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REALISING the POTENTIAL of CONCENTRATING SOLAR POWER in AUSTRALIA Summary for Stakeholders

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REALISING the POTENTIAL of CONCENTRATING SOLAR POWER in AUSTRALIA Summary for Stakeholders REALISING THE POTENTIAL OF CONCENTRATING SOLAR POWER IN AUSTRALIA Summary for Stakeholders PREPARED BY IT POWER (AUSTRALIA) PTY LTD FOR THE AUSTRALIAN SOLAR INSTITUTE MAY 2012 AUSTRALIAN SOLAR INSTITUTE Realising the Potential of Concentrating Solar Power in Australia – Summary for Stakeholders Realising the Potential of Concentrating Solar Power in Australia – Summary for Stakeholders is available as a separate document but also forms part of the full detailed report: Realising the Potential of Concentrating Solar Power in Australia. The Australian Solar Institute (ASI) has commissioned this study to facilitate discussion on the potential for Concentrating Solar Power (CSP) in Australia. Study undertaken and report prepared by IT Power (Australia) Pty Ltd, part of the IT Power group, a specialist engineering consultancy focussing on renewable energy, energy efficiency and climate change. IT Power has offices in Australia, China, India, Kenya,, Morocco, Portugal, UK and USA. Authors: Keith Lovegrove, Muriel Watt, Robert Passey, Graeme Pollock, Joseph Wyder, Josh Dowse. The views expressed in this report are views held by IT Power, formed on the basis of the conclusions reached in the course of its analysis. The report does not seek to present the views of ASI, or any employee or Director of ASI, nor that of the Australian Government. For further information contact IT Power (Australia) Pty Ltd phone: 61-2 6257 3511 email: [email protected] web: www.itpau.com.au © Australian Solar Institute May 2012 www.australiansolarinstitute.com.au ISBN: 978-0-9873356-1-6 (paperback) 978-0-9873356-2-3 (online) Cover photography: CSIRO Solar Thermal Research Hub, CSIRO Energy Centre, Newcastle, NSW, Australia. Contents Report at a Glance 4 Outlining CSP’s future in Australia 6 Meeting Australia’s energy needs 6 CSP’s role in meeting those needs 6 Available CSP technologies 8 Concentrating solar power systems 8 Conversion and storage systems 8 International growth in CSP capacity 9 Australian markets for CSP 11 Market segments and location 11 CSP’s potential advantages 13 Available revenue for a CSP asset 15 Pool prices in wholesale electricity markets 15 Additional network value and income 16 Income beyond the wholesale markets 17 Cost of delivering CSP energy 18 A baseline cost and sensitivities 18 Effect of energy storage 19 Effect of system size 20 Effect of power block size relative to field and store 21 Projected cost reductions 22 The commercial equation for a CSP asset 23 The financial gap 23 Comparison with other renewable sectors 24 Challenges, confidence and risk 25 Public and sector benefits 26 Potential benefits 26 Option value of CSP 27 Actions needed for CSP investment 28 1: Bridge the reducing cost-revenue gap 28 2: Build confidence in CSP’s offer 29 3: Establish CSP-solar precincts 29 4: Foster CSP research, development and demonstration 30 Supporting actions 30 CSP’s future contribution 31 Glossary 34 Report at a Glance Major changes in the world’s established energy • Emission reduction: 10 GW of capacity supply systems are being driven by growing would reduce Australia’s emissions by roughly energy demand, energy security concerns, rising 30 Mt CO2 per year, about 15% of current greenhouse gas emissions, local environmental electricity sector emissions. issues, increasing oil prices, and international • Clean energy sector growth: Only a few competition to lead in the emerging clean countries are currently investing in CSP. With energy technologies. Australia shares these CSP exploiting its world-leading solar global concerns. To address them all at least cost resources, Australia can claim a significant and risk, while providing energy for intra-day place in the global clean energy supply chain. peaks and longer-term demands, a portfolio of Delaying action will see that opportunity energy options is needed. Concentrating Solar missed. Power (CSP) is one of those options. However, a • Community-supported generation: CSP significant cost-revenue gap for CSP projects is need not compete for valuable land or water deterring private investment. Concerted action is and is low-impact. Every 100 MW system needed to close that gap and retain CSP as a would create around 500 job years during strong energy option for Australia’s future. construction and 20 jobs during operation, CSP is proven and available mostly in regional areas. Global installed capacity of CSP is growing • Potential for future solar fuels: Emerging rapidly and is predicted to reach 2 GW in 2013, technology will convert solar energy to liquid led by Spain and the US. Concentrating solar fuels, supplied at scale to both domestic and thermal (CST) plants dominate, typically using export markets. standard steam turbines and often integrating However, the cost-revenue gap thermal energy storage. is currently too great CSP can contribute significantly The CSP cost-revenue equation varies to Australia’s energy needs enormously with system configuration and Australia has just over 50 GW in electricity location. Instantaneous CSP generation generation capacity from all sources. This study correlates well with peak electricity prices. With finds that, it would be technically feasible to thermal storage, the energy value of CSP add up to 15 GW of CSP capacity, with only systems is even higher, up to double the modest grid extensions. Hybrid systems within wholesale market average. Even so, existing fossil-fuel plants, and smaller plants for CSP projects are not yet commercially attractive off-grid mines and towns, are important near in Australia. For utility-scale systems, the term applications for CSP systems. Future baseline ‘levelised cost of energy’ (LCOE) is ‘nation-building’ grid extensions would unlock around $250 per MWh, while maximum more of Australia’s world-leading solar revenue streams in main grid-connected resource, which vastly exceeds all predictable markets currently total around $120 per MWh energy demand. (including renewable certificates). The gap is smaller for the relatively small off-grid mining CSP offers particular benefits and remote towns sector. As part of a future energy portfolio, CSP systems would deliver: • Dispatchable energy supply: Systems that can dispatch electricity in the range of baseload to peaking power are an essential complement to variable renewable sources. CSP with storage has that capability. • Lower emission conventional power plants: CSP can be efficiently integrated into existing and new coal and gas power plants to reduce emissions and extend plant life for a least-cost transition to a low-emission energy future. 4 Realising the Potential of Concentrating Solar Power in Australia The gap will close, with the help 2: Build confidence in CSP’s offer of Australian action The CSP sector should better Consistent with overseas research, this study communicate CSP’s value proposition to finds that the cost-revenue gap for CSP in key stakeholders including AEMO, AEMC, Australia is likely to close over the next 6 to 18 electricity retailers and financiers. years as plant costs fall through global Government, consumer, energy industry and deployment and technology improvement and investor support for CSP will remain ephemeral available revenue rises. However, these until there is a base of understanding and projections depend on continued global confidence. The CSP sector must explain CSP’s investment in CSP. At this early stage of the potential benefits, demonstrate them in global industry, Australia has the opportunity to practice, and respond to concerns. contribute significantly to momentum in reducing costs and risk. Completing 250 MW 3: Establish CSP-solar precincts of Solar Flagships and other deployments and The CSP sector should work with maintaining a sector annual growth in line with governments, regulators and service recent global rates would lead to an Australian providers to pre-approve and provide CSP capacity of around 2 GW by 2020. connections for CSP systems in selected areas of high solar resource. CSP precincts would reduce planning, approvals and grid connection costs, helping to reduce early-stage project risk. They would also spread the costs of solar data collection, environmental impact assessments and community consultation across projects. 4: Foster CSP research, development and demonstration The CSP sector should leverage continued public and industry investment in research, development and demonstration, with more emphasis on meeting Australian needs. Building CSP in Australia requires growth in skills and capabilities that are lacking; targeting Concerted Australian action needed deployment of systems below 50 MW 1: Bridge the reducing cost-revenue gap (overlooked by the global industry); Whilst continuing to focus on lowering incorporating energy storage; improving cost, the CSP sector should work with efficiency; hybridisation with fossil fuel plants; governments and regulators to increase and using advanced cooling technologies the reward for clean energy systems that (reflecting our water constraints). better correlate generation to real-time demand. If these actions are pursued successfully, the Rather than subsidising CSP specifically, CSP sector would be large enough to deliver technology-neutral measures should target the economies of scale within immediate dispatchable characteristics that Australia investment and policy horizons. needs. Early deployment where the cost- revenue gap and other challenges are smaller will help maximise CSP opportunities and bridge the gap. The CSP industry
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