The benchmark levelized cost of electricity (LCOE) for global CSP projects will fall below $50/MWh in 2018, two of the industry’s leading consultants predicted at CSP Seville 2017.
ACWA’s 700 MW Dubai Project, which combines tower and trough technologies, will deliver $73/MWh LCOE from direct normal irradiance (DNI) of about 2,050 kWh per square-meter per year, noted Jonathan Walters, MENA CSP Knowledge and Innovation Program Team Leader and a senior figure at Castalia Advisors. Given this, Walters said, $50/MWh could easily be achieved in Jordan, Egypt, Tunisia, or Morocco, where DNI typically reaches 2,500-2,800.
“It depends on the generation profile needs of the system in the particular country. In Dubai they needed night-time solar; not every country will need that, so it won’t be directly comparable. But in terms of the basic solar resource and being able to get more concessional financing than Dubai had, so long as countries do it on significant scale – it doesn’t have to be 700 MW – I don’t see why we can’t get 5 cents (per kWh, or $50/MWh) in MENA (Middle East and North Africa) in 2018.”
Fifty dollars will “definitely” be achieved next year, especially if Chinese suppliers and financing continue to be involved in MENA projects, said Frank Wouters, Director of the EU GCC Clean Energy Technology Network
“If they throw all the Chinese muscle at it, I think we’ll see even lower prices,” he said. “They like competition. They change policies quickly, they increase targets on a regular basis, decrease tariffs if they see it’s overpriced. They’re quicker in that sense.”
Three criteria to bringing down prices
Belen Gallego, Founder & CEO at Empresarios ATA Insights and Walters’ colleague in the MENA innovation program, pointed out that six to 12 months ago nobody in the CSP sector would have dared mention LCOE. Now the numbers are “looking better” and the industry is buzzing, she said.
In 2008, Spanish CSP projects reached an LCOE of $250-260/MWh, and PV projects were at around the $450/MWh mark. Now, PV is at $20-30/MWh, and CSP has reached as low as around $60/MWh in Australia and Chile, despite there being only 5 GW of global CSP installations compared to 80 GW of global PV installations, she said.
Walters said there are three factors to lowering the electricity costs of a CSP plant: scale, financing and supply chain. Big developers like ACWA have the upper hand when it comes to scale, he argued, noting that the 700 MW Dubai project singlehandedly increased global CSP installed power by 14%.
“I think we’ve seen from how the bidding process is structured that it gives information about plant-level economies of scale, because at 200 MW the bid was 9.45c (per kWh) and at 700 MW it was 7.3c (per kWh). I don’t think we’ve ever had a bidding process that has told us what the plant-level economies of scale might be in such precise terms,” he said.
“The other thing is the sheer scale of megawatt hours, the use of the plant, the capacity factor of the plant. If you have up to 15 hours storage, which the Dubai plant will have, then you’re selling a lot of energy, which allows you to spread the fixed costs and get you down to something low like 7.3 (cents).”
Where financing is concerned, Jordan, Egypt, Tunisia and Egypt have an advantage over wealthier Dubai because they are eligible for concessional climate finance from the likes of the World Bank, he said.
Wouters also emphasized the importance of the supply chain to cost, and he recalled that all four projects he has been involved in have been expensive because they suffered from a limited number of suppliers. ACWA created competitive tension in Dubai by rejecting the traditional approach of tendering a turnkey lumpsum plant, he said.
“The problem with that approach is you have a main contractor who puts a margin, a subcontractor with margin, supplier with margin. This is not the way to low and competitive prices. What they (ACWA) are doing right now… is they’re talking to all the suppliers,” Wouters said.
“I don’t think there’s a lot of guarantees in that project,” he added. “They are doing the sourcing, they’re going to suppliers, vendors of pumps, of tubes of everything, and a large part of the risk is theirs, but that’s also where the upside is, and (where) the low pricing comes from.”
Growth of CSP market will have dramatic price impact
Ultimately, Wouters said, the size of the CSP market will determine the price. Both he and Walters were extremely bullish about CSP’s prospects, with Walters arguing that in many countries the weighted average of daytime PV and night-time CSP is already significantly below gas-fired power and 24-hour dispatchable power.
In many respects, the solar resource for CSP offers an even greater advantage to countries such as Jordan than does the solar resource for PV, Walter said. “The humidity and dust in Dubai affect CSP much more than they do PV. Jordan doesn’t have that level of humidity, so I think there’s very good reasons why you can expect a price that’s significantly lower than Dubai (in CSP) that you wouldn’t see in PV.”
Returning to CSP’s rapid cost improvements, Wouters said it was reflective of the shift from an energy system based on finite resources to an energy system based on technology tapping into infinite resources.
“The thing with technology is the more you do it, the cheaper it gets,” he said. “This is relatively exact science. We’ve known the cost learning curves for other technologies, the photovoltaics, turbines and all those things. I think it’s remarkable that this early in the growth trajectory of CSP, we’re seeing this dramatic cost decline.
“If we keep growing this market, the cost will continue to come down… it’s very simple, and there’s nothing in the CSP value chain that is rare or limited in supply. We have to continue getting used to the idea it will come down even further.”
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