Most activities in CSP started from initiatives in research institutes. All mentioned activities contributed essentially to the development of industrial products and the entire CSP sector.
The CSP core value chain consists of six main phases:
– Project Development
– Plant Engineering & Construction
There are also three cross-cutting activities, which are not directly part of the value chain, but rather serve a super ordinate function. They support the project from the beginning to the end or accompany the technology development and specifications over many years:
– Finance & Ownership
– Research & Development
– Political Institutions
In addition, these cross-cutting activities also offer prospects for local employment.
The first phase of a CSP project is the project development. The decision-making process begins with technical and economic feasibility studies, the site selection, and financing opportunities, which provide the basic scope of the project. After drawing up a first draft incorporating these basic decisions, the conceptual engineering of the project starts with a proposal for the technical specifications. Once the conceptual design is established, the permission process and contract negotiations can begin. These phases are closely interlinked with the financing of the whole project. In current projects, engineering experts specializing in power plant projects offer all the services needed for the project development. Often the project development phase tends to be the longest, due to the fact that feasibility studies, the permission process, and public decision-making processes take a lot of time. Typically, between one and three years pass between the first tender and the final project start (FichtnerSolar AG 2010 and Solar Millennium AG 2010).
The second phase of the CSP core value chain involves the selection and gathering of the raw materials and further transformed materials. While some materials are provided by the world market, others are supplied locally, depending on costs and logistical aspects. Quantitatively, concrete, steel, and glass are the materials most needed for a CSP plant. For a 50 MW reference plant, for example, about 10,000 tons of concrete, 10,000 – 15,000 tons of steel, and 6,000 tons of glass are required. For the Kuraymat plant in Egypt as well as for plants in Spain, concrete and steel have been provided by local suppliers. These are the materials principally required for a CSP plant: glass for the mirrors, steel for the mounting structure, chemicals for the heat-transfer fluid (HTF), and insulating materials together with different metals for the piping.
Material and land requirements for CSP reference plant Parabolic Trough Plant 50 MW with 7 hours storage
Steel 10,000 – 15,000 tons
Glass 6,000 tons
Storage Medium (Salt) 25,000 – 30,000 tons
Concrete 10,000 tons
Insulation Material 1000 tons
Copper19 300 tons
Land 2 km²
The German Aerospace Center (DLR) compared the materials required for different CSP technologies (Viehbahn, 2008). The material needs were normalized to 1 MWel in plant size and 1 hour of thermal storage capacity in order to balance technology specifics (such as differences in efficiency).
This section describes the components, the third phase in the value chain. Conceptually, a CSP plant can be divided into two parts: the solar field and the traditional power block. The key components of the solar field are the metal support structure for the mounting, the mirrors, and the receivers. Since the CSP market worldwide is still at a very young stage, only a few companies exist which can supply these components.
Solar Field of CSP Plant
The metal support structure is made of steel or aluminum and is provided by traditional steel and aluminum companies. The structure has to meet certain requirements for the structural stability against wind loads in order to ensure the precise alignment of the mirrors over the entire length of the collector row, which can reach up to 150 meters.
Mirrors for the CSP industry can be either flat (towers, linear Fresnel) or bent (parabolic trough, dish). Bending and mirror coating are standard processes of the glass industry, and can essentially be performed on standard equipment. Mirrors have to be highly precise. Even marginal reflection losses of direct radiation lead to a lower degree of electrical efficiency and therefore jeopardize the economic efficiency of the whole project. Commercially viable CSP mirror plants must have a minimum capacity (more than 200 – 400 MWel equivalents per year). Typical glass and mirror companies have a wide range of customers in many industries, e.g., automotive glass, technical glass, solar mirrors, and different kinds of special-purpose glass. According to Guardian, the level of complexity for solar products is comparable to automotive requirements (shapes are more complex in the automotive segment, but geometric specifications are stricter for solar mirrors). Although raw flat glass and mirrors are traded globally, the cost of transporting heavy items in a competitive industry is a barrier; locating mirror production near consumption centers is therefore likely to happen once markets reached sufficient size.
Receivers are the most complex part of the solar field. They have to absorb as much light as possible while reflecting as little thermal energy as possible. The transition from glass to metal has to have the same coefficient of thermal expansion. Very few companies worldwide produce this specific component. The steel in receivers has to be specifically selected for good durability and compliance with coating requirements. This steel would impose strong requirements on local production.
Mirrors, receivers, and the mounting support structure represent the main elements of the solar field. In addition, an important role is played by the heat-transfer-fluid system, which includes the heat-transfer fluid (HTF), the piping, insulation materials, and pumps.
In most of the current CSP plants, thermal oil is applied as the HTF. It is produced by large chemical companies. Approximately 13 tons per MWe installed power are needed. Insulation material (about 20 tons per MWe) is widely used and consequently a large number of producers can be identified. The quality of the insulation is highly important as it directly influences the thermal efficiency, and consequently the plant output. Some CSP projects try to use molten salt, which entails some technical advantages (large storage capacity) but a couple of disadvantages as well (e.g., freezing of salt).
In a CSP plant, the hydraulic pumps that circulate the oil or molten salt in the 20 km to 200 km long piping system, and the heat exchangers that transfer the thermal energy into steam, are rather complex and expensive components. International companies with a large degree of know-how in this sector provide these components. Some publications include the HTF systems as part of the solar field; others display it separately, as will be done in this study.
Electrical components, electronic cables, and hydraulic adjustment units (for mirrors) used in the solar field and the power block for all adjustment and control processes have to be precise and of good quality to assure a plant lifetime of at least 25 years.
Power block of CSP plant
The key component of the power block is the steam turbine. Technically, turbines could be considered the most complex and difficult part of a CSP plant. Normally turbines are manufactured by big industrial companies with long-term experience in the field. Due to the extremely specialized requirements of turbines, shipping costs are irrelevant and suppliers can be found all over the world. The power block used for CSP is very similar to that used for combined cycle power plants.
The grid connection is organized and fulfilled by the EPC contractor or other subcontractors that build the access to the local and regional power grid. By means of standardized substations and transformers, the system is connected to the medium voltage or high voltage grid for larger transmission to the final end consumer.
Engineering and construction
The fourth phase of the value chain involves the plant engineering & construction. This is performed by the engineering, procurement, and construction (EPC) contractor. The EPC contractor is responsible for the whole plant construction. As project manager, he selects all the suppliers and awards most of the jobs to subcontractors. Sometimes, even before the contracting entity chooses the final EPC, candidates have already chosen certain component suppliers due to logistical, time-sharing, or political motivations. Normally all component suppliers as well as the subcontractors who carry out the detailed engineering and the civil works are chosen by the EPC contractor. The main task of the project manager is to coordinate all partners.
EPC contractors are usually subsidiary companies of industrial groups and can resort to building companies and engineering consultants in their own company group. The civil works for the total plant are also often closely connected to the EPC contractor, as many companies have their own subsidiaries or joint ventures to undertake these tasks. Large infrastructure companies for buildings, power plants, and other infrastructure projects provide the basic services for civil works, such as preparing the ground, building the supporting infrastructure (streets, houses), and creating the foundation of the power plant. For these civil works, and for the assembly and installation of the collectors, a large number of low skilled workers is required on the construction site. For example, at a Spanish power plant, 500 workers were needed for these works. In North Africa, due to lower productivity, the number of employees can increase to up to 1000-1200. EPC contractors have often been general contractors, building different kinds of plants and industry projects, for many years; they therefore have a wide range of experience to draw upon. In current projects the EPC contractor even serves, in part, as financer and owner, and for the first years is also responsible for the operation and maintenance (O&M), which binds him to the plant.
The fifth phase, Operation, includes the operation and maintenance (O&M) of the plant for up to 25-30 years. This is often performed by local sub-contractors and, as mentioned before, sometimes coordinated by the EPC contractors in the first years. Currently, about 30 people are necessary for the operation and 10 people for the maintenance of a 50 MW CSP plant.
The tasks for operation and maintenance can be split into four different groups: Plant administration (6 workers needed), operation and control (13), technical inspection of the power block (7), and the solar field operation and maintenance (14). For bigger plants, the O&M cost per installed MW decreases (IEA 2010 Roadmap).
The sixth and final phase, the Distribution, involves delivering the electricity from the plant to the consumers. Large utility companies take the responsibility for the distribution. In the United States, these large utilities are obliged to buy or produce a certain amount of solar electricity by the Renewable Standard Portfolios of each U.S. state.
Finance & ownership and political institutions
Two of the cross-cutting activities are absolutely crucial for the realization of a CSP project: Finance & Ownership and Political Institutions.
Since CSP projects are still not profitable without financial support, the project financing is often the most difficult part of the project development. In Spain for example, feed-in tariffs ensure the payment. Based on the feed-in tariff levels and specifications, private investors, together with the project developers (which can be within the same company), calculate the profitability of a proposed plant.
This support mechanism improves the process of making the project bankable because of the long-term guarantees and continuous revenue flows to the owners and consequently to the creditors.
However, if the tariffs are statically set too generously over a longer period of time, the country cannot control the number of plants constructed, as happened in Spain in the PV market. In North Africa so called PPA (power purchase agreements) are often used to assure financing. In a PPA, the state controls the number of plants, and every plant is tendered separately. This leads to individual conditions for every plant constructed, but does not easily promote a dynamic market evolution. In practice, different kinds of ownership structures can be found. There are three common operator models in the context of power plants: Build-Own-Operate (BOO), Build-Own-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT) (Daniel Beckmann 2003).
In a BOO, the private sector finances, builds, owns, and operates a facility or service permanently. In the original agreement, requirements of the public sector are stated and the regulatory authority takes control.
The BOOT contract encloses a final transfer of the plant ownership to the government or to another entity at a previously agreed-upon price or the market price.
Compared to the BOOT contract, a BOT agreement starts the transfer to the government at an earlier point of time (5 years instead of longer periods of 20 to 30 years for BOOT contracts).
Existing financing and ownership structures demonstrate the high level of importance held by political institutions in building CSP plants. Currently, CSP technologies can only be developed with political support. With time, more countries are recognizing this and joining in providing financial support to CSP. For example, Spain has had a feed-in tariff since 2003; some states within the United States support CSP with renewable portfolio standards; Morocco has announced a national solar plan; and India is currently drawing up a feed-in tariff for solar energy.
Research & development
Research & development (R&D) is a cross-cutting issue and a very important aspect for technological progress and fast market entry. To bring the technology forward, project partners must work closely with research institutions. R&D plants play a large role here. Existing R&D plants include the solar tower in Jülich (Germany) and the Plataforma Solar de Almería (PSA) in Spain, where different CSP technologies are tested. In order to reduce the final acceptance period at the end of the construction and commissioning phase of a commercial plant, new methodologies for testing are required. A standardized testing and monitoring procedure for installed solar fields will be an important task for all future projects.
International value chain
Based on the CSP value chain presented above, shows the main international players involved in each phase (either companies or other stakeholders). Some projects are led by large industrial consortia that include new entrants on the CSP market (such as Veolia Environment, CNIM, and Saint Gobain). For a single large CSP investment project, a consortium is formed under an EPC contractor that supplies the components and services for the construction of the plant. After a successful cooperation in a first project, existing relations between the companies are often used to construct new CSP plants. Over the last two years, several mergers and acquisitions have taken place in the CSP industry.
Some important exemplary business activities in the recent years include the following:
In 2006, Spanish Acciona acquired the majority on US CSP company Solargenix.
In 2007, MAN Ferrostaal AG and Solar Millennium AG founded the company MAN Solar Millennium GmbH, specializing in project development, financing, and construction of solar thermal power plants. In 2010, this joint venture became part of the company Flagsol GmbH which until then was the engineering subsidy of Solar Millennium (100 percent). Since this merger, Flagsol belongs 75 percent to Solar Millennium and 25 percent to Ferrostaal. In the meantime (in 2009), a 70 percent share of Ferrostaal was sold by the German MAN holding to the Abu-Dhabi-based IPIC.
In 2008, Sener and Masdar created a joint venture (Torresol) for their common CSP activities.
In March 2009, German Siemens AG bought a 28 percent share of the Italian company Archimede Solar Energy, a technology company of vacuum receivers for parabolic trough plants. In May 2010, this share was increased to 45 percent.
In October 2009, German Siemens AG bought 100 percent of the Israeli vacuum receiver manufacturer Solel for US$ 418 million.
In Feb. 2010, French Areva bought 100 percent of the U.S. technology developer Ausra.
In May 2010, Alstom invested US$55 million in Brightsource.
This chapter identifies the key players in this chain, including their function and background. The positive attitude of the existing players toward expanding their business activities in the MENA region is an important key to promoting local manufacturing, achieved through the development of their own projects in the region, and the intention to form local subsidiaries, local partnerships, and joint ventures for local manufacturing.
Assessment of key parts in the value chain
The different industries required for each phase in the value chain have specific characteristics that are described here in detail. These include, for example, business models, project experience, company size, technology specialization, etc.
The international industry is used here as an example for local industries to show how they could develop in the future. After a close look at the key components, secondary equipment for CSP is also evaluated according to industry characteristics. Results are important when assessing local capabilities for CSP, because international companies have required long-term experience and have undertaken large investments in R&D and technologies to reach market positions.
Materials (raw and semi-finished)
Since the most used raw materials (steel, concrete, and cement) are consumed for the construction and civil works in large volumes of 50 to 150 tons/MW, it is mostly large players in the local and national construction and steel industries who are mainly involved in supplying the CSP projects and EPC contractors. The assembly of the collectors is supplied by large local industrial companies that have a wide range of products and services. CSP is not the primary business concern of these companies due to the still limited market demand. These supply companies are often active in the building and infrastructure sectors. They also supply the automotive industry, which demands a large volume of these companies‘ products. Some of the raw materials are specific to the CSP plants, while other materials needed are also in demand for conventional power plants. The latter category includes products such as steel, concrete, and cement, and involves a large number of companies. In contrast, the number of companies on the world market that can supply CSP plants or CSP manufacturers with a very specific raw material (such as thermal oil) is limited.
Glass companies whose manufacturing is not centered around CSP mirrors see the potential of a good business opportunity and sell their high-class mirror products to this market. Therefore, investments often are made in markets with existing production capacities and factories. Producing CSP mirrors is constrained by the need for low-iron glass ("white glass", as opposed to regular "green glass"), a glass quality required almost exclusively for this type of use. Solar grade glass can in principle be produced at any float line, provided that appropriate low-iron sand is used as the raw material.
Very high quality sand can be found locally in Michigan; high quality low-iron sand is also available in countries like Belgium and Jordan. Sand is very abundant in the Sahara desert and in the Gulf region but, according to Guardian, it is not suitable for solar glass. Since other applications for white glass are limited, it is a costly product. Transitions from green to white (and back from white to green) take about two weeks each, during which the production of the float line is lost, as it operates on a continuous basis (24/7 non-stop for 15 years); the production of glass during transitions can be recycled, but considerable amounts of energy are wasted in the process. A typical float produces approximately 30,000 square meters of glass per day, i.e., over 10,000 mirrors, which is enough to power 5 MW of CSP (depending upon DNI); thus, making mirrors for a 100 MW CSP plant takes less than three weeks. In other words, a CSP-only float line would only be justified by a yearly market of around 2 GW.
Power block, steam generator, and heat exchangers
Since the power block unit uses many of the same components as conventional thermal power plants, large companies internationally active in converting thermal energy to electricity are also active in the CSP market. Companies like General Electric, Siemens, Alstom, ABB, and MAN Turbo are the most important players for steam turbines, generators, and power control. These high-technology companies also cover the technical side of distribution and connection to the grid. A high level of expertise is required for these components in order to reach continuous output, a large number of operating hours and, in particular, high energy-conversion efficiency. The steam turbine technology is mature, so no new revolutionary technological advancements are expected in this highly competitive and concentrated market, with companies like Siemens, Alstom, and GE controlling the major share of the global market.
The company Sener is currently the most experienced player in thermal storage for CSP plants. It is responsible for up to 12 molten salt systems (mainly in Spain) which are either in the operation, construction, or design phase. For example, the storage system used in Andasol 1 consists of two tanks of 14m height and 38.5 m diameter with a concentrate of nitrate molten salts (60 percent NaNO3 + 40 percent KNO3). This engineering company with 5700 employees has its own very strong R&D division, on which Sener spends 10 percent of its revenues.
Flagsol had developed the molten salt thermal storage concept even before Sener entered this market jointly with Flagsol. Flagsol was responsible for the engineering, procurement, and construction of the molten salt storage of the Andasol 3 power plant (currently under commission).
In general, the molten salt thermal storage is not a technology that can be provided only by one player. The components used are standard components in chemical and energy plants. Therefore, no monopoly/oligopoly is likely. However, this might not be the case with the salt itself as a raw product. One 7.5 hour storage system for a 50 MWel plant needs about 3 percent of the annual salt production of the main supplier (SQM, Chile). Recent salt price increases might be a consequence of increasing demand from the CSP industry. For example, German Züblin AG is working on a storage concept with concrete as storage material, today at prototype status.
Finance and ownership
The large volume for the finance of CSP plants (4-8 Mio. US$ / MW) is often provided by many different companies, banks, or financial institutions. On the Spanish CSP market several special purpose vehicles have been founded by a project consortium. Andasol 1 was financed in the beginning by the companies Solar Millennium (25 percent) and ACS Cobra (75 percent). In 2009, after the commission of the project, Solar Millennium sold all shares to ACS. Andasol 3 holds a share in the ownership of the special purpose vehicle ―Marquesado Solar S.L.‖ of which RWE AG, Stadtwerke Munich, Rheinenergie, MAN Ferrostaal, and Solar Millennium also share the ownership.
In Algeria, the ISCC plant was financed by a consortium of the engineering and EPC contractor Abener and Sonelgaz (NEAL). For these first projects, the risk was consequently shared between the project developers and larger investors. The project developers tried to issue a fund to increase their limited financial resources in order to retain these shares of approximately 25 percent.
After finishing the project, the project development company very often sells its share to other owners for the operation. Large development aid institutions have played a very important role in Egypt and Morocco. The Global Environment Facility – together with its implementing agency the World Bank – has been strongly involved in the financing of CSP plants by giving grants to cover the excess costs of CSP.
As in any large investment, debt financing is an important pillar of financing CSP projects, with a share of typically 70-80 percent of the total project volume. Debt financing helps to lower the cost of capital because it is cheaper (approximately 5-7 percent p.a.) than institutional equity financing (approximately 12-15 percent p.a.). Usually, debt financing is realized by long-term bank loans or long-term bonds. The ease or difficulty of realizing debt financing depends on the banks‘ risk perception of the technologies. Today, parabolic trough technology is the only technology that is considered ―bankable‖ or ―proven technology‖ because of its long-term performance track-record.
In coming years, other CSP technologies will achieve bankability as well, through proof of performance in demonstrators and in commercial installations.
National and international policy guidelines and new energy laws on renewable energies have been an important driver for CSP projects, especially in Spain and the United States. Without governmental financial support for CSP technology, the development of CSP projects would not have been economical and bankable, due to the current higher cost of CSP technology as compared to existing conventional fossil alternatives in competitive and liberalized energy and electricity markets. Promotion by the Spanish ministry (Ministerio de Industria, Turismo y Comercio) and by U.S. federal ministries for energy has been necessary to pave the way for CSP in both countries. In both countries, research activities on all topics related to CSP have been increased. These include efficiency increases, new storage options, higher thermal temperatures, and new plant concepts.
Research & Development
Technology research institutions in the United States, Germany, and Spain have been involved in most commercial technology developments. This technology transfer from institutes to the industry usually happens through the following steps:
Founding of new companies from institutes‘ staff (e.g., Novatec Biosol, Concentrix Solar or PSE from Fraunhofer ISE; CSP services from the DLR)
Often, the industry also recruits employees from institutes to build up a high-skilled labor force of engineers and project developers (many examples from almost any institute to almost any CSP company)
Licensed production of components (e.g., tower technology by DLR commercialized by Kraftanlagen München)
Development of materials/components for the industry (e.g., absorber coating of Schott developed by Fraunhofer ISE)
Testing of components for the industry (e.g., testing of the Eurotrough collector on Plataforma Solar de Almería by CIEMAT and DLR, receiver testing of Novatec by Fraunhofer ISE)
Furthermore, standardization issues in CSP technology are currently pushed forward on an international level mainly by research institutes (NREL and DLR).
Most activities in CSP started from initiatives in research institutes. All mentioned activities contributed essentially to the development of industrial products and the entire CSP sector. Many leading engineers and decision makers in CSP companies have a background in one of the leading research institutes. The market growth increased the demand for well trained staff to construct, operate, and maintain a CSP power plant.