Europe CSP players target post-2020 openings as scale slices costs

Accelerated grid expansions, capacity markets and learnings from large Middle East projects could rejuvenate the Spanish CSP market and see European capacity far outstrip recent forecasts of 5 GW by 2030, industry experts told New Energy Update.

Europe’s installed CSP capacity is predicted to rise from 2.3 GW at the end of 2017 to 4 GW by 2030, based on current costs and market frameworks, the International Renewable Energy Agency (IRENA) said in its ‘Renewable Energy Prospects for the European Union (EU)’ report, published in February.

Greater support measures could see capacity hit 5 GW, IRENA said, but CSP experts believe much higher capacities are possible.

CSP costs have fallen rapidly in recent years on technology advances and global competition. Large CSP projects in the Middle East have highlighted economies of scale while rapid growth in China has led to a number of Chinese groups investing in international projects, driving down supply costs.

As European nations strive to meet carbon reduction pledges, a rapid expansion of intermittent PV and wind capacity and sharp reduction of coal-fired capacity will support the case for dispatchable CSP plants with storage, experts say.

IRENA predicts 184 GW of PV and 230 GW of wind capacity will be online by 2030. The Institute for Energy Economics and Financial Analysis has forecast that one-third of the EU’s existing coal-fired plants could be decommissioned by 2021 and European utilities have pledged to not build any more coal-fired power plants after 2020.

As a result, cost efficient CSP plants could be well-positioned for the 2020-2030 new build market, Luis Crespo, president of ESTELA, the European Solar Thermal Electricity Association, said.

Solar thermal capacity could “easily reach 30 GW” in Europe by 2030, Crespo said.

Such growth would require changes to infrastructure capacity and market frameworks, on a national and international scale. Meanwhile, CSP developers must continue to drive down costs and companies can use the latest Middle East projects as a model to boost competitiveness, experts told New Energy Update.

Spain's rebirth

Current CSP activity in Europe includes the construction of a 9 MW Fresnel facility in France and a hybrid biomass-CSP facility incorporating 16.6 MW of CSP in Denmark. Eleven projects with a combined 441 MW capacity are at various stages of planning and development in Italy, Greece, and Cyprus.

            Global CSP activity in Q1 2018

                             (Click image to enlarge)

Source: CSP Today Global Tracker Quarterly Report.

The reawakening of Spain's CSP market represents the largest market potential in Europe in the coming years, according to market participants.

Spain was a trailblazer in CSP technology and hosts 2.3 GW of operational capacity, almost all of Europe’s installed CSP base. All of Spain's installed capacity was commissioned between 2008 and 2013, before activity was halted by the removal of state subsidies. Spanish companies continue to develop CSP technology and play a major role in international projects.

Strong solar resources, good availability of large flat land area and domestic CSP expertise all favor growth in Spain. Other potential markets include the southerly countries of Portugal, Italy and Greece, experts told New Energy Update.

Grid limits

Transport constraints remain a key obstacle to CSP developers looking to develop projects in solar-rich regions in southern Europe. Faster expansion of cross-border interconnection capacity and transmission grid links is required to facilitate growth in the coming years, Ralf Wiesenberg, independent consultant and former head of renewable energy at AF Aries Energy, told New Energy Update.

“Improvement and harmonization of interconnection capacity markets are under way but should be accelerated,” Wiesenberg said.

In particular, transmission constraints between Spain and France must be alleviated to allow CSP plants to export power into central and western European markets.

In a recent report, the European Commission (EC) said “rapid advances in building and modernising the necessary physical infrastructure remain key conditions" for Europe to hit its clean energy objectives. Towards this aim, Europe aims to raise national interconnector capacities to 10% of installed capacity by 2020 and 15% by 2030.

The achievement of these interconnector targets "remains essential if Europe is to reap the full potential of its renewable energy sources while ensuring security of supply and competitiveness," the EC said in its report.

"While progress is promising, the majority of the missing infrastructure links remain yet to be completed. Commitment at all levels, political, technical and financial, therefore needs to be kept up and accelerated," it said.

Green future

Rising PV and wind capacity should open up ancillary market opportunities for CSP plants.

“A rapid increase of installed PV and wind capacity will trigger a significant need of spinning and non-spinning reserve. This situation will be the door opener for a wider development of dispatchable CSP plants in Europe," Wiesenberg said.

According to current price forecasts, CSP plants will need to be able to participate in generation capacity markets to ensure economic viability.

"Market prices for electricity are and will be in general too low in order to offer sufficient economic incentives for investing in CSP in Europe," Wiesenberg said.

"The introduction of capacity markets in addition to existing spot markets for energy will be key for the successful relaunch of dispatchable CSP plants,” he said.

               Wholesale power prices, volumes in Portugal, Spain

                                                         (Click image to enlarge)

Source: European Commission's quarterly report on electricity markets. Data source: Platts, power exchanges.

Falling costs

Global CSP innovations could help reignite market activity to Europe. Technology advances and economies of scale and series are seeing CSP prices approach fossil fuel plant levels. Costs could be reduced further if increasing competition between institutional investors in the renewables sector spreads into the CSP segment and lowers the cost of capital.

"Achieving that price point is the challenge,” Frank Wouters, Director of the EU-GCC Clean Energy Technology Network, told New Energy Update.

“Experience has shown that to achieve low-cost solar power, everything needs to be in place: low-cost land, smart procurement strategy, scale, experienced developers and EPC companies, smart contracting strategy, low cost of capital," he said.

European developers could look to ACWA Power's 700 MW DEWA CSP project in Dubai as a template for development plans. The 14.2 Billion AED ($3.9 billion) DEWA CSP project sets a new industry record for size and cost-efficiency. The project was awarded in September 2017 at a tariff price of $73/MWh through a 35-year state-backed power purchase agreement (PPA).

The DEWA CSP plant will consist of three 200 MW parabolic trough systems, a 100 MW central tower plant and includes up to 15 hours of energy storage. Shanghai Electric is the contracted EPC company for the project. Spain’s Abengoa and U.S. developer BrightSource are the respective technology providers for the parabolic trough and central tower plants.

The plant will be built in the Mohammed bin Rashid Al Maktoum (MBR) solar park, where Dubai plans to build 5 GW of PV and CSP capacity by 2030. The solar park’s infrastructure helps to improve construction logistics and ACWA Power can synergise operations resources with other solar assets in the park.

European projects could also be built in solar parks of 500 to 1,000 MW to reduce development and EPC costs, Wiesenberg said. To optimize economies of scale and series, plants could be of capacity 200-250 MW for parabolic trough and 100-120 MW for CSP tower plants, he said.

"A lot can be learned from the Dubai DEWA IV project," Wouters said.

"There is no reason why such price levels cannot be achieved in Europe," he said.

Hybrid plants

Hybrid PV-CSP projects also represent a significant growth opportunity for CSP developers, combining low-cost PV in the daytime with night-time CSP dispatch.

"CSP hybrids definitely have a role in boosting CSP capacity development," Elina Hakkarainen, Research scientist at the VTT Technical Research Centre of Finland, said.

"In hybrids, the joint use of equipment and hybridization with more traditional technologies can deliver more cost benefits than if either of the hybrid technologies were used as a stand-alone solution," Hakkarainen said.

The market for hybrid projects is growing. Morocco recently launched a request for proposals for two hybrid PV-CSP solar plants at Noor Midelt, each with a gross CSP capacity of between 150 MW and 190 MW and storage capacity.

The Moroccan Agency for Sustainable Energy (Masen) predicts design innovations for the hybrid Noor Midelt project will produce lower prices than stand-alone CSP projects currently being installed at Noor Ouarzazate.

In the right locations in Europe, hybrid PV-CSP projects can "compete with natural gas combined cycle power but is completely carbon free,” Wouters said.

New Energy Update