The cost development of solar thermal energy

Incremental changes can result in substantial cost reductions

The technologies for producing electricity from solar thermal energy can be divided into three main categories:

• Parabolic trough and Fresnel systems
• Central receiver systems, including the solar updraft tower
• Parabolic dish systems, usually combined with a Stirling heat engine

The first commercial CSP plant, which was built in California in the 1980s, used the parabolic trough concept. It has a total capacity of 354 MW. For many years, this was the only large scale CSP plant in the world. Elsewhere, only small demonstration plants were built, as the high investment cost hampered further deployment.

In 2006, a new commercial 1 MW parabolic trough CSP plant was built in Tucson, Arizona. Since then, the development of CSP as a commercial electricity generating technology has taken off. Many CSP projects are currently being built, the majority of which are in Spain and the USA. It is very likely that because of this market boom, investment costs for CSP will go down. The question is how much and how quickly.

Deducing experience ratios

Since experience with CSP is still very limited, it is very difficult to draw experience curves that are useful in making reasonably accurate predictions. The parabolic trough system is still the only CSP technology to be considered commercially viable, and even this technology has only seen three doublings in capacity since its entry into the market.

One way to refine predictions is by aggregating the experience curves for various subsystems (collectors, storage system, power block, etc.). The NEEDS study employed this approach in calculating a progress ratio ranging between 85% and 92%.

A few price estimations that have been published recently assume a relationship between capacity growth and price reduction and are thus implicitly expressing a progress ratio:

• The Spanish Plan de Energías Renovables includes 500 MW of new CSP capacity and predicts a cost decline of 20% during the construction of those plants. This additional 500 MW would represent a doubling of the present global CSP capacity, so the cost decline corresponds to a progress ratio of 80%.
• The CSP Today market association predicts that the cost of electricity from CSP will have dropped from the current 20 €c/kWh to 8€c/kWh when the global CSP capacity reaches 4 GW — three doublings of the capacity. These CSP Today figures convert to a progress ratio of 75%.

Scaling-up is key to reducing investment costs

Many studies have been conducted on how various technical developments could lead to cost reductions for CSP. One comprehensive source of data is the ECOSTAR study, whose conclusions were integrated into the EU Paper 'Renewable Energy Technologies/Long-Term Research in the 6th Framework Programme 2002-2006'.

Regarding the parabolic trough, the ECOSTAR study relies heavily on incremental technology innovations for achieving cost reductions, including:

• Cheaper concentrator fluids
• A lower TCO for storage systems
• Increased unit size of the power block
• Volume production effects

ECOSTAR predicts an investment cost reduction in parabolic troughs of 55 to 65% over the next 15 years.

Concerning central receiver technologies, ECOSTAR identifies the following as the main sources of cost reductions:

• Use of molten salt as a heat transfer fluid (molten salt is currently used for thermal storage)
• Use of saturated steam as a heat transfer fluid
• Scaling-up the size of the plants
• Integration of the solar module with a gas turbines system
• Volume production effects

In general, ECOSTAR considers the scaling-up of plant size as the principal source of future cost reductions. ECOSTAR predicts that the cost of CSP electricity will come down to 6 €c/kWh by 2020 in Southern Spain, and even to 4.5 €c/kWh in areas with high solar irradiation.

Thermal storage increases the investment costs of CSP plants, but according to ECOSTAR, it will most likely ultimately lead to a lower cost of electricity generated from CSP.

An experience ratio of 88%

The NEEDS study concludes that the impact of each individual improvement in technology and efficiency in CSP is small, but taken all together the incremental changes that are currently in the pipeline show a considerable potential for cost decreases.

By taking the input from experience curves, bottom-up analysis, and expert assessments into account, NEEDS suggests an experience ratio of 88%. It does however underline the huge uncertainty of this value by setting a lower sensitivity value at 83% and an upper sensitivity value at 93%.