overall power and 11% in terms of electricity exclusively). Domestic energy consumption between 2001 and 2011 increased at an average rate of 6.1%. 5.1.2. Electricity Demand The Ministry of Energy, Mining, Water and Environment (MEMEE) expects energy demand to grow by 6.9% and 8.7% per year in the next decade. This trend is expected as a result of economic growth alongside the expanding electrification to areas without power. Furthermore, the development of large infrastructural projects and improvement of the standard of life are contributing to the demand on electricity. Therefore, there is a clear need for huge investments in order to meet future demand. The daily electricity demand curve in Morocco does not change significantly throughout the year, with the usual late-evening peak caused mainly by lighting loads. Such an electricity demand curve offers great potential to CSP technology equipped with storage to enable generation at peak hours immediately after the sunset. Later in the evening, demand drops to 60% of the peak values. To match this load curve, the storage capacity of CSP Today Markets Report 2014 | 128 Morocco CSP plants should not be higher than four to five hours. This was one of the requirements in the bidding process for the first CSP plant in Ouarzazate, where a three-hour storage capacity was selected by MASEN. 5.1.3. Grid Transmission Morocco’s transmission grid is owned by the state utility ONE. It covers the entire country (with 96% of the population reached by electricity) and is connected to the Algerian and Spanish grids. The capacity of the connection between Algeria and Morocco is 1.2 GW. Although losses in the network account for less than 5%, ONE aims to strengthen and extend the grid since according to the utility, there is insufficient grid capacity for renewables in the south. The distribution of electricity to the final consumers is the responsibility of ONE for most of the country, as well as seven local municipal authorities and four private companies using ONE’s grid. In 1996, ONE launched a national electrification program named Programme pour l’Electrification Rurale Global (PERG), and the rate of rural electrification reached 97.4 % by the end of 2011. The transmission sector works as a state-controlled monopoly market. ONE is the TSO and owns the entire transmission network. The grid is not fully able to integrate renewable power and requires further investment to guarantee stability over short periods of low voltage. On top of the 20,000 km of high-voltage lines across the country, the grid includes the interconnections with Algeria and Spain, which have a capacity of 1.2 GW and 1.4 GW respectively. The distribution can also be delegated to private companies or communal organizations. There are currently eleven distributing entities other than ONE who cover approximately 55% of the market and also serve all of the country’s rural areas. The distributing companies are seven municipal authorities (Marrakech, FГЁs, Meknes, TГ©touan, Safi, El Jadida-Azemmour and Larache-Ksar El KГ©bir) and four private companies operating in Casablanca, Rabat-SalГ©, Tanger and KГ©nitr 5.1.4. Market Structure Diagram Regulators Generation None ONE Independent Producers Transmission Distribution AutoProducers Imports ONE ONE 7 Municipal Authorities 4 Private Licensees Customers www.csptoday.com CSP Today Markets Report 2014 | 129 Morocco 5.2. CSP Market Morocco has almost no fossil fuel production capacity and as such heavily depends on imports to satisfy its energy needs. On the other hand, the country enjoys one of the best solar resources in the North of Africa. Due to increasing electricity demand and growing population, there is an urgent need to augment installed capacity to address energy security issues. For this reason, the Moroccan authorities have developed a proactive energy policy backed by the development of a data system, which includes demand surveys and performance indicators. Morocco has one of the best solar resources in North Africa and launched the Moroccan Solar Plan (MSP) in 2009 with an overall target of 2 GW solar energy installed capacity by 2020. This, according to government projections, will supply approximately 14% of the country’s electricity demand. Including other renewable energy sources like wind energy, the overall target is 42% of electricity generation capacity by 2020. The policy framework also includes other targets related to energy efficiency in buildings, industry and transportation. The final aspiration is to become a net energy exporter to Europe. This ambitious plan takes into consideration the idea that Morocco could become an exporter of electricity to Europe. It is in a very strategic position from a geographic point of view and can become the heart of the Mediterranean interconnection between the Maghreb region and Europe. A transmission capacity of 1.4 GW already exists between Morocco and Spain. However, this objective is not realistic - at least, not in the short term. The Ouarzazate project, for instance, will supply electricity at approximately 0.15 €/kWh in Phase One, now called Noor 1. This is more expensive than some renewable energy projects in Spain that are able to sell electricity at between 0.05 and 0.06 €/kWh (in particular, wind power projects). Furthermore, Spain already has an over-supply of electricity, meaning it is unlikely to import from Morocco. There is potential that Morocco could export electricity to Germany and the United Kingdom, but this would involve the development of costly transmission networks. The strong competition on the cost front poses some doubts as to whether or not Morocco will be able to attract the necessary investment to develop the overall plan. Generally speaking, one of the issues for funding solar energy is how competitive it would be against www.csptoday.com other sources of energy. For this reason, the Ministry of Energy is still looking with interest at conventional power generation technologies and has granted the construction of a coal-fired plant which should go online by 2017. This could jeopardize the economic feasibility of other renewable energy projects. 5.2.1. CSP-Specific Policy The Renewable Law 13-09, approved in 2010, aims to promote the implementation of renewable energy generation technologies and opens the market to the private sector. The National Agency for Renewable Energy and Energy Efficiency Development (ADEREE) is in charge of implementing Morocco’s national plan for renewable energy and energy efficiency. Other policy stakeholders are the SociГ©tГ© d’Investissements Г‰nergГ©tiques (SIE), a Moroccan investment fund created for developing and promoting renewable energy and energy efficiency, and the Energy Development Fund (FDE), created to support the national energy strategy and strengthen Morocco’s energy independence. The FDE was granted USD 1 billion by the Kingdom of Saudi Arabia, the United Arab Emirates and the Hassan II Fund for Economic and Social Development. The national policy strategy was launched in 2009 and entails an overall investment in the order of USD 13 billion. It focuses on security of supply, diversification of national energy sources, accessibility of energy, lowering the cost of energy, energy efficiency and environment and safety. The Moroccan Solar Plan (MSP) was announced by the government in the same year and entails an investment of USD 9 billion to achieve 2 GW of solar energy installed capacity by 2020 in five sites across the country. The five locations identified are Laayoune (Sahara - 500 MW), Boujdour (Western Sahara - 100 MW), Tarfaya (south of Agadir - 500 MW), Ain Beni Mathar (center - 400 MW) and Ouarzazate (500 MW). The entire project is expected to be completed in 2019. The plan aims to produce 42% of power needs from renewable energy sources, including hydro and wind energy (14% each). This plan has been partially delayed by the global economic recession. In recent years, the government has made relevant efforts to improve the regulatory framework and promote the development of the renewable energy sector in the country. In January 2009, Morocco was one of 75 founding members of IRENA, the International Renewable Energy Agency. In 2011, a memorandum of understanding in relation to the development of solar energy projects was signed between the DESERTEC CSP Today Markets Report 2014 | 130 Morocco Industrial Initiative (Dii) and the Moroccan Agency for Solar Energy (MASEN). The former acts as feasibility advisor while the latter is a joint-stock publicly funded public-private venture set up in 2010 to act as a project developer. Stakeholders of MASEN include the Hassan II Fund For Economic and Social Development, Energy Investments Company and the Office National de l’ElectricitГ© (ONE). MASEN is responsible for the whole MSP and works in cooperation with ONE and the Moroccan Ministry of Energy, Mines, Water and Environment (MEMEE). It manages the procurement of the projects through the tendering and financing activities. MASEN will also act as single buyer of the electricity produced by CSP plants through PPA agreements. The tariffs of the PPAs awarded to renewable energy projects vary according to the time of generation. Although different hours are used throughout the year; production of electricity between 5pm and midnight will receive a peak tariff 15% higher than the off-peak tariff. The electricity produced will be sold to ONE at a price closer to the current Moroccan grid price and hence much lower than the one set in the PPA. This difference is paid by MASEN itself though the financial support received by the various national or international sponsors. The electricity produced is then distributed by ONE. The tender procedure selected by MASEN is an international public competitive bidding process where the bidder offers a lower tariff, which must fulfill certain technical specifications set by MASEN. A Build, Own, Operate and Transfer (BOOT) scheme for 25 years is used for renewable power plants. In relation to financial schemes, there is no Feed in Tariff scheme approved so far. 5.2.2. CSP Project Profiles At the time of writing this report, Morocco had one operational CSP plant with an installed capacity of 20 MW; one under construction (160 MW); two under planning (100 MW and 200 MW); and one announced (20 MW), according to the CSP Today Global Tracker. Table 1 showcases all CSP projects in Morocco at various stages of development. Table 2(5): Morocco CSP Projects Storage Capacity Title Country MWe Technology Status State/Region Developer Noor 2 Morocco 100 Tower Planning Souss Massa Draa MASEN TBC Ain-BeniMathar ISCC Morocco 20 Parabolic Trough Operation Oujda, Oriental Abener - Noor 3 Morocco 200 Parabolic Trough Planning Souss Massa Draa MASEN TBC Noor I Morocco 160 Parabolic Trough Construction Sousse Massa Draa Acciona/ACWA/ Aries/Sener/TSK 3 TBC Announced Tan-Tan TBC В Tan Tan В CSP Desal 20 Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 131 Morocco The Ain Beni Mathar ISCC plant was commissioned in 2010 and has an installed capacity of 472 MW, including 20 MW of CSP Meanwhile, the Noor I project was awarded to the Saudi International Company for Water and Power (ACWA) in September 2012 by MASEN, for a value of USD 850 million. Under the contract, ACWA will build and operate the 160 MW solar plant and will supply electricity at USD $0.19 /kWh. According to research carried out by CSP Today, the tariff submitted by ACWA was 28.8% lower than that of the second bidder. ACWA recently awarded an EPC contract to a consortium formed by the Spanish TSK ElectrГіnica y Electricidad, Acciona Infraestructuras, Acciona IngenierГa and Sener IngenierГa y Sistemas. The operation and maintenance will be undertaken by a consortium led by NOMAC, a subsidiary of ACWA. Construction on Noor I started in May 2013 and commercial operation of the plant is expected to start in the second half of 2015. The first phase of the project received funds of €345 million from European bodies, including the European Investment Bank (€100 million as a loan), the European Union NIF (€30 million grant) and the French Development Agency (€100 million loan). Through the KfW Development Bank, the German environment ministry provided €15 million in grant while the German Ministry for Cooperation (BMZ) provided a loan of €100 million. KfW will continue to support the overall development of CSP plants in Morocco with a further €650 million in the coming years. Financial support was also provided by the African Development Bank and the World Bank (€168 million and €140.25 million respectively through a disbursement of funds from the Clean Technology Fund), and MASEN (€265.28 million) amounting to a total of €1,042.32 million. Figure 2(5): Key Stakeholders in the Noor I CSP Project Government of Morocco Stakeholder description and role Financing role Moroccan State • Shareholder in MASEN Subsidizes difference between two PPAs present in the project through the State Budget Ministry of Interior • Manages special community fund N/A MASEN • Moroccan Agency for Solar Energy • Limited liability company (LLC) with the Moroccan State, ONE, Fonds Hassan II and the SociГ©tГ© d’Investissements EnergГ©tique (SIE) as equal shareholders • Responsible for managing bidding process and selection of private consortium • Monitor SPC • Ownership of the CSP plant upon commissioning • Semi-annual financial reports, independent annual audit and progress reporting to donors (financial statements, physical progress and procurement) • Support R&D, training and technical innovation • Implementation of the FESMP1 • Finance and manage the Associated Facilities (for water supply, grid connections and land) • 25 percent equity stake in SPC • Onward lends IFI debt and manages reporting to IFIs ONEE • Office National de l’Eau et de l’ElectricitГ© incorporating Office National de l’ElectricitГ© and Office National de l’Eau Potable • Construction of the transmission lines and water supply infrastructures • Power dispatch, transmission and distribution • Environmental Managment Plan for transmission lines and water supply • Shareholder in MASEN Required to purchase all power generated by the plant from MASEN vate www.csptoday.com Private • Project implementation including design, construction andCSP Today Markets Report 2014 | 132 performance optimization of the plant 75 percent equity stake in the • Preparation and implementation of project specific ESIA and Private ONEE • Office National de l’Eau et de l’ElectricitГ© incorporating Office National de l’ElectricitГ© and Office National de l’Eau Potable • Construction of the transmission lines and water supply infrastructures • Power dispatch, transmission and distribution • Environmental Managment Plan for transmission lines and water supply • Shareholder in MASEN Required to purchase all power generated by the plant from MASEN Private Consortium • Project implementation including design, construction and performance optimization of the plant • Preparation and implementation of project specific ESIA and ESMP2, financial reporting • Project Implementing Entity 75 percent equity stake in the SPC • African Development Bank • Channel CTF financing • Provide additional concessional financing towards construction • World Bank Group and International Bank for Reconstruction and Development • Support to MASEN and Government of Morocco to initiate the project • Channel CTF financing • Provide additional concessional financing to support Government’s PPA subsidy • European Investment Bank • Coordinates European donors Concessional finance provider • L’Agence FranГ§aise de DГ©veloppement, German Development Bank and German Development Cooperation Co-lenders linked to EC NIF grant • German Ministry of Environment, European Commission Neighbourhood Investment Facility Grant providers AfDB International donors manages reporting to IFIs Morocco Govern progress reporting to donors (financial statements, physical progress and procurement) • Support R&D, training and technical innovation • Implementation of the FESMP1 WBG/IBRD EIB AFD, KfW/BMZ BMU, EC NIF Source: San Giorgio Group Case Study: Ouarzazate I CSP Update The San Giorgio Group, as part of the Climate Policy Initiative (CPI), have provided a detailed analysis of the Ourazazate 1 CSP project (now known as Noor I). Key findings from their research indicate that the project will be approximately 25% cheaper than initial forecasts, making it one of the least expensive large-scale CSP plants. NOOR II (200 MW Parabolic Trough): 5.2.3. Noor CSP: Next Program 3. International Power SA (Dubai branch of GDF Suez) and Abu Dhabi Future Energy Company PJSC/MASDAR. In January 2013, MASEN launched a Request for Qualification (RfQ) process to select the developers of the second phase of Ouarzazate plant, consisting of 300 MW. The bid includes two projects, a 100 MW central tower technology plant (Noor III) and 200 MW parabolic trough plant (Noor II). Both projects need to be equipped with storage. MASEN will provide the land as well as buy the electricity generated through a 25-year long Power Purchase Agreement (PPA). Furthermore, MASEN intends to take between 20% and 30% ownership of the project company. The call for RfQ expired in March 2013 and included a strong recommendation (but not a requirement) for local production of equipment and components. In May of the same year, the two projects jointly received USD 218 million from the Clean Technology Fund (CTF). On 1 August 2013, MASEN announced the shortlisted pre-qualified bidders for the Noor II and Noor III projects. www.csptoday.com 1. Abengoa SA and Abengoa Solar; 2. International Company for Water and Power Projects (ACWA Power) and Sener Grupo De IngenierГa SA; and NOOR III (100 MW Tower): 1. Abengoa SA and Abengoa Solar; 2. EDF SA, EDF Energies Nouvelles SA, Brightsource Energy Inc, Brookstone Partners Morocco SA, Alstom Power System SA and Mitsui & Co Ltd; 3. International Company for Water and Power Projects (ACWA Power) and Sener IngenierГa y Sistemas; and 4. International Power SA (Dubai branch of GDF Suez), Solar Reserve LLC and Abu Dhabi Future Energy Company PJSC/MASDAR. The RFP launch is expected to take place in the fourth quarter of 2013. CSP Today Markets Report 2014 | 133 Morocco 5.2.4. Future Developments With an ambitious target of 2 GW of solar power by 2020, MASEN has seven years left to allocate the remaining 1.5 GW. In addition to the 500 MW Ouarzazate complex, MASEN has identified a number of additional sites for future solar deployment, including: Ain Beni Mathar: 400 MW to be commissioned in 2016 Foum Al Ouad: 500 MW to be commissioned in 2017 Boujdour: 500 MW to be commissioned in 2018 Sebkha Tah: 100 MW to be commissioned in 2019 According to the World Bank (2011), Ain Beni Mathar has received a USD $ 43.2 million grant from the Global Environment Facility, as well as credits from the African Development Bank, Instituto de Credito Official (Spain) and equity from the Moroccan state-owned utility Office National de l’ElectricitГ© (ONE). practical example of this commitment is the creation of MASEN, which provides a positive environment that attracts the attention of international CSP players and financing institutions. As a result, the country represents one of the most promising solar markets. From a technological point of view, local stakeholders indicate that the Fresnel option might give an additional advantage by providing shadow on the ground, hence enabling the practice of agricultural activities in association with the development of energy facilities. However, a critical aspect to consider is the electricity daily demand trend which has a peak after the sunset and therefore envisages the implementation of storage capacity as part of the optimal technology solution. 5.2.5. Local Content Requirements At the time of writing this report, there was no specific policy regarding local content requirements in Morocco. However, the Ouarzazate I project included a stringent local content requirement of 30% in its bidding process. 5.3. Local CSP Ecosystem The Moroccan market is strongly driven by the overarching goal of developing a vibrant renewable energy sector to increase energy security and meet growing domestic energy needs whilst reducing dependence on energy imports. Local policy makers are committed to exploiting the strong solar resources available and take advantage of the strategic position within the Mediterranean Sea that could allow the country to export electricity to Europe. This aspect would secure financial backing from European institutions and would tighten economic and geopolitical links with those countries. At the same time, the development of large-scale renewable energy projects would act as an initiator of local manufacturing expertise which in turn could help Morocco gain a central role in the development of the CSP industry in the entire MENA region. Policy makers have also become aware of how critical the development of the right regulatory and industrial conditions can be. While on the one hand they recognize the importance of gaining momentum to secure an advantage against other countries, they also stress the importance to take time to properly set the ground for a strong and clear roadmap. For the same reason, they are making a genuine effort to coordinate and create synergies with all potential stakeholders. A www.csptoday.com CSP Today Markets Report 2014 | 134 Morocco 5.3.1. Key Government Agencies Table 3(5): Ministries and Government Agencies in Morocco Name Roles and Responsibilities Previous Renewable Energy Programs Agency for the Development ADEREE is a Moroccan institution that facilitates of Renewable Energy and and implements renewable energy strategies, Energy Efficiency (ADEREE) policies and incentive programs. It evaluates the cartography of resources in renewable energy and proposals of solar & wind energy development zones, and proposes areas to be allocated for the construction of renewable facilities. Formerly known as Renewable Energy Centre (CDER). Ministry of Energy, Mines, Water and Environment (MEMEE) MEMEE is responsible for the development of Morocco’s national energy policy. It develops conditions that ensure energy security and access to energy, for both the rural and urban populations. Ministry of Industry, Trade and New Technologies (MCINET) MCINET, together with the Ministry of Energy, Mines, Water and Environment (MEMEE) are jointly developing a national program consisting of incentives and specialized training aimed at attracting local & foreign investment to the renewable sector. Ministry of Interior The Ministry of Interior is the custodian of public collective land in Morocco and is in charge of commercial, private and public land acquisitions. O.N.E. purchased and financed land for the ISCC Ain Beni Matar power plant from the Ministry of Interior, and two land parcels for the gas pipelines were acquired in the same manner. Moroccan Agency for Solar Energy LLC (MASEN) Established in 2009 with the Government, O.N.E., Fonds Hassan II, and SociГ©tГ© d’Investissements EnergГ©tique as equal shareholders, MASEN is entrusted by the Government to develop at least 2,000 MW of grid-connected solar power by 2020. This includes conducting technical, economic & financial studies, supporting research & fund-raising, seeking involvement of local industry for solar projects and establishing associated infrastructure. MASEN entered into a cooperation project for the Ouarzazate CSP plant with the ACWA power-led consortium. The agency oversees Morocco’s CSP projects. www.csptoday.com CSP Today Markets Report 2014 | 135 Morocco 5.3.2. Utilities and Independent Power Producers Table 4(5): Major Utilities and Independent Water and Power Producers in Morocco Name Roles and Responsibilities Previous Renewable Energy Programs Abu Dhabi National Energy TAQA is an independent power producer and Company (TAQA) North Africa majority owner of the facilities that provide 98% of Abu Dhabi’s water and electricity requirements. TAQA’s Energy Solutions division is dedicated to alternative and technology-driven initiatives for long-term energy production. TAQA owns, operates and maintains the Jorf Lasfar power plant in Morocco, which is a coal-fired plant comprising two 330 MW generation units and two 348 MW generation units located on the Atlantic Coast. Jorf Lasfar Electric Co. is an independent power producer that has a long-term purchase agreement with O.N.E. In the UAE, TAQA is implementing a pilot project to use solar energy for air-conditioning systems using concentrated solar panels called Chromasun Micro-Concentrators. Amendis Amendis provides water, wastewater and electricity services in Tangiers and Tetouan and is a concession holder in both cities. Amendis is a subsidiary of the French multi-national group Veolia Environnement. В Energie Electrique de Tahaddart / Electric Power of Tahaddart (EET) В EET is an independent power producer that owns and operates the Tahaddart CCGT Power Plant, a 384 MW combined cycle plant in Tahaddart, 30 km south of Tangiers. The project has a long-term purchase agreement with O.N.E. GDF SUEZ Energy Meta French independent power producer offering business development, construction, and operations & maintenance services. Investing in the Middle East and Africa since 1994. www.csptoday.com GDF Suez will build & operate Tarfaya, Africa’s largest wind farm, in southern Morocco with an output of 300 MW. The utility is investing USD $122 million in the project, which is due to enter service at the end of 2014. It also has solar power plants in Northern Spain and is developing a solar farm in Thailand with Glow Energy. In North America, GDF SUEZ has 20 MW of solar projects under construction. CSP Today Markets Report 2014 | 136 Morocco Lyonnaise des Eaux de Casablanca SA (Lydec) В Morocco-based company engaged in distribution of water and electricity, wastewater collection and storm water and public lightning for five million people. Lydec is the concession holder in Casablanca, and is owned by SUEZ Environnement (51%), the Moroccan insurance company RMA Watanya (15%) and the Moroccan investment company FIPAR-Holding (19.75%). Office National de l’Electricite State-owned company that purchases about (O.N.E.) 95% of the power generated in Morocco through PPAs, and all the imports from Spain and Algeria. Responsible for guaranteeing generation, transmission and distribution of electricity. It also has the exclusivity to plan the means of generation and launch tenders for units with power greater than 10 MW. Since 1994, O.N.E. has been allowed to sign contracts with private generators. A new renewable energy law was also set up recently to allow, under certain conditions, direct sales of electricity generated from renewable energy to large customers or to exports without necessarily transiting through O.N.E. Generation offtaker for the 160 MWe Noor 1 CSP Plant (Ouarzazate Phase 1) and responsible for the construction of the transmission infrastructure of the project. Owner and generation offtaker for the ISCC Ain Beni Matar power plant. Prepares environmental and social assessments for its facilities. Office National de l’Eau Potable (ONEP) A public organization in charge of drinking water supply planning on a national scale; water distribution on behalf of the communes; and technical assistance in terms of water quality monitoring. Responsible for the construction of the water supply infrastructure for Ouarzazate CSP Project, and for the preparation of environmental and social assessments for its facilities. Redal Provides water, wastewater and electricity services in Rabat and is the concession holder in the capital city. A subsidiary of the French multi-national Veolia Environnement. В 5.3.3. Permitting Agencies and Feasibility Study Providers The authorization process entails two different steps. Initially, a developer receives a temporary permit for the construction of the renewable energy facility. Only at the second stage will a final permit for the operation of the plant be granted. Furthermore, this final authorization is subject to starting the generation of electricity within one year from the date it is released. According to the current regulatory regime, the permit is also withdrawn if generation is suspended for more than two years in a row. Specific technical and financial criteria are considered in order to grant the permit for construction of a power plant. www.csptoday.com A critical aspect to take into account at the planning stage is the set of environmental impacts with particular regard to water scarcity. Although a World Bank report identified the impact of the first Ouarzazate plant as “minor to moderate”, there is concern that the overall impact might significantly grow when other plants are built. Table 5 displays a list of permitting and environmental assessment agencies operating in Morocco. CSP Today Markets Report 2014 | 137 Morocco Table 5(5): Permitting Agencies and Environmental Assessment Agencies in Morocco Name Roles and Responsibilities Centre Marocain de Production Propre / Moroccan Cleaner Production Center (CMPP) В CMPP provides technical assistance to the Moroccan industry to implement environmental technologies & management systems to improve their economical & environmental performance. The Centre is part of the UNIDO/ UNEP National Cleaner Production Centers - financed by the Swiss State Secretariat for Economic Affairs. ComitГ© National des Etudes d’Impact Environnementales / National Environmental Impact Assessment Committee (CNEIE) В CNEIE was formed to support the development of Environmental Impact Assessment legislation and regulations. The Committee provides advice to the Environmental Authority on the approval / refusal of proposals. Department of Environment (DE) Ministry of Energy, Mines, Water and Environment The DE of the State Secretariat for Water and Environment (SEEE) within the Ministry of Energy’s (MEMEE) Department of Energy is responsible for coordinating environmental management. В Directorate for Electricity and Renewable Energies (DEER) - Ministry of Energy, Mines, Water and Environment DEER is a subsidiary of the Ministry of Energy, Mines, Water & Environment (MEMEE), and has divisions for electrical equipment & rural electrification; distribution & electric markets; renewable energies; and nuclear safety. Funds for DEER’s operations are allocated directly from the national budget. В L’Institut de Recherche en Energies Solarie et en Energies Nouvelles (IRESEN) or Institute for Research in Solar and Renewable Energy IRESEN conducts research projects, and funds R&D capacities in the field of renewable energy. On June 3, 2013, IRESEN launched a request for proposals to fund R&D projects in solar thermal energy applications and technologies, with a maximum financial contribution to each co-funded R&D project of USD$593,000. (http://www.iresen.org/ download/Call_for_proposals_InnoTherm_ III_2013.pdf ). IRESEN signed a cooperation agreement in Oct 2011 with the German Aerospace Center (DLR) that will regulate all future activities between the two bodies in the field of CSP. The cooperation covers joint research activities such as the organization of workshops, joint publications, exchange of personnel and scientists. www.csptoday.com Previous Renewable Energy Programs CSP Today Markets Report 2014 | 138 Morocco Moroccan Association of Solar Industries and Windmills (AMISOLA) AMISOLA promotes the interests of industries and professionals working in Morocco’s solar and wind energy industries. 5.3.4. Local Consultants and R&D Bodies Locally based projects like Ouarzazate are triggering the creation of local manufacturing expertise and the development of training and R&D activities from local business entities. For instance, the German Aerospace Center (DLR) is planning to set a new solar power research and test center in Morocco on behalf of MASEN. The project is partially funded by the German Government and its long-term objective is the В development of a competitive solar power industry in the country through the construction of pilot and demonstration-scale plants for the evaluation of solar technologies. Local stakeholders and policy makers have already expressed a clear interest in developing research and training activities through collaboration with European institutions because they want to raise their industrial profile and move towards a leading position for solar technologies within the whole region. Table 6(5): Consultants and R&D Bodies in Morocco Name Roles and Responsibilities Previous CSP Projects Citibank Citibank is the consumer banking arm of U.S. financial services conglomerate Citigroup. Citi’s operations cover investment banking, capital markets, equity sales & distribution businesses, transactions services, equity research, and global Islamic banking serving the MENA region. Citibank is the financial advisor for MASEN on the development of Ouarzazate Phase One project. CNIM Group - Babcock Wanson Maroc CNIM Group designs and produces turnkey industrial solutions. It provides consulting and expertise through technical assistance, training, troubleshooting, and operational analyses on the maintenance and rehabilitation of thermal power facilities and waste-to-energy conversion. CNIM Group is the developer, owner and operator of the 1 MWe eCare CSP demonstration project in Morocco. Deloitte Morocco Deloitte is a global U.S. based professional services firm providing audit, tax, consulting, enterprise risk and financial advisory services. Deloitte Morocco is the fiscal advisor for MASEN on the development of Ouarzazate Phase One project. Gide Loyrette Nouel The firm is the legal advisor for MASEN Gide Loyrette Nouel is a business law firm, established in Casablanca, Morocco since 2003. on the development of Ouarzazate Phase One project. It provides legal services covering all areas of Moroccan and international finance and commercial law. It also serves international institutions, government agencies, banks, foreign investors and major Moroccan industrial groups. www.csptoday.com CSP Today Markets Report 2014 | 139 Morocco McKinsey & Company – Morocco McKinsey & Company is a U.S.-based global management consultancy firm advising businesses, governments and institutions. It focuses on solving issues of concern to senior managements. В Norton Rose Fulbright Norton Rose Fulbright is an international UK-based law firm with 3,800 lawyers. It is active in North Africa for more than ten years, acting for domestic and international clients on a range of corporate and banking transactions. The firm has particular expertise in energy, including renewables, infrastructure, mining and minerals, real estate and telecoms. It has established an office in Casablanca, Morocco in 2011. Norton Rose Fulbright is the legal advisor for MASEN on the development of Ouarzazate Phase One project. Regional Center for Renewable Energy and Efficiency (RCREEE) Morocco is one of RCREEE’s 13 RCREEE is an independent nonprofit regional organization that aims to increase the adoption member states of renewable energy practices in the Arab region, by providing accurate and transparent information through strong partnerships with regional governments and global organizations. The Center offers technical assistance and research analysis. Valyans Consulting Valyans is a privately held management consultancy based in Morocco advising banks, insurance companies, government, and developers on strategies, organization, and technology. It is involved with the transformation plans of the Moroccan Government in the areas of trade & industry, education, tourism, and agriculture. Alatec Alatec is a consultancy that has been designated by the Moroccan Agency for Solar Energy as its independent technical advisor for the development of the Solar Thermoelectric Power plant in Ouarzazate 5.3.5. Financing Organizations Funding capital intensive projects can be an issue anywhere. This can be even more relevant in a macroregion where the recent Arab Spring increased the overall perceived geopolitical risk. On the other hand, the lack of track record for the CSP technology makes local investors more cautious and the recent global recession is a further element that can pose a challenge to sourcing suitable funds. That said, the renewable energy initiative launched www.csptoday.com Valyans Consulting assisted MASEN with setting up a Project Management Office to plan, manage and monitor the implementation of the solar program and the Ouarzazate Phase One project. in Morocco had good financial backing provided by international bodies like the Clean Technology Fund (CTF) and managed through the African Development Bank (AfDB) and World Bank. Such solid backing is instrumental in reducing risks and encouraging other private and public investors to contribute further economic support. The interest demonstrated by investors for recent tenders launched by MASEN confirms the progress made by Morocco in providing a viable economic and social environment for the development of renewable energy. CSP Today Markets Report 2014 | 140 Morocco A further interesting element of the local CSP system is the plan of the European Bank for Reconstruction and Development (EBRD) to develop a form of marketbased financing mechanism for renewable energy projects. This potential tool would increase the range of financial tools already available and operative in the country. Amongst them are the Energy Investment Company for renewable energy (SIE) created by the law 40-08 and equipped with a capital of MAD 1 million and the Energy Development Fund (FDE) established in 2010 with a capital of USD 1 billion. However, it is also fair to remember that there is no policy providing financial guarantees to private investors, or any fiscal or tax incentives – the only exception being tax deductions for solar water heating appliances. Nonetheless, both local and international stakeholders are optimistic, and according to an analyst of the International Energy Agency, the second phase of the solar program will be relatively smooth because of the solidity of the financial backing offered by international institutions. Table 7(5): Main Funding Institutions and Banks in Morocco Name Roles and Responsibilities Previous Renewable Energy Projects African Development Bank (AfDB) AfDB’s energy portfolio currently stands at about USD $2 billion. The development bank provides two lending windows: the first is a public window, with mostly concessional funds available to governments. The second is a private window, offering debt and equity on commercial terms. The World Bank Group and AfDB are in the process of applying to the Clean Technology Fund Trust Fund Committee USD $750 million of concessional funds for the MENA CSP scale-up. AfDB is providing a total of USD$390 million to O.N.E. for the Ain Beni Matar ISCC power plant, covering two thirds of the project’s financing needs. Over the first half of 2012, the bank approved USD $800 million in loans to spur private investments in Morocco’s renewable energy sector. Cooperation between AfDB and Morocco in the energy sector dates back more than 40 years. French Development Agency AFD is a financial institution and the main imple- AFD is financing USD $123 million towards the first phase of Ouarzazate (AFD) menting agency for France’s official assistance to developing countries and overseas territories. solar complex. The Agency finances projects and studies through grants, loans, guarantee funds and debt reduction-development contracts to its partners in developing countries. Energy Investments Company (EIC) www.csptoday.com В EIC was established in 2010 with a capital of USD $117.564 million endorsed by the state (71%) and the Hassan II Fund for Economic and Social Development (29%). It is one of the equal shareholders in MASEN. Specializes in equity investments in numerous sectors, including telecoms, transportation, energy, water, and ports. The Fund seeks either majority or minority positions through equity, quasi-equity and convertible debt instruments. CSP Today Markets Report 2014 | 141 Morocco European Investment Bank (EIB) Morocco EIB is the European Union’s nonprofit long-term EIB is financing USD $123 million lending institution. The bank offers finance in towards the development of Ouarzazate the form of loans, guarantees, microfinance, and Solar Complex Phase One. equity investment. IFC - Infrastructure and IFC is a provider of debt, equity and quasi equity В Natural Resource Group (IFC) investments for infrastructure projects (power, water, transport) within the MENA region. IBRD is financing USD $200 million towards the development of Ouarzazate Solar Complex Phase One. International Bank for Reconstruction and Development (IBRD) IBRD is an international Washington-based financial institution that offers loans to middle-income developing countries. It is one of five member institutions that make up the World Bank Group KfW Entwicklungsbank KfW is financing USD $123 million KfW is a German government-owned develtowards the development of Ouarzazate opment bank, with an office in Morocco. It provides loans at lower rates than banks. Since Solar Complex Phase One. KfW’s cooperation with Morocco began in 1961, it has invested € 400 million in the water and sewage sector alone. Moroccan Agency for Solar Energy LLC (MASEN) Established in 2009 with the Government, O.N.E., Fonds Hassan II, and SociГ©tГ© d’Investissements EnergГ©tique as equal shareholders, MASEN is entrusted by the Government to develop at least 2,000 MW of grid-connected solar power by 2020. This includes conducting technical, economic & financial studies, supporting research & fund-raising, seeking involvement of local industry for solar projects and establishing associated infrastructure. MASEN, along with public & private partners, is financing $379 million towards the development of Ouarzazate Solar Complex Phase One. It is also the borrower of all financing for this project. Moroccan Infrastructure Fund MIF is an infrastructure-dedicated private equity В (MIF) fund set up in 2006, with USD $105 million in capital commitments from Moroccan, European and Kuwaiti investors. Invests in companies operating in the communications, energy, renewable energy and industrial sectors within Morocco. SociГ©tГ© d’Investissements EnergГ©tiques (SIE) www.csptoday.com SIE is a state-owned investment company and equal shareholder (25%) in MASEN. It is responsible for supporting the government in achieving renewable energy targets, and provides equity to financially viable energy projects in Morocco. SIE is supporting O.N.E. in the completion of the National Integrated Wind Power Project and participating in the share capital of project companies. It financed the creation of a Renewable Energy Fund dedicated to Morocco’s private and public renewable energy industry with approximately USD $237 million in equity. CSP Today Markets Report 2014 | 142 Morocco SociГ©tГ© GГ©nГ©rale Marocaine des Banques (SGMB) SociГ©tГ© GГ©nГ©rale is a French multinational banking and financial services company headquartered in Paris. Its affiliate SGMB offers a range of products, including traditional banking, investment finance, and green finance – the latter which funds wind farms, solar and hydraulic energy production facilities, waste recovery and other renewable energy projects. SGMB financed the construction and operation of Germany’s Global Tech 1, the largest financed offshore wind farm project, which includes 80 wind energy converters with a total capacity of 400 MW. In 2012, the group’s green finance portfolio amounted to nearly €1 billion. Sustainable Energy Fund for Africa (SEFA) SEFA, a fund that is financially supported by Denmark, aims to support the implementation of AfDB’s strategy to provide grants and equity to small-scale renewable energy projects. SEFA’s committed funds are approximately USD $58 million. SEFA approved a grant of USD $1 million in 2013 to finalize pre-investment activities and feasibility studies for a hybrid renewable energy project (hydro/wind/solar) in Madagascar. It also approved a grant of USD $825,000 in 2012 to finance the concept phase of the Green Tech Financial Facility – a vehicle for investments in private-sector driven green technology projects. 5.3.6. Developers and EPC Firms As part of an international effort, the Energy Sector Management Assistance Program (ESMAP - a trust fund administered by the World Bank) carried out a study on the potential of the rising CSP industry for manufacturing and associated value creation and job opportunities in the MENA region, including Morocco. The results of this study were presented in a workshop in Morocco in 2011 demonstrating the high potential for economic development arising from CSP-related projects. As a matter of fact, the creation of local jobs alongside the development of local entrepreneurship is one of the core strategic objectives in Morocco as it is in other MENA countries. In line with the study quoted above, a report published by the DESERTEC Industrial Initiative (DII - “Economic Impacts of Desert Power”) shows that heavy investment in the renewable energy sector can create 35,000 job years of employment in CSP alongside 23,000 job-years for PV for every €1 billion invested. A particular issue which has been pointed out by local stakeholders is that due to the competitive nature of the bidding process, developers are currently unable to secure a long-term pipeline of projects and as a consequence cannot guarantee long-term supply contracts to manufacturers. This aspect might somewhat undermine the potential for the local growth of the CSP value chain. www.csptoday.com CSP Today Markets Report 2014 | 143 Morocco Table 8(5): Developers and EPC Firms in Morocco Previous Renewable Energy Projects Name Roles and Responsibilities Abengoa Solar Subsidiary of Abengoa. The company designs, finances, constructs, and operates solar power stations. Abengoa Solar is the operator of the 450 MW Ain Beni Matar ISCC power plant. Abengoa’s subsidiary Abener is the developer and EPC contractor of the project. Acciona Acciona is a Spanish renewable energy operator focusing on CSP, PV, wind, hydraulic and biomass energy. It provides engineering & construction, project development, O&M, and energy sales, and has proprietary technology in the design, construction, and O&M of CSP plants. Acciona is building and commissioning the 160 MW Ouarzazate CSP project in Morocco, and in Spain, it owns and built/building six CSP plants: four in Spain and two in the United States. ACWA Power ACWA Power is a Saudi Arabia-based developer, owner and operator of independent water & power projects structured on a concession or utility outsourcing contract model. ACWA Power is developing the 160 MWe Noor 1 CSP Plant (Ouarzazate Phase 1). Al Terrya Al Terrya is a French turn-key solutions provider that develops, finances, builds and runs renewable energy power plants, including biomass, solar and wind power. It operates in Morocco through its office in Rabat. В Alstom Alstom is a French developer and construction company that provides systems and support to the world’s infrastructure markets in the fields of power generation and transport. It is also a manufacturer and supplier of turbines. Alstom Morocco has nine facilities across the country. Alstom has a long-term contract to operate and maintain the 470 MW Ain Beni Mata ISCC power plant. Cegelec Maroc Cegelec is a French electrical contractor providing electrical engineering services to large state electricity, oil, mining, and water enterprises. Cegelec Morocco is a subsidiary of Cegelec, which is part of the Vinci Energies Group. Cegelec Maroc’s consortium was one of the 19 pre-qualified bidders competing for the development of the Ouarzazate CSP IPP Phase One, which resulted in MASEN’s selection of the ACWA Power-led consortium. Cegelec designed and built an 8 MWe solar PV plant in Miradoux, France. Ciments du Maroc Ciments du Maroc, a subsidiary of Italy’s Italcementi Ciments du Maroc is the owner, Group, is one of the largest cement producers and operator and generation offtaker of the suppliers of ready mixed concrete and aggregates in 3 MWe Ait Baha CSP Plant in Agadir. Morocco with its subsidiary Betomar. www.csptoday.com CSP Today Markets Report 2014 | 144 Morocco CNIM Group Babcock Wanson Maroc CNIM Group is a provider of turnkey industrial solutions and consulting and expertise, including maintenance and rehabilitation of thermal power plant boilers; industrial boilers for power production, and waste-to-energy conversion. CNIM Group – Babcock Wanson Maroc is the developer, owner and operator of the 1 MWe eCare CSP demonstration project in Morocco. Enel Green Power Enel Green Power is a renewable energy group that is part of the Italian utility company Enel. The company operates a thermal power plant in Morocco through Endesa, the largest electric utility company in Spain. Endesa operates in Morocco through the 32% stake it holds in Energie Electrique de Tahaddart, owner of the 384 MW combined cycle plant in Tahaddart. Enel Green Power’s consortium was one of the four bidding finalists competing in the tender for the Ouarzazate CSP IPP Phase One, which resulted in MASEN’s selection of the ACWA Power-led consortium. Idom Idom is a Spanish company providing engineering, consulting and architecture services. Idom provided basic detail engineering to Abengoa for the 450 MW Ain Beni Matar ISCC power plant in 2009. Inabensa Maroc Inabensa Maroc carried out the Inabensa Maroc is a subsidiary of Spain’s Abengoa with an office in Casablanca, Morocco. It specializes complete insulation of Ain Beni Matar ISCC power plant in Morocco. in electrical assemblies, mechanical facilities & instrumentation, building of transmission lines, railway electrification, thermal & acoustic protection, concessions of services and manufacturing of capital goods. Nareva Holding Nareya Holding is a Moroccan developer involved in two sectors: power generation (renewable and fossil sources) and water cycle management projects such as desalination, irrigation, and distribution. It has established partnerships with international players to develop large ventures in Morocco. Nareya’s partners include International Power GDF Suez, TAQA, Enel Green Power, Amiantit, and Eesti Energie. The group has an investment level evaluated at USD $400 million. Nareya Holding is developing a number of power projects in Morocco, including Tarfaya 300 MW wind farm project, Safi 1320 MW coal fired power plant, 100 MW Akhfennir wind farm extension, 850 MW wind power project, among others. Nur Energie Nur Energie is a UK-based project developer with a portfolio of nearly 2,270 MW of projects under development using CSP towers, PV, BIPV, and CPV. It selects and secures accessible, high-solar radiation sites; establishes joint ventures with local partners; assembles local teams with expertise; and works with technology partners to identify the optimum technology for the site and offtake agreement. The company also structures critical aspects of project finance, EPC and power offtake contracts. Nur Energie is working with an industrial partner that has a high energy consumption, to provide hedge on fluctuating/increasing energy prices and the security of energy supply. It has been operating two meteorological and DNI measurement stations on two of the industrial partners’ sites since summer 2012. www.csptoday.com CSP Today Markets Report 2014 | 145 Morocco Local Component Supply The majority of components for the first CSP projects developed in the country, namely Ouarzazate and Ain Ben Mathar, are being imported. Not only is there no local content requirement up to now, but local suppliers might also not be able to meet the tight deadlines of the projects. However, the local manufacturing industry is going through a relevant learning curve and the increasing demand for CSP components and systems is expected to act as the main driver for the development of local expertise. For example, the Ouarzazate project used local production mainly for metal structures and other elements at the lower end of the value chain, in which suppliers are using the know-how already developed for other industrial sectors such as airlines production. ACWA Power managers claim that although not compulsory, they are achieving approximately 42% local content in their first project in Morocco. This strategy is enabling them to reduce costs and lower the final tariff at which they bid. As a general overview, the expectation is that in the near future, a wider percentage of components and work will be available through local suppliers. Table 9(5): CSP Components and Suppliers Available Locally in Morocco Component Name of Supplier(s) Website Turbines Inabensa Maroc www.inabensa.com MAN Diesel & Turbo - Morocco (supplied through www.mandieselturbo.com Gepod Agency) Mitsubishi - Maintenance Partners Morocco SARL www.mhi-global.com Siemens - Morocco www.siemens.com/answers/ma/en Steam Generators ABB S.A. www.abb.com Pumps Alfa Laval - Morocco www.alfalaval.com Lorentz (available through GenieSol, Morocco) www.lorentz.de (www.geniesol.com) Luxus Technologies www.luxus-technologies.e-monsite.com Maroc Sealing www.marocsealing.com Mitsubishi - Maintenance Partners Morocco SARL www.mhi-global.com Valves Tracking Systems Heat Exchangers www.csptoday.com SolarKraft, Casablanca http://ma105146736.en.gongchang.com/ Alfa Laval - Morocco www.alfalaval.com AVK Maghreb www.avkvalves.com John Crane (supplied through Maroc Sealing) www.johncrane.com ; www.marocsealing.com MAC Valves (supplied through RENOVPACK Sarl, Morocco) www.macvalves.com Mafoder www.mafoder.com Geniesol SARL www.geniesol.com ITRI Environment www.solairemaroc.com Alfa Laval - Morocco www.alfalaval.com CSP Today Markets Report 2014 | 146 Morocco Receiver Tubes / Solar Collectors Atlas Solaire www.atlassolaire.com SCHOTT France SAS (Tunisia) www.schott.com SolarKraft, Casablanca http://ma105146736.en.gongchang.com/ Alfa Laval - Morocco www.alfalaval.com Dow Chemical Company – Egypt www.dow.com Air-Cooled Condenser Alfa Laval – Morocco www.alfalaval.com CSP Mirrors Saint Gobain http://www.saint-gobain.es/ Heat Transfer Fluid 5.4.2. Raw Material Availability While there are materials and sub components that are readily available, like steel and concrete, there are other that are rare (e.g. glass and molten salts). Table 9 lists some of the suppliers available in Morocco for each of the raw materials used in CSP projects. Table 10(5): Raw material available locally in Morocco and suppliers Material Supplier Steel Delattre Levivier Maroc Maghreb Steel Sonasid Univers Acier InterAcier Ynna Holding Maghreb Steel Glass Cevital (Algeria) Molten Salt BASF Construction Chemicals Concrete Lafarge Morocco Ciments du Maroc Jalmat Morocco Holcim Maroc CГ©rame Afrique Industries Cior Asmar Siedex BГ©ton Becomar Actis Maroc www.csptoday.com CSP Today Markets Report 2014 | 147 Morocco 5.5. Alternative CSP Markets A very promising application for CSP technology in Morocco is water desalination, as the country is negatively affected by the environmental effects associated with reduced rain and extension of forest areas. The utilization of waste heat from the main CSP process could also be exploited to produce fresh drinking water. At the beginning of 2013, an international competitive tender for a feasibility study for the development of water desalination using renewable energy was launched with the financial support of the German development bank KfW. 5.6. Market Forecast Water availability is decreasing due to a combination of population growth and economic development, as well as a reduced amount of precipitation. In 2000, the average availability of water was approximately 1,000 m3 per person per year but the forecast is that it will be less than 500 m3 per person per year by 2020. Faced with water scarcity, Morocco is seriously considering desalination projects. The Office National de l’Eau Potable (ONEP) is currently developing a desalination program which will be completed in 2020. Blessed with a DNI of 2,500 kWh/m2/year, with peaking locations of 2,800 kWh/m2/year, Morocco has little to no fossil-fuel production capacity and could therefore strongly benefit from strengthening its energy portfolio with renewables such as CSP. Since the Moroccan Solar Plan was set into motion in 2009, with a target of deploying 2,000 MW by 2020 – 20 MW currently in operation; 160 MW under construction; 300 MW in planning – the operating capacity by the end of the decade could create a strong basis for a thriving CSP industry that could lend its expertise to the surrounding countries of the MENA region. This application represents a huge opportunity for CSP technology as the government is also looking at desalination as a means of providing water for irrigation. According to the Ministry of Agriculture, the current water deficit is estimated at approximately 58 million m3. A tender for a large plant in Agadir (100,000m3/day) has already been launched by ONEP using a 25 year Build-Operate-Transfer (BOT) model. Combining Morocco’s plants that are in operation and under construction, a total of 180 MW of CSP will soon be delivering power to the country, besides an additional 300 MW that has been announced through the MASEN Noor CSP Next Program and should become online within the next 3 years. To meet its 2,000 MW target by the end of the decade, MASEN has identified four future sites for solar deployment: Based on data provided by waterworld.com (2013), the desalination capacity in Morocco will increase from 83,000 m3/day in 2010 up to 989,000 m3/day in 2016. An important contribution to the desalination capacity will arrive from the plan of the Moroccan government to develop a large plant in the region of Chtouka. The water produced by the 111,000 m3/day plant would be used for irrigation purposes. A possibility to implement CSP technology for desalination would be beneficial as the process is very energy intensive. Overall data provided by the International Renewable Energy Agency (IRENA) indicate that seawater desalination via Multi Stage Flash (MSF) consumes approximately 80.6 kWh of heat plus approximately 2.5 to 3.5 kWh of electricity per m3 of water treated. Reverse Osmosis (RO) requires electricity only in the order of approximately 3.5 to 5.0 kWh per m3 of water treated. In terms of costs, according to the Ministry of Agriculture and Fisheries, the cost of desalination in Morocco is currently around USD $0.941.30 per m3 of water. www.csptoday.com Ain Beni Mathar – 400 MW by 2016 Foum Al Ouad – 500 MW by 2017 Boujdour – 500 MW by 2018 Sebkha Tah – 100 MW by 2019 The identification of these sites, and their allocated future capacity are positive signs showing the commitment of Morocco to solar energy. Morocco’s set targets and their consequent impact on the country’s CSP market are shown below, where the medium-term outlook is strongly influenced by Morocco’s commitment to meeting its target by the end of the decade. The experience to be gained in these projects, along with the local conjuncture upon the culmination of these initiatives, will dictate how the growing trend of the CSP sector will evolve. In Figure 3(5), MASEN’s plans are seen to slightly supersede the optimistic forecast, which only considers plants in operation, under construction and under development. CSP Today Markets Report 2014 | 148 Morocco Figure 3(5): Installed CSP Capacity in Morocco Until 2024 (MW) 6,000 5,275 Morocco MASEN Plan Optimistic 5,000 Conservative Pessimistic 4,000 3,000 1,987 2,000 1,680 845 1,000 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Figure 4(5): CSP Cumulative Energy Production in Morocco until 2024 (TWh) 140 131.1 Optimistic 120 Conservative Pessimistic 100 80 58.3 60 40 30.3 20 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Conclusion Morocco has developed a current installed capacity of 20 MW. However, a further 480 MW are in the pipeline (projects announced or already under development or construction). Although the country has only recently turned its focus to solar energy, strong efforts have been made to prepare the ground for an important deployment phase in the medium and long term. Policy www.csptoday.com makers in the North African country have become aware of how critical the establishment of the right regulatory and industrial conditions can be for CSP growth. For these reasons, Morocco is regarded as a very promising market for future CSP development. CSP Today Markets Report 2014 | 149 Morocco References African Development Bank, 2012. Ouarzazate Solar Power Station Phase 1. Available through: <www.afdb.org/ fileadmin/uploads/afdb/Documents/Project-and-Operations/Morocco%20-%20%20AR%20Ouarzazate%20 Project%20I%20(2).pdf>. [Accessed 04 August 2013]. Falconer A. and G. Frisari. 2012. San Giorgio Group Case Study: Ouarzazate I CSP , Climate Policy Initiative. Available through: http://climatepolicyinitiative.org/our-work/publications/. Filou, E., 2012. The Africa Report: Morocco Turns the Sea Taps On. Dossier, Power and Water. Available through: <www.emiliefilou.com/wp-content/uploads/2012/05/Desalination-Morocco.pdf>. [Accessed 04 August 2013]. Ouattassi, M., 2012. Energy Sector in Morocco. Presentation from the Ministry of Energy, Mines, Water and Environment of the Kingdom of Morocco. Pariente-David, S., 2011. Climate Investment Funds Partnership Forum. Promoting Clean Tech Manufacturing: The Case of Concentrated Solar Power in the MENA Region. World Bank. Richts, C., 2012. The Moroccan Solar Plan: A comparative Analysis of CSP and PV Utilization until 2020. Faculty of Electrical Engineering and Computer Science. University of Kassel. VV.AA. and Marquez, C., 2012. CSP Market Report 2012-13. FC Business Intelligence. Available through: <www. csptoday.com/csp-markets-report>. [Accessed 04 August 2013]. VV.AA, and Muirhead, J., 2013. CSP Today Quarterly Market Report. FC Business Intelligence. Available through: www. csptoday.com/research/quarterly-index.php. [Accessed 04 August 2013]. VV.AA, 2013. Business intelligence information and data. Available on www.csptoday.com. VV.AA, 2013. CSP Today Global Tracker Database. FC Business Intelligence. VV.AA, 2013. Information and data. Available through: <www.tradingeconomics.com>. VV.AA, 2013. Information and data. Available through: <www.indexmundi.com>. VV.AA, 2013. Information and data. Available through: <www.populationdata.net>. VV.AA, 2013. Information and data. Available through: <www.reegle.info>. VV.AA, 2013. Information and data. Available through: <www.data.un.org>. VV.AA, 2013. Information and data. Available through: <www.csp-world.com>. VV.AA, 2013. Information and data. Available through: <www.eia.gov>. VV.AA, 2013. Information and data. Available through: <www.reuters.com>. VV.AA, 2013. Information and data. Available through: <www.jbic.go.jp>. VV.AA, 2013. Information and data. Available through: <www.dii-eumena.com>. VV.AA, 2013. Information and data. Available through: <www.african-markets.com>. VV.AA, 2013. Information and data. Available through: <www.jkornet.com>. VV.AA, 2013. Information and data. 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Available through: <http://www.europarl.europa.eu/RegData/bibliotheque/briefing/2013/130515/ LDM_BRI(2013)130515_REV1_EN.pdf>. VV.AA, 2011. Power System of Morocco: Existing Situation and Perspectives. Technical presentation by Office National de l’ElectricitГ©. Naples, Italy. VV.AA, 2013. Sustainable Energy Policy Road Map: Morocco. European Union. VV.AA, 2012. The Energy Market in Morocco. Why is Energy Demand Growing in Morocco: Key Figures and Drivers of Growth. Longreach Oil and Gas. VV.AA, 2012. Water Desalination Using Renewable Energy - Technology Brief. International Energy Agency - Energy Technology Systems Analysis Programme (IEA-ETSAP) and International Renewable Energy Agency (IRENA). (VV.AA: Various Authors) www.csptoday.com CSP Today Markets Report 2014 | 151 Morocco Acronyms ACRONYM DEFINTION ADEREE National Agency for Renewable Energy and Energy Efficiency Development AFD Development Agency of France AfDB African Development Bank AMISOLE Association of Solar and Wind Power Enterprises BOOT Build, Own, Operate, Transfer BOT Build, Operate, Transfer BMZ German Ministry for Cooperation CDER Moroccan Centre for Renewable Energy Development CMPP Moroccan Cleaner Production Centre CNEIE National Environmental Impact Assessment Committee CPI Climate Policy Initiative CTF Clean Technology Fund DE Department of Environment DEER Directorate for Electricity and Renewable Energies DII Desertec Industrial Initiative DLR German Aerospace Center DNI Direct Normal Irradiance EBRD European Bank for Reconstruction and Development EET Energie Electrique de Tahaddart EIB European Investment Bank EIC Energy Investments Company ESMAP Energy Sector Management Assistance Program FDE Energy Development Fund LYDEC Lyonnaise des Eaux de Casablanca IBRD International Bank for Reconstruction and Development IEA International Energy Agency IFC Infrastructure and Natural Resource Group IRENA International Renewable Energy Agency IRESEN Institute for Research in Solar and Renewable Energy ISCC Integrated Solar Combined Cycle www.csptoday.com CSP Today Markets Report 2014 | 152 Morocco IWES Fraunhofer Institute for Wind Energy and Energy Systems MASEN Moroccan Agency for Solar Energy MCINET Ministry of Industry, Trade and New Technologies MEMEE Ministry of Energy, Mining, Water and Environment MENA Middle East and North Africa MIF Moroccan Infratructure Fund MSF Multi Stage Flash MSP Moroccan Solar Plan ONE Office National d’Electricite ONEP Office National de l’Eau Potable PERG Programme pour l’Electrification Rurale Global PPA Power Purchase Agreement RCREEE Regional Center for Renewable Energy and Efficiency REEEP Renewable Energy and Energy Efficiency Partnership RfQ Request for Qualification RO Reverse Osmosis SEFA Sustainable Energy Fund for Africa SGMB Societe Generale Marocaine des Banques SIE Societe d’Investissements Energetiques TAQA Abu Dhabi National Energy Company TSO Transmission System Operator UAE United Arab Emirates www.csptoday.com CSP Today Markets Report 2014 | 153 USA 6 U.S.A. By Marco Poliafico Peer reviewed by Arnold Leitner Content List of Figures 154 List of Tables 154 Chapter Summary 156 Country Overview 156 6.1. Electricity Market 158 6.1.1. Federal and State Regulators 158 6.1.2. Buying and Selling Electricity 158 6.1.3. Electricity Consumption 160 6.1.4. Grid Transmission 161 6.1.5. Electricity Demand and Consumption 161 6.1.6. Market Structure Diagram 162 6.2. CSP Market 163 6.2.1. Loan Guarantees 163 6.2.2. Federal Policy Incentives 163 6.2.3. State-level Incentives 164 6.2.4. Renewable Portfolio Standards 164 6.2.5. Solar Energy Zones 165 6.2.6. Research and Development 165 6.2.7. Local Content Requirements 166 6.2.8. CSP Project Profiles 166 6.2.9. Challenges facing the development of CSP in the USA 170 6.2.9.1 Shale Gas 170 6.2.9.2 High Cost 170 6.2.9.3 Need for Policy Review 170 6.3. Local CSP Ecosystem 171 6.3.1. Key Government Agencies 172 6.3.2. Utilities and Independent Power Producers 173 6.3.3. Permitting Agencies 174 6.3.4. Local Consultants and R&D Bodies 175 6.3.5. Financing Organizations 176 6.3.6. Developers and EPC Firms 177 www.csptoday.com CSP Today Markets Report 2014 | 154 USA 6.4.1. Local Component Supply 178 6.4.2. Raw Material Availability 179 6.5. Alternative CSP Markets 180 6.5.1. Hybridization 180 6.5.2. Enhanced Oil Recovery 180 6.6. Market Forecast 182 Conclusion 183 References 184 Acronyms 186 List of Figures Figure 1(6): Direct Normal Irradiation in the United States 157 Figure 2(6): California Summer Daily Demand Curve 161 Figure 3(6): Parabolic Trough and Tower CSP Pipelines in the United States 171 Figure 4(6): BrightSource Coalinga CSP Plant For EOR 181 Figure 5(6): Installed CSP capacity in the USA until 2024 (MW) 183 Figure 6(6): CSP Cumulative Energy Production in the USA until 2024 (TWh) 183 List of Tables Table 1(6): Drivers and Barriers 157 Table 2(6): Overview of the Power Markets in the United States 159 Table 3(6): Main fiscal incentives available in the U.S. for CSP technology 163 Table 4(6): List of CSP Projects in the USA (those highlighted in yellow have secured a PPA) 166 Table 5(6): Key Government Agencies in the United States 172 Table 6(6): Utilities and IPPs Operative in the United States 173 Table 7(6): Permitting and Environmental Assessment Agencies in the United States 174 Table 8(6): Consultants and R&D bodies in the United States 176 Table 9(6): Main Funding Institutions and Banks Operative in the United States 176 Table 10(6): Developers and EPC Firms Operative in the United States 177 Table 11(6): Components and Suppliers Available in the United States 178 Table 12(6): Raw Material Suppliers in the USA 180 www.csptoday.com CSP Today Markets Report 2014 | 155 USA Chapter Summary With an average DNI of 2,700 kWh/m2 per year in the CSP-friendly states of the country, and with the daily peaks in the south-western states, the United States has a potential CSP capacity varying between 14 GW to 33 GW. A global pioneer in CSP development, the U.S. is one of the world’s largest consumers of electricity and energy, with one of the most developed power markets. Various incentives have been put in place for CSP development, including but not limited to Renewable Portfolio Standards Research and Development Numerous projects have also been carried out by worldleading U.S. research organizations like the National Renewable Energy Laboratory and the U.S. Department of Energy within the ambitious SunShot Initiative that aims to achieve grid parity for CSP-generated electricity by 2020. This equates to a levelized cost of energy of approximately US$ 0.06/kWh, which in turn requires costs to be cut by around 75%. According to industry experts, the outlook for CSP under the current U.S. market conditions is not as promising as it was a few years ago, although the potential remains tremendous, particularly in southwestern states. High costs and increasing exploitation of shale gas are amongst the main threatening factors to the deployment of CSP, followed by lengthy permitting processes. The United States has a comprehensive supply chain for CSP components and sub-components. As a consequence, all the main parts are easily available in the market. Beyond the electricity market, hybridization is one of the most promising CSP applications for the United States, while another interesting field of deployment is the use of CSP in enhanced oil recovery operations. Country Overview United States Solar resource (average annual sum of DNI): 2,700 kWh/mВІ/year Size: 9,826,675 kmВІ Population (2012): 315.1 million GDP per capita (2012): US$ 49,965 Installed power capacity: 1,168 GW Annual electricity consumption: 3,687 TWh Expected annual electricity demand in 2020: 4,700 TWh Electricity Mix by Installed Capacity (2012) Coal/Lignite 47.57% Natural/Industrial Gases 20.44% Petroleum Products 1.30% Nuclear 19.1% Hydro 6.77% Renewables 3.42% (Geothermal 0.4%, Solar PV 0.04%, Solar CSP 0.02%, Wind 1.35%, Wood 0.92%, Biogas 0.02%, Waste to Energy 0.67%) Other/Imports 1.4% Known Energy Resources Coal, Gas, Petroleum, Biomass, Solar, Wind, Geothermal, Hydro Potential Markets for Industrial CSP Applications Hybridization Enhanced Oil Recovery www.csptoday.com CSP Today Markets Report 2014 | 156 USA Figure 1(6): Direct Normal Irradiation in the United States Source: Source: SolarGIS В© 2013 GeoModel Solar Table 1(6): Drivers and Barriers Drivers Barriers Excellent DNI levels across several states Lack of CSP-specific policy framework (currently under development) Overarching policy goals and Renewable Portfolio Standards Water scarcity and other environmental related conditions, such as dust, that could affect the performance and cost of CSP projects First-class R&D capability in CSP technology High capital costs Good availability of local manufacturing industry to feed Lengthy and costly permitting process the whole supply chain Availability of all raw materials needed by the supply chain Difficulties in accessing transmission grid in potentially good locations Large pipeline of announced projects Decreasing price of natural gas due to shale gas boom www.csptoday.com CSP Today Markets Report 2014 | 157 USA Land availability DOE Loan Guarantee Program terminated Proximity between energy demand hubs (large cities) and potential location for CSP plants Plummeting prices of PV technology Industrial initiatives like SunShot 6.1. Electricity Market The electricity sector in the U.S. has evolved from a monopolistic industry where vertically integrated companies were dominating the market into a deregulated system where a multitude of stakeholders operate along the value chain. There are various public institutions regulating the sector and over 3,000 utility companies. Less than one third are involved in the generation segment whereas many of them are engaged in the distribution sector. The large majority of those companies (approximately 66%) is publicly owned, whilst others are cooperatives or privately owned firms. 6.1.1. Federal and State Regulators The main regulatory bodies are the Department of Energy, in charge of general policy, the Environmental Protection Agency, leading environmental policy, and the Federal Trade Commission, dealing with consumer protection policy. Each state is responsible for the regulation of the distribution sector whereas the Federal Energy Regulatory Commission (FERC) is responsible for the regulation of the inter-state transmission sector. The only sector that is not owned by individual companies is transmission. A number of Independent System Operators (ISOs) or Regional Transmission Organizations (RTOs) operate as non-profit entities and must provide access to all potential generating companies. These ISOs or RTOs are usually jointly owned by a number of utilities operating in the same region and are associated with the North American Electric Reliability Corporation (NERC). Nowadays, there are still some regulated states in which utilities are vertically integrated and prepare integrated resource plans to serve their load. In these states, supply and distribution rates are set through economic regulation. Conversely, in restructured states, generation is deregulated and supply rates are set by markets. However, distribution services are still fully regulated and distribution rates are set again through economic regulation. As an overall picture, the U.S. electric industry comprises more than 3,100 public, private, and cooperative utilities, over 1,000 independent power www.csptoday.com generators, three regional synchronized power grids, eight electric reliability councils, about 150 control-area operators, and thousands of other stakeholders operating as engineering, economic, environmental, and land-use regulatory authorities. Several aspects of the electricity market are federally regulated, whereas others are state-regulated. Further elements such as environmental impacts may be regulated locally. Generally speaking, the Constitution allows federal bodies to regulate private economic activities only where interstate commerce is involved. The Federal Energy Regulatory Commission (FERC) is a federal independent agency that provides regulation at the national level, and is responsible for overseeing the wholesale electricity markets and interstate transmission services. However, there are many areas outside of FERC’s jurisdictional responsibility that are dealt with by the State Public Utility Commissions, such as the regulation of retail electricity rates to consumers, distribution services and approval of the construction of generation facilities. Furthermore, some activities are regulated by the Environmental Protection Agency (EPA), federal land agencies (such as the Bureau of Land Management), or other federal bodies. 6.1.2. Buying and Selling Electricity On the generation side, utilities may produce all the electricity they sell, but they can also purchase some of their supply on the wholesale market from other utilities, federal power agencies, independent power producers (IPPs), or from a market based on membership of a regional transmission reliability organization. Part of the generation is provided by utilities (individual or consortia) although some capacity is owned by federal agencies and an increasing number of independent suppliers. Licensing of nuclear and hydropower plants is federally administered by the FERC, while licensing of other generation technologies is managed at the state and local levels. Federal Power Marketing Agencies (PMAs) were set up to market electricity produced by federal dams. Some of them also built their own thermal power plants. Examples of PMAs CSP Today Markets Report 2014 | 158 USA are the Bonneville Power Administration, the SouthEastern Power Administration, the South-Western Power Administration, and the Western Area Power Administration. In principle, the PMAs only sell power on the wholesale market; however, some of them also operate large transmission grids. The federal power marketing agencies as well as local municipal utilities are exempt from general regulation by FERC. IPPs are also referred to as Non-Utility Generators (NUGs) and own their generation facilities without getting involved in the distribution services. That said, they can also sell electricity to final consumers through brokers. NUGs can enter into long-term agreements or offer power on a short-term basis to the wholesale market. The distribution companies selling electricity to final consumers can be a not-for-profit municipal utility, an electric co-operative (both of them indicated as Consumer-Owned Utilities, or COUs), a private commercial company owned by shareholders (Investor-Owned Utility, or IOU) or a power marketer. The distribution market is also populated by some federally-owned authorities who buy, sell, and distribute power. The IOUs serve approximately 75% of the whole population and are subject to state regulations. Most of them are large companies (in financial terms) and operate both on the electricity and the natural gas markets. The COUs serve approximately 25% of the population, including both cities and many large rural areas. Only some of them deal with natural gas. The city-owned entities are known as “munis” and are governed by the local city council or another elected commission. The public utility districts are utility-only government agencies and are governed by a board elected by voters within the service territory. The Cooperatives are private non-profit entities governed by a board elected by the customers of the utility and operate mostly in rural areas. Many of them were formed in the years following the Great Depression, to extend electric service to remote areas that IOUs were unwilling to serve. Table 2(6): Overview of the Power Markets in the United States 10 Power Markets (ISO/RTO) 8 Reliability Region(s) (NERC) joint through the 3 Interconnections States Covered (all or part of) Western Interconnection California ISO (CAISO) Western Electric Coordinating Council (WECC) California Southwest Western Electric Coordinating Council (WECC) Arizona, New Mexico, Colorado and parts of Nevada, Wyoming and South Dakota Northwest Western Electric Coordinating Council (WECC) Washington, Oregon, Idaho, Utah, Nevada, Montana, Wyoming and part of California Texas Interconnection Texas (ERCOT) (RTO) Electric Reliability Council of Texas (ERCOT) Most of Texas Eastern Interconnection Midwest ISO (MISO) Midwest Reliability Organization (MRO), the South Eastern Electric Reliability Council (SERC) and the Reliability First Corporation (RFC) North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Wisconsin, Illinois, Indiana, Michigan and parts of Montana, Missouri, Kentucky, and Ohio New England ISO (ISO-NE) Northeast Power Coordinating Council (NPCC) Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont New York ISO (NYISO) Northeast Power Coordinating Council (NPCC) New York www.csptoday.com CSP Today Markets Report 2014 | 159 USA PJM (RTO) Reliability First Corporation (RFC) and SERC Reliability Corporation (SERC) District of Columbia, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia. Parts of Indiana, Illinois, Kentucky, Michigan, North Carolina and Tennessee. Southeast Florida Reliability Coordinating Council (FRCC) and SERC Reliability Corporation (SERC) Florida, Arkansas, Louisiana, Mississippi, Alabama, Georgia, Tennessee, North Carolina, South Carolina and parts of Missouri, Kentucky and Texas Southwest Power Pool (SPP) Southwest Power Pool (SPP) Kansas, Oklahoma, most of Nebraska, and parts of New Mexico, Texas, Louisiana, Missouri, Mississippi and Arkansas 6.1.3. Electricity Consumption The United States is one of the world’s largest energy consumers, as well as a leader in the CSP industry sector. U.S. companies produce a wide variety of fuels ranging from oil and natural gas to nuclear and hydro power. Renewable energy technologies are very well developed, and a large number of companies are involved in virtually all subsectors, including wind, solar, geothermal, biomass and biofuels. According to data provided by the Energy Information Administration (EIA), in 2011 approximately 39% of the total new power capacity installed used a renewable technology. The relative weight of the renewable generation within the energy mix is bound to increase significantly and indeed the Bloomberg New Energy Finance (BNEF) forecasts an overall 27% provided by the whole set of renewable technologies by 2030. This would mean over 343 GW of installed capacity and over 420% increase from the similar total amount of 2010. Currently, the United States is the largest solar industry in the world. energy generation peaks during the middle of the day, so would support peak demand. Furthermore, the possibility of implementing thermal storage technology could serve the sustained high demand during evening hours. The oil, gas, coal and nuclear sectors are all very important within the national energy mix and are industrially very advanced. From one side, the U.S. is developing technical know-how and expertise in the exploitation of shale gas, whilst on the other side, the largest estimated reserve of coal globally is available, and makes the country a net exporter. In terms of nuclear power, the United States has the largest installed capacity in the world (World Nuclear Association, 2013) and a very strong supply chain. A specific aspect that makes the CSP technology highly suitable for the US market is the daily trend of electricity demand. In the south-western states, a double folded peak is experienced during the day (due to cooling and industrial load), and then during the first hours of the evening (household and lighting load). Solar www.csptoday.com CSP Today Markets Report 2014 | 160 USA Figure 2(6): California Summer Daily Demand Curve Source: National Renewable Energy Laboratory, March 2010, NREL/FS-6A2-45653 According to the 2012 Annual Energy Outlook, the generation capacity between 2010 and 2015 is expected to increase by 1%. Behind this overall number, solar forecast projection is 242%. 6.1.4. Grid Transmission The U.S. grid is formed by a network of over 300,000 km of HV transmission lines connected to some 18,000 power plants. The transmission grid is formed by high-voltage networks linked to three synchronous interconnections (also referred to as interconnects). These are designed to transfer electricity amongst different regional areas. The three networks are the Eastern Interconnected System, covering the eastern two-thirds of the United States and including adjacent Canadian provinces, the Western Interconnected System, consisting primarily of the Southwest and areas from the Rocky Mountains to the Pacific Coast (again including some Canadian provinces), and the Texas Interconnected System, mainly covering Texas. In 2006, the North American Electric Reliability Corporation (NERC) was established, with the mission to ensure that the grid in the United States be reliable, adequate, and secure. With the mandate of overseeing www.csptoday.com regional operations, eight NERC planning areas have been set. NERC has adopted specific reliability standards that are legal requirements under FERC authority. Within the NERC regions, a variety of entities are operative. The most important players are the Regional Transmission Organizations (RTOs) and the Independent System Operators (ISOs), besides some individual utility control bodies. The ISOs and the RTOs (similar among them) are Transmission System Operators (TSOs) that need to meet FERC requirements and manage planning, operational, balancing and dispatch transmission services. They are voluntary and non-profit companies. Their aim is to promote competition in the wholesale electricity market. Overall, there are currently ten organizations acting as an ISO or RTO, covering any geographical area of the United States with the exception of small grid areas served by individual utilities. 6.1.5. Electricity Demand and Consumption The U.S. consumes approximately 20% of the total electricity generated in the world. According to EIA data, the per-capita energy consumption in the country has been almost constant over the last 40 years, and this might be related to the economic evolution that entailed the relocation of many manufacturing activities CSP Today Markets Report 2014 | 161 USA and the associated shift in energy consumption required to produce those goods. The overall electricity demand increased by a total of 8% between 2000 and 2010, and the gap between production and generation has been covered through imports. According to the Annual Energy Outlook 2013, the growth of electricity demand between now and 2040 will remain slow at an average level of 0.9% per year. Market Structure Diagram Federal Level State Level Private Sector Regulators FERC Public Utility Commissions Generation PMAs Utility Companies IPPs Transmission PMAs RTOs/ISOs 8 NERC Areas Distribution Federal Agencies COUs IOUs Customers www.csptoday.com CSP Today Markets Report 2014 | 162 USA 6.2. CSP Market CSP technology is well known and developed in the U.S., as the first modern plants were built in California in the 1980s. At the time of publication, there was 572 MW in operation, with a further 1.3 GW in construction. Some of the world’s largest CSP projects are expected to connect to the grid before the end of the year (2013). These include the three Ivanpah Towers (which have a cumulative capacity of 377 MW). Of all the CSP markets listed on the CSP Today Global Tracker, the U.S. has the largest pipeline of specific CSP projects under construction, development and planning. The overall policy framework is somewhat complicated because it includes both federal and state-level initiatives. These are mainly divided into two categories, namely financial incentives and green power purchasing goals. The first group includes all the grants, loans and tax incentives adopted at federal or state level. 6.2.1. Loan Guarantees Since 2011, the DOE has awarded approximately US$ 4.235 billion in loan guarantees to five CSP projects, accounting for 1.3 GW of capacity (Mojave, Solana, Ivanpah, Crescent Dunes and Genesis). Now that the loan guarantee program has expired, securing finance for the development of CSP projects will be more difficult, necessitating tax equity investors. The loan guarantee offered an incentive for the early-stage development of the projects, as opposed to a Feed-inTariff scheme that is instead tailored for the operational part of the plant’s lifetime; for this reason, the two mechanisms could even be applied, at least in theory, simultaneously. By offering a lump sum for the development of a project, a loan guarantee would minimize the investment risk and therefore help in overcoming investor concerns. Furthermore, a loan guarantee would be awarded to a single project and in so doing, policy makers could target their intervention geographically or based on a specific type of project. At the same time, though, as it happened in the US, only few projects might be able to access this benefit. 6.2.2. Federal Policy Incentives The main federal policy initiatives are shown in Table 3. A more detailed description is included below: Table 3(6): Main Fiscal Incentives Available in the U.S. for CSP Technology Incentive Description The Modified Accelerated Cost-Recovery System (MACRS) Deductions on property taxes The Business Energy Investment Tax Credits (ITC) Reduction in the overall tax liability US Department of Treasury Renewable Energy Grants Grant scheme US Department of Agriculture (USDA) High Energy Cost Grant Program Grant scheme Federal Manufacturing Tax Credit Scheme Tax credit awarded to manufacturers building CSP components www.csptoday.com CSP Today Markets Report 2014 | 163 USA Modified Accelerated Cost-Recovery System (MACRS): under this scheme that works through depreciation deductions, a business can depreciate its assets in a shorter time. For instance, a CSP project is included in the five-year property and this entails savings on property taxes. Business Energy Investment Tax Credits (ITC): this scheme has been extended until December 2016 and allows for a reduction in the overall tax liability for individuals or businesses that make investments in solar energy generation technology. It helps mitigate high upfront costs for renewable energy projects. The scheme was also extended to small firms without tax liability because they were not yet profitable. The credit is equal to 30% of expenditure, and if the federal tax credit exceeds the tax liability, the excess may be carried forward to the succeeding tax year until 2016. The American Recovery and Reinvestment Act of 2009 (H.R. 1) allows taxpayers eligible for ITC to take this credit or to receive a grant from the US Treasury Department instead of taking the business ITC for new installations. US Department of Treasury Renewable Energy Grants: this scheme was launched in 2009 through the American Recovery and Reinvestment Act,s and is administered by the US Department of Treasury. The grant is equal to 30% of the basis of the property for solar energy and may be taken in lieu of the federal business energy ITC. US Department of Agriculture (USDA) High Energy Cost Grant Program: this scheme is active since the year 2000 and funds projects aimed at improving the energy generation, transmission or distribution in rural communities with grants up to US$ 5 million. Eligibility is limited to projects that have energy costs of at least 275% above the national average. Although the scheme is not currently active, it is expected that new funding opportunities will be available. Another fiscal benefit is represented by the 30% tax credit awarded to manufacturers building CSP components under the federal manufacturing tax credit scheme. However, the funds available under this scheme are limited, so not all companies managed to access it. In February 2013, the Tax Credits for Clean Energy Manufacturing were awarded US$ 150 million by the DOE. This money was made available from the Advanced Energy Manufacturing Tax Credit scheme that entailed a 30% investment tax credit and was awarded to 183 projects for a total investment of US$ 2.3 billion. The US$ 150 million was not utilized in its original destination and was therefore made available within the Clean Energy Manufacturing scheme. www.csptoday.com 6.2.3. State-Level Incentives Other than at federal level, each state can offer specific financing incentives for CSP project development. Many states have already set their own policies including renewable energy portfolio standards, production tax credits, and net metering provisions. However, some of these measures are temporary or not fully beneficial and their instability ended up not attracting mainstream investors. An ITC state level scheme is already present in Arizona, Florida, and New Mexico, but not yet in California or Nevada. Both of them have a property tax exemption scheme which is not applied in the other mentioned states (with the exception of Arizona). It is also worth mentioning that the state of Nevada has a state Loan scheme and a Sales Tax Exemption scheme. The latter is also used in the states of Arizona and New Mexico. The Green Power Purchasing Goals have been introduced by the Federal Energy Policy Act of 2005, and require at least 7.5% of the electricity consumed by federal buildings to be generated by renewable technologies. Those federal facilities that produce renewable energy used on-site or produced on federal land are entitled to double the amount of renewable energy credits. 6.2.4. Renewable Portfolio Standards The Renewable Portfolio Standards (RPS) set the implementation targets for renewable energy in the electricity mix of various states. They require utilities to generate a certain amount of electricity from renewable energy sources or acquire equivalent Renewable Energy Certificates (RECs). RPSs create a trading regime through which utilities missing their targets in their overall supply portfolio can buy green sourced electricity from other suppliers or utilities. So far, 29 states have adopted RPSs, and a further eight states have a similar scheme (Renewable Portfolio Goal - RPG). It is important to mention that, in general, RPSs do not set specific targets for each generation technology, but an overall target for renewable sourced electricity. Out of the 29 states embracing this scheme, only 14 have specified solar energy generation targets. Out of these 14 states, only Nevada and New Mexico include specific CSP generation targets in their RPS (1.5% by 2025 and 4% by 2020 respectively). The combination of 30% federal tax credits, specific state tax credits, property tax exemption and RPS policies has provided significant leverage for CSP development in the South-western states of the United States, facilitating solar energy market growth. CSP Today Markets Report 2014 | 164 USA 6.2.5. Solar Energy Zones Other initiatives aim to simplify the permitting phase or promote R&D activities related to a CSP project. For instance, the Solar Energy Zones program in the southwestern states identified 285,000 acres of public land where a fast-track environmental approval procedure is applied. The program has succeeded in attracting 27 projects since 2008 (between PV and CSP). 6.2.6. Research and Development The National Solar Thermal Test Facility is an R&D partnership set up amongst various national research laboratories and promotes collaboration with the private sector to undertake industrial oriented research programs to generate innovation. The SunShot target for CSP technology is to achieve cost parity with other forms of energy on the grid by 2020. This equates to a levelized cost of energy (LCOE) of approximately US$ 0.06/kWh, which in turn requires costs to be cut by around 75%. The SunShot Vision Study has been funded by the DOE and is based on models developed by the National Renewable Energy Laboratory (NREL). It provides an in-depth assessment of the potential for solar technologies and explores low-cost future scenarios alongside the initiatives put in place to achieve those cost targets. Potential roadmaps, barriers, technical and market aspects are investigated for both PV and CSP technologies. The study indicates that up to 14% of the electricity demand in 2030 could be satisfied by solar energy if the level of cost reductions envisaged by the initiative were achieved. At the same time almost 300,000 jobs could be created. The SunShot Initiative is currently generating investment of up to US$ 55 million over a three-year window in 21 different projects carried out by the private sector, universities and research laboratories. The overarching objective is the development of the next generation of CSP technologies featuring lower costs and higher performance. The initiative considers all the technologies (Stirling, parabolic trough, solar tower and Fresnel) and looks both at short-term and long-term research. The four new funding initiatives recently launched within the SunShot Initiative are CSP-HIBRED, SolarMat, PREDICTS, and CSP: ELEMENTS. CSP-HIBRED received total funding of US$ 20 million from the DOE and focuses on the development of the www.csptoday.com hybridization concept to integrate CSP technology with existing conventional power plants. SolarMat stands for Solar Manufacturing Technology, and supports the development of innovative and commercially viable manufacturing technologies. The “Physics of Reliability: Evaluating Design Insights for Component Technologies in Solar” (PREDICTS) program was launched in February 2013, and was funded with a total budget of US$ 5 million from the DOE for both CSP and PV technologies. Its goal is the development of better predictive models for improving the reliability of systems, components and sub-systems to, in turn, feed the know-how generated into the design stage of such components. This program has the ultimate objective to reduce the risk associated with solar energy systems and therefore increase the bankability of projects. The fourth initiative (Concentrating Solar Power: Efficiently Leveraging Equilibrium Mechanisms for Engineering New Thermochemical Storage - CSP: ELEMENTS) supports the development of thermochemical energy storage (TCES) systems that can operate at higher temperatures (≥650В°C) while providing an overall cost reduction. It was launched in April 2013, and received a total budget of US$ 20 million from the DOE for the duration of approximately 8-24 months. Another project funded through the SunShot Initiative is the “Advanced Collectors”, which focuses on the development of new solar collector elements. The R&D effort will be directed at advanced reflective films, optically accurate reflector panels, low-cost space frames, adaptive optics and accurate tracking systems. The program will also design and build a heliostat suitable for an ultra-high concentrating power tower system to be developed at the National Solar Thermal Test Facility at Sandia National Laboratories. Meanwhile, an R&D project is currently being carried out by the Jet Propulsion Laboratory (JPL) to support the development of a lightweight solar thermal collector structure with the aim of lowering structural costs and simplifying the installation process. At the same time, another project is looking at the development of an innovative receiver for parabolic trough systems to improve their performance as well as the reliability of the components. This would in turn positively affect the operation and maintenance (O&M) cost of the solar field. CSP Today Markets Report 2014 | 165 USA Last, but not least, Arizona State University (ASU) is taking part in three new solar energy projects funded by the Australian and U.S. governments. The investment for these projects includes US$ 68 million for two, eight-year research programs and US$ 15.5 million for 11 collaborative projects. These projects will be developed in collaboration with the Australian Solar Thermal Research Initiative (ASTRI) that is supported by the Australian Renewable Energy Agency (ARENA). In conclusion, R&D activities focus on all of the four CSP technologies (parabolic trough, central tower, linear Fresnel, and dish engines). That said, industry stakeholders recently argued about the existing obstacles to take research from the laboratory to full scale commercialization. Although the incentives of the recent years prompted an impressive acceleration in the deployment of the technology, the current research on new materials, heat transfer fluids, thermal energy storage and coatings will need further capital to enable smooth progression of promising technologies from laboratory-scale prototype systems to pilot plants and demonstration units. 6.2.7. Local Content Requirements At the time of writing this report, there were no local content requirements in the U.S.. This is not likely to change in the future, given the current development of the local supply chain. 6.2.8. CSP Project Profiles At the time of publishing this report, the United States had 16 operational CSP plants with a total installed capacity of 571.16 MW: eleven under construction (totaling 1,323.5 MW), six under development (600 MW), and seven under planning (1,525 MW), according to CSP Today Global Tracker. Table 4(6) showcases all CSP projects in the U.S. at various stages of development. Table 4(6): List of CSP Projects in the U.S. (those highlighted in yellow have secured a PPA) Title MWe Technology Status State/ Region Developer Storage Capacity Palen 1 250 Tower Planning California BrightSource Energy В Palen 2 250 Tower Planning California BrightSource Energy В Quartzsite Solar Energy Project 100 Tower Planning Arizona SolarReserve В Siberia 1&2 400 Tower Planning San Bernardino County, California BrightSource Energy В Sonoran West SEGS 540 Tower Planning Riverside Country, California BrightSource Energy В Hyder Valley Phase 200 1 Parabolic Trough Planning Arizona Pacific Solar Investments В Hyder Valley Phase 125 2 Parabolic Trough Planning Arizona Pacific Solar Investments В www.csptoday.com CSP Today Markets Report 2014 | 166 USA Crossroads Solar Energy Project 150 Tower Development Arizona SolarReserve 8 Rice Solar Energy Project (RSEP) 150 Tower Development California SolarReserve 8 Chevron Hawaii В CSP Process Steam To Be Confirmed Development Hawaii Chevron В Saguache Solar Energy Project 200 Tower Development Colorado SolarReserve 15 Palmdale Hybrid Gas-solar Project 50 Parabolic Trough Development California City of Palmdale В Victorville 2 Hybrid Power Project 50 Parabolic Trough Development California Inland Energy Inc. В Crescent Dunes 110 Tower Construction Nevada Cobra/Santander/ SolarReserve 11 Ivanpah Solar Electric Generating Station I 126 Tower Construction California BrightSource Energy/ Google/NRG В Ivanpah Solar Electric Generating Station II 133 Tower Construction California BrightSource Energy/ Google/NRG В Ivanpah Solar Electric Generating Station III 133 Tower Construction California BrightSource Energy/ Google/NRG В www.csptoday.com CSP Today Markets Report 2014 | 167 USA Genesis Solar 1 125 Parabolic Trough Construction California NextEra Energy Resources В Genesis Solar 2 125 Parabolic Trough Construction California NextEra Energy Resources В Keahole Solar Power 5 Parabolic Trough Construction Hawaii, Oahu Sopogy Mojave Solar Project 280 Parabolic Trough Construction California Abengoa В Solana* 280 Parabolic Trough Construction Arizona Abengoa 6 Sundt Solar Boost 5 Fresnel Construction Arizona TEP/Areva Power В Tooele Army Depot 1.5 Dish Construction Utah Infinia Corporation В BrightSource Coalinga 29 Tower Operation Rotem Industrial Park BrightSource Energy В SierraSunTower 5 Tower Operation California eSolar В Holaniku at Keyhole Point 2 Parabolic Trough Operation Hawaii Sopogy 2 Martin Next Generation Solar Energy Center 75 Parabolic Trough Operation Florida Florida Power & Light В Nevada Solar One 64 Parabolic Trough Operation Nevada Acciona 0.5 Saguaro Power Plant 1.16 Parabolic Trough Operation Arizona Arizona Public Service Company В SEGS I 14 Parabolic Trough Operation Dagget, California Luz International В SEGS II 33 Parabolic Trough Operation Dagget, California Luz International В www.csptoday.com В CSP Today Markets Report 2014 | 168 USA SEGS III 33 Parabolic Trough Operation Kramer Junction, California Luz International В SEGS IV 33 Parabolic Trough Operation Kramer Junction, California Luz International В SEGS V 33 Parabolic Trough Operation Kramer Junction, California Luz International В SEGS VI 33 Parabolic Trough Operation Kramer Junction, California Luz International В SEGS VII 33 Parabolic Trough Operation Kramer Junction, California Luz International В SEGS VIII 89 Parabolic Trough Operation Harper Dry Lake, California Luz International В SEGS IX 89 Parabolic Trough Operation Harper Dry Lake, California Luz International В Kimberlina 5 Fresnel Operation California Areva Power/ Clark Group В Hidden Hills 1 250 Tower On hold California BrightSource Energy В Hidden Hills 2 250 Tower On hold California BrightSource Energy В Rio Mesa 500 Tower On hold California BrightSource Energy В Fort Irwin 500 Parabolic Trough On hold California Acciona/Clark Group В Kingman 200 Parabolic Trough On hold Arizona Albiasa Solar В Westside Solar Project 10 Parabolic Trough On hold Hawaii Pacific Light & Power В Cameo Coal-Fired Hybrid Demonstration Project 2 Parabolic Trough Decommissioned Colarado Xcel Energy В * In October 2013 this project moved into operation Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 169 USA The deployment of utility-scale CSP technology in the U.S. started at the end of the 1980s, when the first SEGS plant was developed in California. Since then, the local market has been one of the most attractive in the world. For this reason, several CSP companies, in particular those from Spain, opened local offices in the country. Unfortunately, in recent years, the market has been affected by external competitive factors including the decreasing price of PV technology and low natural gas prices. That said, there is currently approximately 570 MW of CSP installed capacity and a further 1.3 GW is expected to start production between the end of 2013 and the first half of 2014. This will result in an increase of over 120%. For some projects, it is currently difficult to predict the exact scheduling as there are still some economic and permitting issues to be resolved, which could make overall project development phase longer than foreseen. From a technical point of view, storage is increasingly becoming part of the requirements for new CSP plants. Thermal energy storage (TES) can offer significant benefits over other renewable generation technologies, including PV, as highlighted in a report published by the National Renewable Energy Laboratory (NREL) in 2012. Crescent Dunes is the first commercial scale central tower CSP plant in the United States that will use molten salt as a primary heat transfer fluid for both heat capture and energy storage. It will have a capacity of up to ten hours of thermal energy storage, which will provide operational stability for the electricity grid. Other potential projects are also under discussion. For instance, a report released by the US Army in May 2013 includes the on-site production of energy as part of their sustainability strategy. Within this strategy, two potential sites have been identified for the development of CSP plants for an envisaged total installed capacity of approximately 50 MW. The sites are Fort Bliss and Fort Carson. The DOE announced support for these two CSP projects with a fund of US$ 20 million through the SunShot Initiative for the development of Thermal Energy Storage (TES) systems. 6.2.9. Challenges facing the development of CSP in the USA According to industry experts, the outlook for CSP under the current US market conditions is not as promising as it was a few years ago, although the potential remains tremendous, particularly in the www.csptoday.com south-western states. In that part of the country, there are ideal conditions in terms of excellent solar resources alongside the availability of extensive flat terrain in desert areas and a low level of aerosols (as opposed to the MENA countries). Furthermore, close to these locations there are cities with high energy demand. A potential issue to take into account is water scarcity. Dry-cooling systems might be employed but this would reduce the energy output while increasing the capital costs of the plants. 6.2.9.1. Shale Gas A relevant risk factor for the successful deployment of the CSP technology in the U.S. is the decreasing price of gas due to the exploitation of shale gas. In fact, the booming exploitation of shale gas resources is currently sustaining low natural gas prices. On the other hand, the relevant reduction price experienced by PV technology has been another barrier to the further development of CSP projects. 6.2.9.2. High Cost The main obstacle to the large deployment of CSP technology is the high cost, which makes it uncompetitive with other generation fuels. Research leaders and managers at the National Renewable Energy Laboratory (NREL) agree that the challenge for the industry is to continue to reduce the costs of the systems in the short term. Interviewed by CSP Today in March 2013, Chuck Kutscher, a principal engineer and group manager at NREL, considered the objective of the SunShot program (a levelized cost of electricity generated from CSP plants no higher than 6 cents/kWh, without any subsidies, by the year 2020) challenging to meet, at least with evolutionary changes, namely by developing and improving further the current technologies. Conversely, Kutscher believes that revolutionary and disruptive changes to the existing processes could help in achieving the long-term goal proposed by the initiative. 6.2.9. 3. Need for Policy Review Other action that needs to be taken to encourage the continued development of CSP plants is a review of federal and state level policies. For example, at the moment the general perception shared by industry players is that the policy as it stands does not recognize the added value provided by Thermal Energy Storage. Further reviews will be needed to promote the development of new projects while simplifying the overarching legal framework. CSP Today Markets Report 2014 | 170 USA 6.3. Local CSP Ecosystem The U.S. has always played a leading role in the development of CSP technology. As a matter of fact, the modern age of concentrated solar power can be traced back to the 354 MW Solar Energy Generating Systems (SEGS) projects developed in the Mojave Desert, which are now the oldest operating plants in the world. However, despite the promising potential of some US states, after this first milestone which occurred some 30 years ago, the market has evolved considerably slowly and most roadmaps announced have not been fully pursued. The expectation linked to several large CSP plants prompted important CSP companies, notably from Spain, to open regional offices in the USA in an attempt to secure a share of this very promising market. This is particularly seen in the partnership between BrightSource Energy and Spain-based Abengoa in the development of the 500 MW Palen project. While the U.S. is currently one of the most attractive CSP markets overall, there are signs indicating that future development will be challenging. Parabolic trough technology dominates the CSP project profile in terms of projects under construction or in operation. However, developers are looking with growing interest at central tower technology because of its higher efficiency and lower LCOE and for molten salt towers inherent energy storage capabilities (this is discussed in detail in the CSP Today Solar Tower Report 2014: Cost, Performance and Thermal Energy Storage). Various states are now involved in the development of CSP plants including California, Arizona, Nevada and Hawaii which has spurred strong construction activity. The main industrial players on the local market so far have been Abengoa, BrightSource, NextEra Energy and SolarReserve. Figure 3(6): Parabolic Trough and Tower CSP Pipelines in the United States 1,540 1,600 пЂј Parabolic Trough пЂј Tower 1,400 1,200 MW Capacity 1,000 815 800 600 400 500 502 532 325 200 100 34 0 Planning Development Construction Operation Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 171 USA As mentioned earlier, in addition to the operational 572 MW, 1.3 GW of CSP capacity is expected to start commercial production between the end of 2013 and the first half of 2014. This will increase the country’s total capacity by over 120%, making the United States a world leader in operational experience for CSP technology. According to Tex Wilkins, Executive Director of the CSP Alliance, the five projects which are about to be commissioned should give more confidence to the financial community and make it easier for future projects to be financed. Furthermore, there is a long pipeline of projects of over 3.6 GW installed capacity pending approval. However, it is expected that some few if any of the submitted projects will not go ahead due to legal or financing obstaclesbecause there is no market for the power as utilities have either fully subscribe renewable energy portfolios (RPS) or chose much lower cost photovoltaic projects to meet their RPS needs. Also, several of them may be abandoned for difficulties related to the lengthy and costly permitting process. Based on public administration data from the California Energy Commission, the Bureau of Land Management and information regarding PPA with electric utilities, only five projects have received positive Environmental Impact Reports (EIRs) and other permits out of all the projects currently at planning stage. As a whole, many industry players hope that the benefits provided by the continuous learning curve will further support the long-term growth of the local market. 6.3.1. Key Government Agencies The following table shows a list of the ministries and government agencies in United States, with involvement in the U.S. CSP market. Table 5(6): Key Government Agencies in the United States Previous renewable energy programs (if applicable) Name Roles and Responsibilities Department of Energy (DOE) Supports energy R&D with government scientists and industry partnerships Loan Program Office (LPO) of DOE Guarantees private loans for energy (for renew- Abengoa: Mojave Solar Project, ables only when Democrats hold majority/ Solana, NextEra: Genesis, SolarReserve: supermajority in House and Senate: currently no Crescent Dunes Tonopah, renewable funding) Sunshot Initiative, R&D industry partnerships with 3M, Reflectech, Skyfuel, Acciona Solar, Solar Millennium, Halotechnics, Schott, BrightSource, Abengoa, Alcoa, eSolar, Solar Millennium Department of Defense Must acquire 25% renewable electricity by 2025 Fort Irwin (DOD) to meet Executive Order www.csptoday.com CSP Today Markets Report 2014 | 172 USA 6.3.2. Utilities and Independent Power Producers The following table shows a list of independent water and power producers and utilities operating in the United States. Table 6(6): Utilities and IPPs Operative in the United States Name Roles and Responsibilities Pacific Gas & Electric Company (PG&E) Contracts for renewable power to meet California RPS 33% by 2020, 40% by 2030 Previous renewable energy programs (if applicable) NextEra Genesis Solar Project, Solar Reserve Rice Solar Project, Abengoa Mojave Solar Project, BrightSource Ivanpah I and III, BrightSource Coyote Springs 1 and 2 San Diego Gas & Electricity Contracts for renewable power to meet (SDG&E) California RPS 33% by 2020, 40% by 2030 Mount Signal Solar Southern California Edison Contracts for renewable power to meet (SCE) California RPS 33% by 2020, 40% by 2030 SEGS* I-IX, Ivanpah II, BrightSource Hidden Hills and Rio Mesa (withdrawn) Solar Millenium (now BrightSource/ Abengoa Palen Solar Electric Generating System), Sonoran West, eSolar Sierra Suntower* NV Energy Contracts for renewable power to meet Nevada RPS 25% by 2025 with 5% solar carve out by 2015 Acciona Solar Power: Nevada Solar One, SolarReserve: Crescent Dunes Tonopah Arizona Public Service Contracts for renewable power to meet Arizona RPS 15% by 2025 Abengoa: Solana Generating Station, Solargenix: Saguaro Power Plant* Florida Power & Light / No renewable requirement but previous NextEra Energy Resources Feed-in-Tariff Martin Next Generation Solar (Hybrid)* Hawaii Electric Light Company (HELCO) Hawaiian Electric: Kalaeloa Solar One, Sopogy: Holaniku at Keahole Point Contracts for renewable power to meet Hawaii RPS 25% by 2020, 40% by 2030 * Operating www.csptoday.com CSP Today Markets Report 2014 | 173 USA 6.3.3. Permitting Agencies There are still many regulatory obstacles for CSP developers in the U.S., and one of these is the permitting process, which can take a couple of years; it continues to be one of the weaknesses of the local market. Developers must obtain regulatory permit for siting, grid connection, power production, and environmental performance. This can add millions of dollars in legal fees, unexpected delays, and short-term financing costs that can affect the overall budget. For instance, the construction of new transmission lines, which often involves overlapping jurisdictions (federal, state, local) creates a major regulatory uncertainty for project developers. In June 2010, the Department of the Interior’s Bureau of Land Management (BLM) issued the rental schedule for solar energy right-of-way authorizations on public lands, which consists of a guidance package on grid connection issues for solar energy projects. This initiative helped developers during the planning stage of a project. The BLM is proactively committed in improving the situation for transmission planning and permitting; however, the procedure would need to be simplified to better support CSP projects. Environmental Protection Agency, the Department of the Interior, the Department of Energy, and the Federal Energy Regulatory Commission, amongst others. In some locations, there might also be a need for permits released by local authorities. On the other hand, state and federal taxes disproportionately affect capital-intensive investments such as CSP projects, compared to expense-intensive conventional coal or gas-fired generation. As highlighted in the report вЂ�Fulfilling the Promise of Concentrating Solar Power’ (Pool and Coggin, 2013), U.S. tax policy heavily favors fossil-fuel companies. A notable analysis delivered by the National Renewable Energy Laboratory (NREL) states that if a conventional fossil power plant had to purchase all the fuel upfront, and if this was treated as a capital investment from a tax point of view, the cost of power would be more than doubled. The accelerated depreciation implemented under the Energy Policy Act (2005) helped mitigate this issue, but not enough to completely eliminate the problem. The following table shows a list of permitting and environmental assessment agencies operating in the United States. A variety of bodies are involved in the permitting process and developers must obtain approval from the Table 7(6): Permitting and Environmental Assessment Agencies in the United States Name Roles and Responsibilities Previous Involvement in CSP Projects Federal Level Bureau of Land Management (BLM) Approves energy projects on or related transmission crossing public lands SolarReserve Crescent Dunes, SolarReserve Quartzsite, Iberdrola/Pacific Solar Investments Hyder Valley Solar Fish and Wildlife Service (FWS) Prevents impacts to wildlife habitats and endangered species on public lands BrightSource: Ivanpah, Hidden Hills**, Rio Mesa,** SolarReserve: Crescent Dunes Tonopah, Rice Solar, Abengoa: Mojave Solar Project, Solana, Prevents impacts to wildlife habitats and endangered species in California BrightSource: Ivanpah, Hidden Hills**, Rio Mesa**, Abengoa: Mojave Solar, Abengoa/BrightSource: Palen State Level California Department of Fish and Wildlife (CDFW) www.csptoday.com CSP Today Markets Report 2014 | 174 USA California Energy Commission (CEC) Approves California thermal power plants Victorville Hybrid, NextEra Beacon Solar Energy Project, Abengoa Mojave Solar Project, BrightSource Ivanpah NextEra Genesis Solar, now BrightSource/ Abengoa Palen Solar Power Project (500 MW trough - to be revised) SolarReserve Rice Solar (150 MW tower), Palmdale Hybrid (50 MW trough) California Public Utility Commission (CPUC) Regulates electric utilities, approves pricing of power purchase contracts Victorville Hybrid, NextEra Beacon Solar Energy Project, Abengoa Mojave Solar Project, BrightSource Ivanpah NextEra Genesis Solar, now BrightSource/ Abengoa Palen Solar Power Project (500 MW trough - to be revised) SolarReserve Rice Solar (150 MW tower), Palmdale Hybrid (50 MW trough) Nevada Public Utilities Commission Regulates electric utilities, approves pricing of power purchase contracts Acciona Solar Power: Nevada Solar One* Arizona Corporation Commission (ACC) Regulates electric utilities, approves pricing of power purchase contracts Abengoa: Solana Generating Station, Arizona Public Service: Saguaro Power Plant, SolarReserve: Crossroads Public Utilities Commission of Colorado (PUC) Regulates electric utilities, approves pricing of power purchase contracts Colorado Integrated Solar Project Hybrid Florida Public Service Commission (PSC) Regulates electric utilities, approves pricing of power purchase contracts Martin Next Generation Hybrid * Operating ** Withdrawn 6.3.4. Local Consultants and R&D Bodies The U.S. has a strong industry and R&D capacity, and it can definitely benefit from increasing demand, both internally and worldwide. The deployment of CSP technology could provide an opportunity to develop significant intellectual property export companies. The SunShot target for CSP technology is to achieve cost parity with other forms of energy on the grid by 2020. This approximately equates to a levelized cost of energy (LCOE) of US$ 0.06 /kWh, which in turn requires costs to be cut by approximately 75% (see section 6.2.6. on the SunShot Initiative under Research and Development). www.csptoday.com CSP Today Markets Report 2014 | 175 USA Table 8(6): Consultants and R&D bodies in the United States Name Roles and Responsibilities Previous CSP Projects National Renewable Energy Laboratories (NREL) R&D, component technology analysis, partnership with CSP industry, licenses new technologies developed R&D into high temperature HTF, Supercritical CO2, nanoscale phase changing TES, advanced receivers and reflectors, next generation collectors, Pacific Northwest National Laboratories (PNNL) R&D, technology analysis, partnership with CSP industry, licenses new technologies developed R&D into thermochemical storage, integration into fossil plants hybridization, new approaches in the design of collectors, receivers, and power cycle equipment Sandia National Laboratory (SNL) R&D, technology analysis, partnership with CSP industry, licenses new technologies developed R&D for tower technology licensed to RocketDyne, ongoing R&D with Pratt & Whitney into heliostats 6.3.5. Financing Organizations Now that the loan guarantee program has expired, securing finance for the development of CSP projects will be more difficult, necessitating tax equity investors. Amongst the new incentives, the Clean Energy Manufacturing Initiative was launched by the DOE in April 2013, with the aim to boost the local manufacturing of components for solar energy plants, including CSP. It provides US$ 15 million funding for local companies. All in all, the U.S. is facing market and regulatory challenges, and it remains unclear whether the CSP sector will continue to attract sufficient levels of investment to fulfill its potential. Experts suggest that the increasing use of natural gas in the U.S. will slow growth in the clean energy sector, as utilities aim to contain electricity prices. As a direct consequence, there are concerns over the potential financial difficulties for CSP projects in terms of securing suitable PPA contracts. Table 9(6): Main Funding Institutions and Banks Operative in the United States Name Roles and Responsibilities Previous Renewable Energy Investments NRG Solar, Google Venture Capital BrightSource: Ivanpah Alstom, VantagePoint Capital Partners, CalSTRS, Draper Fisher Jurvetson, BP Ventures, Goldman Sachs, Chevron Technology Ventures Venture Capital BrightSource: Coalinga 29 MW EOR U.S. Renewables Group, Citi Alternative Investments, Sustainable Development Investments, Good Energies, and Credit Suisse Banking, Venture Capital SolarReserve www.csptoday.com CSP Today Markets Report 2014 | 176 USA Abengoa SA Energy Investment, Owner Operator Abengoa: Colorado Integrated Solar Project, Solana Mitsui, Southern California Gas Company, 3M, Kolohala Ventures, Enerdigm Ventures Banking, Venture Capital Sopogy GE, MetCap Investment eSolar Clark Energy Group (Clark Realty Capital) Financing, EPC for government contracts Acciona: Fort Irwin Excel Energy Co-Developer, Owner Operator Abengoa: Colorado Integrated Solar Project City of Palmdale Owner Operator Inland Energy: Hybrid Gas CSP at Palmdale Source: CSP Today Global Tracker, August 2013 6.3.6. Developers and EPC Firms Table 10(6): Developers and EPC Firms Operative in the United States Name Roles and Responsibilities Previous Renewable Energy Projects Acciona Solar Power Developer Nevada Solar One*, Fort Irwin Abengoa Developer, EPC Solana Generating Station, Mojave Solar Project, Palen with BrightSource BrightSource Developer, EPC (for Coalinga) Ivanpah I, II, III, Coalinga (EOR)* SolarReserve Developer, EPC, Owner, O&M Rice Solar Project, Crescent Dunes (Tonopah), Crossroads Solar, Saguache Solar Bechtel Corporation Partnership, head of EPC EPC for BrightSource: Ivanpah I, II, III Lauren Engineering EPC EPC for Acciona Solar Power: Nevada Solar One United Technologies Corp EPC Pratt Whitney Power Systems SolarReserve: Rice Solar Arizona Public Service Developer, Owner Solargenix: Saguaro Power Plant AREVA Solar R&D, EPC R&D with Sandia National Laboratory Pacific Solar Investments (Iberdrola) Developer, EPC Hyder Valley Solar Cogentrix Developer, Owner SEGS* I and II eSolar EPC, Developer Sierra Suntower* Glasspoint Solar Developer, EPC Berry Petroleum: EOR www.csptoday.com CSP Today Markets Report 2014 | 177 USA NextEra Energy Developer, EPC, O&M SEGS* III-IV, Genesis Solar Energy Project Solargenix Energy (Acciona Group) Developer, EPC Saguaro Power Plant Florida Power & Light Company / NextEra Energy Resources Utility, Developer Martin Next Generation Solar* Ausra Developer Kimberlina Linear Fresnel Sopogy Developer of micro CSP MicroCSP cooling at Sempra, Fort Bliss Inland Energy Developer, EPC firm Hybrid Gas CSP at Palmdale MMR Power Solutions Developer, EPC firm Mount Signal Solar *Operating (in Italics) before source Source: CSP Today Global Tracker, August 2013 6.4.1. Local Component Supply The United States has a comprehensive supply chain for components and sub-components needed for CSP plants. As a consequence, all the main parts are easily available on the market, including steel, glass, molten salts and concrete. The following table lists some of the main U.S. suppliers of CSP components. Table 11(6): Components and Suppliers Available in the United States Component Name of Supplier(s) Turbines, Steam Ormat Generators, Tubes, GE Pumps and Valves Tracking Systems www.csptoday.com Website www.ormat.com www.ge-energy.com/products_and_services/products/steam_ turbines/concentrated_solar_power_steam_turbines.jsp AREVA Solar www.areva.com/EN/solar-220/areva-solar.html Flowserve www.flowserve.com CCI www.ccivalve.com/industries-and-solutions/renewables. aspx?sc_lang=en Pentair www.pentair.com/industries/power/index.html Souriau www.souriau.com/index.php?id=intro Babcock Power/Struthers Wells www.babcockpower.com/products/heat-exchangers/ tei-struthers-wells Parker-Hannefin www.parker.com ConeDrive www.conedrive.com/97/ Solarflect www.solaflect.com CSP Today Markets Report 2014 | 178 USA Mirrors and Troughs Receiver Tubes Solar Collector Assemblies (SCE) and Frames Heat Collector Elements (HCE) and Insulation Flaberg www.flabeg.com Rioglass http://www.rioglassolar.com/v_portal/apartados/apartado. asp?te=3 Parker-Hannefin www.parker.com/literature/Praedifa%20Division/PDF%20files/ Solarthermie_ODE5518-GB.pdf Ausra (AREVA Solar) www.areva.com/EN/solar-220/areva-solar.html Solarflect www.solaflect.com/ Guardian www.guardian.com/guardianglass/glassproducts/ EcoGuardSolarEnergyGlass/index.htm SkyFuel www.skyfuel.com/ 3M http://solutions.3m.com/wps/portal/3M/en_US/Renewable/Energy/ Applications/CSP/ Gossamer www.gossamersf.com Ausra (AREVA Solar) www.areva.com/EN/solar-220/areva-solar.html Schott www.schott.com/csp/english/schottsolar-ptr-70-premium-receivers. html?so=newzealand&lang=english Gossamer www.gossamersf.com Gestamp Renewables www.gestampren.com Acciona Solar Power (SGX-2) www.acciona-energia.com/activity_areas/csp/services.aspx Sener, SenerTrough www.torresolenergy.com/TORRESOL/generica_adicional. html?id=cw4cb47d3a0451d&swlang=en Schott/Solel www.schott.com/csp/english/index.html?so=usa&lang=english Microtherm www.microthermgroup.com/high/EXEN/site/concentrated-solar-power.aspx Heat Transfer Fluid Radco Industries and Flow Meters Solutia www.radcoind.com www.therminol.com/pages/ Halotechnics www.halotechnics.com/products/ Dow Chemical www.dow.com/heattrans/csp/index.htm Flexim (flow metering) www.flexim.com/en 6.4.2. Raw Material Supply The below table lists some of the key suppliers available in the U.S. for the main raw materials used in CSP projects. www.csptoday.com CSP Today Markets Report 2014 | 179 USA Table 12(6): Raw Material Suppliers in the USA Material Supplier Steel List of potential suppliers at: www.thomasnet.com/products/pipe-stainless-steel-58581604-1.html Glass List of potential suppliers at: www.thomasnet.com/products/glass-34661207-1.html Molten Salt List of potential suppliers at: www.thomasnet.com/products/potassium-nitrate-62342605-1.html Concrete List of potential suppliers at: www.thomasnet.com/products/admixtures-cement-concrete-475202-1.html 6.5. Alternative CSP Markets The latest plants developed in the U.S. incorporate thermal energy storage units, which will enhance the capacity to serve base-load electricity demand. At the same time, there is a significant amount of research carried out by institutes like the NREL and the Electric Power Research Institute (EPRI) on the potential use of CSP technology for other niche markets. The two most promising applications are described below. 6.5.1. Hybridization Hybridization is one of the most promising CSP applications. The reason why there is an increasing interest in hybrid applications is because of the reduced investments needed to integrate a solar plant into an existing power facility. Furthermore, there is a greater capacity to follow the energy demand profile because of the existing conventional fuel plant replacing the need of any back-up fuel part. Therefore, whilst there is a reduced financial and technical risk, hybrid applications can be a suitable method of demonstrating the full potential of CSP technology and work as a bridging opportunity toward the mass development of standalone solar power plants. A recent NREL report concluded that there were between 11 and 21 GW of U.S. fossil plants available for CSP hybridization. Some companies are already moving ahead to develop hybrid CSP units to retrofit existing conventional power plants. The Martin Next Generation Solar Energy Center is a parabolic trough CSP plant integrated with a carbon-fired power station with a power output of 75 MW located in Florida. It occupies 202 hectares and its cost was approximately US$ 476 million. The Department of Energy at the Pacific Northwest National Laboratory (PNNL) is conducting research to improve the performance of CSP plants integrated in www.csptoday.com conventional gas power plants. Another project recently funded by the US Department of Energy (DOE), with US$ 149,900 (through the Small Business Innovation Research (SBIR) program), is a study on the feasibility for retrofitting a CSP plant to the existing geothermal facility currently installed at the Oregon Institute of Technology (OIT). The solar field would be employed to increase the temperature of the geothermal fluid sent to the power block, in this case an Organic Rankine Cycle (ORC) engine connected with a 280 kW generator. The final aim is the improvement of the overall efficiency and output of the plant and the overall demonstration of the proof of concept of a geothermal solar hybrid system. 6.5.2. Enhanced Oil Recovery A notable field of CSP deployment is Enhanced Oil Recovery (EOR). The main benefit of using CSP technology in this application is represented by economic savings, whether in terms of increasing the oil production, or saving fuel. EOR, also referred to as tertiary recovery, is commonly used in mature fields, where secondary techniques such as water flooding no longer produce economically viable quantities of oil. The most popular method currently employed in the industry is gas and steam injection, better known as thermal recovery. Solar power technology can therefore contribute to the production of steam, replacing (at least partially) the need of conventional fuels. According to a report by GDP Capital, the conventional steam generators employed for thermal EOR are nowadays more expensive than parabolic trough technology. This is particularly true when looking at the lifetime costs resulting from the high operating costs of current technology using expensive fossil fuels. The report mentions a current price of US$ 4-4.5 per million British Thermal Units (BTU) processed when using CSP Today Markets Report 2014 | 180 USA natural gas, compared with US$ 3-4 if CSP technology is employed. This competitive advantage is forecast to increase as the cost of fossil fuels rises, with the use of natural gas for EOR is projected to move toward US$ 5.25 per million BTU extracted in the next decade. According to an analysis carried out by Visiongain, the global EOR market worldwide reached a production of approximately 3 million barrels per day in 2013. The market is expected to increase substantially over the next ten years and the U.S. is likely to play an important role within it. An analysis of the EOR market for the Current Status: Operation Country: U.S. Land Area (acres): 100 Gross Capacity: 29 MW Developers: BrightSource Energy Technology: Tower U.S. and European markets forecasts that revenues will increase from approximately US$ 410 million in 2012 to approximately US$ 1,775 million in 2019. In February 2011, Glasspoint, a California-based firm, launched the first commercial application of CSP used for thermal EOR. Similarly, BrightSource developed the 29 MWth Coalinga CSP project for EOR which was connected to the grid in 2011. Figure 4(6): BrightSource Coalinga CSP Plant For EOR Status Current Status Operation Construction date - actual starting date 01/01/2009 Actual Commercial Operation Date (COD) 10/01/2011 Technology Gross Capacity 29.00 MWe or MWth MWth Technology Tower Application Enhanced Oil Recovery Back-up fuel None Heat Transfer Fluid (HTF) Water Cooling Dry Country U.S. State/Region Coalinga, California Latitude 36.175 www.csptoday.com CSP Today Markets Report 2014 | 181 USA Longitude -120.386 Land Area (acres) 100 Companies Involved Developers BrightSource Energy Developers (Ownership Notes) Chevron (100%) Suppliers O&M Contractors BrightSource Energy, Chevron Source: CSP Today Global Tracker, August 2013 6.6. Market Forecast In the history of CSP, the United States has played a pivotal role in launching the technology and bringing it to a maturity threshold that has resulted in more than 17 countries deploying and considering CSP as a renewable solution for their future energy needs. From the SEGS plant to today’s 572 MW operating capacity, remarkable progress has been achieved, and a track record was established for parabolic trough in particular - a technology that still dominates in today’s CSP sector. That being said, current market juncture in the U.S. is dragging the country’s CSP outlook down, despite its tremendously high potential for this vast region. such as enhanced oil recovery, mining, desalination or others, which could on a year-to-year basis result in a deployment rate between the conservative and pessimistic scenario. Optimistically, the rationale behind this forecast is that the situation will change, and that not only projects in planning and development will come to fruition, but new projects will also be announced and deployed over the next decade. While there is currently no announced future capacity for the U.S., there are over 1,300 MW under construction, in addition to the 571 MW already in operation. A large contingent of capacity is also currently under planning - around 1,865 MW - while 600 MW is under development. With an average DNI of 2,700 kWh/m2/year in the CSP-friendly states of the country, the U.S. has a potential CSP capacity varying between 14 GW to 33 GW. However, several factors are limiting the deployment of future capacities: mainly the competition from PV, cheap natural gas, and a healthy grid with access to power import. With the doubling of gas prices in the last year alone, CSP’s dispatchable advantage could bring it back in the spotlight, if this trend persists. Considering the current U.S. CSP-specific market juncture, the forecast below is fairly optimistic, in the sense that it assumes a continuing interest from developers, and low enough CSP LCOE to compete on a niche level, perhaps through new applications www.csptoday.com CSP Today Markets Report 2014 | 182 USA Figure 5(6): Installed CSP capacity in the USA until 2024 (MW) 10,000 Optimistic 9,000 8,772 Conservative 8,000 Pessimistic 7,000 6,000 5,127 5,000 4,000 3,047 3,000 2,000 1,000 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Figure 6(6): CSP Cumulative Energy Production in the USA until 2024 (TWh) 350 323.6 Optimistic 300 Conservative Pessimistic 251.6 250 201.6 200 150 100 50 0 2006 2008 2010 2012 2014 Conclusion The United States has gained a forefront position within the global CSP market. Currently, there is approximately 580 MW of CSP installed capacity in the country and a further 1.3 GW is expected to start production between the end of 2013 and the first half of 2014, which will result in an increase of over 120%. Although, in the last few years, the deployment of solar thermal power in the www.csptoday.com 2016 2018 2020 2022 2024 U.S. has been somewhat slowed down by competing market factors, there is still tremendous potential for CSP growth in the country, which has also been shown by the large amount of research and development projects carried out. The SunShot Initiative is currently acting as the main incubator of many activities, and the program is expected to bring tangible benefits to the entire CSP value chain in the short and medium term. CSP Today Markets Report 2014 | 183 USA References Gereffi, G. and Dubay, K., 2008. Concentrating Solar Power: Clean Energy for the Electric Grid. Center on Globalization. Governance and Competitiveness. Gruenspecht, H., 2012. The Future Electricity Fuels Mix: Key Drivers. Technical presentation at the Electric Power Conference & Exhibition. Maryland, USA. Itten, R., Frischknecht, R. and Stucki, M., 2013. Life Cycle Inventories of Electricity Mixes and Grid. Paul Scherrer Institut. ESU-services Ltd. Switzerland. Mancini, T., 2011. The Status of CSP Development. Sandia National Laboratories. McLaren, J. and Vimmerstedt, L., 2010. Solar Power and the Electric Grid, Energy Analysis Fact Sheet FS-6A2-45653. National Renewable Energy Laboratory. Available through: < http://www.nrel.gov/analysis/pdfs/45653.pdf>. Nazarian, D., 2012. Introduction to U.S. Electricity Markets. Presentation at the NARUC/CAMPUT Bilateral Roundtable. Maryland Public Service Commission Pitchumani, R., 2013. SunShot Concentrating Solar Power Program Update. Presentation at the Program Review Meeting. Phoenix, AZ, USA. Available through: < http://www1.eere.energy.gov/solar/sunshot/pdfs/csp_review_ meeting_042313_pitchumani.pdf>. Pool, S. and Coggin, J., 2013. Fulfilling the Promise of Concentrating Solar Power. Center for American Progress. Washington, USA. Available through: < http://www.americanprogress.org/issues/green/report/2013/06/10/65887/ fulfilling-the-promise-of-concentrating-solar-power/>. VV.AA and Marquez, C., 2012. CSP Market Report 2012-13. FC Business Intelligence. Available through: <http://www. csptoday.com/csp-markets-report/>. VV.AA and Muirhead, J., 2013. CSP Today Quarterly Update. FC Business Intelligence. VV.AA, 2013. CSP Today Global Tracker Database. FC Business Intelligence. Available through: <http://social.csptoday. com/tracker/projects>. VV.AA, 2013. CSP Today Guide to CSP’s Role in the US Energy Mix. FC Business Intelligence. Available through: <http://social.csptoday.com/technology/ csps-role-us-energy-mix-%E2%80%93-new-guide-released-csp-today>. VV.AA, 2011. Electricity Regulation in the US: A Guide. The Regulatory Assistance Project. Vermont, USA. VV.AA, 2013. FC Business Intelligence information and data. Available through: <www.csptoday.com>. VV.AA 2011. Integrating Renewable Energy Resources Within the Oil Industry - Concentrated Solar Power and Enhanced Oil Recovery. GDP Capital VV.AA, 2013. Information and data. Available through: <www.tradingeconomics.com>. VV.AA, 2013. Information and data. Available through: <www.indexmundi.com>. www.csptoday.com CSP Today Markets Report 2014 | 184 USA VV.AA, 2013. Information and data. Available through: <www.populationdata.net>. VV.AA, 2013. Information and data. Available through: <www.reegle.info>. VV.AA, 2013. Information and data. Available on www.data.un.org. VV.AA, 2013. Information and data. Available through: <www.csp-world.com>. VV.AA, 2013. Information and data. Available through: <www.eia.gov>. VV.AA, 2013. Information and data. Available through: <www.selectusa.commerce.gov>. VV.AA, 2013. Information and data. Available through: <www.ferc.gov>. VV.AA, 2013. Information and data. Available through: <www.fellonmccord.com>. VV.AA, 2013. Information and data. Available through: <www.renewableenergyfocus.com>. VV.AA, 2013. Information and data. Available through: <www1.eere.energy.gov>. VV.AA, 2013. Information and data. Available through: <www.renewableenergyworld.com>. VV.AA, 2013. Information and data. Available through: <www.nrel.gov>. VV.AA, 2013. Information and data. Available through: <www.en.cspplaza.com>. VV.AA, 2013. Information and data. Available through: <www.companiesandmarkets.com>. World Nuclear Association, 2013. Country Profile: Nuclear Power in the USA. Available through: <http://www. world-nuclear.org/info/Country-Profiles/Countries-T-Z/USA--Nuclear-Power/#.Uj14j5GoWP8>. (VV.AA: Various Authors) www.csptoday.com CSP Today Markets Report 2014 | 185 USA Acronyms ACRONYM DEFINITION ACC Arizona Corporation Commission ARENA Australian Renewable Energy Agency ASTRI Australian Solar Thermal Research Initiative ASU Arizona State University BLM Bureau of Land Management BNEF Bloomberg New Energy Finance BTU British Thermal Units CDFW California Department of Fish and Wildlife CEC California Energy Commission COU Consumer-Owned Utility CPUC California Public Utility Commission DOD Department of Defense DOE Department of Energy DNI Direct Normal Irradiance EIA Energy Information Administration EIR Environmental Impact Report EOR Enhanced Oil Recovery ERCOT Electric Reliability Council of Texas EPA Environmental Protection Agency EPRI Electric Power Research Institute FERC Federal Energy Regulatory Commission FRCC Florida Reliability Coordinating Council FWS Fish and Wildlife Service HELCO Hawaii Electric Light Company IOU Investor-Owned Utility IPP Independent Power Producer ISO Independent System Operator ITC Investment Tax Credits IWPP Independent Water and Power Producer JPL Jet Propulsion Laboratory www.csptoday.com CSP Today Markets Report 2014 | 186 USA LCOE Levelized Cost of Electricity LPO Loan Program Office MACRS Modified Accelerated Cost-Recovery System MENA Middle East and North Africa MRO Midwest Reliability Organization NERC North American Electric Reliability Corporation NPCC Northeast Power Coordinating Council NREL National Renewable Energy Laboratory NUG Non-Utility Generator OIT Oregon Institute of Technology ORC Organic Rankine Cycle PG&E Pacific Gas & Electric Company PMA Power Marketing Agency PNNL Pacific Northwest National Laboratories PPA Power Purchase Agreement PSC Public Service Commission PUC Public Utilities Commission REC Renewable Energy Certificate RFC Reliability First Corporation RPG Renewable Portfolio Goal RPS Renewable Portfolio Standards RTO Regional Transmission Organization SCE Southern California Edison SEGS Solar Energy Generating Systems SERC SERC Reliability Corporation SERF South Eastern Electric Reliability Council SNL Sandia National Laboratory SPP Southwest Power Pool TES Thermal Energy Storage USDA United States Department of Agriculture WECC Western Electric Coordinating Council www.csptoday.com CSP Today Markets Report 2014 | 187 India 7 India By Marco Poliafico Peer reviewed by Geetanjali Patil Choori Contents List of Figures 188 List of Tables 188 Chapter Summary 190 Country Overview 190 7.1. Electricity Market 192 7.1.1. Electricity consumption 192 7.1.2. Electricity demand 193 7.1.3. Grid transmission 194 7.1.4. Market Structure Diagram 194 7.2. CSP Market 195 7.2.1. The Jawaharlal Nehru National Solar Mission 195 7.2.2. Delays and extensions 196 7.2.3. Hybrid Program 197 7.2.4. Renewable Purchase Obligations and Renewable Energy Certificates 198 7.2.5. Current CSP Projects 199 7.2.6. Local content requirements 201 7.3. Local CSP Ecosystem 202 7.3.1. Indian CSP ecosystem 202 7.3.2. Manufacturing Capability and Local Supplies 202 7.3.3. Steep learning curve 203 7.3.4. Key Government Agencies 203 7.3.5. Independent Water and Power Producers and Utilities 205 7.3.6. Permitting Agencies and Feasibility Study Providers 206 7.3.7. Local Consultants and R&D Bodies 208 7.3.8. Financing Organizations 209 7.3.9. Developers and EPC firms 212 7.4.1. Supply of Local Components 215 7.4.2. Raw Material Availability 219 7.5. Alternative CSP Markets 220 7.5.1. Process steam applications of concentrating solar thermal 220 7.5.2. UNDP- GEF project 221 www.csptoday.com CSP Today Markets Report 2014 | 188 India 7.5.3. Biomass solar thermal hybrid projects 221 7.5.4. Desalination 221 7.6. Market Forecast 223 Conclusion 225 References 226 Acronyms 228 List of Figures Figure 1(7): Direct Normal Irradiation in India 191 Figure 2(7): Installed CSP Capacity in India Until 2024 (MW) 224 Figure 3(7): CSP Cumulative Energy Production in India until 2024 (TWh) 225 List of Tables Table 1(7): Drivers and Barriers in India 192 Table 2(7): Growth of Renewable Energy Share in India’s Electricity Mix 193 Table 3(7): Selection Criteria for the Tender Process of CSP projects in India 195 Table 4(7): India NSM – Achievements and Lessons Learnt from JNNSM Phase 1 197 Table 5(7): CSP Hybrid Pilot Program - Project Configuration 197 Table 6(7): India Solar Program Tariffs 198 Table 7(7): India Solar Thermal Cost – Benchmark 199 Table 8(7): India Solar Thermal Tariffs – Benchmark 199 Table 9(7): Current CSP Projects in India 199 Table 10(7): Indian CSP Ecosystem 202 Table 11(7): Ministries and Government Agencies in India 203 Table 12(7): Independent Water and Power Producers and Utilities in India 206 Table 13(7): Permitting Agencies and Environmental Assessment Agencies in India 207 Table 14(7): Consultants and R&D Bodies in India 208 Table 15(7): Main Funding Institutions and Banks Operative in India 210 Table 16(7): Developers and EPC Firms Operative in India 213 Table 17(7): Components Available Locally in India 215 Table 18(7): Raw Material Availability and Suppliers 220 Table 19(7): The World’s First Linear Fresnel Desalination Plant 221 Table 20(7): LFR Desalination Plant Specifications 222 www.csptoday.com CSP Today Markets Report 2014 | 189 India Chapter Summary According to the 2013 CSP Today Markets forecast, India is ranked as the fifth most promising CSP market globally. With an average DNI of 2,100 kWh/m2 per year, and a sustained ecosystem promoting the development of utility-scale solar projects, the Indian CSP industry is poised for growth in the short and medium term. As the fourth largest consumer of energy in the world, India consumes an estimated 794 TWh of electricity annually, and by 2020, the country is expected to require 2,000 TWh of electricity per year. In response to the rising domestic demand for electricity, in 2010, the Government of India launched the National Solar Mission (NSM) to deploy 20 GW of grid-connected solar power, with the aim of reducing the cost of solar power in the country. As of August 2013, a CSP capacity of 50 MW had been realized under the NSM Phase 1, and 420 MW remains in the phase 1 pipeline. Phase 2, which is expected to begin in 2014, targets a CSP capacity of 1,080 MW, representing 30% of the overall target solar capacity. A new CSP hybrid program will be incorporated into Phase 2 to support the construction of four CSP hybrid plants. In addition, the Renewable Purchase Obligations mechanism will be employed to support the implementation of solar projects. Besides the NSM, other states, such as Gujarat and Rajasthan, also have their own guidelines and incentives. At the time of publishing this report, India had 56 MW of operational CSP plants; five CSP plants under construction totaling 254 MW; three under development totaling 210 MW; four under planning totalling 156 MW; and five announced totalling 155 MW, according to the CSP Today Global Tracker. The domestic content requirement is a critical aspect in India’s NSM. In Phase 1, this constituted 30% of required components excluding land, although some developers are targeting up to 50% local content to be price competitive. The local CSP ecosystem in India is characterized by a growing market with tremendous opportunities for both grid-connected and off-grid projects. For this reason, hybridization of the current fossil fuel-based capacity represents one of the most promising applications for India’s CSP industry. To facilitate a greater understanding of India’s CSP ecosystem, a comprehensive list of government bodies, permitting agencies Country Overview India Solar Resource (average annual sum of DNI): 2,100 kWh/mВІ/year Size: 3,287,263 kmВІ Population (2012):1.237 billion GDP per capita (2012): US$ 1,489 Installed power capacity: 223 GW Annual electricity consumption: 794 TWh Expected annual electricity demand in 2020: 2,000 TWh Electricity Mix by Installed Capacity (2012) Coal/petrol 56.4% Hydro 19.3% Renewables 12.2% Natural gas 9.1% Nuclear 2.4% Oil 0.6% Known Energy Resources Coal, Wind, Natural Gas, Biomass, Solar Potential Markets for Industrial CSP Applications Mining, Desalination www.csptoday.com CSP Today Markets Report 2014 | 190 India and utilities, as well as local feasibility study providers, EPC firms, and financing organizations, is outlined in this chapter. While there are materials and sub components that are easily available on the Indian market, such as steel, glass, and concrete, other components are less easy to find, or are even rare, such as molten salts. When it comes to the alternative applications market, process steam applications, hybrid biomass CSP, and desalination are the areas with the largest potential for CSP in India. The Ministry of New and Renewable Energy in India is already implementing a project promoting CSP-based process heat applications and another for the hybridization of CSP and biomass. Among the main drivers for CSP deployment in India are the energy generation targets established by the government, the growing manufacturing sector, and the environmental impact of fossil fuel electricity generation, while low feed-in-tariffs, unreliable DNI data, and the complexity of land acquisitions, are considered to be some of the fundamental challenges hindering the development of the local CSP market. Figure 1(7): Direct Normal Irradiation in India Source: SolarGIS В© 2013 GeoModel Solar www.csptoday.com CSP Today Markets Report 2014 | 191 India Table 1(7): Drivers and Barriers in India Drivers Barriers Energy generation target set up by JNNSM Capital costs / level of investment required for CSP projects Off-grid and industrial generation tends to be powered by expensive fossil fuels, promoting the cost-competitiveness of CSP Financing for the projects has been difficult Tailored policy for solar energy projects developed Limited track record and lack of indigenous know-how at State level Increasing electricity demand (doubled between 1990 and 2011) Environmental concern over water requirements Environmental impact of the fossil-fuel dominated Adequacy and stability of policy and regulatory framework power sector Growing manufacturing sector Low FITs Open Access System for private power generation Availability and reliability of DNI data due to the lack of adequate energy data and high levels of aerosol in the atmosphere Difficult for international EPC firms to be competitive due to low profit margins limiting the profit margin. Weakness of the transmission grid Obtaining approvals and complexity of land acquisition 7.1. Electricity Market India is one of the most important power markets in the world. Globally, it is the fourth largest consumer of energy and fifth in terms of installed capacity (in addition to the 223 GW quoted in the box above, there is approximately 35 GW of captive generation). Its economy is largely dependent on fossil fuels. The electricity market in India is characterized by joint regulatory activities carried out by the central government and individual states. This can make the overall situation quite complicated at times. The regulatory reform developed between the late nineties and the beginning of the new decade established the Central Electricity Regulatory Commissions (CERCs) and the State Electricity Regulatory Commissions (SERCs). Nowadays, the three segments of the market (generation, transmission and distribution) are separated, although many companies still operate in more than one sector. www.csptoday.com The generation is managed by three different players. Some plants are owned and managed by the central government and related bodies (approximately 31.5% of the overall installed capacity). Among these is the National Thermal Power Company (NTPC), a domestic state-owned company, as well as NHPC and NPCIL. Approximately 46% of the installed capacity is owned by states or state-level corporations like State Energy Boards (SEBs), Government Securities (GSEC) and others. Finally, private developers in the form of IPPs control approximately 22.5% of the installed capacity in the country. 7.1.1. Electricity Consumption The average annual domestic electricity consumption per capita in India is very low. In rural areas, fewer than 100 kWh (per person per year) is used, whereas in urban areas this value rises to approximately 300 kWh. These numbers are well below the world average CSP Today Markets Report 2014 | 192 India of 2600 kWh and a minor fraction when compared to the consumption in Europe (6200 kWh). The overall consumption (including industry and all other economic sectors) is approximately 780 kWh per person per year. Unfortunately, discrepant estimates regarding consumption levels exist due to the lack of quality and availability of robust data. India accounts for more than 20% of the world’s population and nearly 300 million people do not have access to the electricity grid. A large number of people living in rural communities use traditional fuels, ranging from fuel-wood to agricultural waste and biomass for heating and cooking needs. Not only does the lack of access extend to over 33% of the rural population, but also to approximately 6% of the citizens of urban centers. India is currently one of the world’s fastest growing energy markets. There is an ambitious plan for the development of renewable technologies due to the limited amount of fossil fuel reserves. In fact, the share of renewables in India’s generation mix has grown from a mere 2% in 2003-2004, to 6% in 2006-2007, to reach 12% in 2013. Table 2(7): Growth of Renewable Energy Share in India’s Electricity Mix Renewable Energy Share Year 2% 2003 - 2004 6% 2006 - 2007 12% 2012 - 2013 Source: AF-Mercados EMI, 2013 The country has already developed a strong wind energy market and looks at nuclear as another potential technology to further deploy in the next decades. However, more investment is needed in all three major segments of the market (generation, transmission and distribution) to guarantee access to the whole population and improve the quality and reliability of the electricity delivered. Some investment is already being made, but they are far from being enough to meet demand. The International Energy Agency estimates the amount of investment needed to secure electricity access to the entire population is in the order of about USD 135 billion. www.csptoday.com India also has serious environmental problems related to the electricity generation sector; therefore, the choice of clean fuels would have a positive impact on the mitigation of these issues. There has already been an encouraging level of penetration of renewable energy technologies; in particular, wind energy. Generation capacity is mainly owned by the states (approximately 45%) and by the central government (approximately 30%), with a remaining portion managed by private investors (approximately 25%). 7.1.2. Electricity Demand The electricity demand in India is growing fast due to a mix of factors, including the relevant growth of the manufacturing sector, the dramatically rising domestic demand, and new villages being connected to the grid. As a result of increasing demand, it is expected that the installed capacity needed by 2017 will be in the order of 300 GW. This would be even higher if plant availability, spinning reserve and losses were taken into account (DIREC, 2010). Primary energy consumption more than doubled between 1990 and 2011, according to a report produced by the US Energy Information Administration. The electricity consumption increased at an average rate of approximately 7% between 1970 and 2011, but this rate almost doubled to around 13% in the last two years. The final consumers of electricity are mainly the industrial sector (approximately 42%) and the domestic sector (approximately 28%), whereas the agriculture and commercial sectors use 20% and 10% of the overall demand respectively. Residential consumption is expected to grow dramatically in the next 20 years due to improved living conditions, a rising population and the connection of new rural areas. Energy demand in India is growing at an average annual rate of 8%. The cause is two-fold with both the population and economy growing. Another important aspect characterizing the demand is the strong trend toward urbanization. The gap between demand and the available supply is one of the most serious issues in the Indian electricity market. The country suffers a major shortage of generation capacity, especially in the North Eastern, Western, and Southern regions, where major regional imbalances are experienced. The power deficit during peak load in CSP Today Markets Report 2014 | 193 India 2010 was beyond 10% of the overall demand. At the same time, supply of electricity is generally intermittent and unreliable, causing rolling black outs affecting both agricultural and industrial activities. 7.1.3. Grid Transmission The transmission network is developed according to five regions covering the whole country. Although each region is connected to the adjacent ones, there is not enough high-voltage connection capacity to make sure that surplus of supply can be delivered to other locations throughout the country. This contributes to the issue of balancing demand and supply. In recent years, there has not been good distribution of investment between generation and transmission. As a result, a number of new generation hubs have not been useful on the market because of transmission bottlenecks. This is, for instance, what happened to the wind power generation in Tamil Nadu. Another issue for the transmission sector is the losses that, in some regions, exceed 35%: much higher that the world average, which is lower than 15%. These losses are caused by both technical and non-technical factors, mostly represented by illegal tapping of lines and electric meter faults. The government set an objective to reduce this to approximately 17% by 2017 and to around 14% by 2022. The transmission network was formerly divided into five regional grids that were not interconnected. Now, the Power Grid Corporation of India Ltd. (PGCIL) is responsible for inter-state transmission and development of the national grid, owning about 40% of the whole network. PGCIL acts as the Central Transmission Utility (CTU). Different State Transmission Utilities (STUs) are responsible for developing the transmission infrastructure within the states, and in some cases the private sector is also involved at this level. The distribution is almost entirely owned by SEBs. 7.1.4. Market Structure Diagram Central Government State Regulators CERC SERC Generation CGS, MPP... NTPC, NHPC, NPCIL... IPPs Transmission PGCIL (CTU) STU Private Licensee DISCOMs Private Licensee Distribution Private Sector Customers www.csptoday.com CSP Today Markets Report 2014 | 194 India 7.2. CSP Market Among the various renewable energy resources, the potential of solar energy is the highest in India, equivalent to about 6,000 million GWh of energy per year (De, 2013). In comparison, the level of electricity generation in 2008-2009 from all renewable resources was 0.7 GWh (De, 2013). Indian states that have the maximum insolation are Rajasthan and Gujarat. In addition, the states of Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Maharashtra and Chattisgarh also enjoy good insolation levels. Most of these states are in regions with unmet electricity demand. The Ministry of New and Renewable Energy (MNRE) of India is in charge of planning and promoting the development of renewable energy generation technologies. The power market is regulated by the Central Electricity Regulatory Commission (CERC) and the State Electricity Regulation Commissions (SERCs). 7.2.1. The Jawaharlal Nehru National Solar Mission The government has set an ambitious program for the implementation of solar energy technologies (PV and CSP) with the Jawaharlal Nehru National Solar Mission (JNNSM or NSM). The objective is to establish leadership in solar energy by creating appropriate policy conditions for the implementation of solar technologies across the country. The program is also intended to boost the local manufacturing capacity for the PV industry over the next decade. The overarching goal is the development of 20 GW capacity (between PV and CSP), to be installed in three different phases: the first was supposed to be completed by 2013 but has been delayed to 2014, the second phase should start from the end of the first phase until 2017 and the third phase should take place from 2017 to 2022. Within the policy framework, the agency in charge for the procurement through Power Purchase Agreements (PPAs) with the developers and the overall implementation of Phase 1 is the National Thermal Power Corporation’s VidyutVyapar Nigam Ltd (NVVN). The electricity market operates through very peculiar arrangements. NVVN establishes a “tripartite” agreement to buy the electricity from the Independent Power Producers (IPPs) and sell it to the Discoms (see market structure diagram). The PPA signed with IPPs is 25 years long and a Power Sale Agreement (PSA) is similarly signed with the Discoms. This is the current mechanism set up within the JNNSM guidelines. Phase 1 was launched in 2010 and anticipated the implementation of 500 MW each for PV and CSP technology. The bid process was held in November 2010, and 77 CSP proposals totaling 1,815 MW were received by NVVN. At the end of the selection process, seven CSP proposals had been selected for an overall capacity of 470 MW. A very competitive reverse auction system was set to agree the final tariffs. The threshold established by CERC was of INR 15.31/kWh. The lowest bid was INR 10.49/kWh (offered by Lanco). Many industry insiders expressed concern on the effect that such a low level of tariff could have on the capacity to fulfill the NSM targets. The guidelines regarding the selection criteria for CSP projects are summarized in the table below. Table 3(7): Selection Criteria for the Tender Process of CSP projects in India Criteria for Shortlisting Criteria Evaluation Capacity Between 5 MW and 100 MW because there is the requirement to connect the plant to the TRANSCO at 33 kV and above Request for Selection (RfS) Developers need to submit their expression of interest within 30 days starting from when the Request for Selection (RfS) is issued by NVVN Processing Fee The non-refundable processing fee to be submitted with the expression of interest by each developer is Rs 1 Lakh, i.e. approximately USD 2,129 www.csptoday.com CSP Today Markets Report 2014 | 195 India Number of Applications by a Each group cannot submit a request for selection for more than 100 MW. This can Company be represented by a single plant or by multiple plants with overall capacity within the threshold Qualification Criteria for Shortlisting Financial Criteria - Net Worth This parameter would be calculated from the unconsolidated audited annual accounts of the last four years (prior to submission) and should be at least equal to Rs 3 crore, i.e. approximately USD 639,000 per MW of the project proposed up to 20 MW. For each MW beyond the 20 MW, a further value of Rs 2 crore (approximately USD 426,000) should be demonstrated Technical Criteria Only new plant & machinery can be used. Any CSP technology can be used (or any combination of them). The developer has to be a design and engineering company with a track record of at least a 1 MW plant or an EPC with a track record of at least 100 MW already installed (these are not the only criteria available). The developer must include in the project appropriate monitoring equipment (solar irradiance, ambient air temperature, wind speed, electricity generated) and commit to submit regular reports to the relevant ministry Connectivity to the Grid The plant should be designed for connection with the State Transmission Utility (STU) at 33kV or above and the connecting point should be at the substation (as opposed to the distribution substation). The STU would have the responsibility for construction of the transmission line between the plant and the substation. The developer needs to submit a letter specifying the location of the project and confirming the technical feasibility of the connectivity to TRANSCO Water Availability The developer should submit the request for water services to the relevant local authority or state and include evidence of agreed arrangement within the application Land Availability The developer is required to gain ownership or lease hold rights for at least 30 years for 100% of the land required for the project at the time of filing the application to NVVN (2 Hectares/MW). Source: JNNSM -Guidelines for Selection of New Grid Connected Solar Power Projects, produced by Mercom Capital Group, 2011 7.2.2.Delays and Extensions Of the seven projects selected under the Phase 1 of the solar mission, only one was expected to meet the May 2013 deadline: namely, the 50 MW Godawari project, which was ultimately connected to the grid on 5 June 2013. For this reason, the government first postponed phase 2 and then extended the completion deadline for phase 1 to March 2014 (10 additional months). According to a draft paper released by the MNRE, this was to allow for the lessons learnt during phase 1 to www.csptoday.com be better digested and incorporated into the new bidding round. The change does not cover the 30 MW CSP projects under the Migration Scheme, which had already signed PPAs with different policies. This change avoided millions of dollars in penalties, so it has been well received by the developers. Alongside the extension to Phase 1, the government is also reviewing the guidelines for the JNNSM as a tailored committee is studying possible amendments aimed to bring about greater clarity. CSP Today Markets Report 2014 | 196 India Table 4(7): India NSM – Achievements and Lessons Learnt from JNNSM Phase 1 Feed-in-tariff changed over to competitive bidding Competitive bids discovered real CSP cost and levelized cost of electricity (LCOE) Involvement of multi-lateral financial institutions High localization achieved, 40-60% Growth of local suppliers – EPC turn-key providers are now available in India Technical expertise and senior construction manpower multiplied, which will help in Phase 2. Movement of Chinese suppliers of mirrors, receiver tubes, heat transfer fluid, structures and salt into India, which is expected to bring more cost benefits to Phase 2 Unreliable DNI data spurred the MNRE to set up solar radiation measurement stations at various regions, which is increasing investors’ confidence for funding projects in India Insufficient completion time resulted in delays and missing deadlines Source: Somani, 2013 Phase 2 of the JNNSM is expected to start in 2014. The target capacity for the year 2015 has now been set at 1080 MW CSP and 2520 MW PV technology. Therefore CSP represents 30% of the overall installed capacity. The projects will be selected through a similar reverse bidding process. 7.2.3.Hybrid Program A new program to support the development of CSP hybrid plants has also been announced by MNRE. The government will support the construction of four hybrid pilot plants of 20 to 50 MW, depending on land availability and commitment of the hosting state government. The first will implement hybrid cooling, with the objective of reducing water consumption; the second will work with steam temperature above 500 CВє; the third will be equipped with 10 or more hours of molten salts storage to achieve round the clock operation; and the fourth will employ 30% natural gas as a backup fuel, and is likely to be in the form of an ISCC. The Request for Proposal is expected to be out in August 2013, and the development will be under NSM Phase 2 and supported by the VGF concept (Somani, 2013). Table 5(7): CSP Hybrid Pilot Program - Project Configuration Air-cooling system to reduce water consumption Gas backup up to 20% Gas backup is meant to support HTF heating and auxiliary firing to raise steam temperature up to 500CВ° Thermal storage of minimum 2 to 3 hours CUF will be prescribed based on concept, technology and DNI Developer will have the choice for an alternative technology and land www.csptoday.com CSP Today Markets Report 2014 | 197 India PV solar energy could be allowed for auxiliary power Access to transmission will be guaranteed Source: Somani, 2013 The plants will be located in four different states (Rajasthan, Gujarat, Tamil Nadu and Andhra Pradesh). The government will facilitate the provision of land, water, grid connection, geo-technical and environmental studies and PPA licenses. The developers will be selected through a competitive bidding process under the guidelines of the MNRE and the Renewal Fuel Standard Program. Until recently, ISCC technology was not formally recognized under the NSM, and thus related projects could not technically be taken up under the framework. However, with the introduction of the new solar-thermal hybrid program that comes under the MNRE’s energy strategy for 2011-2017, which will involve interaction with the Ministry of Petroleum and Natural Gas, the picture is about to change. 7.2.4. Renewable Purchase Obligations and Renewable Energy Certificates The mechanism of the Renewable Purchase Obligations (RPOs) will be employed to support the implementation of solar energy projects. Each utility must include a portion of energy generated from solar plants in their electricity mix, and can meet this obligation either by purchasing the required quantity of solar electricity directly from producers or by buying solar Renewable Energy Certificates (RECs). The RPO is currently set at an average of 0.25% of total electricity generation. Renewable Energy Certificates (RECs) are issued to any generating entity selling renewable electricity to the grid at the Average Pooled Purchase Cost (APPC) of the relevant distribution utility or to third-party consumers at a mutually-agreed price. The current REC tariff for solar projects is currently between INR 9.3/kWh (floor price) and INR 13.4/kWh (ceiling price). Besides the NSM, some Indian state governments have their own guidelines and incentives for the development of solar energy projects. For instance, the Gujarat State Solar Energy Policy was published in 2009 and is valid until 2014. This framework is the only one in India with fixed FIT and works on a first-come-firstserved basis. The tariff is set at INR 14/kWh for the first 12 years, and INR 7/kWh for the following 13 years. The Rajasthan Solar Energy Policy was published in 2011. The Karnataka Solar Policy was announced in 2011, and the maximum size allowed for CSP plants is 10 MW. The policy does not have any local content requirement. During the first phase, only 2 CSP projects (10 MW each) were submitted out of maximum 30 MW, and the remaining 10 MW were assigned to PV projects. This policy follows a reverse bidding system with a cap tariff of INR 11.3/kWh. Another state government with a specific policy is Tamil Nadu which aims to install 1 GW of solar power by 2017. An overview of tariff information is provided in the table below. Table 6(7): India Solar Program Tariffs Solar Program Allocation MW Tariff (INR/kWh) PPA Period National Solar Mission 20,000 15.31 25 years Rajasthan Solar Program 12,000 1.95 25 years Gujarat Solar Energy Policy 935 14.0 From years 1 to 12 7.0 From years 13 to 25 Maharashtra 15.24 25 years Jharkhand 13.12 25 years Madhya Pradesh 11.26 25 years www.csptoday.com CSP Today Markets Report 2014 | 198 India Karnataka 350 25 years 11.35 Source: AF-Mercados EMI, 2013 The introduction of competitive bidding for solar power procurement has significantly brought down tariffs over the last three years, and is helping states fulfill their solar Renewable Purchase Obligation targets at reasonable costs. Table 7(7): India Solar Thermal Cost – Benchmark Rs Cr/MW 2010-11 2011-12 2012-13 2013-14 Solar Thermal 14.2 15 13 12 Source: AF-Mercados EMI, 2013 Table 8(7): India Solar Thermal Tariffs – Benchmark Rs/Kwh 2010-11 2011-12 2012-13 2013-14 Solar Thermal 15.31 15.04 12.46 11.9 Source: AF-Mercados EMI, 2013 7.2.5. Current CSP Projects Table 9(7): Current CSP Projects in India Bid RS/ kWh Storage Financiers 12.20 No Bank of Baroda Name Developer MW capacity Current status Technology Godawari Green Energy Hira Group 50 Operation Parabolic Trough Indian Institute of Technology CSP Project Abengoa 3 Operation Parabolic Trough Acme Rajasthan Solar Power 1 ACME Group 2.5 Operation Solar Tower 15.31 no LFR Solar Thermal Desalination plant Empereal-KGDS 1.06 Operation Linear Fresnel n/a 0.5 hours www.csptoday.com no Department of Science and Technology, (DST) Govt. of India CSP Today Markets Report 2014 | 199 India IIT /SEC plant Empereal-KGDS - Operation Linear Fresnel n/a no Ministry of New and Renewable Energy, (MNRE) Govt. of India Abhijeet (Corporate Abhijeet Ispat Alloys) 50 Construction Parabolic Trough 12.24 no BOI and IOB Reliance Areva CSP 1 Reliance Power 125 Construction Linear Fresnel 11.97 no ADB, US Ex-Im, Megha Megha Engineering Limited 50 Construction Parabolic Trough 11.31 no IDBI MNRE R&D Project Ministry of New and Renewable Energy 1 Construction Parabolic Trough n/a no Ministry of New and Renewable Energy Gujarat Solar One Cargo Power and 25 Infrastructure Construction Parabolic Trough 9 hours 70% from Banks Bap Project / Dalmia Dalmia Cements 10 Solar Power Development Dish 15.31 no Diwakar Solar FMO Lanco Solar 100 Development Parabolic Trough 10.49 4 hours Axis KVK Energy Ventures Lanco Solar 100 Development Parabolic Trough 11.20 4 hours ICICI Rajasthan Solar One Entegra 10 Planning Parabolic Trough 8 hours Reliance Areva CSP 2 125 Planning Linear Fresnel No Aurum Renewables Aurum 20 Planning Linear Fresnel Mathania ISCC TBC 35 Announced Parabolic trough Gujarat CSP Pilot plant TBC 35 Announced TBC 5.83 (targeted) No Andhra Pradesh Pilot CSP Plant TBC 20 Announced TBC 5.83 (targeted) No Rajasthan CSP Pilot Project TBC 40 Announced TBC 5.83 (targeted) No www.csptoday.com Reliance Power 12.19 No No GEF USD 49 million Debt CSP Today Markets Report 2014 | 200 India Tamil Nadu CSP Pilot TBC Project 25 Announced TBC 5.83 (targeted) No Acme Rajasthan Solar Power 2 ACME Group 10 On hold Solar Tower 15.31 no Indian Institute of Technology – CSP Project Empereal-KGDS 1 Planning Linear Fresnel Yes Source: CSP Today Global Tracker, August 2013 7.2.6. Local Content Requirements The domestic content requirement is a critical aspect of Indian projects. For all of the CSP plants awarded in Phase 1, the domestic content requirement was 30%, excluding land, but including any other component or installation. Some developers, however, are targeting up to 50% local content in order to be price competitive. In general, different companies are approaching the local content requirement differently. Many local industry stakeholders are very interested in developing local manufacturing skills and promoting know-how transfer. Furthermore, they aspire to become the serving industry for the development of CSP technology in the MENA region. Indian engineering companies have good experience in supplying power block components for traditional power plants. Looking at other components, the local supply chain is not sufficiently developed at present and investors need to import components for both the solar field and thermal storage system. As a matter of fact, the projects in Phase 1 have suffered delays in equipment supply, probably due to the high requirement for local components that could not meet the delivery times. A domestic local content requirement has not been confirmed yet for Phase 2. The Ministry of New and Renewable Energy and the Fraunhofer Institute for Solar Energy Systems ISE signed a Memorandum of Understanding promoting the development of research, demonstration and pilot projects employing PV, CSP and hydrogen technology. Furthermore, many projects between the ISE and India have already been planned in detail or are in the development phase. www.csptoday.com CSP Today Markets Report 2014 | 201 India 7.3. Local CSP Ecosystem 7.3.1. Indian CSP ecosystem Table 10(7): Indian CSP Ecosystem developers EPCs Financiers Policies Abhijeet Jyoti Engineering BOI National Solar Mission Lanco ACME IOB Lanco Infratech Bank of Baroda MEIL Aurum Axis Lauren CCL Reliance Godawari Empereal-KGDS US Ex-Im Reliance FMO Gujarat REC Turbine Makers Other State Policies HTF CSP-Biomass Hybrid IDBI Shriram EPC ICICI Off-grid CST Structures Steel Empereal-KGDS The CSP local system in India is characterized by a growing market with tremendous opportunities both for grid-connected and off-grid projects. Fossil fuel plants are struggling to keep up with increasing demand and are a source of environmental concern. For this reason, hybridization of the current fossil-fuel-based installed capacity is one of the most promising applications for the CSP industry in the country. Overall, India is becoming one of the most attractive CSP markets in the world. That said, the local environment has a variety of strengths and weaknesses that need to be taken into account when developing a project. 7.3.2. Manufacturing Capability and Local Supplies One of the key aspects within the whole value chain is manufacturing capability. Generally speaking, India has well trained workers and engineers and the low cost of www.csptoday.com Glass Manufacturers ADB Corporate Ispat Cargo Solar Global Manufacturers the workforce is without doubt one of the most relevant aspects to consider within the value chain. However, it is also true that the country lacks the specific skills required for the production of many components and parts of a utility-scale CSP plant. This aspect is strictly interconnected with the domestic content requirement proposed by the JNNSM and the reverse bidding mechanism. From one side, developers need to reduce the costs by maximizing the uptake of local resources to make the project financially viable. From the other side, components and adequate skilled personnel are not always available to sufficiently guarantee quality during the construction stage. This is a major concern for developers because it might undermine the optimal performance of the energy plants. For instance, some Phase 1 projects have been delayed because components like the Heat Transfer Fluid (HTF) were not available. CSP Today Markets Report 2014 | 202 India and well-trained workers will definitely pave the way for more manufacturing industries to improve their expertise and reduce costs, which in turn will support the growth of installed capacity. On the positive side, local manufacturing capabilities are improving steadily, which provides a promising picture for the future development of the solar program. Various components of the power block are already available locally because they are similar to the parts employed in conventional thermal power plants. Furthermore, steel parts, control systems and civil construction-related skills are already locally available. Other elements such as hydraulic drivers, HTF and adapted turbines are becoming more available as experience and know-how are gained by local suppliers. Thermosol Glass is setting up Asia’s first fully automated glass processing plant in Gujarat to produce high quality parabolic mirrors used in CSP projects across the globe. Moreover, the projects developed in India are becoming a showcase for Fresnel technology as some plants under construction are much larger than the previous commercial ones developed in Spain. Likewise, hybridization is considered the biggest opportunity for CSP technology in the country. It is expected that specific environmental conditions will prompt the development of a tailored technical solution. The possibility to use CSP for distributed off-grid and alternative use is another sizeable opportunity given the quantity of people that are not connected to the grid. Off-grid solutions could replace expensive diesel generation, as well as provide heat and cooling load and process steam for industries. 7.3.3. Steep Learning Curve India considers Phase 1 as the right opportunity to gear up and face a steep learning curve which will allow the country to become a regional manufacturing hub for the whole of the CSP industry, at least in the plans of the policy makers. Progress is constantly being made along the value chain and strong competition from local developers is leaving almost no room for international developers. The huge potential for CSP technology alongside the availability of low-cost 7.3.4. Key Government Agencies At the planning stage, an investor or developer will need to work with government agencies to gain the necessary permitting requirements. Table 11(7) provides an overview of the main government bodies active in India that might be relevant to a CSP energy project. Table 11(7): Ministries and Government Agencies in India Name Roles and Responsibilities Bureau of Energy Efficiency - Ministry of Power В This department within the Ministry of Power establishes systems and procedures to measure, monitor and verify energy efficiency results. Creates policies and develops strategies on self-regulation and market principles to achieve energy efficiency. Certifies energy managers and performs energy audits. www.csptoday.com Previous renewable energy programs (if applicable) CSP Today Markets Report 2014 | 203 India Central Electricity Authority (CEA) CEA describes the standards on the construction of electrical plants, electric lines and connectivity to the grid, installation and operation of meters, and safety and grid standards. Facilitates exchange of power within the country from surplus to deficit regions, and with neighboring countries for mutual benefits. Advises the central and state governments, licensees or generating companies on matters which enable them to operate, maintain, and improve the electricity system under their ownership/ control. A study carried out by the CEA in 2009-10 to evaluate the potential for dry cooling as an alternative to reduce water consumption by power plants found that dry cooling can cause an increase in base tariff by 8 to 9 percent. The committee, constituted of members drawn from BHEL, NTPC, MAHAGENCO, and other stakeholders found that dry cooling reduces plant output by 7 percent, and causes an increase in power consumption by 0.2 percent to 0.3 percent as a percentage of gross power production. Central Electricity Regulating Commission (CERC) CERC is the key regulator of the power sector in India. Under Regulation 61, CERC has set the normative capital cost for solar thermal power projects as 1,200 Lakh/MW for the FY 2013–14. Government of Rajasthan Issued the Rajasthan Solar Energy Policy in 2011, with the objectives of developing solar power plants to meet the renewable purchase obligation, promoting off-grid applications of solar energy and developing solar parks. Approved the solar projects of 11 private developers for setting up 66 MW capacity CSP and PV systems. After the announcement of the National Solar Mission (NSM), the Government of Rajasthan permitted these proposals to be migrated to the NSM. The seven PV plants, each 5 MW, are already commissioned under the migration scheme of NSM, while the CSP plants of 30 MW are under implementation. India Meteorological Department (IMD) IMD provides current and forecast meteorological information and statistics for optimum operation of weather-sensitive activities. Detects and locates earthquakes and evaluates seismicity in different parts of the country for development projects. IMD has 45 radiation observatories recording various radiation parameters.В At all these stations, measurement of global solar radiation is being carried out, while at selected stations, other parameters like diffuse, direct, net, net-terrestrial and reflected radiation, and atmospheric turbidity are also measured. Observations made at the national network of radiation stations are used in assessing solar energy potential across the country. Ministry of New & Renewable Energy (MNRE) The MNRE is responsible for formulating and implementing policies, establishing new and renewable energy development program, and intensifying R&D in the sector. As of 31 March 2013, the MNRE had installed and grid-connected 1.68 GW of solar PV, 1.9 GW of wind power, 3.6 GW of hydropower, and 1.26 GW of biomass power. www.csptoday.com CSP Today Markets Report 2014 | 204 India National CDM Authority – Ministry of Environment & Forests (NCDMA) A single window clearance for Clean Development Mechanism (CDM) projects in India. Receives CDM project proposals and upon acceptance, issues a Host Country Approval. Approved hundreds of renewable energy projects throughout India. The full list can be viewed through the following link: http://www.cdmindia.gov.in/approved_ projects.php?n=1 Solar Energy Corporation of India (SECI) SECI is a newly formed publicsector company, established by the MNRE to administrate the provision of the Viability Gap Funding. SECI plans to call for bids for four pilot CSP projects, requiring an investment of about Rs 2,555 crore. The projects have been sanctioned by VGF of Rs 1,020 crore and the bidders who seek the least funding will bag the projects. SECI will offer these projects for international competitive bidding in 2014. Tamil Nadu Energy Development Agency (TEDA) TEDA is leading Tamil Nadu reach its objective of TEDA is a state governgenerating 40% of India’s solar energy by 2015. ment-owned agency that promotes renewable energy sources in Tamil Nadu and the nodal agency for renewable energy in the state. 7.3.5. Independent Water and Power Producers and Utilities The development phase of a project will require contact and commercial agreements with utility companies. These can provide the necessary permits to connect to the electricity and water grid (if available). Table 12(7) provides an overview of the most important utility companies and IPPs in India. www.csptoday.com CSP Today Markets Report 2014 | 205 India Table 12(7): Independent Water and Power Producers and Utilities in India Name Previous renewable energy programs (if applicable) Roles and Responsibilities Central Permission for the Implementation of Metering CTU makes interstate transmission arrangements of solar energy generated Transmission Utility Code, Protection System can be obtained through solar power plants. (CTU) from the host Distribution Utility, the State Transmission Utility (STU), or the Central Transmission Utility (CTU), also known as Power Grid Corporation of India. The STUs are in charge of issuing condition subsequent approvals for grid connections. Gujarat Urja Vikas Nigam Ltd Generation offtaker for Gujarat Solar One Wholly owned subsidiary of Gujarat Electricity CSP plant. Board. Created as a part of its efforts towards the restructuring of the power sector, with the aim of improving efficiency in management and delivery of services to consumers. National Thermal Power Corporation (NTPC) Vidyut Vyapar Nigam Ltd. (NVVN) NVVN is the generation offtaker for the CSP A wholly owned subsidiary of NTPC Ltd. NVVN is designated by the government as the Nodal plants being built under the National Solar Agency for Phase I of Jawaharlal Nehru National Mission. Solar Mission, for the purchase of power from solar Projects connected to grid at 33 KV and above, and for sale of such power bundled with the power sourced from NTPC Coal Power Stations to distribution utilities under Phase I (2010-2013) of JNNSM. Any technical or price proposal must be sent to NVVN for a project allotment under the JNNSM scheme. Jaipur Vidyut Vitran Distributes and supplies electricity in the 12 Nigam Ltd. districts of Rajasthan. Generation offtaker for the 10 MW Bap CSP Plant. Rajasthan Vidyut Prasaran Nigut (RVPN) Solar power project developers in Rajasthan need to sign a transmission agreement with RVPN. In the case of other states, it would be the respective State Transmission Utility. RVPN is Rajasthan’s state transmission utility. Tamil Nadu Water TWAD was established by the Government of and Drainage Board Tamil Nadu to ensure the supply of water and (TWAD) sewerage facilities to the state Tamil Nadu, except Chennai Metropolitan area. 7.3.6. Permitting Agencies and Feasibility Study Providers This stage of project development can be one of the weakest parts of the process. As a matter of fact, there can be problems both with land acquisition and with obtaining the necessary permits. The former www.csptoday.com TWAD is the utility offtaker for the Ramanathapuram CSP Desalination Plant in Tamil Nadu (Water Purchase Agreement signed between TWAD and developer of the plant, KD Design Services). is also affected by difficulties in water availability and the fact that land itself is a scarce commodity. The latter mainly depends on complex bureaucratic organization. The power sector needs to comply with the state and federal regulations. There are too many bodies (between the state and the federal ones) that CSP Today Markets Report 2014 | 206 India are involved in the decision-making process. This situation makes it almost impossible to develop a sound and effective policy. The regulatory situation of the electricity market is also complicated by the common energy wastage, bribes and cheating. As a result, the permitting phase can be quite time- consuming. Another relevant difficulty at the planning stage is the availability and reliability of DNI data. India does not have enough ground-measured solar data and indeed the government also tendered for 50 new monitoring stations to be built all over the country to overcome this issue. The quality of data available through satellite is not fully reliable because of the amount of aerosol present in the atmosphere, including dust, sand and other solid particles reducing the DNI. It is fair to say that the situation in this regard is constantly improving and more accurate forecasts will help build the business case for the lenders who are not fully confident with respect of CSP technology. Table 13(7) lists the key permitting and environmental assessment agencies operating in India Table 13(7): Permitting Agencies and Environmental Assessment Agencies in India Name Roles and Responsibilities Centre for Wind Energy C-WET is implementing the Solar Radiation Resource Technology – Ministry of New Assessment (SRRA) stationВ project across the nation to & Renewable Energy (C-WET) assess and quantify the solar radiation availability and weather parameters with a view to develop a Solar Atlas. Ministry of Environment & Forests (MOEF) Previous renewable energy programs (if applicable) C-WET, Chennai completed the first phase of the project by installing a network of 51 SRRAs stations using high resolution instruments. MOEF issues environmental and forest clearance/ В permission if a proposed project area involves any forest. Pollution Control Board (PCB) Approval or clearances for CSP projects need to be attained during project construction from the PCB. В Solar Energy Centre (SEC) – Ministry of New and Renewable Energy (MNRE) SEC provides facilities for technology evaluation & validation, solar resource assessment, testing & standardization, monitoring & data analysis, and training. SEC has developed national standards and established testing protocol for solar thermal devices and research facilities. Reviving a 50 Kwe CSP Plant by indigenizing some critical components like Heat Collection Elements. The plant is being used as R&D and educational facility. Rajasthan Renewable Energy Corporation Ltd. A State Nodal Agency that promotes and develops non-conventional energy sources in Rajasthan. Facilitate allotment of revenue land, power evacuation approval, execution of PPAs and coordination with MNRE and State Agencies, including State Transmission Utility and Discoms. Implemented the electrification program for remote unpowered villages where grid-connection was either not feasible or not cost-effective, and that were not covered under Rajiv Gandhi Grameen Vidyutikaran Yojana. Rajasthan State Pollution Control В Conducts site visits to ensure proposed sites do not involve wet land, agricultural land, ecologically sensitive locations or areas with large populations. Clears availability of adequate water for solar plants. Provides science-based policy options for environmental compliance. www.csptoday.com CSP Today Markets Report 2014 | 207 India 7.3.7. Local Consultants and R&D Bodies India still represents somewhat unfamiliar territory for international CSP developers. This increases the importance of collaborating with local partners with business intelligence capabilities and knowledge of the local environment. Table 14(7) shows a list of consultants and R&D centers operative in India. Table 14(7): Consultants and R&D Bodies in India Name Roles and Responsibilities Previous CSP Projects Clique Consultants Pvt. Ltd. Engineering consultants working across all major industries. В Council on Energy, An independent, nonprofit policy research institution that Environment and Water works to promote dialogue and common understanding on energy, environment, and water issues in India and elsewhere through research, partnerships with public and private institutions, and outreach to the wider public. Assessing India’s 22 GW solar mission, including progress of Phase 1 of the NSM. Jointly published “CSP: Heating up India’s Solar Thermal Market under the NSM” with the Natural Resources Defense Council. Energy Guru Worked on Cargo Solar’s Gujarat Solar One Energy Guru provides feasibility studies, expert advice on technology, and government incentives, turn-key solutions, and Dalmia Solar. financing to renewable energy projects such as utility-scale Solar PV, Solar CSP, Small Wind, Large-Wind, Geothermal, Biogas and Biomass Power Plants. Energy Guru promoting hybrid CSP for biomass and coal based power plants. Energy Guru also works in Direct Steam Generation technology for process steam and cooling applications. Indian Institute of Technology Bombay (IITB) IIT Bombay offers intellectual property available as patents, patent applications, and know-how based on its R&D efforts for licensing to interested parties in various areas, including solar energy. IITB the second in the chain of IITs, is a technical university set up in 1958. IITs are a group of autonomous public engineering and management institutes comprised of 16 institutes throughout India. They receive comparatively higher grants than other engineering colleges in the country. Contracted KG Design Services Renewable Energy to build a Linear Fresnel CSP Plant in Gwalpahari, South of Delhi, to produce 2 MWth dry saturated steam. This will be part of generating and uploading 1 MWe to the grid at the solar energy center of the MNRE. Natural Resources Defense Council (NRDC) An international nonprofit environmental organization with more than 1.3 million members and online activists. Jointly published “CSP: Heating up India’s Solar Thermal Market under the NSM” with the Council on Energy, Environment and Water. Procon Engineers Consultants on design, detailed engineering, project management, construction and operation & maintenance of power plants offering feasibility reports, procurement assistance, project management and energy audit services. В www.csptoday.com CSP Today Markets Report 2014 | 208 India Saurya Solar energy consultancy and training firm offering engineering solutions such as detailed annual insolation data on the site; distance to grid connection points and allowed max power to be fed in the grid; soil reports and studies of local environmental conditions, irradiation, and temperature profile; surveys of areas surrounding the site for shading effects and industry influences; availability of electricity for installation work and water for later maintenance. Worked with Lanco Solar, National Thermal Power Corporation, Bharat Heavy Electricals Ltd., amongst many others. Sponsors research, demonstration and pilot projects in Solar Energy Association of Gujarat renewable energy. Provides technical and financial assis- Implementing Gujarat Solar Power Policy 2009, which will remain in operation up to 31 tance to projects advancing renewable energy development March 2014. Solar Power Generators (SPG) of a max 500 MW, installed and commissioned in Gujarat. Undertakes, on its own, or in collaboration during this period will become eligible for with other agencies, renewable energy R&D programs. the incentives declared under this policy, for Establishing an Energy Resources Centre that will collect 25 years from the date of commissioning or energy-related information. Manages policies & tenders. for the lifespan of the SPG, whichever comes earlier. Solar Energy Society of India (SESI) В Indian Section of the International Solar Energy Society. Publishes the biannual SESI Journal. Organizes workshops and the annual International Congress on Renewable Energy. Provides information on a variety of topical issues to the renewable energy community. Empereal-KGDS Empereal-KGDS is recognized as an In-House R&D Centre by the Department of Scientific and Industrial Research (Government of India). Empereal-KGDS is actively involved in developing standalone solar thermal power plants, solar-biomass hybrid power plants for non-stop operation, solar desalination for providing potable water in arid rural and coastal areas and solar process steam systems. Built a solar thermal research center in Coimbatore, Tamil Nadu, to test and develop Linear Fresnel systems and MED desalination systems. Setup Linear Fresnel test system capable of generating saturated and superheated steam. Contracted by Indian Institute of Technology Bombay to build a Linear Fresnel CSP Plant at The Solar Energy Centre, Gwalpahari in South of Delhi, to produce dry saturated steam for power generation. Developed the Ramanathapuram Desalination Plant in Tamil Nadu, an indigenous CSP method using Linear Fresnel Reflector to produce steam for seawater desalination by Multi-Effect Distillation. Implementing a direct superheating Linear Fresnel solar thermal system with secondary concentrator, for IITM. 7.3.8. Financing Organizations Capital investment is a critical aspect for CSP projects in India. However, the non-transparent regulatory framework does not attract investors. Many stakeholders expressed concerns for the reverse bidding mechanism which entailed the reduction of FITs www.csptoday.com awarded in Phase 1 because they can jeopardize the financial feasibility of the projects. A study from the World Bank concluded that such a low level of FITs would mean the projects were not economically viable. As a matter of fact, low FITs might discourage lenders because they could find the returns unattractive. CSP Today Markets Report 2014 | 209 India Furthermore, the PPAs under the JNNSM scheme are subject to the receipt of revenues from the Discoms and this basically passes on the risk to the investors of a project. Policy-wise, it is not clear yet what will happen after the completion of Phase 1, therefore there remains uncertainty over the stability of future payments. On the other hand, support for projects comes from state-based FITs as well as from the opportunity to use the Clean Development Mechanism as a market tool. Furthermore, the Open Access System is another driver that enables large power consumers to establish a private power generation source for their needs. With this system, any power producer can sell electricity to any user across the country by bearing the cost of transmission and distribution losses or other costs of delivery. An important lesson learnt by the government during the first phase of the JNNSM was to not over-commit itself financially. The two support mechanisms considered for the second phase are the Generation Based Incentive (GBI) and Viability Gap Funding (VGF), although according to a report issued by India Solar Compass, the former was a less likely option. Moreover, solar prices are falling rapidly, and the government wants to avoid over-committing itself to give support beyond the need of the industry. Thus, the most likely alternative seems to be the VGF scheme, which has already been employed by the government for Public Private Partnership infrastructure projects like roads, airports, railways, ports, and large conventional power plants, but not yet for solar power projects. Unlike the GBI, the VGF is a one-off or short-term capital assistance that bears a part of the high capital investment required in setting up a CSP project. This could take various forms, including credit enhancements, supplementary grant funding, loans, and interest subsidy. For solar projects, the support would be provided through the National Clean Energy Fund, while the newly incorporated Solar Energy Corporation of India (SECI) would be appointed to oversee the process and carry out disbursements. Within the VGF mechanism, the two options currently investigated are the incentives per unit of electricity sold (Rs/kWh), or a percentage of CAPEX (Rs/MW). According to local stakeholders interviewed by CSP Today, the target tariff could be in the order of 5.50 6Rs./unit considered. However, the VGF scheme may increase the risk as developers could have different off-takers and banks would need to perform credit due diligence for each of them. Table 15(7): Main Funding Institutions and Banks Operative in India Previous Renewable Energy Projects (if applicable) Name Roles and Responsibilities Asian Development Bank (ADB) ADB is a regional development bank established to facili- ADB financed USD 103 million towards the development of Reliance Power’s 100 MW tate economic development of Asian countries. ADB has provided 69 loans in the energy sector worth a total of $10 CSP CLFR Plant. million, accounting for 34.5% of the bank’s total provided loans. Headquartered in Philippines, with worldwide representative offices. Axis Bank Axis Bank is the third largest private sector bank in India, offering financial services to large and mid-corporates, SMEs, agriculture and retail businesses. Bank of Baroda Bank of Baroda is an Indian state-owned bank providing Bank of Baroda is financing the Godawari CSP Plant in Rajasthan. financial services in retail and investment banking and asset management. It is designated by the government as a profit-making public sector undertaking. www.csptoday.com Axis Bank is financing the 100 MW Diwakar CSP Plant in Rajasthan. CSP Today Markets Report 2014 | 210 India Bank of India Bank of India is a state-owned commercial bank headquar- Bank of India has provided finance towards tered in Mumbai. It is India’s 4th largest public sector bank, the 50 MW Corporate after the State Bank of India, Punjab National Bank, and Ispat Alloys CSP Plant. Bank of Baroda. Canara Bank Canara Bank is an Indian public sector bank headquartered in Bangalore, Karnataka with overseas branches. Established in 1906, it is one of the oldest banks in the country. It provides investment, commercial, retail, private and consumer banking, and asset management. Sponsors three regional rural banks: Shreyas Gramin Bank, South Malabar Gramin Bank, and Pragathi Gramin Bank. Canara bank is a state-level lead bank in Kerala. Canara Bank provided finance towards SunBorne Energy Services India’s INR 1,400 million for the 15 MW PV plant in Karmaria, Gujarat. It also partnered with the UN Environment Programme on a solar loan program, which was a four-year USD 7.6 million effort, launched in April 2003 with the aim of accelerating the financing market for solar home systems in Southern India. Department of Science and Formulates science and technology related policies. Technology, Government Promotes high-end basic R&D through its research instiof India tutions or laboratories for the development of indigenous technologies. Undertakes or financially sponsors scientific and technological surveys, research, design and development, where necessary. Financed the Ramanathapuram Linear Fresnel Reflector CSP Desalination Plant developed by KG Design Services in Tamil Nadu. Dutch Development Bank - Provides short and long-term finance, as well as high-risk, also known as Netherlands innovative financing structures such as mezzanine and equity. Development Finance Company (FMO) The Dutch Development Bank provided USD 80 million in finance to Reliance Power’s 100 MW CSP CLFR Plant. Export-Import (Exim) Bank of India Exim Bank of India was launched by the Government of India to finance and facilitate India’s foreign trade. It provides investment, commercial, retail and private banking, asset management, and mortgages. The Bank supports all stages of the business cycle, from import of technology and export product development to export production and marketing, pre-shipment and post-shipment, and overseas investment. Exim Bank of India provided finance towards SunBorne Energy Services India’s INR 1,400 million for the 15 MW PV plant in Karmaria, Gujarat. Industrial Credit and Investment Corporation of India (ICICI) ICICI is a private sector development bank set up to assist in the creation, expansion and modernization of the private industrial sector in India. Provides long-term and medium-term loans in rupees and foreign currencies. Underwrites new issues of shares and debentures. Guarantees loans raised by private concerns from other sources. ICICI is financing the 100 MW KVK Energy Ventures CSP Plant in Rajasthan. Industrial Development Bank of India (IDBI) IDBI is a full-service Mumbai-headquartered commercial bank with majority government shareholding. Provides financial solutions to businesses in retail, corporate, agriculture and SMEs. IDBI is financing the 50 MW Megha CSP Plant in Andhra Pradesh. www.csptoday.com CSP Today Markets Report 2014 | 211 India Indian Overseas Bank (IOB) IOB is a major bank based in Chennai, with over 2,650 IOB is providing finance towards the 50 domestic branches and 14 overseas branches as of 31 May, MW Corporate Ispat Alloys CSP Plant. 2013. Indian Renewable Energy Development Agency Ltd. (IREDA) IREDA was stablished to promote, develop and extend financial assistance to renewable energy and energy efficiency /conservation projects At least 60 % of IREDA IV-LoC (an interest-subsidized loan of EUR 200 million from the German Government) amount has been allocated for renewable energies, including CSP. State Bank of India (SBI) SBI is a government-owned bank headquartered in Mumbai, and India’s largest by assets, with USD 501 billion as of December 2012. It provides a range of banking products through its local and overseas network of branches, including products aimed at non-resident Indians. SBI financed solar PV projects in Tamil Nadu in 2011. State Bank of Patiala (SBP) SBP is an associate bank of the State Bank of India, founded in 1917. It is a public sector bank performing the normal functions of a commercial bank as well as some functions similar to that of a central bank for the princely state of Patalia. SBP was the first bank in India to go on CORE 100%. Provided finance towards SunBorne Energy Services India’s INR 1,400 million for the 15 MW PV plant in Karmaria, Gujarat. State Bank of Travancore (SBT) SBT is a public bank and the premier bank of Kerala, where Provided finance towards SunBorne Energy it has 676 branches. The bank is a subsidiary of State Bank Services India’s INR 1,400 million for the 15 Group and provides investment, commercial, retail, private MW PV plant in Karmaria, Gujarat. and consumer banking, and asset management. 7.3.9. Developers and EPC Firms Some of challenges presented by the local Indian environment include project management and project execution. There is also limited know-how due to the lack of a positive climate towards foreign investment. On top of this, the government has not invested enough in infrastructure, although the situation is slowly improving. In particular, in some remote areas, the inadequate level of infrastructure can make the planning and construction process more challenging and time-consuming. According to some local industry players, Phase 1 projects have been delayed due to the unavailability of site infrastructure. www.csptoday.com CSP Today Markets Report 2014 | 212 India Table 16(7): Developers and EPC Firms Operative in India Previous Renewable Energy Projects (if applicable) Name Roles and Responsibilities Abengoa Solar India Subsidiary of Spain-based Abengoa. Designs, finances, constructs, and operates solar power stations. Signed an agreement with Bharat Heavy Electricals in January 2011 to jointly undertake CSP projects in India. Acciona – India Acciona is a Spanish renewable energy operator focusing on CSP, PV, wind, hydraulic and biomass energy. Provides engineering and construction, project development, O&M, and energy sales. The company has proprietary technology in the design, construction, operation and maintenance of CSP plants. Acciona Energy owns and built/is building six CSP plants: four in Spain and two in the United States. ACME Group ACME Group develops, constructs, and operates MW-scale Developer and owner of the 2.5 MW CSP and PV power projects. It is the only Indian company ACME Solar Tower in Rajasthan, operational since April 2011. with an exclusive master license for developing utility-scale solar thermal projects in India. ACME’s first CSP plant, a 2.5 MW solar tower, has been commissioned in Bikaner, Rajasthan and will be scaled up to 10 MW. AREVA India Pvt. Ltd. Designs, manufactures and installs solar steam generators for global power generation and industrial steam needs. Provides turnkey solutions using its Compact Linear Fresnel Reflector technology. Aurum Renewable Energy Subsidiary of Aurum Ventures - a Mumbai-based investment company active in automotive components, Pvt. Ltd. EPC contractor for Dhursar CSP Plant in Rajasthan. Developer and owner of the 20 MW Aurum Fresnel CSP Plant in Gujarat. telecom, real estate and renewables. Bharat Heavy Electricals Ltd. (BHEL) Engaged in the design, engineering, manufacturing, Signed an agreement with Abengoa in construction, testing, commissioning and servicing of core January 2011 to jointly undertake CSP sectors such as power, transmission, industry, renewable projects in India. energy, oil and gas, and defense. Cargo Solar Power - Cargo Develops, executes and manages CSP projects. Power & Infrastructure Ltd. Owner and developer of Gujarat Solar One CSP Plant in Gujarat. Corporate Ispat Alloys Abhijeet Group Subsidiary of Abhijeet Group. Engages in construction of power plants, and owns coal mines. Owner and developer of the 50 MW Abhijeet CSP Plant in Rajasthan. Dalmia Solar Power Subsidiary of Dalmia Bharat Group. Develops thermal and solar power generating projects. Developing a 10 MWe CSP Plant in Rajasthan. Entegra Ltd. Developer of renewable energy projects primarily in India Developing the 10 MW Rajasthan Solar One CSP Plant, which is scalable up to 200 MW. Godawari Green Energy Ltd. Subsidiary of HIRA Group India. Constructs and operates renewable energy projects. Owner and developer of the 50 MW Godawari CSP Plant in Rajasthan. www.csptoday.com CSP Today Markets Report 2014 | 213 India Idom Engineering (New Delhi Office) Global engineering services firm based in Spain, operating Providing basic and detail engineering in industry and energy, infrastructure, architecture, and for the 50 MW Megha CSP Plant in consulting. Andhra Pradesh. Idom is designing an 8-hour thermal energy storage system based on molten salts. Indure Pvt. Ltd. Manufacturing and contracting arm of Design Indure Group. EPC Contractor for power plants and material handling systems, thermal and PV solar power plants, in India and abroad. Empereal-KGDS See Table 14(7) under Section 7.3.7 “Local Developer of stand-alone solar thermal power plants, Consultants and R&D Bodies”. solar-biomass hybrid power plants for round-the-clock operation, solar desalination for providing potable water in arid, rural and coastal areas, solar process steam systems, and combinations of the above. KVK Energy Ventures Ltd. Develops natural gas, LSHS, coal and coal rejects, biomass, Owner and developer of the 100 MW KVK solar and wind power plants. Energy Ventures CSP Plant in Rajasthan. Lanco Solar Subsidiary of Lanco Infratech. Solar power project developer, providing turnkey EPC solutions. Lauren CCL Engineers Pvt. Provides engineering, procurement, management and construction services for thermal solar power facilities in Ltd. EPC contractor for the 20 MW Aurum Renewable Energy Fresnel CSP Plant in Gujarat. Owner and developer of the 100 MW Diwakar CSP Plant in Rajasthan and the 100 MW KVK Energy Ventures CSP Plant in Rajasthan. EPC contractor for the 25 MW Gujarat Solar One CSP Plant in Gujarat. India. Lauren Jyoti Private Ltd. EPC Contractor for the 50 MW Godawari Provides engineering, procurement and construction services for renewable and conventional power facilities in CSP Plant in Rajasthan. India. Headquartered in Mumbai, it is a 50:50 joint venture of Lauren Engineers & Constructors Inc., USA and Jyoti Structures Ltd, India. Megha Engineering and Infrastructure Ltd. (MEIL) MEIL is an engineering and infrastructure company specializing in power, irrigation, drinking water, railway and ports, media, hydrocarbon, sewage, buildings, and industrial infrastructure. Owner and developer of the 50 MW Megha CSP Plant in Andhra Pradesh. Rajasthan Sun Technique Energy Subsidiary of Reliance Power. Developer of large-scale solar power projects. Developer of the 100 MW Dhursar CSP Plant in Rajasthan. Reliance Power Develops, constructs and operates power projects in India Owner of the 100 MW Dhursar CSP Plant and internationally, with a portfolio of over 35,000 MW in Rajasthan. of power generation capacity in operation and under development. Shriram EPC Ltd. (SEPC) EPC contractor and turnkey solutions provider for CSP plants, wind farms, thermal and biomass power plants. www.csptoday.com Design, engineering, procurement, supply, erection, testing and commissioning for Corporate Ispat Alloys’ 50 MW CSP Plant in Rajasthan. CSP Today Markets Report 2014 | 214 India SunBorne Energy Services Subsidiary of SunBorne Energy Holdings, LLC. Involved in the development and finance of solar power projects, India Pvt. Ltd. EPC, O&M, and minority asset ownership. Backed by four large investors: General Catalyst Partners, Khosla Ventures, Wadhawan Holdings, and an unnamed solar module manufacturer. Technit Engineering & Construction Entered into a memorandum of understanding with Suryachakra Power Corporation and Citadel Research & Solutions to work together on a 5 MW CSP plant in Andhra Pradesh. Provides engineering, procurement, construction, opera- EPC Contractor for the 10 MW tion and management servicesВ for large-scale projects Rajasthan Solar One CSP Plant. worldwide operating in: oil & gas, energy, industrial plants, oil refineries and petrochemical plants, mining, and infrastructure & architecture civil Works. Source: CSP Today Global Tracker, August 2013 7.4.1. Supply of Local Components Table 17(7): Components Available Locally in India Component Name of Supplier(s) Website Turbines Arani Power Systems www.aranipower.com Belliss India www.bellissindia.com Bharat Heavy Electricals Ltd. (BHEL) www.bhel.com/product_services/product.php?categoryid=62&link=Power GE Energy India www.ge-energy.com/solutions/regions/india.jsp Hitachi Ltd. www.hitachi.co.in/products/business/energy/steam_turbine IB Turbo Pvt. Ltd. www.ibturbo.com Kessels Steam Turbines www.kessels.in Max Watt www.maxwatt.net Mitsubishi Heavy Industries - India www.mhiindia.com Siemens Ltd. www.energy.siemens.com/hq/en/renewable-energy/solar-power TD Power Systems Ltd. www.tdps.co.in/product_steam_solar_app.html Triveni Engineering & Industries www.trivenigroup.com/turbines/salient-features.html Turbo Energy Ltd. (TEL) www.turboenergy.co.in Turbotech www.turbotechindia.com VVK Turbo www.vvkturbo.com www.csptoday.com CSP Today Markets Report 2014 | 215 India Steam Generators Anu Solar Power Pvt. Ltd. www.anusolar.in/Solar-Power-Generators.html Arani Power Systems www.aranipower.com Bharat Heavy Electricals Ltd. (BHEL) www.bhel.com/product_services/product.php?categoryid=62&link=Power GB Engineering Enterprises Pvt. Ltd www.gbengineering.in Hitachi Ltd. www.hitachi.co.in/products/business/energy/index.html Sondex Heat Exchangers India www.indiamart.com/sondex-heatexchangers/profile.html Pvt.Ltd. Pumps TD Power Systems Ltd. www.tdps.co.in/product_steam_solar_app.html Thermax www.thermaxindia.com/Large-Industrial-Boilers/Solar-Thermal/Solar-SteamGenerators.aspx Adhithana Engineering Corporation LLP www.adhithana.com Alfa Laval – India www.alfalaval.com Bharat Heavy Electricals Ltd. (BHEL) www.bhel.com/product_services/product.php?categoryid=62&link=Power Hitachi Ltd. www.hitachi.co.in/products/business/energy/index.html Lorentz www.lorentz.de Sondex Heat Exchangers India www.indiamart.com/sondex-heatexchangers/profile.html Pvt.Ltd. Sedop www.csptoday.com www.sedopsolar.com/accessories.html CSP Today Markets Report 2014 | 216 India Valves Aalborg (available through Advance Tech) www.advancetech.in/ourbusiness/details/889/378/industrial-&-manufacturing/ our-partners/aalborg-instruments-&-controls-inc Adhithana Engineering Corporation LLP www.adhithana.com Alfa Laval – India www.alfalaval.com Bharat Heavy Electricals Ltd. (BHEL) www.bhel.com/product_services/product.php?categoryid=62&link=Power Bharat Solar Energy www.bharatsolarenergy.com/3-/content.html BOMAFA Special Valve Solutions Pvt. Ltd. www.bomafa-india.com/en/ HP Valves & Fittings India Pvt. Ltd. www.hpvalvesindia.com John Crane Sealing Systems India Pvt Ltd www.johncrane.co.uk MAC Valves (supplied through www.macvalves.com Compete Tools Pvt, Mumbai; www.competetool.co.in Ardee Hi-Tech Pvt. Ltd, Andhra www.ardeegroup.com Pradesh; and A.C. Automation, Delhi). Sedop www.sedopsolar.com/accessories.html Steam Turbine Engineering India Pvt. Ltd. www.steipl.com/index.html Thermax www.thermaxindia.com/Solar.aspx Valtorc International (supplied www.valtorc.com through Ardee Hi-Tech Pvt. www.ardeegroup.com Ltd, Andhra Pradesh) Tracking Systems www.csptoday.com Headway Solar www.headwaysolar.com/solar-axis-tracker-solutions.html Lorentz www.lorentz.de Meca Solar http://www.mecasolar.com/_bin/seguidor_2_eje.php Samrat Solar www.samratsolar.com SunPower India www.sunpowercorp.co.in/products/solar-trackers CSP Today Markets Report 2014 | 217 India Heat Exchangers Alfa Laval – India www.alfalaval.com Arani Power Systems www.aranipower.com GB Engineering Enterprises Pvt. Ltd www.gbengineering.in HRS Process Systems Limited www.hrsasia.co.in Parkaire Engineering Co. Ltd. www.parkaire.net Patels Airtemp www.patelairtemp.com Sondex Heat Exchangers India www.indiamart.com/sondex-heatexchangers/profile.html Pvt.Ltd. TEMA India Ltd. www.temaindia.com Universal Heat Exchangers Ltd www.uniheat.com Receiver Tubes / Solar Collectors Anu Solar Power Pvt. Ltd. www.anusolar.in/Solar-Power-Generators.html Airier Natura www.airier.com/product.html Clique Solar www.cliquesolar.com/index.aspx Kenergy www.kenergy.co.in Empereal-KGDS www.empereal.com KVK Energy Ventures Ltd. www.csptoday.com Maharishi Solar www.maharishisolar.com Megawatt Solutions Pvt. Ltd. www.megawattsolutions.in Photon Energy Systems Ltd. www.photonsolar.in/html/pvs-thermal.html SCHOTT Glass India Pvt. Ltd. www.schott.com/solar/english/index.html?so=uk&lang=english SharperSun www.sharpersun.com Siemens Ltd. www.energy.siemens.com/hq/en/renewable-energy/solar-power/ Taloyormade Solar Solutions Pvt. Ltd. www.tss-india.com/ Thermax www.thermaxindia.com/Solar.aspx Ultra Conserve Pvt. Ltd. www.conserve.co.in/index.php CSP Today Markets Report 2014 | 218 India Heat Transfer Fluid Alfa Laval – India www.alfalaval.com Dowtherm by Dow Chemical Company (available in India through Thermic Fluids Pvt. Ltd.and Chimanlal Maganlal & Co.) www.thermicfluids.com LANXESS India Private Ltd. www.basic.lanxess.com/bac/en/products/diphyl Solutia - Eastman www.eastman.com www.solutia.com Therminol Air-Cooled Condenser CSP Mirrors www.therminol.com AM Clean Air Engineering Pvt. www.hvacequipments.co.in Ltd. Parkaire Engineering Co. Ltd. www.parkaire.net/water_%20air_cooled_condensers.htm Patels Airtemp www.patelairtemp.com Flabeg Solar India Pvt. Ltd http://www.flabeg.com/ Thermosol Glass http://www.thermosolglass.com/ SCHOTT Glass India Pvt. Ltd http://www.schott.com/india/english/index.html 7.4.2. Raw Material Availability While there are materials and components easily available like steel, glass and concrete, there are others that are less easy to find such as molten salts. Table 18(7) lists the main suppliers available in India for each of the raw materials used in CSP projects. www.csptoday.com CSP Today Markets Report 2014 | 219 India Table 18(7): Raw Material Availability and Suppliers Material Supplier Steel HIRA Steel Ltd Indian Steel Works Ltd Indian Steel Corporation Ltd Jindal Steel Power Ltd Welspun Steel Ltd ThyssenKrupp Electrical Steel India Pvt. Ltd Essar Steel Monn Steel India Ltd Tata Steel Glass Saint Gobain Emmvee Toughened Glass Pvt AIS Glass Solutions Ltd Triveni Glass Ltd JK International Asahi India Modiguard Sezal Glass HNG Float Glass Ltd Gold Plus Glass Industry Ltd Molten Salt Triveni Chemicals Concrete RDC Concrete Pvt. Ltd JBA Concrete Solutions Concrete India Pvt. Ltd UltraTech Concrete New Concrete India Pvt. Ltd Lafarge ACC Larsen & Toubro Madras Cements Grasim 7.5. Alternative CSP Markets India has a high potential for the employment of CSP technology particularly for the production of industrial heat and process steam. Such applications would fit in well with the expanding trends of the manufacturing industry in these years. Another area for potential application in some parts of the country would be water desalination. Finally, there is a huge potential for the www.csptoday.com hybridization of the existing fossil fuel power stations. 7.5.1. Process Steam Applications of Concentrating Solar Thermal Concentrated solar systems have been found to be quite suitable for cooking food for hundreds and thousands of people in community kitchens, especially CSP Today Markets Report 2014 | 220 India at religious places and institutional and industrial canteens. The world’s largest system functions at Shirdi, for cooking food for 20,000 people a day. The systems have also found applications for heat, laundry and food processing in industries. These include systems at Gajraj Drycleaners, Ahmed Nagar, Maharashtra; ITC, Maurya, Delhi and Tapi Food Industries, Valsad, Gujarat. The systems are mainly being installed at places where steam generated through conventional boilers is already being used for cooking application. Installed in hybrid mode, these systems could save a significant amount of fuel oil at such places. These systems, along with vapor absorption machines, have been demonstrated for air conditioning as well. The systems have been installed at places where power cuts are high and electricity is expensive: 100 TR air conditioning plant at Muni Seva Ashram, Vadodara; 92 TR at TVS, Suzuki factory near Chennai; 212 TR at Civil Hospital, Thane near Mumbai; 30 TR plant at Magnetic Mareli, Gurgaon; and 100 TR for process cooling at Mahindra Vehical Manufacturers Ltd, Chakan, Pune etc. These are just a few examples. A total of about 80 steam-generating systems have been installed so far in the country, with a cumulative dish area of 25,000 square meters. 7.5.2. UNDP-GEF Project To boost the use of concentrating solar technologies, the Ministry of New and Renewable Energy has also been implementing a new UNDP-GEF supported project on “Market Development & Promotion of Solar Concentrator-based Process Heat Applications in India”, since April 2012. The objective of the project is to promote and commercialize concentrating solar technologies for industrial process heat applications in India and to facilitate the installation of 45,000 m2 of installed solar collector area by March 2017 through 30 demonstration and 60 replication projects. Direct emission reduction from these projects during its 5 years period will be 39,200 tons of CO2. 7.5.3. Biomass solar thermal hybrid projects The Ministry of New and Renewable Energy, under the Government of India, is implementing a MNRE - UNDP/ GEF assisted project on “Removal of Barriers to Biomass Power Generation in India.” The aim of the project is to accelerate the adoption of environmentally sustainable biomass power technologies by removing identified barriers, thereby laying the foundation for large-scale commercialization of biomass power through increased access to financing. As part of this project, the Ministry is contemplating the support of the Detailed Project Report and Bid Document for establishment of commercial-scale projects based on hybrid biomass CSP technology for generation of grid connected power. The capacity of such power plants may be in the range of 2 to 10 MW depending upon the technology deployed, location, economic viability, and other factors. The aim of providing such technical assistance is to help project developers achieve faster development of commercially viable projects, and to create new investment opportunities in the country. 7.5.4. Desalination India has a great potential for desalination, with a 7,000 km long coastline and severe water scarcity problems. India is home to the world’s first Linear Fresnel desalination plant. The plant, which was developed by Empereal-KGDS, went into commissioning in October 2012 and into commercial operation in February 2013. The details of this plant are provided below: Table 19(7): The World’s First Linear Fresnel Desalination Plant Current Status: Operation Country: India Gross Capacity: 1.06 MW Developers: Empereal-KGDS Technology: Linear Fresnel EPC: Empereal-KGDS Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 221 India Table 20(7): LFR Desalination Plant Specifications Status Current Status Operation Status Notes MED-TVC testing completed EPC Date Granted 01/09/2010 Notice to Proceed (NTP) 01/09/2010 Construction date - actual starting date 01/03/2012 Expected Commercial Operation Date (COD) 01/09/2012 Actual Commercial Operation Date (COD) 12/02/2013 Technology Gross Capacity 1.06 MWe or MWth MWth Technology Linear Fresnel Application Demonstration Back-up fuel Biomass fuel (Juliflora) Back-up fuel percentage 50% Heat Transfer Fluid (HTF) Water Net Annual Production - Expected (GWh) 6 GWh thermal Solar Field Inlet Temperature (oC) 40 Solar Field Outlet Temperature (oC) 218 Storage (Hours) 0.50 Storage temperature (Celsius) 211.00 Country India State/Region Ramanathapuram, Tamil Nadu Latitude 9.15 Longitude 78.45 Solar Field Aperture Area (sq m) 1,404 www.csptoday.com CSP Today Markets Report 2014 | 222 India Companies Involved Developers Empereal-KGDS Coimbatore Developers (Ownership Notes) Department of Science and Technology (DST) owned plant developed by M/S Empereal-KGDS, in collaboration with National Institute of Ocean Technology, Chennai EPC Empereal-KGDS Utilities Utility (Off-taker) 1 Tamil Nadu Water And Drainage Board (TWAD) PPA Notes Water Purchase Agreement signed between TWAD board and developer Investment & Finance Financing Financing provided by Department of Science and Technology, Govt. of India Suppliers O&M Contractors Empereal-KGDS O&M Contract Length 3 years Mirror Supplier FR 1 Saint Gobain Additional Additional Info This is a desalination plant. The capacity of the Linear Fresnel solar field is 560 kW (thermal). Since it is a hybrid system, the biomass boiler output is also at 500 kW (thermal). Storage Medium: Steam accumulator Additional: The steam produced by solar energy is used for desalinating the sea water by a Multi-Effect Distillation system that produces 6,000 liters/hour of ultra-pure desalinated water. The total dissolved solid in the desalinated water is less than 2 parts per million (ppm). Source: CSP Today Global Tracker, August 2013 7.6. Market Forecast Amongst the countries that constitute today’s worldwide CSP market, India certainly seems an ambitious player, with the Jawaharlal Nehru National Solar Mission (JNNSM) targeting up to 20 GW of grid-connected solar power by 2020. With 56 MW of www.csptoday.com capacity already installed, 254 MW in construction today, and 210 MW in development, the Indian market is one to watch in the next decade as the country works towards its targeted capacity. Despite India’s large CSP potential, progress in the first round of tenders has been disappointing, and raises concerns regarding the CSP Today Markets Report 2014 | 223 India deployment timing of future plants. With an average DNI of 2,100 kWh/m2/year, and a sustained ecosystem promoting the development of utility-scale solar projects, the Indian CSP industry is poised for growth in the short and medium term. Indeed, according to the Ministry of New and Renewable Energy’s (MNRE) JNNSM Phase 2, the target capacity matrix for 2014-2015 is 1,080 MW for CSP and 2,520 MW for PV. The forecast shown below only considers 2014 and 2015 projects that are already under construction or development as a capacity ceiling, due to the inherently long lead time: 36 to 48 months from development to operation. As such, India’s CSP targets promise a good future for the domestic CSP industry, but execution of this matrix will be challenging within the two remaining years, as per the three scenarios that predict lower capacities by 2015. The potential of the country is, however, well-demonstrated in later years of the forecast, as execution tends to lag on prediction, and therefore even under the optimistic scenario, the CSP capacity reached by 2022-2023 will remain relatively low at 2.0 to 2.7 GW, comparatively far behind the target of 10 GW by 2022. Delays in deployment, as is the current case in India, explain why, once again, the conservative and pessimistic scenarios are relatively closer to each other than to the optimistic outlook. In the conservative and pessimistic scenarios, the momentum of deployment is significantly slower, assuming the current target was not reached by 2024. But with the addition of new programs supporting hybrid power plants and other applications, the forecast could be outperformed by reality under the right market conjuncture. Figure 2(7): Installed CSP Capacity in India Until 2024 (MW) 4,000 3,666 Optimistic 3,500 Conservative Pessimistic 3,000 2,500 2,000 1,390 1,500 1,000 697 500 0 2006 2008 www.csptoday.com 2010 2012 2014 2016 2018 2020 2022 2024 CSP Today Markets Report 2014 | 224 India Figure 3(7): CSP Cumulative Energy Production in India until 2024 (TWh) 100 91.1 Optimistic 90 Conservative 80 Pessimistic 70 60 48.8 50 40 32.7 30 20 10 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Conclusion India’s CSP industry has undergone a year of development and intensive learning. While four out of five CSP projects under Phase 1 of the National Solar missed their commissioning deadlines, this provided valuable lessons to be incorporated into Phase 2. Such lessons include reconsidering the completion time given to developers, and providing more reliable DNI data. Phase 1 also saw a number of achievements, such as huge cost reductions in capital expenditure, increased localization of components and services, and the implementation of a competitive bidding process for solar power procurement that has significantly brought down CSP tariffs in India. www.csptoday.com CSP Today Markets Report 2014 | 225 India References Basu, S., 2011. IDFC Policy Group. India Solar Policy: Elements Casting Shadow on Harnessing the Potential. De, A. 2013. AF-Mercados EMI. Workshop on Challenges and Issues in Solar RPO Compliance/RECs. Dunn, R., 2012. SolarPACES 2012. Report on the 2012 SolarPACES Conference. Lamb, P. M., 2006. Center for Environmental Science and Policy. The Indian Electricity Market: Country Study and Investment Context Working Paper. Stanford University, USA. Somani, G., 2013. 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Jawaharlal Nehru National Solar Mission, Guidelines for Selection of New Grid Connected Solar Power Projects. VV. AA., and Marquez, C., 2012. FC Business Intelligence. CSP Today Market Report 2012-13. VV, AA., and Muirhead, J., 2013. FC Business Intelligence. CSP Today Quarterly Update. VV, AA., 2013. FC Business Intelligence. CSP Today Global Tracker Database.
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Information and data available through: <www.re-database.com>. VV. AA., 2013. Information and data available through: <www.csp-world.com>. VV. AA., 2013. Information and data available through: <www.iitk.ac.in>. VV. AA., 2013. Information and data available through: <www.renewableenergyworld.com>. VV. AA., 2013. Information and data available through: <www.indianpowermarket.com>. VV. AA., 2013. Information and data available through: <www.cpil.co.in>. (VV.AA: Various Authors) www.csptoday.com CSP Today Markets Report 2014 | 227 India Acronyms ACRONYM DEFINITION ADB Asian Development Bank APPC Average Pooled Purchase Cost BHEL Bharat Heavy Electricals Ltd. CEA Central Electricity Authority CERC Central Electricity Regulatory Commission CTU Central Transmission Utility C-WET Centre for Wind Energy Technology DNI Direct Normal Irradiance FIT Feed-in-Tariffs FMO Dutch Development Bank GBI Generation Based Incentive GSEC Government Securities ICICI Industrial Credit and Investment Corporation of India IDBI Industrial Development Bank of India IITB Indian Institute of Technology Bombay IMD India Meteorological Department INR Indian Rupee IOB Indian Overseas Bank IPP Independent Power Producer IREDA Indian Renewable Energy Development Agency Ltd. ISCC Integrated Solar Combined Cycle JNNSM Jawaharlal Nehru National Solar Mission MEIL Megha Engineering and Infrastructure Ltd. MENA Middle East and North Africa MNRE Ministry of New and Renewable Energy MOEF Ministry of Environment and Forests NCDMA National Clean Development Mechanism Authority NRDC Natural Resources Defense Council www.csptoday.com CSP Today Markets Report 2014 | 228 India NSM National Solar Mission NTPC National Thermal Power Company NVVN Vidyut Vyapar Nigam Ltd PSA Power Sale Agreement REC Renewable Energy Certificate RfS Request for Selection RPO Renewable Purchase Obligation RVPN Rajasthan Vidyut Prasaran Nigut SBI State Bank of India SBP State Bank of Patiala SBT State Bank of Travancore SEB State Energy Board SECI Solar Energy Corporation of India SESI Solar Energy Society of India SERC State Electricity Regulatory Commission STU State Transmission Utility TEDA Tamil Nadu Energy Development Agency TWAD Tamil Nadu Water and Drainage Board VGF Viability Gap Funding UNDP – GEF United Nations Development Program – Global Environmental Facility www.csptoday.com CSP Today Markets Report 2014 | 229 Chile 8 Chile By Marco Poliafico Contents List of Figures 230 List of Tables 230 Chapter Summary 232 Country Overview 232 8.1. Electricity Market 234 8.1.1. Electricity Consumption 236 8.1.2. Electricity Demand 236 8.1.3. Grid Transmission 236 8.1.4. Market Structure Diagram 238 8.2. CSP Market 239 8.2.1. National Energy Strategy: 2012-2030 239 8.2.2. CSP Suitability: Highest DNI in the World 240 8.2.3. Energy Demand Profile 240 8.2.4. First CSP Tender 241 8.2.5. Local Content Requirements 242 8.2.6. CSP Project Profiles 243 8.3. Local CSP Ecosystem 244 8.3.1. Key Government Agencies 245 8.3.2. Utilities and Independent Power Producers 246 8.3.3. Permitting Agencies and Feasibility Study Providers 246 8.3.4. Local Consultants and R&D Bodies 246 8.3.5. Financing Organizations 248 8.3.6. Developers and EPC Firms 249 8.4. Local Component Supply 250 8.5. Alternative CSP Markets 250 8.5.1. Case Study: Minera El Tesoro, Chile 8.6. Market Forecast 251 252 Conclusion 253 References 254 Acronyms 256 www.csptoday.com CSP Today Markets Report 2014 | 230 Chile List of Figures Figure 1(8): Direct Normal Irradiation in Chile 233 Figure 2(8): Load Profile of the SIC System on 10 June 2013 241 Figure 3(8): Installed CSP Capacity in Chile Until 2024 (MW) 252 Figure 4(8): Cumulative CSP Energy Production in Chile to 2024 (TWh) 253 List of Tables Table 1(8): Chile CSP Development: Drivers and Barriers 234 Table 2(8): Transmission Power Systems of Chile 237 Table 3(8): Criteria of the Tender Process for CSP Plants in Chile (February 2013) 241 Table 4(8): CSP Projects in Chile 243 Table 5(8): Ministries and Government Agencies in Chile 246 Table 6(8): Utilities and Independent Power Producers in Chile 246 Table 7(8): Permitting Agencies and Environmental Assessment Agencies Operative in Chile 246 Table 8(8): Consultants and R&D Bodies Operative in Chile 247 Table 9(8): Main Funding Institutions and Banks Operative in Chile 249 Table 10(8): Developers, EPCs and Engineering Companies Operative in Chile 249 Table 11(8): Techno-Economic Data of Mineral El Tesoro CSP Plant 251 www.csptoday.com CSP Today Markets Report 2014 | 231 Chile Chapter Summary Recently moving into the CSP spotlight owing to its excellent DNI that ranges from 2,445 kWh/m2 to 3,832 kWh/m2 per year, Chile benefits from a transparency index which justifies the country’s growing interest in CSP generation. With a potential of up to 2,636 GW of CSP, the country’s wheels are in motion to exploit CSP technologies, and a parabolic trough plant of 14 MW is already in operation. In addition, there is currently 1,080 MW in planning. Chile is ranked as the sixth most promising CSP market. Chile is the second-least energy self-sufficient country in the Latin American and Caribbean (LAC) region and experiences the second highest electricity prices within the same area. The country is now considering more seriously the shift toward indigenous energy sources, given the abundance of wind and hydro resources, particularly in the south, while in the north region, the Atacama Desert has one of the world’s highest levels of solar irradiation. The current largest user of energy in Chile and the engine of the economy is the mining sector, as well as the industrial (together accounting for 36%), followed by the transport sector (35%). Chile’s economy is expected to continue growing at a rate of 4% to 5% over the next 15 years. A particular aspect of importance in the energy market is the transmission grid, which is spread unevenly throughout the country, due in particular to the challenges related to its physical geography. The current energy policy in Chile is based on the “National Energy Strategy: 2012-2030: Energy for the Future” announced in 2012. Through this strategy, the government reaffirmed its commitment to achieve a 10% target of generation from renewable technologies by 2024. For the time being, there is no Feed-In-Tariff scheme or specific policy for the deployment of solar energy. However, CSP is considered the most appropriate technology to exploit the extraordinary amount of solar resources. Given the high electricity prices, Chile could even become the first solar power market to be independent of subsidies or tax benefits, and to reach grid parity based on local costs. Country Overview Chile Solar Resource (average annual sum of DNI): 3,300 kWh/mВІ/year (in the north) Size:756,096 kmВІ Population (2012):17.4 million GDP per capita (2012): US$ 15,363 Installed power capacity: 17.61 GW Annual electricity consumption: 60.1 TWh Expected annual electricity demand in 2020: 100 TWh Electricity Mix (2012) Coal/Petroleum 35% Natural Gas 25% Diesel, Oil 3% Large Hydro 34% Renewables 3% (small hydro 1%, wind 1%, biomass 1%) Known Energy Resources Coal, Oil, Natural Gas, Hydro, Wind, Biomass, Solar Potential Markets for Industrial CSP Applications Mining www.csptoday.com CSP Today Markets Report 2014 | 232 Chile Figure 1(8): Direct Normal Irradiation in Chile Source: SolarGIS В© 2013 GeoModel Solar s.r.o. www.csptoday.com CSP Today Markets Report 2014 | 233 Chile Table 1(8): Chile CSP Development: Drivers and Barriers Drivers Barriers Extraordinary solar resources No specific regulatory framework is available for CSP - the current one still presents barriers for the penetration of renewable energies Need to diversify the energy mix to increase the energy security Limited grid capacity and lack of adequate transmission lines, as the best locations are not always close enough to existing grid facilities High dependence on fuel imports and the volatility of their Water scarcity international cost Growing energy demand, due to population and economic Lack of track record and associated know-how related to trends CSP technology High electricity prices Finance sector does not have experience in funding CSP projects whilst high capital investments are required Growing mining sector and associated energy demand Missing interconnection of the four power systems Renewable Portfolio Standards Difficulties in signing long-term contracts Chile is one of the few producers of salts employed in Thermal Energy Storage systems Lack of adequate financial support - these projects are still considered high risk Opportunity for hybrid plants integrated with already existing thermal power plants Poor coordination among institutions involved in the energy sector Environmental concern due to the high GHG emissions and social acceptance of green sources Lack of good R&D projects and statistical data on resource availability (this barrier is being addressed by the recent initiatives described in this chapter) Access to electricity for remote regions Conflicts of interest between the public and private sectors The need to increase competitiveness by increasing the number of players in the electricity market Difficulties for new entrants due to the high concentration of the market amongst few stakeholders Lack of strong political commitment despite the ambitious announcements 8.1. Electricity Market The ruling Chilean government under President Sebastian PiГ±era has set the objective of annual GDP growth rates of 6% until Chile reaches the status of a developed country with a GDP per capita of US$ 22,000 in the year 2018. Large hydropower schemes have historically provided most of the generation capacity; approximately 35% of the installed capacity of Chile is represented by hydroelectric plants. However, the situation has been quite unreliable due to heavy droughts (particularly in 1998-1999 and 2007-2008) www.csptoday.com which seriously impacted the energy sector. Due to these issues, Chile initially shifted its energy mix towards natural gas imported from Argentina. However, Argentina was forced to deal with its own domestic shortages due the massive crisis in 2004 and as a consequence, it unilaterally stopped natural gas exports. At that point, Chile’s energy mix shifted toward diesel, with huge implications in terms of cost and environmental impact. At the same time, Chile invested in the development of the coal industry. CSP Today Markets Report 2014 | 234 Chile As a whole, Chile’s power generation levels have declined over the last 20 years, but consumption increased by 4 times during the same period. The above-described mix of natural events such as droughts, increasing energy demand and high price of diesel, as well as other imported fuels, had a serious impact on the energy market. In 2005 the country was already importing more than 70% of its energy supply. In 2011, a blackout kept more than 10 million people (approximately 58% of the population) without electricity for several hours, demonstrating the need for further installed capacity. Nowadays, Chile is heavily dependent on energy imports, mostly supplied by other South American countries (mainly Ecuador, Brazil, Colombia and Argentina). The country still imports approximately 70% of its primary energy supply due to the extremely limited availability of domestic energy resources. As a consequence, it is the second least energy self-sufficient country in the Latin American and Caribbean (LAC) region, preceded only by Panama. The import of oil, gas and coal represents more than 23% of the total value of Chilean imports. The local power market is also characterized by clear environmental concerns as the power grid has the highest Greenhouse Gas (GHG) emission of all the major Latin American electricity grids. Last but not least, Chile experiences the second-highest electricity prices, after only Uruguay. The Chilean power market is based on the concept of marginal cost – the last unit of electricity dispatched determines the price – while using diesel for the peak load (after hydro and coal) causes the price to rocket. According to data provided by the Organization for Economic Cooperation and Development (OECD), electricity prices increased by 400% between 1998 and 2011, reaching a level of US$ 256.4/MWh, which is much higher than the average price in the OECD countries (US$ 159.4/MWh). Chile is also looking at importing shale-gas from the United States, starting from 2016. The issues around energy security and environmental concerns increased distrust towards imports and volatility towards international fuel prices. The favorable view of renewable energy was reinforced by the repeated energy crises faced by the country and for this reason Chile is now considering more seriously the shift toward indigenous energy sources. Non-Conventional Renewable Energy (NCRE) is defined by Chilean law as renewable energy generation excluding hydropower projects over 40 MW and the source of around 3% of www.csptoday.com total energy production (mostly represented by microhydro facilities). However, there is abundant availability of wind and hydro resources, particularly in the south, while the north region (Atacama Desert) has one of the world’s highest levels of solar irradiation. The potential of geothermal energy is high throughout the whole territory. All in all, the potential for generating renewable energy is very high, and there is a dire need to increase the reliability and security of the national energy industry. Furthermore, the growing economy and associated increasing energy demand make the business case for investing in renewable energy capacities. Although the potential for CSP plants has not been clearly determined on a large scale, according to the 2013 forecast carried out by CSP Today, it is expected that approximately 2 GW CSP could be produced by 2024 in the most optimistic scenario, and 348 MW based on the pessimistic forecast. The Chilean power market is completely privatized, and the current framework, in which the three segments (generation, transmission and distribution) operate in a completely independent manner, was established by the Electricity Act of 1982. This system attracts investment from international players and leaves to the state a minimal regulatory role. The national electricity industry involves 70 companies. Out of these, 40% operate in the generation segment, 7% in transmission and 53% in the distribution sector. Despite its liberalization, the electricity market is practically controlled by a small number of companies. For instance, the generation sector in the central market (SIC - see below) is dominated by three players (Endesa, Tractevel (Colbun) and AES Gener) owning together approximately 90% of the total installed capacity. The SING market has six dominant players owning over 99% of the installed capacity (E-CL, Electroandina, Gasatacama, Celta, Norgener and AES Gener). A similar situation exists in the distribution sector, where few companies dominate the market, namely CGE DistribuciГіn S.A., Chilectra S.A., Chilquinta EnergГa S.A., and Inversiones ElГ©ctricas del Sur S.A.(Grupo SAESA). The power sector in Chile is organized as a pool market structure, which entails the coordination of all of the physical and financial operations through a central system. The short-term price of electricity (spot price) is determined through ad-hoc modeled calculations carried out by the Market Operators (MO) of the two main grids, and the transactions from producers to CSP Today Markets Report 2014 | 235 Chile distributors occur within the wholesale market. This is privately operated and therefore in theory completely open, although it is controlled by a few generating companies (as explained above), which in practice operate in a virtual monopoly regime because of the high cost of building the transmission network. The role of the MO and of the System Operator (SO) is vested by independent entities – the Economic Load Dispatching Centers (Centro de Despacho de Carga, CDEC - owned by a group of generating companies) who coordinate all the transactions in the market. The CDECs are supervised by the SEC and amongst their other responsibilities is to monitor the safety and the smooth operations of the grid system. Generators sell the electricity to distribution companies within the wholesale market through public tenders at a fixed price determined by the CDECs, and via long term Power Purchase Agreements (PPAs) - usually 15 years long. However, they can also negotiate financial contracts directly with free clients (see definition below) or access the spot market to sell additional production outside of the PPA system. They also pay transmission fees, which can provide a 10% margin to transmission companies. Operators of this sector are classified according to the size of their systems. The large systems have an installed capacity higher than 200 MW, whereas small systems have a maximum capacity of 1.5 MW. Some large mining companies or other heavy users of electricity have their own captive generation, mainly developed to avoid the high operational costs of diesel generators (if renewable technologies are employed) and the cost of building transmission lines. 8.1.1. Electricity Consumption The current largest user of energy is the mining sector and industry in general (approximately 36%), followed by the transport sector (35%) and buildings (both commercial and residential - approximately 29%). This distribution of energy consumption per final user is expected to be even more pronounced in 2030 when the final energy demand is projected to be distributed between the industrial sector (41%) and the transport sector (40%), followed by the residential (16%) and commercial (3%) sectors. Therefore, it is expected that industry and transport will consume more than 80% of the overall demand. In line with these data, the energy demand for the industrial sector alone is projected to grow at a rate of 4.2% per year, whereas the same parameter for the transport sector is expected to be 4.9% per year. Lower growth rates are projected for the www.csptoday.com residential and commercial sectors (respectively 2.3% and 3.6% per year). The industrial sector, including the mining industry, consumed 68% of the total electricity generation in 2011. In the northern region, this rises to between 80% and 90%. This figure is expected to grow 5% annually in the coming years. Under current trends, the growing energy demand will be satisfied by coal-fired power generation and, increasingly, by diesel. As for oil and natural gas, Chile imports most of the coal utilized in electricity generation. Nuclear is not yet part of the energy mix; however, it is an option considered for the medium and long term. 8.1.2. Electricity Demand Chile’s economy is expected to keep growing at a rate of between 4% and 5% for the next 15 years. At the same time, the population is currently increasing at an average rate of 0.8% per year. The increasing energy demand is caused by both of the aforementioned factors, but in particular by the expansion of the industrial sector. The energy demand is expected to increase on average by 4% per year from now until 2025 and electricity demand is projected to increase between 5.5% and 6.5% in the same period. These high rates are also caused by the relatively high energy intensity, in terms of electricity indicating a low energy efficiency of the local economy (0.42, compared with the average OECD value of 0.27). Translated in terms of electricity demand, this means that increasing the GDP by 1 unit requires approximately a 1.5 unit increase of electricity supplied. All of the data compiled show that further generation capacity is needed to satisfy the growing demand. According to Chile’s National Energy Strategy, an additional 8 GW of installed capacity is needed by 2020 to meet energy requirements. A particular aspect of the mining industry’s electricity demand is the almost flat profile due to continuous business operations. This element suggests the suitability of CSP technology with Thermal Energy Storage (TES) to guarantee electricity production around the clock for mining operations. 8.1.3. Grid Transmission The transmission grid is spread unevenly throughout Chile, due in particular to the challenges related to its physical geography. The transmission and distribution grids serve almost all of the urban population and approximately 95% of the rural population. CSP Today Markets Report 2014 | 236 Chile The country has suffered, in the past, from a lack of tailored policy and incentives to support the development of a suitable transmission grid able to accommodate renewable energy capacity. This is expected to change as the government plans to expand the role of renewables within the energy mix over the next decade to increase energy security and resilience from imports. The transmission sector is divided into four separate power systems providing electricity to different geographic locations. The Large Northern Interconnected System, or Sistema Interconectado del Norte Grande (SING), is the larger one and supplies the north of the country, from Arica in the north to the town of Coloso in the south. Its generation capacity is provided 100% by thermal power plants and is mainly absorbed by the mining industry, representing 90% of the total demand (all free customers). The Central Interconnected System, or Sistema Interconectado Central (SIC), covers the central part of the country, from the end of the northern system down to the island of Chiloe, in the southern region, for a total length of approximately 2,100 km, including the capital city of Santiago. The generation capacity here is represented by hydropower for 45%-65%, and the remaining portion by thermal power plants, with some residual percentage provided by wind. The Aysen Electric System corresponds to five medium systems located in the southern region (Palena, HornopirГ©n, Carrera, CochamГі and Aysen). Finally, the Magellan Electric System covers four subsystems (Punta Arenas, Puerto Natales, Porvenir and Puerto Williams). It is located in the southernmost part of Chile and supplies the cities of the same names. Additional information is provided in the Table 2(8). Table 2(8): Transmission Power Systems of Chile SING SIC Aysen Magellanes Extended Name Northern Interconnected System Central Interconnected System Aysen Electric System Magellan Electric System Portion of the national generation capacity 28% 71% 0.4% 0.6% Population served 6% 92% < 1% < 1% Free clients 90% 35% 0% 0% Regulated clients 10% 65% 100% 100% Regions served Arica/Parinacota, TarapacГЎ and Antofagasta Atacama, Coquimbo, ValparaГso, RegiГіn Metropolitana (Santiago), Libertador General Bernardo O’Higgins, Maule, Bio BГo, AraucanГa, Los RГos and Los Lagos Aysen Magellanes www.csptoday.com CSP Today Markets Report 2014 | 237 Chile As a whole, these transmission systems serve over 97% of the population, but are not currently connected. However, there are plans for connecting the two major systems (SIC and SING) in the future, as part of the new Energy Strategy. The development of the four different transmission systems has been conditioned by both geographical and commercial factors. Transmission companies need to allow access to new entrants who wanted to invest in this segment. All of the distribution companies operate under a utility monopoly concession, released for an indefinite period, and obtained from the government for a specific geographic area. Their rates are regulated if the final consumers are regulated customers, since the retail sector is operated as a public service. Two groups of consumers are identified in the Chilean market, namely regulated customers and free customers. Regulated customers are all domestic users and any other consumer with a connected capacity of less than 2 MW, although it is possible to be included in the free customer category when power demand is higher than 500 kW. Free customers are usually large industries (e.g. mines) or commercial activities with demand capacity higher than 2 MW who are not subject to price regulation and are therefore able to negotiate prices directly with the power generation companies (there is no need for the intermediation of trading or distribution companies). 8.1.4. Market Structure Diagram Private Sector Generation 28 Companies Regulatory Transmission Distribution 5 Companies 37 Companies Customers www.csptoday.com Ministry, CNE, SEC CONAMA Free Customers (unregulated) CSP Today Markets Report 2014 | 238 Chile 8.2. CSP Market Today, the energy sector is managed by the Energy Ministry through its regulatory body the National Energy Commission, or ComisiГіn Nacional de EnergГa (CNE), although the Ministry of Economy plays an active and important role as well. In 2010, the US Department of Energy (DOE) and the National Renewable Energy Center (NREL) supported the development of Chile’s Renewable Energy Centre (CER), which was created to work under the guidelines of the Ministry of Energy and ensure the optimal development of NCRE within the energy mix. In the same year, the renewable generation target was increased to an ambitious 20% by 2020. However, this was soon abandoned on economic and fiscal grounds. The energy policy in Chile is based on a few milestone laws that support the development of private sector energy investment. The right of access to transmission and distribution networks for small generators was regulated by law 19.940 in 2004. This also introduced full exemption from transmission fees for plants under 9 MW, and partial exemption for plants between 9 and 20 MW. This subject was further amended, alongside other aspects of long-term contracts for generators, by law 20.018 in the same year. In 2008 (amended in 2010), parliament approved law 20.257 establishing the Renewable Portfolio Standards (RPS), thereby creating the obligation for generators with over 200 MW of installed capacity to implement at least 5% of electricity produced by NCRE sources within their energy mix. According to the regulatory framework, this threshold is bound to increase 0.5% per year starting from 2014 becoming 10% by 2024. Companies which fail to comply with this will be fined a penalty of US$ 30 per MWh exceeding the minimum threshold, which increases to US$ 45per MWh for repeat offences. In 2010, the Ministry of Energy and the Ministry of the Environment were established with the aim of coordinating the energy market and related policies. 8.2.1. National Energy Strategy: 2012-2030 The “National Energy Strategy: 2012-2030: Energy for the Future”, including the new policy, was announced in 2012. This new master plan document highlighted six fundamental objectives including (only relevant ones are quoted here): to increasingly incorporate non-conventional renewable energy sources into the Chilean electricity matrix; to strengthen the design and solidity and boost the development of the transmission system; to address the different challenges presented by the market and electricity distribution; www.csptoday.com and, to promote sustained progress by developing international inter-connections. Through the National Energy Strategy, the government reaffirmed its commitment to generate 10% from renewable energy resources by 2024 and to introduce support mechanisms for the development of new renewable energy projects. These included a tender mechanism to encourage the development of NCRE sources, and specific incentives, such soft loans, tax incentives and subsidies from the government to mitigate the risk for projects and achieve grid parity. For example, the introduction of a guaranteed 12 year-long PPA scheme for renewable energy projects is under consideration. In addition, a Geographic Information System (GIS) with data on resource potential and project portfolio is being considered, to evaluate the economic potential for NCRE projects and enable decision-making by NCRE investors. The GIS would integrate and display geographic information regarding energy demand, energy resources, available government land, environmental protection zones, amongst others. In terms of increasing the implementation of NCREs within the energy mix, the National Strategy aims to increase the deployment of hydropower to between 45% and 48% of the overall energy mix. The plan also indicates that nuclear energy is being considered among the different options. However, there is a strong opposition from environmental leaders regarding the environmental risks that are considered avoidable given the high potential for renewable energy sources. Looking at the development of the transmission system, an investigation is being carried out to assess the potential interconnection of the two largest grids of the country: the Central Interconnected System (SIC) and the Large North Interconnected System (SING). This would increase the security and reliability of the overall network, and would better enable the deployment of renewable energy sources. Alongside this initiative, there is also discussion regarding the opportunity to create “utility corridors” – namely, areas that the state could expropriate, under appropriate commercial agreements with the owners, to extend transmission connections if these are considered strategic for the development of the electricity grid. In relation to the distribution segment, the strategy plans to create Independent Operation Centers (IOCs) for each electricity system that would replace the existing Economic Load Dispatch Centers and work at regional level as autonomous legal entities (although under the supervision of the CNE). These new bodies will have the responsibility of planning for transmission systems; CSP Today Markets Report 2014 | 239 Chile contributing to the security and sufficiency of the system in the long term. Additionally, the regulation overseeing the connection of small generators should be reviewed, with the aim of facilitating the integration of NCRE projects into the power system. Another pillar of the Energy Strategy is the development of international connections. These are considered important due to the unsatisfactory integration experiences that the country has had in the past, such as when importing gas from Argentina. A regional interconnected system would improve the reliability of the grid and therefore the security of supply, enabling a higher diversification of the energy mix whilst potentially reducing costs. Chile aims to consolidate physical links with Argentina and explore any opportunities to connect with neighboring countries, namely Peru and Bolivia. Figure 2(8) is an example of the daily load profile for the SIC system, showing the demand for energy in the country. The example refers to a random day (10th June 2013). Despite the fact that the SIC system serves many urban centers and therefore does not feature a constant energy demand, the absence of strong peaks is noticeable. The difference between the minimum demand and the maximum demand during the day is approximately 28%. The graph is sourced from www.cdec-sic.cl. 8.2.2. CSP Suitability: Highest DNI in the World Chile’s solar irradiation levels are amongst the highest in the world. This has been investigated and confirmed by a number of scientific studies carried out by national and international bodies, including the UN Economic Commission for Latin America and the Caribbean (ECLAC) and the Global Energy Research Institute. In the northern region particularly, the climate of the 600-mile-long Atacama Desert has ideal conditions. With its 0.6 mm rainfall per year, it is one of the driest places on the planet and can receive approximately 2,445 kWh/m2/year to 3,832 kWh/m2/year. These values are reached thanks to a combination of altitude, clear skies and the low influence of atmospheric aerosols. On the other hand, increasing demand for energy and the good match between CSP generation (when implementing TES) and the typical flat profile of industrial consumers, alongside the social and environmental benefits, make CSP technology an ideal fit for this country. Furthermore, given high electricity prices, Chile could even become the first solar power market independent of subsidies or tax benefits for solar energy, reaching grid parity based on local costs. For all these reasons, CSP has been included as the top priority within the CTF investment plan. 8.2.3. Energy Demand Profile For the time being, Chile does not have a Feed In Tariff (FIT) or any other specific policy for the deployment of solar energy. However, CSP is considered the most appropriate technology to exploit the extraordinary availability of resources whilst satisfying the country’s energy demand. The fact that CSP is dispachable and can be used even after daylight hours makes it particularly suitable for Chile, where demand remains high in the morning and evening. www.csptoday.com CSP Today Markets Report 2014 | 240 Chile Figure 2(8): Load Profile of the SIC System on 10 June 2013 Source: CDEC-SIC 8.2.4. First CSP Tender The first tender for CSP plants was published in February 2013. The Ministry of Energy, through the CorporaciГіn de Fomento de la ProducciГіn de Chile (CORFO), or the Chilean Economic Development Agency, provided a subsidy of up to US$ 20 million, besides facilitating land access. Furthermore, the government negotiated a consortium of financing sources for a total amount of more than US$ 350 million in soft loans, with a below-market interest rate. Part of these funds was offered by the European Union (subsidy of up to US$ 18.6 million), the Inter-American Development Bank (IDB - loans for at least US$ 66 million) and the German Development Bank (KfW - loans for US$ 135.2 million). The deadline submission for project proposals was delayed two months from August 2013 to October 2013. Some of the requirements for developers are summarized in Table 4(8). Table 3(8): Criteria of the Tender Process for CSP Plants in Chile (February 2013) Parameter Criteria Size Minimum 10 MW Grid System Either of the two major networks (SIC or SING) Technology Any (parabolic trough, central tower, dish stirling, Fresnel) Storage Minimum 3 hours at 85% load Back-up fuel Not allowed, other than to maintain thermal fluids and/or molten salts at the right temperature to avoid freezing. The amount of back-up fuel cannot be higher than 6% of the annual electricity generated by the plant www.csptoday.com CSP Today Markets Report 2014 | 241 Chile Land The developer can either propose a location or use the land which the government has made available for this project (Maria Elena) Water The developer has to declare the amount that will be required for O&M of the plant Track record The developer must present detailed information of a track record in CSP (either direct or indirect experience through a subcontracted company). Such experience needs to refer to a plant of a minimum of 10 MW PPA Developers must demonstrate that they have arranged either a PPA or a MoU for the purchase of electricity. MoU needs to be resolved into a PPA within 12 months from the outcome of the tender process. The developer could also sell in the spot market although financing could be complicated in this case Other data The submission must include a year’s worth of meteorological data, including solar radiation data and other parameters at the location of the plant In conclusion, the main objectives of the Chilean energy policy are the promotion of energy-competitive prices, the achievement of energy supply security and the development of sustainable energy generation technologies. Despite the recent introduction of new regulatory reforms and incentives to facilitate the development of the renewable energy sector, there are still some barriers hindering the energy market from achieving the stated objectives. Recent projections indicate that unless a stronger initiative is taken, following the current trend, only 8.5% of electricity would be generated from renewable technologies by 2030. This prediction casts some shadows over the national target of 20/20 (20% by 2020), and calls for further substantial action to reinforce the ambitious announcements. 8.2.5. Local Content Requirements Chile does not have any local content requirements at present. According to an industry insider working within Chile, the country has an extremely liberal economy. However, there are no local content requirements aimed at building up the local CSP supply chain and most industrial products are currently imported from abroad. www.csptoday.com CSP Today Markets Report 2014 | 242 Chile 8.2.6. CSP Project Profiles Table 4(8): CSP Projects in Chile Storage Capacity (hours) Title MWe Technology Status State/Region Developer/s Maria Elena 1 100 Tower Planning Antofagasta Aprovechamientos Energeticos S.A./ Ibereolica Solar 13.5 Maria Elena 2 100 Tower Planning Antofagasta Aprovechamientos Energeticos S.A./ Ibereolica Solar 13.5 Maria Elena 3 100 Tower Planning Antofagasta Aprovechamientos Energeticos S.A./ Ibereolica Solar 13.5 Maria Elena 4 100 Tower Planning Antofagasta Aprovechamientos Energeticos S.A./ Ibereolica Solar 13.5 Minera el Tesoro 14 Parabolic Trough Operation Atacama Desert Abengoa Pedro de Valdivia 1 (PhaseI) 90 Parabolic Trough Planning Antofagasta Ibereolica Solar 10.5 Pedro de Valdivia 2 (Phase I) 90 Parabolic Trough Planning Antofagasta Ibereolica Solar 10.5 Pedro de Valdivia 3 (Phase II) 90 Parabolic Trough Planning Antofagasta Ibereolica Solar 10.5 Pedro de Valdivia 4 (Phase II) 90 Parabolic Trough Planning Antofagasta Ibereolica Solar 10.5 Enerstar MarГa 160 Elena ISCC Parabolic Trough Planning MarГa Elena Enerstar 6 Enerstar Sierra 160 Gorda ISCC Parabolic Trough Planning TBC Enerstar 6 Mejillones Fresnel Announced Antofagasta GDF Suez/ Solar Power Group 5 Source: CSP Today Global Tracker, August 2013 The 14 MW Minera el Tesoro was the first CSP project in the entire South American continent and is located in the Atacama desert. The parabolic trough plant employs a Thermal Energy Storage system integrated www.csptoday.com into a copper mine and supplies heat to the Minera El Tesoro production processes. The thermal energy generated by the solar field (1,280 collector modules) provides approximately 55% of the global CSP CSP Today Markets Report 2014 | 243 Chile consumption of the industrial activity enabling the reduction of annual emissions by about 10,000 t of CO2. The total investment required by this first project was in the order of US$ 12-14 million. The 360 MW Pedro de Valdiva project has obtained the mandatory environmental permits and should require a total investment of approximately US$ 2.6 billion. The same company – Ibereolica – is developing the 400 MW Maria Elena project, which will employ central tower technology and molten salts for both the thermal storage and Heat Transfer Fluid (HTF). The biggest challenge for these projects is to secure financing. It is only once PPAs have been secured and financing achieved that there is likely to be a definite timeframe for these projects. Another Spanish company, Enerstar, announced plans for investing approximately US$ 700 million in Chile’s renewable energy sector. Currently, it is carrying out an investigation for a business case related to a 240 MW Integrated Solar Combined Cycle (ISCC). Another hybrid project under planning is the 5 MW Mejillone, which should supply superheated steam to the coal plant owned by the same developer in the same location. The number of projects in the pipeline is expected to grow as soon as various companies show interest in the local market. Amongst them there are important international developers like SolarReserve, Abengoa and GDF Suez. Besides the CSP projects under construction or under development, there has been an announcement regarding the creation of the Atacama Solar Platform. This initiative was established by a consortium including the FundaciГіn Chile, the state mining company Codelco and several government agencies. The overall plan is to develop solar zones including both manufacturing activities and solar energy facilities. 8.3. Local CSP Ecosystem The Chilean CSP market is still very much at a nascent stage and therefore its local CSP ecosystem, particularly in the area of the supply chain, is not as expansive as that of the other markets analyzed in this report. The scenario for CSP technology in Latin America, and in particular in Chile, is extremely favorable. The excellent solar radiation levels, increasing demand for energy, high energy prices and necessity to diversify the energy mix are all important factors which, alongside the environmental concerns for the carbon footprint of www.csptoday.com the current energy portfolio, make CSP very competitive and attractive. The huge potential for CSP technology in Chile has also been highlighted by the Renewable Energy Country Attractiveness Index (RECAI) published by Ernst & Young (2013). The report says that CSP will drive growth in Chile in the long term, because of its great suitability to the demand profile and the current issues in the country’s power sector. It is therefore crucial for developers approaching the local market to focus on the motivating factors, such as the high energy costs and increasing energy demand, and the possibility of supporting the growth of the mining sector and other industries. The cost of the energy produced will likely become a crucial factor that will determine the success of CSP technology in the local market. Current on-the-spot market prices range between EUR 70 and EUR 80 per MWh. Also, considering the high amount of imported energy, Chile is very vulnerable to changes in its supply chain and fluctuating energy costs. The current market situation offers a great potential for international developers because renewable energy projects will likely be able to compete with conventional fuel projects without incentives. This is mainly due to the particular situation in which Chile imports fuels and the consequent pricing policy currently applied to the market. In support of this, a study carried out by Bloomberg New Energy Finance on the comparative costs of various electricity generation technologies in the Chilean power sector shows that electricity from renewable sources is already competitive on the energy market. The northern region has been identified as the best location for CSP applications for a variety of reasons, including the strong solar resources, the extension of land and the proximity to energy demand hubs (primarily related to mines) that are currently supplied by costly diesel generators or coal-fired plants. Furthermore, the difficulty in developing the transmission network in remote areas where high energy demand loads are located makes the overall scenario somewhat favorable to a sustainable solution that can provide local generation without the need for transmission, using solar resources and transforming them into dispatchable electricity or heat. Another important element to take into account is that the energy demand profile of each region is different. For instance, the central part of the country is the most populated and the bulk of its demand is associated with the residential and commercial loads. On the contrary, CSP Today Markets Report 2014 | 244 Chile the northern region hosts the predominant part of the industries, such as mines, that operate continuously, with a reasonably flat load profile. Whereas the central region is characterized by the presence of hydropower facilities, although their production has been very volatile in the last years, the northern region is mostly occupied by the desert and is affected by water scarcity. Technology-wise, for the time being it seems that the parabolic trough technology has the greatest potential; not only because it has the highest market share and therefore track record, but also because it is capable of accommodating thermal energy storage. Other technologies, like the Fresnel, will also have their place when they are able to integrate TES, which is considered essential to Chile. A potential difficulty in the local market is the barrier to new entry for private developers in the generation segment, as approximately 90% of the current capacity is controlled by three large companies or their subsidiaries. This particular situation is made more complicated by the potential conflict of interest between the public and the private sector due to the links and the repeated movements of high level managers between the two. All of these elements give more political influence and power to the large private groups, and are an obstacle to a transparent decisionmaking process in the public sector. The overall decision-making process within the energy sector involves different entities, amongst which there are the environmental commission and other ministries, such as those for transport, housing, economy, agriculture and mining. Looking at the political framework, although it is important to acknowledge the country’s commitment to overcoming various obstacles, it is fair to highlight the general tendency in making announcements that are not always followed up with substantial actions. From this point of view, the cumbersome bureaucracy and lack of political will to pursue objectives in a tangible way is hindering progress and this ends up creating mistrust, or at least caution, by casting a shadow over policy ambitions and targets set by the government. capacity to produce the expected development. On the political front, the shift of five different ministers of energy between 2010, when the Ministry of Energy was established, and 2012, indicates a level of instability that might not encourage the pursuit of the necessary initiatives. All in all, CSP technology represents an opportunity for Chile to position itself at the forefront of this technology whilst resolving its historical problems of energy dependence; CSP therefore has an enormous potential which is still largely untapped. 8.3.1. Key Government Agencies Amongst the main regulatory bodies of Chile’s electricity market are the Ministry of Energy, the National Energy Commission (CNE), The Superintendency of Electricity and Fuels (SEC) and the National Environmental Commission (CONAMA). The Ministry of Energy passed many of the responsibilities to the CNE, but is in charge of the development of the long-term strategies and policies. Furthermore, the Ministry of Energy is part of the Executive Committee of the CONAMA which seeks to promote better coordination with the entity in charge of the environmental policy and regulations. The CNE covers most of the regulatory functions, including tariff regulation, policy making, grid management and overall system development strategy planning. This body is characterized by the involvement of ministers and the private sector is able to exert a good amount of political influence. This situation has often cast some shadows on the sector’s real independence. The SEC has monitoring responsibilities for the fulfillment of the legal and technical requirements and operates through the Ministry of Energy. From a regulatory point of view, although the liberalization of the energy market has always been celebrated as a role model in the power economic sector, it seems that the introduced reforms are not enough to promote the adequate deployment of renewable sources. Although these are a top priority on the agenda of the government, the overall framework still lacks the www.csptoday.com CSP Today Markets Report 2014 | 245 Chile Table 5(8): Ministries and Government Agencies in Chile Name Roles and responsibilities La ComisiГіn Nacional de EnergГa / National Energy Commission (CNE) Performs regulatory functions, including tariff regulation, policy making, grid management and overall system development strategy planning. Ministerio del Medio Ambiente / National Environmental Commission (CONMA) Government bureau responsible for environmental policy, as well as the protection and conservation of natural resources. Superintendencia de Electricidad y Combustibles / The Superintendency of Electricity and Fuels (SEC) Monitors legal and technical requirements in electricity production. Ministerio de EnergГa / Ministry of Energy Government bureau responsible for the policies in the energy sector. Centro de EnergГas Renovables / Renewable Energy Center (CER) at CORFO Government agency responsible for ensuring the optimal participation of Renewable and Non-Conventional Energy (ERNC) in Chile’s energy matrix. Agencia Chilena de Eficiencia EnergГ©tica / Chilean Energy Efficiency Agency (AChEE) Foundation whose mission is to promote, strengthen and consolidate the efficient use of energy. 8.3.2. Utilities and Independent Power Producers: An Overview Table 6(8): Utilities and Independent Power Producers in Chile Name Roles and Responsibilities Centro de Despacho EconГіmico de Carga (SIC y SING) / Economic Load Dispatching Centres Coordinate the operation of the interconnected electrical installations operating in the SIC and SING. Table 7(8): Permitting Agencies and Environmental Assessment Agencies Operative in Chile Name Roles and Responsibilities Servicio de EvaluaciГіn Ambiental Manages the “System of Environmental Impact Assessment” (SEIA), used for the environmental assessment of projects adjusted to the provisions of the current rules. Source: CSP Today 8.3.3. Permitting Agencies and Feasibility Study Providers: An Overview Various entities are involved in the permitting phase of a project, including the environmental commission and relevant local municipalities. From a technical point www.csptoday.com view, CSP with thermal storage would be the most suitable solution for the northern region. 8.3.4. Local Consultants and R&D Bodies Chile is also investing in research and development CSP Today Markets Report 2014 | 246 Chile (R&D) activities related to a variety of aspects, including the use of solar energy in the mining sector, the integration of solar energy into the power grid, the development of solar energy generation in urban and rural communities, solar energy storage, solar water treatment and the economic, social and regulatory aspects of solar energy development. There is an ongoing effort to team up with international research centers and develop valuable know-how through multi-disciplinary research within the solar energy sector. For example, a new research center called SERC-Chile is being created through a collaboration by various national universities, including the University of Chile, the University of TarapacГЎ, the University of Antofagasta, the Technical University Federico Santa MarГa, Adolfo IbГЎГ±ez University and the University of ConcepciГіn y FundaciГіn Chile. Various international organizations have set up collaborative opportunities with local partners, including the government. In June 2011, the Inter-American Development Bank (IDB) started the ATACAMATEC technical cooperation activity, which focuses on several studies connected with solar and marine power in the country. Even earlier, since 2006, the Ministry of Energy began teaming up with GIZ on different fields related to the solar energy industry, including the development of an online wind and solar explorer coordinated by the Geophysics Department of the University of Chile. In addition, the Ministry of Energy and CORFO are preparing an international tender to launch a solar power research center in Chile. Last but not least, the “Promotion and Development of Local Solar Technologies in Chile” project, funded by the Global Environment Facility (GEF) and launched in 2012, focuses on technology-transfer activities, including CSP, to promote the development of a national solar energy market. One aspect to consider is the difficulty to rely on local meteorological reports. On one hand is the challenge of land extension and logistical difficulties in maintaining a sound network of data collection stations. On the other hand, because of Chile’s complicated geography, the environment and climate largely differ throughout the various parts of the country. However, an important effort has been forthcoming in this direction, as a government-launched project has managed to produce more detailed and reliable information through the use of satellite estimations mathematically combined with measurements of land values. Finally, the assessment of more than half of the country’s territory (from Arica to Port Montt) has already been completed. Table 7(8): Consultants and R&D bodies operative in Chile Name Roles and Responsibilities DICTUC S. A. Engineering consultant in solar energy. FundaciГіn Chile Engineering consultant in solar energy. TerraSolar Engineering consultant in solar energy. Atacama Solar Platform. The Atacama Solar Platform Initiative was established by a consortium comprised of FundaciГіn Chile, State mining company Codelco and several government agencies. The plan is to develop solar zones over the next few years that will include both the manufacture of solar panels and construction of solar power plants. AsociaciГіn Chilena de EnergГas Renovables Alternativas (ACERA) Association of companies related to the development of renewable energy projects. AsociaciГіn Chilena de EnergГa Solar (ACESOL) Trade association of companies engaged in the development of solar energy projects. Source: CSP Today www.csptoday.com CSP Today Markets Report 2014 | 247 Chile 8.3.5. Financing Organizations The most common barrier to the development of CSP projects in Chile is the high cost of initial investment. The main difficulty in this regard is the fact that this technology does not have enough track record and therefore is seen as an unknown foray. Other issues linked to the financial dimensions of CSP projects are the difficulty in negotiating long-term PPA contracts, which tend to have low and therefore unattractive prices, and the lack of tailored incentive schemes, such as feed-in-tariffs). To give a better overview of the financial scenario, the doubts regarding the long-term profitability and the unpredictability of renewable electricity prices on the spot market need to be considered as well. That said, given that demand is currently growing at a faster pace than installed capacity, private developers expect no sudden drops in electricity prices, which is seen as a competitive benefit for renewable energy generation. Looking at the current economic scenario, mining companies are the best target for long-term energy supply contracts. Furthermore, the existence of established industrial facilities, with their ancillary services and road infrastructure already in place, would provide access to sites of interest and secure potential savings at construction stage. On top of these advantages, CSP projects in Chile can qualify to be included in the Clean Development Mechanism (CDM) and generate extra profits through carbon credit trading. interest. A positive exception is represented by the Chilean Government’s Corporacion de Fomento de la Produccion (CORFO), which acts as a key incubator for the renewable energy sector and has already invested over US$ 12 million to support various projects. Moreover, a good capital market and a business-friendly culture has prompted the interest of several international funding bodies that are now active in Chile, including the European Investment Bank, the InterAmerican Development Bank and the World Bank. According to Bloomberg New Energy Finance (BNEF) a total amount of US$ 4.5 billion has been invested in Chile’s renewable energy sector in the last 5 years, until 2013. The Clean Technology Fund announced a soft credit with the value of US$ 66.12 million in September 2012. This amount will be added to a further government grant of US$ 20 million government grant to build a CSP project with Thermal Energy Storage, which is currently being tendered, the outcome of which will be revealed later in 2013. The Banco Interamericano de Desarrollo (BID) has an important role within the ongoing bidding process. It backed the government to help obtain funds from the Clean Technology Fund (CTF) and supported the design of the procurement documents. The BID will also offer financial support to the final winners. In fact, the receipt of a loan from the BID’s private sector department has been included as one of the requirements for the developers of the winning project. There are some elements to take into account that could help the financial performance of a CSP project. For instance, some of the buyers are willing to pay more for clean energy due to corporate social responsibility considerations. Furthermore, the social opposition to large-scale conventional power plants is increasing the relative attractiveness of other technologies, including solar. However, in the short term CSP technology still faces considerable cost and risk barriers, and therefore might require public support, for instance in the form of subsidies. Not having a track record in the country, there are no verified technology-performance data for local conditions, which increases the perceived financial risk. Furthermore, if the lack of financial support makes the projects unprofitable, this in turn would not attract private investors. Generally speaking, local banks have not been very engaged in renewable energy projects so far, and it is common opinion that successful agreement on a PPA scheme would be a strategic key to attracting their www.csptoday.com CSP Today Markets Report 2014 | 248 Chile Table 9(8): Main Funding Institutions and Banks Operative in Chile Name Roles and Responsibilities CorporaciГіn de Fomento de la ProducciГіn (CORFO) Agency in charge to implement the government policies in entrepreneurship and innovation fields. Provides funding mechanisms for energy projects, among others. ComisiГіn Nacional de InvestigaciГіn CientГfica y TecnolГіgica (CONICYT) Advisory body in matters of scientific development. Provides funding mechanisms for energy projects, among others. 8.3.6. Developers and EPC Firms The Chilean market, as with all of the markets discussed in this report, needs to be understood before investing in large generation energy projects. An accurate knowledge of the local area and stakeholders, including the local community, will be essential for the successful development of a project. The employment of local services and products wherever possible would also enhance this process. Table 10(8): Developers, EPCs and Engineering Companies Operative in Chile Name Roles and Responsibilities Previous Renewable Energy Projects Abengoa Solar Inc. International company dedicated to developing energy projects. Solar plant Minera el Tesoro, providing process heat. Abengoa Chile Chilean branch of an international company dedicated to developing energy projects. Solar plant Minera el Tesoro, providing process heat. GDF Suez A French multinational electric utility company operating in the fields of electricity generation and distribution, natural gas, and renewable energy. Back in 2010, GDF SUEZ and Solar Power Group agreed to jointly develop a 5 MW CSP plant with linear Fresnel International company dedicated to developing energy projects. Primary focus on wind, but currently has two operational CSP plants in Spain of 50 MW each. Ibereolica www.csptoday.com Technology, which will supply superheated steam to the Mejillones 150 MW coal-fired plant north of Chile. CSP Today Markets Report 2014 | 249 Chile 8.4 Local Component and Raw Material Supply Chile is already equipped with good capabilities in various parts of the CSP supply chain. However, despite the existence of a local capacity to produce some CSP components in the central part of the country, it is very expensive to transport them to the northern region where CSP plants would be located. This makes the situation somewhat complicated, and for this reason some foreign suppliers are considering the opportunity to locate their production units directly in the northern part of Chile. Furthermore, the Energy Strategy itself highlights how the country encourages and facilitates the entry of new foreign players into the local value chain. Indeed, many analysts believe that if a strong CSP local market were to develop, there would be opportunities for foreigner suppliers and industrial players along the entire value chain. An important factor worth mentioning is the position of Chile as the largest exporter of thermal storage salts (sodium and potassium nitrate), already supporting many CSP projects worldwide. 8.5. Alternative CSP Markets The mining sector is the engine of the Chilean economy. Today, the country is the most prominent producer of copper in the world, accounting for 35% of global production, as well as being one of the largest producers of silver and gold. This industrial sector is a huge consumer of energy (both in the form of electricity and heat, with a proportion of 75% and 25% respectively). The production of metals in Chile currently uses approximately 33% of all electricity generation (11% in terms of energy, including heat). The largest part of this demand comes from the northern region and currently relies on diesel as an energy carrier, despite the fact that the best solar resources are available in the same area. In addition, the sector is continuously growing and as a consequence, its demand for energy is expected to rise further. At the current rate, it is foreseen that by 2020, the electricity consumption of Chile’s mining industry will increase by 97%. The mining sector, as the most representative but not the only industrial sector developed in Chile, suffers strongly from the lack of reliability in energy supply and from high energy prices. While there is a critical need for power for all of this sector’s operations, many of the facilities are located in remote areas where utility (electricity, gas, water) grids are not available and this results in further expenses for the transport of necessary resources to the sites. Alongside these issues, www.csptoday.com there is an increasing pressure for environmentally sustainable processes and practices as the traditional sources, including gas, diesel and coal, are facing increasing mistrust from the local population and environmentalists. All the needs identified within Chile’s mining industry make an incredible business case for CSP technology. There is an opportunity to reduce energy costs by drastically removing the high operational costs of sourcing and transporting fossil fuels. At the same time, there is a potential for localizing the generation in the same areas where there is high demand and where main transmission lines are challenged by the country’s geography. Furthermore, solar thermal power can offer a reliable and sustainable source for both heat and electricity. In fact, the waste heat could be employed for a variety of applications, including the production of hot sanitary water, heating leach dumps or being recovered to be used as process heat. Last but not least, conversely from PV and wind, CSP can implement thermal energy storage systems that can guarantee dispatchable, round-the-clock power supply to match the flat energy demand profile of these industries (the demand profile in the SING system is very flat, with a variation factor of only 7.7%). Thermal energy storage is indeed one of the most important technical features to implement. The typical load factor of the mining industry would require at least 4 hours of storage. However, as a result of the requirements and the risk typically perceived by clients, it is likely that storage of up to 12 hours might be considered. The huge potential for the employment of CSP in Chile’s mining sector is further enhanced by the amount of land available. Other than electricity, CSP can generate steam to supply process heat used in various parts of the production chain. Other applications that can be developed are solar thermal desalination and solar refrigeration. Furthermore, given that so far a wide range of thermal power plants has been developed for such applications, CSP could be also employed in hybrid mode, to augment the current capacity already available. This opportunity is currently being explored by developers. One of the potential problems that should be taken into account at the development stage is the likelihood of negative effects arising from the process operations on a CSP plant. For instance, the effect of dust and sand produced during various activities carried out on site, CSP Today Markets Report 2014 | 250 Chile or due to storms or other local climatic events. Similar considerations should be made for the potential effect of gases, such as Nitrogen Oxide (NOx) and Sulfur Oxide (SOx), or blasts occurring as part of the mining process. Another aspect to be investigated is the potential conflict in the use of land, as the same location of a plant could be exploited for agricultural purposes, or more likely for expansion of the same mining activities. As a matter of fact, the development of these activities is quite dynamic, so there might be some difficulty in occupying a portion of land for a long period of time. That said, CSP technology has a huge potential for the mining sector and some developers have already started exploiting it to support the needs of this sector for continuous expansion within the country. An important aspect to keep in mind is the need to pursue development costs comparable with the costs currently faced by mines in order to make a CSP project financially feasible. 8.5.1. Case Study: Minera El Tesoro, Chile The mining companies in Chile are the largest energy consumers in the country for both extraction and production processes. With its strong mining industry, Chile is expected to attract in the next decade some US$100 billion in mining investment. As a result of the sector’s growth, it is expected that by 2020, the electricity consumption of Chile’s mining industry will increase by up to 97%, providing enough incentive for CSP developers to position themselves strategically to supplement or complement the energy supply chain of current and future mining operations. CSP activities are already underway in the country. The Spanish company Abengoa recently commissioned a 10 MW solar thermal plant for Minera El Tesoro, which is the first CSP plant integrated into a mining process worldwide. Minera El Tesoro, located in Chile’s Atacama Desert, is currently the largest CSP plant in South America. The plant comprises 1,280 PT-1 solar thermal collector modules which supply process heat for the copper electro-extraction process in mining production. The plant is expected to substitute more than 55% of the diesel fuel currently used in the process, and incorporates thermal energy storage. In the past, Minera el Tesoro was using diesel to provide the heat requirement for the SXEW process. Diesel heaters were also used to provide thermal energy to other minor services such as cathodes washing and reagent heating. Table 11(8): Techno-Economic Data of Mineral El Tesoro CSP Plant Location Sierra Gorda, Antofagasta Mining company Antofagasta Minerals Facility Minera El Tesoro EPC Abengoa Estimated investment US$ 14 million Plant capacity 10 MW thermal Annual energy yield (thermal) 24,845 MWh/year Surface area 6-7 Ha CSP technology Parabolic Trough (PT) PT collector type PT-1 Number of PT collectors 1,280 Water heating temperature 150 В°C www.csptoday.com CSP Today Markets Report 2014 | 251 Chile Mining process application Solvent extraction – Electrowinning Diesel consumption saving: 55% Operational costs savings Approximately US$ 2 million CO2 emission reduction 8,000 - 10,000 tons per year (4%) Number of storage tanks 3 Storage tanks volume 100 m3 Source: CSP Today Global Tracker, August 2013 parabolic trough plant of 14 MW is already in operation. See Appendix C for the intricacies of integrating CSP with the mining process. 8.6. Market Forecast Recently moving into the CSP spotlight owing to its excellent DNI that ranges from 2,445 kWh/m2/year to 3,832 kWh/m2/year (3,300 kWh/m2/year average), Chile benefits from a clearness index which justifies the country’s growing interest in CSP generation. With a potential of up to 2,636 GW of CSP, the country’s wheels are in motion to exploit CSP technologies, and a There are currently 360 MW of CSP under development, and 405 in planning in Chile. Apart from that, the 13 GW of renewable energy targeted, and the expected 40% increase in energy demand by the end of the decade, both as electricity and heat, in conjunction with the CSP potential of the country constitute the core requirements necessary for the industry to lift off, most likely within the next 2-3 years. Figure 3(8): Installed CSP Capacity in Chile Until 2024 (MW) 2,500 Optimistic Conservative 2,000 1,915 Pessimistic 1,500 1,000 797 500 348 0 2006 2008 www.csptoday.com 2010 2012 2014 2016 2018 2020 2022 2024 CSP Today Markets Report 2014 | 252 Chile Figure 4(8): Cumulative CSP Energy Production in Chile to 2024 (TWh) 50 47.0 Optimistic 45 Conservative 40 Pessimistic 35 30 25.1 25 20 15 13.1 10 5 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Conclusion The scenario for CSP technology in Latin America, and in particular Chile, is extremely favorable. The northern region, where the Atacama Desert is located, has ideal conditions for CSP, being one of the driest places on the planet with one of the highest solar radiation levels in the world. The superior solar radiation, increasing demand for energy, high energy prices and the need to diversify the energy mix are all important factors which, alongside environmental concerns for the carbon footprint of the current energy portfolio, make CSP very competitive and attractive. Chile’s energy market also offers a great potential for international CSP developers because renewable energy projects are likely to be able to compete with conventional fuel projects without incentives. The first tender for CSP plants was released in February 2013 and financially supported by The Ministry of Energy with a subsidy of up to US$ 20 million. Furthermore, the government negotiated a consortium of financing sources for a total amount of over US$ 350 million in soft loans. Minera el Tesoro was the first CSP project in the South American continent, but the number of projects in the pipeline is expected to grow soon as various companies are showing interest in the local market. www.csptoday.com CSP Today Markets Report 2014 | 253 Chile References Behnke, R., EstГ©vez, G., and Arias, I., 2009. Las EnergГas Renovables No Convencionales en el Mercado ElГ©ctrico Chileno. ComisiГіn Nacional de EnergГa - GTZ. Available through: <www.giz.de/de/downloads/sp-ERNC-mercado-electrico-chileno.pdf> [Accessed 20 September 2013]. Canales, G., 2012. Chile: Development & Opportunities of the Renewable Energy Market. Presentation by Centro de Energia Renovables. Available through: <www.kallman.com/presentations/Chile-Development-and- OpportunitiesRenewable-Energy-Market.pdf> [Accessed 20 September 2013]. Correa, P. M., 2013. CSP - A Feasible Solution for Mining Activities in the Atacama Desert- Technical Presentation. Suntrace Chile. 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(VV.AA: Various Authors) www.csptoday.com CSP Today Markets Report 2014 | 255 Chile Acronyms ACRONYM DEFINITION AChEE Agencia Chilena de Eficiencia EnergГ©tica (Chilean Energy Efficiency Agency) ACERA AsociaciГіn Chilena de EnergГas Renovables Alternativas BID Banco Interamericano de Desarrollo CDEC Centro de Despacho EconГіmico de Carga (Economic Load Dispatching Centres) CDM Clean Development Mechanism CNE ComisiГіn Nacional de EnergГa (National Energy Commission) CONAMA National Environmental Commission CONICYT ComisiГіn Nacional de InvestigaciГіn CientГfica y TecnolГіgica CORFO CorporaciГіn de Fomento de la ProducciГіn de Chile CTF Clean Technology Fund ECLAC Economic Commission for Latin America and the Caribbean GEF Global Environment Facility GIS Geographic Information System IDB Inter-American Development Bank IOC Independent Operation Centre LAC Latin American and Caribbean NCRE Non-Conventional Renewable Energy OECD Organization for Economic Cooperation and Development RECAI Renewable Energy Country Attractiveness Index SEC Superintendency of Electricity and Fuels SIC Sistema Interconectado Central (Central Interconnected System) SING Large Northern Interconnected System (Northern Interconnected System) www.csptoday.com CSP Today Markets Report 2014 | 256 China 9 China By Cayetano Hernandez Contents List of Figures257 List of Tables 257 Chapter Summary 260 Country Overview 260 9.1 Electricity Market 262 9.1.1 Electricity Consumption 263 9.1.2 Electricity Demand 264 9.1.3 Grid Transmission 264 9.2 CSP Market 266 9.2.1 CSP-Specific Policy 266 9.2.2 CSP Project Profiles 266 9.2.3 Local Content Requirements 269 9.2.3.1 Investing 272 9.2.3.2 Equipment 272 9.3 Local CSP Ecosystem 273 9.3.1 Key Government Agencies 274 9.3.2 Permitting Agencies 274 9.3.3 Financing Organizations 275 9.3.4 Transmission Grid Operators 275 9.3.5 Developers, EPC Firms and Utilities 277 9.4 Local Component Supply 277 9.4.1 Steam Generators 279 9.4.2 Turbines 279 9.4.3 Pumps 280 9.4.4 Valves 280 9.4.5 Receiver Tubes 281 9.4.6 Heat Transfer Fluid (HTF) 282 9.4.7 Collector Frames 283 9.4.8 Raw Material Availability 283 9.4.8.1 Steel 284 9.4.8.2 Glass 284 www.csptoday.com CSP Today Markets Report 2014 | 257 China 9.4.8.3 Concrete 286 9.4.8.4 Molten Salt 287 9.5 Alternative CSP Markets 288 9.5.1 Coal - ISCC 288 9.5.2 Desalination 290 9.5.3 Enhanced Oil Recovery 291 9.6 Market Forecast 294 Conclusion 296 References 297 Acronyms 297 List of Figures Figure 1(9): Direct Normal Irradiation in China (DNI Map) 261 Figure 2(9): Electricity Production in China by Source of Generation 263 Figure 3(9): Installed Capacity Distribution in China 264 Figure 4(9): China’s Current Power Network 265 Figure 5(9): Map of Wind Feed-In-Tariff 267 Figure 6(9): Flow Diagram of Approval Stages in China 275 Figure 7(9): Power Grid Companies in China 277 Figure 8(9): Non-metallic Mineral Resources in China 287 Figure 9(9): Map of Coal Resources in China 289 Figure 10(9): DNI Resources in China 289 Figure 11(9): Desalination Capacity in Coastal Cities (m3/day) in China (2010) 291 Figure 12(9): China’s Oil Production and Consumption 1990-2013 292 Figure 13(9): Location of China’s Major Oil Fields 293 Figure 14(9): Locations of Known CSP Projects in China 293 Figure 15(9): Installed CSP Capacity in China Until 2024 (MW) 295 Figure 16(9): Cumulative Energy Production in China Until 2024 (TWh) 295 List of Tables Table 1(9): Drivers and Barriers 262 Table 2(9): Erdos Solar Plant Parameters (First CSP FiT) 268 Table 3(9): List of CSP Projects in China 269 Table 4(9): Foreign Investment Categories 272 Table 5(9): Key Government Agencies in China 274 Table 6(9): Permitting Agencies in China 275 Table 7(9): Financing Organizations in China 276 Table 8(9): Renewable Energy Projects Co-financed by Development Banks 276 Table 9(9): Transmission Grid Operators in China 277 Table 10(9): Electric utilities in China 278 Table 11(9): Main Steam Generator Manufacturers in China 279 Table 12(9): Turbine Manufacturers in China 280 www.csptoday.com CSP Today Markets Report 2014 | 258 China Table 13(9): Pump Manufacturers in China 281 Table 14(9): Valve Manufacturers in China by Industry 281 Table 15(9): Receiver Manufacturers in China 282 Table 16(9): Heat Transfer Fluid Providers in China 283 Table 17(9): Collector Frame Manufacturers in China 284 Table 18(9): China Steel Exports and Imports (2012) 284 Table 19(9): Main Steel Companies in China by Production (2012) 285 Table 20(9): Top 10 Chinese Glass Manufacturers (2012-2013) 286 Table 21(9): CSP Mirror Manufacturers in China 286 Table 22(9): Concrete Producers in China by Production 287 Table 23(9): Molten Salt Producers in China 288 Table 24(9): China’s Oil Production, Consumption, and Import (2011) 291 Table 25(9): EOR Projects Implemented in China 294 www.csptoday.com CSP Today Markets Report 2014 | 259 China Chapter Summary The CSP Today 2013 Markets Scorecard has ranked China as the seventh most-promising CSP market. With a population of more than 1.3 billion, far exceeding all other emerging CSP market demographics, China faces rapid energy demand growth. To meet future demand, China will need to have added over 1,300 GW to its grid between 2005 and 2030. China has an optimistic target of reaching 3,000 MW of CSP power by the end of the decade. The aim of this is to address China’s desire to refocus its energy portfolio on more environmentally-friendly technologies. to mid-term, including the lower cost of Chinese PV energy, the difficulty of transmitting electricity from western to the eastern areas, and the long periods of water scarcity, heavy brown clouding and sandstorms. China’s total installed power capacity at the end of 2011 reached 1,060 GW, where coal was the dominant source of electricity. With DNIs ranging from 1,800 to 2,500 kWh/m2 per year, China may not be a country benefiting from the best solar resource, but considering its population and the availability of land for CSP projects, the country could potentially have 5,821 to 8,105 GW of CSP capacity. China is currently implementing its 12th Five Year Plan (2011-2015) on Renewable Energy Development, and has targeted an installed capacity for solar thermal electricity power plants of 1 GW by 2015 and 3 GW by 2020. At present, CSP Feed-in-Tariffs (FiT) are under study in China. The bidding process of the first project resulted with three companies submitting a FiT of 2.25, 0.98 and 0.94 RMB/kWh. China Datang was awarded the contract with the lowest price at 0.94 RMB/kWh. Despite holding great promise for future CSP deployment, China’s CSP industry is challenged by numerous barriers to its development in the short Around 350 MW are now under development, largely in the provinces of Qinghai, Gansu, Tibet, Inner Mongolia and Ningxia, where parabolic trough and 50 MW are the Country Overview China Solar Resource (average annual sum of DNI): 1,900~2,000 kWh/mВІ/year Size:9,596,960 kmВІ Population (2012): 1.351 billion GDP per capita (2012): US$ 6,091 Installed power capacity: 997 GW Annual electricity consumption: 5,150 TWh Expected annual electricity demand in 2020: 6,697 TWh Electricity Mix by Installed Capacity (2010) Coal 67% Natural Gas 4% Petroleum 2% Nuclear 1% Hydro 21% Wind5% Bioenergy 1% Geothermal 0% Solar PV 0% CSP 0% Potential Markets for Industrial CSP Applications Process Heat Hybrid Plants: Coal Plants, Biomass Plants, and Geothermal Plants Electricity Hybrid Plants: Coal Plants, Biomass Plants, and Geothermal Plants Desalination Mining Waste Plants www.csptoday.com CSP Today Markets Report 2014 | 260 China main characteristics - following the Spanish example. Regarding finance, the Asian Development Bank and the World Bank are participating in three CSP projects. China is the largest producer of coal, gold, and some of the rarest minerals in the world. It is also the largest consumer of other mining products, especially thermal coal, with around 49% of total global consumption, and iron ore, accounting for around 58% of total global consumption. Seawater desalination is quickly developing in China, where in its 12th Five-Year Plan, the government announced a target of 2.2-2.6 million m3/day of online seawater-converted capacity by 2015. Several Enhanced Oil Recovery (EOR) pilot projects have also been implemented in China, and in the coming years, two projects are going to be constructed in the Dagang and Daqing Oil Basins. An entire Chinese supply chain CSP industry is in the process of being created, covering project development, materials and components including mirrors, receivers, support structures, control systems, molten salt/heat storage, heat transfer fluids, steam generators, power blocks, pumps and system integration. Figure 1(9): Direct Normal Irradiation in China (DNI Map) Source: SolarGIS В© 2013 GeoModel Solar s.r.o. www.csptoday.com CSP Today Markets Report 2014 | 261 China Table 1(9): Drivers and Barriers Drivers Barriers CSP Technology can be a pivotal energy generation source in The lower cost of national Chinese photovoltaic (PV) energy China, adding energy stability to the country, given its population makes PV more competitive in price of 1.3 billion and electricity demand of about 5,200 TWh in 2012 NDRC has set a solar power target of 1 GW by 2015 and 3 GW by 2020. Large pipeline of announced projects Difficulty of transmitting electricity generation from the western areas to the eastern areas Taking advantage of the economies of scale in China could lead to cheaper equipment costs and a lower LCOE New investments are needed for the construction of high voltage grid lines (HVAC-DC) Development of hybrid plants, such as Integrated Solar Combined Very low temperatures of -30ВєC are easily reached during winter Cycle plants with gas or coal can reduce the release of carbon nights. This makes it a challenge to keep oil fluid during nights emissions with no production Opportunity to develop Central Receiver Technology Long periods of water scarcity, heavy brown clouding and sandstorms Huge land availability, especially in the Western part of the country where the solar resource is located Complexity of administrative and permits procedures Consumption per capita is expected to increase exponentially and therefore a diversified mix of energy is needed Lack of a clear and definitive Feed-in-Tariff for solar thermal electricity 9.1. Electricity Market Up until 1994, the electricity supply was managed at a provincial level by electric power governmental bureaus. In 1997, the Ministry of Electric Power was transformed into the State Power Company of China (SPC). The SPC was dismantled in 2002, and since then, ownership of transmission and generation assets has been separated. Utilities are now managed by eleven smaller corporations outside of the government administration structure. The smaller companies include two electric power grid operators, five electric power generation companies (Big 5) and four relevant business companies. In terms of resources, China has abundant energy. The country has the world’s third-largest coal reserves, mainly in the north and southwest, and massive hydroelectric resources in the southwest regions. In April 1996, the Electric Power Law was implemented, in order to promote the development of the electric power industry, protect the legal rights of investors, managers and consumers, and regulate generation, distribution and consumption. www.csptoday.com CSP Today Markets Report 2014 | 262 China Figure 2(9): Electricity Production in China by Source of Generation Source: Energy Information Administration 9.1.1. Electricity Consumption China has become the world’s second-largest electricity consumer after the United States, with the industrial sector in China accounting for the majority of electricity consumption. The electric power industry in China has witnessed continuous growth. At the end of 2000, the total installed power was only 315 GW, and by the end of 2010, total installed capacity reached 997 GW, where coal and hydro together represented almost 90% of the total installed capacity. The total installed capacity at the end of 2011 reached 1,060 GW with similar values. At present, coal is the dominant source of electricity supply, representing roughly 80% of the supply and a just under 70% of the installed capacity (see Figure 3(9)). www.csptoday.com CSP Today Markets Report 2014 | 263 China Figure 3(9): Installed Capacity Distribution in China Marine - 0% Solar csp - 0% Solar pv - 0% Geothermal - 0% Bioenergy - 1% Hydro - 21% Nuclear - 1% Coal - 67% Wind - 5% Source: International Energy Agency, 2013 9.1.2. Electricity Demand China is a zero importer-exporter country in terms of electricity, which means that generation comes entirely from the domestic market. Generation has increased at an average ratio of around 10% since 2005 as consumption per capita is constantly increasing. The price of electricity in China is regulated by the government, with different caps depending on the province and final user. The lower electricity prices encourage wasteful use of cheap electricity and therefore producers are struggling to generate enough power, which results in regional power shortages when generation drops in a region. Interconnections between regional grids are weak, and long-distance transmission capacity is small, which means that power cannot be routed in from other regions where there is surplus capacity. China’s power transmission system remains underdeveloped. There is no national grid and the lack of a unified national grid system reduces the efficiency of power generation nationwide and increases the risk of localized shortages. The evolution of the grid in China shows an isolation of the western provinces Xinjiang and Tibet and a grid mainly comprising 220kV, 330kV and 500kV lines: Reforms to the pricing system are needed, such as competition among generators and separation of thermal tariffs into capacity and dispatch components, differential peak and off-peak pricing, among others, but none of them have been adopted. 9.1.3. Grid Transmission The State Grid Corporation of China (SGCC), which is the biggest grid operator in the country, supplies power to around 90% of China and serves over 1 billion people. In 2011, SGCC’s total length of transmission lines was more than 655,000 kilometers, where its substation capacity was 2.39 billion kilovolt-amps (kVA). www.csptoday.com CSP Today Markets Report 2014 | 264 China Figure 4(9): China’s Current Power Network Source: State Grid Corporation of China For long distance interregional transmission, three major ultra-high voltage UHVAC (1,000 kV) and three UHVDC (800 kV) transmission lines will run from Inner Mongolia to the south, and from Sichuan and Xinjiang to the east, which will unify the North, East, and Central grids into one operating unit. It will also enable the country to connect the enormous renewable potential - mainly hydro, wind and solar from western China - to meet booming demand from the eastern coastal provinces. The main problem in China is the voltage drop when power is sent over very long distances from east to west of the country. www.csptoday.com CSP Today Markets Report 2014 | 265 China 9.1.4. Market structure diagram: China’s power sector GENERATION ASSETS China Huaneng Power Group Corp. Power Plant Assets of State Power Corp. (including Huaneng) China Datang (Group) Corp. State Power Corp. of China China Huadian Corp. China Guodian (Group) Corp. Power Grid Assets of State Power Corp. China Power Investment Corp. TRANSMISSION & DISTRIBUTION ASSETS Power Grid Assets of State Power Corp. Yunnan, Guizhou & Guangxi Power Grid Guangdong Power Grid State Grid Corp. of China North China Grid Corp. (Shandong included) Northeast China Power Grid Corp. East China Grid Corp. (Fujianincluded) China Southern Power Grid Co. Ltd. Hainan Power Grid CentralChina Grid Corp. (Sichuan & Chongqing included) Northwest China Power Grid Corp. Source: International Energy Agency, 2013 9.2. CSP Market 9.2.1. CSP-Specific Policy Government incentives are deployed by the National Development and Reform Commission (NDRC), the country’s economic planning agency, which every 5 years reviews energy-related strategies. Currently, China is undergoing the 12th five-year plan (2011-2015) on Renewable Energy Development, and has targeted an www.csptoday.com installed capacity for solar thermal electricity power plants of 1 GW for 2015 and 3 GW for 2020. China has set a fixed Feed-in Tariff (FIT) for their new renewable energy plants. This financing mechanism started in 2009 for wind projects and applies for 20-25 years, in a move that will help project operators obtain profits. CSP Today Markets Report 2014 | 266 China The NDRC will make adjustments to the FIT going forward from time to time, based on factors such as investment cost changes and technology developments. Before the launch of the FIT, the NDRC had been implementing a concession rights auction regime in granting development rights for large solar projects in China. The auction winners were usually those offering the lowest grid power prices, often large state-owned enterprise power providers. Besides FITs at the national level, some of the provinces have decided to promote solar energy, primarily photovoltaics, using local funds from provincial budgets. The FiT for each renewable energy project represents a significant premium over the average rate of 0.4 RMB/kWh paid to coal-fired electricity generators. Understanding how the FiT has evolved in more mature markets in China, such as wind and PV, could help determine whether the same tendency can be expected for CSP. Four categories were established by the NDRC for onshore wind projects, which, based on the region, will be able to apply for the tariffs. Areas with better wind resources will have lower feed-in tariffs, while those with lower outputs will be able to access more generous tariffs. Figure 5(9): Map of Wind Feed-In-Tariff пЂј I. 0.51 RMB/kwh пЂј II. 0.54 RMB/kwh пЂј III. 0.58 RMB/kwh пЂј IV. 0.61 RMB/kwh Source: National Development and Reform Commission www.csptoday.com CSP Today Markets Report 2014 | 267 China After wind, the next technology following the same pattern was photovoltaics, which in June 2011 was allocated a unified FIT of 1 RMB per kWh. In 2012, a similar provincial FiT was approved, depending on the location of the project. The CSP FiT is currently under study in China. The first project’s bidding process resulted in three companies submitting a FIT of 2.25, 0.98 and 0.94 RMB/kWh. China Datang was successful, with the lowest price at 0.94 RMB/kWh. The bidding for the first parabolic trough design project in China was opened in January 2011 to construct the 50 MW parabolic trough plant located in Erdos, Inner Mongolia. Some of the requirements for the bidding were: Although it was called a FiT, it was more of a tendering process or a mix of both, where the Government, after the bidding process, chose the lowest priced bid on a project-by-project basis. Since this FiT is currently too low to develop a project, the Chinese Government is revising the FiT based on the cost of the projects, which could lead to higher values. However, there is no clear date for when this will happen, and the CSP industry in China remains in waiting. Table 2(9): Erdos Solar Plant Parameters (First CSP FiT) Parameter Value Construction period (months) 30 Concession operation period with fixed FIT price (years) 25 Fixed Price FIT <PV price Proportion of natural gas <10% Storage Yes, with molten salt Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 268 China 9.2.2. CSP Project Profiles Table 3(9): List of CSP Projects in China MW Capacity Technology Status State/ Region Developer Storage Capacity BEIJING DAHAN 1 MW PILOT PROJECT 1 Power Tower Operation BEIJING IEECAS - HAINAN NANSHAN SANYA 1 MW PILOT 1 Dish Operation HAINAN ECUBE ENERGY - HAINAN SANYA 1.5 MW 1.5 PILOT Fresnel Operation HAINAN HUANENG - XINJIANG TURPAN 180 kW PILOT PROJECT 0.18 Parabolic Trough Operation XINJIANG CHINA GUODIAN GROUP BY GUODIAN QINGSONG TURPAN NEW ENERGY CO. LTD. ORION INNER MONGOLIA 10 MW 10 Dish Construction INNER MONGOLIA HELIOFOCUS - SUPCON DELINGHA 10-50 MW 50 Multi-Tower Construction QINGHAI ZHEJIANG SUPCON SOLAR TECHNOLOGY 2.5 GANSU JINTA 50 Parabolic Trough Development GANSU CHINA HUADIAN ENGINEERING CO. 1 INNER MONGOLIA ERDOS 50 Parabolic Trough Development INNER MONGOLIA CHINA DATANG CORP. RENEWABLE POWER 03-May NINGXIA ISCC PROJECT 92.5 Parabolic Trough Development (ISCC) NINGXIA HANAS NEW ENERGY GROUP - QINGHAI DELINGHA 50 Parabolic Trough Development QINGHAI CHINA GUANGDONG NUCLEAR SOLAR ENERGY DEVELOPMENT CORP. 7 Title www.csptoday.com CSP Today Markets Report 2014 | 269 China QINGHAI DELINGHA 10 Tower Development QINGHAI CHINA GUANGDONG NUCLEAR SOLAR ENERGY DEVELOPMENT CORP. GOLMUD 50 Fresnel Development QINGHAI CHINA HUANENG CLEAN 6 ENERGY RESEARCH INSTITUTE SHANNAN 50 Fresnel Development TIBET CHINA HUANENG CLEAN 5.5 ENERGY RESEARCH INSTITUTE QINGHAI GOLMUDPROJECT 10 – 1,000 Parabolic Trough Planning QINGHAI CHINA POWER INVESTMENT CORP. - GANSU JIUQUAN 10 Parabolic Trough Planning GANSU CHINA DATANG CORPORATION AND TIANWEI NEW ENERGY - GANSU JIUQUAN 50 Parabolic Trough Planning GANSU CHINA GUANDONG NUCLEAR POWER GRUP (GDN) - GANSU WUWEI 50 – 200 Parabolic Trough Planning GANSU CHINA GUANDONG NUCLEAR POWER GRUP (GDN) - GANSU 1.5 Parabolic Trough Planning GANSU BAODING TIANWEI GROUP AND CHINA DATANG - GANSU 100 Parabolic Trough Planning GANSU SETC TIANJIN COMPANY - GUANDONG 1 Parabolic Trough Planning GUANDONG CAMDA NEW ENERGY - www.csptoday.com - CSP Today Markets Report 2014 | 270 China CHABEI PROJECT 64 Parabolic Trough Planning HEBEI BEIJING GUOTOUJUNAN INVESTMENT MANAGEMENT CO. INNER MONGOLIA ERDOS 30 Parabolic Trough Announced INNER MONGOLIA BEIJING CONTROL TECHNOLOGY DEVELOPMENT - INNER MONGOLIA 550 Parabolic Trough Announced INNER MONGOLIA BEIJING KANGTUO HOLDING - JIANGSU NANJING 0.1 Parabolic Trough Announced JIANGSU NANJING ZHONGCAITIANCHENG NEW ENERGY COMPANY NINGXIA 100 Parabolic Trough Announced NINGXIA BEIJING CONTROL TECHNOLOGY DEVELOPMENT - QINGHAI GOLMUD 50 - 100 Parabolic Trough Announced QINGHAI GD ENERGY - QINGHAI GOLMUD 50 Parabolic Trough Announced QINGHAI CHINA HUADIAN ENGINEERGING CO. LTD - QINGHAI 50 - 1,000В Parabolic Trough Announced QINGHAI LION INTERNATIONAL INVESTMENT - SHAANXI 50 - 2,000 Parabolic Trough Announced SHAANXI SHANDONG PENGLAI AND ESOLAR - SICHUAN ABAZHOU 100 Parabolic Trough Announced SICHUAN BAODING TIANWEI GROUP (TIANWEI NEW ENERGY) - TIBET LHASA 50 Parabolic Trough Announced TIBET CHINA HUANENG TIBET COMPANY - TIBET 6 - 130 Dish TIBET TIANJING CAIXI SOLAR CO. AND SETC CO. - XINJIANG 1.5 - 200 Parabolic Trough Announced XINJIANG CHINA HUANENG GROUP - www.csptoday.com Announced CSP Today Markets Report 2014 | 271 China XINJIANGPROJECTS 337 Parabolic Trough Announced XINJIANG CHINA GUODIAN GROUP BY GUODIAN QINGSONG TURPAN NEW ENERGY CO. LTD XINJIANG 12 - 300 Parabolic Trough Announced XINJIANG XINJIANG QUINGSONG BUILDING MATERIALS AND CHEMICALS GROUP CO. LTD AND GUODIAN XINJIANG COMPANY Not Known 100 Not Known Announced Not Known AVIC XIAN AERO ENGINE GROUP LTD. Not Known 50 Not Known Announced Not Known CHINA HUADIAN CORPORATION - Not Known 100 Not Known Announced Not Known GUANGDONG KANGDA - Not Known 100 Not Known Announced Not Known SHANGHAI GONGDIAN ENERGY TECHNOLOGY CO. LTD - Source: CSP Today Global Tracker, August 2013 9.3. Local Content Requirements 9.3.1. Investing In China, there are different categories of projects for foreign investors (encouraged, permitted, restricted or prohibited) and they are subject to different government approval requirements. Investing in a project categorized as “encouraged” for foreign investment may have some implications, such as the provincial government having greater authority over the project and certain tax benefits being available. Projects under the “restricted” category are not out of reach for foreign investors, but these projects may be subject to higher restrictions. The table 4(9) summarizes these requirements: Table 4(9): Foreign Investment Categories Foreign Investment Categories Total Investment (million US$) Verification and Approval Authority 1 Encourage or Permitted >=500 State Council (National Level) Restricted >=100 Encourage or Permitted >=300 Restricted >=50 2 www.csptoday.com NDRC and MOFCOM CSP Today Markets Report 2014 | 272 China 3 Encourage or Permitted <=300 Restricted <50 Local Administrations of NDRC (DRC) and MOFCOM Source: European Solar Thermal Electricity Association The approval of provincial or equivalent authorities is generally enough for projects in the “encouraged” and “permitted” categories if total investment is less than US$ 300 million. For вЂ�restricted’ category projects, provincial approval is enough only if the total investment is less than US$ 50 million. Projects in the “permitted” or “restricted” category exceeding these amounts must be approved by the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC). Provincial authorities may often delegate their approval authority to municipal or other lower-level government authorities. However, provincial authority to approve a “restricted” category project may not be delegated. State Council approval is required for projects in the “restricted” category if total investment exceeds US$ 100 million, but is generally required for projects in the “encouraged” category or “permitted” category only if total investment exceeds US$ 500 million The effect of these categorizations is to make clear the approval requirements and encourage those projects that are seen as high-priority projects for Chinese development. Renewable energy projects can benefit from these categories. The category of “encouraged” projects includes the following project types: a. Construction and operation of power stations using technology for clean burning of coal; b. Construction and operation of thermo-electric cogeneration power stations; c. Construction and operation of hydroelectric power stations; and d. Construction and operation of power stations using new sources of energy (including solar energy, wind energy, magnetic energy, geothermal energy, tidal energy, biomass energy). www.csptoday.com 9.3.2. Equipment Regarding equipment, although there is no specific local equipment policy for CSP, an entire Chinese supply chain CSP industry is being created, as shown in section 9.4, from project development, to materials and components (mirrors, receivers, support structure, control system, molten salt/heat storage, HTF, steam generator, power blocks, pumps and system integration). The localization progress within other renewable industries in China also represents a considerable potential for the solar industry. China’s strength is its huge manufacturing capacity and competitively priced local equipment, so unless there is an important need for foreign technology equipment, it will be difficult for foreign companies to enter the domestic market. The development of the wind industry in China provides significant insights into the scope and development of local CSP equipment suppliers. During the 9th Five-Year Plan (ending in 2000), it was mandatory that wind turbine equipment purchased for wind projects contained at least 40% locally-made components. In 2003, the NDRC launched a program that included local content requirements of 50%, increasing to 70% in 2004, where it remains today. Consequently, these local content requirements made international foreign firms interested in selling wind turbines in China to develop a manufacturing strategy that involved either establishing local manufacturing facilities or setting up assembly facilities for Chinese-made components. This was achieved by developing Joint Ventures (JV) with local partners or Wholly Foreign Owned Enterprises (WFOE or WOFE), which are limited liability companies entirely owned by foreign investors. The main concern of foreign companies in China is the protection of intellectual property rights and maintaining long-term mutual benefit relations with local companies. CSP Today Markets Report 2014 | 273 China 9.4. Local CSP Ecosystem 9.4.1. Key Government Agencies Table 5(9): Key Government Agencies in China Ministries and Government Agencies Roles and Responsibilities National Development and Reform Commission (NDRC) The National Development and Reform Commission (NDRC) is one of the most important organizations in China and is a macroeconomic management ministry under the Chinese State Council, which has broad administrative and planning control over the Chinese economy. Within the wide range of functions of the NDRC is responsibility for energy planning and pricing. National Energy Administration (NEA) In 2008, the National Energy Administration (NEA) was founded under the NDRC. However, in January 2010, the State Council decided to set up a National Energy Commission (NEC). The commission is responsible for drafting national energy development plan, reviewing energy security and major energy issues and coordinating domestic energy development and international cooperation. The National Energy Bureau (NEB) operates under the supervision of the NDRC and is responsible for developing plans, policy framework and administering all energies in China, including coal, oil, gas, nuclear, new energies and renewable energies. China National Renewable Energy Centre (CNREC) Reporting to the NEA, the China National Renewable Energy Centre is a new agency created to assist in renewable energy policy research and industrial management and coordination. The agency researches renewable energy development strategies, planning, policy and regulation, coordinates and implements industrial standardization, and manages international and regional cooperation. Ministry of Finance (MOF) The Ministry of Finance is in charge of economic and public finance policies, administration of public finance and external debt, revenue and tax legislation reforms, Central People’s Government expenditure, government revenue distribution, economic development expenditure, social security expenditure, domestic government debts, fiscal and tax policies, and fiscal research and education. Ministry of Science and Technology (MoST) The Ministry of Science and Technology draws up science and technology (S&T) development plans and policies, drafts related laws and regulations, and implements the National Basic Research Program, National High-Tech R&D Program and S&T Enabling Program. The Ministry also compiles and implements plans on national laboratories, national S&T programs, and research conditions. Furthermore, it issues policies to encourage the synergy of enterprise, university and research institute. MoST is responsible for budgeting, final accounting, and supervising of S&T funds. It proposes, with relevant departments, major policies and measures on the rational allocation of S&T resources. Through bilateral and multilateral channels, it draws up policies on S&T cooperation and exchange, guiding relevant departments and local governments in international interaction. Ministry of Environmental Protection (MEP) The Ministry of Environmental Protection develops and implements national policies, and plans, as well as administrative rules and regulations for environmental protection. Among its responsibilities is the development of environmental protection standards, pollution prevention in key regions and river basins, and the achievement of national emission reduction targets. In addition, the MEP supervises nuclear and radiation safety and takes part in emergency response to nuclear accidents. Lastly, it carries out environmental science and technology work, organizes key scientific research projects and technological demonstrations in the field of environmental protection. www.csptoday.com CSP Today Markets Report 2014 | 274 China 9.4.2. Permitting Agencies A simplified model of project approval in China is shown in figure 6(9): Table 6(9): Permitting Agencies in China Permitting Agencies Roles and Responsibilities National Development and Reform Commission The NDRC is the agency in charge of permitting at the national level, but every region in the country has its own local provincial government for the initial steps of the approval. Development and Reform Commission The agents in local and provincial governments are the DRC agencies, which are the development and reform bureaus (the subordinate bodies of the NDRC at local or provincial level) that finally enacts Government decisions at a national level. Figure 6(9): Flow Diagram of Approval Stages in China APPROVAL STAGES OF PROJECTS IN CHINA LOCAL City DRC County DRC PROVINCIAL (Region) Prefecture DRC Province DRC STATE COUNCIL (Government) Country NDRC Source: European Solar Thermal Electricity Association The starting point for a permitting process in China begins at a local level in the target city, and then the county, and finally prefecture level, to finish local approval. Following that, the permit will need provincial approval until it gets definitive approval from the Central Government. Another option is to start at country level, where they will suggest a county for the initiation of a project. www.csptoday.com 9.4.3. Financing Organizations The financial system has been regulated since 1984. The PeopleВґs Bank of China acts as a central bank, conducting macro control and supervision over the nationВґs banking system. CSP Today Markets Report 2014 | 275 China Table 7(9): Financing Organizations in China State-Owned Commercial Banks (SOCBs) Joint Stock Commercial Banks (JSCBs) Industrial and Commercial Bank of China (ICBC) CITIC Industrial Bank Industrial Bank Agricultural Bank of China (ABC) Huaxia Bank China Minsheng Banking Co. Bank of China (BOC) Guangdong Development Bank Evergrowing Bank China Construction Bank (CCB) Shenzen Development Bank China Zheshang Bank Bank of Communications (BOCOM) China Merchants Bank China Bohai Bank Shanghai Pudong Development Bank Regarding renewable energy, and particularly CSP, the Domestic and International Development Banks are very active in China; three of which are the most important in the financing of renewable energy projects. Regarding CSP, the development banks which are currently studying several projects are detailed below: Table 8(9): Renewable Energy Projects Co-financed by Development Banks Domestic and International Development Banks Previous Renewable energy projects (if applicable) China Development Bank Projects in wind and PV energy Asian Development Bank Qinghai Delingha 50 MW parabolic trough with 1 hour storage Gansu Jinta 50 MW parabolic trough with 7 hours storage World Bank www.csptoday.com Inner Mongolia Erdos 50 MW parabolic trough with 3-5 hours storage CSP Today Markets Report 2014 | 276 China Figure 7(9): Power Grid Companies in China Northeast Power Grid Company Northwest Power Grid Company North China Power Grid Company East China Power Grid Company Tibet (managed by National Power Grid Company) Central China Power Grid Company Southern Power Grid Company Source: State Grid Corporation of China 9.4.4. Transmission Grid Operators Table 9(9): Transmission Grid Operators in China Transmission Grid Operators Roles and Responsibilities State Grid Corporation of China (SGCC) The State Grid Corporation of China (SGCC) is the largest state-owned electric power transmission and distribution company in China, controlling 80% of ChinaВґs transmission and distribution network, making it the world’s largest electric utility. SGCC provides sustainable electric power to the Northwest, Northeast, North, Central and East Grids. China Southern Power Grid Company (CSG) China Southern Power Grid Company provides sustainable electric power to the South Grid (Guangdong, Guangxi, Yunnan, Guizhou and Hainan) provinces and regions. China’s grid is divided into six grids: Northwest, Northeast, North, Central, East and South. There are two companies controlling the grid: the SGCC, which controls the first five grids, and the CSG, which controls the southern grid. www.csptoday.com 9.4.5. Developers, EPC Firms and Utilities In China, utilities also act as developers and EPC contractors, since they are not just utilities but also major holdings groups. CSP Today Markets Report 2014 | 277 China As seen in table 3(9), the market is still under development. However, the Chinese CSP development market is dominated by the so-called Big 5 utility players and China Guandong Nuclear: a. b. c. d. e. China Guodian China Huaneng China Power Investment China Datang China Huadian These five companies are all State Owned Enterprises (SOE) directly administered by SASAC, which is responsible for managing SOEs, including the appointment of top executives and approving any mergers or sales of stock or assets, as well as drafting laws related to SOEs. Their listed subsidiaries function as Independent Power Producers (IPPs). Each of these Big 5 accounts for around 10% of national installed capacity, and their subsidiaries an extra 4% to 5%. Additionally: Two other SOEs are also IPP subsidiaries: the Shenhua Group, which is the largest coal mine operator, through their subsidiary of the China Shenhua Energy Company, and China Resources Group, through their company, China Resources Power Holdings Company Limited. Two specialized hydropower companies independent of the five groups operate the country’s largest hydropower plants: the Three Gorges Group Company and the Ertan Hydropower Company. There are two specialized nuclear companies: the China Guangdong Nuclear Power Company and the China National Nuclear Corporation. Finally, a portion of China’s generation assets consists of secondary companies and off-grid power plants owned by industrial enterprises, or sub-provincial governments Table 10(9): Electric utilities in China Big 5 Utilities Other IPP Nuclear Hydro Secondary companies: China Guodian Corporation China Shenhua Energy Company China Guangdong Nuclear Power Group Three Gorges Group Company Shenzhen EnergyВ Co., Ltd. Guangzhou Development Industry Naitou SecuritiesВ Co., Ltd. Sichuan MinJiang Sichuan Hydropower Leshan Electric Power China Power Investment Corporation China Resources Group China National Nuclear Corporation The Ertan Hydropower Company Guangdong Yuedian GroupВ Co., Ltd. Chongqing Jiulong Electric Power Panjiang Coal and Electric Power Group Yunnan Wenshan Fujian Electric Power MingDong Electric Power Anhui Province Energy GroupВ Co., Ltd. Chongqing Fuling Electric Power IndustrialВ Co., Ltd. Hunan Huayin Electric Power Guangxi Guidong Guizhou Electric Power Qianyuan Power Sichuan Xichang Electric Power Datang group . Huaneng group Shenergy Hebei Jiantou Energy CompanyВ Shanghai InvestmentВ Co., Ltd. Shanxi Top Energy Huadian group Guangdong Baolihua New Energy Stock Inner Mongolia Sichuan Mingxing Mengdian Huaneng Electric Power Thermal Power Shenergy Group, Shanghai. Shandong Sichuan Chuantou Luneng Taishan Energy Stock Cable www.csptoday.com SDIC Huajing Power Sichuan Guangan Holdings Aaa Public CSP Today Markets Report 2014 | 278 China In addition to the Big 5 companies, China Guangdong Nuclear is quite active in the development of CSP plants. 9.5. Local Component Supply This section focuses on the evaluation of the most important manufacturers and suppliers along the value chain for the deployment of CSP Technology. Future developments by these suppliers could drive the technology to significant price reductions, and therefore also in the LCOE. However, the industry is waiting until domestic policy is clarified by central government on behalf of the NDRC. Since China has vast thermal knowledge and experience, the majority of CSP-related components are already available. The biggest challenge lies in the solar field. Key components analyzed in this study are: 9.5.1. Steam Generators Some of the main steam generator manufacturers in China that could operate in CSP Projects are: Table 11(9): Main Steam Generator Manufacturers in China NВє Company 1 Livo Equipment Company 2 Jiangsu Taihu Boiler Company 3 Dongfang Boiler Company 4 Xinde Tangshan Boiler group 5 Taihu Boiler Co., Ltd. 6 Changsha Boiler Co., Ltd. 7 Shanghai Boiler Works, Ltd. Source: European Solar Thermal Electricity Association Livo Equipment Company has worked in several projects in the international market related to new energy power equipment, especially in CSP steam generators, environmental equipment, nuclear power equipment and complete sets of engineering equipment, as well as design, manufacturing and technology services. The company focuses its activity www.csptoday.com on steam generators and all kinds of heat exchangers and boilers. Since 2007, Livo has provided over 50 steam generators, superheaters, economizers, reheaters and heat exchangers for salt and heat transfer fluid. This equipment has been installed in projects across Spain, Turkey, India and China, such as PS10/20, Hilo, Solnova, Godawari, Cargo and CNPEC testing project. Jiangsu Taihu Boiler Company has worked as a component supplier for the 1 MW Dahan Power Plant in Badaling, Beijing, providing boiler and thermal storage devices. Dongfang Boiler Company signed an HTF system equipment procurement contract with Tianwei (Chengdu) Solar Thermal Power Development Company), for Datang Tianwei (a mining area in Gansu Province, JiaYuGuan), a solar thermal test 1.5 MW demonstration project. Dongfang Boiler CSP generation equipment and other products have been included in the strategic new products in Sichuan Province. Xinde Boiler Company won the auxiliary boiler purchase of CGNPC Delingha CSP demonstration project. On March 2013, in the purchase of auxiliary boiler in new-build 1500 kW steam turbine generator system for CGNPC Delingha (phase I) CSP demo project, Xinde Tangshan Boiler Group quoted RMB 1,572,000 to be recommended for the winning candidate units. Taihu Boiler Company is another steam generator provider, with activities in the manufacturing and R&D of different kinds of boilers. The company has participated in the Beijing Yanqing 1 MW tower plant in Badaling. Changsha Boiler Company works in the development, production, installation, and other engineering services of boilers, pressure vessels, and environmental protection equipment; as a steam generator provider, the company has worked on the Qinghai, Delingha 50В MW Tower project. Shanghai Boiler Works has collaborations with Alstom and Foster Wheeler and is a branch of the equipment manufacture division of Shanghai Electric Group, which is currently working on the Qinghai, Golmud plant. As for international companies, Aalborg is promoting their business in China, with the design and delivery of steam generators for CSP plants in the utility field, CSP module systems for industrial projects and gas and CSP Today Markets Report 2014 | 279 China oil-fired steam boilers, as well as engineering services. 9.5.2. Turbines At present, the main domestic turbine manufacturers related to the CSP industry are Harbin Turbine, Dongfang Electric Group Steam, and Hangzhou Steam Turbine, in addition to other companies working in CSP turbine research and development. The main power block manufacturers in China that are targeting the CSP industry are: Table 12(9): Turbine Manufacturers in China NВє Company 1 Dongfang Electric Group 2 Shanghai Electric Group 3 Harbin Turbine Co., Ltd. 4 Hangzhou Steam Turbine 5 Nanjing Steam Turbine Co., Ltd. 6 Xian Aero-Engine PLC and passed the 50 MW Chinese standard review in June 2012, with completely independent intellectual property rights: the first at domestic level. It has also reached the international advanced level. At present, Harbin Steam Turbine has been working on analysis and further optimization of the steam turbine in order to make it more adaptable for CSP plants. In the international market, Harbin Turbine Company is currently designing Argentina’s Salta 20 MW Parabolic Trough project. Hangzhou Steam Turbine Company has supplied components for the Dahan Tower project in Beijing, providing the turbine for the 1 MW Power Tower in Badaling. The equipment will also be part of SUPCON Delingha, Qinghai (phase I) 10 MW project. Xian Aero-Engine is a manufacturing and R&D base for large- and medium-sized military and civilian aircraft engines, and has developed a gas-turbine production base. They are developing turbines for 100 MW projects. International CSP-turbine providers such as Siemens, MAN Diesel & Turbo and Alstom are also promoting their businesses in China, since they already have a local presence. Source: European Solar Thermal Electricity Association Dongfang Electric is a power-generation equipment company involved in R&D, design, manufacture, and power plant project EPC. Currently, they are working on the HTF system equipment procurement contract for the 1.5 MW project in Gansu. Shanghai Electric Group is as a supplier for the entire chain of equipment for EPC projects, and provides a comprehensive service for modern equipment. They have already created a CSP division and the company is currently working in the design, manufacture, and O&M of the Qinghai, Golmud 100 MW Plant. For equipment manufacturing, the company has a joint venture with Siemens. Harbin Turbine Company, a subsidiary of Harbin Electric Corporation, is a large-scale state-owned enterprise in China that designs and manufactures large-sized turbines, nuclear turbines, industrial steam turbines, marine steam turbines and gas turbines. 9.5.3. Pumps These products are commonly used in other industries in China, so there is no major difference for CSP applications. Big companies are already established in the domestic market, such as Danfoss, VELAN and KSB. International CSP pump providers such as Alfa Laval Group, Sulzer Pumps and FRIATEC AG are also involved in commercial activities in China. In addition, Sulzer (Dalian) Pumps & Compressors Ltd. - a joint venture between Swiss Sulzer Technology Company and Dalian Danai Pumps Ltd. - specializes in the manufacture of various industrial pumps with power generation between them. Other important pump manufacturers in China include: Harbin Steam Turbine’s factory has actively undertaken research and development for special CSP turbines, www.csptoday.com CSP Today Markets Report 2014 | 280 China Table 13(9): Pump Manufacturers in China NВє Company 1 Shanghai Liancheng (Group) Co., Ltd. 2 Sanlian Pump Company 3 Ningbo JT Machinery Co., Ltd. 4 Shanghai Suoto Pump Industrial Co., Ltd. 5 Pacific Pump Group Co., Ltd. 6 Taizhou Yangchun Electric Motor Co., Ltd. 7 Zhejiang Kaicheng Pump Valve Co., Ltd. 8 Shanghai Pacific Pump Manufacture (Group) Co., Ltd. 9 Shanghai Aoli Pump Manufacture Co., Ltd. 10 Taizhou Yuanle Pump Co., Ltd. Valves Regarding the valves industry in China, many companies provide a range of products for the CSP industry, as shown in the table 14(9): Table 14(9): Valve Manufacturers in China by Industry Metallurgy Nuclear Power Air Conditioning Petrochemical Jiangsu Shentong Valve Co., Ltd. Jiangsu Shentong Valve Co. Zhejiang Sanhua Co., Ltd. Neway Valve (Suzhou) Co., Ltd Shijiazhuang No.1 Valve Company Ltd Dalian DV Valve Co., Ltd Zhejiang Dunan Artificial Liangjing Group Valve Environmental Equipment Co., Co., Ltd Ltd Shijiazhuang Sanhuan Valve Co Wujiang Dongwu Machine Co., Ltd. www.csptoday.com Lanzhou High Pressure Valve Co., Ltd CSP Today Markets Report 2014 | 281 China In the metallurgy valve field, Jiangsu Shentong Valve Co., Ltd., Shijiazhuang No.1 Valve Company Ltd., and Shijiazhuang Sanhuan Valve Co., Ltd. are the major manufacturers in China. For nuclear power valves, the Chinese nuclear-power valve market is predominantly occupied by foreign manufacturers, such as KSB and VELAN. Competitive domestic players include Jiangsu Shentong Valve Co., Ltd., Dalian DV Valve Co., Ltd. and Wujiang Dongwu Machine Co., Ltd. CNNC SUFA Technology Industry Co., Ltd. mainly produces nuclear power valves, nuclear chemistry valves and other special valves. In the air conditioning valve field, Zhejiang Sanhua Co., Ltd. and Zhejiang Dun’an Artificial Environmental Equipment Co., Ltd. dominate approximately 70% of the global market. The petrochemical industry is the largest valve consumer in China. The home-made general valves can basically meet the needs of petrochemical production, but some special valves would still depend on imports. The major players in this field are Neway Valve (Suzhou) Co., Ltd., Liangjing Group Valve Co., Ltd. and Lanzhou High Pressure Valve Co., Ltd. 9.5.5. Receiver Tubes Internationally, receiver tubes companies Schott Solar and Siemens dominate the heat collector elements (HCE) market for parabolic trough technology. However, China is currently developing a sizeable CSP industry, especially in receivers - one of the most important elements of the solar field. In table 15(9), we can see a summary of the main receiver manufacturers: Table 15(9): Receiver Manufacturers in China NВє Company 1 IEECAS in collaboration with Himin Solar Co., Ltd 2 SUNDA – Beijing Sunda Solar Energy Technology Co., Ltd. in collaboration with Beijing Solar Energy Research Institute –( BSERI) 3 Huayuan New Energy 4 Linuo Solar Thermal Group Co., Ltd. 5 Sunrain New Energy 6 Huiyin Group 7 Lanzhou Dacheng Technology Co., Ltd. 8 Beijing Tianruixing Solar Thermal Technology Co. Ltd 9 Shenzhen Weizhen Solar Energy Products Co. Ltd 10 Royal Tech. Solar Co. Ltd 11 Hubei Guizu Noble Vacuum Science and Technology Co. Ltd 12 BaySolar CSP Co. Ltd. Source: European Solar Thermal Electricity Association www.csptoday.com CSP Today Markets Report 2014 | 282 China Commercially, companies such as Himin, Huiyin, Beijing TRX, Lanzhou Dacheng Technology and Royal Tech are all very active in domestic and international markets. Solutia have local cooperation activities in order to commercialize their product with Royal Tech’s receivers. Table 16(9): Heat Transfer Fluid Providers in China Himin Solar is located in solar valley in Dezhou city, Shandong Province in China where they are also developing a 2.5 MW Fresnel plant. Their headquarters covers an area of 2 million square meters. Himin works as a local and international supplier of CSP core components, absorber tubes, Fresnel receivers and parabolic trough receivers. Sunda is working in China as Receiver R&D and Manufacturer with some parabolic trough pilot projects in Hebei, Langfang, 200 kW, Beijing 12 m trough, and Hunan Yuanling 200 kW PT. Also it has developed a pilot project in Korea Gwangju. Huayuan New Energy has worked as Receiver R&D and Manufacturer in Xinjiang province, Turpan city for a 180 kW pilot project that was planned to be enlarged. Huiyin Group currently owns and operates a 10,000 square meter site specifically for HCE production in Wendeng, Weihai, in China, Shandong province. Huiyin has successfully concluded tests on its new HCE in Spain at Plataforma Solar de Almeria (PSA) and has obtained ISO 14000 and ISO 9001 certificates from TUV. Lanzhou Dacheng Technology has constructed a research and development base in Gansu province where it has developed a Receiver R&D and Manufacturer 200 kW parabolic trough and Linear Fresnel projects and is providing some tubes in the Delingha, Qinghai project. Royal Tech Solar Co., which works in the manufacture and R&D of receivers, has designed, produced and built a 100-meter trough loop in Jiangsu province, and a 600-meter test loop in Inner Mongolia, using VP-1 as heat transfer fluid in temperature cycle testing. NВє Company 1 HUB Chemical Limited Co., Ltd. 2 Shanghai Long Star Chemical Co., Ltd 3 Shenzhen Enesoon Technology Co., Ltd Regarding the domestic market, new players have emerged, such as HUB Chemical Limited, a manufacturer of fine chemicals, heat transfer fluids and industrial lubricants. They offer products for the CSP industry, such as biphenyl, diphenyl oxide (DPO) and heat transfer fluid of many kinds, including hydrogenated terphenyl and another for 400В°C parabolic trough systems. HUB also provides a wide range of industrial lubrication solutions including hydraulic fluids, metal working fluids, vacuum pump fluids, air compressor oil and many other types. Shanghai Long Star Chemical Co., Ltd is a professional supplier of HTF and hot oil furnace cleaning agent. In the trough CSP power generation and in the current application of oil, such as biphenyl HTF, the company can provide SCHULTZ S740 products. Shenzhen Enesoon technology has got licenses in Shexian, Hebei province for the production base of core material and HTF, for solar-thermal power generation, such as hydrogenated terphenyl and biphenyl. 9.5.7. Collector frames In the field of collector frames, Himin Solar Co., as well as other receiver suppliers, can provide the frames/ structures for the absorber tube. They have provided the trough collector structure in some of the Beijing pilot projects in Badaling. Baysolar, a company that has PV developments in Europe and the US, has acquired financing from a Chinese investment company in Sichuan for the construction of a CSP evacuated tube factory in Mianyang. 9.5.6. Heat Transfer Fluid (HTF) The main international HTF providers, Solutia and Dow Chemical Company, with offices in Suzhou and Shanghai respectively, both have a presence in China. www.csptoday.com CSP Today Markets Report 2014 | 283 China Table 17(9): Collector Frame Manufacturers in China NВє Company 1 Beijing Jingcheng Cailong Steel Structure Co., Ltd. 2 Jiangsu Henglida Machine Co., Ltd. 3 Himin Solar Co., Ltd 4 Baotou Hydraulic Mechanical Plant Beijing Jingcheng Cailong Steel Structure mainly engages in steel structure technology development, production, and installation. Within the CSP industry, they have worked in support structure manufacture and installation for the Beijing parabolic trough Badaling project and in Guangdong at the Guangzhou Sun Yat-sen Institute for a pilot project. Jiangsu Henglida specializes in producing hydraulic series complete equipment sets. The main products are the Hydraulic push rod series, hydraulic tool series, electromagnetic valve series, oil cylinder series, etc. Baotou Hydraulic specializes in hydraulic machine design and manufacture. Their main products are the hydraulic cylinder, lubrication and pneumatic systems, and a dedicated set of non-standard equipment. 9.5.8. Raw Material Availability CSP plant construction requires commodity type materials. The main raw materials needed for CSP to be analyzed in this study are: Steel Glass Concrete Molten salt 9.5.8.1. Steel Within the CSP Industry, steel is mainly used for the parabolic trough collector in the solar collector element support structure, but also in the support structure of the mirrors in the tower technology. Some other applications include piping, valves, pumps, and tanks. Key raw materials needed in steelmaking are iron ore and coal, although other elements such as limestone and recycled steel are used. As mentioned previously in this report, there is an adequate supply of coal and iron in the northern part of the country. In terms of crude steel production, China advanced from representing 20% of the market share in 2002 to becoming the major market in the world, with 46% in 2012, producing 1,547 million tons. China also emerged as global leader for steel exports and ranked sixth for imports in 2012. The domestic steel price is in the range of 3,000 Yuan (US$ 480) to 3,500 Yuan per ton. Table 18(9): China Steel Exports and Imports (2012) Country steel exports 2012 Mt Country steel imports 2012 Mt China 54.8 US 31.5 EU 47.1 EU 29.5 Japan 41.5 Germany 22.9 South Korea 30.2 South Korea 20.4 Russia 26.7 Thailand 15.2 Germany 26 China 14.2 Ukraine 24.1 Italy 13.9 Turkey 18.7 France 13.2 Italy 18.3 Indonesia 12.2 France 14.6 Turkey 11.5 Source: World Steel Association www.csptoday.com CSP Today Markets Report 2014 | 284 China The main companies that produce steel are shown in table 19(9). They are ordered by production amount in million tons. Chinese companies are highlighted in yellow: Table 19(9): Main Steel Companies in China by Production (2012).* World Ranking World Producing Companies Production (Mt) Chinese Ranking China Producing Companies 1 Arcelor Mittal 93.6 1 Hebei steel group 2 Nippon Steel 47.9 2 Bao steel Group 3 Hebei Group 42.8 3 Wuhan steel Group 4 Baosteel Group 42.7 4 Jiangsu Shagang Group 5 POSCO 39.9 5 Shougang Group 6 Wuhan Group 36.4 6 Anshan iron and steel group 7 Jiangsu Shagang group 32.3 7 Xinxing Cathay International 8 Shougang Group 31.4 8 Taiyuan steel 9 JFE 30.4 9 Shandong steel 10 Ansteel Group 30.2 10 Tianjin Pipe * Chinese companies are highlighted in yellow www.csptoday.com CSP Today Markets Report 2014 | 285 China 9.5.8.2. Glass With the rapid development of China’s economy, the glass industry is also growing. China is a major producer of glass, and the output of flat glass has ranked first worldwide for 20 consecutive years, accounting for over 50% of the global market. By the end of 2011, there were 3,344 glass and glass product manufacturing enterprises in China. The total asset of the industry was CNY 510.59 billion. The main companies involved in the manufacturing of glass products in the country are: Table 20(9): Top 10 Chinese Glass Manufacturers (2012-2013) mirrors for all the technologies available in CSP. Their production line covers power trough mirror, power tower mirror, Fresnel and power dish mirror. Currently, Taiwan Glass’ tower mirror has passed the DLR agency inspection certification, and trough mirror inspection work is still in progress. In terms of positive market response, most of the heliostat in Supcon Delingha project (phase one) will be produced by Taiwan Glass. Table 21(9): CSP Mirror Manufacturers in China NВє Company 1 Shandong Jinjing Technology Co., Ltd. (Glass) NВє Company 1 Jiangsu Farun Group Co., Ltd. 2 Lanzhou Blue Sky Float Co., Ltd.(Glass) 2 Taiwan Glass Group 3 Zhejiang Daming Glass Co., Ltd. 3 China Glass Holdings Limited 4 Rayspower New Energy Co., Ltd. 4 CSG Holding Co., Ltd. 5 Taiwan Glass Group 5 Zhejiang Glass Company Limited 6 Beijing TeraSolar Photothermal Technologies Co. Ltd 6 Xinyi Glass Holdings Limited 7 7 Jinjing Science & Technology Stock Co., Ltd. 8 Fuyao Glass Group Industries Co., Ltd. Dalian Great Ocean New Energy Development Co. Ltd (involved in dish Stirling) 9 Hebei Shahe Anquan Industry Limited Company 10 Zhuzhou Kibing Group Co., Ltd. Internationally, the main share of global glass market is still monopolized by major players such as: Asahi Glass and Nippon Sheet Glass, Japan Saint-Gobain, France Guardian, United States Rioglass, Spain The above companies are all participating in the Chinese CSP industry through their local presence. Within the domestic CSP industry, Zhejiang Daming Glass is the major mirror manufacturer and won the public bidding of CGNPC Delingha test project for Fresnel CSP reflector, as the only domestic supplier in this project. Source: European Solar Thermal Electricity Association Other companies, such as Lihu Glass Group in Shanxi, Sinogold New Energy Technology in Beijing, Hebei Yiyang in Hebei, and some glass manufacturers have started to invest in CSP mirror production. 8.5.8.3. Concrete Concrete is an easily available construction material in China. Construction minerals, such as sand, gravel, clay and natural stone, are widely available in the country and are extracted in very large quantities. The price varies between 300-400 Yuan per m3 depending on the quality. Some of the most important concrete producers in China are: Daming Glass New Energy provides flat and curved www.csptoday.com CSP Today Markets Report 2014 | 286 China Table 22(9): Concrete Producers in China by Production NВє Company 1 China Resources Cement 2 Shanghai Jiangong Construction Material 3 Jidong Concrete 4 China Construction Concrete 5 Jinyu Group 6 Shanghai Jiangong 7 Western Construction Group 8 Jiangsu Weiye 9 Shanghai City Construction 10 Jiangsu Minghe 8.5.8.4. Molten Salt Figure 8(9): Non-metallic Mineral Resources in China Source: China Geological Survey (CGS, under the Ministry of Land and Resources) www.csptoday.com CSP Today Markets Report 2014 | 287 China The common molten salt in CSP is used as an eutectic mixture of 60% NaNO3 and 40% KNO3. The price of molten salt is around 6,000 Yuan per ton. The top three raw material producing countries/regions of selected industrial salts are the European Union zone with around 22%, USA with 20% and China accounting for around 18 %- totaling 60% of the global production. As we can see in the map below, the availability of molten salt is abundant in China, especially in the western and northern parts of the country. Major international molten salt players such as the Norwegian Yara and the Chilean SQM are already in the Chinese market, SQM with joint venture in Sichuan SQM Migao Fertilizer Co. Ltd. Other Chinese companies that would also be able to provide molten salt are: Table 23(9): Molten Salt Producers in China NВє Company 1 Tianjin Yuanlong Chemical Industry Co., Ltd. 2 Wentong Group Tianjin Xinyuan Global Trading Co., Ltd. 3 Xiaxian Yunli Chemicals Co., Ltd. 4 Tianjin Xinyuan Global Trading Ltd. 5 Shenyang Xin Guang Chemical Factory 6 Zouping Changshan Zefeng Fertilizer Co., Ltd. 7 Su Jia Trading Co., Ltd. Zhengzhou billion tons by 2015, with the goal of controlling production growth. China, typically a net coal exporter, became a net coal importer in 2009 for the first time in over two decades. Indonesia and Australia are the largest coal exporters to China, accounting for over 50% of the market share of imports in 2011. Despite abundant domestic coal, several factors are contributing to the rise in imports, including the higher cost of domestic coal, bottlenecks in transporting domestic coal to power plants, coking coal resource restraints, and environmental and safety concerns. Currently, there is a coal-CSP hybrid project approved, using parabolic trough technology for the solar plant. This hybrid plant is going to be developed by Hanas New Energy Group, with construction Partners such as North China power engineering and Siemens. The location of the project is in the province of Ningxia in Wuzhong city prefecture, Yanchi County in the town of Gaoshawo. It will be the first coal hybrid demonstration project in Asia, and will see a total investment of RMB 2,250 million. The plant’s power capacity will be 92.5 MWe, of which 40 MW will be CSP, but the project is on hold at the moment since the FiT has not been confirmed yet by the Government. 9.6. Alternative CSP Markets 9.6.1. Coal - ISCC In 2011, China consumed around 4 billion tons of coal, representing about half of the world’s total consumption. More than half of China’s coal is used for power and heat generation; therefore, coal consumption generally reflects electricity demand and industrial growth. Industries such as steel and construction accounted for 30% of coal use in 2011. In terms of energy consumption, the 12th Five-Year Plan (FYP) is expected to provide 11% of the country’s total energy consumption through non-fossil fuel energy by 2015, and 15% by 2020, up from 8.3% in 2009, which indicates that the government wants to reduce fossil fuel energy consumption. As regards coal, the country’s 12th FYP calls for a production ceiling of 4.4 billion tons and capacity ceiling of 4.6 www.csptoday.com CSP Today Markets Report 2014 | 288 China Figure 9(9): Map of Coal Resources in China пЂј 0 – 1,000 Mt пЂј 1,000 – 10,000 Mt пЂј 10,000 – 50,000 Mt пЂј 50,000 – 100,000 Mt пЂј 100,000 – 250,000 Mt Heilongjiang Jilin Liaoning Ningxia Shaanxi Hubei Yunnan Guangxi ng do ng a Gu n Hunan Shanghai Fuji a Guizhou Jiang xi Sichuan su Anhui Henan ng Jia Qinghai Tibet ng do an Sh Zhejiang Gansu Inner Mongolia Hebei Xinjiang Hainan Source: Barlow Jonker Pty Lt, 2003 Figure 10(9): DNI Resources in China Source: SolarGIS В© 2013 GeoModel Solar s.r.o. www.csptoday.com CSP Today Markets Report 2014 | 289 China The DNI conditions in the Northern region where coal deposits are most abundant are not very high. However, for ISCC plants, like the one being developed by the Hanas New Energy Group, DNI does not need to be that substantial. A DNI of ≥2,000kWh/m2/year is usually needed for standalone CSP plants to be financially viable. However, with ISCC cost reduction benefits, such as joint use of equipment, can bring regions with a DNI of ≥1,700kWh/m2/year (and natural gas resources) into consideration. 9.6.2. Desalination The desalination industry is developing quickly in China; some of the reasons for this momentum are: that China has the world’s largest development potential for desalination. The first batch of regions and companies has been selected to carry out seawater desalination pilot projects by the NDRC. The list include the cities of Shenzhen and Zhoushan, Luxixiang Island in Zhejiang province, Binhai New Area in Tianjin, Bohai New Area in Hebei, and several industrial parks and companies. Among the listed companies that may benefit from the policy to reach this goal are: the South Huitong Co., Beijing OriginWater Technology Co., Ltd., Zhejiang Hailiang Co., Ltd. and Jiangsu Asia-Pacific Light Alloy Technology Co., Ltd. The lack of water resources: China is one of the countries suffering a shortage of water, especially in the north and northwest regions, coastal cities, and islands in the north. The heavy and chemical industries are well-developed in the coastal region, and the demand for industrial water is huge. The price of water and the cost for desalination are getting closer due to technological challenges, resulting in an increased urban tap water price. Although China started its desalination research and development fifty years ago, it only started to install desalination systems in 2003, and now has around 40 institutions involved in desalination and more than 600 companies manufacturing related equipment. In terms of policy, the country announced in its 12th Five-Year Plan for desalination a target of 2.2 to 2.6 million m3/day of online sea water converted capacity by 2015, compared with 660,000 cubic meters in 2011. More than half of the freshwater channeled to isles and more than 15% of water delivered to coastal factories will come from the sea by 2015, according to the plan. The Ministry of Science and Technology and the National Development and Reform Commission published the water desalination plan with an obligatory target stating that 70% to 75% of major equipment should be made in China. The goal behind this target is to build the country’s desalination industry, now mostly in the hands of foreign companies, which is similar to what previously happened with the wind industry. Industry analysts estimate that the development plan will require an investment of around 21 billion Yuan, or US$ 3.35 billion (1 US$ = 6.26 Yuan). Within the international industry, it is generally believed www.csptoday.com CSP Today Markets Report 2014 | 290 China Figure 11(9): Desalination Capacity in Coastal Cities (m3/day) in China (2010) Dalian: 9,600 Tainjin 227,000 Tsingtao: 46,000 Zhejiang: 95,100 Others: 134,900 Source: Frost and Sullivan, 2011 The first solar-thermal power generation and desalination scientific research base in China has been built in Lingao, Hainan. The project, constructed by Hainan Tianneng, uses trough concentrated system, steam generating system and desalination system to make demonstration and experimental research. Through the solar energy water and electricity combined generation system and energy storage technology, the project aims to improve the quality of CSP generation output. Table 24(9): China’s Oil Production, Consumption, and Import (2011) 9.6.3. Enhanced Oil Recovery Although there have been no direct CSP-EOR projects or research in China, it is a field worth discussing as China is the world’s second-largest consumer and net importer of oil after the United States. Approximately 19% of China’s energy consumption comes from oil, with 70% coming from coal (EIA, 2012). According to the Energy Information Administration (2012), as of January 2012, China held 20.4 billion barrels of proven oil reserves - the largest amount in the Asia-Pacific region. Source: EIA, 2012 Oil Million barrels per day in 2011 Production 4.3 Consumption 9.8 Import 5.5 Although China is now the world’s fifth largest oil producer, the country has been a net oil importer since 1993. In 2011, more than 50% of China’s crude oil imports came from the Middle East, mainly Saudi Arabia and Iran, but also other countries such as Angola and Russia. www.csptoday.com CSP Today Markets Report 2014 | 291 China Figure 12(9): China’s Oil Production and Consumption 1990-2013 Source: EIA, 2012 The Chinese oil market is dominated by four major national oil companies: China National Petroleum Corporation (CNPC) China Petroleum and Chemical Corporation (Sinopec) China National Offshore Oil Corporation (CNOOC) China National Chemicals Import and Export Corporation (Sinochem) The 12th Five-Year Plan explicitly aims to reduce carbon dioxide emissions and the NDRC has a target reduction value of 17% by 2015 that varies geographically, according to province. Enhanced oil recovery (EOR) is expected to help in achieving this reduction. www.csptoday.com CSP Today Markets Report 2014 | 292 China Figure 13(9): Location of China’s Major Oil Fields Source: EIA, 2012 Figure 14(9): Locations of Known CSP Projects in China Source: CSP Today Global Tracker, August 2013 www.csptoday.com CSP Today Markets Report 2014 | 293 China Looking at the current locations of CSP plants in figure 14(9) above, there are CSP plants already underway in the Jiangsu and Shenghi regions which are home to some of the largest fields in the country. EOR in China, it is not beyond possibility that it may be considered in the future. Several EOR pilot projects have been implemented in China, as shown in table 25(9): Although there are no concrete plans to use CSP for Table 25(9): EOR Projects Implemented in China Basin Year of EOR under operation Technique Liaohe 1998 Steam/ Gas Injection Zhongyuan 2002 Gas Injection Daqing 2006 Gas Injection Jilin 2006 Gas Injection Shengli 2007 Gas Injection Dagang 2007 Chemical/Gas Injection Bohai 2009 Gas Injection Songliao 2009 Gas Injection Junggar 2009 Gas Injection In the coming years two EOR projects are going to be constructed in China: Dagang Basin: The GreenGen project, located in Tianjin, will be China’s first commercial-scale Integrated Gasification Combined Cycle (IGCC) power plant. It will combine Carbon Capture and Storage (CCS) with EOR operations. The project has been allocated a budget of US$ 1 billion and will be developed by seven Chinese state-owned companies and the US coal magnate Peabody Energy. Daqing Basin: The governments of Japan and China are implementing a project to inject CO2 emitted from a thermal power plant in China into an oilfield. The project will be implemented at the Harbin Thermal Power Plant in Heilongjiang Province. The captured CO2 will then be transported via a pipeline nearly 100 kilometers to the Daqing Oilfield to be injected and stored. The project is estimated to cost between US$ 216 million and US$ 324 million. Once constructed, it will be the first case of injecting CO2 from a thermal power plant into an oilfield in China. 9.7. Market Forecast With a population of more than 1.3 billion, far exceeding all other emerging CSP market demographics, China www.csptoday.com faces rapid energy demand growth, as the largest electricity consumer in the world. With its growing energy demand, China’s grid is becoming increasingly strained, and the motivation to use cheap conventional power is high. To meet future demand, China will need to add over 1,300 GW to its grid between 2005 and 2030. By the end of the decade, 3,000 MW of CSP power is expected to be deployed to address China’s desire to refocus its energy portfolio on more environmentally-friendly technologies. As a result, wind power has now passed the generation rates of coal and nuclear. With DNIs ranging from 1,800 to 2,500 kWh/m2/year, China may not be a country benefiting from the best solar resource, but considering its population and the available land for CSP projects (900,000 km2 out of 9,710,000 km2; approximately 10% of land area), the country could potentially have 5,821 to 8,105 GW of CSP capacity. While only 3.7 MW of CSP capacity is currently in operation in China, the industry is active and projects are in the works. Indeed, with 60 MW under construction, 1,700 MW announced, 286.5 MW in planning, and another 352.5 MW under development, interest from investors in future CSP deployment reinforces the country’s commitment towards the 3,000 CSP Today Markets Report 2014 | 294 China MW envisaged by the end of the decade. In addition to its CSP-specific target, China also expects to have 50 GW of renewable energy delivering power to its grid by 2020, providing a favorable conjuncture for new technologies such as CSP. The outlook for China and its CSP market is certainly promising, with anticipated capacity forecasted between the targeted 3 GW, up to 10 GW. Once again, the optimistic scenario is well aligned with the realizable deployment set forth by the current announcement, but could very well not be fully realized if execution is delayed and market momentum declines. With China’s industrial expertise, however, its contribution to the reduction of CSP technology costs could positively affect the bankability of CSP, and promote deployment globally. Figure 15(9): Installed CSP Capacity in China Until 2024 (MW) 4,000 3,614 Optimistic 3,500 Conservative Pessimistic 3,000 2,500 2,000 1,390 1,500 1,000 634 500 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Figure 16(9): Cumulative Energy Production in China Until 2024 (TWh) 350 Optimistic 300 Conservative 272 Pessimistic 250 227.2 200.6 200 150 100 50 0 2006 2008 www.csptoday.com 2010 2012 2014 2016 2018 2020 2022 2024 CSP Today Markets Report 2014 | 295 China Conclusion China aims to have 1 GW of installed CSP capacity by 2015 and 3 GW by 2020; the target of 1 GW of CSP by 2015 seems over-optimistic considering the current number of projects under operation and construction. Although it is more than likely that the 1 GW target will not be reached by 2015, China is still a promising market, something which is reflected by the entry of international players such as BrightSource and SolarReserve to name a few. However, there are numerous barriers facing the development of CSP in China. The low cost of PV, in addition to the lack of a definitive Feed-in-Tariff for CSP and the need to upgrade grid infrastructure between East and West, are major obstacles that need to be addressed before CSP can realistically gain a foothold in the market. For this reason, China is ranked as the seventh most promising market of the eight markets covered in this report. www.csptoday.com CSP Today Markets Report 2014 | 296 China References Barlow Jonker Pty Lt, now under Wood Mackenzie, Market Research Report, 2003. Available through: <http://www. woodmacresearch.com/cgi-bin/wmprod/portal/corp/corpPressDetail.jsp?oid=834107> China Geological Survey, 2013. Available through: <http://en.cgs.gov.cn/> [Accessed August 2013]. CSP Today Global Tracker, 2013. Available through: <http://social.csptoday.com/tracker/projects> [Accessed August 2013]. European Solar Thermal Electricity Association, 2013. Available through <http://www.estelasolar.eu> [Accessed August 2013]. Frost and Sullivan, Market Research Report, 2011. Available through: <http://www.frost.com/prod/servlet/ frost-home.pag> National Development and Reform Commission, 2013. Available through: <http://en.ndrc.gov.cn> [Accessed August 2013]. State Grid Corporation of China, 2013. Available through: <http://www.sgcc.com.cn/ywlm/socialresponsiility> [Accessed August 2013]. U.S. Energy Information Administration, 2012. China. Analysis: Background. Available through: <http://www.eia.gov/ countries/cab.cfm?fips=CH> [Accessed 27 July 2013]. World Steel Association, 2013. Available through: <http://www.worldsteel.org/> [Accessed August 2013]. Acronyms ACRONYM DEFINITION ABC Agricultural Bank of China BoC Bank of China BOCOM Bank of Communications BSERI Beijing Solar Energy Research Institute CCB China Construction Bank CCS Carbon Capture and Storage CNREC China National Renewable Energy Centre CGS China Geological Survey CNOOC China National Offshore Oil Corporation CNPC China National Petroleum Corporation CSGC China Southern Grid Company www.csptoday.com CSP Today Markets Report 2014 | 297 China DPO Diphenyl oxide EIA Energy Information Administration EOR Enhanced Oil Recovery ESTELA European Solar Thermal Electricity Association FIT Feed in Tariff HTF Heat Transfer Fluid ICBC Industrial and Commercial Bank of China IEA International Energy Agency IGCC Integrated Gasification Combined Cycle IPP Independent Power Producer ISCC Integrated Solar Combined Cycle JSCB Joint Stock Commercial Bank LCOE Levelized Cost of Electricity MEP Ministry of Environmental Protection MoF Ministry of Finance MoST Ministry of Science and Technology NDRC National Development and Reform Commission NEA National Energy Administration NEC National Energy Commission PSA Plataforma Solar de Almeria SGCC State Grid Corporation of China SOCB State-Owned Commercial Bank SOE State Owned Enterprise SPC State Power Company of China WFOE Wholly Foreign Owned Enterprise www.csptoday.com CSP Today Markets Report 2014 | 298 UAE 10 United Arab Emirates By Marco Poliafico Contents List of Figures 299 List of Tables 299 Chapter Summary 301 Country Overview 301 10.1. Electricity Market 303 10.1.1. Electricity Consumption and Demand 304 10.1.2. Grid Transmission 305 10.1.3. Market Structure Diagram 306 10.2. CSP Market 306 10.2.1. Masdar 307 10.2.2. CSP Project Profiles 308 10.2.3. Local Content Requirements 311 10.3. Local CSP Ecosystem 311 10.3.1. Key Government Agencies 312 10.3.2. Independent Water and Power Producers 313 10.3.3. Local Utilities and Transmission Grid Operators 315 10.3.4. Permitting Agencies 316 10.3.5. Local Consultants and R&D Bodies 317 10.3.6. Financial Organizations 318 10.3.7. Developers, EPCs and Engineering companies 319 10.4.1. 322 Supply of Local Components 10.4.2. Raw Material Availability 10.5. Alternative CSP Markets 324 324 10.5.1. Desalination 324 10.5.2. Enhanced Oil Recovery 325 10.6. Market Forecast 326 Conclusion 327 References 328 Acronyms 329 www.csptoday.com CSP Today Markets Report 2014 | 299 UAE List of Figures Figure 1(10): Direct Normal Irradiation in the UAE 302 Figure 2(10): Masdar’s Integrated Business Units 308 Figure 3(10): Location of North East Bab Field, UAE 325 Figure 4(10): DNI Conditions in the UAE 325 Figure 5(10): Installed CSP Capacity in the UAE 2006-2024 (MW) 327 Figure 6(10): CSP Cumulative Energy Production in UAE Until 2024 (TWh) 327 List of Tables Table 1(10): Drivers and Barriers 303 Table 2(10): UAE CSP Project Portfolio, 2013 309 Table 3(10): Shams 1 Project Overview 309 Table 4(10): Shams 1 Project Details 309 Table 5(10): Ministries and Government Agencies in the UAE 312 Table 6(10): Independent Water and Power Producers in the UAE 314 Table 7(10): Utility Companies in the UAE 315 Table 8(10): Permitting Agencies and Environmental Assessment Agencies in the UAE 316 Table 9(10): Consultants and R&D Bodies Operative in the UAE 318 Table 10(10): Main Financing Institutions and Banks in the UAE 319 Table 11(10): Developers, EPCs and Engineering Companies Operative in the UAE 320 Table 12(10): CSP Components Available Locally in the UAE 322 Table 13(10): CSP Raw Material Suppliers Available in the UAE 324 www.csptoday.com CSP Today Markets Report 2014 | 300 UAE Chapter Summary The United Arab Emirates (UAE) enjoys one of the highest levels of income per capita in the world, and unlike other countries in the Middle East and North Africa, this market is shaped through privately structured, government-supported organizations and is open to the entry of new developers. The UAE is ranked as the eighth most promising CSP market. The UAE announced investments of more than US$ 102.3 billion in renewable energy projects to be developed by 2020 and has the economic potential to develop more than 20 GW of solar power generation by 2030. The two largest emirates by area, Abu Dhabi and Dubai, set an overall generation target from renewables of 7% by 2020 and 5% by 2030 respectively. The UAE flagship project is the multi-billion dollar investment for the development of Masdar, the sustainable city launched in 2006. Amongst other projects, Masdar Institute announced a pilot program for developing and testing solar desalination technologies in 2013. At present, the UAE does not have a tailored policy framework and lacks a specific incentive scheme for renewable energy projects. However, there are discussions around the possible introduction of a feed-in-tariff program. No specific local content requirements have been announced for CSP projects, but an important business requirement is that 51% of any new company must be owned by UAE nationals – with the exception of free zone companies that can be 100% owned by foreign investors. Furthermore, lower-than-expected DNI conditions and the potentially damaging impact of dust on CSP operations could be a strong deterrent against the market. Considering the level of water scarcity in the UAE, CSP technology would be ideal for solar desalination applications, as up to 90% of the freshwater in the entire Gulf region is supplied through desalinated seawater. Not only could solar thermal power provide the electricity for the process, but waste heat could also be usable for thermal desalination. Another potential area for the deployment of CSP technology is the provision of heating and cooling for buildings and industrial applications. In addition, enhanced oil recovery (EOR) represents a promising avenue for CSP developments due to the existing EOR activities being undertaken in this market. Country Overview United Arab Emirates Solar Resource (average annual sum of DNI): 2,000 kWh/mВІ/year Size:83,600 kmВІ Population (2012): 8.45 million GDP per capita (2012): US$ 45,731 Installed power capacity: 30 GW Annual electricity consumption: 87 TWh Expected annual electricity demand in 2020: 180 TWh Electricity mix by installed capacity (2012) Natural Gas 90% Oil 10% Renewables < 1% Known energy resources Natural Gas, Oil, Nuclear, Solar Energy Potential Markets for Industrial CSP Applications Desalination Cooling Load for HVAC Systems Enhanced Oil Recovery www.csptoday.com CSP Today Markets Report 2014 | 301 UAE Figure 1(10): Direct Normal Irradiation in the UAE Source: SolarGIS В© 2013 GeoModel Solar s.r.o www.csptoday.com CSP Today Markets Report 2014 | 302 UAE Table 1(10): Drivers and Barriers Drivers Barriers Increasing electricity demand Dust and haze affect DNI conditions Good solar resources Soft and corrosive soil in parts of the country, such as Dubai, which may require special heavy steel structures Displacing oil and gas used for domestic electricity generation with renewable resources, and freeing up hydrocarbons for higher value applications and export. Lack of tailored policy with financing mechanisms and transparent regulatory framework Commitment to energy diversification and carbon footprint reduction Suitable land is rare and expensive On-the-ground learning experience from Shams 1 could help in identifying and combating risk for future CSP developments Higher price over PV technology and higher consumption of water Using electricity and waste heat from CSP in future desalination plants Difficulty in accessing finance because solar energy is still perceived as a high-risk investment Lack of locally skilled human resources and knowledge base Electricity Market The United Arab Emirates (UAE) is a federation of seven emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain) together enjoying one of the highest levels of income per capita in the world. Abu Dhabi, the capital city, is the largest – occupying 85% of the area – and is the richest in terms of oil resources. Dubai is the second-largest emirate by area. Together, Dubai and Abu Dhabi form the core of the country’s economy. The energy market approach pursued by the UAE has been different from many other MENA countries, consisting of privately structured organizations (such as TAQA and MASDAR) that are supported by the government. These organizations act as private entities developing market partnerships with international stakeholders. To date, only Dubai and Abu Dhabi have created regulatory bodies for the electricity sector. The electricity market of the UAE has a complex structure due to the many stakeholders operating within it. Starting from the independent regulator, the Regulation and Supervision Bureau releases licenses to all companies operating in the country and works with the Federal Electricity and Water Authority (FEWA), an independent government body, to oversee the entire sector. Similarly, the Federal Authority for Nuclear Regulation (FANR) is the independent government www.csptoday.com body in charge for overseeing the development of the nuclear sector. Market bodies in the energy sector operate at an emirate level. The main two are the Abu Dhabi Water and Electricity Authority (ADWEA) and the Dubai Water and Electricity Authority (DEWA). Dubai also has another government agency, the DSCE (Dubai Supreme Council of Energy), responsible for all initiatives relating to the energy sector including generation, transmission and distribution of electricity for public consumption. Equivalent market operators in the other emirates are the Sharjah Electricity and Water Company (SEWA) in Sharjah, and the Federal Electricity and Water Authority (FEWA) in the northern Emirates. These bodies are independent public authorities wholly owned by the government and are also able to run research and development projects. An example of this is the National Water and Energy Research Center, a subsidiary of ADWEA, which is responsible for the overall policy of the electricity sector, including privatization matters, in the emirate of Abu Dhabi. The generation as well as the desalination capacity is predominantly provided by Independent Water and Power Producers (IWPPs) in Abu Dhabi. These projects are awarded on a Build, Own and Operate (BOO) business model through long-term Power and Water CSP Today Markets Report 2014 | 303 UAE Purchase Agreements (PWPA), typically 20 years. Their ownership is split between ADWEA (60%) and the international investor (40%). In other cases, the authority fully owns the installed capacity of the emirate in which it operates. For example, DEWA is an integrated supplier owning and operating the transmission, distribution and generation – all the segments of Dubai’s electricity market. This emirate only recently passed legislation allowing the private sector to participate in electricity generation, and is shaping its market on the model adopted by Abu Dhabi. Energy produced has to be sold to single buyers who in turn become the sole procurers and sellers of water and electricity in their emirate. In the case of Abu Dhabi, this applies to Abu Dhabi Water and Electricity Company (ADWEC), whereas in the other emirates, the single buyers are the same – DEWA, SEWA and FEWA. All of these companies charge the distribution companies with Bulk Supply Tariffs (BST). The Abu Dhabi Transmission and Dispatch Company (TRANSCO) is the government-owned transmission operator in the emirate of Abu Dhabi. It is a subsidiary of ADWEA and currently owns excess capacity in preparation for the future demand growth. Recently, TRANSCO also become involved in the planning, development and operation of electricity transmission networks in the northern emirates. The other transmission operators are represented by the same authorities operating in the emirates (DEWA, SEWA and FEWAL). All of the networks are physically connected to form the Emirates National Grid (ENG), a country-wide project launched in 2000 and completed in 2008. The ENG is owned by different relevant partners, i.e. ADWEA (40%), DEWA (30%), FEWAL (20%) and SEWA (10%). The ENG is in turn connected to the regional GCC grid. The transmission and distribution network is constantly expanding, particularly around Dubai, where new developments are continuously built. The last part of the electricity supply chain is represented by the distribution. DEWA, SEWA and FEWAL own and manage the distribution networks at municipality level. In Abu Dhabi two companies are operative: Al Ain Distribution Company (AADC) and Abu Dhabi Distribution Company (ADDC). Private investment in conventional power generation and commercial agreements in the form of PPAs have www.csptoday.com already been employed in both emirates. Respectively, four and six IPPs are operative in Abu Dhabi and Dubai. Although the UAE economy has traditionally been dominated by the oil and gas sector, over the last decade there has been a strong commitment to diversify energy resources and now only 60% of the overall GDP is associated with that sector. Diversification of economic resources is in fact an integral part of the Abu Dhabi Government’s 2030 Vision and the wider UAE Vision 2021; a roadmap for transforming the emirate into a sustainable and diversified, high valueadded knowledge economy. As a consequence of these government-led initiatives, the energy mix is slowly moving away from fossil fuels. Amongst the main drivers for the change in energy policy are the risk of exposure to fuel price changes and the loss of revenue associated with the internal consumption of fuels that could be otherwise exported. Electricity generation in Abu Dhabi is provided by Abu Dhabi Water & Electricity Company (ADWEC), which at the same time exports the surplus to the Northern Emirates. The UAE is also looking at nuclear power, and the first of four plants should be built by the Emirates Nuclear Energy Corporation (ENEC) by 2017. An estimated investment of approximately US$20 billion will provide the country with these four nuclear power facilities by 2020. Totaling an installed capacity of 5.6 GW, these plants are expected to produce nearly quarter of the nation’s electricity needs (ENEC, 2011) 10.1.1. Electricity Consumption and Demand According to a report released by the Kuwait Financial Centre, power generation capacity in the UAE has grown at an average rate of 12% per year during the last five years. Conversely, the growth rate for power consumption in the same period was approximately 8%. The fact that the installed capacity is growing at a higher rate than consumption clearly paves the way for the country to become a net exporter when the regional GCC power grid becomes operative. This project, known as the GCC Interconnection Grid, was agreed at the end of 2001 and commissioned by the GCC Interconnection Authority (GCCIA). Energy demand in the UAE grew by approximately 5.2% in 2011 and on average 9% per year in the last 6 years, with a peak of almost 23% in 2008. This trend is driven by both economic and demographic growth. Energy CSP Today Markets Report 2014 | 304 UAE demand usually peaks during hot summer days when the maximum cooling load is needed. Overall, the consumption in UAE is expected to grow at a rate of approximately 8.5% per year in the next 5 years and the bulk of this trend will come from Abu Dhabi, where demand will grow by 11% per year in the same time frame. However, ADWEC estimates that electricity exports to the Northern Emirates will increase by 142% by 2020. Conversely, Dubai’s consumption growth rate will be lower (approximately 3.5% per year in the next decade and 2.5% in the following one). In the longer term, power consumption is estimated to increase by more than 100% by 2020. A report produced by DEWA confirms that the installed capacity increased by 7% in 2012 alone. In terms of the energy mix, the use of natural gas is much higher than in other MENA countries. In fact, the consumption of this resource has increased to the point that UAE currently imports gas from Qatar through the Dolphin gas pipeline. 10.1.2. Grid Transmission Approximately 92% of the UAE population is connected to the Emirates National Grid (ENG); however, some industrial plants have not been able to secure sufficient supply and for this reason had to develop captive power generation. In 2012, the efficiency of the electricity transmission grid improved by approximately 6.9%, and there is a strong commitment to improve the overall performance of the system whilst expanding the transmission and distribution networks. For instance, a report published by DEWA indicated that in 2012, a 7% increase in the capacity and efficiency of its electricity transmission networks was achieved. As a whole, DEWA succeeded in reducing the percentage of line losses in its electrical network to 3.49% in 2011 from a level of 6.28% ten years prior to that. Various upgrading projects at substations have been carried out by Alstom, such as the Jebel Ali 400kV GIS substation and Bukadra & Jafza 400kV GIS substation for DEWA; Dhaid 220kV GIS substation for ENG; Tawyeen 11kV GIS substation for TRANSCO; Mussafah 400kV GIS substation and Al Khazna 220 kV in Abu Dhabi for ADWEA, to mention a few. Other industrial players active in the region within these types of projects are ABB and AREVA. The Transmission and Distribution (T&D) division of AREVA recently won an order worth approximately US$ 266million for eleven high voltage www.csptoday.com Gas-insulated (GIS) Substations from DEWA. This commitment to expand the transmission and distribution networks was also reinforced by Saeed Al Tayer, managing director and chief executive officer at DEWA, during a recent interview. In terms of the GCC Interconnection Grid, the project will be conducted in three phases. The first phase, which was the largest of all three phases, entailed the development of the North Grid across Kuwait, Saudi Arabia, Bahrain and Qatar and was completed in 2009. The second phase involved the internal connection among the southern systems (United Arab Emirates and Oman) and was completed in 2011. Meanwhile, the third phase of the project will see the interconnection of the GCC North Grid with the GCC South Grid and is still under development. With the completion of the third phase, the entire interconnection would be accomplished. During the first two years of operation, the GCC Interconnection Grid contributed significantly to the continuity of power flow to the power systems of the member states. Between July 2009 and the end of 2010, there were about 250 incidents of sudden loss of generation units connected to the networks in various member states, but because of the GCC interconnection, the systems managed to avoid supply interruptions (Ebrahim, 2012). Numerous benefits are anticipated with the achievement of a common GCC electricity market, such as increased energy security and reliability, greater renewable energy penetration, reduced cost of supply for consumers, and promotion of regional integration and trade. Equally important is that the GCC Interconnection Grid will allow private investors to develop larger projects with access to a wider market, including not only the GCC, but also other pools, such as the EJILST (Egypt, Jordan, Iraq, Lebanon, Syria, and Turkey) and the UCTE (Europe). The availability of a common market will thus provide opportunity for the establishment of power plants close to resources, giving freedom for IPPs and IWPPs to select strategic locations in a much larger market. CSP Today Markets Report 2014 | 305 UAE 10.1.3. Market Structure Diagram Regulation and Supervision Bureau (RSB) + Federal Electricity and Water Authority (FEWA) Abu Dhabi Authority/ Operator Dubai ADWEA Northern Emirates Sharjah DEWA SEWA FEWAL IWPPs Single Buyer ADWEC DEWA SEWA FEWAL Transmission TRANSCO DEWA SEWA FEWAL Emeriates National Grid Distribution ADDC, AADC DEWA SEWA FEWAL Customers 10.2. CSP-Specific Policy The UAE has one of the highest carbon footprints in the world due to a variety of factors, including the development of energy-intensive industries, such as aluminum smelting, and the subsidized price of energy. The country has a strong commitment to lower carbon emissions (30% by 2030) through an overall strategy www.csptoday.com that also aims to reduce dependence on fossil fuels. The steps taken so far are encouraging and have made the UAE one of the most dynamic markets for renewable energy technologies in the MENA region. However, the country has not set any mandatory renewable energy targets as such. CSP Today Markets Report 2014 | 306 UAE The UAE announced investments of more than US$ 102.3 billion in renewable energy projects to be developed by 2020. Both Dubai and Abu Dhabi aim to achieve targets of between 5% and 7% generation from renewable resources by 2030. As is the case in Saudi Arabia, one of the major drivers for the UAE to produce renewable energy is to cut down on its domestic consumption of oil and natural gas. According to the US Energy Information Administration (EIA), the UAE has the seventh-largest reserves of crude oil and natural gas in the world. However, due to increasing levels of domestic consumption, the UAE is now a net importer of natural gas. With expectations that the UAE is unlikely to uncover any more major oil reserves, the country is increasingly recognizing the importance of renewables and nuclear technology. In a press release provided by the Masdar Institute’s Dr. Steve Griffiths, executive director of Institute Initiatives and a professor of the Practice in Chemical Engineering, the UAE has the economic potential to develop more than 20 GW of solar power generation by 2030. In his opinion, the UAE could require more than 120 GW of new installed capacity by 2017 to meet demand, and appropriate polices need to be implemented to stimulate the deployment of renewable energy generation technologies. The maximum benefits, according to local industry experts, would be derived through a mix of PV and CSP technologies. In 2012, the Mohammad Bin Rashid Al Maktoum 1 GW Solar Park was launched in Dubai, and is targeting completion by 2030. This project, requiring an overall investment of about US$ 3.3 billion, will be developed by the Dubai Supreme Council of Energy and managed and operated by DEWA. It is expected that the project will include 200 MW of PV and 800 MW of CSP technology. This split, however, has not been officially announced and is therefore subject to change. The site selected for this development is a 48 km2 area in the vicinity of Seih Al Dahal. Dubai also set up the Dubai Carbon Centre of Excellence (DCCE) to encourage the development of strategies for the reduction of carbon emissions and dependence on fossil fuels. Moreover, as part of the overall sustainability strategy, the emirate launched a green building code in 2009, whereas at a federal level the National Energy Efficiency and Conservation Programme was launched in 2011. 10.2.1. Masdar The UAE flagship project is possibly the multi-billion dollar investment Masdar City, the sustainable community that will house some 50,000 people when fully developed. The Masdar initiative is a commercially driven project launched in 2006 with a commitment of US$ 15 billion by the Abu Dhabi Government. As a wholly-owned subsidiary of the state-owned Mubadala Development Company, Masdar acts as a catalyst for the economic diversification of the emirate. The Abu Dhabi Future Energy Company (ADFEC) was established to oversee the emirate’s initiatives in the renewable energy sector and achieve an overall generation target of 7% from renewables by 2020. ADFEC launched the Masdar City project alongside a wide range of other projects, including a 50 MW PV solar farm outside of Abu Dhabi; the 100 MW Shams CSP plant (60% owned by ADFEC) in Madinat Zayed; the 850 kW Sir Bani Yas Island wind energy project; and the 500 MW integrated hydrogen and desalination plant and CCS project which will be the world’s largest hydrogen plant by 2015. Further plans include 100 MW wind energy installations to be located close to the Saudi border. Masdar operates through four integrated units, including Masdar City. The Dubai integrated Energy Strategy 2030 was developed by SEC in 2010. According to this strategy, Dubai will generate 5% of its energy consumption from renewables by 2030. In the same time frame, the energy mix of the emirate will integrate 12% from nuclear power, 12% from clean coal and 71% from natural gas. Masdar Clean Energy makes direct investments to develop and operate a global portfolio of renewable energy generation projects, including CSP, solar PV and offshore wind energy. An overview is showcased in Figure 2(10). www.csptoday.com Masdar Institute of Science and Technology (MIST), an independent R&D institute developed in collaboration with the Massachusetts Institute of Technology (MIT), is instrumental to all the technological developments that will be initiated in the UAE. Masdar Venture Capital operates via Masdar Clean Technology Fund (MCTF) and DB Masdar Clean Tech Fund (DBMCTF), and provides capital to grow a portfolio of companies. CSP Today Markets Report 2014 | 307 UAE Figure 2(10): Masdar’s Integrated Business Units Masdar Clean Energy Masdar City MASDAR Masdar Capital Masdar Institute of Science and Technology In addition, E.ON Masdar Integrated Carbon, a joint venture between E.ON and Masdar, focuses on reducing carbon emissions through carbon capture and storage (CCS), energy efficiency and waste-to-energy projects. Masdar City acts as a cluster of local companies operating within an urban area aiming to become one of the most sustainable cities in the world. Not only does it host the head office of the International Renewable Energy Agency (IRENA), but it also carries out research and development, testing and market development of clean technologies. As a free zone, Masdar City offers 100% foreign ownership with no restrictions on capital movements, profits or quotas strong IP protection framework and zero-percent import tariffs. Various facilities are available for companies, from workstation space in fully equipped offices for very small businesses to vast offices. Masdar has already signed up German electronics and engineering company Siemens, US-based General Electric, Japan’s Mitsubishi, and South Korea’s SK Group, and expects to bring in more of the 100-plus companies already registered with the Masdar Free Zone. In 2013, Masdar Institute plans to launch a pilot program for developing and testing solar desalination technologies. The program will be directed by Masdar Institute in collaboration with other stakeholders, such as the Abu Dhabi Water and Electricity Authority, the emirate’s Environment Agency and the Abu Dhabi Sewerage Services Company. www.csptoday.com Currently, the UAE does not have a tailored policy framework and lacks a specific incentive scheme for renewable energy projects. However, there are discussions around the possible introduction of feed-in-tariffs. 10.2.2. CSP Project Profiles Abu Dhabi’s Shams 1 is currently the largest operational CSP plant in the world. It extends over an area of approximately 2.5 km2 and consists of 768 parabolic trough collectors distributed on 192 rows of loops. Its construction began in the second half of 2010 and required an investment of around US$ 610.85 million from the 3 partners (Total, 20%, Abengoa, 20% and Masdar 60%). Shams 1 experienced a number of difficulties in its founding years, particularly in terms of dust and lower-than-expected DNI levels. In the UAE, dust reduces insolation by about 30%, so the average DNI is only 1,934kWh/m2 per year. Unlike a typical CSP plant, Shams 1 produces about 18% of electricity with natural gas. Combining hybridization and backup, it utilizes two separate burners to help regulate production and guarantee capacity – especially in peak and mid-peak periods. As such, Shams 1 project is making use of natural gas backup in place of storage. The 1 GW Mohammed Bin Rashid Al Maktoum Solar Park was initially expected to have an 800 MW capacity and is located in the emirate of Dubai. However, no concrete steps towards the development of CSP projects in Solar Park had been taken at the time of CSP Today Markets Report 2014 | 308 UAE publication and CSP Today has since been informed that this figure is not official and therefore may be subject to change. It is likely that once the solar technologies have more of a track record in the region, the government will make a definite decision on the allocation towards CSP. Table 2(10): UAE CSP Project Portfolio, 2013 Title MWe Technology Status Shams 1 100 Parabolic Trough Operation 1 GW Mohammed Bin Rashid Al Maktoum Solar Park TBC CSP portion TBC Planning Table 3(10): Shams 1 Project Overview Current Status: Operation Country: UAE Land Area (acres): 741 Gross Capacity (MWe): 100.00 Developers: Abengoa Masdar Total Technology: Parabolic Trough EPC: Abener Teyma Source: CSP Today Table 4(10): Shams 1 Project Details Status Current Status Operation Announced (date of first appearance in the press) 01/12/2006 EPC Date Granted 01/05/2010 Construction date - actual starting date 01/07/2010 Actual Commercial Operation Date (COD) 17/03/2013 Technology Gross Capacity 100.00 MWe or MWth MWe Technology Parabolic Trough Application Solar Electricity www.csptoday.com CSP Today Markets Report 2014 | 309 UAE Back-up fuel Dual: Natural Gas or Diesel Back-up fuel percentage 18% Heat Transfer Fluid (HTF) Synthetic Oil Net Annual Production - Expected (GWh) 210 Solar Field Inlet Temperature ( C) 302 Solar Field Outlet Temperature (oC) 393 Cooling Dry Country UAE State/Region Madinat Zayed Latitude 23.57 Longitude 53.71917 Solar Field Aperture Area (sq. m) 627,840 Land Area (acres) 741 o Companies Involved Developers Abengoa Masdar Total Developers (Ownership Notes) Shams Power Company is owned by Masdar (60%), Abengoa (20%) and Total (20%) EPC Abener Teyma Utilities Utility (Off-taker) 1 ADWEC Utility 1 PPA Currency UNITED ARAB EMIRATES - DIRHAM Utility 1 PPA Date 01/01/2010 Incentives Incentive 1 PPA/Tariff period 25yrs Investment & Finance CAPEX (millions) 600 CAPEX Currency US$ www.csptoday.com CSP Today Markets Report 2014 | 310 UAE Financing BNP Paribas, KfW, Mizuho, National Bank of Abu Dhabi, Natixis, Sumitomo Mitsui Banking Corporation, The Bank of Toyko-Mitsubishi, Union National Bank and WestLB. US$ 600 million Debt Financing. Masdar (60%) together with Total Abengoa Solar Emirates Investment Company (40%) formed a Special Purpose Vehicle (SPV) called Shams Power Company. The SPV holds the equity of the project (20%), while the remaining share (80%) is bank financed. Suppliers O&M Contractors Abener O&M, SINI Heat transfer fluid supplier (HTF) SOLUTIA Heat transfer fluid model (HTF) SOLUTIA THERMINOL Turbine supplier MAN Steam Generator Supplier Foster Wheeler Mirror supplier PT 1 Flabeg Mirror model PT 1 Flabeg RP- 3 Receiver tubes supplier PT 1 Schott Receiver tubes model PT 1 Schott PTR 70 receiver Solar collector frame supplier PT Abengoa Solar Solar collector frame model PT Abengoa Solar ASTRO Suppliers – Information Suppliers (Air cooled condenser): GEA Power Cooling Safety valves supplied by Leser. Additional Info This project achieved financial close in March 2011. Power is exported at 220 kV. This project has made use of 258,048 parabolic trough mirrors, 192 solar collector assembly loops with eight solar collector assemblies per loop, 768 solar collector assembly units and 27,648 absorber pipes. Source: CSP Today Global Tracker, August 2013 10.2.3. Local Content Requirements At the time of writing this report, there were no specific local content requirements for CSP power plant projects and there no suggestions that such measures would be introduced in the near future. However, an important business requirement is that 51% of any new company is owned by UAE nationals, according to the UAE’s Commercial Companies Law 1984 - “the Companies Law”. will be pursued in the power sector by 2015, both in renewable and non-renewable technologies. There is also a good business case for renewable energy projects because of the revenue gained from fossil fuels exports. Furthermore, the development of CSP technology offers the opportunity to build up a local industry in the country with consequent positive effects in terms of job creation and retained know-how. 10.3. Local CSP Ecosystem In an interview with CSP Today, general manager of Shams Power Company, Yousif Ahmed Al-Ali, shared his point of view indicating that there is already a sizable CSP ecosystem in the UAE, stemming largely from The UAE is one of the most attractive power markets in the MENA region for international investors. It is expected that more than US$ 100 billion of investments www.csptoday.com CSP Today Markets Report 2014 | 311 UAE the construction of the Shams 1 CSP plant. Although Masdar opted for parabolic trough technology for Shams 1, as long as CSP technologies can prove their operational viability and bankability, be it parabolic trough, solar tower, linear Fresnel or dish Stirling, the UAE market will be open for them. “Given the UAE’s available land and abundant solar potential, there is room for other CSP technologies in the region, as long as they are proven, scalable and bankable. CSP offers base-load generation capacity and the potential for large-scale energy storage, which both help stabilize the grid,” Al-Ali highlights. Philip Moss, managing Partner at Mana Ventures, an international clean energy investment firm headquartered at Masdar City, argues that the lack of a comprehensive framework able to support the development of renewable power projects is one of the major challenges for any renewable energy player approaching the local CSP market. Being a very new market, it requires a good amount of commitment for the identification the right partners and the most appropriate way to gain engagement at government level. From his point of view he sees the UAE market as very similar to the Saudi one. However, he recognizes that the UAE has already begun working on the development of renewable energy projects, so the government has worked through the issues to a greater degree than they have in Saudi Arabia to date. On the other hand, Moss highlights the potential competition of the CSP industry with PV technology, due to PV’s lower CAPEX and shorter lead-time needed for development. This aspect could in turn create another critical issue for CSP projects: in comparison, they appear less bankable than PV plants and therefore may need some financial support. In Moss’s view, hybrid plants combining natural gas and CSP technology are the most likely way forward in the UAE in the medium term. 10. 3.1. Key Government Agencies UAE government entities play a major role in the conventional and renewable energy markets, as large national corporations as well as utilities in the sector are mostly government owned or backed, such as Abu Dhabi National Oil Company, Masdar, DEWA, and Dubai Supreme Council. Understanding the functions and responsibilities of these government bodies is therefore essential for successful operation within the UAE market. Table 5(10) outlines the UAE ministries and government agencies that are directly or indirectly involved in the country’s renewable energy market. Table 5(10): Ministries and Government Agencies in the UAE Previous renewable energy programs (if applicable) Name Roles and Responsibilities Dubai Supreme Council of Energy (DSCE) Oversees planning of Dubai’s energy sector. Organizes the rights and duties of energy service providers. Manages pricing to influence Initiated and funding the 1 GW Mohammed Bin community consumption behavior. Identifies and Rashid Al Maktoum Solar Park. drives policies and regulations. Aims to diversify fuel mix by adding solar, nuclear and other renewables. Executive Affairs Authority Abu Dhabi A government agency that provides strategic policy advice to the Chairman of Abu Dhabi Executive Council, His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, across all portfolios of the government. www.csptoday.com The Executive Authority is divided into five advisory units. One of them is the Economic and Energy Affairs, which established the Interagency Working Group on Energy. This group is tasked with formulating a comprehensive energy strategy in the areas of power generation and water supply. CSP Today Markets Report 2014 | 312 UAE Fully-owned subsidiary of Mubadala Development Company. Seeks to position Abu Dhabi as a global hub for research and development activities in the new energy sector and to achieve economic diversification. Owns 60% in Shams 1 CSP Plant. Plans to build desalination plants operated by renewable energy at commercial scale in Abu Dhabi. Launched the 3.5-year long pilot program to test and develop advanced desalination technologies using renewable energy, on which construction is projected to beginВ by 2016. Ministry of Energy (MoE) Coordinates and represents petroleum, electricity, minerals and water affairs. The MoE is currently working on creating a strategy for an integrated energy policy that includes renewables, nuclear, and hydrocarbons, with the aim of diversifying the country’s energy mix. Ministry of Environment and Water (MoEW) Works on the integrated management of the environmental ecosystem and natural resources to realize a green economy. Offers all forms of support to custom departments in the country to help them perform their duties. The MoEW, in cooperation with Zayed International Prize for the Environment, launched a US$ 272,250 Emirates Appreciation Prize for the Environment, to stimulate environmentally conscious initiatives in the country. Ministry of Foreign Affairs (MoFA) - Directorate of Energy & Climate Change (DECC) The DECC within the MoFA liaises with IRENA, represents the UAE in international negotiations, and supports the national climate change strategy. DECC is facilitating the UAE’s engagement in IRENA’s work program. For instance, in linking IRENA to the Clean Energy Ministerial initiative on solar and wind energy mapping, in which the UAE has an active role. Mubadala Development Company Advancing the development, commercialization and deployment of renewable energy on a national and global level. Provides a test bed for the world to develop commercially viable energy technologies. Building Masdar City, the zero-carbon, zero-waste city being built in Abu Dhabi. Established Masdar City, Madar PV, and Shams1. Outside of the UAE, Mubadala’s renewable assets include Torresol Energy in Spain and the London Array – one of the biggest offshore wind power plants in the UK. Municipality of Abu Dhabi Responsible for developing the environment and infrastructure in the emirate of Abu Dhabi. Implemented a solar PV project in its head office producing electricity at a rate of 100 kW/hour. Sponsored a national initiative to deploy solarpowered recycling containers. Masdar 10.3.2. Independent Water and Power Producers Table 6(10) provides an overview of the independent power and water producers operating in the UAE. www.csptoday.com CSP Today Markets Report 2014 | 313 UAE Table 6(10): Independent Water and Power Producers in the UAE Name Roles and Responsibilities Previous renewable energy programs (if applicable) Abu Dhabi National Energy Company (TAQA) Independent power producer and majority owner of the facilities that provide 98% of Abu Dhabi’s water and electricity requirements. TAQA’s Energy Solutions division is dedicated to alternative and technology-driven energy initiatives for long-term efficient energy production and generation. TAQA is currently implementing a pilot project in Abu Dhabi to use solar energy for air-conditioning systems using concentrated solar panels called Chromasun Micro-Concentrators. Joined Abu Dhabi Sustainability Group in 2012. Arabian Power Company (APC) APC was established to purchase and rehabilitate Abu Dhabi’s Umm Al Nar Power and Desalination Plant and build additional electricity and water production capacity. APC is a special purpose vehicle established by ADWEA, International Power PLC, Tokyo Electric Power Company, and Mitsui & Co. Ltd. В Emirates CMS Power Company (ECPC) ECPC was established to build, own and operate the Al Taweelah A2 combined cycle power and desalination plant in the emirate of Abu Dhabi. ECPC’s Taweelah A2 Plant includes three heat recovery steam generators. The low-pressure steam generation is achieved by recovering waste heat using heat re-claimers. Emirates SembCorp Water & Power Company (ESWPC) Established Fujairah F1 IWPP plant located at Qidfa near the emirate Fujairah, on the Gulf of Oman coast. В Fujairah Asia Power Company Established F2 plant as a new IWPP at Qidfa, near the emirate of Fujairah, on the Gulf of Oman coast (adjacent to ADWEA Fujairah F1 plant). В Gulf Total Tractebel Power Company (GTTPC) GTTPC was established to purchase and rehabilitate the Taweelah A1 Plant in the emirate of Abu Dhabi, from the capacity of 221.25 MW / 28.4 MGD to its ultimate capacity of 1350 MW / 84 MGD on a build, own and operate basis. В Established the Shuweihat 1 IWPP plant located Shuweihat CMS International at Jebel Dhana, near Shuweihat, 250 Km west of Power Company (SCIPCO) the city of Abu Dhabi. В TAPCO was established to purchase and rehabilitate the Taweelah B Plant in the Emirate of Abu Dhabi. В Taweelah Asia Power Company (TAPCO) www.csptoday.com CSP Today Markets Report 2014 | 314 UAE Utico A private build-own-operate company for desalination, specializing in power, potable water, waste water, chilled water, and steam solutions. Handles utilities’ development from concept to В design, finance to EPC & operations & maintenance, transmission and distribution to billing & collection. Utico is a subsidiary of Ghantoot Group Of companies, a privately owned US$ 2bn conglomerate. 10.3.3. Local Utilities and Transmission Grid Operators Table 7(10): Utility Companies in the UAE Previous renewable energy programs (if applicable) Name Roles and Responsibilities Abu Dhabi Transmission and Dispatch Company (TRANSCO) Transmission Grid Operator - subsidiary of Abu Dhabi Water and Electricity Authority (ADWEA). Completed the 220kV modification works at Madinat Zayed, in Abu Dhabi’s Western region, to facilitate integration of Masdar CSP Shams-1 Solar Plant into the main bulk transmission grid. Installed a number of solar panels on the roof of its building. Abu Dhabi Water and Electricity Authority (ADWEA) Produces, transmits and distributes electricity and water within the emirate of Abu Dhabi. Also supplies customers in other emirates, through the construction of ADWEA-owned power plants, and via export of spare power to other utility authorities (e.g. DEWA, SEWA, and FEWA) over the Emirates National Grid. ADWEA, in collaboration with Masdar, installed PV panels on the roofs of 11 government and private building in the emirate of Abu Dhabi. Dubai Electricity and Water Authority (DEWA) Supplies electricity and water to consumers in the emirate of Dubai. Currently managing and executing the 1 GW Mohammed Bin Rashid Al Maktoum Solar Park. Federal Electricity and Water Authority (FEWA) Generates and distributes electricity in the northern emirates of Ajman, Ras Al Khaimah, Fujeirah and Umm Al Quwain. Owns & operates six power plants and three desalination plants В Ras Al Khaimah Electricity and Water Authority A newly established government entity that will В regulate ownership, management, operation & maintenance of electricity generation & water desalination plants, water rights, distribution & transport network, electricity transmission, and dispatch network of the electricity & water sector in the emirate of Ras Al Khaimah. www.csptoday.com CSP Today Markets Report 2014 | 315 UAE Sharjah Electricity and Water Authority (SEWA) Supplies electricity, water and natural gas to consumers in the emirate of Sharjah. Plans and implements expansions and future projects to develop electricity, water and natural gas services. 10.3.4. Permitting Agencies The permitting phase can be an issue because renewable energy projects do not follow the same approval process as other utilities. Furthermore, each emirate has its own regulatory requirements. Generally, the key bodies involved in the permitting process include the municipality, the road and transport В authority, the water and electricity agency, the environmental department and the master planning department. Unfortunately, the permitting process can not only vary from location to location, but also from one master planning department to another. Table 8(10) outlines a list of permitting and environmental assessment agencies operating in the UAE. Table 8(10): Permitting Agencies and Environmental Assessment Agencies in the UAE Previous renewable energy programs (if applicable) Name Roles and Responsibilities Department of Municipal Affairs (DMA) Contributes to the work of the Executive Council in planning and managing the infrastructure & assets; enabling the private sector to play a role in delivery of municipal services; ensuring optimization of Abu Dhabi’s resources; and fostering a transparent regulatory environment that enhances the emirate’s investment climate. DMA, in collaboration with the emirate’s municipalities and International Code Council, established the Abu Dhabi International Building Code, which aims to improve the construction standards of buildings across the emirate. Dubai Central Laboratory (DCL) Provides product conformity assessments. Perform tests, studies, standards development and measurement control. Solar heating systems installed in Dubai must obtain a certification from Dubai Central Laboratory, and should come equipped with a backup system. DCL issued specific rules for the certification of solar collectors (http://www.dcl. ae/NR/rdonlyres/5F47C243-9DF0-461D-AA1427CE8FDF3036/0/RDDP212178ICSolarCollectors. pdf ). Department of Economic Development - Dubai (DED) Organizes and regulates trade and industry within the emirate of Dubai. To practice business activity, a company should be registered and licensed at the DED. This includes renewable energy companies. В Dubai Municipality (DM) Plans, designs, builds and manages Dubai’s municipal infrastructure, facilities and services. DM is implementing a large-scale solar energy systems project aimed at saving electricity consumption. Solar water heaters have already been installed in residential villas, labor accommodations, hotel buildings, public facilities, and educational institutions. DM has made solar water heaters mandatory for all new buildings in Dubai from March 2012. www.csptoday.com CSP Today Markets Report 2014 | 316 UAE Emirates Authority for Standardization & Metrology (ESMA) Tested and certified Solitaire Solar’s central solar The sole standardization body in UAE. water heating systems. Formulates and issues national standards of the UAE and adopts international standards. Grants the Emirates Quality Mark for national products. Monitors the application of standards adopted, and provides advice to commercial/industrial sectors around the constraints of conformity and quality. Environment Agency – Abu Dhabi (EAD) Develops regulatory controls to protect the environment. Provides advice to the Government of Abu Dhabi on environmental policies & implements awareness initiatives. Evaluates and registers environmental consultancy offices in Abu Dhabi. Issues environmental permits or No Objection Certificates to industrial/ commercial facilities and development projects prior to commencement of site activities. Carries out necessary environmental studies to process the permit. National Center of Meteorology & Seismology (NCMS) Provides meteorological services and seismic engineering to all sectors in the country, including synoptic and mesoscale metrology, atmospheric dynamics, atmospheric chemistry, precipitation processes and storms. Assisted with the UAE University-Faculty of Engineering’s research вЂ�Modelling Global Solar Radiation in UAE using Artificial Neural Networks’, which included weather data on global radiation, temperature, sun hour, wind speed and humidity. Regulation and Supervision Bureau (RSB) Licenses activities to those who undertake a вЂ�Regulated Activity’ in the water, wastewater and electricity sectors, which includes generation, transmission, distribution, and sale of electricity and water. Protect the interests of consumers as to the terms and conditions and price of supply. В 10.3.5. Local Consultants and R&D Bodies One of the weaknesses of the UAE is the lack of a strong tradition for energy data collection and availability. However, more robust data sets have been collected in the last five years, particularly in Abu Dhabi and Dubai. Alongside this, the cost of renewable energy projects is coming down because of improved know-how in resource assessment. For example, a resource-mapping project has been carried out by Masdar Institute. An important milestone for the development of R&D capabilities will be the new 1 GW solar park located in Dubai. The park will host a research center and a renewable energy academy to spur continued innovation. Table 9(10) shows a list of local consultants and R&D centers operative in the UAE. www.csptoday.com CSP Today Markets Report 2014 | 317 UAE Table 9(10): Consultants and R&D Bodies Operative in the UAE Name Roles and Responsibilities Previous CSP Projects Abu Dhabi Sustainability Group (ADSG) ADSG is a public-private partnership providing services to its members from the governmental and private sectors, to help them take action to improve sustainability management and reporting practices. For 5 years, the ADSG’s events and activities have provided a platform for debating sustainability issues and best practices. Alpin Limited Masdar City-based clean-tech engineering consultancy providing master-planning services, energy modeling and analysis, energy audits, measurement and verification, daylight modeling, and renewable energy strategies. В Emirates Solar Industry Association (ESIA) A non-profit, non-governmental organization that promotes solar power in the UAE and MENA region. Organizes networking opportunities for solar professionals, produces reports on the latest technologies and standards, and creates partnerships and cooperation between the public and private sectors. Provides assistance to international companies looking to establish a presence in the region. ESIA’s membership doubled to 100 companies from 2012 to 2013. International Renewable Energy Agency (IRENA) Conducts renewable readiness assessments to provide policy guidance and facilitates the sharing of case studies and best practices. Serves as a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA, along with Masdar, released the UAE Solar Atlas, freely available online since early 2013 and can be accessed by government organizations or private enterprises for assessing the technical feasibility of any proposed renewable energy project. Manaar Energy Consulting & Project Management Provides investment and strategy advice, market Manaar’s Head of Consulting Robin Mills operations and analysis, and data analysis and authored the Sunrise in the Desert study on the management. dramatic advance of solar power in the Middle East, in collaboration with the Emirates Solar Industry Association. Mills won the ESIA’s Solar Awards 2012 for Media Personality of the Year. Masdar Institute for Science and Technology Masdar Institute for Science and Technology is an independent graduate-level university that focuses on advanced and sustainable technologies. 10.3.6. Financial Organizations Perhaps the biggest challenge for CSP in the UAE is the lack of development track record (with only the Shams 1 project in operation), as well as the risk associated with CSP investments. It is very hard to make CSP projects competitive with conventional power plants because of the subsidized prices for energy from hydrocarbons. The commercial benchmark is the cost of electricity generation from natural gas, but there is no doubt that www.csptoday.com Masdar Institute is a subsidiary of Masdar, which has 60% ownership of the Shams 1 CSP plant in Abu Dhabi. its LCOE is lower. At the same time, the fact remains that subsidizing and burning oil and gas for domestic consumption instead of exporting it causes the country significant lost revenue. The fact that the UAE is already a net importer of natural gas shows the growing threat of decreasing energy independence. The UAE needs to find a balance between the risk of CSP and the need the need for an alternative energy source. For this reason, it is strategically important that the UAE establishes CSP Today Markets Report 2014 | 318 UAE a tailored roadmap that gives long-term stability and security on returns on investment for Independent Power Producers and investors. This could take the form of a power purchase agreement or feed-in-tariff. The main financing institutions and banks involved with the UAE’s renewable energy sector are outlined in Table 10(10). Table 10(10): Main Financing Institutions and Banks in the UAE Name Roles and Responsibilities Previous Renewable Energy Projects Dubai Supreme Council of Energy (DSCE) The DSCE’s Dubai Integrated Energy Strategy 2030 focuses on an integrated approach to design standards, public infrastructure, finance, management and maintenance. Initiated and funding the 1 GW Mohammed Bin Rashid Al Maktoum Solar Park in Dubai. Studying several funding options for the project, like developing a clean energy fund, and plans to encourage private partnership. National Bank of Abu Dhabi (NBAD) Abu Dhabi-based financial institution operating since 1968. Offers a range of banking services including retail, investment and Islamic banking services. Contributed to the funding of Shams 1 (100 MW) CSP Plant. Union National Bank (UNB) Abu Dhabi-based financial institution established as a Public Joint Stock Company in 1982. Offers a range of banking services including retail, investment and Islamic banking services. It is the only bank that is jointly owned by Abu Dhabi and Dubai. Contributed to the funding of Shams 1 (100 MW) CSP Plant. 10.3.7. Developers, EPCs and Engineering Companies A particular issue that developers and EPC contractors will need to solve is the adaptability of CSP plants to the local environment. The desert and local climate can be characterized by high concentrations of dust in the lower layers of the atmosphere, which can in turn reduce the direct solar irradiance to levels below 2,000 kWh/m2 per year. Another specific issue is the soft and corrosive nature of the soil in various locations of the emirates, such as Dubai. This aspect might require some special preparation of the mounting frames and for all the civil works on the ground. In terms of development of the value chain, general manager of Shams Power Company, Yousif Al-Ali, advises that this could be the right time to start looking into local partners as this would pay dividends within a long-term strategy necessary to operate successfully in the country. Table 11(10) shows a list of developers and EPC firms operating in the UAE. www.csptoday.com CSP Today Markets Report 2014 | 319 UAE Table 11(10): Developers, EPCs and Engineering Companies Operative in the UAE Name Roles and Responsibilities Previous Renewable Energy Projects (if applicable) Abengoa Solar Subsidiary of Abengoa. Designs, finances, constructs and operates solar power stations. Developed Shams 1 (100 MW) CSP Plant in Abu Dhabi as the EPC contractor. Acciona - UAE In Spain, Acciona Energy owns and built/ Spanish renewable energy operator focusing on CSP, PV, wind, hydraulic and biomass energy. building six CSP plants: four in Spain and two in the United States. Provides engineering and construction, project development, O&M, and energy sales. Acciona has proprietary technology in the design, construction, operation and maintenance of CSP plants. Ansaldo Thomassen Gulf L.L.C. Italian supplier, installer and full-cycle, integrated В Potential CSP developer in the UAE. operator of power generation plants, with capabilities to build turnkey renewable and nuclear energy power plants on green field sites using its own technologies and independent design, production, construction, commissioning and service resources. Bechtel Corporation One of the largest construction, engineering and project management companies in the U.S. with an office in Abu Dhabi. Involved in local projects such as Khalifa Port, Kizad, and King Fahd Industrial Port. In May 2013, Bechtel announced it would be establishing a global center of engineering excellence in the UAE, initially focused on rail and marine engineering projects. Performing project management, EPC, and startup services for the 400 MW Ivanpah CSP facility in southeastern California. Provided engineering, procurement & construction management services for the Solar Two 10 MW CSP plant in California’s Mojave Desert during the late 1990s. Byrne Looby Partners International consulting engineering company working for asset owners and developers, contractors, and government agencies. Provides assistance for civil engineering projects including water, infrastructure, marine, and energy projects. Operates in the UAE through an office in Abu Dhabi. Designed the solar panel frames and foundations for a range of solar farms on agricultural land throughout the UK, ranging from 5 MW to 20 MW. Performed operations assessments of possible foundation and framing solutions to determine the most economical solution. Potential CSP developer in the UAE. Cheqpoints Carries out turnkey basis MEP works such as supply & installation of ducting, piping, fittings, valves, insulation and cladding associated with solar collectors and cooling towers. Installed a thermal solar system for Grand Hyatt Dubai. Millennium Energy Industries Turnkey solar solutions provider based in Jordan with An office in Abu Dhabi. Installed a solar system for Masdar’s university project. The system will supply mixed-use building of solar hot water system using 400mВІ of collector area. www.csptoday.com CSP Today Markets Report 2014 | 320 UAE Mubadala Development Company An investment and development company supporting the diversification of the UAE by investing in key social infrastructure in Abu Dhabi and worldwide. Owner of Masdar. Majority developer and owner (60%) of Shams 1 100 MW CSP Plant in Abu Dhabi. Mulk Enpar Renewable Energy Provides total solutions to off-grid and on-grid CSP systems, including site selection, engineering design, manufacturing, fabrication, installation andВ commissioning.В Developed its own, patented CLFR system and solar collector mirror. Owns a 200 MW manufacturing facility in Sharjah, producing all components of Mulk Enpar Renewable Energy Parabolic Troughs, with an initial capacity of 200 MW per annum upgradable to 500 MW. Global Energy Carries out turnkey energy recovery, solar water heating and cooling, and steam generation projects. Potential CSP developer in the UAE. Tractebel Engineering Tractebel’s Renewable division provides turnkey solutions, from pre-design to commissioning, including renewable resources assessment, permitting, engineering studies, procurement, to follow-up of the construction and management. With regional offices in Abu Dhabi and Dubai, Tractebel was contracted for the execution, engineering, construction, procurement and management of the Shams 1 CSP Plant. Total – UAE A French multinational integrated oil & gas company with growing focus on alternative energy projects. Total has had operations in the UAE since 1939. Owns 20% in Shams 1 CSP Plant, as part of a joint venture that constructed, developed, designed, and will operate and maintain the power plant. WorleyParsons Large Australian provider of project delivery and consulting services to the resources & energy sectors and complex process industries. Provides engineering services and project management consultancy through two offices in the UAE (Abu Dhabi & Dubai). Provided engineering support to the 400 MW Ivanpah CSP project in California during the Evaluate and Define phases. Potential CSP developer in the UAE. www.csptoday.com CSP Today Markets Report 2014 | 321 UAE 10. 4.1. Local Component Supply Table 12(10): CSP Components Available Locally in the UAE Component Name of Supplier(s) Website Turbines Alstom Power (7 UAE offices) www.alstom.com Ansaldo Thomassen Gulf L.L.C. www.ansaldoenergia.it General Electric Solar UAE www.ge.com/ae MAN Diesel & Turbo Middle East www.mandieselturbo.com Mitsubishi Heavy Industries UAE http://ae.mhi.co.jp/ Siemens UAE www.siemens.ae WorleyParsons (Abu Dhabi & Dubai) www.worleyparsons.com Doosan (Abu Dhabi & Dubai) www.doosan.com Foster Wheeler International www.fwc.com Alfa Laval – UAE www.alfalaval.com Apex Power Concepts www.apexpowerconcepts.com Ecosmart International www.ecosmart-intl.com Microsol International www.microsolinternational.com Mitsubishi Heavy Industries UAE http://ae.mhi.co.jp/ Mitsubishi Heavy Industries UAE http://ae.mhi.co.jp/ Steam Generators Pumps www.csptoday.com CSP Today Markets Report 2014 | 322 UAE Valves Alfa Laval - UAE www.alfalaval.com Apollo Industrial Products www.apollouae.com Bin Ghalib Energy Enterprises www.mbee.ae Emirates Green Electrical and Mechanical Trading www.emiratesgreen.com Eniprom www.eniprom.com Enviro Trading Company www.etegroup.com Global Energy www.globalenergygrp.com/products.php MAC Valves (supplied through International Technical Supplies & Services LLC, UAE) www.macvalves.com John Crane MEA Regional Office www.johncrane.com Midland Trading www.midland-uae.com/check_valves.html Technoflow www.technoflowllc.com Tracking Systems Mulk Enpar Renewable Energy www.mulkre.com Heat Exchangers Alfa Laval - UAE www.alfalaval.com GEA Ecoflex Middle East FZE http://www.gea-phe.com/uae/themes/ company/profile/ Gulf Sondex www.gulfsondex.ae HRS Funke Heat Exchangers FZCO www.hrshe.ae Oilfields Supply Centre Ltd. www.oscdubai.com Safario www.safario.com Tranter (available through their UAE Representative Cheqpoints) www.tranter.com Mulk Enpar Renewable Energy www.mulkre.com Schott Solar (Jebel Ali FZ) www.schott.com Alfa Laval - UAE www.alfalaval.com Dow Chemical IMEA www.dow.com/middleeast/locations/ Receiver Tubes / Solar Collectors Heat Transfer Fluid www.csptoday.com CSP Today Markets Report 2014 | 323 UAE Air-Cooled Condenser GEA Ecoflex Middle East FZE www.gea-phe.com/uae/themes/company/ profile/ SPIG (available through their UAE Representative www.spig-int.com Cheqpoints) CSP Mirrors Mulk Enpar Renewable Energy 10.4.2. Raw Material Availability While there are materials and sub components that are easily available in the UAE, like steel, glass and concrete, there are other that are rare, such as molten salts. Table 13(10) shows some of the main suppliers available in the UAE for each of the CSP raw materials considered. Table 13(10): CSP Raw Material Suppliers Available in the UAE Material Supplier Steel Taybah Steel FZE Hadeed Steel Industries Al Nimr Steel Trading Star Steel; Emirates Steel Standard Steel Fabrication Techno Steel Mabani Steel Glass Gulf Glass Industries Emirates Glass LLC RAK Ghani Glass LLC Intraco UAE Ltd. Spectrum Glass LLC Bosco Group Danway Industries Quality Aluminium & Glass Co. Molten Salt Unavailable Concrete Unimix UAE National Readymix Concrete Company Grey Matters Transgulf Readymix Concrete Co. 10.5. Alternative CSP Markets 10.5.1. Desalination Considering the level of water scarcity, CSP technology www.csptoday.com http://www.mulkre.com/ would be ideal for solar desalination applications. Another area of strong interest for the potential deployment of CSP technology is the provision of heating and cooling for buildings and industrial applications. The solar powered water desalination sector is on the priority list for the UAE as it is for all GCC countries, because being an energy intensive process it would save hydrocarbon resources that can be exported. Furthermore, solar desalination is considered the only sustainable option that could mitigate the environmental impacts associated with this process. The potential desalination market for CSP technology is huge, as nearly 90% of the freshwater in the whole Gulf region is supplied through desalinated seawater. Not only can solar thermal power provide the electricity for the process, but the waste heat can be used for thermal desalination. The Abu Dhabi-based Masdar is starting a pilot project this year (2013) with the aim of building a full-scale renewably powered desalination plant by 2020. This option is also being pursued with the aim of improving water security. In an interview with CSP Today, Mohammad Abdelqader El Ramahi, Head of Asset Management, Technical and Services at Masdar highlighted the significant interest received from leading industrial players. At the time of the interview (April 2013), the bidding process was still going ahead. The overall project entails two phases, the first being focused on the further development of a more cost-efficient and environmentally sound desalination process whereas the second aims to integrate the process with renewable energy generation technologies. Therefore, opportunities may exist for CSP developers when Masdar starts the bidding process for the second phase, expected to commence in 2016. In a presentation given in October 2012, at the Fulbright Academy’s Seventh Annual Conference, Dr. Hassan E. S. Fath, professor at the Masdar Institute of Science and CSP Today Markets Report 2014 | 324 UAE Technology, endorsed the potential of solar thermal desalination. He explained that the use of solar-driven desalination with integrated Multi-Stage Flash or Multiple-Effect Distillation (MSF/MED) technology could lead to a 30% reduction in the cost of water production. Dr. Fath also pointed out how, in his opinion, thermal desalination (MSF/MED) will continue to be the leading process due to the specific biochemical conditions of water (the famous “four Hs” of the Gulf water – namely high temperature, high salinity, high turbidity and high marine life). At the moment, desalination provides approximately 75% of the fresh water produced in GCC countries. Another potential application for CSP technology is energy production for cooling loads; namely for air-conditioning systems. Abu Dhabi Water and Electricity Authority is already showing interest in this field, and an international company has installed a demonstration plant of its commercial solar-powered air-conditioning technology in a building previously served by electric chillers. The system employs small-scale roof-mounted systems and makes use of the heat accumulated in the Heat Transfer Fluid (HTF) to feed the boiler of the building in a double-effect absorption chiller, which Figure 3(10): Location of North East Bab Field, UAE is connected to the air-conditioning system. The availability of solar energy matches very well with the peak demand of air-conditioning in buildings; this application could therefore replace a substantial portion of the electricity demand in high-temperature countries like UAE. 10.5.2. Enhanced Oil Recovery The Abu Dhabi Company for Onshore Oil Operations (ADCO) initiated an Enhanced Oil Recovery (EOR) project in November 2009 to test the injection of CO2 into the North-East Bab Field: a complex carbonate reservoir. Masdar is supplying up to 60 tons of CO2 per day that are injected into a series of pilot wells. ADCO’s main objectives for utilizing CO2 EOR are to significantly increase reserves, sustain long-term production, and maximize ultimate recovery. When comparing the location of the Bab Field with the level of DNI conditions (see figures 3(10) and 4(10)) the level of the DNI is in the range of 1,750 to 1,900 kWh/ mв‚‚, whereas the range in the Asab and Shah fields is considerably higher. (See Appendix C for more details on the technical requirements for EOR). Figure 4(10): DNI Conditions in the UAE Source: Energy Information Administration Source: SolarGIS В© 2013 GeoModel Solar s.r.o) www.csptoday.com CSP Today Markets Report 2014 | 325 UAE 10.6. Market Forecast The United Arab Emirates is now operating 100 MW of Parabolic Trough and has roughly 800 MW of CSP capacity in planning, depending on the official announcement to be made by the Dubai Supreme Council of Energy (DSCE) regarding Mohammed Bin Rashid Al Maktoum Solar Park. The country considers renewable energy a critical asset to its future energy portfolio as it currently holds the highest carbon footprint per capita in the world, and regarding solar power, it possesses a moderately favorable DNI of 2,000 kWh/m2/year. Its solar potential is not to be underestimated, considering it could meet up to 50% of the country’s energy demand by 2050, according to the Institute of Solar Research (DLR), in order to preserve its conventional oil and gas resources. In the medium-term, the UAE will require drastic measures and policies to address the 100% increase in power consumption expected by 2020. As per Figure 5(10), the outlook on the UAE’s future CSP capacity is promising, within the same range of magnitude as the projects currently under development. However, with an average development time of up to 24 months, it is expected that the CSP industry kickoff will be slow and precarious leading to 2015, before a resurge in market growth is expected again. www.csptoday.com CSP Today Markets Report 2014 | 326 UAE Figure 5 (10): Installed CSP capacity in the UAE 2006-2024 (MW) 1,400 1,217 Optimistic 1,200 Conservative Pessimistic 1,000 800 600 521 400 210 200 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2020 2022 2024 Figure 6(10): CSP Cumulative Energy Production in UAE Until 2024 (TWh) 40 Optimistic 35 Conservative Pessimistic 30 25 20 15 10 5 0 2006 2008 2010 2012 2014 Conclusion The UAE has one of the highest carbon footprints in the world due to a variety of factors, but the country has a strong commitment to reducing carbon emissions (30% by 2030). Shams 1 is currently the largest plant in the world and arguably the flagship for CSP in the MENA region. Further development of CSP technology in the UAE will can enable the build-up of a local industry in the country with consequent positive effects in terms of jobs created and retained know-how, which is considered one of the most important aspects of www.csptoday.com 2016 2018 the economic policy. However, for the time being CSP suffers the competition with PV technology, due to the lower CAPEX of solar PV and the relatively shorter lead-time needed for its development. The new 1 GW solar park in Dubai and the Masdar City project represent important potential avenues for R&D capabilities, upon which to build up future innovation and industrial development of CSP technology in the whole region. Thus, whilst the UAE has many positives, it is likely that it will take time for this market to emerge as a strong contender in the global CSP market. CSP Today Markets Report 2014 | 327 UAE References Afridi, M. and Baryalay, H., 2012. United Arab Emirates, Afridi & Angell. Emirates Nuclear Energy Corporation, 2011. Powering the future of the UAE through safe, clean and efficient nuclear energy. ENEC Official Website. Available through: <http://www.enec.gov.ae/> [Accessed 13 September 2013]. Schoppmeyer, U., 2012. Project Finance for Solar Energy. Presentation at the Solar energy in the Near and Middle East. Numov Conference, Erfurt. VV.AA, and Muirhead, J., 2013. CSP Today Quarterly Update. CSP Today. VV.AA, and Marquez, C., 2012. CSP Market Report 2012-2013. FC Business Intelligence, Groupe Reaction Inc. CSP Today. VV.AA, 2013. Business intelligence information and data. Available through: <www.csptoday.com>. VV.AA, 2013. Global Tracker Database. CSP Today. Available through: < http://social.csptoday.com/tracker/projects>. VV.AA, 2013. Information and data. Available through: <www.csp-world.com>. VV.AA 2013. Information and data. Available through: < http://data.un.org>. VV.AA, 2013. Information and data. Available through: <www.indexmundi.com>. VV.AA, 2013. Information and data. Available through: <www.populationdata.net>. VV.AA, 2013. Information and data. Available through: <www.reegle.info>. VV.AA, 2013. Information and data. Available through: <http://m.gulfnews.com>. VV.AA, 2013. Information and data. Available through: <www.gizmag.com>. VV.AA, 2013. Information and data. Available through: <www.solardaily.com>. VV.AA, 2013. Information and data. Available through: <www.adwec.ae>. VV.AA, 2013. Information and data. Available through: <www.alstom.com>. VV.AA, 2013. Information and data. Available through: <www.abb.co.uk>. VV.AA, 2013. Information and data. Available through: <www.areva.com>. VV.AA, 2013. Information and data. Available through: <www.greenprophet.com>. VV.AA, 2013. Information and data. Available through: <www.solardesalinationforum.com>. VV.AA, 2013. Information and data. Available through: <www.tradingeconomics.com>. VV.AA, 2012. Renewable Energy Country Attractiveness Indices. Ernst & Young. www.csptoday.com CSP Today Markets Report 2014 | 328 UAE VV.AA, 2012. Switch on the Lights - Unlocking the UAE’s Solar Potential - United Arab Emirates Solar Survey 2012, Annual Survey Report. Emirates Solar Industry Association, PricewaterhouseCoopers. VV.AA, 2012. UAE Energy Outlook - Factors for Global Renewable Energy Roadmaps. Technical presentation at a conference in Valletta, Malta. Ministry of Foreign Affairs and Directorate of Energy and Climate Change. VV.AA: Various Authors Acronyms ACRONYM DEFINITION AADC Al Ain Distribution Company ADCO Abu Dhabi Company for Onshore Oil ADDC Abu Dhabi Distribution Company ADFEC Abu Dhabi Future Energy Company ADSG Abu Dhabi Sustainability Group ADWEA Abu Dhabi Water and Electricity Authority ADWEC Abu Dhabi Water and Electricity Company APC Arabian Power Company BST Bulk Supply Tariffs CCS Carbon Capture and Storage DCCE Dubai Carbon Centre of Excellence DCL Dubai Central Laboratory DECC Directorate of Energy & Climate Change DED Department of Economic Development - Dubai DEWA Dubai Electricity and Water Authority DMA Department of Municipal Affairs DSCE Dubai Supreme Council of Energy EAD Environment Agency – Abu Dhabi ECPC Emirates CMS Power Company EIA Energy Information Administration ENEC Emirates Nuclear Energy Corporation ENG Emirates National Grid EOR Enhanced Oil Recovery www.csptoday.com CSP Today Markets Report 2014 | 329 UAE ESIA Emirates Solar Industries Association ESMA Emirates Authority for Standardisation & Meteorology ESWPC Emirates SembCorp Water & Power Company GTTPC Gulf Total Tractebel Power Company FANR Federal Authority for Nuclear Regulation FEWA Federal Electricity and Water Authority IRENA International Renewable Energy Agency MCTF Masdar Clean Technology Fund MED Multiple Effect Distillation MENA Middle East and North Africa MIT Massachusetts Institute of Technology MOE Ministry of Energy MOEW Ministry of Environment and Water MSF Multi-Stage Flash NBAD National Bank of Abu Dhabi NCMS National Centre of Meteorology & Seismology RSB Regulation and Supervision Bureau SCIPCO Shuweihat CMS International Power Company SEWA Sharjah Electricity and Water Company TAPCO Taweelah Asia Power Company TAQA Abu Dhabi National Energy Company TRANSCO Transmission and Dispatch Company UNB Union National Bank www.csptoday.com CSP Today Markets Report 2014 | 330 Rest of the World 11 Rest of the World CSP Today Markets Digest (19 Countries) Contents List of Tables 331 11.1 Algeria 333 11.2 Australia 335 11.3 Brazil 337 11.4 Egypt 339 11.5 Greece 341 11.6 Israel 343 11.7 Italy 344 11.8 Jordan 346 11.9 Kenya 347 11.10 Kuwait 348 11.12 Mexico 349 11.13 Namibia 350 11.14 Oman 351 11.15 Portugal 352 11.16 Qatar 353 11.17 Spain 354 11.18 Thailand 358 11.19 Tunisia 359 11.20 Turkey 361 Acronyms 363 List of Tables Table 1(11):Current CSP Projects in Algeria 333 Table 2(11): Current CSP Projects in Australia 335 Table 3(11): Current CSP Projects in Brazil 337 Table 4(11): Current CSP Projects in Egypt 339 Table 5(11): Current CSP Projects in Greece 341 Table 6(11): Current CSP Projects in Israel 343 Table 7(11): Current CSP Projects in Italy 345 Table 8(11): Current CSP Projects in Jordan 346 www.csptoday.com CSP Today Markets Report 2014 | 331 Rest of the World Table 9(11): Current CSP Projects in Kenya 347 Table 10(11): Current CSP Projects in Kuwait 348 Table 11(11): Current CSP Projects in Mexico 349 Table 12(11): Current CSP Projects in Oman 351 Table 13(11): Current CSP Projects in Portugal 352 Table 14(11): Current CSP Projects in Qatar 353 Table 15(11): Current CSP Projects in Spain 354 Table 16(11): Current CSP Projects in Thailand 358 Table 17(11): Current CSP Projects in Tunisia 359 Table 18(11): Current CSP Projects in Turkey 361 www.csptoday.com CSP Today Markets Report 2014 | 332 Rest of the World 11.1. Algeria Algeria – Country Overview DNI:2, 500 kWh/mВІ/year Size:2.38 million kmВІ Population (2012):38.48 million GDP per capita (2012): US$ 3,187 Installed power capacity: 8.1 GW Annual electricity consumption: 35 TWh Expected annual electricity demand in 2020: 75-80 TWh Table 1(11): Current CSP Projects in Algeria Title MWe Technology Status State/ Region Developer Storage Capacity (hours) Beni Abbes 150 Tower Planning Benni Abbes SPE TBC DLR- Algeria CSP Project 7 Tower Planning Boughezoul BMU/DLR/MESRS TBC El Oued 150 Tower Planning El Oued SPE TBC Hassi-R’mel 25 Parabolic Trough Operation Hassi-R’mel Abener/ Abengoa/ Cofides/ New Energy Algeria Hassi-R’mel II 70 Parabolic Trough Planning Hassi-R’mel New Energy Algeria TBC MeghaГЇer 70 Parabolic Trough Planning El M’Ghair New Energy Algeria TBC NaГўma 70 Parabolic Trough Planning Naama New Energy Algeria TBC Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Regulatory frameworks to support renewable energy in Algeria were first introduced in 2004, when the country’s first renewable energy law was enacted: a law on the promotion of renewable energies in the context of sustainable development. This law provides a general framework for the national program to promote and develop renewable energy and provide related incentives. In addition to the renewable energy laws present in Algeria, a decree on energy mix diversification was also enacted by the Algerian government. The objective www.csptoday.com of the decree is to create incentives in the form of Feed-in-Tariffs. This decree envisages the following bonuses, which are paid on top of the market electricity price. For solar electricity entirely produced by solar irradiation (e.g. PV or solar-only CSP plants), the bonus is 300%. For solar thermal electricity with gas co-firing, the bonus schedule is as follows: 180 % for a solar contribution of 20 to 25 % 160 % for a solar contribution of 15 to 20 % 140 % for a solar contribution of 10 to 15 % CSP Today Markets Report 2014 | 333 Rest of the World 100 % for a solar contribution of 5 to 10 % 0 % for a solar contribution of 0 to 5 % In 2011, the Algerian Ministry of Energy and Mines launched an energy efficiency and renewable energy program with a budget of US$ 120 billion. The target is to install 22 GW of new power capacity from renewables between 2012 and 2030. In the course of this program, approximately 60 solar PV and CSP plants are expected to come online. Wind farms, as well as hybrid power plants, are also planned to take part in this mass renewable energy rollout by 2020. Between 2012 and 2030, of the total 12 GW intended to meet domestic electricity demand, 2,000 MW are to be produced from wind power, 2,800 MW from PV and 7,200 MW from other forms of solar energy, such as CSP. The deployment of CSP is expected to have three phases. The first, taking place between 2011 and 2013, aims to construct two solar power plants with a capacity of 150 MW each. These are in addition to the Hassi R’Mel ISCC hybrid power plant project. The second phase, between 2016 and 2021, will involve the construction of four CSP plants with a total capacity of approximately 1,200 MW. Finally, the third phase, between 2021 and 2030, will entail the installation of 500 MW annually until 2023, and 600 MW annually until 2030. In June 2012, the state-owned electricity and natural gas utility Sonelgaz outlined its CSP strategy, identifying a number of suitable sites, including Beni Abbes, Naama, Bechar M’Ghaier El Golea, Laghouat, Ouargla, El Oued and Adrar, which will have a total of 500 MW by 2020. The first of these CSP projects, which is expected to move into operation by 2015, is the 150 MWВ El OuedВ project, and the second is the 150 MW Beni Abbes project scheduled to come online in 2016. www.csptoday.com CSP Today Markets Report 2014 | 334 Rest of the World 11.2. Australia Australia – Country Overview DNI:2,400 kWh/m2/year Size:7.7 million kmВІ Population (2012):22.7 million GDP per capita (2012): US$ 44,234 Installed power capacity: 68.4 GW Annual electricity consumption: 243.9 TWh Expected annual electricity demand in 2020: 275 TWh Table 2(11): Current CSP Projects in Australia MW capacity Technology Current status State/ Region Developer/ Promoter Lake Cargelligo 3 Tower Operation New South Wales Lloyd Energy Systems Liddell 1 Fresnel Operation New South Wales AREVA Liddell Phase 2 3 Fresnel Operation New South Wales Macquarie Generation Novatec Solar 9.3 Liddell Solar Expansion Fresnel Operation New South Wales Macquarie Generation/ Novatec Kogan Creek Solar Boost 44 Fresnel Construction Queensland CS Energy/ Areva Solar Oasis 43.5 Dish Development Whyalla Solar Oasis Pty Ltd Collinsville Hybrid Project 30 Fresnel Planning Queensland Australian Renewable Energy Agency (ARENA) Title Storage Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Australia has an enormous potential for CSP deployment due to the extraordinary solar and land resources that are available. There is growing interest in exploring the potential for hybridization due to the high number of existing coal-fired power plants. The Australian Renewable Energy Target (RET) objective has been in place since 2007 and aims to meet 20% of the country’s electricity demand through the development of renewable energy generation sources by 2020. The RET is split into two parts: a Large-scale Renewable Energy Target (LRET) and a Small-scale Renewable Energy Scheme (SRES). CSP projects fall under the LRET, www.csptoday.com which plans to produce 41,000 GWh/year of renewable energy by 2020. To achieve this target, the government has introduced a Renewable Energy Certificate (REC) scheme to enable commodity trading of renewable energy generation. The objective of the REC scheme is to create a financial incentive for investment in renewable energy sources through the creation and sale of certificates that can be traded for cash, the value of which fluctuates according to market conditions. Apart from the REC scheme, in December 2009, the Government of Australia launched the Solar Flagships program: a specific regulatory framework for solar energy development that aims to support large-scale, CSP Today Markets Report 2014 | 335 Rest of the World grid-connected solar power projects and accelerate the local commercialization of solar power technologies. In 2012, the 250 MW Solar Dawn Kogan Creek Project, which was part of the Solar Flagships initiative, was withdrawn as it was unable to meet the extended June 2012 financial deadline. In addition the 43.5 Solar Oasis project lost its government funding of AUD 60 million for failing to meet scheduling deadlines. However, developers have indicated that they will be continuing to promote the development of the project even without funding from government. In December 2012, the Commonwealth Scientific and Industrial Research Organisation (CSIRO), together with the Australian Solar Thermal Research Initiative (ASTRI), announced an AU$ 87 million, eight-year long international collaboration with organizations including six local Australian Universities and the USA-based NREL, Sandia National Laboratories and Arizona University, aimed at transforming Australia into a global leader in CSP technology. The goal of the program is to lower solar thermal power costs to 12 c/kWh by 2020. To achieve this, the initiative is striving to reduce CAPEX, improve the capacity factor of CSP plants, improve efficiency and lower the operational and maintenance costs. www.csptoday.com CSP Today Markets Report 2014 | 336 Rest of the World 11.3. Brazil Brazil – Country Overview DNI:1,900 kWh/m2/year Size:8.5 million kmВІ Population (2012):196 million GDP per capita (2012): US$ 12,594 Installed power capacity: 106.2 GW Annual electricity consumption: 407.2 TWh Expected annual electricity demand in 2020: 651.5 TWh Table 3(11): Current CSP Projects in Brazil Title MWe Current status Technology State/Region Developer Coremas 50 Announced Parabolic Trough Coremas Brax Energy/ SkyFuel Helioterm 1 Development Parabolic Trough Petrolina CEPEL Storage Capacity (hours) Yes Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Brazil is a potentially interesting market for the deployment of the CSP because of the country’s good insulation resources, particularly in the Northeast of the country, and due to the rapidly growing energy demand. However, the large share of the hydropower sector makes CSP generation technology still uneconomic in comparison. Other policy and commercial aspects of the energy market need to be put in place to encourage the solar thermal electric industry. Brazil is committed to reducing its CO2 emissions by between 36% and 39% by 2020. A National Energy Plan has been published by the Empresa de Pesquisa EnergГ©tica (EPE), the energy planning unit of the Brazilian Ministry of Mines and Energy. Brazil does not have a specific policy or incentive scheme dedicated to CSP technology. The only feed-In type policy scheme for supporting renewable energy generation technologies is PROINFA (Incentive Program for Alternative Sources of Electric Energy), which was introduced in 2002. The Brazilian government supports a вЂ�Contracting Free Market’ or ACL (Ambiente de Contratação Livre) whereby contractors can independently and bilaterally produce and sell electricity, paying transmission fees to use the existing energy infrastructure. Here, conditions, www.csptoday.com prices and quantities are negotiated between the power generators, importers, traders and consumers (for example in energy-intensive industries such as the automobile industry). The ACL is open for any consumer with a connection above 3 MWe. The ACR, or Regulated Contract Environment (Ambiente de Contratação Regulada), on the other hand, encompasses all electricity distribution concessionaires on the National Interconnected System that produce more than 500 GWh/year. Distributors producing more than 500 GWh/year are required to partake in auctions regulated by the Brazilian Electricity Regulatory Agency (ANEEL), prepared by EPE, and held at the Electric Energy Commercialization Chamber (CCEE), with the goal of ensuring the lowest possible energy price for consumers. Distributors under ACR can, however, purchase energy from alternative energy plants. The Brazilian Government defines the energy sources allowed at a certain auction, as well as the general upper price limit per MWh – then the allowed sources can compete amongst each other. Ultimately, ACL gives the opportunity for new sources of energy to operate and sell electricity independently, as long as they adhere to the general sector regulations. CSP Today Markets Report 2014 | 337 Rest of the World In June 2013, Eletrosul, a subsidiary of Brazil’s major utility company Eletrobras, operating in the Southern states of Brazil, released plans to conduct a feasibility study for large-scale CSP activity in the Rio Grande do Sul and Mato Grosso do Sul regions. The first step in this direction is the announcement of a tender for the installation of four solar radiation measurement stations. Eletrobras’ research unit CEPEL is working under an MCTI/MME project to build a 1 MWth parabolic trough loop in Petrolina. In July 2013, energy research company EPE opened an auction for A-3 renewable energy projects. For the first time, CSP and PV have been included in the auction. No set caps have been set for CSP or PV, and there is no absolute guarantee that any solar projects will receive approval. The results are dependent upon the case provided by bidders, including solar resource studies, site identification and feasibility www.csptoday.com studies. However, allowing solar projects to partake in the auction is a step in the right direction and potentially paves the way forward for future auctions. Bidders in the auction will be selected according to a reverse bidding system, where the lowest tariff will be successful. Under the A-3 framework developers will have three years from the date of the auction to complete the project. On 9 September 2013, it emerged that applications for 290 MW of CSP had been registered, compared to 2.73 GW of PV. The majority of these projects were registered in the state of Bahia (240 MW of CSP), whilst 50 MW of CSP were registered in ParaГba. CSP Today Markets Report 2014 | 338 Rest of the World 11.4. Egypt Egypt – Country Overview DNI:2,300 kWh/m2/year Size:1 million kmВІ Population (2012):80.72 million GDP per capita (2012): US$ 6,539 Installed power capacity: 23.4 GW Annual electricity consumption: 143.5 TWh Expected annual electricity demand in 2020: 171 TWh Table 4(11): Current CSP Projects in Egypt Storage Capacity (hours) Title MWe Technology Status State/Region Developer Kom Ombo 100 Parabolic Trough Development Aswan New and Renewable Energy Authority 4 Kuraymat ISCC 20 Parabolic Trough Operation Kuraymat New and Renewable Energy Authority N/A Marsa Alam 30 Parabolic Trough Planning Red Sea Canal Distribution Company/ Governorate of Red Sea 8 Taqa CSP Project 250 Tower Planning Egypt TAQA В TBC Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives At present, there is no specific regulatory framework in Egypt to promote renewable energy. Nevertheless, the Egyptian government has adopted a number of measures in order to enhance wind and solar energy deployment. The Supreme Council of Energy in Egypt announced a strategy for renewable energy in 2008 stating that the contribution of renewable energies should make up 20% of total electricity generation by 2020. Wind technology was slated to have a share of 12% of the renewable energy portfolio, while the contributions of other renewable energy technologies (such as hydro and solar energy) were not specified, despite their significant penetration levels. development plans with solar energy targets of 100 MW of CSP and 20 MW of PV. The current regulatory framework in Egypt for private investments in large-scale renewable energy is achieved through a competitive bidding system on state-owned land. However, the Egyptian government has proposed a new law to govern the electricity sector. This law, currently being discussed, constitutes the most recent legal initiative taken by the government to encourage renewable energy deployment and privately owned electricity generation. Through the embodiment of this electricity draft law, the government is clearly indicating its vision for renewable energy and for the potential of national CSP industrial developments. In the five-year energy plan from 2012 to 2017, the Supreme Council for Energy of Egypt presented Recently, the Egyptian Ministry of Electricity and Energy (MOEE) announced that, given the country’s huge solar www.csptoday.com CSP Today Markets Report 2014 | 339 Rest of the World energy sources, the electricity sector has started setting up Egypt’s first solar energy power plan. The plan aims at generating 3,500 MW of solar energy by 2027. In 2012, the Egyptian Academy of Scientific Research and Technology (ASRT) announced the launch of a pilot CSP project to test a generation process with simultaneous desalination of water. This demonstration project, titled Multi-Purpose Applications by Thermodynamic Solar MATS, received US$ 28 million from the European Union and will involve European universities and companies. The facility will be located close to Alexandria on the north coast of the country, and will include a research station where Egyptian researchers will be trained. The final aim is to build a relative low-cost, high-efficiency solution alongside the capability to export this technology to other African countries. www.csptoday.com CSP Today Markets Report 2014 | 340 Rest of the World 11.5. Greece Greece – Country Overview DNI:1,519 kWh/m2/year Size:131,940 kmВІ Population (2012):11.3 million GDP per capita (2012): US$ 26,427 Installed power capacity: 14.3 GW Annual electricity consumption: 54.7 TWh Expected annual electricity demand in 2020: 59.2 TWh Table 5(11): Current CSP Projects in Greece Title MWe Technology Current Status State/ Region Developer Storage Capacity (hours) M.I.N.O.S. CSP 50 Tower Development Crete Motor Oil Hellas TBC Maximus 75 Dish Development Florina Maximus N/A Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Greece is potentially a good market for CSP development, both because of the high solar resources and for its strategic position in the Mediterranean. Also, the presence of a large number of small islands would lend itself to the development of hybrid technology to increase the resilience of the whole system. However, the country needs to improve its attractiveness for a sound deployment of renewable energies by reducing risks associated with the administrative and financial environments. The Greek energy sector has been growing over the last 10 years, characterized by high energy consumption, low fuel efficiency, low labor and capital productivity, as well as an expensive energy mix. The high dependence on oil-derived fuels is one of the main drivers for introducing higher shares of renewable energy. However, the growth of the energy sector is somewhat constrained by the limited activity of Greek players in international projects, as well as within the domestic value chain. Greece’s energy policy covers a wide spectrum of objectives, including the improvement of energy efficiency. Optimization of the energy mix alongside the exploration of the potential for new generation technologies like CSP has been recommended in recent country reports as an important objective of national policy. The new National Action Plan for Renewable Energy Sources (2010-2020) is an ambitious plan aiming to reform the www.csptoday.com county’s energy sector to produce 20% of the country’s primary energy from renewables by 2020 (of which 40% should be in the electricity sector, 20% for heat and 10% for transport). In the electricity sector, a major role is envisaged for wind and solar PV, besides the existing large hydropower sources. The increasing contribution of renewables will also be provided through other technologies, like biomass, geothermal and concentrated solar power. Amongst the objectives of the new law (3,851), the following are included: Accelerate the permitting procedure of larger projects Simplify the licensing of smaller projects Improve the attractiveness of feed-in-tariffs for all renewable technologies Deal with the “Not in my Backyard” (NIMBY) phenomenon at several levels Establish an office that can coordinate all the administrative and regulatory aspects of renewable energy projects (a one-stop-shop) CSP is not currently operational in Greece; however, several projects are in the pipeline, for a total installed capacity of 379.7 MW. A major developer following these projects is UK-headquartered Nur-Energie. New CSP developments in Greece are eligible for a feed-intariff between 264.85 and 284.85 €/MWh – depending on the supply of energy guaranteed. CSP Today Markets Report 2014 | 341 Rest of the World In January 2013, the developer Maximus was awarded €44.6 M to develop a large-scale Stirling dish power plant with a total installed capacity of 75.3 MWe, located in the north-west of Greece in the region of Florina. The plant features 25,160 Stirling dish units, each with a 3 kW-rated power output, and consists of 37 small power plants of modular design, built on different land plots, all of which will be connected to the grid via a single connection point. www.csptoday.com CSP Today Markets Report 2014 | 342 Rest of the World 11.6 Israel Israel – Country Overview DNI:2,500 kWh/m2/year Size:20,770 kmВІ Population (2012):7.6 million GDP per capita (2012): US$ 31,296 Installed power capacity: 12 GW Annual electricity consumption: 46.4 TWh Expected annual electricity demand in 2020: 80 TWh Table 6(11): Current CSP Projects in Israel Storage Capacity (hours) Title MWe Technology Status State/Region Developer Ashalim Plot A 110 Parabolic Trough Development Ashalim, Negev Abengoa/ Shikun & Binui 4 Shneur 120 Parabolic Trough Development Kibbutz Ze’elim, Negev Shikun & Binui TBC Two Sigma CSP 60 Parabolic Trough Development Kibutz Mashabel Kugler/ Two Sadeh Stigma TBC Ashalim Plot B 121 Tower Development Ashalim, Negev Alstom/ BrightSource Energy TBC BrightSource SEDC 6 Tower Operation Rotem Industrial BrightSource Park Energy N/A HF Cartwheel 12 Dish Development Rotem Industrial HelioFocus Zone 0.5 Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives In 2009, the Israeli government established a target to meet 10% of Israel’s electricity needs using renewable energy by 2020, opening up a market of 4 GW; most of which will likely be provided by solar energy. The renewable energy industry is currently pushing for this target to be increased to 20%, in line with the European Union. The Public Utility Authority for Electricity is the Israeli regulatory body responsible for implementing governmental policies and licensing electricity generation. Since 2008, it has issued different regulations to enable the private sector to generate electricity. The FIT scheme for small and medium-sized PV installations does not include FITs for large-scale CSP and PV projects. Negotiations surrounding the regulatory framework to support CSP technologies are ongoing www.csptoday.com and involve the following objectives: A favorable FIT for CSP projects that would attract investors. According to what some industry experts have told CSP Today, the government is aiming to set tariffs at approximately EUR 0.16/kWh, while the industry is pushing for higher tariffs of around EUR 0.23/kWh Improvement of tax benefits for solar developers Building of new transmission lines that connect the south of Israel, where the solar potential is higher than the large urban areas located in the center of the country Facilitation of permitting with the Israel Land Administration - the government authority responsible for managing public land. CSP Today Markets Report 2014 | 343 Rest of the World A Build-Operate-Transfer (BOT) structure is expected to be adopted for the development of CSP plants, and indeed this is the case of the contract assigned in June 2013 with Negev Energy to build the 10 MW Ashlim plant. The BOT structure covers the planning stage, financing, construction and operation of the plants for a period of 25 to 30 years, upon which the plant will be handed over to the government. www.csptoday.com CSP Today Markets Report 2014 | 344 Rest of the World 11.7. Italy Italy – Country Overview DNI:1,500 kWh/m2/year Size:301,230 kmВІ Population (2012):60.92 million GDP per capita (2012): US$ 36,116 Installed power capacity: 101.2 GW Annual electricity consumption: 290 TWh Expected annual electricity demand in 2020: 342.9 TWh Table 7(11): Current CSP Projects in Italy Title MWe Technology Current status State/ Region Developer Storage Capacity (hours) Archimede 5 Parabolic Trough Operation Catania, Sicily 8 Archetype SW550 30 Parabolic Trough Development Prioro Gargallo, ENEL Sicily ENEL TBC Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Italy has a promising landscape for CSP development due to high solar resources in the south part of the country and the high-quality industrial and R&D activities already in place. Italy is focusing more on the development of mini-CSP technology. However, the limited land availability and the competition for its use with other sectors, like agriculture and tourism, are limiting factors. Interest has been steadily growing in Italy’s renewable energy sector, and in the last few years, the country has come one of the booming markets for PV energy development. However, there are still legislative and policy constraints, making it unlikely that Italy will achieve its 2020 renewable generation targets. The CSP sector is promoted by an industrial lobby ANEST that has been active since 2009. The only CSP plant currently operating in Italy is an integrated gas 5 MW parabolic trough, based in the far southern region. However, other projects of up to 30 MW are planned. Several industrial component producers are already active in the sector and support international projects in collaboration with international EPC firms and developers. Thanks to high-quality R&D activity, Italy has been promoting the technical development of CSP, particularly through research activities led by the national agency for energy and environment ENEA, amongst other bodies. www.csptoday.com One aspect of special interest is the geographical position that gives Italy a potentially strategic role in the development of the large Mediterranean project DESERTEC and the Trans-Med Super Grid. The policy regulation introduced in the market in 2012 improves incentives for the CSP sector by increasing feed in tariffs for all the plants that come into operation before the end of 2015. For plants employing CSP technology for at least 85% of their overall generation, the rate is between 14% and 28%, which is higher when compared with the previous legislation. In December 2012, Italy’s Enel Green Power (EGP) released plans to build two CSP plants. The first will be a 30 MW parabolic-trough plant in Sicily, whereas the second involves building a 25В MW CSP plant linked to a water desalination project in a Mediterranean country other than Italy, and not yet identified. In 2013, Italy’s Archimede Solar Energy and Japan’s Chiyoda successfully commissioned their new parabolic trough test loop with molten salt as heat transfer fluid (HTF) and thermal energy storage (TES) system. This facility, located in the central part of the country, comprises a 600-meter long parabolic trough loop and a two-tanks-direct molten salt storage system with up to five hours of TES. The configuration is not used in commercial plants, but only in a demonstration plant in Sicily (Archimede ISCC). CSP Today Markets Report 2014 | 345 Rest of the World 11.8. Jordan Jordan – Country Overview DNI:2,500 kWh/m2/year Size:92,300 kmВІ Population (2012):6.5 million GDP per capita (2012): US$ 5,899 Installed power capacity: 2.7 GW Annual electricity consumption: 16.5 TWh Expected annual electricity demand in 2020: 28 TWh Table 8(11): Current CSP Projects in Jordan * Title MWe Technology Current status State/Region Developer Storage Capacity (hours) Mitsubishi Corporation Jordan 50 TBC Announced Ma’an Mitsubishi TBC Abengoa Jordan 25 TBC Announced Ma’an Abengoa TBC *Only one of the projects will be successful. Shortlisted developers have until early 2014 to submit their final proposals. Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives In February 2010, the “Renewable Energy & Energy Efficiency Law” was passed in Jordan and included the introduction of a fixed tariff and tendering system intended to stimulate investments in renewable energy. The Ministry of Energy and Mineral Resources (MEMR) has set as a 10% renewable energy target by 2020. The government has proposed a plan to locally produce 90% of its energy by 2020 and is seeking Build-OperateTransfer (BOT) projects for the development of up to 600 MW of solar power capacity by 2020. The country is also contemplating the creation of a government-sponsored fund to support the development of renewable energy projects and to evaluate the resource potential to identify promising opportunities for future deployments. One of these potential projects is the Sahara Forest Project (SFP) similar to the one launched in Qatar. Jordan, where desert comprises 75-80% of the land area, designated 20 hectares for a test and demonstration center and 200 hectares for development and expansion. Following an agreement signed with Aqaba Special Economic Zone Authority in 2011, the SFP agreed to conduct three comprehensive studies, which will be financed and supported by Norwegian authorities. In April 2012, MEMR announced 34 expressions of interest for renewable energy electricity generation projects, www.csptoday.com which were qualified to sign memoranda of understanding with the Ministry to proceed to submit direct proposals for their projects. This led to five CSP projects being selected, and the latest results have shortlisted two CSP projects, one of which will establish the project in the Ma’an development area should their final proposal be accepted. Shortlisted developers have until early 2014 to submit their final proposals and technology selections. Jordan has also joined forces with Algeria, Egypt, Morocco and Tunisia in the MENA CSP scale-up initiative. The initiative will be implemented under the Clean Technology Fund (CTF) and aims to generate 1 GW of energy; about 15% of the projected global CSP output. This initiative would entail approximately US$ 4.8 billion of public and private investment in CSP and the development of CSP-related transmission infrastructure in the whole region for domestic supply and exports. In January 2013, Jordan secured US$ 50 million from the CTF. The fund will be implemented by the African Development Bank and aims to develop up to 100 MW of solar energy projects, including CPV, through a strategic collaboration with the Abu Dhabibased Masdar. The Electricity Regulatory Commission (ERC) has also announced a FiT scheme for solar energy generation projects. The rate for PV is approximately US$ 0.17/kWh, whereas the rate for CSP-sourced electricity is US$ 0.19/kWh. CSP Today Markets Report 2014 | 346 Rest of the World 11.9. Kenya Kenya – Country Overview DNI:1,229 kWh/m2/year Size:582,650 kmВІ Population (2012):43.18 million GDP per capita (2012): US$ 808 Installed power capacity: 1.7 GW Annual electricity consumption: 5.8 TWh Expected annual electricity demand in 2020: 22.3 TWh Table 9(11): Current CSP Projects in Kenya Title MWe Technology Current Status State/ Region Developer Storage Capacity (hours) KenGen CSP Plant 20 TBC Announced TBC TBC KenGen Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Kenya can be a potentially ideal market place for CSP when looking at its solar resources and energy demand. Along with five other countries, Kenya is now involved in the Scaling-up Renewable Energy Program (SREP) led by the World Bank, which could provide support for policy development and funding opportunities. However, there are still serious bottlenecks for the development of large utility-scale plants. Only a small percentage of the population has access to the transmission grid to date, and there is inadequate local know-how for the development and the maintenance of CSP energy facilities. Renewable energy targets in Kenya were initially set up at the first National Energy Conference in 2008, but were missed, largely due to the lack of available capital funding. Indeed, according to the government, financial support to renewable energy projects is one of the biggest challenges for their development in Kenya. The first feed-in-tariff scheme was launched in 2008, and solar energy was included only two years later. The level of feed-in-tariff varies from a minimum of US$ 0.08/kWh for biogas, small hydro and biomass up to US$ 0.15/kWh for solar technologies. In 2010, the government established a package of Solar Water Heating Regulations to try and encourage the development of this technology. Other than the feed-in-tariff scheme, in 2011, Kenya introduced SREP, which eliminated (from the previous value of 16%) the import duty on renewable equipment and accessories. This www.csptoday.com international program is jointly managed by the African Development Bank and World Bank. Generally speaking, the country lacks a suitable framework for the promotion of renewable energy investments. The average yearly increase in renewables is about 4.5%. Although there is strong potential for the development of CSP, particularly in the northern part of Kenya, high costs and lack of know-how are two important bottlenecks preventing its take-up. In a report produced by the government, PV technology (CSP is not even mentioned) is estimated to cost more than double the large hydro (US$ 35/kWh vs. US$ 14.1/ kWh) and more than three times of almost all the other technologies (small hydro US$ 12/kWh, wind US$ 8.8/ kWh, biogas and biomass US$ 8/kWh and geothermal US$ 7/kWh). Off-grid and tailored applications like telecommunications, cathodic protection of pipelines, lighting and water pumping, are considered more interesting instead. Another reason why the policy for solar energy has been unsuccessful so far lies in the considerable potential the country has for other renewable technologies, especially micro and small hydro, which are believed to be huge. Likewise for wind and geothermal - their potential is largely untapped. CSP Today Markets Report 2014 | 347 Rest of the World 11.10 Kuwait Kuwait – Country Overview DNI:1,848 kWh/m2/year Size:17,820 kmВІ Population (2012):3.25 million GDP per capita (2012): US$ 62,664 Installed power capacity: 12.7 GW Annual electricity consumption: 46.6 TWh Expected annual electricity demand in 2020: 65.2 TWh Table 10(11): Current CSP Projects in Kuwait Title MWe Technology Current Status State/ Region Developer Storage Capacity (hours) Shagaya Renewable Energy Complex Project 50 Parabolic Trough Development Al Abdaliyah KISR 10 Al Abdaliyah Solar Plant (ISCC) 60 Parabolic Trough Planning Safat Ministry of Electricity and Water Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Kuwait is a net exporter of oil, and like all members of the OPEC organization, its economy is almost exclusively dependent on hydrocarbons. However, the need for diversification alongside the availability of solar resources can make CSP technology interesting in the medium term. Kuwait only recently showed an interest in renewable energy. The United Nations Development Programme (UNDP) in 2003 guided the government-funded Kuwait Sustainable Environmental Management Program which aimed, amongst other things, to raise awareness of and education on renewable energy sources, and the Kuwait Institute for Scientific Research (KISR) started assessing the country’s potential in 2004. Kuwait does not have an independent market regulator, nor a public electricity authority. Various political factors have placed the development of the electric sector at a standstill. However, ambitious plans for the upgrade of the electric grid and doubling generation capacity have been recently announced. These plans should also entail the involvement of the private sector (the last of the Gulf countries to do so), a movement which has indeed encountered political resistance. Recently, KISR announced the country’s interest in harnessing renewable energy sources. The main applications of interest are electricity generation and seawater desalination. CSP and PV are both included in the targeted technologies, alongside wind energy and solar cooling. In the long term, Kuwait plans to employ nuclear technology as well. That said, there is currently no tailored energy policy or incentives for renewable energy generation. www.csptoday.com CSP Today Markets Report 2014 | 348 Rest of the World 11.12 Mexico Mexico – Country Overview DNI:1,135 kWh/m2/year Size:1.97 million kmВІ Population (2012):112.3 million GDP per capita (2012): US$ 10,064 Installed power capacity: 59.3 GW Annual electricity consumption: 201 TWh Expected annual electricity demand in 2020: 217 TWh Table 11(11): Current CSP Projects in Mexico Title MWe Technology Agua Prieta II 14 Parabolic Trough Current Status State/ Region Developer Storage Capacity (hours) Construction Sonora n/a Abengoa Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Amongst the emerging CSP markets, Mexico is definitely one of the most promising. Its excellent solar resources, alongside well-paced industrial development, provide valuable strengths for the country. Likewise, the rapidly growing internal demand and the need to rearrange the current energy mix call for an increased focus on renewable energy generation. Local Mexican suppliers are already involved in the supply chain of US-based CSP plants. The Mexican energy policy is based on a law for renewable energy development passed in 2008 and on the National Strategy for Energy Transition and Sustainable Energy Use developed by SENER (as a follow-on from that same law). The two pillars of the national strategy are energy efficiency and renewable generation. At the same time a more detailed 15-year energy plan has been issued by the Federal Commission of Electricity (CFE). Solar energy has received more attention in recent years, and studies estimate that up to 50 times the current electricity generation can be provided by exploiting the enormous potential for solar energy. International institutions like the World Bank, Inter-American Development Bank and Global Environment Facility (GFE) have expressed their interest in supporting the development of renewable energy generation projects in Mexico, whereas nationally, the interests of the solar industry are represented by the solar energy association ANES. CSP technology has a strong potential and the CFE are considering it as www.csptoday.com part of their plans for energy development. Initially, in 2002, there was a plan for the construction of the first Integrated Solar Combined Cycle (ISCC) plant with a 25 MW parabolic trough installed capacity. However, this project was abandoned due to a lack of interest from potential investors and re-established in 2005. The overall objective is a cumulative 1,390 MW capacity installed by 2020. In the last quarter of 2012, Abengoa won an order to build a CSP plant for the state-owned Mexican Federal Electricity Commission, using solar-gas hybrid technology (ISCC). The 12 MW parabolic-trough solar field will be integrated with a 465 MW combined-cycle gas turbine plant during a later construction phase. The concentrating solar power installation is receiving funding from the UNDP’s GEF. CSP Today Markets Report 2014 | 349 Rest of the World 11.12 Namibia Namibia – Country Overview DNI:2,190 kWh/m2/year Size:825,418 kmВІ Population (2012):2.25 million GDP per capita (2012): US$ 5,293 Installed power capacity: 0.4 GW Annual electricity consumption: 3.5 TWh Expected annual electricity demand in 2020: 5.65 TWh CSP Specific Policies and Incentives Namibia has extraordinary solar resources. It is estimated that the country could produce 70% of the current world electricity generation if all the areas suitable for CSP plants were utilized. The DNI available is the second highest in the world after that of Chile. However, Namibia is still an emerging country; therefore, any development of the technology will be hindered by a variety of regulatory, economic and technical barriers. Last but not least, the grid network itself only reaches approximately 41.8% of the population, and this rate drops to 25% in rural areas. The Ministry of Mines and Energy (MME) in Namibia is responsible for the development of energy policy. This is still based on the White Paper of Energy Policy (WPE) produced in 1998. In 2006, the Renewable Energy and Energy Efficiency Institute (REEEI) was created, to become the national information resource center. Despite various limitations like the availability of human and financial resources and low level of economic independence, the REEEI coordinated projects like the Renewable Energy and Energy Efficiency Capacity Building Program (REEECAP) and the Namibian Renewable Energy Program (NAMREP). Between 2007 and 2010, the NAMREP aimed to promote financial, economic, political and public awareness of solar energy. At the same time, the REEECAP was introduced to support the energy efficiency policy formulated by the WPE. In 2008, the Renewable Energy Industry Association of Namibia (REIAN) was founded to group and represent small and medium enterprises supplying and installing relevant technologies. In relation to CSP, in 2012, the REEEI coordinated a project, partly funded by the MME, to produce a pre-feasibility study for the development of CSP technology in Namibia. Unfortunately, several key issues, including a lack of R&D capabilities and work skills to support the development of this technology, as well as the distributed generation in general, mean www.csptoday.com that so far no plants have been actually built. Amongst the other barriers, renewable generation technologies have to face the interest of the government in a nuclear program: this technology has been supported by significant investment from foreign companies. Furthermore, a recent strategic plan for 2012/2017 released by the MME focused on the development of nuclear technology, whilst renewable generation was not discussed at all. The MME is currently reviewing the WPE and a new document on energy policy should be published by 2013. Activities are now underway to develop an energy regulatory framework to support grid-connected projects in Namibia. Finally, a National Integrated Resource Plan (NIRP) is being produced with the financial support of the World Bank. At the beginning of 2013, the project “Concentrating Solar Power Technology Transfer for Electricity Generation in Namibia” (CSP TT NAM) was endorsed by the Global Environment Facility. The project aims to increase Namibia’s renewable energy share by developing the necessary framework and conditions for the successful deployment of CSP technology. One of the key goals is the construction of the first CSP plant by 2015. The project is supported by the United Nations Development Program (UNDP), the Government of Namibia, the Ministry of Mines and Energy, and the Renewable Energy and Energy Efficiency Institute. It will be funded with approximately US$ 2.5 million from different sources, such as the Development Bank of Southern Africa, Clinton Climate Initiative and national institutions. CSP Today Markets Report 2014 | 350 Rest of the World 11.13. Oman Oman – Country Overview DNI:2,000 kWh/m2/year Size:312,460 kmВІ Population (2012):3.31 million GDP per capita (2012): US$ 25,221 Installed power capacity: 4.26 GW Annual electricity consumption: 15.52 TWh Expected annual electricity demand in 2020: 31 TWh Table 12(11): Current CSP Projects in Oman Title Petroleum Development Oman CSP EOR Project MWe 7 Current Status Operation CSP Specific Policies and Incentives Oman could become a pioneer in CSP deployment if it chooses to do so. Abundant solar resources and land availability are matched by the need for diversification and the potential economic return associated with exported oil and gas. However, the predominant role of oil and gas in the energy market alongside a lack of know-how and the absence of a tailored energy policy has created a challenging overall picture for CSP technology to date. Oman is increasingly showing interest in renewable energy generation technologies. Ministerial and technical committees have been established and two main priorities have been identified: the investigation of renewable energy potential in Oman through feasibility studies, and the review of the market structure and overall regulatory framework. Technology Parabolic Trough Developer GlassPoint Storage Capacity (hours) n/a Utility-scale solar energy plants have significant potential in this GCC country and could be instrumental in reducing the consumption of internal oil and gas resources, which in turn could be exported to further boost the economy. In this energy scenario, there is high interest in the development of CSP technology. The utilization of renewable energy generation technologies would be very suitable for electricity generation in Oman, as well as for water desalination, particularly in remote areas that are difficult to connect to the main system. A large project is currently awaiting approval from Oman’s Public Authority on Electricity and Water. The main areas of focus are currently solar and wind technologies, whilst a limited potential is associated with all other applications. Pilot PV technology projects have commenced in recent years and the Authority for Electricity Regulation (AER) has commissioned feasibility studies to investigate the potential of CSP technology. Furthermore, several private companies have signed a Memorandum of Understanding (MoU) and other commercial agreements to develop solar energy projects. Other than the policy initiatives already quoted, Oman does not have any tailored fiscal incentive system such as feed in tariffs, but the overall energy policy is currently under review. www.csptoday.com CSP Today Markets Report 2014 | 351 Rest of the World 11.14 Portugal Portugal – Country Overview DNI:1,717 kWh/m2/year Size:91,985 kmВІ Population (2012):10.53 million GDP per capita (2012): US$ 22,316 Installed power capacity: 18.92 GW Annual electricity consumption: 51.19 TWh Expected annual electricity demand in 2020: 52 TWh Table 13(11): Current CSP Projects in Portugal Title MWe Current Status Island Renewable 8 Planning Technology Developer Parabolic Trough Island Renewable Ltd Storage Capacity (hours) TBC Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Portugal represents a potentially very interesting market for CSP development. The country enjoys high levels of solar irradiation and strong government support for the development of renewable energy generation technologies, further confirmed by a target raised in 2011. The relevant role of renewable energy within the energy mix could benefit from an increased penetration level of CSP technology because of its capability to store energy. Other than temporary financial problems undermining the opportunity for developing large projects, the low capacity of the grid seems to be the major bottleneck. Portugal has set a very ambitious and supportive policy for the development of renewable energy and, indeed, massive progression has been witnessed over the last ten years. a net exporter. This is the reason why the new National Energy Strategy set more ambitious targets. There are very promising resources in Portugal, both in terms of wind and solar. The country hosts the world’s largest PV plant - yet solar energy is still far behind wind development. The policy includes a feed-in-tariff scheme, tailored tendering and concession procedures, investment subsidies (PRIME-Programme) and tax reductions. The latest FITs were issued between 2005 and 2007, when CSP technology was included. Subsidy payments and tax incentives have been mainly used for smaller-scale applications whilst FITs and tendering schemes favored larger-scale renewable applications. CSP projects up to 10 MW can claim FITS between € 0.263 /kWh to € 0.273. The energy policy launched in 2001 was based on the 4 Es (Energy Efficiency and Endogenous Energies). It was initially focused on replacing oil and coal with natural gas and liberalizing the energy market; it then moved on to renewable energy generation technologies. A wide range have been targeted by the government since 2007, including wave energy, waste-to-energy, biogas, hydro, PV and wind energy technologies. The installed capacity more than tripled between 2004 and 2009 and Portugal is now amongst the top-ranked in Europe for energy generation from renewables. This result is particularly due to the massive development of wind generation. According to the International Energy Agency, Portugal recently achieved the status of www.csptoday.com CSP Today Markets Report 2014 | 352 Rest of the World 11.15 Qatar Qatar – Country Overview DNI:2,266 kWh/m2/year Size:11,571 kmВІ Population (2012):2.05 million GDP per capita (2012): US$ 92,501 Installed power capacity: 4.893 GW Annual electricity consumption: 23.04 TWh Expected annual electricity demand in 2020: 72.2 TWh Table 14(11): Current CSP Projects in Qatar Title MWe Technology Current status State/ Region Developer Storage Capacity (hours) Sahara Forest Project: Qatar Parabolic Trough Operation Doha Qafco N/A QEERI DohaSOL Solar Desalination Project Parabolic Trough Planning TBC Qatar Environment & Energy Research Institute TBC Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Qatar can potentially become an active CSP market, as the rate at which its electricity demand is increasing is one of the highest in the world and solar resources are abundant. However, the predominant role of oil and gas in the energy market alongside technical and policy-related barriers create a challenging overall picture for CSP penetration. Qatar is the second-smallest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). Its policy so far has been highly focused on oil production and exportation, a situation which seems unlikely to change, at least in the short term. To date, the country does not have any dedicated legal or regulatory frameworks for the deployment of renewable energy technologies. As a consequence of the various generation shortfalls, the government is starting to invest in the refurbishment of the power system, encouraging foreign investment and implementation of Independent Power Projects (IPPs). components for the PV industry, mainly polysilicon. The plan for 1,800 MW to be completed by 2014 is aimed at satisfying approximately 80% of the overall water desalination demand. Other than solar energy, the country has also started deploying biomass energy in a plant with an installed capacity of 40 MW. Qatar already has a CSP project in operation as part of the larger Sahara Forest Project (SFP). Working in collaboration with Yara and Qafco, the SFP encompasses a number of different research and development activities including saltwater greenhouses, evaporative hedges, PV, salt production, halophytes and algae production. The International Renewable Energy Agency (IRENA) recently signed a Memorandum of understanding with Qatar to promote the development of renewable resources. The country has a sizeable production of www.csptoday.com CSP Today Markets Report 2014 | 353 Rest of the World 11.16 Spain Spain – Country Overview DNI:2,100 kWh/m2/year Size:505.99 million kmВІ Population (2012):47.27 million GDP per capita (2012): US$ 30,626 Installed power capacity: 106.3 GW Annual electricity consumption: 270.4 TWh Expected annual electricity demand in 2020: 394.8 TWh Table 15(11): Current CSP Projects in Spain Developer Storage Capacity (hours) Ciudad Real SolarReserve TBC Construction Sevilla STEAG 7 Parabolic Trough Construction Caceres Cobra 7.5 50 Parabolic Trough Construction Alicante FCC Solaben 6* 50 Parabolic Trough Construction Caceres Abengoa/ ITOCHU Corporation Solaben I* 50 Parabolic Trough Construction Caceres Abengoa/ ITOCHU Corporation Termosol 1 50 Parabolic Trough Operation Badajoz NextEra Energy Resources 9 Termosol 2 50 Parabolic Trough Operation Badajoz Florida Power & Light/ NextEra Energy Resources 9 Andasol 1 50 Parabolic Trough Operation Granada ANTIN/ Cobra/ RREEF Infrastructure 7.5 Andasol 2 50 Parabolic Trough Operation Granada Cobra 7.5 Title MWe Technology Current Status AlcГЎzar 50 Tower Development Arenales PS 50 Parabolic Trough Casablanca 50 Enerstar Villena www.csptoday.com State/ Region 4 CSP Today Markets Report 2014 | 354 Rest of the World Andasol 3 50 Parabolic Trough Operation Granada Ferrostaal/ RheinEnergie/ RWE Innogy/ Solanda/ Stadtwerke Munchen 7.5 ASTE - 1A 50 Parabolic Trough Operation Ciudad Real Aries/Eiser/Elecnor 8 ASTE - 1B 50 Parabolic Trough Operation Ciudad Real Aries/Eiser/Elecnor 8 Astexol-2 50 Parabolic Trough Operation Badajoz Aries/Eiser/Elecnor 7.5 Borges 22.5 Parabolic Trough Operation Lldida Abantla/Comsa-Ente Consol Orellana 50 Parabolic Trough Operation Badajoz Acciona Extresol 1 50 Parabolic Trough Operation Badajoz Cobra 7.5 Extresol 2 50 Parabolic Trough Operation Badajoz Cobra 7.5 Extresol 3 50 Parabolic Trough Operation Badajoz Cobra 7.5 Gemasolar 20 Tower Operation Sevilla Masdar/ Sener / Torresol 15 Energy HelioEnergy 1 50 Parabolic Trough Operation Sevilla Abengoa HelioEnergy 2 50 Parabolic Trough Operation Sevilla Abengoa Helios 1 50 Parabolic Trough Operation Ciudad Real Abengoa/Caja Castilla La Mancha Corporacion/Fundo de Capital de Risco Energias RenovaveisCaixa Capital/ HYPERION/Hypesol Energy Holding Helios 2 50 Parabolic Trough Operation Ciudad Real Abengo/Caja Castilla La Mancha Corporacion/ Fundo de Capital de Risco Energias Renovaveis-Caixa Capital/HYPERION/ Hypesol Energy Holding www.csptoday.com CSP Today Markets Report 2014 | 355 Rest of the World La Africana 50 Parabolic Trough Operation Cordoba Grupo Magtel/Grupo Ortiz/ TSK 7.5 La Dehesa 50 Parabolic Trough Operation Badajoz SAMCA Renovables 7.5 La Florida 50 Parabolic Trough Operation Badajoz SAMCA Renovables 7.5 La Risca 50 Parabolic Trough Operation Badajoz Acciona/Mitsubishi Lebrija 1 50 Parabolic Trough Operation Sevilla Siemens/Valoriza Majadas 50 Parabolic Trough Operation Caceres Acciona/Mitsubishi Manchasol 1 50 Parabolic Trough Operation Ciudad Real Cobra 7.5 Manchasol 2 50 Parabolic Trough Operation Ciudad Real Cobra 7.5 MorГіn 50 Parabolic Trough Operation Sevilla Ibereolica Solar Olivenza I 50 Parabolic Trough Operation Badajoz Ibereolica Solar Palma del Rio I 50 Parabolic Trough Operation Cordoba Acciona/Mitsubishi Palma del Rio II 50 Parabolic Trough Operation Cordoba Acciona/Mitsubishi PS10 11 Tower Operation Sevilla Abengoa 1 1 PS20 20 Tower Operation Sevilla В Puertollano Ibersol 50 Parabolic Trough Operation Ciudad Real Iberdrola Renovables Solaben II 50 Parabolic Trough Operation Caceres Abengoa/ ITOCHU Corporation Solaben III 50 Parabolic Trough Operation Caceres Abengoa/ ITOCHU Corporation Solacor 1 50 Parabolic Trough Operation Cordoba Abengoa / JGC Corporation Solacor 2 50 Parabolic Trough Operation Cordoba Abengoa / JGC Corporation Solnova 1 50 Parabolic Trough Operation Sevilla Abengoa Solnova 3 50 Parabolic Trough Operation Sevilla Abengoa Solnova 4 50 Parabolic Trough Operation Sevilla Abengoa www.csptoday.com CSP Today Markets Report 2014 | 356 Rest of the World Soluz Guzman 50 Parabolic Trough Operation Cordoba Abantia/FCC/Mitsui Valle 1 50 Parabolic Trough Operation Cadiz Masdar/ Sener 7.5 Valle 2 50 Parabolic Trough Operation Cadiz Masdar/ Sener 7.5 * In October 2013 this project moved into operation Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives As a result of the moratorium passed in January 2012 (abolition of the Royal Decree), no government incentives currently exist to support CSP in Spain. According to Protermosolar, the moratorium may be a temporary measure while a new policy framework is defined. If the moratorium reveals itself to be a permanent measure, and the government does not announce an alternative scheme for supporting CSP projects, the industry in Spain will most likely stagnate. The Proposed Law of Fiscal Measures for Energy Sustainability (or Proyecto de Ley de Medidas Fiscales para la Sostenibilidad EnergГ©tica), distributed in September 2012, aims to raise €3 billion a year, and proposes a uniform 6% tax on all forms of energy generation. Additionally, the windfall profits that Spain’s big five electrical companies have been enjoying until now from fully amortized nuclear and hydro plants will be curtailed with the introduction of taxes on radioactive waste and a 22% levy on the use of water for electricity production. be updated according to the standard Consumer Price Index (CPI), but with an index that will exclude “elements outside the electric system” (such as staple foodstuffs). Secondly, whilst CSP plants could previously choose to operate under two different options, either at fixed-tariff or receive the вЂ�market price plus a premium’, from now on only the fixed tariff will be allowed. In July 2013, Spain reduced profits for renewable energy projects. Feed-in-Tariffs are now to be removed and replaced with a new scheme of investment supplements. Under the new law, both renewables and cogeneration plants will receive a payment for their investment, instead of the former FIT. This has been established at a 7.5% rate before tax. However, this rate will not be applied to the CAPEX of the plant, but rather to what the Spanish Government deems as a вЂ�reasonable cost’ for the CSP plant. Clean technologies were encouraged by the application of a вЂ�green cent’ tax on carbon-based fuels, ranging from €0.028 per cubic meter of natural gas to €14.97 per ton of coal. However, the regulation proposal includes a clause that states: “Electrical energy produced from the use of fossil fuels in a generation installation that uses as its primary source a renewable energy will not be subject to an economic bonus.” This has raised concern that the proposed legislation could hit the generation profits that Spanish CSP plants make while they are using gas as a backup fuel, and which have been factored into every operator’s business plans. In February 2013, Spain’s Council of Ministers approved the new Royal Decree Law aimed at reducing the tariff deficit. Two changes will be applied to the economic regime under which the CSP sector is regulated in Spain. Firstly, the Feed-in-Tariff will no longer www.csptoday.com CSP Today Markets Report 2014 | 357 Rest of the World 11.17 Thailand Thailand – Country Overview DNI:1,005 kWh/m2/year Size:513,120 kmВІ Population (2012):66.79 million GDP per capita (2012): US$ 4,972 Installed power capacity: 47.3 GW Annual electricity consumption: 135.2 TWh Expected annual electricity demand in 2020: 222.6 TWh Table 16(11): Current CSP Projects in Thailand Title MWe Current status Kanchanaburi 5 Operation Technology Developer Storage Parabolic Trough Thai Solar Energy no Co Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Thailand is gradually becoming an interesting market for the deployment of CSP technology. Good solar insulation alongside a strategic opportunity to match CSP generation with biomass technology, given the latter’s large availability, signal to hybrid small-scale as the most promising solution for this Asian country. However, a more consistent regulatory frame and investments to guarantee grid capacity would be necessary to fully exploit the high solar potential of this region. Thailand’s policy on electric power is regulated by the Energy Regulatory Commission (ERC). This country was one of the first to implement in Asia an incentive scheme (FiTs) program in 2007. It is called “adder” because it adds additional payment to renewable energy generators on top of the normal prices received by producers when selling electricity to power utilities. A particular aspect of Thailand’s policy is that it has five different long-term energy plans prepared by separate government departments, and each of them focuses on specific technologies or sources. As a consequence, there is no integrated energy plan, mainly due to lack of coordination amongst these various institutional bodies. The two plans relevant to renewable energy technologies are the long-term Power Development Plan (PDP 2010-2030) and the 15-Year Renewable Energy Development Plan (REDP 2009-2022) which unfortunately set two different targets for the development of renewable energy generation. www.csptoday.com Last but not least, Thailand does not have a renewable energy law backing up these policy plans. According to the REDP, the target for solar power generation installed by 2022 is 500 MW out of a total of 5,607.5 MW, although it is necessary to consider the predominant role of biomass (3,700 MW installed by the same year). The lack of a robust and unified vision for the energy sector causes discontinuous support to energy policy, and this in turn has created a level of uncertainty for potential investors. The feed-in-tariff for CSP technology is currently 0.27 €/kWh and applies for 10 years only. The possibility to negotiate international funding with institutional bodies like the Asian Development Bank or the World Bank is a further element aiming to encourage investments. Although Thailand has only two CSP plants at present, there are at least another 14 in the pipeline and European developers have already expressed interest in this country. CSP Today Markets Report 2014 | 358 Rest of the World 11.18 Tunisia Tunisia – Country Overview DNI:2,100 kWh/m2/year Size:163,610 kmВІ Population (2012):10.78 million GDP per capita (2012): US$ 9,477 Installed power capacity: 4.3 GW Annual electricity consumption: 14.6 TWh Expected annual electricity demand in 2020: 22.8 TWh Table 17(11): Current CSP Projects in Tunisia Storage Capacity (hours) Title MWe Technology Status State/Region Developer TuNur 2,000 Tower Announced Southern Region Nur Energie/ Top Oilfied Services В Akarit 50 Parabolic Trough Planning Gabes STEG 4 Elmed CSP Project 100 Parabolic Trough Planning Tunisia STEG В Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives In 2008, Tunisia’s National Agency for Energy Conservation released the Renewable Energy and Energy Efficiency Plan, which targets 10% penetration from renewable energy sources by 2011. Afterwards, a law on energy conservation was amended in February 2009 to allow independent production of electricity from renewable energy. This law enables large electricity consumers to produce electricity from renewable sources to support their own consumption, as well as to sell their electricity surplus to the grid. The Tunisian Company of Electricity and Gas (SociГ©tГ© Tunisienne de l’ElectricitГ© et du Gaz, STEG) is therefore committed to buying this electricity at domestic market prices. However, no specific incentives are available to promote large-scale production. Aside from the law on energy conservation, there are tax incentives in place for energy efficiency and renewable energy projects: Reduction of customs duties to the minimum rate of 10% (from 18%) and exemption from VAT for imported equipment used for energy efficiency and renewable energy www.csptoday.com Reduction of customs duties and exemption from VAT for imported raw materials Exemption from VAT for locally-manufactured raw materials Another existing policy is Law 2004-72, which promotes the responsible use of energy. It defines the sensible use of energy as a national priority, and identifies it as the most important element of an effective policy for sustainable development. The law promulgates the following objectives: energy saving, renewable energy promotion, and substitution of conventional energy with renewable and sustainable alternatives. Another active program in Tunisia that will contribute to supporting renewable energy is the Mediterranean Solar Plan (MSP), part of the Union for the Mediterranean (UfM) project. The idea of the UfM is to set out a policy framework for renewable energy and energy efficiency to mitigate climate change in the coming years. The MSP is expected to go through a deployment phase from 2012 to 2020 and to be financed by the World Bank and the European Development Bank, with the ultimate goal of setting up an effective green electricity import-export framework CSP Today Markets Report 2014 | 359 Rest of the World under the Trans-European Networks initiative. Furthermore, in 2009, the government launched the Tunisian Solar Plan (TSP), which encompasses 40 projects. Most of the projects are solar (including three CSP) and wind energy related, with the purpose of saving around 660 metric tons of oil a year, representing approximately 22% of the country’s total energy production by 2016. Tunisia has also joined forces with Algeria, Egypt, Jordan and Morocco in the MENA CSP scale-up initiative. The initiative will be implemented under the Clean Technology Fund (CTF) and aims to: Generate about 1 GW of energy, totaling about 15% of the projected global CSP output Secure more than US$ 4.8 billion of public and private investment in CSP Develop CSP-related transmission infrastructure in the Maghreb and Mashreq regions for domestic supply and exports. Finally, in 2012, Tunisia received backing from the Clean Technology Fund of US$ 20 million to improve its CSP transmission infrastructure. www.csptoday.com CSP Today Markets Report 2014 | 360 Rest of the World 11.19 Turkey Turkey – Country Overview DNI1,980 kWh/m2/year Size783,562 kmВІ Population (2012)73.6 million GDP per capita (2012) US$ 10,498 Installed power capacity 44.8 GW Annual electricity consumption154.8 TWh Expected annual electricity demand in 2020 250 TWh Table 18(11): Current CSP Projects in Turkey Title MWe Technology Current Status Dervish CSP Plant 50 Tower Development Greenway CSP Tower 5 Tower Operation State/ Region Karaman Mersin Developer Storage Capacity (hours) eSolar/ GE/ MetCapeSolar TBC Greenway N/A Source: CSP Today Global Tracker, August 2013 CSP Specific Policies and Incentives Turkey is increasingly becoming a promising market for CSP. The policy targets set by the government and fast growing energy demand alongside the very good availability of insulation are all elements encouraging the development of solar energy generation projects. However, the ability to access comparably cheap gas resources and other technical and market barriers make solar thermal electricity still far from competitive. The Turkish energy policy has been in place for almost two decades. The first financial model to support renewable generation was developed in 1984, when the BOT (Build, Operate, and Transfer) system was issued. This model was then replaced by the BOO (Build, Own, and Operate) model, before being removed in 2000. In 2001, the Electricity Market Law introduced a new incentive framework. This was followed by a law on the utilization of renewables in electricity generation, first issued in 2005 then amended in 2007 and 2011. A New Energy Strategy Plan has been prepared by the Ministry of Energy and Natural Resources (MENR) in 2010, setting short-term targets for 2014, and long term objectives. It establishes that energy efficiency, increasing the use of renewables and integrating nuclear energy into the energy mix are the main targets for 2023. As a matter of fact, the strategic plan is not legally binding, however it is expected that future legislation will incorporate this. www.csptoday.com Solar energy is recognized as an important component of Turkey’s future energy mix and can provide 5.5% of the fuel consumption by 2030. To achieve this objective, Turkey initiated “The Private Sector Renewable Energy and Energy Efficiency Project”, sponsored by the World Bank through a new US$ 5.2 billion multilateral Clean Technology Fund. The Renewable Energy Networks (RENET) is another project between Turkish and European Universities, carried out to address the R&D weakness in the sector. The Energy Market Regulatory Authority (EMRA) has produced guidelines for solar energy project developers, indicating the requirements for granting a license. Amongst others, the land should not be a first-class farming field, and no more than 2 hectares per MW installed should be occupied. Resource assessment should be carried out for at least 6 months and applications would be only be approved in areas where the global horizontal radiation is higher than 1,620 kWh/m2 per year. Although not specific to solar thermal electricity, these guidelines give an indication of the current relevant policy. CSP has been listed as an important research area in the вЂ�Summary of National Mid & Long-Term Science and Energy Technology Development Plan’ (2006–2020) by the MENR. A US$ 1.2 million R&D project has also been funded in collaboration with the Scientific and CSP Today Markets Report 2014 | 361 Rest of the World Technological Research Council of Turkey (TUBITAK) to address the two main barriers in the development of CSP in Turkey, namely technology and costs. Furthermore, feasibility research for a 10 MW central tower plant was carried out by the electricity generation company EUAS. The current financial incentive for CSP technology is calculated as the sum of a base tariff (US$ 0.13/kWh) plus a domestic manufacturing addition, which is assigned when some components are provided locally. The additions are structured in the following way: Vacuum tubes US$ 0.24/ kWh Reflecting Surface Panels US$ 0.06/kWh Solar Tracking systems US$ 0.06/kWh Heat energy storage systems US$ 0.13/kWh Tower and steam production system US$ 0.24/kWh Stirling Engine US$ 0.13/kWh Integration of solar panels and mechanical systems US$ 0.06/kWh Therefore, the maximum contribution for localizing the supply chain is US$ 0.92/kWh and the overall threshold for the feed-in-tariff is US$ 0.23/kWh. www.csptoday.com CSP Today Markets Report 2014 | 362 Rest of the World Acronyms ACRONYM DEFINITION AER Authority for Electricity Regulation, Oman ANEEL Brazilian Electricity Regulatory Agency ARENA Australian Renewable Energy Agency ASRT Academy of Scientific Research and Technology ASTRI Australian Solar Thermal Research Initiative BOO Build, Own, and Operate BOT Build, Operate, and Transfer CCEE Electric Energy Commercialization Chamber, Brazil CFE Federal Commission of Electricity CPI Consumer Price Index CSIRO Commonwealth Scientific and Industrial Research Organisation CTF Clean Technology Fund EGP Enel Green Power EMRA Energy Market Regulatory Authority, Turkey ERC Energy Regulatory Commission, Thailand GFE Global Environment Facility IRENA International Renewable Energy Agency KISR Kuwait Institute for Scientific Research LRET Large-scale Renewable Energy Target MATS Multi-Purpose Applications by Thermodynamic Solar MEMR Ministry of Energy and Mineral Resources, Jordan MENR Ministry of Energy and Natural Resources, Turkey MOEE Ministry of Electricity and Energy, Egypt MME Ministry of Mines and Energy, Namibia MSP Mediterranean Solar Plan NAMREP Namibian Renewable Energy Program NIRP National Integrated Resource Plan, Namibia OPEC Organization of the Petroleum Exporting Countries PDP Power Development Plan REC Renewable Energy Certificate REDP Renewable Energy Development Plan REEECAP Renewable Energy and Energy Efficiency Capacity Building Program REEEI Renewable Energy and Energy Efficiency Institute REIAN Renewable Energy Industry Association of Namibia RENET Renewable Energy Network RET Renewable Energy Target SFP Sahara Forest Project www.csptoday.com CSP Today Markets Report 2014 | 363 Rest of the World SREC Small-scale Renewable Energy Scheme SREP Scaling-up Renewable Energy Program STEG SociГ©tГ© Tunisienne de l’ElectricitГ© et du Gaz TSP Tunisian Solar Plan TUBITAK Scientific and Technological Research Council of Turkey UfM Union for the Mediterranean UNDO United Nations Development Programme www.csptoday.com CSP Today Markets Report 2014 | 364 Appendix A Appendix A: Scorecard Methodology The status of the CSP industry and its potential varies greatly from one location to another. Indeed, even well-established markets, while possessing great expertise in the field of CSP, are not immune to economic and political downturns. As such, it is important to layout the current conditions the industry is facing globally and locally. The objective of this market scorecard is thus to rank the countries according to the current potential that they offer for the commercial development and deployment of viable CSP technology. In the current study, typical factors for all renewable energy converters and CSP specific ones are integrated in order to obtain a valid picture for each local market and its attractiveness to CSP investors. Figure 1(A): CSP Market Indicators and Influential Factors(A) summarizes the components assumed to have major effects on the development of a CSP market. The implication of each component is briefly described below. In this section, several factors similar to the ones introduced in the market forecast were considered. Most of the input to the model is based on statistical data, which is processed and converted into a normalized index. These points for each indicator are summed to get a final score for each country. Whenever there are several factors affecting an indicator, arithmetic averaging is used to merge the factors into one indicator. The country-specific score, prior to weighting, was quantified, and compared against the maximum and minimum values of the set. For example, calculation of a country’s score for its DNI resources can be represented as: Each factor’s score contributed to its corresponding indicator and then summed to obtain the final score. CSP Market Indicators A country’s CSP market attractiveness and its potential for development are influenced by several factors. Some of these factors are common to all types of renewable energy technologies and are related to a country’s political and economic stability, its financial situation, and needs of its energy sector. However, there are some factors which are specific to the CSP market and which determine its commercial readiness. www.csptoday.com CSP Today Markets Report 2014 | 365 Appendix A Figure 1(A): CSP Market Indicators and Influential Factors CSP Market Indicators – DNI – CSP Potential – Announced CSP Capacity Permitting – Reguatory Policies – Fiscal Incentives Industry Readiness – Inustrial Competence – CSP Related Industries Ease of Financing Political & Economic Stability – Global Competitiveness – Political Instability – Corruption Perception National CSP Targets Energy Sector – Net Imported Electricity – Oil/Gas Insecurity – Electricity Consumption Growth Technical Market Potential Renewable Energy Support Technical Market Potential This indicator investigates the domestic resource quality for CSP technology. It takes into account time-independent factors like solar irradiation (DNI) and CSP potential, as well as market-dependent factors, such as announced CSP capacity in the country in question. Renewable Energy Support This indicator aims to measure the presence of the different financing instruments or incentives to support, encourage and enable expansion of a CSP-specific or renewable energy market. Availability of each incentive is scored as 1, while the lack thereof is scored as 0. These incentives are grouped as given below: Regulatory Policies score include the quota obligation, net metering and tradable renewable energy certificates. The data covered here include legislative measures and laws that shape the policies of the countries in favor of expanding renewables. The only factor which is specific for installed technology is the feed-in-tariff (FIT). FIT is also analyzed in the current category; however, it is www.csptoday.com assigned four times more weight compared with other governmental incentive factors. Fiscal Incentives are mainly capital subsidies, investment or production tax credits, reduction in taxes and energy production payments. Public Financing mechanisms in this section are public investments loans, grants and public competitive bidding. Ease of financing This indicator is mainly a composite approach between subjective and objective ratings. It is based both on the general local financing index annually published by the World Bank and also subjective ratings on the ease of loan access and financing through local equity market. Country rankings given in this index are converted into scores using the same normalization procedure described above. Subjective scores take into account survey results, interviews and the authors’ knowledge and experience. CSP Today Markets Report 2014 | 366 Appendix A National CSP Targets This indicator converts the announced CSP target to the required addition of capacity per year. The larger this annual capacity increase is, the larger the CSP market for new players. Energy Sector Indicators The energy sector index represents the local prospective benefits of CSP considering the local electricity market. It analyzes the net electricity imports, local oil insecurity, gas security, and electricity demand increase. The more the country’s market is in need for electricity and energy, the more renewable energy projects bear a chance at competing against domestic conventional energy production. Oil and gas insecurity values are calculated through the analysis of domestic proven oil and gas reserves and their consumption rate. Industry Readiness This criterion was evaluated by considering the presence of local expertise that could support the insurgence of CSP at a technical level. Such expertise can originate from boiler makers, piping, steel producers and so on. While mirrors, metal support structure, pylons and general assembling or civil works could be performed by local labor; the share of local work contribution is limited by complexity and expertise availability. Industry readiness is composed of both local industrial abilities and availabilities of CSP-specific manufacturing facilities. Typical industrial indicators are local supplier quantity, local supplier quality, production process sophistication, availability of the latest technologies and availability of scientists and engineers. These factors are indicative of the local industrial background. CSP-specific indicators investigate the availability of glass manufacturing, bending and coating facilities, electronic and cabling industries, local steel production and piping capacity. These capabilities are the basic requirements for the local development of a CSP industry. Political and Economic Stability The political and economic climate of the country shapes the whole business environment in a country and thus affects the investment activities in all sectors including CSP. www.csptoday.com Three existing indices that quantitatively measure these effects are global competitiveness, political instability and corruption perception. Performance of each country is published annually by companies and organizations. For this study, the Global Competitiveness Report published by the World Economic Forum is referred to. Permitting Although the main approach in the model was to develop an objective ranking system for the countries of interest, for scoring, the permitting process an expert opinion-based quantification was used, based on the survey results, interviews and self-experience. Relative Weight of the Indicators At the starting point of this analysis, the relevance of these factors was determined by conducting a survey, with responses from 630 renewable energy experts, of whom 259 are experts in the CSP industry. All indicators are aggregated using the weightings derived from the mentioned survey and presented in Table 1(A): Survey Based Indicator Weights(A). Table 1(A): Survey Based Indicator Weights Parameter Weight Renewable Energy Support 25% Ease of Financing 20% National CSP Targets 17% Technical Market Potential 11% Energy Sector 9% Political and Economic Indicators 8% Industry Readiness 6% Permitting 4% Limitations Even though the current methodology takes into account the major factors for CSP market development, there are many other indicators that could affect the ranking presented in this report. Some of the important indicators that are not included in this analysis are land and labor costs, grid connectivity and subsidies on the fossil fuel and energy taxation. CSP Today Markets Report 2014 | 367 Appendix A In addition, scores only represent the current market situation, which is prone to modifications in the short or long term. For example, current high scores and the industry-leading position of the U.S. will change remarkably in the near future, considering the quickly changing market forces towards the use of natural gas for electricity generation. Definitions: Technical Market Potential The technical potential of a country for CSP development is an important metric to consider when comparing different markets. This potential is not only defined by the available solar resource, but also by other factors such as water availability, environmental restrictions, lands slopes and grid connection – all critical to quantifying the true potential for CSP deployment. While an exact estimate of the true potential of a market is difficult to obtain, and the data found in different papers and studies are sometimes difficult to compare, the combination of the estimated CSP potential (in terms of installed capacity and energy generation), the solar resource (DNI), the capacity announced as well as capacity in development, together form representative metrics of the commercial potential of CSP technologies. Therefore, these factors were combined in order to quantify the technical potential of each market. In addition, various recognized data sources such the DLR’s DNI Atlas, along with the CSP Today Global Tracker, were used as input. As a result, countries such as USA, Saudi Arabia, Chile, Morocco and South Africa stood out in the technical market potential ranking. Fiscal Incentives Capital, Subsidy, Grant or Rebate Investment or Production Tax Credit Reduction in Sales, Energy, CO2, VAT or other Taxes Energy Production Payment Public Financing Public Investment, Loans or Grants Public Competitive Bidding Ease of Financing Under today’s global economic situation, getting a CSP project financed has shown to be critical and challenging as well as complex, depending on the particular local conditions of the market considered. In order to define a metric that reflects the ease of financing for a CSP project, several macro-economic and financial factors were combined. The DoingBusiness.Org website, in conjunction with the World Economic Forum’s “The Global Competitiveness Report 2012-2013” report, were used as main sources, together with expert opinion based on real projects for quantifying the ease of financing at a country-wise level across a multitude of factors, which together formed the ease of financing metric. Doing Business Getting credit Protecting Investors World Economic Forum Access to Financing Restrictive Labor Regulations Tax Rates Inflation Renewable Energy Support National CSP Targets Renewable energy support is one of the most decisive factors for investing in CSP technologies since emerging CSP markets are still at the early stages of the learning curve, where they need some type of support to push and boost its development. Several parameters are essential in forming a country-specific Renewable Energy Support metric, from regulatory policies, to fiscal incentives, to public financing. The REN21 Renewables 2013 Global Status Report was used as a main source combined with expert opinion, providing a direct score for each of the underlying parameters considered. In order for a country to be attractive to CSP investors, it is important to have real and solid CSP targets that support a country’s decision to create a midterm industry, which encourages the establishment of a local CSP industry. CSP players are more interested in investing in such markets, where they can find a continued pipeline of projects that compensate investment and development costs, rather than in places with just a couple of potential projects and no further activity expected. Regulatory Policies Feed-In Tariff Electric Utility Quota Net Metering Tradable Renewable Energy Declaration (RED) www.csptoday.com As a metric for quantifying a country’s decision to boost CSP development, the national CSP targets announced by the different governments were assessed. To do so, the announced installed capacities were used in combination with metrics to quantify the real chances of meeting those goals. CSP Today Markets Report 2014 | 368 Appendix A Permitting Although the permitting and bureaucratic process is usually not one of the main factors that are evaluated when comparing different countries, in some markets, the complex, lengthy and costly permitting process required by local authorities can be an important hurdle that can discourage CSP investors. This is even more important for foreign companies that need to spend quite a lot of time in understanding the local regulations and eventually require the support of a local partner. Contrary to this, an easy permitting process makes it easier to enter a new market, which at the end favors CSP activity. The DoingBusiness.Org website, together with expert opinion, was used to quantify the permitting process ranking of the countries considered. Industry Readiness The level of development of a country’s industrial network is an important factor in evaluating the real potential of a new CSP market. Although under the current globalized economy, importing components and services from all over the world does not represent a major issue, the availability of local industry and engineering services can be a good way to reduce costs and make CSP projects more competitive. Besides which, high levels of localization are usually required by the governments. The World Economic Forum’s “Global Competitiveness Report 2012-2013” report was used as a source for quantifying Industrial Indicators and CSP-specific Indicators across the considered scorecard countries. For Tunisia, the Industrial Indicators this year were not compiled in the World Economic Forum’s 2013 report owing to the country’s current and therefore, the minimum scores across the competing countries were used to minimize the overall ranking penalty. Forum’s 2013 report owing to the country’s current conjuncture and therefore the minimum scores across the competing countries were used to minimize the overall ranking penalty. To assess the political environment, the Viewswire.eiu. com Social Unrest (political instability) index score was used, and to assess corruption levels, the Transparency International’s Corruption Perceptions Index 2012 was used. Energy Sector A strong energy sector is crucial to enable and promote CSP development. Countries with high electricity consumption growth require new installed capacity to be added to the national grid, and in some of them, CSP can be a good energy source that can offer dispatchable energy. Countries with high dependence on fossil fuel imports for their electricity generation mix might be looking at new energy sources, such as CSP, which can reduce their energy insecurity and their risk of price volatility. To estimate the country-wise score of the energy sector for the considered countries, the following energy metrics were aggregated from The World Bank’s indicators: Net Imported Oil Oil Insecurity Gas Insecurity Electricity Consumption Growth Political and Economic Indicators A positive political and economic environment is a critical factor when investing in a new CSP market. For example, due to the revolutions that some of the MENA countries have witnessed over the last two years, the development of CSP projects was negatively affected and in some cases even canceled. To quantity the political and economic atmosphere, several metrics such as the Global Competitiveness Index, Political Instability and Corruption Perception Index were used to estimate the political and economic metric. The World Economic Forum’s “Global Competitiveness Report 2012-2013” report was used as a source for quantifying the global competitiveness index across the considered scorecard countries. For Tunisia, these factors were not compiled in the World Economic www.csptoday.com CSP Today Markets Report 2014 | 369 Appendix B Appendix B: Forecast Methodology This section presents the methodology used for the development of the market forecast. The methodology can be divided into the following main tasks: Data Collection This refers to the gathering and organization of information to create the backbone of the forecast. Expert Opinion Based on the survey conducted, the forecast’s most influential parameters were identified. Due to the current infancy of the CSP industry, historical data are limited to few countries and modeling becomes a difficult exercise. Several assumptions are therefore required to carry on with the study. In order to have a basis for the model, the opinions of CSP experts were obtained and analyzed through an extensive survey of 243 CSP experts. Modeling Using the collected and processed data, a simplified representation of this complex system was conceived using a technology diffusion model based on the well-known logistic curve. Scenarios Since the historical data related to CSP are too limited and the future bears high uncertainties, a set of scenarios investigating a range of possibilities has been analyzed under a set of established assumptions, including optimistic, conservative and pessimistic. Further information on these scenarios is provided in this appendix. The ultimate objective of this exercise was to develop a comprehensive model that would allow five and ten-year market forecasts to be performed using clear assumptions and defendable methodologies. It is important to remember that the elaboration of a market forecast, especially in a fast-changing environment like the renewable energy industry, is a challenging task that requires not only time, but also research. Indeed, the last few years have seen a number of prestigious companies and agencies continuing to perform a plethora of studies in this regard with poor prediction success. The current model is not complex, yet it takes into account the main factors affecting the development of the CSP market. Data Collection First, the historical and recent developments of the CSP industry were investigated and analyzed to determine the main barriers and drivers affecting its growth; the main influencing factors are identified in figure 1(B). The effect of each factor for the regions of interest was compiled through extensive background research. The parameters presented in table 1(B) are used to quantify and weigh the elements expected to influence the CSP industry. Direct factors are considered to be more predictable in their influence on the market, while indirect factors are thought to be subject to considerable uncertainty and are thus extremely difficult to foresee, perhaps having a more subtle effect on the industry. Results and Discussion A number of CSP projects in the construction stage, development or planning pipeline, as well as announced national targets, were used to calibrate the forecast model. www.csptoday.com CSP Today Markets Report 2014 | 370 Appendix B Figure 1(B): Forecast Influential Parameters CSP Today Market Enabling Factors and Forecast Strategy direct Factor Indirect Factor decision Points Market Expansion Environmental Measures International Agreements Global Global Technology Maturity Global Energy Demand Global Economic Stability Unconventional Fossil Fuel Reserves PV Price Ease of Financing Market Saturation National CSP Targets Local Energy Demand Permitting Incentives Grid Coverage Water Availability DNI Community/Local Specific Community/Local Specific Conventional Power Cost Political Stability Population/Economic Growth High Cost of Energy Presence of Supporting Industries and Local Expertise Data Collection and Expert Opinion Although influencing factors are straightforward to define, quantifying such factors and converting them into predictors can be a difficult task. In order to define the importance of each factor, a survey was conducted through an online platform. Expert interviews were also conducted to gain informed opinions on the topic. After these analyses, a relative percentage was given, and weight factors were assigned to the factors and inserted into the model. Other than the influencing factors, two decision points were also defined in the model. These are extremely critical factors that can completely block the take-off of an industry, or boost it by providing an additional driving force to CSP deployment. For this reason, PV prices and the extraction rate of unconventional fossil fuels were analyzed separately. An 80% overall impact weight was assigned to the influencing factors and 20% to the decision points. www.csptoday.com CSP Today Markets Report 2014 | 371 Appendix B Table 1(B): Influencing Factors and Weights for CSP Development Maximum value: 5 (Based on the survey) Influencing factors (Impact weight 80%) Relative weight of each factor (%) 4.2 4.9 Market expansion 4.4 5.2 Environmental measures & climate change 3.2 3.8 Conventional power cost 2.9 3.5 International agreements 3.0 3.5 Ease of financing 3.7 4.3 Market saturation 2.0 2.4 National CSP targets 3.5 4.1 Energy demand 3.5 4.1 Permitting 3.1 3.6 Incentives 3.9 4.6 Grid coverage 2.9 3.4 Water availability 2.5 3.0 DNI 4.1 4.9 Global energy demand 3.5 4.1 Global economic stability 3.8 4.5 Political stability 3.8 4.5 Economic growth and stability 3.8 4.5 High cost of technology 3.1 3.7 Presence of supporting industries and local expertise 2.9 3.4 Indirect Local Indirect Global Direct Local Direct Global Technology maturity Technical Growth Drivers Technology Maturity For each of the drivers listed above, a weight representing their importance was used to scale the global or country-wise score achieved. The weighting associated with the technical growth drivers was from negative 10 to positive 10; a positive value denoting an enabling factor and a negative value denoting an abating effect. The development of the global CSP market is highly dependent upon technology cost reductions. Increased efficiencies and matured technology are among the most important global drivers enabling investment in and reduction of the operating costs of CSP plants. The state of the technology and prospective improvements can set the rules for competing with other renewables and eventually with conventional power generators. The concept of technology diffusion and maturity (lifecycle) is demonstrated in 2(B): www.csptoday.com CSP Today Markets Report 2014 | 372 Appendix B Figure 2(B): Technology Diffusion Lifecycle 100 75 Market Share % 50 25 Innovators 2.5% Early Adopters 13.5% Early Majority 34% Late Majority 34% Grid Coverage As CSP is a high-capacity centralized power generation technology, it requires transmission infrastructure to reach the site of demand. It is also advisable that this infrastructure be expanded to neighboring regions, allowing exports and regional trade. Grid extension in the MENA region is an example of how beneficial this factor may be. Two such examples are the interconnection between Tunisia and Italy and the GCC grid, both of which constitute significant local CSP-enabling factors. Water Availability Because CSP technology can require considerable amounts of fresh water if the most cost effective wet-cooling is utilized, the availability of fresh water in the country can have a direct influence on the feasibility of a project since dry-cooling is typically more expansive and less efficient. DNI A fundamental technical driver for reducing the cost of CSP is the availability of direct normal irradiance (DNI) received on a given area. Considering this inherent characteristic of CSP, the industry will first consider projects in the highest DNI regions around the globe. Another technical limitation may be access to gas networks for backup in some locations, and fresh water. This latter factor is especially relevant as a large numbers of CSP plants are deployed in dry regions, if not deserts, where DNI values are highest. www.csptoday.com Laggards 16% 0 As CSP capacity is ramped up, it is expected that the most favorable sites will be used first and therefore, the positive influence of this factor will be reduced over time. Presence of Supporting Industries and Local Expertise Industrial experts argue that along with the improved technical state of the technology, further reductions in the costs for CSP electricity in developing countries are achievable through local manufacture of components and use of local service providers and labor force. These factors are therefore positive enablers for CSP deployment. Market Growth Drivers The market growth drivers were determined in the same fashion as explained for the technical growth drivers (assigning a score from -10 to +10). Market Expansion Current growth rates of the CSP market are not governed by production capacity. In fact, steep cost reductions will be driven by market opportunities, which require further expansion of today’s market and the creation of new opportunities on a global scale, contributing positively to the reduction in CSP prices. Market Saturation Technology diffusion not only depends on the CSP Today Markets Report 2014 | 373 Appendix B maturity of the technology, but also on market pull. When a technology is adopted on a large scale, local markets may become saturated and reduce further development opportunities. Since the relevant CSP markets remain at a fairly early stage of development and the forecast horizon is fairly short, a low weight was assigned to this factor based on the CSP Today Market Survey results. An example of a saturated market would be Spain, as it features an exceeding amount of operating capacity and requires no more new installed capacity to meet demand. National CSP Targets While many countries have committed to national renewable energy targets, not all have established CSP-specific targets. This factor remains reflective of a given government’s inclination to invest in alternative energy technology such as CSP, and is therefore a critical indicator of market growth. As governments become more conscious and progressive in their energy strategies, an increasing share of renewable energy is expected to be targeted and contribute positively to the development of CSP. Energy Demand Another factor affecting market development is the cumulative and local energy demand change and its distribution around the globe. For example, considering India’s electricity demand, which is expected to double by 2022, it is evident that careful planning for the country’s future energy mix is crucial for sustainable development, long-term profitability and energy independence. Rapidly increasing energy demand is therefore an incentive for a nation to invest and pursue renewable energy technologies such as CSP. Permitting In both relatively established markets – Spain and the USA – and emerging ones, such as India, South Africa and Morocco, a common challenge for new CSP plants is obtaining permits. The wheels of bureaucracy generally grind very slowly; in some cases, doubling project lead-times. In California for example, environmental studies on state or federal land can take up to 24 months. Environmental Measures and Climate Change Energy policies can be directly derived from environmentally-related initiatives. An example of such a coupling is the Kyoto Protocol and its influence on 2020 renewable energy targets. Further efforts to decarbonize national energy mixes will sustain the desire to pursue renewable alternatives such as CSP, making the influence of this factor significant. International Agreements The specific needs of developing countries play a crucial role in the effective development of the global CSP market. For example, while CSP in the MENA region is primarily being developed for export, other players (such as India and the USA) are ramping up CSP capacity to cover their own energy requirements. Considering the already-high marginal cost of electricity in several potential importing countries (mainly in Europe), electricity exports are expected to be a catalyst to the continuous growth and development of CSP, especially for North African countries. This model takes into account the positive influence that international energy trading agreements between countries can have on renewable energy roll-outs. Global Economic Stability In a society where some of the most traded commodities are energy related, the coupling between energy and economic development is significant. Since renewable energy projects require by nature large initial investments, aversion to investing due to excessive fluctuations in the economy caused by inflation or the imminence of a recession, for example, can detrimentally affect the growth of technology such as CSP, when investors remain insecure and in most cases unwilling to invest in large-scale projects. Political Stability Political stability refers to the level of threat posed to government, society and business by social protests. This factor encompasses economic distress and underlies the vulnerability of a country. Political stability therefore enables the establishment of strong shortand long-term comprehensive energy policies. Socio-Political Growth Drivers Economic Growth Socio-political growth drivers were determined in the same fashion as technical growth drivers (assigning a score from -10 to +10). The subtle influence of socio-political elements should not be neglected as it has proven to be extremely significant in the past. As mentioned previously, the economic and energy agenda of a country are often interrelated. A country with escalating demographics and a rapidly growing economy will have an urgent need to ramp up its energy supply. Countries demonstrating rapid www.csptoday.com CSP Today Markets Report 2014 | 374 Appendix B economic expansion will thus exhibit a stronger pull towards the deployment of renewable energy technologies, such as CSP. technologies such as CSP. This factor therefore has an increasing and positive influence on the deployment of CSP plants. Cost Growth Drivers High Impact Decision Points The cost growth drivers were determined in the same fashion as explained for the technical growth drivers (assigning a score from -10 to +10). Since some external factors can have a stronger influence on CSP markets, a second decisional instrument was created in the forecast model, featuring the threat of PV competition and the increasing amount of non-conventional resources, which in the USA have already revealed their effect on CSP projects. Conventional Power Cost For all renewable energy technologies, achieving grid parity constitutes the ultimate objective. When incentives are disregarded, the gap between the levelized cost of electricity of renewable energy technologies such as CSP, and the price of conventional power, is increased when fuel prices drop. Alternatively, a reduction in conventional fossil fuel reserves will ultimately lead to higher energy prices and promote the decarbonization of the energy mix, hence promoting the development of technologies, such as CSP. This is a particularly sensitive factor, as, on a year-to-year basis, energy commodity prices such as oil and gas tend to fluctuate drastically, as was the case with gas in the USA in Q2-2013, compared with Q2-2012. Ease of Financing Renewable energy technologies are intrinsically more challenging to finance than conventional power plants, due to their high capital costs. The limited maturity of a technology such as CSP also increases investment risk, which can induce reluctance from investors to embark on a project. With increasing maturity, decreasing cost and proper support through regulatory frameworks, financing blockages are expected to attenuate. Incentives Incentives have been paramount in the development of renewable energy. While this was fully justified in the stages of technological infancy, the successful roll-out of CSP technology and its ability to be utilized commercially will lead to such policy support being revised and reduced. CSP will therefore have to further boost its competitiveness, and in turn, the positive influence of incentives is expected to diminish over the next decade. Escalating Cost of Energy While energy prices vary over time, in place as well as in commodity, depending on a long list of factors, a general trend is that dependence on conventional fuel, along with growing economies and demographics, will sustain the price volatility of energy commodities, driving the desire to pursue alternative energy www.csptoday.com PV Competition Until the PV price peak in mid-2008, the CSP industry reported sustained growth. However, with the Asian manufacturing players entering the PV market, PV prices have steadily decreased by 40% each year. The peak price of USD 4/Wp in 2008 has since dropped four fold. The ease of PV financing, thanks to its well-established track record, has also contributed to displacing the growth of CSP. Without discarding the distinct advantages of both technologies, at the current market size of CSP there is no mystery as to why PV prices have a big influence on the development of CSP. Two years ago, this competition became visible in the USA, with CSP projects totaling more than 1 GW being replaced by PV. Still, considering the expected decrease in costs and CSP’s unique utility-level storage capabilities and hybridization possibilities with fossil fuel power plants, as well as the potential new applications for this technology in emerging markets, CSP may prove to be more profitable than PV, moving forward. Weights of 10.1/15 and 9.9/15 were assigned to this factor, based on the research team’s opinion for the optimistic, conservative and pessimistic scenarios, respectively. Non-Conventional Resources In contrast to the peak oil argument, some argue that liquid fuels production will be sufficient to meet global demand well into the 21st century, as rising prices stimulate new discoveries, enhanced recovery and the development of non-conventional resources such as oil sands and shale gas. For example, recent discoveries of huge shale gas reserves in the USA are changing the rules of play. After 2014, the USA’s ambitious renewable energy policies are CSP Today Markets Report 2014 | 375 Appendix B expected to be watered down through an adjustment of the current regulations and promotion of natural gas in the electricity sector. There are significant proven and unproven non-conventional fossil fuel prospects all around the world. However, apart from the USA, their global production is assumed to be almost negligible over the next five years, taking into account the lack of experience, long lead times, and environmental concerns related to extraction methods. The effect of the possible exploitation of such resources is included in the model as a major source of negative impact on the development of the CSP market. Weights of 10.1/20 and 9.9/20 were assigned to this factor, based on the research team’s opinion for the optimistic, conservative and pessimistic cases, respectively. The influence factors and high decision points presented in table 2(B) and table 3(B) were respectively allocated 80% and 20% of the total decision score prior to weighted scaling. Table 2(B): High Impact Decision Points Decision Points (Impact Weight: 20%) Global Unconventional Fossil Resources (shale gas, oil sands, etc.) PV Price Once the selected factors were retained for consideration in the forecasting model (as indicated in the previous section), the next step was to determine the influence of these factors on the development of CSP. Both direct and indirect factors at global and local levels could have both types of influence –positive and negative – on the development of CSP, as shown in Table 3(B): Factor Ranking System. Once aggregated with the score of other factors, the rate of technology diffusion was either scaled or reduced as per the general forecasted market condition. www.csptoday.com Table 3(B): Factor Ranking System Levels of Influence Ranking Strong Growth Enabler 10 Growth Enabler 5 Neutral 0 Growth Attenuator -5 Strong Growth Attenuator -10 To quantify the influences of the retained factors, extensive research was performed to gather reliable information and determine the effect of these factors on the individual markets. The main information sources used in this report were as follows: Internationally-recognized publications (IEA Solar Energy Perspectives, World Bank, IEA CSP Road Map, Greenpeace, US EAI, etc.) Journals and papers Conference presentations Market development reports from companies and agencies Reports and policies regarding FITs from various state and central governments Survey results Modeling Once the retained factors were identified and the data compiled, a forecast model was developed. This forecast is based on learning curves and on a simple logistic S-curve technology diffusion model. Combined component costs are found to diminish over time, mainly due to learning by doing and economies of scale, as well as the introduction of new technical solutions. The wind industry is a common example of this, where a standard drivetrain configuration has not yet been reached despite global installed capacity exceeding 240 GW. While a CSP plant’s power block may not profit from large cost reductions in the future, the solar field certainly still offers cost saving potential. The learning curve describes the past evolution of system costs as a function of global cumulative installed capacity, and is usually extrapolated to predict future cost variations. The learning rate (LR%) represents the CSP Today Markets Report 2014 | 376 Appendix B percent reduction in prices with every doubling of installed capacity. Optimistic Inclination Influencing Factors Theoretically, the cost of each component (C) at time t is related to the cost at time zero, the ratio of global installed capacity (P) and a technological progress rate (PR) as follows: This scenario assumes the adoption of ambitious policies for, and major participation by, the international community in CSP development. It is based on a set of optimistic but nonetheless achievable economic and technological assumptions. C t = C0 ( Pt ) log(PR)/log(2) where PR = 100 – LR% Where A simple technology diffusion model is used in the forecast to predict the time evolution of installed capacity globally and at a regional level. Technologies do not grow continuously over their lifetime; there are always some limiting conditions, such as material availability or energy resources. The capacity growth and doubling time for each technology also depend on the diffusion or market penetration of the technology. This variation in installed capacity is modeled using a logistic function by Winkler, as follows: Ct = ert ( 1/C0) – ( 1/M ) + ( ert/M ) Where t is measured in years, r is the annual growth rate and M is the maximum capacity when there is no remarkable increase in installed capacity. In this forecast, the above formula is used to project future capacity growth based on the growth rate calculated through influence factors. The retained influence factors were used as amplifiers/attenuators of market trends and compared to the maximum national CSP potential. Our forecast is based on a technology diffusion model which requires the input of a maximum capacity towards the end of its lifecycle. In this scenario, CSP projects are developed in larger size, and presently unavailable technologies are developed to the point at which they become fully commercial. The market embraces the continuation of support mechanisms and removal of resource-consuming administrative barriers. The current technology diffusion model fits an S-curve for the market development of CSP technology. In the optimistic outlook, the capacity under construction and development is deployed as per table 4(B) until 2017: Table 4(B): Optimistic Deployment of Plant in Construction and Development YoY Fulfillment (%) Optimistic Construction 2014 60.00% Construction 2015 35.00% Construction 2016 5.00% Development 2016 40.00% Development 2017 30.00% Scenarios Decision Factors The scenarios introduced in this forecast are meant to help investors and decision makers adapt their plans in this rapidly changing environment. As mentioned before, however, there are limits to knowledge that lead to uncertainties. As such, not addressing all possibilities can result in overly rigid prescriptions for future actions. Recognition of these uncertainties in this model has led to the development of three different scenarios for this forecast: Optimistic, Conservative and Pessimistic. For the optimistic scenario, the current hindering effects of low PV prices and rising extraction rates of unconventional shale gas do not accentuate in the coming years. The model considers that the current downtick in PV prices does not reflect a well-balanced market, but rather an uneven demand/supply relationship which will result in slightly increasing and then balancing prices in the near term. It also assumes that fair competition from PV can be tolerated by a globally expanding CSP market. From the retained factors considered for the model, a range of time-varying influence is considered to yield an optimistic/pessimistic range, based on the variability of published data. www.csptoday.com Although gas companies are posting higher shale gas reserves and extraction rates in the USA, there is a considerable doubt and criticism about the announced CSP Today Markets Report 2014 | 377 Appendix B numbers. If the environmental risks related to their extraction are also factored in, it is assumed that in the timeline of this forecast, global exploitation of these resources may slow down, but will not dominate the renewable energy market. Conservative Inclination Influencing Factors The conservative scenario is the most probable one, assuming that the current political and economic climate prevails together with the encouraging incentives for renewable energy, even though they tend to be revised regularly. As the developing countries are far from maturity, the global growth rate is assumed to remain positive for the time horizon of this forecast. Although the technology development is uncertain for the considered time period, this scenario considers regular improvements in the CSP systems without any major breakthrough. In the conservative outlook, the capacity under construction and development is deployed as per table 5(B) until 2017: Table 5(B): Conservative Deployment of Plant in Construction and Development YoY Fulfillment (%) Conservative Construction 2014 60.00% Construction 2015 25.00% Construction 2016 10.00% Development 2016 30.00% Development 2017 20.00% Pessimistic Inclination Influencing Factors The pessimistic scenario assumes a major weakening of existing support mechanisms and a lack of political support for CSP in the future. In other words, incentives vanish and renewable energy targets do not suffice in further supporting the CSP industry. Furthermore, this scenario maintains a prolonged global economic slowdown. According to this scenario, the market does not develop as per its potential, resulting in a delay in the expected technological and economic improvements for commercial take-off. In the pessimistic outlook, the capacity under construction and development is deployed as per table 6(B) until 2017: Table 6(B): Pessimistic Deployment of Plant in Construction and Development YoY Fulfillment (%) Pessimistic Construction 2014 60.00% Construction 2015 15.00% Construction 2016 10.00% Development 2016 20.00% Development 2017 10.00% Decision Factors Large discoveries of new unconventional fuel are also integrated as a hindering factor in this scenario, as well as an increasing competitiveness from PV in the renewable energy sector. Decision Factors Results and Discussion According to this scenario, high competition from PV will continue due to further price drops. Thanks to its inherent advantages, however, CSP will be able to survive and stay in the game, with modest cost reductions resulting from technological improvements and global market expansion. The model estimates installed capacity from both a global and local perspective, while technical learning and technology diffusion are based on a global experience. This is further supported by the fact that historical data are only available for certain pioneering countries. However, the global model is limited in its scope and requires adaptation of the inclination factors to account for local influences. In some local markets, the discovery and economical extraction of unconventional fossil resources will limit the CSP deployment rate, but at a global level, CSP technology will achieve increasing capacities. www.csptoday.com On the other hand, there are great uncertainties in local forecasts, considering the lack of deployment history CSP Today Markets Report 2014 | 378 Appendix B in many countries and presently unpredictable market conditions. That said, integration of the many local factors present in the model increases the reliability of the forecast, along with the three scenarios considered. The forecast results are also compared with the announced national targets, and related assumptions are reviewed in cases where the optimistic forecast predicted lower capacities. www.csptoday.com CSP Today Markets Report 2014 | 379 appendix c Appendix C: Alternative Applications for CSP Mining In order to understand how CSP technologies can integrate into the mining industry, it is important to visualize how the mining industry operates. The mining process can be divided into three broad stages, each involving several operations: The first stage is extraction, which includes activities such as blasting, drilling, digging, ventilation and dewatering in order to loosen and remove material from the mine. Large amounts of electricity is used for this stage for powering equipment such as cranes, pumps, heaters, furnaces, etc. (if electricity grid is not available, a CSP plant with thermal energy storage can provide this demand). The second stage is materials handling, which involves the transportation of ore and waste away from the mine to the mill or disposal area. The third stage that includes beneficiation and processing is completed at the processing plant. This stage recovers the valuable portion of the mined material and produces the final marketable product. Beneficiation operations primarily consist of crushing, grinding, and separations, while processing operations comprise of smelting and/or refining. During this stage, a high amount of thermal energy is required, which can be provided by CSP. Therefore, based on the specific type of energy requirements of each stage, CSP can be a good source of energy largely in stages 1 (mainly in the form of electricity) and 3 (mainly in the form of heat) Heat integration into mining processes: high and low temperatures CSP technologies can provide large amounts of energy at different ranges of temperatures as high as 550-600В°C depending on the CSP technology employed. There www.csptoday.com are various technologies for harnessing solar energy, so depending on the required temperature, one must choose the appropriate technology for each application. This feature allows CSP technologies to adapt to the needs of different industrial processes. For example, the technology of a flat plate solar collector generally can reach “low” temperatures of up to 100В°C. This is higher than the temperatures needed in some mining and industrial processes such as tempered electrolyte (~47В°C), washing and cathode detaching (~75В°C) and heap leaching (~35В°C) among others. On the other hand, CSP technologies can provide high temperatures for other mining processes such as heavy fuel oil pre-heating (needed in melting processes) and copper electro-winning process. CSP as a replacement of fossil fuels in the mining industry CSP can be used as a pre-heater of heavy oil fuels required in boilers and furnaces for energy-intensive mining processes. Normally these heavy-oil fuels are of very low quality and need to be pre-heated to facilitate their transportation within the mining facilities. Also, the integration of a CSP plant can replace the use of conventional energy sources to heat solutions in different mining processes: The replacement share will depend on the particular mining process, site-specific irradiation conditions, and space availability for the installation of the solar field. For example, the process of copper electro-winning is very energy intensive, requiring the electrolyte to be heated to a temperature of around 50В°C. Indeed, this temperate can be easily achieved by flat plate collectors, but higher temperatures of up to 150В°C are needed in order to store the heat in water tanks (around 95В°C) for extended operation hours of the mine (after sun hours), and here CSP technology comes into play. CSP Today Markets Report 2014 | 380 appendix c Currently, most mining companies use diesel heaters for these processes. In replacing diesel heaters with CSP, mining companies will be significantly reducing their operational costs (including the elimination of several diesel transportation trucks to the mining-site). For example, the CSP plant at Minera El Tesoro (Antofogasta Minerals -Abengoa) is expected to substitute more than 50% of the diesel fuel currently used in the solution heating process for the copper electro-extraction process in the mining production (Abengoa, 2013). In summary, the use of CSP technologies with storage can be a reliable, dispatchable and cost effective alternative to supply the constant energy demand required in the mining industry, offsetting the use of expensive conventional fossil fuels that is most cases have to be transported over long distances making them even less competitive. If there is enough solar resource available on site, as it is the case in most of the mining hotspots today, CSP can be used to provide both electricity (mainly required during the extraction and material handling stages) and/or heat (mainly during the processing stage), increasing energy security, reducing the impact of fossil fuel price volatility and eventually reducing the energy bill for the mine operator. Enhanced Oil Recovery Early in the lifecycle of an oil well, pressure in reservoirs will usually naturally push oil out and promote extraction. As the well is depleted, extraction rates are reduced and so too the profitability. By the time the well reaches the end of its economically viable life, up to two thirds of a reservoir’s oil can remain trapped and therefore un-extracted. With increasing oil viscosity, the fraction of untouched oil can be much higher. Advanced oil recovery technologies can help extraction companies boost oil field production and extend their lifecycle. As an oil field ages, the decline in pressure and oil production require the injection of steam, chemicals or gas into the well. Injecting steam heats the oil in the reservoir, decreasing its viscosity and facilitating flow and extraction back to the surface, increasing productivity. Such a technique is known as enhanced oil recovery (EOR). Enhanced oil recovery is also referred to as improved oil recovery or tertiary oil recovery. Enhanced oil recovery is commonly used in mature fields where secondary techniques such as water flooding no longer produce economically viable quantities of oil. Using EOR, 30 to 60% or more of the reservoir’s original oil can be extracted. www.csptoday.com There are three major categories of EOR that have been found to be commercially successful to varying degrees: Thermal recovery, which involves the addition of heat from steam to lower the viscosity, or thin, the heavy viscous oil, and improve its ability to flow through the reservoir. Gas injection, which uses gases such as natural gas, nitrogen, or carbon dioxide for expanding and pushing additional oil towards the production wellbore or other gases that dissolve in the oil and decrease viscosity to improve flow rates. Chemical injection, which can involve the use of long-chained molecules (polymers) to increase the effectiveness of water flooding, or the use of detergent-like surfactants to help lower the surface tension that often prevents oil droplets from moving through a reservoir. Amongst the three types of EOR techniques, it is possible to integrate CSP only for thermal or steam recovery. CSP cannot be used or integrated easily in gas injection and chemical EOR. Temperatures Required for Thermal EOR Each field requires steam to be injected at a specific temperature for the process. Differences in reservoir depths set the pressure for the steam, and each particular oil field therefore has its own temperature requirements. The temperature levels are usually around 350В°C. Superheated steam can be readily achieved using CSP technologies. CSP technologies like parabolic trough (PT), linear Fresnel (LF) and solar tower or central receivers (CR) can provide steam in a wide range of temperatures from 300В°C up to 550В°C. Each CSP plant has a generator that produces steam, which is fed to the steam turbine to generate power. In case of CSP for EOR, the steam produced can be directly injected in the oil field; depending on the temperature required, the temperature can be adjusted. Water Requirement for Producing Steam Since most of the CSP plants for EOR will be located in desert or arid regions, the availability of water for producing steam could be problematic. However, EOR applications do not require high purity water – in fact, EOR applications typically produce heavily polluted water. After treatment, however, it can be re-used, converted back into steam and re-injected into the field. Hence, water is not a major issue for integration of CSP in steam EOR process. CSP Today Markets Report 2014 | 381 appendix c Constant Supply of Solar Steam? Desalination Because of the seasonal variation of solar energy, a CSP based steam EOR may not be able to feed steam to the oil field on a constant basis. However, a recent study has proven that for the same cumulative amount of steam injected (during the same period), the oil recovery from solar generated steam injection and that from constant rate steam injection are essentially the same, both for fractured reservoirs and for non-fractured reservoirs (Van Heel, 2010). There are different desalination technologies being deployed worldwide that have achieved commercial status with proven track records. These technologies produce fresh water by two different processes evaporation and separation through membranes, using as the driving force thermal energy and mechanical power (electrical power) respectively. Three technologies are primarily utilized for seawater desalination: multi effect distillation (MED), reverse osmosis (RO) and multi stage flash (MSF). The dominant technology is RO, accounting for 60% of the global capacity, followed by MSF with 27% and MED with 8%. Although these three technologies are mature and capable of producing large amounts of fresh water, the selection of the most suited desalination technology from a technical point of view will be based on the water production capacity, the energy consumption (both thermal and electric) and the seawater quality. With a current worldwide seawater desalination capacity of 65 million m3/d, the desalination industry consumes around 75 TWh of electricity annually (which represents around 0.4% of the global electricity consumption). This is the equivalent to the electricity that would be generated by 500 Parabolic Trough plants with 50 MW and seven hours of storage, like those deployed in Spain, and representing a cumulative investment in excess of 120,000 million Euros. The global desalination capacity is expected to rapidly grow, with a forecasted electricity consumption of 122 TWh by 2030 in the MENA region alone. This will more than double current consumption and result in the need to add large amounts of new electricity generation capacity - in the range of thousands of MW (equivalent to more than 500 Parabolic Trough plants). Such figures highlight the conundrum facing the region, and the promising opportunities open to CSP technologies to displace fossil fuels in this industry. Since solar EOR systems can easily be integrated with existing gas-fired steam generation systems, hybrid configurations could be used to supply 24 hours a day steam production, all year long, under varying solar weather conditions. Oilfields in areas lacking natural gas can especially benefit from CSP, creating and injecting steam for EOR purposes without the capital investment of a gas infrastructure. This will particularly appeal to regions where natural gas is unavailable or is in limited supply, such as parts of the Gulf Cooperation Council (GCC) (CSP Today, 2013) Costs To produce oil from wells after primary and secondary recovery, more energy and expenses are required than the equivalent energy and expenses recovered; upon this, retirement of the well ensues. EOR methods are extremely costly and the decision to push forward with EOR largely depends on the economic context (petroleum prices). This will in turn dictate if an oil company will decide to freeze production or proceed with EOR. EOR expenses during tertiary exploitation depend on the method used, as well as the heat source. With large uncertainty in global gas prices, EOR using conventional sources is becoming increasingly costlier, which in turn increases the cost of oil recovery. The major benefit of EOR using CSP lies in the low running costs. Steam represents as much as 60% of the production cost for heavily oil extraction. Solar EOR could supply up to 80% of a field’s annual steam requirements. In addition to being cost competitive with gas, solar EOR provides an edge against long-term gas price escalation. Solar EOR can generate steam at an average cost from $1.75 to $3.00 per MMBTU [21]. Overall costs of CSP technology; more specifically, the cost of parabolic trough plants, have been proven to be lower than for conventional steam generation used in thermal EOR today. Although the capital cost of CSP technology may be higher, the overall operating costs are much lower than from conventional fuels, and as a result, CSP could viably provide the necessary heat. www.csptoday.com CSP Today Markets Report 2014 | 382 appendix c Table 1(C): Desalination technologies Process Evaporation Membrane Thermal Multi Stage Flash (MSF) Vacuum Membrane Distillation (VMD) Multi effect Distillation (MED) Solar Stills Multi effect Humidification (MEH) Mechanical Mechanical Vapor Compression (MVC) Electro Dialysis (ED) Reverse Osmosis (RO) Table 2(C): Key parameters of desalination technologies Technology Electricity Concentrate Consumption Temperature (В°C) (kWh/m3) Thermal Consumption (MJ/m3) Typical Production (m3 /day) MED 60 to 75 1.5 to 2.5 150 to 200 100,000 RO <45 3.5 to 5.0 В 200,000 MSF 90 to 120 2.5 to 3.5 250 to 300 90,000 The integration of CSP technologies with desalination processes offers particular benefits if it is combined with thermal energy storage. This can be achieved using three different design solutions which combine electricity and thermal energy generation via either thermal or membrane separation processes: Use CSP technologies to generate electricity as a conventional CSP power plant to supply the electricity consumption of the desalination process. This is suitable for the RO process. Use CSP technologies to generate steam to supply the thermal energy consumption of the desalination process. This is suitable for a MED/MSF process. Use CSP technologies to generate both electricity and thermal energy (combined heat and power generation) to supply both the thermal and electricity consumption of the desalination process. This is suitable for a MED/MSF process. In the case of a thermally driven process, the advantages of the MED technology over MSF lay in the lower thermal and electricity consumption, lower investment cost and the capability to be operated at variable load (which matches with the intermittent nature of solar energy without storage). For these reasons, MED is more www.csptoday.com suitable for integration with large-scale CSP desalination projects. Although the integration of CSP technologies into a desalination plant offers great advantages, there are some challenges that must be taken into account. In order to be cost effective, CSP plants must be located in the vicinity of the desalination facility, i.e. close to the coast with the associated consequences: Problems with materials due to a high saline atmosphere and potential sand erosion. This might lead to higher O&M costs. Performance problems due to a reduced DNI (potentially more cloudy conditions), high aerosol load, high humidity and sand suspension. For RO facilities, the CSP plant could be located inland, although long transmission lines may be required unless power generation and consumption are decoupled; therefore using the CSP plant as a conventional solar plant to inject electricity into the grid. In the case of MED/MSF, this is not possible as transporting steam over long distance is not a viable option. The low temperature required for MED/MSF technology is way below the temperature levels achieved with CSP Today Markets Report 2014 | 383 appendix c the current large-scale CSP technologies. New designs will therefore need to be investigated and further developed for thermally driven concepts such as combined heat and power. It should be noted that the cost of CSP for desalination has decreased over the years and resides currently between US$ 1.6 - US$ 2.1/m3 (the lower end using RO and the higher end using MED), and it is expected to keep decreasing to US $0.9/m3 by 2050. Figure 1(C): Technical Concepts for Integrating CSP into Desalination Plants Source: Trieb, 2007 www.csptoday.com CSP Today Markets Report 2014 | 384 appendix c References: CSP Today, 2013. Desalination and Enhanced Oil Recovery. CSP Today Industrial Applications Guide. Available through: <http://social.csptoday.com/markets/csp-and-mining-integration-potential-analysed-new-guide>. Trieb, F. 2007. Concentrating Solar Power for Seawater Desalination. DLR. Available through: <http://www.dlr.de/tt/ Portaldata/41/Resources/dokumente/institut/system/projects/aqua-csp/AQUA-CSP-Full-Report-Final.pdf>. Van Heel, A. 2010. The Impact of Daily and Seasonal Cycles in Solar-Generated Steam-On-Oil Recovery. Available through: <http://www.onepetro.org/mslib/servlet/onepetropreview?id=SPE-129225-MS>. VV.AA, 2013. Information and data. Available through: <http://www.abengoasolar.com/web/en/nuestras_plantas/ plantas_para_terceros/chile/index.html>. www.csptoday.com CSP Today Markets Report 2014 | 385
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