So, what are the advantages and disadvantages of having CSP incentive structures in place?  Does the CSP industry compete on a level playing field with other energy sources?  And does it have a reasonable chance of developing outside the boundaries of existing incentive structures?

By Andrew Williams

Advantages and Disadvantages

According to Dr. Ranga Pitchumani, Program Director - Concentrating Solar Power for the SunShot Initiative at the U.S. Department of Energy (DOE), virtually all of the large-scale CSP projects under construction in the U.S. today were financed under the DOE's Loan-guarantee Program, which supports innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risk.

However, although Kevin Smith, CEO of SolarReserve, believes that such incentives were 'certainly a successful renewable energy incentive that did advance CSP deployment,' he is keen to stress that governments 'continue to provide billions of dollars' to conventional fuels such as coal and natural gas - which are mature, highly profitable industries - but that support for renewable energy development has been caught up in partisan politics. Without long-term policies in place, Smith warns that there is no market for the CSP industry in the U.S. and that developers will be forced to look to other countries where markets do exist.

"Between 2002 and 2008, fossil fuels received $72 billion in taxpayer dollars, as compared to the renewable energy industry that received just $12 billion.  CSP would not need incentives if there was a level playing field for the energy industry, meaning either the US should cut support for all energy sources, including fossil fuels, or provide support for all, including renewable energy," argues Smith.

The amount given to renewable energy in the USA increased significantly in 2010 where, according to the Institute for Energy Research (IER), renewable energy received $16 billion and fossil fuels just $ 2.5 billion for the fiscal year 2011. However, this drastic re-assignment of state funds was short lived as the funding for many renewable energy programmes was cut, including the Loan Guarantee Programme for CSP, arguing that the electricity output of renewable energy did not justify state expenditure on renewable energy subsidies.

Figure 1: Comparison of Subsidy and Production Shares by Fuel Type for FY 2010

Source: Energy Information Association

Some industry experts have argued that cutting CSP subsidies before the technology has the chance to reach a critical mass may dramatically stunt development.

Pitchumani's view is that, although there are challenges going forward, CSP does have a strong position for success.

"I am confident that we will reduce our costs, especially with the impetus and momentum created by the SunShot Initiative.  In the near term we are [also] prepared to validate the performance of CSP Hybrids, which ... makes CSP very cost competitive in the near-term by effectively utilizing an existing power block infrastructure and ... invigorating the supply chain for CSP [and] providing the operational and other critical data to the utility industries for greater comfort in CSP options on the grid," he says.

"[Moreover], CSP with thermal/thermochemical storage on-board offers cost-competitive large-scale electricity with the benefit to utilities of low to no intermittency," he adds.

A Level Playing Field?

For Smith, when people talk about CSP being a 'higher-cost fuel source,' they are typically comparing it to existing coal, natural gas or PV prices.  However, his view is that if a level playing field was created for all energy sources - by removing all subsidies or providing the equivalent amount of subsidies to all generators - CSP would 'certainly' be much more cost-competitive. 

Paula Mints, Principal Analyst - Solar Services Program at Navigant agrees, pointing out that all energy technologies receive subsidies and that 'only solar has to apologize for them.'  

"You couldn't build a nuclear facility without significant subsidies.  Natural gas is so cheap now that it is squeezing coal.  The long-term benefit to the environment is never factored in when it comes to solar - if it were to be factored in, solar would win hands down," she argues.

On a global level the debate of whether to subsidise energy rages on. Sir David King addressed the British House of Commons stating that the removal of fossil fuel subsidies was a "clear opportunity" for incentivising countries to move to a "low-carbon pathway". Building upon International Energy Agency (IEA) statistics, Sir David explained that "fossil-fuel consumption subsidies amounted to US$409 billion worldwide in 2010 [...] global renewable energy subsidies were US$66 billion". He added that the removal of fossil fuel subsides could "decrease primary energy demand by around 5%" and CO2 emissions by 5.8%" by 2035.

Pulling the Rug

So, what are the implications of cutting the learning curve for CSP by suspending financial support before technological and operational solutions are found?  Pitchumani predicts that without loan-guarantees and with a flattening in demand of power, the pipeline for CSP will likely see a short-term reduction in the coming few years.  However, his view is that this is more a function of strong growth in meeting current renewable energy demand than the cutting of incentives.

"The reduction in demand for CSP will likely be disruptive to the supply chain, which can be mitigated by growth for CSP in opportunities such as hybrid applications and opportunities in the global landscape," he says.

Meanwhile, although Smith believes that efficiency gains in technology, construction and throughout the supply chain, will certainly bring the cost of CSP down, he stresses that the need for support in deploying these first projects remains critical.

"The US is certainly falling behind in renewable energy investment, and countries such as Germany and China are leading the way to their own energy security and independence," he says.

Table 1: Latest Events in Incentives for Renewable Energy: Australia, Spain and the USA