Grid parity solar: CSP gains on PV

CSP Today reporter Heba Hashem finds that not only is CSP gaining on PV’s cost competitiveness; it w

By Heba Hashem in Dubai

Growth in the Concentrated Solar Power (CSP) sector faltered last year as photovoltaic (PV) module prices dropped, driving several high-profile U.S. projects to convert to PV.

In the long-run, however, CSP’s ability to incorporate thermal storage and to supplement conventional power generation offers benefits beyond the value of the kilowatt-hours they generate. Dispatchable power, for example, can improve financial performance and help the grid operator to reliably match supply and demand.

To gain a clearer idea of where CSP stands in the race to grid parity, it is worth evaluating and comparing the cost of both CSP and PV power generation. A number of factors must be considered when weighing up the cost-competitiveness of PV and CSP.

Firstly, the levelised cost of electricity (LCOE) takes into account the ratio of an electricity-generation system’s costs—installed cost plus lifetime operation and maintenance (O&M) costs—to the electricity generated by the system over its operational lifetime, given in units of cents/kilowatt-hour (kWh).

Worldwide, PV installations reached 26.9GW in 2011, based on data collected by IMS Research. In contrast, only 1.3GW of CSP capacity was operational last year, with another 2.3GW under construction, according to the European Academies Science Advisory Council.

The higher deployment of PV goes back to cost-related factors and the value of electricity produced by each technology. Currently, the installed cost for utility-scale PV plants is lower ($3/W - $3.8/W) than that of CSP ($5.79/W).

As a result, far more PV than CSP capacity can be installed for a given amount of investment, as stated in the Department of Energy and National Renewable Energy Laboratory’s SunShot Vision Study.

“The main issue facing CSP is the evolution of utility-scale solar PV; it is now lower cost, easier to site, and does not require water for cooling,” says Peter Asmus, Senior Analyst at Pike Research.

Opting for dry or hybrid cooling systems in CSP systems instead of wet cooling could result in a higher equipment cost and, depending on design, may affect performance.

Various studies have sought to define the cost and performance effects of dry cooling to minimise the impact on LCOE. “A recent analysis estimated that switching to dry cooling would raise the LCOE of a trough plant by 3%–8%, depending on location and plant design”, states the SunShot Vision Study.

Yet the performance and cost penalty for power tower systems should be lower, because CSP technologies operating at higher temperatures experience smaller penalties from dry or hybrid cooling systems.

Narrowing the LCOE gap

The European Photovoltaic Industry Association estimated that worldwide, the range of LCOE for large ground mounted PV in 2010, was approximately $0.16–$0.38 per kWh. The wide LCOE range for PV is due largely to the sensitivity of the solar radiation (insolation) to the system’s location – even minor changes in location or orientation of the system can significantly impact the overall output of the system.

For instance, the PV LCOE range in Northern Europe, which receives around 1,000 kWh/m2 of sunlight, was valued around $.38 per kWh; Southern Europe, which receives around 1,900 kWh/m2 of sunlight, had an LCOE of $.20 per kWh; and the Middle-East, which receives around 2,200 kWh/m2 of sunlight, had an LCOE of $.16 per kWh.

By contrast, the worldwide range in LCOE for parabolic trough CSP, was estimated to be from $0.14–$0.18 per kWh, excluding government incentives.

Generally, the LCOE is expressed in terms of cents per kilowatt-hour (kWh). Alternatively, the cost of a CSP plant can be expressed in terms of dollars per watt (W). However, the LCOE takes capacity factor and O&M costs into account, while dollars per watt does not.

For example, a 100MW CSP plant can be built with TES and additional collector area to increase its capacity factor. This hypothetical design might generate 100% more energy per year and have a 60% higher installed cost than an alternative design without TES and additional collector area; such a plant would have a higher installed dollars-per-kilowatt cost but a lower LCOE than the alternative-design plant.

Assuming fixed financial input, the LCOE for a CSP system can be reduced in two ways: by lowering capital or O&M costs; and by improving annual performance. In the future, CSP installations with thermal energy storage (TES) are likely to be more cost-effective compared to plants without TES. The addition of low-cost TES increases may increase the capital cost, but it has the potential to reduce the LCOE.

At present, a CSP plant without TES requires a similar upfront investment as a utility-scale PV system, while CSP with TES has higher capital costs than PV. For central PV (utility-scale single axis-tracking systems of 100MW) the capital costs in 2010 were about $4,000/kW, while for distributed utility-scale PV (utility-scale single axis-tracking systems of between 1-20MW), the capital costs stood at $4,400/kW, with similar fixed O&M costs of $51/kW per year for each of the PV technologies.

In comparison, the costs for building a CSP system (dry-cooled trough plant with a solar multiple of 1.4) in 2010 ranged from $4,000-$8.500/kW, with fixed O&M costs of $50/kW per year. The upper end of the range reflects plants with TES, whereas the lower end includes no-TES troughs, direct-steam generation towers and dish/engine systems.

CSP grid flexibility crucial for renewables

CSP systems produce more electrical energy per unit of capacity because they are typically deployed where solar resources are higher, use solar tracking, and their resources are deployed with several hours of TES capacity, which significantly increases a CSP plant’s capacity factor.

The collector area for a CSP plant can also be expanded to accumulate solar energy in excess of the peak load requirements of the power generator and can store it as thermal energy, to be used to generate power during non-sunny times of the day.

“Storage can shift solar energy periods of peak demand and provide firm capacity and ancillary”, says E3 Senior Consultant Andy Taylor.

By contrast, the peak power for PV is determined by the size, efficiency, and location of the collector area, while capacity is determined by the local source and ability to track the sun. Most importantly, because it is less amenable to large-scale storage, PV is much more challenging for grid operators than CSP with TES, which is dispatchable and therefore more reliable.

“Grid flexibility is a key factor influencing future penetration of renewable generation”, highlights Mark Mehos, National Renewable Energy Laboratory’s CSP Program Manager. He says TES increases grid flexibility because it “allows shifting of the solar resource to periods of reduced solar output with relatively high efficiency.”

Importantly, he notes that more use of CSP with TES “could result in greater use of non-dispatchable PV and wind, especially at higher penetrations”.

Although additional investment is required to expand the collector area of a CSP plant and to add TES tanks, the increased operational hours of the power block offsets these costs. Moreover, if the solar field and TES costs are low enough, the net effect is a decrease in LCOE.

Controlling material supply

PV technologies use a number of materials that could be subject to shortages if production levels increase. This applies in particular to tellurium and indium. A shortage can occur when not enough material is being mined.

When it cannot be economically mined at prices the PV industry can support, or if competing uses drive up material costs, PV could be exposed to considerable price rises long before supply is truly exhausted.

By comparison, the major constituents of a CSP plant – glass, aluminium, steel and concrete – are not generally subject to rigid supply limits, although they are affected by changes in commodity prices.

Despite the tough competition imposed by PV prices, the CSP industry’s revenue is anticipated to rise from the current $2.1 billion to $5.1 billion in 2013, reaching an estimated $8.6 billion by 2020, with the US and Spain leading on installed capacity. CSP is soon to claim its place alongside PV as a cost competitive alternative energy.

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Updated 05/06/12