As established CSP markets face economic challenges and new markets look for fresh policy frameworks, CSP Today considers where the best opportunities lie.
By Francesca Boothby
As the CSP industry expands across the globe, so too are the incentive mechanisms on offer by countries grabbing a slice of the action. The recently published CSP Today feed-in tariff guide provides information regarding regulators, types of incentive and the tariffs offered by the USA, Spain, South Africa, India, Morocco, Italy, Portugal and Greece.
Spain is one of the most interesting case studies for feed-in tariffs (FiTs). With a deeply established CSP market that has been in structured operation since the 1980’s, Spain recently found it’s lauded model (which kick started the successful renewable energy market we see today), in jeopardy. Dr Luis Crespo, Secretary General at Protermosolar, explains how, after explosive growth came 6 months of regulatory uncertainty.
The government resolved to select a number of highly mature projects with a combined capacity of 2400MW to be rolled out in annual phases until 2013 (maintaining the fixed rates of the 2007 Royal Decree). As Dr Crespo points out, for those who have already invested, the situation is favorable. With elections coming up this year however, what happens with regard to tariffs for the remaining capacity of 5000MW post 2014 remains uncertain.
Similarly for other countries in Europe, changes are underway. In Portugal for example, a regime has been established which offers 26.3 – 27.3 on projects less than 10MW, which is valid for 15 years. This came after the Decree Law 33A in February 2005, which established a new calculation system with maximum and minimum tariffs.
In the US however, tariffs vary from state-to-state, (this is also the case in India). The Loan Guarantee Program of the US department of Energy has $10bn in total sums available for renewable energy systems. There are various mechanisms in the USA such as investment and electricity tax credits.
Competitive opportunities: MENA
Not included in the guide but a region to watch as a hotspot of future activity is MENA (Middle East and North Africa). Countries such as Bahrain, Kuwait, Oman, the Emirates, Egypt and Saudi Arabia are all on the verge of making concrete decisions. Developers currently consider them the most attractive in the world for CSP industry because of the potential long-term growth.
The area is experiencing systemic growth in electricity demand coupled with a need to move away from oil which exhibits high price volatility and is a limited resource. Added to this, the area has good DNI and access to the grid. Countries like Saudi Arabia have a solid industry foundation meaning that CSP plants could be relatively quickly installed. They would also be supported by the willingness of the local industry to integrate and the potential to export.
Reda El Chaar, Business Development Manager at ACWA Power, Saudi Arabia notes that Saudi Arabia has experienced policy delays due to a lack of renewable energy targets and a tariff framework. The Kingdom is expected to announce these by the end of 2011. According to El Chaar, new rates for the region need to “move away from the Feed-in tariff mentality towards a competitive bidding system”.
He suggested that Morocco, Jordan, and Saudi Arabia have an excellent framework for procuring fossil fuel generated electricity through competitive bidding. This could be easily adapted for electricity generated from solar power. He explains that while FiTs provide an excellent way of growing an industry, market dynamics are now so different that it would be “economic suicide to implement them [in the MENA region]”.
Another region that is rapidly gaining traction is China, which recently announced it’s first nationwide FiT of Rmb1/kWh. The national energy policy aims to increase solar power capacity to ten times its current amount. Nathaniel Bullard, analyst at Bloomberg New Energy Finance sees this as a “slow methodical process” that blends some elements of the European system (e.g. 50MW plant size) with an emerging competitive bidding system.
He points out that China intends to localize the process, to create a supply network of receiver tubes, mirrors and control systems. Already there is no need to import steam turbine equipment in China. Although it may appear to be in early stages, Bullard notes that there is already an immense solar thermal network that exists in China currently used for hot water. With higher heat pressures China is poised to change this to electricity and export the model.
To harness ‘least cost, best fit’ opportunities, parties interested in new CSP developments should now expect fierce bidding. It remains to be seen whether moving away from the European model of established Feed-in tariffs will cause the “mess” predicted by Dr Crespo or the “growth through competition” foreseen by El Chaar.
More than likely, there will be a blend of both. The MENA region has every chance to retain its attractiveness over the next phase of CSP development, learning from the experiences of Spain and growing alongside China.
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