EXECUTIVE SUMMARY: Concentrated Solar Power Market Trends, Policy Landscape, Technology Drivers, Competitive Threats, and Global Forecasts

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1 EXECUTIVE SUMMARY: Concentrated Solar Power Market Trends, Policy Landscape, Technology Drivers, Competitive Threats, and Global Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Pike Research at sales@pikeresearch.com. Published 4Q 2011 R. David Hague Industry Analyst 0 Peter Asmus Senior Analyst

2 Section 1 EXECUTIVE SUMMARY 1.1 Introduction Concentrated solar power (CSP) has been a start-stop industry since the 1500s, when Leonardo da Vinci conceived the use of a parabolic mirror concentrator to heat water for dyeing cloth. It is plausible that da Vinci failed to design a CSP system that was cost competitive with the primary fossil fuel of his time, chopped wood. More than 490 years after da Vinci s death, CSP made history when the first commercial-scale systems went online in the Mojave Desert. Luz Industries designed and built a series of nine CSP systems during the late 1980s. Like da Vinci, Luz s Solar Electricity Generation Systems (SEGS) were unable to compete with a modern equivalent of chopped wood, natural gas. The company went bankrupt in 1991, a year after the final system, SEGS IX, came online. However, seven of Luz s original SEGS continue in operation today, providing 310 MW of generating capacity. These systems remained the largest series of commercial CSP installations until 2009, when Spain gave CSP another jump-start on the heels of aggressive government backed feed-in tariffs (FITs). The current CSP revival was jump-started around Several key policy announcements at that time inspired investors and engineers to start developing again. Fueled by global warming concerns and geopolitical conflicts surrounding the dependence on fossil fuels, the revival gained steam in California accelerated its Renewable Portfolio Standard (RPS) and several European Union (EU) countries introduced FIT programs ensuring investment returns on capital-intensive utility solar plants. The CSP movement peaked in as silicon-based PV solar modules rose to record prices during a temporary global shortage of solar-grade silicon. The 2008 global economic collapse did not have an immediate effect on CSP due to the hyper-growth and publicity surrounding all renewable energy technologies. Between 2008 and 2010, Spain brought 14 new utility-scale CSP plants online. The country, the global leader in CSP deployment, tripled global capacity with the addition of 667 MW of new CSP thanks to its highly successful FIT program. As the economy began to settle, Spain ratified its FIT program to offset budget deficits in This stalled new construction starts in Spain indefinitely. Spain, once the global leader in new CSP project, currently has zero projects under construction further stalling industry growth The CSP market is paused at the moment not stopped. Five projects totaling 1,532 MW are currently under construction in the United States as the direct result of the Department of Energy s (DOE) Loan Guarantee Program. By 2013, the global capacity of CSP will double for the second time in five years. The biggest threat to resumed growth in CSP is the dropping prices of PV modules. PV module prices continue to drop beyond 50% of their peak in mid In addition, the established track record of PV is more attractive to financial backers. Yet, CSP may overcome competition from PV by reducing costs as the result of bigger scale and two technology propositions that increase operating revenue and profits: hybridization with fossil fuel plants through a process called Integrated Solar Combined Cycle (ISCC) and utility-sized energy storage capabilities. 1

3 In the United States, though, a disparity exists between CSP projects awarded and projects brought online as operational. While 6,886 MW have been awarded, only 1,532 MW (spread across five projects backed by U.S. DOE loan guarantees) are under construction. Chart 1.1 below puts forth several key takeaways for the U.S. CSP market: The only projects moving forward with construction are backed by the U.S. DOE Loan Guarantee Program; these projects total 1,532 MW Projects totaling 745 MW have been canceled or delayed to the point that project validity is questionable Projects totaling 1,209 MW have been replaced with PV Projects totaling 3,400 MW remain in the pipeline with uncertainty Chart 1.1 CSP Project Announcements vs. Construction Starts, United States: October 2011 Replaced with PV 36% Awarded US-DOE Loan Guarantee 21% Canceled 5% Pre-Construction 38% (Source: Pike Research) 2

4 1.2 Industry Growth At a macro level, the global CSP market consists of six key regions: the United States, Europe, the Middle East and North Africa (MENA), China, India, and Australia. The following primary drivers for regional CSP market growth are ranked in priority: Site selection with available direct normal irradiance (DNI): DNI, the amount of solar radiation received over a given area that is perpendicular (or normal) to the rays coming from the sun, is the primary regional driver because it is a fundamental, geography dependent requirement for CSP. Renewable energy policies, goals, and incentives: CSP remains expensive when compared to fossil fuels; competitiveness is dependent on regional policy, goals, and incentives. Proximity to markets served and installed or planned transmission infrastructure: CSP is a centralized power generation technology that produces high levels of electricity that requires infrastructure to move to point of use. The CSP industry will remain focused on regions with attractive DNI profiles. CSP market growth is dependent on project bankability/financing, policy, cost reductions in technology, cost competitiveness with PV, and expanded transmission capabilities driving exports to other regions. Growth projections demonstrate the start-stop nature of CSP growth. Pike Research s five-year forecast for CSP revenue shows declines in the base and average scenarios. The flex points discussed in this report should be closely watched, as they will drive the timing and intensity of CSP market recovery in year Chart 1.2 CSP Revenue, World Markets: $25,000 $20,000 Base Scenario Average Scenario Aggressive Scenario ($ Millions) $15,000 $10,000 $5,000 $ (Source: Pike Research) 3

5 Section 9 TABLE OF CONTENTS Section Executive Summary Introduction Industry Growth... 3 Section Technology and Applications Technology Overview Anatomy of Main System Configurations Power Tower Parabolic Trough Dish Linear Fresnel Lens CSP Applications Standalone Power Generation Hybridization with Fossil Fuels: Integrated Solar Combined Cycle (ISCC) Energy Storage Process Heat Natural Resource: Solar Direct Normal Irradiance (DNI) Competition from Photovoltaics Water Usage and the Challenge from PV Section Market Issues Introduction Commercial History Market Drivers Climate Change and Greenhouse Gas Reduction Energy Security Energy Supply Diversification Renewable Portfolio Standards (United States) Policies and Incentives Feed-In Tariffs Government-Backed Loan Guarantees Tax Breaks, Subsidies, and Incentives Worldwide Incentives Policy Trends: United States, Europe, MENA, India, China, and Australia United States European Union: Spain and Italy Middle East and North Africa India China Australia R&D Grants and Subsidies Private Sector Investments Market Barriers Permitting Financing Transmission

6 Section Key Markets United States U.S. Market Disparity U.S. Market Drivers and Opportunities European Union Middle East and North Africa Masdar MASEN DESERTEC India China Australia Section Key Industry Players Abengoa Solar ACCIONA Energy AREVA BrightSource Energy China Renewable Energy Scale-up Program (CRESP) DESERTEC Foundation esolar Jawaharlal Nehru National Solar Mission (India s Solar Mission) Masdar Morocco Agency for Solar Energy (MASEN) NextEra Energy Resources Novatec SCHOTT Solar Siemens Solar Millennium (and Solar Trust of America) SolarReserve Torresol Section Market Forecasts Methodology Flex Points in Model Incentives Regional Politics and Policies Technology Market Conditions Recent Signals Global CSP Market Forecast Regional Breakdown United States Europe MENA India China Australia Market Value by Region, World Markets United States Europe MENA

7 6.5.4 India China Australia Section Company Directory Section Abbreviations Section Table of Contents Section Table of Charts and Figures Section Scope of Study Sources and Methodology Notes

8 Section 10 TABLE OF CHARTS AND FIGURES Chart 1.1 CSP Project Announcements vs. Construction Starts, United States: October Chart 1.2 CSP Revenue, World Markets: Chart 3.1 Current Project Pipeline, Announced, Under Development, and in Construction, World Markets: Chart 3.2 Total Primary Energy Demand, World Markets: Chart 4.1 Project Announcements vs. Construction Starts, United States (October 2011) Chart 4.2 Electric Power Industry Net Generation, United States: Chart 6.1 CSP Capacity, World Markets: Chart 6.2 CSP Revenue, World Markets: Chart 6.3 CSP Capacity, United States: Chart 6.4 CSP Revenue, United States: Chart 6.5 CSP Capacity, Europe: Chart 6.6 CSP Revenue, Europe: Chart 6.7 CSP Capacity, MENA: Chart 6.8 CSP Revenue, MENA: Chart 6.9 CSP Capacity, India: Chart 6.10 CSP Revenue, India: Chart 6.11 CSP Capacity, China: Chart 6.12 CSP Revenue, China: Figure 2.1 Power Tower... 4 Figure 2.2 Parabolic Trough CSP Technology... 5 Figure 2.3 Dish Stirling... 5 Figure 2.4 Linear Fresnel Lens... 6 Figure 2.5 Simplified Steam Generation Flow Chart... 7 Figure 2.6 Stored Power Dispatch Principle... 8 Figure 2.7 Indirect vs. Direct Normal Irradiance... 9 Figure 2.8 Global Direct Normal Irradiance Figure 4.1 Coal-Fired Power Plants, United States Figure 4.2 Direct Normal Irradiance, United States Figure 4.3 High-Voltage Direct Current Transmission Lines, United States Figure 4.4 Direct Normal Irradiance, Europe and MENA Figure 4.5 DESERTEC Concept Figure 4.6 DNI, India Figure 4.7 DNI, China Figure 4.8 Population Density, China Figure 4.9 DNI, Australia Table 3.1 Renewable Portfolio Standards by State Table 3.2 Renewable Energy Policies and Incentives, World Markets Table 3.3 United States DOE Loan Guarantee Awards Table 3.4 CSP Subsidies, MENA Table 4.1 CSP Projects Awarded Under PPAs, United States Table 4.2 CSP Projects, Europe Table 4.3 CSP Projects, MENA

9 Table 4.4 CSP Projects, India Table 4.5 CSP Projects, China

10 Section 11 SCOPE OF STUDY This market research report provides an overview of the global concentrated solar power (CSP) market. Pike Research focuses on the key markets for CSP, including the United States, Europe, the Middle East and North Africa (MENA), India, China, and Australia. The report s purpose is not to provide an exhaustive assessment of technologies covered. Rather, it aims to offer a strategic examination of the CSP market that focuses on renewable energy policy drivers, market conditions, and competition from PV. Pike Research strives to identify and examine factors that promote or prevent the adoption of CSP to aid readers in the development of their business models. This report includes projections of CSP power generation capacity growth and revenue through SOURCES AND METHODOLOGY Pike Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Pike Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Pike Research s analysts and the firm s staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Pike Research is an independent market research firm whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. The firm is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. 70

11 NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2011 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 71

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