Considering the Protermosolar statements: "solar thermal technology with thermal storage is a key part of the renewable energy mix that can really reduce dependence on gas (and fossil fuels in general) for night-time electricity generation, thanks to its high flexibility, its spinning reserve (synchronous condition), and its long thermal storage capability(over 6 hours). The value of solar thermal technology should not be measured exclusively by the cost of the energy produced (LCOE), since its role, thanks to its storage and capacity to reduce curtailments, is keyfor the system to achieve high volumes of intermittent renewable penetration, energy independence and local development". Any further contribution, or is that the core of Protemosolar's discourse right now? In other words, what does solar thermal have that wind or photovoltaic, for example, do not?
We have storage, which gives us a certain firmness and flexibility. We like to call solar thermal "nighttime solar", because we consider that we are a perfect complement to daytime solar (photovoltaic). And we are a perfect complement thanks to our ability to defer production from day to night, or whenever necessary. I would emphasize that solar thermal is an extraordinarily competent technology in terms of its contribution to security of supply and technological independence. We provide stability to the grid. Typically, stability has been provided by conventional thermal technologies: nuclear, coal, combined cycle gas turbines. Well, our concentrating solar thermal power plants (CSP), which are also thermal, can provide just that. Our equipment is equivalent to that of the traditional power plants, but in renewable energy. We are the renewable alternative, one of the renewable alternatives... to provide backup.
Just a few weeks ago, the president of the Spanish Wind Energy Association, Juan Diego Díaz Vega, said that "the technologies that should provide flexibility to renewables are not penetrating at the necessary level (...) and, unless something changes," he added, "in two years' time, the system will not be able to accommodate the renewable generation we foresee on the basis of the authorizations granted". Simultaneously (or almost simultaneously), just a few weeks ago, Protermosolar asked the Government topropose new incentive schemes - such as auctions and capacity markets – to give the right and stable signals to investors who want to install a solar thermal plant. Because, although building a CSP is more expensive than installing a photovoltaic plant, the solar thermal plant - insists the Association - provides that security of supply, due to its manageable condition, which does not give a photovoltaic or wind power plant. That is why Protermosolar asks for tenders whose conditions take into account this added value. In a nutshell, the solar thermal technology can help to alleviate/solve a problem that is looming, 2 years away, but CSPneeds to be remunerated in a differentiated way because the service that provides is different. Differential value, is that so?
The wholesale electricity markets - in Spain the day-ahead market, the intraday markets - do not give price signals to attract long-term investments in back-up renewable technologies. If there are more and more renewables, with low market prices... this is not going to attract new investors. Well, that's where different mechanisms come from, which in some way come to fill that gap. And capacity markets and tenders are one of those alternatives. They offer an economic complement that somehow stabilizes those necessary revenues that can give certainty of price signal in the long term, and that facilitates the attraction of new back-up renewable projects.
Well, capacity mechanisms can fill this gap and provide certainty to the investor, because, roughly speaking, what the investor is being told is that he will be paid a bonus for having the facility available to meet the needs of the system at a given time. I understand that this is where capacity auctions come in. And I suppose that the CSP tender proposed by the government in October did not go that way, or did not take into account the CSP singularities and that is why the tender was void [The auction works like this: the government sets a price cap which the renewable energy producer would charge per megawatt hour produced during a given period: 10, for example. The participants in the auction must lower that price cap: I will produce that megawatt hour at 9; I will produce it at 8; I am able to produce it at 7 and still get an attractive return because my technology is more efficient; and so on, and so on, until no one goes lower. That way, electricity will be very competitive for consumers. And the companies are assured that they will charge their megawatt hours at a price for a period of time established by the government in its auction (in this case, twenty years). The price set by the government is secret. The companies bid at the auction with sealed envelopes. When the Government says "the auction begins", the Government publishes the price - ten, for example - and all the envelopes are opened. And it turned out that no company bid less than ten. Conclusion? Not a single megawatt was awarded]. The auction did not award a single megawatt out of 220. Why did it fail?
Good question... In any case, let's see... To talk about failure... Of course, we were very disappointed... But we believe that what happened can be used to improve the mechanism for the next auction. One of the aspects to be improved is the auction design, since it has caused that the prices offered have been decoupled from the real costs of the technology. Therefore, we must work on an auction design that attracts investment in back-up renewable technologies, with more than six hours of storage, being able to cover the night hours with renewable energy and providing security and stability of supply equivalent to fossil technologies.
And what was the price cap set by the government?
We do not know. It is not known. These areconfidential prices.
And what are the international reference prices?
Irena [International Renewable Energy Agency] reports state a price range between $150 and $250 per megawatt hour in the last five years. In the last two years, two new CSP plants have been commissioned: one in Chile and the other in the United Arab Emirates. In the case of Chile, the price per megawatt hour was $114; in the case of the United Arab Emirates, was $76. In Spain, with the analyses Protermosolar has made, we have seen that the price references of the entire fleet that was installed here in Spain between 2008 and 2013, compared with the current costs, have been reduced by 50%.
So I understand that the Government made a mistake. Because if it has those references and sets a price that is too high....
Well, I don't like to label with "failure" or "mistake"... Let's see: we have to decarbonize the electricity sector by 2030 with 74% of renewable energies. And right now I would say that the electricity sector is decarbonizing well in terms of energy, but not in power. What does that mean? Well, to meet the same demand we need more and more power. In other words, we are not being able to reduce the installed capacity in the system. At present we need 2.5 times more installed capacity than demand requires. We still need nuclear power, we need coal in part, we need the 26 gigawatts of CCGT we have in the system. What should we do? Well, we need to see how we can replace fossil power, how we can close conventional CO2-emitting thermal plants and replace them with back-up renewables. Yes, we have to give incentivize new to renewables that provide backup. And one of the lessons learned is that auction designs that are valid for inframarginal renewable technologies such as wind and photovoltaics... may not work for back-up renewables. Well, lesson learned. Now what is needed to work on the design of auctions that allow the integration of back-up renewables.
Irena's reports -I have just heard- place solar thermal between 150 and 250 dollars per megawatt hour; Chile, 114; Emirates, 76. I say this because, recently, at the renewable energy fair, Genera, one of the most important offshore wind farm developers in Spain proposed a range (for a hypothetical future auction of onshore wind) of between 150 and 200 euros. And onshore wind is not flexible or controllable, like CSP.
Well, when this type of cost comparisons are made... it is necessary to analyze carefully and prudently. For example, Chile has a solar radiation that exceeds practically 60% of the direct normal irradiation in Spain; and the Emirates project has a financial scheme of a 35-year PPA [a long-term guaranteed purchase agreement at a determined price]. This is like a mortgage: the payment you have with 35 years period is not the same as the one you have at 20 years. In other words, all this has to be put in context. Furthermore -I insist-, we should not only compare LCOE. We have to evaluate in some way how CSP technology offers security of supply, local economic growth, and energy independence.
When we talk about renewables with backup, and apart from solar thermal, are we talking about pumping...?
Of course we are. We are talking about biomass, pumped hydro, geothermal.... And of course also wind or photovoltaic with storage...
And what about hydrogen? Is hydrogen a rival of solar thermal? I say this because it is often presented as a solution for the decarbonization of certain industrial sectors or as a storage solution for renewable energies?
There are two applications in which we have to bet firmly from the solar thermal field: controllability and firmness within the electricity system and the decarbonization of industrial processes (SHIP – Solar heat for industrial processes). If we remove power block stage from a CSP power plant, in which the heat is transformed into electricity, then we would be left with just a heat factory (CST – Concentrating Solar Thermal): we produce heat from solar irradiation. And we can provide that heat directly to industry. Industry in Spain is the second largest emitter of greenhouse gases, accounting for 21%. 75% of industry's energy demand is in a heat form, and of that 75%, 90% is produced by industry with fossil fuels. Hydrogen... is the long term, but the rigorous short term in the decarbonization of SHIP is CST, a technology that is already commercially implemented. I believe that one of the objectives we should set for 2023 is to encourage each industry to crunch the numbers. We say: gentlemen, are you aware that there are technologies that are already a solution, that can already provide heat (renewable heat) to your industrial processes? Let them do the numbers. I tell them that the CST cost for this type of process ranges between 20 and 50 euros per thermal megawatt hour, which places us below the current gas cost. In a nutshell, these are the two key applications of solar thermal technologies: Solar heat for industrial processes and the decarbonitation of the night of the electricity system, thanks to to our condition of backup and storage. We are the alternative to fossil fuels in both fields.
The government is reviewing the National Energy and Climate Plan, which currently has set a target of 5,000 megawatts for CSP in 2030. Will it raise that target?
Difficult to say. The important thing is the credibility of that figure... And that what is put in place... is what must be done. Let's do it, let's have the auctions and the necessary mechanisms to make back-up renewables real.
In any case, is the sector capable of installing those 5,000 megawatts by 2030? I say this because there are only seven years left....
Yes, without any doubt.
What if there is a pandemic, or a war, or a ship crosses the Suez Canal? Do we have the entire solar thermal supply chain here?
We have the entire industrial chain of the sector. We have expertise in operation and maintenance. We are supporting 6,000 direct and indirect jobs for the installed capacity we have [2,300 MW]. CSP is located in municipalities with an average of 12,000 inhabitants. CSP is possibly the technology that has provided the most rural development and growth in Spain. We contribute 1.500 million euros to GDP every year. Spain is currently the world's leading country in terms of installed capacity. And the sector's chain is still alive. But it is very important that we do not forget about promotion. We also have to find the way to boost this promotion.
In any case, I come back to the question: the supply chain should not be the problem. In other technologies you may need materials that are more difficult to obtain, but here we are talking about tubes, mirrors, steel. All the components of our technology can be supplied and manufactured entirely in Europe, without having critical or rare metals in their composition, which results in European security of supply and no dependence on the volatility of energy markets and rare metals.
I will conclude by insisting on the idea that we have already touched on, but which seems to me to be key: wind and photovoltaic power plants are increasingly concerned about the need for storage and controllable solutions. What does solar thermal propose?
Let's say there are several alternatives. Regarding electricity production, there are now some initiatives to transform power to heat (curtailments may be stored in thermal energy storage facilities), for example. Let's see, storage comes to cover three gaps: what is called peak saving, which is avoid the peak hours (that is, it is necessary to produce here for one hour... that has a gap); then there is the weekly daily storage (we are talking about more than six and up to ten hours of storage); and finally, there is seasonal storage. Well, there is no doubt that the gap that CSP occupies is that of daily and weekly storage. There we are practically unbeatable. What we propose is to promote that part. To decarbonize the night. With regard to the production of SHIP, thermal storage can currently absorb the surplus of electrical curtailments, the so-called power to heat, with an efficiency close to 100% and at a very competitive cost. In addition, the decarbonization of these processes can be done with local production with our concentrating solar technology, which is capable of delivering heat above 100 degrees and at lower prices than gas.