Concentrating Solar Power (CSP) Financing and the Clean Technology Fund

Transcription

1 Concentrating Solar Power (CSP) Financing and the Clean Technology Fund Presentation by Dana R. Younger Infrastructure Department Climate Investment Funds CTF Trust Fund Committee Washington, DC

2 The Resource Solar energy comes in two flavors diffuse and direct (beam) Solar Photovoltaics (PV) can use both components CSP can use only the direct normal irradiation (DNI) because diffuse sunlight cannot be effectively focused or concentrated So where is the direct solar energy found?

3 Global Solar Radiation

4 China Solar Radiation Map

5 US Southwest Solar Resource (Unfiltered Data)

6 How Do We Develop This Resource? Concentrating Solar Technologies can be used to mine this resource. Some technologies (CST) use curved mirrors to focus the sun s rays and to make steam, others directly produce electricity (CPV). Steam is used to produce electricity via conventional power equipment. In multi-megawatt plants, CSP provides lower cost solar electricity than ground-mount or rooftop solar PV. Can also provide bulk and/or distributed generation.

7 Concentrating Solar Power Technologies Parabolic Trough Linear Fresnel Power Tower Dish Engine Concentrating PV

8 Trough Technology Trough collectors (single axis tracking) Heat-collection elements Heat-transfer Oil (Therminol VP1) Oil-to-water steam generator Oil-to-salt thermal storage Conventional steam- Rankine cycle power block

9 Power Tower Technology Heliostats (two-axis tracking) Air or molten-salt receiver Air or molten-salt working fluid Thermal storage Conventional steam- Rankine cycle power block, or combustion turbine Several developers in the US and several in Spain Focus on molten-salt plant

10 Dish Stirling Technology Dish (two-axis tracking) 10 and 25 kw Stirling engines Thermal receivers Distributed generation or bulk power 8 Different system configurations built and tested over the last 20 years Significant utility interest

11 Concentrating PV Technology kw CPV systems Two axis tracking structure 350 m 2 concentrator 3M acrylic lens concentrator at 250X or parabolic dish with PV at focal point Silicon solar cells Many companies are developing new designs and sound business plans

12 Why CSP and Why Now? Necessity utilities other options (coal, nuclear, natural gas) have significant long term risks with cost implications Uniqueness of thermal energy storage Policies still unreliable, such as RPS and ITC both of which are essential in the US and Feed-in tariffs in EU Public opinion favors solar

13 Awareness of CSP Utilities Growing fast where good DNI and policies exist Policy makers Generally lagging as evidenced by inadequate or unreliable policies at all levels of government Investors Growing fast as evidenced by press reports and conferences but lagging wind and solar PV investments, held back by policy uncertainty and today s financial market situation

14 CSP s Positive Attributes for Utilities Utilities are familiar with steam generation Suitability for utility scale installations of 100MW or more Stable, known and decreasing costs and zero carbon emissions provide hedge against NG price volatility and carbon caps Other generation options have significant risks Ability to provide firm dispatchable output which is of great value to utilities

15 Flow Diagram HTF-Salt Heat Exchanger

16 On-Peak Capacity (%) Insolation (kwh/m^2/day) CSP Track Record: 354MW at Kramer Junction, CA 120% 100% 80% Mount Pinatubo Volcano CA Energy Crisis Averaged 80% onpeak capacity factor from solar Over 100% with fossil backup 60% 40% 20% Could approach 100% from solar with the addition of thermal energy storage. 0% Solar Contribution Boiler Contribution Direct Normal Radiation 0 SCE Summer On-Peak Weekdays: Jun - Sep 12 noon - 6 pm

17 Thermal Energy Storage USDOE Solar Two molten-salt power tower experience Indirect 2-tank molten-salt design for parabolic trough plants Uses oil to salt heat exchangers to transfer energy to/from storage Pump maintenance gantry crane Oil-to-salt heat exchanger (typical of 6) Vent valve (typical of 3) Isolation valve (typical of 4) Nitrogen transfer line Cold salt pump Hot salt pump Cold Salt Tank Drain valve (typical of 2) Hot Salt Tank Pressure control valve Immersion heater (typical of 4) Distribution ring header Distribution ring header Immersion heater (typical of 4) Cooing air pipes (typical of 24) Nitrogen cooler Nitrogen compressor Nitrogen storage tank Cooing air pipes (typical of 24) 1.0 m

18 Thermal Energy Storage AC Cobra Andasol 1 plant in Spain will be the first to use the indirect 2-tank moltensalt thermal energy storage. Plant should be operational before the end of the year.

19 Additional Utility Attributes Large, multi-national corporations are now involved in every part of value chain Project and Technology Developers Utilities and Independent Power Producers Engineering and Construction Companies Quality counterparties reduce overall CSP project risk Large balance sheets Power and construction expertise Strategic technology deployment

20 Attributes of CSP for Policymakers Very large domestic resource potential Carbon free electricity Potential for cost reduction Economic benefits will result from its development Increased public awareness and support of the benefits of clean energy

21 CSP Attributes for Investors Scalable With a solid Power Purchase Agreement (PPA), the return on investment can be adequate to encourage mainstream equity and favorable debt financing terms. Once debt is paid, operates with no fuel has potential to become financially attractive clean energy asset.

22 Global CSP Industry Today Technologies trough, tower, dish engine, linear Fresnel, and CPV, each of which have variations making the industry very robust US SEIA CSP Division has ~40 current members EU s ESTIA has similar member numbers Both Associations deal with policy/legislative/regulatory issues and have members who cover all CSP technologies, from consulting firms to multinationals Over 400 MW in commercial operation, about 4,800 MW under development or contract in the US and about 3,500 MW under development in the rest of the world Continued market growth is predicted

23 Select CSP Industry Participants Trough Abengoa Solar, Acciona, FPL Energy, Solar Millennium, Solel, SkyFuel Tower Abengoa Solar, Bright Source Energy, esolar, Solar Reserve/UTC Dish SES, Infinia Fresnel Ausra, SkyFuel

24 Capital Flows for CSP Abengoa Solar financed PS10, PS20, Solnova ( 2 x 50MW) in Spain and Algeria & Morocco ISCCS with bank debt and same plan for APS Solana (280 MW) in US Solar Millennium - financed Andasol 1 & 2 in Spain with bank debt Acciona financed Nevada Solar 1 (64MW) in US with bank debt GEF provided $200M for ISCCS projects in Morocco (in construction), Egypt & Mexico - - India project was cancelled. Trough companies didn t anticipate major problems attracting tax equity investors/commercial debt as the ITCs were renewed last year but the global financial crisis has created new uncertainty and US projects are now being delayed Ample equity available for start-ups as evidenced by: Ausra, SkyFuel, esolar, Bright Source and Solar Reserve all conducting successful VC fund raises

25 CSP Activity in the US (as of July 2008)

26 CSP Activity in EU & ROW (as of July 2008) * Natural gas/hybrid project; capacity shown is CSP portion only

27 Major Steps to Bring a CSP Plant On-Line Site control, PPA negotiation, regulatory approval, interconnection agreement and financial close (some in parallel) months Permitting and engineering (in parallel) months Construction months Total time 4-6 years

28 Nevada Solar One 64 MW

29 Abengoa Solar Power Tower Plants

30 Abengoa Solar US 280 MW Plant

31 Costs of CSP There are many costs and they are must be carefully defined nominal, real, constant dollars, first year, levelized and average Capital costs and delivered energy costs are most important to the market Cost is not a wish or a hope - it depends on many variables, all of which must be known to EPC contractors and investors Costs change and that risk must be managed The market will define the cost and the value of CSP Financial parameters, plant size, market size and incentives all impact the cost of energy from CSP plants

32 Choice of Business Model Impacts Costs Turnkey Utility ownership IPP Partnership Lease Other structures

33 Utility Ownership STEP 1: Project Development Project Sponsor Equity Project Development Company Construction Cost EPC Contractor Lender Construction Loan Development Fee Plant Value Utility/Utility Consortium Equity Corporate Equity Long-Term Debt Bond Market STEP 2: Utility Purchase

34 Private Ownership - IPP Contractor Construction Cost Operator Operations Cost Cash Distributions & Tax Incentives Equity Project Sponsors Government Taxes Rules, Regulations, & Incentives Project Development Company Output Revenue Output Purchaser Debt Service Construction & Term Loans Lender Tax Incentive Monetization Payments

35 Modified Internal Rate of Return (MIRR) Financial Analysis Results Private-Dev Bank Debt Private-Tax Exempt Bond 75:25 Debt-to-Equity Private-Taxable Bond Utility Purchase 70:30 Debt-to-Equity Private-Commercial Debt Public-Private Partnership 65:35 Debt-to-Equity PPA Price (cents/kwh)

36 Nominal LCOE ($/kwh) Real LCOE (2005$/kwh) CSP Cost Reduction Predictions Exist but could be Misleading Assumes: - Trough Technology w ith 6 hours of TES - IPP Financing; 30-year PPA - California Property Tax exemption - Includes scale-up, R&D, learning effects - Barstow, California site Cumulative New Capacity by 2015 (MW)

37 Cost Reduction based on Plant Size 160% 140% 139% Effect of Plant Size 120% 100% 115% 100% 90% 80% 60% 40% 20% 0% 25 MWe 50 MWe 100 MWe 250 Mwe 2006 Nexant Study: Optimum Size ~250MWe For Current Technology Parabolic Trough Plant, 6-hours Thermal Energy Storage, IPP Financing, 10% ITC

38 Cost Reduction based on Market Size 120% Effect of Deployment 100% 80% 100% 93% 87% 81% 60% 40% 20% 0% Current 1000MW 2000MW 4000MW Based on Experience from Existing Plants (California)

39 Effect of Financial Incentives Effect of Incentives (IPP Financing) 120% 100% 80% 100% 85% 92% 96% 75% 60% 40% 20% 0% Base: 10% ITC, 5-yr MACRS 30% ITC, 5-yr MACRS Base + Prop Tax Exclusion Base + Sales Tax Exclusion All

40 CSP Costs Today and Tomorrow In the SW US with best conditions, LCOE is in the mid-high teens in /kwh for firm dispatchable power and could drop to the low-mid teens with existing incentives Commodity price rises and global financial crisis have introduced market turmoil and utilities financial position is weaker than one year ago. Current cost gap is ~2-5 /kwh in the US market Several independent and credible studies project 8 /kwh (nominal) cost level after 4GW installed globally, removing the cost gap and becoming competitive with natural gas

41 Energy Cost Cost Gap will Close RPS, incentives and policies can close the cost gap between fossil and CSP-derived energy Policies and Incentives Current Cost Gap CSP energy cost Fossil energy cost Commodity Prices, Financial Markets, Equipment, etc. t Carbon, Fuel Risk

42 Needed Policies Carbon valuation policies that reflect conventional power projects true externalities Adequate Feed-in Tariffs Land access policies Transmission policies and investment Investment tax credits and other financial incentives

43 Market Outlook Carbon limits are likely & can help close the CSP cost gap CSP can scale up fast without critical bottleneck in needed materials making it a good CC mitigation response option Price for CSP power is near commercial range and costs will come down with increased capacity and could fall below costs for conventional generation in the next decade Many available CSP technology options add certainty to cost reduction projections US and EU R&D programs will continue to grow in size and value Economic development and environmental benefits will drive political support US CSP market has potential to grow to 2-4 GW per year and a comparable rate is possible in other suitable parts of the world

44 Conclusions CSP is a Unique Renewable Technology Large resource in many countries Ability of CST to store energy to fit utility need Medim-term potential for cost competitiveness Market is Rapidly Developing Interest in CSP growing in many CTF-eligible regions/countries (MENA, SADCC, India, PRC, Mexico, Chile) Large, credible, financially stable developers Real (financeable, buildable and reliable) projects prepared Policy Decisions Needed to Maintain Momentum Investment tax credits/adequate feed-in tariffs Supporting policies & financing (eg CTF and capital grants)

45 IFC s Track Record in Power Projects: 120 projects in 40 emerging markets countries 21,733 MW private generating capacity 94 generation projects 7 transmission projects 19 distribution companies Distribution, $770, 15% Transmission, $258, 5% US$5 billion committed in power Financing: $ 5 billion committed in generation, T & D $ 2.5 billion raised through syndication $ 22 billion aggregate project values Renewables: 19% of generation investments in hydropower $0.9bn in 30 renewable energy projects (20 hydro, 2 wind, 2 geothermal & 6 other) Generation (multiple technologies), $601, 15% Other Renewables, $45, 1% Geothermal, $65, 2% Wind, $58, 1% Hydro, $738, 19% Generation, $3,987, 80% Coal, $1,173, 29% US$4 billion committed in generation Oil, $427, 11% Natural Gas, $879, 22%

46 Grid-Tied Solar Power Plant Projects IFC mobilized $4 million in GEF grant financing for a 1 MWe Solar PV Power Plant erected in 2004 by a utility client CEPALCO in the Philippines IFC evaluating several possible 1-5 MWe Solar PV power plant projects in India with private companies under the new GoI support program IFC in discussions with other solar firms concerning possible solar power projects including CSP in various countries in Africa, Asia & Latin America

47 For more information: Key Contacts for IFC Power/Renewable Energy Mr. Darius Lilaoonwala Sr Manager, Power/Renewables Mr. Dana R. Younger < Sr Renewables Adviser Clean Technology Fund Ms. Lisa Da Silva <lisa da Program Manager