The media has not been kind to the concentrated solar power (CSP) industry of late.
Not even a month ago, Greentech Media wondered aloud if the now-defunct Palen CSP project might be the last of its kind built in the U.S. And not long before that, the Christian Science Monitor asked if CSP had “missed its chance” to capture the industry from solar photovoltaics. Consulting firm Navigant told the world it thinks the CSP market is losing steam, the Wall Street Journal (among others) mocked it for “scorching” birds and the Motley Fool called it “already dead.”
But to many close to the CSP business, rumors of its demise have been greatly exaggerated. Analysts and industry insiders both acknowledge that the economic landscape in the short term is rough for new CSP projects. But, given time for cost reductions and the right regulatory environment, CSP may still have a robust role to play.
The looming end of the investment tax credit
One of the biggest questions about CSP’s future has to do with the federal investment tax credit (ITC).
The current ITC for solar provides a 30% credit for any residential or commercial project once in service, but the ITC is due to expire at the end of 2016. As it turns out, the “in service” part has proven to be a problem.
Under Section 45 of the tax code, certain renewables are allowed to take advantage of the ITC once construction begins—an exemption written into the 2013 ITC extension known as a “commence construction” requirement. Solar, however, is listed in Section 48 of the tax code, and cannot take advantage of the loophole. Instead, solar projects must be placed in service before investors can take advantage of the ITC.
For CSP, that timeline spells trouble. The gigantic solar arrays, towers, and parabolic troughs used in CSP projects can take years to build, and even longer to get permitted and approved by local, state, and federal stakeholders. The developers of Ivanpah, the largest CSP plant in the world, for instance, first began applying for loan guarantees in 2006. The plant began operating earlier this year.
The lengthy timeline means it is practically impossible to get new CSP projects up and running in time to take advantage of the tax credit. And lenders demand months of cushion between the expected completion date and the expiration of the tax credit, squeezing the schedule even more.
“While the ITC expires at the end of the 2016—assuming there’s no extension—lenders require you to be placed in service at least 6 months prior to that,” Joe Desmond, senior vice president for marketing and governmental affairs at solar project developer BrightSource, told Utility Dive in an interview.
For the CSP industry, it’s as if the ITC has already expired, he said.
“If you’re a large power plant, no investor is going to lend money for a CSP project and say ‘As long as you’re operational by December 30, 2016 and everything goes perfect