By Jason Deign 

Like it or not, the CSP industry is going a phase of consolidation. In a sector which is already highly diverse, with four major technology variants compared to three in PV and two in wind, the supply chain has been made up of a large number of companies.

Now, though a number of large players have abandoned the ring, apparently in response to reduced growth expectations for the sector.

“There has been tremendous optimism in recent years,” explains Gus Shellekens, director of the sustainability and climate change team at PricewaterhouseCoopers UK. “But the forecast demand for projects has not been what these companies were hoping for.”

He continues: “A number of companies have decided the market is not there yet, particularly if there are easier opportunities out there. What you are seeing is fairly straightforward business thinking. There’s a lot of that within big companies.

“For the smaller ones, they were dependent on a few projects and if they have been delayed that has put pressure on their operations. The natural progression is a reduction in the number of companies in this space. A number will have low or negative margins.”

Shellekens sees the likelihood of further consolidation. What does a thinning out of component makers mean for the supply chain, though?

Reduction in choice

Clearly, one consequence is a reduction in choice for plant developers. This may not be an altogether bad thing, however. According to Shellekens, “I think it will help the industry in the long term because diversity is making it difficult for the industry to be taken seriously”.

“I think the best thing for the industry is a period of regrouping to work out how it can compete better. Competing against PV is a no-win game.”

With fewer suppliers in the market, each supplier has the potential to seize a bigger portion of the market, win more orders, and produce a greater volume of components.

This in turn could lead to the kind of economies of scale that the industry so badly needs in order to bring down costs. There is an alternative scenario, though. In this, a lack of competition between suppliers means component makers have little incentive to reduce prices.

Even though consolidation may mean that prices do not come down as fast as they would have done with more competition, there are nevertheless benefits to cutting down supplier numbers.

Solar thermal capacity

“Consolidation of the better players or more professional players is probably a good thing because there is a very limited amount of solar thermal capacity to actually build around the world and it makes sense for it to go to those who have developed more experience.”

The downside is that continued high component pricing will further slow CSP’s progress in the solar energy sector. Never mind, says Jenny Chase of Bloomberg New Energy Finance. “Our view of solar thermal is that it is a 20-year play rather than a five-year play,” she states.

“It works, it gives you power that has certain advantages over PV, but it is more expensive. It is something that is worth continuing to develop and to deploy, but you’re not necessarily looking at a rapidly growing market.

“What you’re doing is developing the technological base and hoping that in 20 years’ time, when there’s so much PV on the ground that there is a much higher premium for storable or base-load, non-fluctuating power, the premium will be worthwhile.”

And in the meantime, if CSP really wants to tackle the cost issue then individual players will need to make it a strategic priority. Shellekens says that suppliers are still primarily concerned with margins and “the industry needs to have a wakeup moment.”

He points out that ESTELA, the European Solar Thermal Electricity Association, has already commissioned A.T. Kearney to produce a CSP cost roadmap but “nobody has taken heed. The industry needs to think about short-term profits versus a longer-term role in the power industry.”

To respond to this article, please write to Jason Deign

Or contact the editor, Jennifer Muirhead