CSP power-heat costs could drop 50% on stable policy support
Industrial power and heat developers are adapting designs to minimize construction costs and shorten payback periods and greater financing support could see costs fall by a half, industry experts told New Energy Update.
Falling technology costs and growing carbon reduction objectives have spurred industrial companies to turn towards renewable energy solutions.
A number of CSP developers are specialising in combined CSP-CSH (concentrated solar heat) plant configurations to tap the growing demand for industrial heat applications.
Industrial heat makes up two-thirds of industrial energy demand and is responsible for most of the sectors' CO2 emissions, as it is mostly produced from fossil fuel combustion.
Industrial segments which can be served by CSP-centred heating systems include chemicals, plastics, food and beverage, machinery, mining, paper manufacturing, textiles and metal surface treatment.
CSP costs have fallen dramatically in recent years, and further innovation gains are set to open up new markets for the technology.
Combined CSP-CSH plants require more bespoke configurations, reducing the potential for economies of scale and series.
To maximize the competitiveness of these plants, developers will require policy support for dual heat and power applications to ensure a pipeline of projects in the coming years, Svante Bundgaard, CEO of Aalborg, a specialist developer of CSP and CSH plants, told New Energy Update.
Supportive policy and financing schemes will allow CSP-CSH developers to increase volumes and reduce costs, as has already been seen in standalone CSP markets in South Africa, Morocco and UAE, Bundgaard said.
“A stable policy framework could give the basis for more than 50% cost reductions over a five to six-year basis,” he said.
Low-and-medium-temperature heat (below 400 degrees C) will account for three-quarters of the total growth in industrial heat demand by 2040, equivalent to over 16.5 trillion MWth hours, according to the International Energy Agency (IEA).
Global industrial heat demand by temperature level
Current CSP designs often operate at temperatures below 400 degrees C, making them highly suitable to supply low to medium temperature heating services.
In 2016, Aalborg commissioned a 36 MW CSP tower plant and integrated energy system serving a Sundrop Farms tomato growing estate in the South Australian desert.
The plant incorporates a CSP tower system to provide electricity, heating and desalination services to 200,000 square meters of state-of-the-art greenhouses. Freshwater is provided from the desalination of seawater transported 5 km from the Spencer Gulf coast.
CSP with storage plants also allow industrial clients to operate 24 hours a day.
Aalborg collaborated with Norwegian thermal battery developer EnergyNest to develop parabolic trough and solar tower systems which can provide dispatchable, predictable power day and night. The system incorporates EnergyNest’s Heatcrete modular direct-steam storage system, an alternative to molten salt systems which offers competitive costs and scalability, according to the developer.
A key challenge for CSP-CSH developers is reducing the payback period for initial investment.
Capex costs depend on scope and location. To take one example, Aalborg's 16.6 MWth Bronderslev Forsyning combined heat and power (CHP) plant in Denmark cost around $50 million. The plant combined solar and biomass with an organic rankine cycle turbine to supply the district energy network.
Aalborg's utility-scale CSP, CSH projects
Note: Aalborg announced a new 2.6 MWTh district heating project in Egedal, Denmark on February 27.
Payback periods for CSP-CSH plants are often longer than 3-5 years which often presents a barrier for industrial investment thresholds. Thus far, this has limited the market development to industrial operators with specific site demands or particularly high fossil fuel costs, such as remote industrial sites.
“Payback periods are unfortunately still the major investment criteria,” Christian Zahler, Managing Director at Industrial Solar, a German solar thermal systems developer targeting remote industrial sites and regions with high fuel costs, said.
“When we started almost 10 year back the expectation was max. 2 years, preferably below 1 year. Today our customers are open to accept longer periods from 4-7 years,” Zahler said.
“If clients were to focus on the IRRs instead of payback periods, we would definitely have more projects…But companies typically think within a 5 years’ timeframe,” he said.
Project finance models used for other power technology types, such as Build-Operate-Transfer, Build-Operate-Own or operational leasing of assets, can support project development, Bundgaard said.
CSP technology has already been proven in many utility-scale and industrial applications and offers a lifetime of over 25 years, he noted.
For wider deployment, cost reductions are required to improve the competitiveness against fossil fuel fired and PV-based systems.
In the stand-alone CSP sector, many developers have used economies of scale and series to drive down costs.
CSP-CSH applications are small and more bespoke and therefore offer less scope for standardisation of manufacturing. Developers must improve their designs and focus on reducing installation costs to lower the levelized cost of energy, Bundgaard said.
“Given the lower size of solar fields, costs cannot be reduced based on scale and volume,” he said
Aalborg and its suppliers are working on several key areas to reduce the cost of industrial scale applications.
The developer has developed its design to minimize work onsite, simplifying assembly and mounting and requiring no overhead cranes or onsite assembly factories, Bundgaard said.
Aalborg is also focusing on 'engineering value add,' aiming to remove redundancies and optimize interfaces between parts to reduce costs, he said.
Targeting smaller customers with high fuel costs could allow greater standardisation, Miguel Frasquet, CEO of Solatom, a CSH start-up, told New Energy Update.
Solatom has developed a 14.5 kW plug-and-play linear Fresnel CSH design and is targeting Spanish food and beverage customers, such as meat processing plants and cheese factories.
By the end of Q3 2018, the company had sold two projects to industries and had five further projects in the pipeline.
“Our design is plug and play, depending on the size needed more pre-calibrated modules are connected together,” Frasquet said.
Many of Spain's industrial companies can access gas at subsidized prices but customers cut off from the gas network rely on far more expensive diesel and fuel oil.
Solatom has identified 7.1 GW of heating demand from small and medium-sized Spanish enterprises with high heating costs, Frasquet said.
Payback period for these customers could be 'between three and seven years,' he said.
Ongoing advancements in CSP technology could also unlock opportunities in the high temperature heating markets (over 400 degrees C).
Until now, CSP plants have typically used oil or molten salt as heat transfer fluid, limiting temperatures to below 550 degrees C. Higher temperature plants could increase the efficiency of power and high temperature heat solutions.
In the U.S., Brayton Energy, the National Renewable Energy Laboratory (NREL) and Sandia Laboratories are developing CSP plant designs which can heat transfer fluids to over 700 degrees C under a $25-million Department of Energy (DOE) grant.
Researchers predict these plants could be commercially available by around 2025-2030, unlocking fresh market applications for high temperature heat.
Access to high temperature customers would double the potential market for CSP-CSH applications, to some 33 trillion MWth, IEA figures show.
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