By Andrew Williams 

Impacts

According to Elena Nekhaev, Programmes Director at the World Energy Council (WEC) and Co-Editor of the recent WEC and Bloomberg New Energy Finance report World Energy Perspective: Cost of Energy Technologies, the volatility of oil prices is “nothing new” and is “in the very nature of the oil business.” In her view, if oil prices continue to fall the impact on competing industries will eventually be negative since most of them “will appear relatively more expensive”, something that she believes is particularly true for CSP solar.

"This will mean more difficulties in CSP financing, few projects, less R&D funding and other related negative impacts. The relatively small CSP market is today not flexible enough to accommodate high price volatility", she adds.

In a more upbeat assessment, Samira Rüdig-Sotomayor, Analyst - Solar Insight at Bloomberg New Energy Finance says that, in the short-term, declining oil prices are “unlikely to have a large impact on the solar thermal industry”, largely because solar thermal projects “are built for long-term stability of electricity price and the grid and, at least in the near-term, it is more likely to be built to displace oil”.

"Solar thermal projects have a minimal lifetime of twenty years. The solar thermal plans of oil-rich nations are unlikely to be affected as these countries will face an oil crisis anyway with or without lower or higher oil prices in the long-term due to the quantity of oil they consume," she adds.

Meanwhile, Christoph Kost, Scientist in the Renewable Energy Innovation Policy group at the Fraunhofer Institute for Solar Energy Systems (ISE) and Lead Author of the report Levelized Cost of Electricity: Renewable Energy Technologies, does not expect declining oil prices to strongly impact CSP, as electricity generation from oil “is not common in many countries”, except for oil exporting countries, which he says “would not use not world markets for internal oil use [anyway]”.

Technologies

For Nekhaev, “less-developed” CSP technologies such as tower and heliostat plants are “likely to suffer most” from declining oil prices because the cost of producing electricity from any generation technology “falls at the rate which reflects the level of deployment”.

"Today, the share of tower and heliostat plants is not high enough to expect accelerating growth. This is true for practically all CSP technology sub-classes, including the most developed parabolic trough plants. Their cost using the MWh basis is still nearly three times as expensive as coal or gas plants and 50% more expensive than PV," she says.

Conversely, Rüdig-Sotomayor doesn't think any solar thermal technologies will be particularly affected by declining oil prices. However, she argues that the Enhanced Oil Recovery application of solar thermal technologies “could suffer” if international prices drop too much, as extracting more oil “would no longer be profitable”.

"Countries which import oil to generate electricity may hold off on investing in solar thermal if the price of oil is very low and maintains this level for a significant amount of time. Currently, the volatility of oil price continues to be a motivator for those countries interested in solar thermal," she says.

Cost Competitiveness

Looking ahead, Rüdig-Sotomayor believes that, in terms of price fluctuations, solar thermal “compares favourably” to power generation from oil, but warns that the falling cost of photovoltaics and batteries “may dent this competitiveness”.

That said, Nekhaev argues that, given the “enormous size” of solar energy and its “clean image”, the future of solar industry “looks bright”, and she points out that the total annual solar radiation falling on Earth is at present “more than 7,500 times the world’s total annual primary energy consumption”.

"If this energy could be converted at only 10% efficiency, it would correspond to about 3,000GW of installed generating capacity. A break-through technology could change the solar market overnight. The advice to CSP developers would be: keep an eye on LCOE but think out of the box how to convert the huge potential of solar energy into an efficient technology”, she says.

In Kost's view, future LCOE competitiveness can be reached by focusing efforts on the “best production processes” in the industry to achieve “mass production” and to optimise “power plant concepts, solar-field design and material use”. He also recommends improved innovation and R&D efforts in areas such as heat storage, operating temperature and “optimised plant size and layout”.

"In the medium-term, industry consolidation and new companies in the markets will increase competition as lower production process and economies of scale should be achieved”, he adds.