This report examines Concentrating Solar Thermal power (CST), a renewable energy resource that presents policy-makers and investors with a significant potential for reducing carbon dioxide emissions from the power sector.

Key Findings

CST provides a large-scale option to deliver a zero-carbon electricity system.

  1. Concentrating solar thermal power offers real potential to reduce dependence on coal and displace emissions from the power sector globally. As countries begin limiting greenhouse gas emissions, CST is an important option, on its own and as part of a broader portfolio of renewable energy technologies.

  2. Storage systems can improve the economics of CST plants and improve their value proposition to utilities. Storage provides a buffer against cloudy periods, extends generation to cover peak load, and can allow a CST plant to produce power after the sun has set, helping to meet baseload power demand.

  3. CST remains more expensive than coal as a generation source, but prices are expected to decline significantly as technology learning occurs. A carbon price of approximately $115 per ton of CO2 would be needed for CST (trough with 6 hours of storage) to become economically competitive with coal-fired power.

  4. This carbon price is higher than expected from the early stages of most cap-and-trade systems, but far lower than the carbon prices projected in some climate policy studies. The effectively limitless potential for CST acts as a ceiling for carbon prices and must be considered in relation to the significant costs of inaction—in other words, the economic damages from doing nothing to mitigate climate change. CST costs are still high compared to coal, but are expected to decline.

  5. CST has been disadvantaged by high commodity prices. CSTplants require large volumes of glass, cement, and steel. Future price trends for these commodities will have a significant impact on the cost of power and its competitiveness with coal, because CST replaces lifetime fuel payments with upfront capital in its cost structure. Equally important is innovation in the CST industry. Pilot designs include substitutable materials in key components (providing a hedge against commodity price spikes).

  6. Costs are expected to decline as new capacity comes online. Key areas of cost improvement will come through research and development (R&D), particularly in improved storage materials, optical design, mirrors, heat collectors, heat fluids, and plant operation. Most plants today are smaller than optimal, in some cases because of the structure of policy support (as in Spain). Larger plants (e.g., for parabolic troughs the optimal turbine size is between 150 and 250 MW) will produce additional economies of scale. Technical challenges will likely make larger plants impractical, but clustering multiple plants in proximity could reduce some fixed costs. Several simple policy options can accelerate CST deployment and bring down costs.

  7. The regulation and pricing of carbon is a reality in many markets. Traditional fossil fuels experience new competitive challenges under these conditions, and viable zero-carbon energy options stand to win big in the market for new power generation capacity.

  8. Under a carbon constraint, CST with storage will be attractive to utilities. However, continued specific renewable energy support will be necessary in the near term to drive investment, as carbon prices alone are unlikely to be sufficient in the near term to cover the cost gap between CST and coal. Neither U.S. nor EU carbon market prices is expected to exceed $100 per ton of CO2 in the near term (although prices in this range could occur by 2030, according to some recent modeling scenarios).

  9. In the near term, investment will be driven in part by policy incentives. The most generous incentives at present are provided through Spain’s feed-in tariff. This model is being taken up in some developing countries and may merit consideration in the United States. U.S. support based on tax credits for investment and/or production has proven less effective, largely because it is subject to periodic and uncertain renewal. The 2008 renewal of the U.S. Investment Tax Credit (ITC) extended the support for eight years, a much longer lifespan than previously offered. This is a step in the right direction; however, investors would benefit greatly from a more stable support regime.

  10. Another modification to the ITC in the U.S. allows utilities to invest directly in owning CST generation under structured tax equity deals. Previously, CST developers had to procure power purchase agreements (PPA) and tax equity investors on their own. Given the credit crunch, this is good news for the fledgling industry because it is a fresh pool of capital, but it may mean developers will need to produce more flexible business models.

  11. The ability of CST to displace baseload coal and reduce emissions will depend on deploying effective storage systems and on integrating CST into a portfolio of zero-carbon power generation options. While thermal storage systems for CST already work well, research, development, and demonstration (RD&D) support would be valuable and should be aimed at bringing down the costs for these systems.

  12. While the challenges of deploying CST in industrialized countries are being addressed, new coal plants are being built at a furious pace in rapidly developing countries. According to the IEA, China doubled its coal-fired generation between 2000 and 2006, and more than 40 percent of China’s expected $1.3 trillion investment in added generation capacity through 2030 will likely be coal-fired. Given the rapid growth of demand in developing countries, speeding up CST deployment in these countries by even a few years could make a huge difference to the emissions trajectory. Both China and India (but particularly India) could deploy CST technology to limit their rapidly expanding coal-building activities. New multilateral financing mechanisms such as the Clean Technology Fund managed by the World Bank should support CST deployment in these countries. As a promising option to reduce GHG emissions and improve energy security, CST should be a priority in international collaboration on research, development, and deployment issues.

  13. The wider application of CST will require a stronger and more integrated transmission system. In the U.S., a greater federal role and/or improved coordination between grid operators will be needed. In the EU, robust transmission links with North Africa will be critical and are already being developed.

Executive Summary

Concentrated solar thermal power (CSTP or CST) is alternately referred to as concentrated solar power (CSP). This report uses the acronym CST throughout.

In a world of rising energy prices, security concerns, and climate change, the production of energy will need to change in fundamental ways. In the electricity sector, certain renewable energy sources appear ready for the mainstream, offering not just a solution to these challenges but an exciting opportunity for investment, innovation, and job creation. Many regions are deploying wind and solar energy, successfully managing their intermittency. However, these resources are innately less predictable than coal, which limits their use at high rates of market penetration and as reliable sources of power around the clock (i.e., baseload electricity). Both developed and emerging economies require reliable power supplies on demand, and many energy analysts routinely assert that there is no realistic alternative to building more coal-fired power generators.

A serious energy alternative

This report provides a rebuttal to that assertion, outlining the potential groundbreaking role of concentrating solar thermal power (CST) in providing power on the margin of the demand curve, as well as replacing coal at the core of the power mix. If catastrophic climate change is to be averted, then reducing carbon dioxide (CO2) emissions from fossil fuel combustion is critical, and displacing coal-fired generation is the preeminent challenge. Given the hurdles facing fast, large-scale deployment of other climate-friendly technologies such as carbon capture and storage (CCS) and nuclear power, large-scale uptake of renewable energy sources such as CST will be critical to the solution.

What is concentrating thermal power?

CST uses reflective material to concentrate the sun’s rays to power steam turbines or engines. When combined with thermal storage—which enables a plant to produce power under cloud cover and after the sun has set—CST can generate electricity on demand, not just when the sun is shining. Globally, solar resources are abundant.Solar resources in Australia, Mexico, the Middle East, and southern and northern Africa are equally promising. Parts of Latin America, India, central Asia, and China also have great potential (see Figure 1). Other areas, such as Europe, have solar resources that are only marginally suitable for CST, particularly in Spain and Portugal. Because CST technology components are produced from readily available commodities such as steel and glass, bottlenecks to CST market growth will likely be no more problematic than other energy options. Although CST is only one part of the energy solution, it potentially offers a major supply option in some of the world’s largest economies and load centers.

Sun blocks

Despite the technical viability of CST, there are significant barriers of which policy-makers and investors need to be aware. Costs are currently high relative to coal. Further improvements to the technology will help bring costs down, and investors and operators are still learning how to design and operate plants most efficiently. The U.S. Department of Energy (DOE) has a goal of producing baseload power from CST at competitive prices by 2020. For the time being, consistent policy support will be important to accelerate deployment and market acceptance. The regions with the best solar resources are often arid or water-scarce. Incorporating advanced technologies such as dry cooling and wet/dry hybrid cooling systems can reduce water consumption but also increase project costs. Producing zero-carbon electricity and heat for seawater desalination is an expensive option, but may be attractive in these regions as water scarcity concerns increasingly factor into decision-making.

The most abundant solar resources are not evenly spread globally and often do not coincide perfectly with large energy-consuming population centers. Improved transmission systems will need to keep pace with the growth of CST and other renewable energy generation technologies. CST has some track record, but investors are still wary of new technologies. CST is capital intensive, and at a time when financial markets are struggling, measures to increase investor confidence will be important.

A bright future

Policy-makers and investors are looking for ways to meet rising energy demand while cutting CO2 emissions from fossil fuel use. CST offers a major opportunity to meet this challenge in a way that does not increase the long-term cost of electricity. Thanks to policy support in the U.S. and Spain, in particular, the CST industry is developing into one that can deliver at scale (see Table 1). There is real scope for policy to accelerate widespread deployment of CST in the United States and in Europe at first, but also in the Middle East and North Africa, exploiting their abundant solar resources, and in major developing economies like China and India, addressing major environmental concerns. To take advantage of its potential, policies are needed to help bring down the costs of CST plants with thermal energy storage by providing predictable price support and thereby improving investor confidence, and in the longer term to improve regulation and increase investment in transmission infrastructure. The availability of CST and other renewable power options means that expanded coal use should no longer be seen as an inevitable factor in maintaining economic growth.