An energy industry veteran with five decades of experience, Fred Morse has been involved in CSP since its beginning in the USA and has managed the CSP R&D program under Presidents Carter and Reagan. Today, Fred Morse will share his views on policy lessons and the future of CSP.
What are the main policy lessons we can extract from the CSP experience in the USA?
FM: The main lesson is that policies make markets. In the early 2000s a successful effort was made to get the Western Governors Association to agree on a target of 1000 MW of CSP. This unprecedented target along with the Renewable Portfolio Standards, a policy that required utilities to generate a certain share of its electricity from renewables, set the stage for what happened next.
Because CSP was competing with highly subsidized coal, gas and nuclear, it was not enough for it to have an opportunity to enter the power market while it was too expensive; no one would buy it. In the 1990s the Congress passed a 10% investment tax credit (ITC). If you built a power plant, you could write off 10% of the capital cost from your taxes. But that wasn’t enough to make CSP competitive. Developers were also able to accelerate depreciation but that wasn’t enough either. Then in 2005, to promote nuclear power, the Energy Policy Act increased the investment tax credit to 30% and made it applicable to renewable as well. Now CSP was looking attractive. But in 2008 the financial system crashed and while we had a 30% ITC there were no investors to use it because their profits were gone.
The breakthrough came when the Congress gave a grant in lieu of the ITC, which alongside the renewable portfolio standards and accelerated depreciation allowed the second wave of large CSP plants to happen: Ivanpah, Solana, Genesis, Mojave and Crescent Dunes.
CM: What can other countries which are hoping to start their CSP programs learn from this?
FM: A main lesson is that governments must deal properly with the subsidy imbalance between fossil fuels and CSP. In the USA, State governments leveled the playing field by combining renewable energy targets (the RPS) with the Federal government’s tax credits.
Another lesson is that long-term, low interest debt is a great catalyst for CSP. In the USA, the mechanism that provided this kind of debt was the Federal Loan Guarantee Program, in which the Federal government covered the innovation risk and committed to pay the debt if the developers couldn’t.
As you know, the operations and maintenance (O&M) cost of a CSP plant is quite low. So, with low interest debt, CSP projects become very viable.
My other recommendations are (1) that utilities and policy makers use current and accurate information about cost and performance and they need to understand how CSP fits into their energy system and (2) that incentives used should promote competition and force cost decreases in subsequent plants.
CM: Could CSP still play a role in the USA given the low natural gas prices and historically low PV prices?
FM: In the southwest where the DNI is ideal for CSP, utilities need flexible generation. In addition, some states are moving toward carbon free generation. CSP with thermal energy storage provided flexible power that is carbon free. That makes CSP very attractive to them.
As the load graph in figure 2 is typical of many southwest utilities, they are now delivering more electricity at midnight than at noon, because there is so much PV at midday. This creates a great opportunity for CSP with thermal storage because it can reliably deliver renewable energy at night, when PV and other renewables might not be available and it can provide energy during the peaks thereby reducing the ramps that the utility would otherwise have to meet.
In a future scenario where more PV and Wind are added to the grid, utilities will want FRED: Flexible Renewable Energy on Demand. Unlike CSP with thermal storage, current baseload plants are not easily cycled. Therefore, the more PV that comes onto the grid, the more value CSP has as a flexible, renewable resource.
By Carlos Márquez