CSP in the Mediterranean:

technology potential and development opportunities

Stefano Barazzetta
Milano, June 2009

This report is solely for the use of the recipients. No part of it may be circulated, quoted or reproduced for distribution
outside the recipients organization without mentioning IG Partners as a source.
v. 29/06/2009
CSP: THE NEXT BIG THING?

• So far solar equals photovoltaic, but:

– cost per kWh remains stubbornly high
– photovoltaic penetration continues to be very small

• CSP holds great promise but faces numerous hurdles

– various competing and still evolving technologies with thermal storage as key
– significant potential for reducing costs and advantage in limited space requirement
– several players already active
– US and Spain current market leaders but enormous potential in the Mediterranean

2
SOLAR PV REMAINS EXPENSIVE, AND WITH LIMITED PENETRATION

Electricity price and PV generation cost comparison Europe electricity generation capacity:
2008 total capacity vs. photovoltaic capacity
€/kWh 2000 - 2008
%, GW

100% = 700 810

0,0% 0,4%
Average EU-27 price 0,12

PV capacity
100,0% 99,6% Total capacity
Electricty from PV 0,35 *

2000 2008

*: average of costs related to low latitudes with high solar irradiation and high latitudes with low solar irradiation
3
Source: Eurostat (2009), Epia (2009), Eia (2009)
 CSP: CONCENTRATED SOLAR POWER
CSP plants concentrate solar radiation to produce electricity via a steam turbine*
CSP process and components
Absorb the solar Convert the Convert the
Transfer the
Concentrate the radiation and thermal energy mechanical energy
Process thermal energy to
solar radiation convert in into into mechanical into electricity
a conversion unit
thermal energy energy using a generator

Components Collector Receiver Heat transfer medium Conversion unit & Electricity generator
(e.g. mirror) (e.g. absorber tube) (e.g. oil) Steam Turbine

Working principles and features of CSP CSP: parabolic trough

• a solar reflector field consisting of mirrors technology
(parabolic shape or flat) concentrates solar
• Different technologies
radiation onto a receiver (i.e. absorber tube in
are available, at different
which synthetic oil or an other medium flows, or levels of maturity
a central receiver tower holding the heat transfer • CSP plants are usually
medium) large-scale plants (10/50
• the heated transfer medium is pumped through MW and beyond, up to
a heat exchanger generating steam which drives 300 MW), best suited for
a steam turbine to produce electricity utility-scale applications

• during the cycle, the transfer medium can also

go through a heat exchanger to charge the heat
storage system: molten salt (or another storage
medium) can be heated and used afterwards to
retrieve thermal energy for operation during the
night
4
*with the exception of the dish technology where a Stirling engine generates electricity
 CSP: TECHNOLOGY OVERVIEW
Four different technologies, at different levels of maturity and deployment
Parabolic trough Power tower Dish/engine Linear Fresnel

Bolic

Base technology Central tower receiver Several units each with Flat shape mirror
Stirling engine
Commercial Installed
519 31 - 1,4
Capacity [MW]
proven/ pilot/
Status commercial R&D/pilot
commercial proven
Capex*
4.200 – 9.000 5.600 – 8.500 5.600 – 9.000 3.500 – 7.700
[USD/kW]
Full Generation current: 0,12-0,17 near term: 0,12-0,38 near term: 0,12 near term: 0,10
Cost** [USD/kWh] future: 0,06-0,08 future: 0,06-0,08 future: 0,06 future: 0,08
Plant/Unit Size
10-300 10-200 0,03-1 1-200
min/max [MW]
Area requirements without storage: 2,5 without storage: 3,5 second best without storage: 1,5
[ha/MW] with storage: 4,0 with storage: 6,5 after linear Fresnel with storage: n.a.
Storage possibility Y Y N Y
Announced pipeline
4.500/6.000 2.600/3.000 1.400 – 1.800 480/750
up to 2016 [MW]
Solargenix°, Solel Solucar/Abengoa
Stirling Energy Systems Ausra, Novatec Biosol,
Key Developers Solar Millennium BrightSource Energy
Infinia, Abengoa Solar Power Group
Abengoa, Sky Fuel eSolar, Torresol°°

*: €/USD = 1,4 - Deutsche Bank (2009) estimates; **U.S. generation costs estimates; ° Acciona has a 55% stake in Solargenix ; °°Torresol is a JV between Sener and Masdar 5
Source: DLR (2007), McKinsey (2008), Sandia National Laboratories (2008), Cleantech (2008), SolarPaces/Estela/Greenpeace (2009), Deutsche Bank (2009)
 THERMAL STORAGE IS KEY
Thermal storage allows CSP to supply electricity even when the sun does not shine and
to dispatch energy predictably and on demand, significantly improving plant revenues
Heat is stored in molten salt (or other media) and can be retrieved for operation during the
night: the plant is able to produce electricity for a longer number of hours

NO THERMAL
STORAGE PEAK PROs CONs
power production
_ LOAD • increases the load factor from 30% to • not fully tested at commercial level
California demand _ 50% and beyond • plant-specific (at the moment): tailor
• allows to produce more valuable made solutions are expensive
electricity
• increases the capex* and land
• is very efficient(> 90%) requirements of the plant **

WITH
Thermal storage: commercial installations Thermal storage
THERMAL
Andasol 1 plant
STORAGE Storage
Plant Year Technology
hours
Higher
PS20 (solar tower) 2009 1 steam
electricity
value Andasol 1
2008 7,5 molten salt
(parabolic trough)

PS10 (solar tower) 2007 1 steam

*Thermal storage additional capex for the Andasol 1 plant amounts to about 40€/kWh (5% of total plant cost), but reduces the electricity cost by 11%; using concrete instead of molten salt as
storage medium is estimated to reduce additional capex to 20€/kWh; ** at Andasol 1 (200 ha in total), thermal storage footprint is 50 ha 6
Source: Sandia National Laboratories (2008), CSP Today, Photon, Scientific American, SolarPaces/Estela/Greenpeace (2009)
CSP: GREAT PERSPECTIVES, WITH SOME SERIOUS HURDLES

CSP is a viable CO2-free alternative to PV for large-scale infrastructure

PROs CONs

• a (partially) mature technology, notwithstanding • location specific: high potential in the US, lower
still open to many improvements: economies of in Europe, enormous in North Africa
scale have not yet been reached
• not yet cost-competitive with conventional
• best positioned to exploit the potential offered electricity sources
by solar energy, several times larger than the
• capital intensive: financing may constitute a
current and future world electricity demands
major hurdle in the actual economic downturn
• more cost-effective than solar photovoltaic, and
• huge quantities of water needed for the cooling
competitive with other renewables sources
process: dry-cooling technologies are under
• scalable and with thermal storage possibility development, but not mature yet
allowing dispatchable power, i.e. electricity
• components bottlenecks possible in the medium
predictable and on demand (unlike other
term (i.e. receivers, mirrors, etc..)
renewables): both of great interest for utilities
• typical large-scale deployment reliant on the
• hybridization potential for deployment together
development of integrated and dedicated
with traditional technologies or as retrofit to
grids/connections
existing plants
• performance negatively affected by wind and
• many government incentives already in place
dust
• huge pipeline of projects around the world, and
growing: Spain and US are the leaders
7
 CSP HAS THE POTENTIAL TO BE COST COMPETITIVE WITH CONVENTIONAL
POWER SOURCES
Technology developments, learning curve effects, economies of scale and political
support may help CSP electricity generation costs to decrease significantly

Comparison of electricity generation costs

USD cents/kWh

Coal 5,0
Conventional
plants Nuclear 7,0

CCGT 10,8

Large Hydro 4,0

Geothermal 5,0
CSP - FUTURE 6,0 - 65%
Biomass 8,5

Renewable On-shore Wind 9,1

plants Off-shore Wind 15,1
CSP - TODAY 17,0
Photovoltaic 49,0

8
Note: CSP generation costs refer to the US; in Europe costs are higher (> 0,20 €/kWh for parabolic trough plants), but quickly decreasing
Source: Deutsche Bank (2009), team analysis
 CSP: WHICH LOCATION?

CSP plants need high sun radiation: desert areas offer the highest potential

CSP Direct Normal Irradiation*

suitability kWh/m2/year kWh/m2/day
Unsuitable < 2.000 < 5,5
Suitable 2.000<DNI<2.400 5,5<DNI<6,6
Good 2.400<DNI<2.800 6,6<DNI<7,7
Excellent > 2.800 > 7,7

* Direct Normal Irradiation (DNI) is the sunlight that is not deviated by clouds, fumes or dust in the atmosphere and which reaches the Earth’s
surface in parallel beams for concentration 9
Source : Schott (2008), team analysis
CSP OFFERS AN ENORMOUS POTENTIAL WITH LIMITED LAND USE

CSP has a limited footprint, far smaller than required by other renewables

NORTH AFRICA HAS AN ENORMOUS POTENTIAL LIMITED LAND USE

• A desert area of 80 km x 80 km dedicated to CSP could Area needed to satisfy the current world electricity
produce in a year as much energy as contained in all Middle demand through different renewable energy sources
East oil production (9 billion barrels/year) km2
• World electricity demand* can be met through a desert area
of 300 km x 300 km (as small as 0.23% of all world deserts)
9.000.000

2.520.000

270.000
90.000

CSP Photovoltaic Wind Biomass

Areas of the size as shown by the red squares would be
sufficient for CSP plants to generate as much electricity as % on
consumed by the World and by EU-25 respectively Italy’s 30% 90% 840% 3.000%
surface
*19.000 TWh/y (2008) 10
Source : DLR (2006), U.S. Department of Energy, World Resources Institute/Goldman Sachs (2009), Desertec (2009), team analysis
 CSP OFFERS HUGE GROWTH PERSPECTIVES IN THE SHORT TERM

CSP is gaining momentum after two decades of dormancy: 550 MW in operation*,

1 GW in construction, more than 10 GW in the pipeline

Solar installed capacity CSP: cumulated capacity forecast

%, GW MW
6.200
CAGR
500
‘08-’15 RoW
100% = 15,5 84,5
3% Spain
14% 57%
USA
3.700
CSP

PV
97% 25% 1.700
86%
838 200
480 750 2.000
274 354 354
419
61 750
274 354 354 419 419

2008 2015e 1990 1995 2005 2008 2009e 2010e 2011e

*70 MW installed during 2009 (spanish plants PS20 ,Puertollano and PE1 started operations) 11
Source : Emerging Energy Research (2009), EPIA (2009), McKinsey (2008), Cleantech (2008)
CSP VALUE CHAIN AND KEY PLAYERS
The CSP arena is evolving rapidly, with the entry of technology-focused start-ups and
increasing interest from utilities: further integration downstream and upstream is expected
Technology Operation &
Project Development Project Financing Engineering Construction
procurement Ownership
Qualify site, feasibility study, Devise viable financing Detail planning & Technology supplier: Construction Hold, buy and sell
paperwork, economic and structure and provide implementation, plant receiver, mirrors, works shares in the power
technical analysis for financing layout, advisory structure, thermal plant, operate plant
storage, etc..

EBIT margins estimate 25%-50% 40%-65% 5%-20% 5%-25% 5%-15% n.a.

KEY PLAYERS

SOLEL IL X X X (X)

SOLAR MILLENIUM DE X X X X X X

ABENGOA S.A. ES X X X X X X

SOLARGENIX US/ES X X X (X)

SENER INGENERIA ES X (X) X (X)

ACCIONA ES X X X (X) X X

SKYFUEL US X X X (X) (X)

BRIGHTSOURCE US X X X (X) X

AUSRA US/AU X X X

SCHOTT SOLAR, FLABEG DE X

MAN FERROSTAL DE X

ACS COBRA ES X X X

IBERDROLA, EDP, PG&E various X

12
Source : Deutsche Bank (2009), team analysis X: core business; (X): minor activities
 MARKET: TODAY THE U.S. AND SPAIN ARE UNDISPUTED THE LEADERS
After the first plants during the ‘80s, CSP is coming back, driven by oil price volatility,
climate change concerns, and new incentive schemes
California 1985-1992
• 9 parabolic trough plants built for a total of 354 MW: the plants
were provided with natural gas back-up (SEGS plants)
• Electricity production costs decreased by about 2/3, from 0,44
$/kWh for the first 14 MW plant to 0,17 $/kWh for the last 80
MW plant
Source : ENEA (2008), CSP Today.com, SolarPaces/Estela/Greenpeace (2009), team analysis
Spain 2007-2009
• Spain ha set a 500 MW CSP target for 2010, and has approved a 0,27 €/kWh – 25
years feed in tariff for CSP
• Between 2007 and 2009 the first European CSP plants have started operations:
• PS10 (11 MW) and PS20 (20 MW), solar tower technology
• Andasol 1 (50 MW) and Puertollano (50 MW), parabolic trough technology
• PE1 (1,4 MW), the world first linear Fresnel commercial plant
• The current pipeline includes at least 12 plants in construction for a total of 800
MW, plus about 2.000 MW near construction, 8.000 in authorization, 3.500
announced
USA 2007-2009
• In 2007 Nevada Solar One (67 MW, parabolic trough) starts operations, the first CSP
plant built in the U.S. since 1991
• CSP development is mainly driven by RPS (Renewable Portfolio Standards), which
oblige utilities to source certain shares of electricity from renewables
• More than 5.000 MW are in construction/pipeline
13
CSP IN THE MEDITERRANEAN: AN ALMOST LIMITLESS SOURCE OF ENERGY

Electricity generation potential from CSP in North Africa is practically unlimited:

Algeria alone has a potential as large as 9 times the world electricity demand
Europe’s potential is far lower, but still enough to meet half of the continent’s current
electricity demand

NORTH AFRICA EUROPE

World Electricity Demand Country CSP % on EU Country CSP % on EU
2008 potential demand potential demand
TWh/y TWh/y
TWh/y
Algeria 169.000 5.200% Spain 1.278 39%
17%
Lybia 140.000 4.300% Portugal 142 4%

Egypt 73.000 2.250% Turkey 131 4%

RoW
Morocco 20.000 615% Cyprus 20 <1%
Europe
Tunisia 9.000 276% Italy 7 <<1%
83%
Total Total
tot. 19.000 North Africa 411.000 12.600% Europe 1.578 48%

22 times
the world electricity demand
Note: net economic potential, evaluated excluding areas with constraints related to land characteristics (land use, slope, geomorphologic structure) and hydrography and considered
to be economically exploitable (DNI equal or greater than 2.000 kWh/m2/y) 14
Source: DLR – MED CSP (2006);
CSP IN THE MEDITERRANEAN: CURRENT PIPELINE

In the Mediterranean 5 plants are currently in operation, all of them in Spain: several
other plants are in construction or in the development phase
Country Installed Planned Feed-in Note
capacity capacity tariff
MW MW
27 c€/kWh – 25 years • five plants in operation (3 opened in 2009)
Spain 132 > 10.000 (max 50 MW plants) • about 800 MW in construction
• natural gas/CSP hybrid* plants under development: two
Algeria - 265 N 20 MW plants are in construction and three 75 MW plants
have been planned (ISCSS*)
Greece - 50 24 – 26 c€/kWh • 50 MW plant in construction in Crete
• 40 MW natural gas/CSP hybrid plant (ISCSS) in
Egypt - 40 N construction
• 20 MW natural gas/CSP hybrid plant (ISCSS) in
Morocco - 20 N construction
27 c€/kWh (< 10 MW)
Portugal - 7 16-20 c€/kWh (> 10 MW)
• 7 MW plant planned
22-28 c€/kWh - 25 years
Italy - 5 (max 125 MW** plants)
• 5 MW pilot hybrid plant in construction in Sicily

TOTAL 132 > 10.000

* two hybrid configurations are possible: in SEGS plants a small natural gas component, up to 25% of the total power production, is installed along with the CSP component; in ISCSS plants a small
CSP component is integrated into a traditional gas plant, to produce up to 15% power during peak hours
** the constraint is the total plant footprint (max. 2mil m2), which limits the size of the plants to approx. 125 MW 15
Source : CSP Today (2008), team analysis, SolarPaces/Estela/Greenpeace (2009)
EUROPE – NORTH AFRICA GRID INTERCONNECTIONS

The deployment of long range electrical interconnections will be required in

order to import electricity from North Africa to Europe

• The only existing electrical connection in the • Algeria and Germany have
Mediterranean links Spain with Morocco announced the construction of a
• In August 2008 Italy and Tunisia have signed an 3.000 km long / 6 GW connection
agreement to deploy an electrical link between the cities of Adrar and
Aachen, for a 2 bil € investment
• 3 more EU-North Africa links have been announced
Electrical international links in the Mediterranean Aachen
(Germany)

Adrar
(Algeria)

16
Source : German Ministry of Environment / Mediterranean Observatory of Energy (2008)
 FEASIBILITY STUDIES AND PROJECTS
Many feasibility studies for the deployment of CSP in the region have been
conducted and others are in progress: the interest in CSP is growing fast
Project/ Source Description Target Investment Average
Objective bil € CSP CapEx
mil €/MW
Development of CSP in World Bank* concept note for a CSP scale-up 1 GW CSP+links: 4,5/6,2
MENA program in the Middle East and within 4,5/6,2
(2009 – in progress) North Africa region (plants + 2015
electrical links)
Completion of current Emerging estimates the investments needed 14 GW CSP: 60 4,3
CSP global pipeline Energy to complete the current global CSP within
(2009) Research pipeline (about 14 GW) 2019
Mediterranean Estela/ promotes and estimates the 19 GW CSP: 81 4,3
Solar Plan Union of the investments needed to develop CSP within links: 16
(2008 – in progress) Mediterrane technology in the Mediterranean 2020
an region (plants + electrical links)

DESERTEC German estimates the CSP potential in the 100 GW CSP: 350 3,5
(2005-2006) Aerospace Mediterranean region, and the within links: 45
Center (DLR) investments and benefits related to 2050
the deployment of 100 GW of CSP in
In June 2009 the reinsurer Munich Re has North Africa and of the required
announced that it has formed a consortium electrical links to Europe (20
together with other German companies submarine HVDC** lines, 5 GW
(Siemens, Deutsche Bank, E.On, RWE) to each)
explore the possibility of turning Desertec
into a real-world project
* World Bank is currently evaluating a 600 mil € investment in the program trough the Climate Investment Fund 17
** High Voltage Direct Current
DRIVERS FOR THE GROWTH OF CSP IN THE MEDITERRANEAN REGION

Increasing focus on CO2 emissions reduction, oil price volatility, energy

security and global climate regulations are driving the growth of CSP
Growth of energy demand in the Mediterranean region:
• recent estimates* indicate that by 2030:

energy demand in the area will grow by 44% vs. 2005 levels

30% of natural gas demand and 40% of oil demand will be met trough imports

CO2 emissions growth in the Mediterranean region:

• by 2030 CO2 emissions are estimated to grow by 50% vs. 2005 levels

‘20-20’ 2020 emissions and renewables package:

• committed EU to reduce GHG emissions to at least 20% below 1990 levels by 2020 and to
increase the share of renewables in energy use to 20% by 2020
• makes explicit provisions that “green electricity” imported from third countries may qualify
for the target

18
*Source: Mediterranean Observatory of Energy (2008)
 CSP IN THE MEDITERRANEAN: AN ENORMOUS AND UNTAPPED POTENTIAL

Exploiting just 0,2% of the CSP potential in the Mediterranean region would
allow to exceed the current contribution of all renewables in the EU and to
satisfy about 15% of the 2050 EU electricity demand forecast

EU-27 electricity generation EU-27 electricity generation

2006 2050
TWh TWh, %
2; Solar PV
489 TWh
100% = 3.354 TWh 100% =4.600 TWh
6; Geothermal
82; Wind
RENEWABLES 700 TWh;
15% 90; 15%
Biomass
CSP*

309;
Hydro
ALL OTHER
85% SOURCES 3900 TWh;
85%
CONVENTIONAL

*Assumptions: 100 GW with thermal storage (average load factor of 80%) 19

Source: EU energy and transport in figures, Paul Scherrer Institut, team analysis
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