Technical Assistance Consultant’s Report

Project Number: 43356 / TA 7402

Capacity Development Technical Assistance (CDTA)

January 2012

People’s Republic of China: Concentrating Solar Thermal Power Development (Financed by the Climate Change Fund)

Prepared by:

Team Leader: Jorge Servert; Co-Team Leader: Wang Zhifeng; International Technical Expert: Diego Martinez; International Financial Expert: Zhu Li; Coordinator: Hu Jicai; National Technical Experts: Ma Chongfan, Huan Dongfeng, Lu Zhenwu, Zhang Suhua, Lin Bao, lui Huaiquan, Chen Changzheng.

Revisions:

Revision Date Comment Signatures

Originated Checked Approved by by by

ABBREVIATIONS

ADB – Asian Development Bank AEBIOM – European Biomass Association AEEG – Gas and Electric Energy Authority ARRA – American Recovery and Reinvestment Act CAPEX – Capital Expenditures CAS – Chinese academy of Sciences CHEC – China Huadian Engineering Company CO – Coordinator CNRS – Centre National de la Recherche Scientifique CRS – Power Towers or Central Receiver Systems CSIRO – Commonwealth Scientific and Industrial Research Organization CSP – Concentrating Solar Thermal CSP – Concentrating Solar Power CTL – Co-Team Leader DE – Dish/engine Systems DLR – Germany's national research center for aeronautics and space DNI – Direct Normal Irradiation DSG – Direct Steam Generation EA – Environmental Analyst EEC – Energy Economist EGEC – European Geothermal Energy Council EIRF – Environmental Impact Registration Form EIS – Environmental Impact Statement ENEA – Ente Nazionale per l’Energia, l’Ambiente e le Nuove Tecnologie EPC – Engineering, Procurement and Construction EPCM – Engineering, Procurement, Construction and Management EPIA – European Photovoltaic Industry Association EREC – European Renewable Energy Council EREF – European Renewable Energies Federation ESHA – European Small Hydropower Association ESTELA – European Solar Thermal Electricity Association ESTIF – European Solar Thermal Industry Federation EUBIA – European Biomass Industry Association EU-OEA – European Ocean Energy Association EUREC – Agency - European Association of Renewable Energy Research Centers EWEA – European Wind Energy Association FA – Financial Analyst FIT – Feed In Tariff FLG – Federal Loan Guarantee GDP – Gross Domestic Product GHG – Greenhouse Gas GME – Gestore del Mercato Elettrico GW – Gigawatt ha – hectare HTF – Heat Transfer Fluid HVAC – High Voltage Alternating Current HVDC – High Voltage Direct Current IEA – International Energy Agency IRENA – International Renewable Energy Agency ISCCS – Integrated Solar Combined Cycle System ISES – International Solar Energy Society ISO – International Standard Organization ITC – Investment Tax Credit ITE – International Technical Expert (ITE) ITL – International Team Leader JEDI – Job and Economic Development Impact kWe – electric kilowatt kWh – kilowatt-hour kW – thermal kilowatt LCOE – Leveraged cost of Electricity LF – Linear Fresnel reflector system MENA – Middle East and North Africa MGP – Mercato del Giorno Prima MITC – Manufacturing Investment Tax Credit MOST – Ministry of Science and Technology MTC – Manufacturing Tax Credit MW – Megawatt MWe – Electric Megawatt MWh – Megawatt per Hour MWt – Thermal Megawatt NDRC – National Development and Reform Commission NEA – National Energy Administration NREL – National Renewable Energy Laboratory NSI – Nevada Solar One NTE – National Technical Expert OECD – Organization for Economic Cooperation and Development OPEX – Operational expenditure O&M – Operation and Management costs PPA – Power Purchase Agreement PPP – Power Purchase Price PPPa – Public Private Partnership PRC – People's Republic of China PROTERMOSOLAR – Spanish association of thermo-electric industry PSA – Plataforma Solar de Almería PSI – Paul Scherrer Institute PT – Parabolic Troughs PTC – Parabolic-trough collector PV – Photovoltaic RE – Renewable Energy REC – Renewable Energy Certificate REN21 – Renewable Energy Policy network for 21st Century CNY – Renminbi R&D – Research and Development SDPC – State Development and Planning Commission SDS – Social Development Specialist SEGS – Solar Energy Generating System SEIA – Solar Energy Industries Association SERC – State Electricity Regulatory Commission S – State Economic and Trade Commission SNLA – Sandia National Laboratories Albuquerque SPC – State planning commission SPM – Suspended Particle Matter SRFU – Solar Research Facilities Unit SSPS – Small Solar Power Systems SWOT – Strength, Weakness, Opportunities, Threats TA – Technical Assistance TEIAR – Tabular environmental Impact Assessment Report TES – Thermal energy storage TGP – Treasury Grant Programs WACC – Weighted Average Cost of Capital WREN – World Renewable Energy Congress

INDEX

1 EXECUTIVE SUMMARY (KEY FINDINGS) 10

1.1 Outputs 10 1.2 Key findings 10

2 PROJECT BACKGROUND AND CONTEXT 16

2.1 Project Background & rationale 16 2.2 Scope of the Technical Assistance 17

3 TASK 1: ROAD MAP FOR CSP DEVELOPMENT IN GANSU AND QINGHAI 20

3.1 Key Findings 20 3.2 Road map rationale 20 3.3 Background and situation analysis 20

3.3.1 The solar concentrating technologies 20 3.3.2 Worldwide current situation 24 3.3.3 People´s Republic of China (PRC) 25

3.3.3.1 People´s Republic of China energy mix 25 3.3.3.2 Gansu and Qinghai energy mix 26

3.4 Strategic analysis 26

3.4.1 SWOT 27 3.4.2 Benchmarks 28 3.4.3 Risk, mitigation and contingency 29

3.4.3.1 Risks associated to regulation 29 3.4.3.2 Risks associated to population and society 31 3.4.3.3 Risks associated to manufacturing industry 31 3.4.3.4 Risks associated to investors 33 3.4.3.5 Risks associated to weather: 35 3.4.3.6 Risks associated to plants needed supplies 36 3.4.3.7 Risks associated to grid 37

3.4.4 Barriers 38 3.4.5 Potential barriers 38

3.5 CSP deployment: electricity generation, cumulative installed capacity, value proposition & share on the national energy mix by 2040 39

3.5.1 CSP developing scenario in PRC 39 3.5.2 Business-as-Usual scenario (BAU) 43 3.5.3 Intermediate Scenario 44 3.5.4 Proactive Scenario 45 3.5.5 Deployment 2012-2017 46 3.5.6 Deployment 2017-2022 47 3.5.7 Deployment 2022-2027 47 3.5.8 Deployment 2027-2032 48 3.6 Toward competitiviness, grid parity, cost for society. 48

3.6.1 Introduction 48 3.6.2 Investment reduction 49 3.6.3 Operation and maintenance costs 50 3.6.4 Financial hypothesis 50 3.6.5 Cost for society 51

3.7 Key actions to promote and support CSP 54 3.8 Action plan 55

3.8.1 Actions for National, regional and local government 55 3.8.2 Actions for Utilities and National State Grid 58 3.8.3 Actions for financial institutions 60 3.8.4 Actions for Universities and Research Centers 60 3.8.5 Technologies and R&D 60

4 PILOT PROJECT 1 MWE DAHAN TOWER PLANT 63

4.1 Background 63 4.2 Key Findings and lessons learned 64 4.3 Pilot MW-scale project review 64

4.3.1 Background information 64 4.3.2 Project funding 64 4.3.3 Main research tasks 65 4.3.4 Stakeholders in the pilot project 65 4.3.5 Major barriers in implementation 66

4.4 1MW Dahan tower plant review 66

4.4.1 Location 66 4.4.2 System design 67 4.4.3 Equipment procurement 67 4.4.4 Stakeholders in the pilot project 67 4.4.5 Status of Dahan tower plant 68

4.5 Economic and financial analysis on 1MWe Dahan tower plant 70

4.5.1 Economic analysis 71 4.5.2 Levelized Cost of Electricity 71 4.5.3 Financial analysis 72 4.5.4 Return on Equity based on Cash Flow 72 4.5.5 Suggested power purchase price 72

4.6 Measures to promote the CSP development 72

4.6.1 Cost reduction 72 4.6.2 Political incentives 73

5 SITE SELECTION & PREFEASIBILITY ASSESSMENT FOR 50 MW DEMO CSP PLANTS IN GANSU AND QINGHAI 74

5.1 Background 74 5.2 Key Findings 74 5.3 Rationale of a CSP project in Gansu and Qinghai 75 5.4 Project sites description (Site selection rationale description) 76

5.4.1 Qualitative multi-criteria analysis 77 5.4.2 Technical Criteria 77

5.5 Socio-Economic Criteria 77

5.5.1 Environmental Criteria 78 5.5.2 Site Selection for Gansu 78 5.5.3 Site Selection for Qinghai 78 5.5.4 Gansu 79 5.5.5 Qinghai 79

5.6 Prefeasibility assessment 80

5.6.1 Technical 80 5.6.2 Economical and Financial Analysis 82

5.6.2.1 Economic Assessment 82 5.6.2.2 Financial Assessment 83

5.6.3 Social analysis 88 5.6.4 Possible social impacts 88 5.6.5 Land used 89 5.6.6 Demographic impact 89 5.6.7 Involuntary resettlement 89 5.6.8 Economic impact 89 5.6.9 Employment and income 89 5.6.10 Social acceptance issue 89 5.6.11 Environmental Impact 90 5.6.12 EIA requirements for the Project 90 5.6.13 Soil erosion 90 5.6.14 Biodiversity conservation and sustainable natural resources management 90 5.6.15 Pollution prevention and abatement 91 5.6.16 Management of hazardous materials and pesticide use 91 5.6.17 Greenhouse gas emissions 91 5.6.18 Health and safety 91 5.6.19 Induced and cumulative impacts 91 5.6.20 Physical cultural resources 92 5.6.21 Conclusions and recommendations 92 5.6.22 Risk analysis 92

5.7 Suggestions on CSP incentive policies 94

5.7.1 Tariff or electricity price set up 94 5.7.2 Supply information and promote training 94 5.7.3 Policy 94 5.7.4 New technologies 95 5.7.5 Value chain development 95 5.7.6 International cooperation 95 5.7.7 Promote the development of High Voltage Direct Current lines 95

6 ASSESSMENT AND STRENGTHENING OF INSTITUTIONAL CAPACITY 97 6.1 Background 97 6.2 Key Findings 97

6.2.1 Catalogue of capacities needed for CSP 98 6.2.2 Institution capacities needed for CSP 99 6.2.3 Assessment of institutional capacities in PRC 100

6.2.3.1 Overview of CSP development in PRC 100 6.2.3.2 Institution capacity existing in PRC 101

6.2.4 Gap Identification 109

6.3 Formulation and implementation of a capacity-strengthening program 110

6.3.1 International programs on capacity strengthening 110

6.3.1.1 Asian Development Bank: Asian Solar Energy Initiatives 110 6.3.1.2 International Energy Agency 111 6.3.1.3 The World Bank Group Program in Supporting CSP 112 6.3.1.4 DESERTEC Initiatives 113 6.3.1.5 European Commission, research and innovation program on CSP 113 6.3.1.6 National Renewable Energy Laboratory of the US Department of Energy (USDOE) 114

6.3.2 International networks related with CSP Development 116 6.3.3 Summary of national programs on capacity – strengthening 117

6.3.3.1 National Alliance for Solar Thermal Energy 117 6.3.3.2 Gansu Provincial CSP Innovation Strategy Alliance 117

6.4 Measures to enhance awareness of CSP power among stakeholders 118

6.4.1 Information dissemination 118 6.4.2 Technical and commercial operation demonstration 118 6.4.3 Encourage participation and contribution to international networks 118

7 DISSEMINATION OF KNOWLEDGE PRODUCTS TO RELEVANT PROVINCES ON LESSONS LEARNED AND CHALLENGES IN CSP POWER DEVELOPMENT 120

7.1 Scope 120 7.2 Key findings: 120 7.3 Dissemination knowledge products 120 7.4 CSP knowledge dissemination website 122 7.5 CSP knowledge dissemination seminars 123

8 CONCLUSIONS 129 9 LIST OF FIGURES 131 10 LIST OF TABLES 131 11 REFERENCES 132

1 EXECUTIVE SUMMARY (KEY FINDINGS)

1.1 OUTPUTS

The present report is a summary of the Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development” funded by Asian Development Bank and being the executing agency China Huadian Engineering Company.

The key outputs of the TA are:

 Development of a road map for Concentrated Solar Power (CSP) demonstration and deployment in Gansu and Qinghai Provinces.  Implementation of a pilot MW-scale CSP plant.  Identification of a priority demonstration project and prefeasibility assessment in Gansu and Qinghai Provinces.  Capacity assessment and strengthening of CSP demonstration.  Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP power development.

1.2 KEY FINDINGS CSP development is feasible in People`s Republic of China (PRC), specifically in Gansu and Qinghai and it would bring benefits not only to PRC but to the global economy. From the analysis carried out, grid parity could be achieved in 2030 if proactive actions are taken.

In 2040, it is feasible that 15% of total electricity produced in PRC is supplied using CSP if appropriate actions are taken.

CSP development can be a major driving force on local economy and energy production, reaching an installed capacity of 100 GW in 2030 and 400 GW in 2040 in P.R.C and 20 GW and 50 GW installed capacity in Gansu and Qinghai respectively in the proactive scenario.

For Gansu, and Qinghai, taking into account their forecasted demand and wind energy deployment, it will be necessary to set up a high capacity transport grid to supply the demand located in the east as internal demand will not cover production. This also opens an opportunity for high energy demand companies to be established in Gansu and Qinghai.

Gansu and Qinghai have a good solar resource but not the best in PRC Nevertheless, there is access to water supply, favorable topography, grid and transport and, hence, they are suitable areas for demo projects and future development.

CSP is a stable predictable source of energy that can stabilize other renewable energy sources such as wind and solar PV. In Gansu and Qinghai, there are plans to set up wind and solar PV power plants on the order of GW. This is not feasible if no firm power is installed (such as CSP).

PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Respectively, Gansu and Qinghai hold 5% and 14% of total PRC suitable land for CSP.

Nowadays, electricity generation costs using CSP are higher than if using fossil fuels or other sources of renewable energy; nevertheless, it has some unique features: Availability of primary resource, dispatchability and potential for cost reduction.

CSP has been proven commercially in USA and Spain, creating a good track record.

CSP development in PRC, due to its manufacturing and development capabilities, as shown in wind or solar photovoltaic (PV), should lead to a decrease on investment costs and hence on the cost of the energy produced.

However, initial support is needed to achieve momentum, creating a virtuous circle: pipe- line of projects-industry development-cost reduction. ADB capacity building and financial support is a useful tool to reach this goal.

PRC advantage in R&D capacity and new products time to the market combined with appropriate policy and planning support can speed up the introduction of new generations of more efficient CSP plants and hybrid power plants (coal, combined cycles or biomass)

To supply all the electricity demand in PRC, Gansu or Qinghai in 2040: 150,000 km2, 2,400 km2 or 1000 km2 equivalent to 1,5%, 0.5% or 0,1% of their territory (using current technology) respectively, would be needed.

Nevertheless, Gansu or Qinghai can develop a CSP industry to export energy to PRC In the present analysis, in 2040, to fulfill the proactive scenario of CSP energy production 65 TWeh and 174 TWeh would be produced in those provinces, respectively. The total land required should be 2% of suitable land, which means 0.2 % or 0.3% of total land in each province. This would generate a yearly income around CNY 30 billion and CNY 80 billion, respectively.

There are some constrains and capacity gaps in PRC: lack of knowledge of the technology, specifically among design institutes and authorities; lack of water needed for cooling and cleaning; extreme winters and dust storms, grid capacity, specific regulation and lack of indigenous developed industry. The roadmap defines actions to eliminate or reduce constrains and gaps.

A CSP power plant in Jinta, Gansu is feasible from a technical point of view, even though it faces the challenge of: low temperatures, high speed winds and lacks of indigenous developed industry; to achieve economical feasibility, a premium over fossil fuel generation price is needed.

A 50 MW power plant based on parabolic trough using thermal oil as a working fluid without energy storage and with wet cooling is proposed as demo project. This choice has been made: Balancing risks, profits, local constraints and capabilities.

The major gaps are:

Lack of a development plan for CSP. Government of PRC has published the 12th five year plan, in which renewable energy technologies, such as wind (a goal of 100 GW for 2015), solar (a goal of 15GW for 2015) are key technologies. However, no specific development plan or roadmap on CSP has been defined.

Lack of specific incentive policies targeted at CSP. PRC has issued wind power price policy, which is so called standardised power price policy for wind power project, concessional bidding process for grid connected solar PV projects and lately a feed-in-tariff for solar PV (CNY 1/kWh). There are no specific incentive policies for CSP.

Lack of experience on CSP design, construction and operation. There is no utility-scale commercial CSP project in PRC The Government of PRC has awarded a 50 MW CSP project in the Inner-Mongolia region to a Chinese company (Datang) through concession bidding. There are no established experiences on CSP design, construction and operation.

Lack of standards etc. No national standards have been developed nor issued for key components of CSP in PRC

Lack of investment confidence. For an emerging CSP industry, developers/investors are now reluctant and less confident to invest in CSP projects due to high capital cost, on the range of 1000 million CNY. Furthermore, local manufacturers for key components have not been established, and mainly rely on imported products, such as receivers. The scale of CSP projects investment is far too large for small and private enterprises in PRC to get involved.

Lack of awareness in financing institutions. PRC’s economy heavily depends on bank loans. Bank assets comprise 77% of all financial asset compared to 26% in the US. However, the banking system is still at the early business stage and lack of skills to identify the risky and profitable projects. PRC is now carrying out a banking system reform, which requires the banks to raise risk weighting for the loans in order to limit the bad debts, meanwhile, Chinese banks have very limited knowledge on the renewable energy and energy efficiency. This will increase the reluctances of capital investment to renewable energy and energy efficiency projects. Lack of awareness of CSP technology and development status in financial institutions is one of the main barriers for CSP development in PRC

The global value chain for CSP industry has been analyzed and, even though, there are companies or organizations to fulfill all the links, there is still a deficit in capacity and maturity in most of them.

Task 1: Road Map.

 CSP has been proven commercially feasible in the U.S.A. and in Spain and there are relevant programs for further development in: Australia, PRC, India, Middle East and North Africa (MENA) region, South of Africa and America.  CSP technology has large room for reduction on: investment and operation and maintenance (O&M) costs as well as improvement in performance.  CSP technology is a clean, dispatchable and stable technology.  CSP technology, nowadays, is not competitive with fossil fuels, hence, some kind of support is needed to push forward its development. This support can be implemented using different mechanisms: Feed-in-tariff, power bidding tariff, grants, tax holidays or duty free tax, soft loans, public private partnership.  In PRC, there is a growing interest on CSP.  Gansu, Inner Mongolia, Qinghai, Xizang and Xinjiang have a good solar resource for CSP development but all of them are far from end power users and are relatively underdeveloped. Also, all of them have a good resource of wind energy which has to be combined with a firm source of electricity such as CSP.  Feed-in-tariff main lesson learned: Feed-in-tariff is a good mechanism to stimulate CSP development if combined with enough human capability but, if set too high, it can lead to an excess of expensive installed capacity with a high cost for society.  PRC has developed renewable energy related legislation (grid connection, promotion, obligation to buy energy) and environmental legislation creating a frame that has been good enough to attract investment in wind, solar PV and biomass, mainly, from local investors.  There is a capacity gap in some key technical and financial institutions in PRC as CSP is a new technology.  Three scenarios on the evolution of total installed CSP capacity have been, proposed. These scenarios are coherent with forecasts on PRC energy demand growth and regional and world CSP forecasts.  PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Gansu and Qinghai have suitable available land for CSP. 5% and 14% of total PRC suitable land are in Gansu and Qinghai respectively.

Task 2: Pilot project 1MWe , Dahan Tower Plant.

 CSP technology started to attract great attentions from media, research institutes and industry in PRC since Ministry of Sciences and Technology founded the Institute of Electrical Engineering, Chinese Academy of Sciences (IEECAS) to build a R&D and demonstration 1MW solar power tower system. With the implementation of the project, the industry chain is forming gradually. At the beginning of 2011, National Development and Reforming Commission (NDRC) announced the grid-connecting price for the Inner Mongolia 50MW parabolic trough plant through a concession bidding procedure. The first commercial CSP plant in PRC It shows that the technology and project demonstration are relevant for a new technology to be recognized and be paid attention by the government and industry.  The project comprises two parts, one is R&D, and the other is demo system engineering. The R&D products are used in the demo project. There are several stakeholders in the whole project, and the funds from the Ministry of Science and Technology are allocated to each stakeholder directly, based on individual contracts. The organization leading the whole project is the Institute of Electrical Engineering, Chinese Academy of Sciences (which is also the owner of the demo plant) found it difficult to control the whole process of implementation. Because of an insufficient control of the funds, the delivery deadline for the R&D products is delayed beyond the construction schedule. R&D needs collaborations and trust among different research institutes, universities and industries to reach optimal achievements.  Experience has shown that meeting deadlines and budget goals, and solving licensing complexity has been very difficult for the Institute. Time and effort has been consumed for the civil engineering work permission, which leads to delays on construction. Entrusting professional Engineering, Procurement and Construction (EPC) companies instead of being done by the Institute can be a good option.

Task 3: Site selection and prefeasibility assessment for 50 MW demo CSP plants in Gansu and Qinghai.

 A study has been carried out and, in the opinion of the experts, the recommended technology for the first 50 MWe CSP plant in PRC is Parabolic Trough Collector with synthetic oil as heat transfer fluid (PTC) and, if possible, a natural gas back-up boiler.  Parabolic Trough is the only technology with enough commercial experience to ensure the success for this first CSP project in PRC minimizing risks. As a very clarifying data, 2300 MW out of 2339 MW planned to be built in Spain until year 2013, are PTC technology. This does not imply that future projects are not going to be developed using other technologies whose development is encouraged.  As a result of the financial assessment calculations, the minimum estimated electricity cost is 1 CNY/kWh, when considering national equipments, CDM benefits and an ADB loan.  Both social and environmental impact studies have been carried out for the two locations with positive results.  Four candidate sites had been proposed in Gansu by the Executing Agency, and another two sites in Qinghai. Though all proposed sites are basically acceptable, a site has been identified in Gansu and another one in Qinghai .

Task 4: Assessment and strengthening of institutional capacity.

The successful global commercial development of solar PV and wind has largely profited from the effectiveness of institutions and groups, including policy makers, investors, and project developers, manufactures, and utility.

This task assesses both the international and domestic institutional capacity required for CSP deployment in PRC, recommends measures to enhance awareness of CSP power and also provides assessment of CSP value chain in PRC.

Network is an effective way for industry to share information on technology development, market initiative, policy lobbying and actions, as well as to obtain information and public awareness building. In the past decade, networks on CSP, either technical networks or industrial associations have emerged and expanded. International networks play a vital role on promoting CSP industries. The following measures to enhance awareness of CSP power among stakeholders are recommended:

 Information dissemination, through workshops, conferences, publications and study tours for main stakeholders and players in CSP value chain.  Establish technical and commercial operation demonstration to potential project developers and players in CSP value chain.  Encourage participation and contribution to international networks on CSP. PRC is now active in international networks on solar PV, with devoted efforts and support from industries and institutions. This has proven to have very positive effect on the solar PV industry, market and policy development,  Establish and enlarge scale of national networks. Although PRC has established national networks, it is still in an early stage, and government and industrial supports are needed to enlarge its scale and influence.

The CSP value chain in PRC has being integrated with participation of more players including project developers, materials producers, components manufacturers, Energy, Procurement and Construction (EPC) companies, operators, electricity distributors, investors and owners, research institutions and governments. As a result, CSP materials like steel, concrete and glass can be supplied locally by existing producers in PRC, as long as they can improve production processes to meet special requirements for CSP use. Key components like receivers and heliostats have been developed by a few domestic companies in PRC, and these products shall be industrially verified and improved. However experience on EPC and system integration is scarce in Chinese enterprises. Therefore the institutional capacity, in terms of manufacturing, R&D and financing as well as policy making, shall continue strengthening trough information dissemination, demonstration projects and formulation of specific CSP incentives and in particular international cooperation.

Task 5: Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP development.

 When properly explained and understood the long term profits, the public and relevant stakeholders are interested on CSP technologies and projects.  Public dissemination can help to mitigate barriers which will emerge on the development of CSP projects.  Public dissemination can help to gain supports for CSP development from different stakeholders including local people, government authorities, R&D agencies, Non Governmental Organizations (NGOs), public media, commercial banks, investors, industries, education organizations, etc.  Public dissemination needs the participation and support from different stakeholders.

2 PROJECT BACKGROUND AND CONTEXT

2.1 PROJECT BACKGROUND & RATIONALE

During June 2009 the country programmed meetings in Beijing, a capacity development technical assistance (TA) for Concentrating Solar Thermal Power Development was discussed with the Government of the People's Republic of China (PRC), which led to its inclusion in the 2009 country assistance pipeline of the Asian Development Bank (ADB)1. During the TA fact finding mission in October 2009, ADB reached an understanding with the China Huadian Engineering Company (CHEC) and the government on the impact, outcome, methodology and key activities, scope, cost estimates, financing plan, consulting service´s inputs, outline terms of reference for consultants, and implementation arrangements of the TA2.

The TA has direct relevance to the country´s partnership strategy, which emphasizes environmentally sustainable development and inclusive growth (Asian Development Bank, 2008). ADB's operational strategy also highlights inclusive economic growth in an efficient, equitable, and sustainable manner. In its long-term strategic framework 2008–2020

(Strategy 2020), ADB has identified energy as a core operational sector and is achieving environmental sustainability as strategic priority (Asian Development Bank, 2008). The TA will address relatively weak solar power development in the PRC, which is an integral part of climate change mitigation strategies of the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA).

The TA is ADB’s first solar power intervention in the PRC, and capacity strengthening, pilot project implementation, and prefeasibility assessment of an at-scale demonstration project in a poor western province may spur CSP power development throughout this area of PRC. It will build on lower-carbon emission interventions in PRC's energy sector, such as (i) renewable energy (wind and biomass), (ii) clean coal technologies (integrated gasification combined cycle and carbon capture and storage), and (iii) energy efficiency. The TA is fully aligned with the government's priority on saving energy and protecting the environment by seeking a more balanced, diversified energy mix with a stronger emphasis on renewable energy.

PRC forecasted economic growth, even through the efforts on reducing energy intensity on GDP through efficiency improvement and changing the economical model, will lead to an energy demand growth in the next years in absolute figures. This is a challenge both for PRC and the world due to the scarcity of fossil fuels resources and the impact on environment.

Worldwide there are projects and programs to develop CSP in Europe (Spain), USA, India, MENA region, Chile, Australia, South Africa, with major multilateral organizations involvement. Currently, more than 1 GW is in operation and announced projects are over 40 GW (CSP Today, 2010). This development offers the opportunity for capital and operation and maintenance (O&M) costs reduction and a market for Chinese companies.

1 The TA first appeared in the business opportunities section of ADB's website on 5 October 2009. 2 CHEC is a state-owned enterprise and is a group of company of China Huadian, one of the five large state- owned generating companies in PRC A major challenge for renewable energy sources3 (wind and sun) is that the primary source of energy is not firm, nor predictable, hence, introducing instability into the electrical system. As electricity storage is expensive and not environmentally friendly, spinning reserve must be ready to cover lack of supply when using solar photovoltaic (PV) or wind power, this leads to a limitation in the maximum installed capacity of solar PV or wind. CSP plants are stable if heat storage is installed or CSP is hybridized with fossil fuels or biomass hence can it be used as base load or to follow demand (energy supply security).

CSP technology has been proven in commercial plants, being parabolic the dominant technology trough over 90% of power plants. But, it is still a non-mature technology in comparison with other clean energy sources. Economy of scale, risk reduction, new technologies with higher efficiencies, lower investment and lower water use shall emerge lowering the cost of the energy produced. If appropriate actions are taken and support is given, CSP will be competitive with solar PV and will reach grid parity being able to supply base and peak load for PRC demand in 2020 and grid parity in 2030.

Besides on-grid electricity, CSP can be used for industrial process heat, co-generation of heating, cooling and power, water desalination and small domestic or industrial applications.

Concentrating solar fuels (CSF, such as hydrogen and other energy carriers), in the future, could be used in transport or be transported using pipelines.

PRC has a large industrial and R&D base which can be used to develop an own industry which could supply components, system integration, financing and O&M both in PRC and abroad, similar to the one existing on wind turbines or solar PV. This opportunity could be of special interest for both Gansu and Qinghai provinces.

2.2 SCOPE OF THE TECHNICAL ASSISTANCE

This report summarizes the Capacity Development Technical Assistance (CDTA), 7402- PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”. It outlines: the key findings, project rationale, CSP road map, support on the 1MWe Dahan Tower, CSP demo plants in Gansu and Qinghai feasibility analysis, dissemination activities and knowledge product created.

 Task 1: Development of a roadmap for CSP power demonstration and deployment in Gansu an Qinghai provinces.  Task 2: Implementation of a pilot MW-scale CSP power plant.  Task 3: Identification of a priority demonstration project and prefeasibility assessment in Gansu and Qinghai provinces.  Task 4: Capacity assessment and strengthening of CSP power demonstration.  Task 5: Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP power development.

Within the frame of the Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”, the following activities have been carried out:

3 Hidropower is more predictable and in case of regulation dams it is firm and stable. Geothermal is stable. Nuclear energy is usually considered as clean energy in PRC, this source is also stable. Task 1: Review and assess existing CSP development activities worldwide and complementary activities being carried out in the PRC.

 Capture lessons learned from the international experience in formulating policies, regulations, programs and targeted initiatives to promote and support CSP power activities.  Undertake a comprehensive Strengths, Weakness, Opportunities and Threats (SWOT) analysis for CSP development, its demonstration and future application in Gansu and Qinghai.  Develop an initial outline of the CSP road map and seek stakeholder consultations.  Prepare the CSP road map, and identify residual critical gaps—capacity, legal and regulatory—that may delay or prevent CSP demonstration.

Task 2: Implementation of a pilot MW-scale CSP power plant.

 Review the current ongoing pilot MW-scale project under the Eleventh Five-Year Plan (2006-2010).  Analyze ongoing activities in the pilot project and propose technology selection, and ascertain government and stakeholder commitment for its implementation.  Assess the financing need of the pilot project and type of funding needed to lower the cost barrier in its implementation.  Evaluate economics of the pilot project and its likely impacts such as social, environmental, financial, and electricity tariff.  Based on the pilot project planning, design, procurement, and implementation, undertake comprehensive risk assessment for CSP power, and identify measures to mitigate risks.

Task 3: Identification of a priority demonstration project and prefeasibility assessment in Gansu and Qinghai Province.

 An assessment of the CSP technologies currently available and the proposal of one or several of them for the pilot project.  An economic and financial study to derive key financial indicators (e.g. Financial Internal Rate of Return, Net Present Value, etc.) and to determine the expected electricity generation costs and target tariff.  Environmental and social impact studies.  Development of criteria to rank among several candidate sites for a 50MW project in Jinta, Gansu.

Task 4: Capacity assessment and strengthening of CSP demonstration.

 Identify institutional skills and resources needed to implement the CSP power road map. Review existing capacity and readiness of planners, research institutes, implementing agencies, and regulatory agencies to support CSP power demonstration and identify gaps.  Formulate, recommend, and implement a comprehensive national and international capacity-strengthening program for planners, researchers, implementing agencies, and regulators to bridge capacity gaps  Identify appropriate knowledge and experts’ networks needed to support CSP power activities and a structured mechanism to facilitate them  Identify measures to enhance awareness of CSP power among stakeholders, and organize appropriate national and international workshops and seminars Task 5: Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP power development.

 Preparation of dissemination knowledge products. o TA knowledge products o CSP knowledge products o Brochure editing and publishing o Brochure dissemination  Establishment of knowledge products dissemination website  CSP knowledge dissemination seminars o CSP knowledge dissemination seminar at Gelmud of Qinghai province o CSP knowledge dissemination seminar at Jingta of Gansu province  International study trip o Aims and purpose o Participants & destinations choosing o Budget planning o Study trip planning and preparations o Trip & and visit o Study trip report preparation  Preparation of pilot project  Preparation of solar data measurement  Host the Large-Scale Solar Power Development Workshop in June, 2011

3 TASK 1: ROAD MAP FOR CSP DEVELOPMENT IN GANSU AND QINGHAI

3.1 KEY FINDINGS

As a result of the analysis, the following key findings are:

 CSP has been proven commercially feasible in the U.S.A. and in Spain and relevant programs for further development have been launched in: Australia, PRC, India, Middle East and North Africa (MENA) region, South of Africa and America.  CSP technology has a large room for reduction in Investment and Operation and Maintenance (O&M) costs and performance improvement, as well.  CSP technology is a clean, dispatchable and stable technology.  CSP technology, nowadays, is not competitive with fossil fuels hence governmental and multilateral support is needed to push forward its development. This support can be implemented using different mechanisms: clear planning, R&D support, feed-in- tariff, power bidding tariff, grants, tax holidays or duty free tax, soft loans, promote public private partnership, etc. as described in the report.  In PRC, there is an active interest on CSP.  Gansu, Inner Mongolia, Qinghai, Xizang and Xinjiang have a good solar resource for CSP development but all of them are far from end power users and are relatively underdeveloped. Also, all of them have a good resource of wind energy which has to be combined with a firm source of electricity such as CSP.  The main lesson learned is that feed-in-tariff combined with enough human capability is a good mechanism to stimulate CSP development, but if set too high, it can lead to an excess of installed capacity and cost for society.  PRC has developed renewable energy related legislation (grid connection, promotion, obligation to buy energy) and environmental legislation creating a frame that has been good enough to attract investment in wind, solar PV and biomass, mainly, from local investors.  There is a capacity gap in some key technical institutions and financial institutions in PRC as CSP is a new technology.  Based on the analysis carried on PRC’s CSP development potential and on international references, a forecast on PRC’s CSP yearly installed capacity, has been made up to 2040. PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Particularly, 5% and 14% of total PRC suitable land are in Gansu and Qinghai respectively.

3.2 ROAD MAP RATIONALE

Within the frame of Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”, the road map is a tool to define feasible goals and the appropriate strategies and actions to support their achievement.

Even though, as shown in this report, CSP can be a relevant source of clean energy for PRC, compared with other clean energy technologies such as solar PV, wind or biomass, there is a lack of presence in a tailor-made policies and government targets .

3.3 BACKGROUND AND SITUATION ANALYSIS

3.3.1 The solar concentrating technologies

The irradiance available for terrestrial use is only slightly higher than 1 kW.m-2, and consequently, it can only supply low temperatures to a thermal fluid due to heat losses. It is, therefore, an essential requisite to make use of optical concentration devices that enable the thermal conversion to be carried out at high solar fluxes and with relatively low heat losses.

CSP systems can use the direct solar radiation, only. This is made up of the rays reaching the Earth’s surface directly from the Sun and not of those reflected by the environment (albedo, diffuse radiation…)

Figure 1 Components of solar radiation on Earth’s surface (courtesy NREL)

In order to reflect those rays onto the receiver, thus concentrating the solar radiation, it’s necessary to have the mirrors tracking the Sun as it moves on the sky along the day.

The position of the Sun with reference to a specific point on the Earth’s surface can be determined with a set of two angles: azimuth & altitude angles or hour angle & declination.

The systems which concentrate solar radiation onto a linear receiver (a tube) are called ‘linear focus’ or 2D systems. Such systems need to track the Sun only according to one of the above mentioned angles, depending on the orientation of the collector (W-E or N-S). These are the so-called ‘one-axis tracking’ systems. (for instance, a Linear Fresnel)

The systems which concentrate solar radiation onto a singular receiver are called ‘point focus’ or 3D systems. Such systems need to track the Sun according to both of the above mentioned angles. These are the so-called ‘two-axis tracking’ systems (for instance, a heliostat).

In the case of a solar thermal power plant, the solar energy is transferred to a thermal fluid at an outlet temperature high enough to feed a heat engine or a turbine that produces electricity.

Solar transients and irradiance fluctuations can be mitigated by using an oversized mirror field and using the excess energy to load a thermal or chemical storage system.

Hybrid plants using fossil backup burners connected in series or in parallel are also possible. Combination with coal or biomass fired or gas combined cycles is feasible.

Concentrating solar power today is represented at different degrees of commercial deployment by four technologies: parabolic trough systems (PT), linear Fresnel reflector systems (LF), power towers or central receiver systems (CRS), and dish/engine systems (DE). Curved Absorber Absorber tube and mirror Tube reconcentrator

Curved mirror Pipe with thermal fluid

Parabolic Trough Linear Fresnel

Receiver / Engine Solar Receiver Reflector

Heliostats Dish/Engine Central Receiver

Figure 2 Schematic diagrams of the four CSP systems scaled up to pilot

Regarding costs, it is generally agreed that with current investment costs all CSP technologies require a public support strategy for market deployment.

Concerning the path from theoretical design to commercial exploitation, the following phases are normally considered:

Figure 3 From design to commercial exploitation

Figure 4 High-level CSP industry roadmap

(Kearney, Solar Thermal Electricity 2025. Clean electricity on demand: attractive STE cost stabilize energy production, 2010)

If applied to the four CSP technologies:

 PT would be in stage 7. Revision of technology for optimization  CRS in phase 6. Construction of commercial plant  LF and DE in phase 5. Construction of pilot project

Typical solar-to-electricity annual conversion efficiencies and other relevant factors for the four technologies, as compiled by a group of experts, are listed in the table below (IEA Roadmap, 2010).

4

e Technology Annual solar-to- electricity efficiency Land occupancy ha/MW cooling Water (L/MWh) Storage possible Possible backup/hybrid mode fuels Solar Outlook for improvements

Yes, but Parabolic Large 3000 15% not yet for Yes No Limited trough or dry 2.7 DSG5

4 Base on operating power plants data

5 DSG: Direct steam generation Yes, but Linear 8%- Medium 3000 not yet for Yes No Significant Fresnel 10% or dry 1 DSG

20%- Depends 6 Medium 2000 Very Tower 35% on plant Yes Yes 1.6 or dry configu- significant

ration

Depends Yes, but in Through Parabolic 25%- Small None on plant limited Yes mass dish 30% configu- cases production ration Table 1 Characteristics of Concentrating Solar Power Systems 7

The values for parabolic troughs, by far the most mature technology, have been demonstrated commercially. Those for linear Fresnel, dish and tower systems are, in general, projections based on component and large-scale pilot plant test data and the assumption of mature development of current technology. Major improvement can be achieved in the not so matured technologies.

3.3.2 Worldwide current situation

Generation of electricity and heat was by far the largest producer of CO2 emissions and it was responsible for 41% of the world CO2 emissions in 2008 (International Energy Agency, (2010)). By 2030, the World Energy Outlook (International Energy Agency) forecasts that the demand for electricity will be almost twice as high as current demand, driven by rapid growth of population and income in developing countries.

Nowadays, world energy matrix is mainly based on fossil fuels leading to sustainability, supply safety and geopolitical problems. Clean energy share increase is an effective way to address them.

Following intense activity in the early 80’s, the CSP technology suffered a “blackout” in the 90’s but nowadays it is rising again as a high-potential, technically and economically feasible clean energy source.

These new impetus are found especially in countries like Spain or the USA, but other emerging economies are also in their early stage toward a full deployment of CSP technology.

Concentrating Solar Thermal Power (CSP) can provide critical solutions to global energy problems within a relatively short time frame.

CSP has the potential to make major contributions to clean energy because: it is a relatively conventional technology and ease to scale-up; primary energy excess can be stored and hence, decuple offer and demand; it is commercially proven (SEGS trough plants in

6 Concepts to be proven with commercial power plants, this means plants in real operation, up to know the figures come from simulations, not from real plants operation.

7 IEA CSP Roadmap, 2010 operation for more than 25 years); it is suitable for Independent Power Producer (IPP) and it has a proven potential for further cost reduction, as it is in the initial learning curve stage8.

Current installed capacity (August 2011) is 1,3 GW, where 1,270 MW are Parabolic Trough, 38 MW Power Tower, 10 MW Fresnel and 3 MW Stirling Dish. In Spain there are 750.5 MW installed, 717 of them are parabolic trough, 1.4 Fresnel, 31 Power Tower and 1.09 Stirling Dish. USA has a total amount of 554.5MW installed. The distribution of the technology is 543 MW of Parabolic Trough, 5 MW of Fresnel, 5 MW of Power Tower and 1.5 MW of Stirling Dish.

Different analysis have been carried out by the World Bank, Ecostar DLR, A.T. Kearney and SolarPaces-Estela-GreenPeace to estimate the evolution of CSP installed capacity in the world.

3.3.3 People´s Republic of China (PRC)

3.3.3.1 People´s Republic of China energy mix

PRC has been experiencing rapid economy development in recent decades, while primary energy consumption has increased steadily to 3,250 million tons of coal equivalent (TCE) in 2010 (National Bureau of Statistics of China, 2011), at annual growth rate of 5.8% during the period of 1981 to 2010. Coal and oil always dominate the nation’s energy mix, accounting for around 88%.

Due to continuous economy development and the increasing in the Chinese standard of living, there is significant potential for further increase on energy demand. According to the forecast by Energy Research Institute of National Development and Reform Commission, primary energy demand will range from 3,853 to 4,772 million TCE by 2020, 4,604 to 5,852 million TCE by 2035 and 5,022 to 6,690 million by 2050.

PRC faces rising challenges on energy supply and environment including air pollution and the climate change. Therefore, renewable energy is one of strategic options of PRC´s energy development, to improve PRC’s clean energy supply and energy security, enhance the quality and competitiveness of its economy, reduce pressure on the environment, and mitigate the effects of climate change.

The 12th Five Year Plan describes how PRC will additionally adjust its energy mix by developing all sources of non-fossil fuel energy. A major target for the new plan is that non- fossil fuel energy will reach 11.6 percent in 2015, and 15 percent of the total energy consumption in 2020 (currently at about eight percent). Solar energy is expected to be the cornerstone industry of the newly developed energy industry.

According to estimates for three scenarios (i.e. proactive, intermediate and business-as- usual) by the (Chinese Academy of Engineering, 2011), renewable energy is projected to be 170-320 million TCE as an energy alternative, representing 4.3%-8.1% of total energy demand (12.7%–18.2% if hydropower included) by around 2020; and be 320-640 million TCE as one of main energies, representing 7.2%-14.3% of total energy demand (16.3% - 24.4% if hydropower included) by around 2030.

8 The expected cost reduction for this technology by 2025 is around 50% (A.T. & ESTELA, 2010), in the present roadmap a 10% learning ration has been used. PRC has a high potential for CSP development between 51,000 TWeh/year and 71,000 2 TWeh/year energy production with a suitable area between 700,000 km (7% of total PRC land) and 900,000 km2 (10% of total PRC land). Potential output exceeds present coal generation 16 times, and exceeds 2030 projections seven times (International Energy Administration, 2009). Similar figures emerge when CSP potential is compared to domestic coal reserves. PRC’s proved reserves could generate about 235 thousand TWeh – equivalent to five years of CSP output in the most pessimistic scenario (Ummel, 2010), nevertheless PRC has some unique difficulties related to extreme weather conditions, sand storms, lack of water and distance from production to the final users. (Ummel, 2010)

In 2040, all the electricity demand could be supplied using around 1.5 % of PRC territory (using current technology) or 150.000 km2.

3.3.3.2 Gansu and Qinghai energy mix

Gansu and Qinghai are two provinces in PRC with a good solar resource, according to (Ummel, 2010) analysis they account for 5.4% and 14% of total CSP potential respectively. Current Technical Assistance focuses on these two provinces. Nevertheless, Inner Mongolia, Xinjiang and Xizang, rich in solar resources can also profit from this analysis.

According to Qinghai statistical yearbook 2010 (Qinghai Provincial Statistics Bureau, 2010), the primary energy consumption in Qinghai Province was 23.48 million TCE in 2009, at annual average growth rate of 8.4% during the period of 1991 to 2009. And coal accounted for 41.5%, oil for 8.5%, natural gas for 13.9% and hydro power for 36.1%. While energy production was 29.68 million TCE, at rapid growth rate of 19.3 % during the period of 2004 to 2009, Qinghai province has become a net energy exporter to other provinces since 2005.

In Gansu province, the primary energy consumption was 54.82 million TCE in 2009 (Gansu Provincial Statistics Bureau, 2010), at annual average growth rate of 5% during the period of 1991-2009; and the coal accounted for 67.10%, oil 12.15%, natural gas 0.46%, hydro and wind power 20.29%. The energy production has speed up in the recent decade, at growth rate of 11.2% from 2000 to 2009, and reached 42.32 million TCE in 2009. But Gansu province still needs to import energy from other provinces.

Gansu and Qinghai potential electricity generation capacity is between 2,700 TWeh/year to 3,400 TWeh/year and 7,000 TWeh/year to 10,000 TWeh/year respectively covering a total land of 38.000 Km2 (8% of Gansu surface) to 48.000 Km2 (10% of Gansu surface) and 90.000 Km2 (12% of Qinghai surface) to 126.000 Km2 (18% of Qinghai surface) (Ummel, 2010). These quantities are much larger than current energy electricity production or demand.

3.4 STRATEGIC ANALYSIS

A strategic analysis covering SWOT, Benchmarks, Risks and Barriers is presented, the analysis is valid for PRC, particularly Gansu and Qinghai:

3.4.1 SWOT

Helpful Harmful

to achieving the objective to achieving the objective

STRENGTHS WEAKNESSES

 Low Population Density.  Leveraged Cost of Energy (LCOE) higher than conventional and  Good solar resource, land and water availability at Gansu and Qinghai. other renewable energy (e.g. wind and solar PV) sources.  Government support central and local.  Distance from production to the final user.  Solar resource availability  Lack of skilled workers, technicians, engineers and scientists on  Minimum waste generation. this field.  Enough natural gas, water resource or other secondary fuels supply to feed the plant.  Complex population structure.  CSP for electricity production can follow demand.  Unfavorable weather conditions.  Involvement of ADB on the project.  High altitude.  CSP can combine heat and power production and can be hybridized with fossil or  Transportation and communication are inconvenient for the biomass fuel. remote regions.

Internal Origin  Significant effect in poverty reduction trough local jobs creation for erection and O&M.  Maturity of technology.  New business opportunity.  Lack of other stakeholders (e.g. domestic commercial bank, both New jobs creation. federal and provincial governments .) experience, knowledge and

Attributes of the project Attributes of the project   Improve standard of living of the western people. confidence on CSP.  Possibility of alternative applications.  Administrative process for renewable energies well known and master by the major players.

OPPORTUNITIES THREATS

 Worldwide concern about GHG emissions and the climate change.  Decrease of fossil fuels price and their volatility.  Existing international R&D and consulting resources.  Development of other renewable technologies.  PRC central government is discussing the National Developing Planning, 2011-2015.  Lack of necessary funding for such a large project investments.  Capacity of PRC to competitive mass production.  Political and/or media pressure of coal & oil/nuclear lobby to  Reduced time to the market capacity of Chinese industry. forget about solar technologies in case of initial solar project  Global scarcity of fossil fuels resources. failures or difficulties.  Increase of fossil fuels price and their volatility.  Social pressure against the projects because of their (initial) extra cost in this critical moment for any country’s economy.  Without accurate and reliable DNI data.  Lack of concrete financial frameworks to support the diffusion of External Origin CSP.

Attributes of the environment Attributes of the environment

Table 2 PRC SWOT Analysis 3.4.2 Benchmarks

The following bench-marks are fixed as a reference point. The roadmap proposed is coherent with them and proposes actions to make feasible reaching these targets:

 Create a reliable weather database with data about solar radiation, wind, temperature, humidity and rainfall over all Chinese territory by 2020.  Create domestic manufacture and supply chains for CSP plants by 2020.  Create standard system on design, tests and certification on CSP plant and related equipment by 2020.  Grid parity is achieved in 2030.  Technology development leader in 2030.  Total target (or expected) CSP installed capacity by 2040: 400 GW.  Create the necessary framework for education of CSP-related technicians (plant O&M) and engineers (technology development to reach the targets listed in the former benchmarks).  Development of the necessary grid infrastructure to bring solar electricity from sunny regions to more populated regions following renewable energy depolyment.  Specific regulation to promote renewable energy and CSP such as: Grid connection priority and regulation, stable and clear retribution, firm power, dispatchability retribution and priority on dispatching energy

3.4.3 Risk, mitigation and contingency

3.4.3.1 Risks associated to regulation

Identified Risks Risk Mitigation Risk Contingency

Specific Renewable Take advantage of Hire foreign consultants Energy regulation international experience specialized in regulations development takes longer and advice. to shorten development than expected. time based on international experience. Create a focus group.

Stimulation mechanisms Take advantage of Prepare alternative configuration selected is international experience regulation to replace the not optimal. and advice; make periodic new regulation in case of checks of the regulation; malfunctioning. introduce some safeguard clauses in the regulation to review it without introducing regulatory risk. Set up a portfolio of stimulation mechanisms to have a more stable supporting system.

It is possible that Require a new specific An alternative team who regulators try to adapt an regulation for this issue. develops in parallel a existing document on regulation Create a group of Renewable Energy independent experts. regulation without enough customization to take into Create a surveillance team account Chinese reality. to follow the outcome when regulation is applied.

The new regulation does Prepare alternatives which Introduce complementary not encourage CSP can reinforce the new stimulus to fine tune development or regulation within the investment. deployment speed. regulation to be trigged if necessary.

The new regulation is too Take advantage of Prepare contingency generous so the international experience regulation which is applied framework results and advice. in case of a rapid inefficient in short time and expansion of this kind of Prepare alternatives which the process has to be technology. can slowdown the slowed down. development within the regulation but without jeopardizing legal security. Identified Risks Risk Mitigation Risk Contingency

The Stimulation Facilitate the knowledge Develop a R&D program to Mechanism selected can transfer between research boost this technology. be inefficient to promote centers and Introduce policies to technology development or manufacturers. promote Public Private cost reduction. Partnerships

Environmental Regulation Set arbitration between Develop new technologies can be too demanding or CSP development and with less environmental unrealistic, so the projects environment impact. are not feasible or Develop a portfolio of unnecessarily delayed. projects in different areas.

If Environmental Compare regulation with Develop technologies and Regulation is inadequate, international benchmarks procedures for the and the major hazards are identified risks. Set clear and feasible to not considered, the enforce penalties. consequences of a potential accident can Promote public opinion cause serious awareness. environmental damages.

Table 3 Risks associated to regulation

3.4.3.2 Risks associated to population and society

Identified Risks Risk Mitigation Risk Contingency

Possible resettlements can Create campaigns about Create new urban centers generate social opposition. benefits of this kind of destined to the resettled technology. local habitants. Improve life quality of resettled people. Improve life quality of local communities Portfolio of locations to chose the ones with lower impact on population Long range urban planning defining Solar parks.

Lack of interest by existing Publicity on the future Governmental regulation teaching institutions on market for new education on new titles. new training and work opportunities.

Lack of interest by possible trainees on CSP

Lack of support by public authorities on training on CSP

Table 4 Risks associated to population and society

3.4.3.3 Risks associated to manufacturing industry

Identified Risks Risk Mitigation Risk Contingency

The role of local Boost the creation of Promote joint ventures with companies is eclipsed by indigenous manufacturer technology providers international or some large companies by stimulation combining international Chinese companies. policies. and national companies.

If few industrial players are Make arbitration to avoid Apply the PRC regulations in place, they could control these situations. to promote free market. the market creating an Promote the creation of oligopoly situation which new companies would keep prices up. Promote the investment on R&D.

Locations for CSP plants Promote special Set transport mechanisms are far away from current development areas nearby to supply the plants. manufacturing centers. good solar resource areas.

Identified Risks Risk Mitigation Risk Contingency

Fluctuations in prices of Long term contract, on the Create Government funds steel, glass for mirrors or range of three to five to cover possible gas can increase risk and years. fluctuations of the price hence financial costs. which make impossible the construction of plants.

No clear body to develop PRC appropriate Use international standards, which gather governmental body standards consensus from involvement in the stakeholders: Industry, process. developers, utilities, government, financial institutions, .

The standardization sets Make a public reference of Use international the references in quality standards. standards manufacturing. The lack of Facilitate the knowledge standardization can lead to transfer among inefficient or non manufacturers. competitive products. Creation of standardization Committees

Table 5 Risks associated to manufacturing industry

3.4.3.4 Risks associated to investors

Identified Risks Risk Mitigation Risk Contingency

Investors are not attracted Check periodically the Prepare alternative by these projects and the results and forecast the regulation which can predicted amount of MW future developments, if replace the new regulation installed is not reached. needed fine tune the in case it is not efficient regulation without enough to attract investor increasing uncertainty. interest. Clear communication of Government interest on CSP development to the different stakeholders. Trough communication and training reduce perceived risk.

Investors are too attracted Check periodically the Prepare alternative by these projects due to results and forecast the regulation which can their international future developments, if replace the new regulation experience and target is needed fine tune the if it is impossible to slow exceeded. regulation without down development but increasing uncertainty. without increasing uncertainty of jeopardizing existing projects.

Lack of reliable weather Make publicly available Use of private databases. data. reliable weather data.

Lack of interest by the Introduce stimulation Public development of major players due to a lack mechanisms that promote projects. of projects pipe line to stable pipeline project which supply in PRC or development (i.e. FIT). abroad. Make visible the pipeline of projects.

Lack of wiliness by the Information campaign. Public support of new domestic financial technology projects. Training. institutions and investors to Specific policy and implement the new Financial or guarantee allocation for new projects. technology. mechanisms from governmental agencies or multilateral institutions.

Table 6 Risks associated to investors Risks associated to technology

Identified Risks Risk Mitigation Risk Contingency

Forecast in conventional Long term contracts with Create stimulation technology cost reduction suppliers based on mechanism for R&D. fails. partnership agreements. Create stimulation New technologies do not Make the pipeline of mechanism for mature. projects visible to CSP components value chain so economies manufacturers. of scale can develop. Promote the participation in international bidding. Promote R&D-Industry collaboration.

Problems in technology Enhance and boost Make R&D agreements and knowledge transfer to relations between foreign between foreign and pilot and demo projects. and indigenous R&D indigenous R&D centers centers and foreign and and foreign and indigenous indigenous manufacture manufacture companies. companies.

New technologies for Boost R&D to reduce Avoid oligopoly situations electricity storage reduce global CSP costs and in heat storage medium. the cost of this alternative. particularly, thermal storage.

Transposition of Multidisciplinary team of New standard international standards experts in charge development. without taking into account Follow up committee Chinese specificities or lack of standardization.

Table 7 Risks associated to technology

3.4.3.5 Risks associated to weather:

Identified Risks Risk Mitigation Risk Contingency

Locations can be Create protection Develop technology or inappropriate for this mechanism to avoid reinforce the existing technology due to the damages in the equipment. weather conditions. equipments. Increase preventive and Increase the requirements predictive maintenance. for materials and equipments. Portfolio of projects to avoid areas with major risks.

Sandstorms or other Develop security Create physical barriers adverse weather mechanisms (automatic (i.e. trees) to reduce conditions can cause regulation of solar field) sandstorms effect. problems or damages in which protect equipments the solar field or when inclement weather is unexpected cleaning costs. detected. Technology development.

Table 8 Risks associated to weather

3.4.3.6 Risks associated to plants needed supplies

Identified Risks Risk Mitigation Risk Contingency

Shortage of gas for hybrid Develop a stimulation Promote hybrid coal-solar power plants due to mechanism to hybridize power plants. competitive uses or lack of fossil fuels with clean supply. energy. Promote R&D and demonstration projects.

Usually locations with good Create Water reserves and Change the wet cooling DNI have problems with specific canalizations to system of the power plant water supply. Water ensure the supply for these by dry cooling shortages can stop plant plants. operation. Promote R&D on dry cooling Promote Combined Heat and Power projects, such as desalinization or industrial heat.

Some CSP plants may Enhance the existing Create the necessary need basic infrastructure infrastructures. transport infrastructures. development (roads and electric lines) before construction.

The needs of qualified Taking advantage of Create specific programs scientist, designers, international experience, to train engineers, scientific operators, specialized EPC design training courses and operators. companies, financial with international advice. institutions, . can complicate or delay the construction and operation of the plants.

Scarcity of raw materials Plan and communicate to Lower import taxes for and components the industry the plan to CSP use of components develop CSP plants. and materials. Disseminate the pipe-line of projects

Table 9 Risks associated to plants needed supplies

3.4.3.7 Risks associated to grid

Identified Risks Risk Mitigation Risk Contingency

CSP plant locations, grid Take into account grid Create HVDC grid. capacity and distance to situation when defining end user, can make the plants location. Promote projects not feasible. the creation of clean industry, energy intensive and population areas near the CSP plants and promote combined heat and power production

Lack of agreement Preparatory meetings and between: central, regional, agreements in advanced. local government for HVDC development.

Lack of interest by the Dissemination on HVDC Regulation and planning. National State Grid as profits, pilot projects. (HVDC) will compete with the current grid

Lack of resources to Create a specific fund. Promote private-public finance this infrastructure. partnership in such a way that risks are shared and overall diminished increasing investment and financing

Table 10 Risks associated to grid

3.4.4 Barriers

Technical barriers:

 Extensive need of land.  Extensive need of water for cooling and cleaning.  Unfavorable weather conditions (extreme temperatures and sand storms)  Lack of available solar resource data.  Lack of indigenous industry.  Lack experience of building CSP power plants and no experience of running CSP power plants.  Lack of accepted standards.  Distance from production to demand, grid weakness.  Technology risk for new developments.  World market of several critical components is on the hands of a very few suppliers.  Access to water or natural gas networks.

Economical, policy barriers:

 Lack of specific governmental plan for CSP development integrated in official planning.  Current higher LCOE than other sources for the electricity generated.  Lack of experience on CSP investing in PRC(confidence and perceived risk of investors)  High Initial investment and difficulty to build economically sound pilot project (feasible in solar PV and Wind).  Lack of knowledge, experience and confidence of domestic commercial banks on CSP projects.

Social Barriers:

 Resettlement  Perceived risks due to lack of knowledge on the technology.

Environmental Barriers

 Regulation on the use of thermal oil.

3.4.5 Potential barriers

 Feed-in-tariff rigidity.  Hybridization bounded.  Slowing down of the R&D and pilot projects.  Competition with other renewable energy sources (solar PV, wind, nuclear and mining lobbies) 3.5 CSP DEPLOYMENT: ELECTRICITY GENERATION, CUMULATIVE INSTALLED CAPACITY, VALUE PROPOSITION & SHARE ON THE NATIONAL ENERGY MIX BY 2040

3.5.1 CSP developing scenario in PRC

Three possible scenarios have been considered for the developing of CSP in PRC, Gansu and Qinghai. These are: Business-as-Usual, Intermediate Scenario and Proactive Scenario.

These scenarios are:

Business-as-Usual (BAU) Scenario: No specific action is taken other than the general regulation for renewable energy in PRC CSP must compete with other renewable energies. In 2040, 2% of the electricity is produced using CSP.

Intermediate Scenario: Actions are taken by the government to promote the development of this technology, such as planning and setting up goals, multilateral soft-loans, projects concession biddings and R&D support. In 2040, 6% of the electricity is produced using CSP.

Proactive Scenario: Actions are taken by the government to boost the development of technology projects, pipe-line industry such as planning, multilateral soft loans, investment subsidies for new technologies, project concession bidding, feed-in-tariff and power bidding. In 2040, 15% of the electricity is produced using CSP.

These scenarios will be affected by exogenous factors such as: the development of CSP in other parts of the world, the evolution of fossil fuels and other energy sources, and storage costs and CO2 and other externalities perceived value, global and local evolution of economy and major natural or man-made disruptions.

Different scenarios will lead to different rates of reduction of the gap with competitive sources of energy. Support or leverage should finish once equilibrium is achieved. Measures proposed in this roadmap are oriented to narrowing the gap maximizing profit for society.

The three scenarios have been defined by the team of experts taking into account the restrictions (Energy demand, land availability, investment, grid, water, human resources, .) and international experience, both on installed capacity and energy mix.

To represent the installed capacity a logistic curve could have been used, but taking into account the early stages of development, a simple polynomial has been used.

Intermed. Proactive Wyear W Ayear year W0 (MW) 100 100 α 3 3 A (MW/year) 7 18.5

Where: W is total installed capacity, year0=2,012 for all scenario, W0 is year 2012 forecasted installed capacity and α is the growth exponent

Base scenario has been built from the information that was available and discussed on the period of the 12th Five-Year plan was prepared starting with 50 MW in 2012, growing to 400 MW in 2017 and 2,400 MW in 2022 and making the hypothesis that installed capacity will double every five years after 2027, starting with 6,000 MW at that date.

In the following figure, the scenarios growth forecasted are shown and compared with SolarPaces-Estela-Green Peace forecasts:

Installed Capacity Scenarios 1,000,000 Proactive

100,000

Intermediate 10,000

MW Base 1,000

SolarPaces‐Estela‐ 100 GreenPeace (Moderate Scenario for PRC) SolarPaces‐Estela‐ 10 GreenPeace (Advanced 2000 2010 2020 2030 2040 2050 Scenario for PRC) Year

Figure 5 Cumulate installed capacity scenarios

As no information is available at this moment, an objective criterion has been defined to fix the share for Gansu and Qinghai on total installed capacity: Proportionality with the suitable land for CSP in comparison with total land suitable in PRC, Hence, 5.3% of total in Gansu and 13.8% of total in Qinghai. (Ummel, 2010). Of course, this share could be easily modified with appropriate regional support or policies.

In next two figures, the energy mix evolution for different energies sources is presented for proactive scenario. The mix proposed has been created incorporating CSP contribution on top of the forecast made by Chinese Academy of Engineering, (Chinese Academy of Engineering, 2011) and evenly decresing other sources contribution9.

Chinese Academy of Engineering planning was prepared before Japan nuclear crisis 2011. The nuclear power safety is further stressed in PRC According to the requirement of the State Council of China in March of 2011, the approval on more than 20 new nuclear power projects were suspended till the formulation of nuclear power safety plan, which may led to slowdown of the development of nuclear power in P.R.C till 2020 or later, and leave more space for renewable power to meet the electricity demand in future. Therefore, it is significant to show the potentials of renewable power,

9 The Chinese Academy of Engineering did not even consider the contribution of CSP, which shows the interest of the current road map. in particular CSP with stable power supply, and attract more concern and investment on CSP projects.

14000 Others 12000 PV 10000 Biomass 8000 Hydro 6000 Wind 4000 Gas 2000 Nuclear 0 Oil 2010 2015 2020 2025 2030 2035 2040 2045

Figure 6 Energy mix following Chinese Academy of Engineering10,

12,000 CSP 10,000 Others 8,000 PV

6,000 Biomass

TWh/year Hydro 4,000 Wind 2,000 Gas Nuclear 2010 2015 2020 2025 2030 2035 2040

Figure 7 Electricity production mix for PRC including CSP, source: (Chinese Academy of Engineering, 2011) and own elaboration.

Energy Research Institute forecast for renewable energies by 2020 assigns 0.3% to solar energy lower than proactive CSP development scenario 1.2% of total energy.

installed Electricity capacity mil.tce (TWh) (GW) hydro 350 1050 336 7,5% Breakdown nuclear 80 520 166,4 3,7% wind power 150 300 96 2,1% solar energy 20 40 12,8 0,3% biomass 30 180 57,6 1,3% Total 630 2090 14,9%

10 Note that CSP is not considered

Table 11 2020 target: 15% of non-fossil energy in Chinese energy mix, ERIAnalysis of land and investment constrains

Two basic constraints are the availability of useful land and financial resources.

In the following figure the proportion of the land needed to deploy CSP in P.R.C is shown:

 suitable for CSP 9.5% of total PRC land

 needed to supply 100% of total electricity11 2% of total PRC land and  needed to fulfill the proactive scenario (15% of total energy) 0,25%

and it can be compared with PRC total surface.

Land (103 km2) in 2040 total suitable 100% proactive for CSP energy scenario demand

PRC 9,597 912 149 22

Gansu 454 48 2 1

Qinghai 721 126 1 2

Figure 8 Suitable land for CSP (PRC, Gansu and Qinghai) needed land to supply 100% and 15% (proactive scenario) of the electricity in 2040 in PRC

Needed investment could be a constrain for CSP development, as can be seen in next figure

11 Current land use for a typical P.T. power plant has been consider, this should decrease with the deployment of more efficient technologies and forecasted increase in capacity factor. 1,000

100 CNY/year) 9 Proactive (10

10 Intermediate Base investment

1

Needed 2010 2020 2030 2040 2050

0

Figure 9 Needed investment for different scenario (equity and loan)

Forecasted needed investment is on the order of CNY 10 billion till 2020, which means under CNY 10 per habitant. In 2030, when grip parity is to be reached, the investment would be on the order of CNY 100 billion, hence under CNY 100 per habitant. This investment seems feasible for Chinese economy considering the reward of 15% clean solar energy less costly than coal.

3.5.2 Business-as-Usual scenario (BAU)

This is the scenario where no special actions are taken. CSP path is guided by the general regulation for renewable energy in PRC and this technology must compete with other renewable energies.

For this scenario, the analysis done by World Bank (World Bank, 2006 ), Kevin Ummel (Ummel, 2010), A.T. Kearney (AT Kearney, 2010) and International Energy Agency (IEA CSP Roadmap , 2010) have been used as a reference, combined with expert analysis. As a result, in 2040 1,3% of total electricity is produced using CSP. The basic hypothesis is that PRC is a follower of the technology developed abroad, and it can also benefit from the development in other areas such as MENA or USA to develop its manufacturing industry.

Deployment starts with conventional Parabolic Trough (P.T.) with thermal oil as heat transfer fluid; in 2020, a new more efficient technology is introduced (Technology 1)12, followed by a new one (technology 2) in 203513. On parallel, hybrid power plants are set up. Most plants are built using P.T.

12. For performance calculation, Technology 1, has been identified with a central receiver (tower) using molten salt as a working fluid and for technology 2 central receiver using air as a working fluid. The model has been made using these two technologies as a reasonable hypothesis of future development; nevertheless, technology development may lead to other more beneficial possibilities.

13 A simple model has been defined for new technology introduction and technology share. From starting deployment date, the following stages are followed: 5 MW pilot Project; after, commercial deployment at a rate 1.5 times faster than the last new technology which was introduced. For hybrid plants 1/3 of total installed capacity has been considered with 60

50 40 Hybrid (GW)

Installed 30 Technology 2 CSP 20 Technology 1 capacity

Total 10 Parabolic Trough 0 2012 2017 2022 2027 2032 2037 2042

Figure 10 Installed capacity for different technologies. Base Scenario

3.5

CSP 3.0

on

2.5 Parabolic Trough 2.0 capacity Technology 1 1.5 increase

Technology 2 (GW/year) 1.0

installed 0.5 Hybrid Yearly 0.0 2010 2020 2030 2040 2050

Figure 11 Yearly increase of installed CSP capacity. Base Scenario

In this scenario, PRC is a technology follower and, basically, develops its installed capacity with mature Parabolic Trough (PT), technology which is developed abroad, through; improvements are introduced in PRC with a delay. Technology 1 and Hybrid plants are able to compete with the pre-established technology (PT) from 2025 and Technology 2 beyond 2035.

Total installed capacity would reach 48 GW in 2042. The yearly growth rate for PT would steadily increase up to 3 GW per year (in 2042) while technology 1 will grow up to 1 GW per year (in 2042). In 2042, the CSP mix would be: 70% PT; 19% technology 1; 2% technology 2 and 9% hybrid plants

3.5.3 Intermediate Scenario

Intermediate Scenario: Actions are taken by the government to promote the development of this technology, such as planning and setting up goals, multilateral soft-loans, projects concession biddings and R&D support. In 2040, 6% of the electricity is produced using CSP. PRC is not a follower but a relevant actor in economies of scale, learning curve evolution, investment, O&M and risk reduction.

Deployment starts with conventional Parabolic Trough (P.T.) with thermal oil as heat transfer fluid; in 2020, a new more efficient technology is introduced followed by a new one in 2035. On parallel, hybrid power plants are set up. Most plants are built using P.T. but as new technologies are supported the share is larger than in base scenario.

a minimum of 50 MW. P.T. is calculated as the difference between total and other technologies. 200

150 Hybrid (GW)

Installed 100 Technology 2 CSP Technology 1 50 capacity

Total Parabolic Trough 0 2012 2017 2022 2027 2032 2037 2042

Figure 12 Installed capacity for different technologies. Intermediate Scenario

8

CSP 6 Parabolic Trough on

capacity Technology 1

4 Technology 2 increase

(GW/year) 2 Hybrid installed 0 Yearly 2010 2020 2030 2040 2050

Figure 13 Yearly increase of installed CSP capacity. Intermediate Scenario

As Technology 1 and Hybrid plants have been supported, these technologies will actively compete with parabolic trough, leading to a new industry where PRC can have a dominant position. Technology 2, will be starting commercial development at the end of the period.

Total installed capacity would reach 189 GW in 2042. The yearly growth rate for PT would steadily increase up to 7 GW per year (in 2035) and, from then on, it would keep almost constant while technology 1 would grow up to 5 GW per year (in 2042) with a tendency to replace PT as leading technology; hybrid plants would be relevant with a yearly growth rate of 3 GW per year in 2042. The CSP mix would be: 61% P.T.; 19% technology 1; below 1% for technology 2 and 19% hybrid plants.

3.5.4 Proactive Scenario

Proactive Scenario: Actions are taken by the government to boost the development of technology, projects pipe-line, industry, such as planning and setting up goals, multilateral soft loans, investment subsidies for new technologies, project concession bidding, feed-in-tariff, power bidding. In 2040, 15% of the electricity is produced using CSP.

Support is larger than in intermediate scenario; more ambitious targets (planning, multilateral soft loans, investment subsidies for new technologies, project concession bidding, feed-in-tariff and power bidding) are planned; a stronger support to new technologies and a clear decreasing feed-in-tariff with installed capacity will be set up.

Deployment starts with conventional Parabolic Trough (P.T.) with thermal oil as heat transfer fluid. In 2020, a new more efficient technology is introduced followed by a new one in 2035. In parallel, hybrid power plants are set up. Most plants are built using P.T. but as new technologies are supported the share is larger. 600

500 400 Hybrid (GW)

Installed 300 Technology 2 CSP 200 Technology 1 capacity 100

Total Parabolic Trough 0 2012 2017 2022 2027 2032 2037 2042

Figure 14 Installed capacity for different technologies. Proactive Scenario

16 14

CSP 12 on

Parabolic Trough 10 capacity 8 Technology 1

increase 6

Technology 2 (GW/year) 4 installed Hybrid

Yearly 2 0 2010 2020 2030 2040 2050

Figure 15 Yearly increase of installed CSP capacity. Proactive Scenario

As Technology 1 and Hybrid plants have been strongly supported, these technologies will rapidly decrease costs and lead to a new industry where PRC can have a dominant position. Technology 2, will become price competitive with Technology 1 and Hybrid, and start substituting them at the end of the period as LCOE for this technology approaches the others.

Total installed capacity would reach 500 GW in 2042. The yearly growth rate for PT would steadily increase up to 11 GW per year (in 2035) and, from then on, it would keep almost constant while technology 1 would grow up to 14 GW per year (in 2042) replacing PT as leading technology; also, technology 2 will grow up to 7 GW per year (in 2042) following technology 1; hybrid plants would be relevant with a yearly growth rate of 7 GW per year (in 2042). In 2042, the CSP mix would be: 43% P.T.; 30% technology 1; 8% technology 2 and 19% hybrid plants

3.5.5 Deployment 2012-2017

Till 2017, actions to support the development of demonstration power plants, conventional technology, and pilot projects on new technologies, such as combined cycles, coal and CSP combined or tower to increase efficiency and reduce costs are recommended.

In 2015, sustainability of the process should have been proven to the stakeholders to make credible the support and secure the creation of a pipe-line for the next five years boosting the components industry and capabilities. Spain experience in CSP feed-in- tariff has shown that this mechanism is adequate to support rapid deployment and industry development with low transaction costs and it is able to mobilize all the stakeholders; but, if set to high, it has an over cost for society. Therefore, once enough maturity (investment, O&M and industry) is reached, (estimated around 2015), it is recommended to introduce it, including an appropriate energy price decreasing formula. / .

It is expected that at least 100 MW will be in operation in 2012/13. The deployment could take place, if properly supported, through: planning and political support, soft loans, investment loans, concession bidding and case by case demo projects.

At the end of the period between 300 MW and 2,000 MW could be in operation (international experience (Spain) shows the feasibility) of conventional technology.

Some pilot projects of new technologies (Technology 1) such as molten salt tower could be in operation (5-10 MW have been considered), to achieve this goal, R&D or pilot project grants could be a good mechanism to cover the excess investment costs and risks. Also, some combined cycle or hybrid power plants should be developed (50 MW have been considered) and a similar support as for conventional CSP would be needed, plus some political support.

3.5.6 Deployment 2017-2022

Based on the momentum created the whole industry value chain should already be on place to supply in PRC and overseas market.

Between 18 GW and 2.4 GW could be on operation, in the PRC combining conventional CSP with hybrid plants and first commercial projects of Technology 1.

At this stage feed-in-tariff could be a good mechanism to promote a stable market, cautions in legislation to reduce feed-in-tariff as power is installed is recommended. Feed-in-tariff could be combined with project bidding for new technologies which have been proven in pilot projects and are ready for commercial demonstration, public promotion and public, private partnership can speed up deployment and lower the risks14.

3.5.7 Deployment 2022-2027

A this stage, conventional technology should be competing with Technology 1, and, even though inertia, lack of industry and financial risk will probably make conventional still more popular, Technology 1 should start its commercial development. Probably, some support will be needed for the first commercial plants.

Between 6 GW for BAU scenario and 62 GW for proactive scenario could be placed, where around 2 GW and 8 GW could come from Technology 1 and IGSCC respectively in the proactive scenario. These two technologies should be in conditions to compete with the same rules than conventional.

A new group of technologies, Technology 2, such as tower air receivers, could be promoted at this stage to lower the LCOE (5 MW are forecasted), for this R&D or pilot project grants could be a good mechanism to cover the investment costs.

14 For example, Solar Parks 3.5.8 Deployment 2027-2032

At this stage, conventional technology should be competing with Technology 1 and Technology 2, Technology 1 and conventional should reach grip parity in the proactive scenario. Technology 2 should start its commercial development; some support will be needed for the first commercial plants.

Between 12 GW for BAU scenario and 140 GW for proactive scenario could be placed, where around 21 GW and 26 GW could come from Technology 1 and IGSCC respectively in the proactive scenario. These two technologies should be in conditions to compete with the same rules than conventional.

Market should be well developed at this stage and able to compete with traditional sources.

3.6 TOWARD COMPETITIVINESS, GRID PARITY, COST FOR SOCIETY.

3.6.1 Introduction

According to the Technology Road Map published by IEA in 201015, supposing an average 10% learning ratio16, CSP investment cost would fall by about 50% from 2010 to 2020, as cumulative capacities would double seven times. The US Department of Energy has set an objective for its CSP program to reach competitiveness with fossil fuels by 2015 for intermediate load, at around USD 100/MWh (CNY 0.65/kWh), and by 2020 for base loads, at around USD 50/MWh (CNY 0.33/kWh).

In the 12th Five Year Plan published in 2011 by Government of PRC, the target for CSP is to reach 1.000 MW by 2015.

If PRC reaches this target, and stakeholders are active, the investment cost is likely to fall by 50% between 2015 and 2020. Electricity costs would decrease even faster with greater capacity factors and make CSP technology competitive with conventional technologies for peak loads by about 2020.

The basic logic behind promoting the development of CSP is that through: Experience and optimization, economies of scale, technological innovation and risk reduction the cost of the energy produced will be reduced.

As latter shown, if PRC follows the proactive scenario, CSP will be able to compete with coal fired supercritical power plants around 2030, and ten years later if base scenario is followed. For peak hours and, in comparison with gas combined cycles, parity will be reach before.

15 Technology Road Map, Concentrating Solar Power – International Energy Agency, 2010.

16 Learning ratio is a concept used to define the cost reduction (measured in real terms) as installed capacity increases, m The experience curve or learning curve is usually written as I= I0 W ; where I represents specific investment (investment per MW), I0 represents the initial investment for first plants, W represents the cumulative installed capacity m and m is defined though another concept known as Progress ratio, PR =2 , Progress ratio is a parameter that expresses the rate at which costs decline for every doubling of cumulative installed capacity, and learning ration is defined as LR = 1-PR, which means the unitary specific investment decrease for each doubling of the cumulative installed capacity. Hence, a learning ratio equal to 10% means an specific investment reduction equal to 10% every time installed capacity doubles, 3.6.2 Investment reduction

CSP is capital expenses oriented, hence reducing the investment has a strong impact on the cost of the energy produced.

The reduce investment due to increase in capacity is usually represented by the learning curve, broadly described in literature, (Neij, 2008). For CSP, learning rate has a range from 5% to 15%, in the present roadmap, 10% has been used. In 2012 an initial investment of CNY 33/kW has been considered for parabolic trough technology based on Jinta project prefeasibility analysis.

When a new technology17 becomes commercial, it has been considered, as starting point, an overinvestment over last commercially available technology investment cost equal to 20%.

The specific resulting averaged investment for each scenario can be seen in the following figure.

35.0

30.0 CNY/W

25.0

20.0 Proactive investment

Intermediate 15.0 Base specific

10.0

5.0 Avergaged

0.0 2010 2015 2020 2025 2030 2035 2040 2045

Figure 16 Specific averaged investment for the technology mix in the scenario

As more experience is gained, economies of scale are developed for equipment manufacturing, and new more efficient technologies (hence fewer materials are needed) the specific investment will decrease. Even though, introduction of new technologies have been considered a major break trough could lead to a sharper reduction.Energy produced

The energy output has been calculated multiplying installed capacity by capacity factor18 and total year hours.

17 New technology refers to the introduction of Technology 1 and Technology 2.

18 Technology evolution will lead to working fluid temperature and storage capacity increase, thus, capacity factor increase. (IEA CSP Roadmap , 2010) Capacity factor benchmark has been used (1% linear yearly increase). 1600 1400 1200 TWh/year 1000 Proactive 800 Intermediate produced 600 Base 400 Energy

200 CSP 0 2010 2015 2020 2025 2030 2035 2040 2045

Figure 17 CSP energy forecast production for the 3 scenario

3.6.3 Operation and maintenance costs

O&M costs are not easy to estimate. CSP plants owners do not usually offer information on these costs. On the other hand, the labor costs highly differ by country. 0.032 Euro (€)/kWh (DLR, 2003) was proposed, on due diligence analysis usually a value between 6%-8% of income is used equivalent (0.017 €/kWh – 0.024 €/kWh) in Europe with an average of 0.024 €/kWh. In PRC, taking into account the tariff goal O&M costs could start on the range of 0.06 CNY/kWh – 0.08 CNY/kWh with a tendency down to 0.05 CNY/kWh.

3.6.4 Financial hypothesis

All calculations have been made on real terms and real discount rate has been set up at 8% in 2012, decreasing lineally up to 5% in 2042 (to take into account risk reduction), for parabolic trough technologies. For other technologies a similar approach is taken but starting at 8% when they become commercial. Real interest rate has been set up at 3% with 2 years grace period. 8% tax on income and 15% on profit following NDRC has been applied.

3.6.5 Cost for society

1.7 1600

1.5 1400 1200 1.3 1000 LCOE coal (TWh/year) 1.1 800 Proactive (rmb/kWh) 0.9 600 Intermediate produced

LCOE 0.7 400 Base 0.5 200 Energy 0.3 0 2010 2015 2020 2025 2030 2035 2040 2045

Figure 18 Average LCOE, different scenario and supercritical coal power plant and total energy produced.

Till 2025 for proactive scenario and 2035 for BAU scenario, the averaged cost of energy produced during the plant life (25 years) is higher than the cost of the energy produced using fossil fuels. Nevertheless, as technology and economy of scales evolves, LCOE will be reduced and, therefore, ).

Once CSP LCOE becomes equal to coal LCOE, if CSP electricity price is made equal to its LCOE19, break even will be reached for society. From that point, energy produced using CSP will be cheaper than coal.

The over-cost for society has been calculated yearly multiplying the difference between coal and CSP LCOEs by the energy that would be produced by the plants in operation that year during its 25 years estimated life and then accumulated starting year cero of the program as shown in the following figures. Hence, they show how much society would have to pay for the CSP program over what it would have had to pay if energy were produced using coal.

19 LCOE real discount rate would be equal to 6.2 % in 2030 and 5.7% in 2035 Cumulated CSP over cost using as reference supercritical coal 500 ‐ ‐500 2005 2015 2025 2035 2045 Cumulative Proactive ‐1,000 ‐1,500 CNY

9 Cumulative ‐2,000 10 intermediate ‐2,500 Comulative BAU ‐3,000 ‐3,500 ‐4,000 Year

250

200

150 Cumulative Proactive CNY

9 100 Cumulative

10 intermediate 50 Comulative BAU

‐ 2010 2020 2030 2040 2050 ‐50 Year

Figure 19 Over-Cost for society for different scenarios by period and cumulative in comparison with supercritical coal

As can be seen in the figure, break-even for society is reached in 2030 for proactive scenario and in 2040 for BAU scenario. Proactive scenario maximum accumulated deficit (2023) is equal to 170 billion CNY which is lower than maximum deficit in intermediate scenario (2031) which is equal to 180 billion CNY due to the faster introduction of new technologies and economies of scale in the proactive case.

After break even is reached, the energy produced using CSP would be cheaper than the one produced using coal creating savings for society that would cumulate 3.5 trillion CNY in 2042 for proactive scenario.

Technology road map (Local CSP industry development target)

CSP deployment, will lead to demand and pressure on local supplies. Typical material requirements for a 50 MW plant with 7 hours storage is as follows (World Bank, 2011): Material Requirement for a 50 MW plant with 7 hours storage

Steel 10,000 -15,000 tons

Glass 6,000 tons

Storage Medium 25,000 – 30,000 tons

Concrete 10,000 tons

Insulation Material 1,000 tons

Copper 300 tons

Table 12 Material requirement for a 50 MW plant with 7 hours storage

Taking into account these requirements, CSP technology will demand the following cumulative amounts of material in the different scenario:

Materials Supply Requirement for CSP Scenarios 1 1,000,000,000 Steel Proactive 100,000,000

Steel Intermediate 10,000,000

1,000,000 Steel Base tons

100,000 Glass Proactive

10,000 Glass Intermediate

1,000 Glass Base 2005 2010 2015 2020 2025 2030 2035 2040 Year

Figure 20 Material requirements in Scenarios 1 Materials Supply Requirement for CSP Scenarios 2

100,000,000 Concrete Proactive

10,000,000 Concrete Intermediate

1,000,000 Concrete Base 100,000 tons Insulation Material 10,000 Proactive Insulation Material 1,000 Intermediate Insulation Material Base 100 2000 2010 2020 2030 2040 2050 Copper Proactive Year

Figure 21 Material requirements in Scenarios 2

This demand of raw materials and resources could be a limitation for CSP development or lead to costs’ increase.

3.7 KEY ACTIONS TO PROMOTE AND SUPPORT CSP

To achieve the vision of this roadmap and a cleaner future, some key actions need to be made by both central and regional Governments:  Long term focus and stable policies and funding for R&D and pilot projects  Regularly, review legislation to promote CSP, eliminate barriers, decrease transaction costs and reduce uncertainty and risk  Support and make available reliable weather and DNI data.  Avoid arbitrary limitations on plant size and hybridization ratios, instead develop primary source-based reward methods  Clear procedure and private public partnership.  Promote the development of a High-Voltage Direct Current (HVDC)  Promote the use of PRC desserts to supply clean energy: wind and solar.

Industry :  Collaboration with R&D centers on improving efficiency and cost reduction on: o New components o New heat transfer fluids o Higher working temperatures o Mass production o Parabolic trough and heliostats o Heat storage  Further development of central receiver concepts and cycles.  Experience sharing

Utilities :  Facilitate grid access for CSP developers  Participate actively in project development  Own and operate CSP plants as part of assets portfolio  Promote experience sharing to reduce Operation and Maintenance (O&M) costs  Participate in R&D projects in partnership and with R&D centers and industry  Reward the advantage of dispatchability and stability of CSP in comparison with other renewable energies  CSP plant system optimization

Financial institutions:  Increase internal capacities  Joint international-national project financing  Development banks soft loans and technical assistance.

Universities and research centers:  Develop basic research useful for CSP, such as: selective coatings, nanotechnology, new materials, hydrogen permeation, reflective surfaces, artificial intelligence, .  Partnership with Industry  Training and education on CSP

3.8 ACTION PLAN

The key actions have been prioritized and set up in a time frame for intermediate and proactive scenarios. Its intensity has to be fine tuned to reach the installed capacity, energy costs and production. They are described for the main stakeholders and shown in the following Gantt diagrams where, also, major targets on capacity factor, installed capacity and share on the energy mix are shown for proactive scenario.

3.8.1 Actions for National, regional and local government

National, regional and local governments have a key role to play on CSP development defining a clear planning and policy which should be long term oriented.

Direct incentives: On the first stages, to start up, a power bidding schema is recommended for some demonstration projects; this projects should have some support such as: case by case price for the electricity produced, risk reduction: (solar parks or public land, environmental clearance, pre-awarded grid connection, tax reductions, multilateral soft loans, loan guaranties, etc.). Once demo projects show the feasibility of the technology and the real investment, performance, costs and risks are known a feed-in-tariff can be set up to speed up the process and reduce market price (around 2014). Gradually (around 2020), as CSP becomes more competitive: feed-in- tariff and other incentives should be moderated to avoid reheating and reduce cost for society. Finally (around 2030) incentives should be eliminated as CSP should be cost competitive. This scheme should be kept for new technologies, with high cost reduction potential, through supporting pilot and demo projects; technology investment subsidies are recommended to reduce the risk.

Enabling environment: Some basic actions to reduce risk such as: providing DNI and wether data in the first years and, continously, supporting international collaboration, and new technologies R&D, are recomended. Also, the development of HVDC lines is necessary and, latter, promoting the exchange of clean energy with other regions or countries. Support to industry. To start up the virtous circle: projects pipe line-industry development-cost reduction, some initial support to currently state of the art local components industry is recomended and, after, to new emerging technologies industry.

Including externalities: Externalities such as CO2, supply security, dispatchability should be taken into account and make explicit through market mechanisms such as CERs or CO2 market.

Figure 22 Action plan. Government.

3.8.2 Actions for Utilities and National State Grid

Active participation in CSP projects. Leading PRC‘s utilities are state own companies with technical and financial strength to develop CSP projects. They can play a vital role on starting the pipe-line of projects. They can take some risk and get the reward from being the first into the market. This should lead to owing as part to their assets CSP plants.

Grid access. Experience shows that a key factor for clean energy development is the access to the grid in remote areas. CSP is a grid friendly energy as it is more stable than wind or solar PV, National State Grid can help its development; this will also help on future grid management. In the future, HVDC lines will be necessary and long range planning will be necessary.

Integrate other producers. As smaller developers get involved in the market, clear regulation and power purchase agreements will be needed and mutually beneficial (starting 2015)

Knowledge sharing. To reduce energy cost, R&D activities and O&M experience sharing between non competing projects are a useful tool.

Including externalities. Evaluating (in a first stage) and latter rewarding benefits for the grid will be mutually beneficial for the CSP plants operators and the National State Grid.

Figure 23 Action plan. Utilities and National State Grid.

3.8.3 Actions for financial institutions

Financial institutions play a vital role in capital intensive infrastructures such as CSP plants.

In a first stage, local financial institutions should develop a good knowledge of the technology and appropriate financial mechanism. Also, in a later stage, they can participate in international projects financing .

Multilateral development bank have a clear role to play in the first demonstration projects providing financing and reducing risk.

3.8.4 Actions for Universities and Research Centers

Universities and R&D Centers can play a transversal role through break troughs, supporting industry on technology development and training the necessary personnel.

3.8.5 Technologies and R&D

After analysis of technology roadmaps, such as (IEA CSP Roadmap , 2010) and analysis with Chinese experts a basic timeframe is proposed for new technologies development and introduction. Their maturity stage, international and Chinese current focus and possible rewards if developed has been taken into account.

Figure 24 Action pjukllan. Financial institutions. Universities and Research centers.

Figure 25 Technologies and R&D. 4 PILOT PROJECT 1 MWE DAHAN TOWER PLANT

4.1 BACKGROUND

To explore the key technologies and equipments of solar power tower technology and verify its feasibility, Ministry of Sciences and Technology, PRC (MOST) funded Institute of Electrical Engineering, Chinese Academy of Sciences (IEE-CAS) under the PRC National Hi-Tech R&D program during the 11th Five-Year Plan to make R&D and demonstration of 1MW solar power tower system, with a total funding of CNY 47.37million.

The pilot project covers a series of R&D study tasks and an integrated demo 1MW Dahan solar power tower plant. There are five research task packages in the pilot project, covering the system design, solar collecting, high-temperature solar-thermal conversion, thermal energy transfer and storage, system control and technology integration. Each task is further covering more specific sub-tasks.

 Task 1: Solar thermal power plant overall design and system integration  Task 2: Research on heliostat with high accuracy and development of complete set of equipments  Task 3: Research on high-reliable receiver, heat transfer and thermal storage method and system establishment  Task 4: Centralized control strategies for the whole plant  Task 5: Establishment of solar thermal power experimental platforms

There are nine stakeholders contracted under this project:

 Institute of Electrical Engineering, Chinese Academy of Sciences  Institute of Engineering Thermophysics, CAS  Changchun Institute of Optics, Fine Mechanics and Physics, CAS  Shanghai Institute of Ceramics, CAS  Xi’an Jiaotong University  Sun Yat-Sen University  Hohai University  China Huadian Engineering Co., Ltd  Himin Solar Co., Ltd

According to the allocation mechanism of Ministry of Sciences and Technology, the funding was allocated to each stakeholder directly based on the research tasks contracted. The Institute of Electrical Engineering, Chinese Academy of Sciences is the leader organization of the pilot project as well as the owner of the Dahan plant.

The 1MW Dahan tower plant system, together with other facilities built will act as an experimental and test platform. New technologies or components can be tested and verified on it.

Owing to Dahan tower plant’s demonstration effect, ADB supported $250,000 (1,694,000RB) for the equipments procurement of this pilot project, one is for the saturated steam receiver, which is developed by China Huadian Engineering Co., Ltd (CHEC), and manufactured by Wuxi Huaguang Boiler Factory; and the other is for the thermal storage, which is researched and developed by Institute of Electrical Engineering, Chinese Academy of Sciences (IEE-CAS), and manufactured by Wuxi Taihu Boiler Factory. 4.2 KEY FINDINGS AND LESSONS LEARNED

 Following the implementation of the R&D and demo engineering of the tower system, concentrated solar thermal power (CSP) start to be paid attention in PRC and the industry chain is forming gradually. With the demonstration effect and publicity influence of Dahan tower plant, Chinese government began to take the solar thermal power generation technology into consideration for the renewable energy promotion. According to “The 12th Five-year Plan on Solar Power Generation (draft) compiled by the National Energy Administration, by 2015, the solar thermal power might reach 1000MW in installation.  The project comprises two parts, one is R&D, and the other is demo system engineering. The R&D products are used in the demo project. There’re several stakeholders in the whole project, and the funds from the Ministry of Sciences and Technology are allocated to each stakeholder directly based on the individual contract. The leading organization of the whole project, Institute of Electrical Engineering, Chinese Academy of Sciences which is also the owner of the demo plant found that it’s difficult to control the whole process of implementation. Because of the insufficiency of control of the fund, the delivery deadline for the R&D products were delayed behind the construction schedule. A lesson learned is that it can be a good option to allocate the control over the funds to the owner who is responsible of allocating them to each stakeholder according to the real progress of the activities. R&D needs collaborations and trust among different research institutes, universities and industries to reach optimal achievements.  The experience has shown that meeting deadlines and budget goals, and solve licensing complexity has been very difficult for the institute. Much time has been consumed for the civil engineering work permission, which has lead to the delays on construction. Entrusting Engineering, Procurement and Construction (EPC) to a professional company instead of being done by the institute can be a good option.

4.3 PILOT MW-SCALE PROJECT REVIEW

4.3.1 Background information

To explore the key technologies and equipments of solar power tower technology and verify its feasibility, Ministry of Sciences and Technology, PRC (MOST) funded the Institute of Electrical Engineering, Chinese Academy of Sciences (IEE-CAS) to make R&D and demonstration project of 1MW solar power tower system. The project comprises two parts, one is R&D, and the other is demo system engineering.

The 1MW tower system, together with other facilities built will act as an experimental and test platform. New technologies or components can be tested and verified on it.

4.3.2 Project funding

The pilot project is initially supported by Ministry of Sciences of Technology under the PRC National Hi-Tech R&D program during the 11th Five-Year Plan, with a total funding of CNY 47.37million. With the implementation of the project, ADB provides $250,000 (1,694,000RB) for the Pilot Project Equipments Procurement. The ADB’s fund plans to be used for: 1) the saturated steam receiver, which is developed by China Huadian Engineering Co., Ltd (CHEC), and manufactured by Wuxi Huaguang Boiler Factory. 2) the thermal storage, which is researched and developed by Institute of Electrical Engineering, Chinese Academy of Sciences (IEE-CAS), and manufactured by Wuxi Taihu Boiler Factory. 4.3.3 Main research tasks

The pilot MW scale project covers a series of R&D study tasks and an integrated demo 1MW Dahan solar power tower plant. There’re five research task packages in the pilot project, covering the system design, solar collecting, high-temperature solar-thermal conversion, thermal energy transfer and storage, system control and technology integration. Each task is further covering more specific sub-tasks.

 Task 1: Solar thermal power plant overall design and system integration  Task 2: Research on heliostat with high accuracy and development of complete set of equipments  Task 3: Research on high-reliable receiver, heat transfer and thermal storage method and system establishment  Task 4: Centralized control strategies for the whole plant  Task 5: Establishment of solar thermal power experimental platforms

4.3.4 Stakeholders in the pilot project

There are nine stakeholders contracted under this project:

 Institute of Electrical Engineering, Chinese Academy of Sciences (IEE-CAS)  Institute of Engineering Thermophysics, CAS  Changchun Institute of Optics, Fine Mechanics and Physics, CAS  Shanghai Institute of Ceramics, CAS  Xi’an Jiaotong University  Sun Yat-Sen University  Hohai University  CHEC  Himin Solar

According to the allocation mechanism of Ministry of Sciences and Technology, the fund will be allocated to each stakeholder directly based on the research tasks contracted. The Institute of Electrical Engineering, Chinese Academy of Sciences is the leader organization of the pilot project and it are responsible for the management of the Dahan plant after its completion.

In the implementation of the Dahan plant itself design and construction, the following stakeholders have been identified:

Stakeholders Contract Remark

IEE-CAS Plant system design and Project leader and plant integration, operator, owner

Northwest Electric Power Design Design institute Design Institute (NWEPDI)

CHEC PMC Project management

Himin Solar Ltd Heliostat and installation Component supplier & constructor Hebei Construction & Solar tower constructor Investment Group Jiangsu Taihu Boiler Boiler & thermal storage Component supplier Company device

Hangzhou Steam Turbine Steam turbine Component supplier Company Xi’an Jiaotong University Water/steam receiver Component supplier

Table 13 Stakeholders identified in the Dahan plant building

4.3.5 Major barriers in implementation

The major barriers and difficulties have been related to the lack of experience on:

 Permitting (IEE-CAS)  Building solar towers as this is the first project  System integration

IEE-CAS is an R&D institution with no experience on EPC.

So far the whole system’s reliability and performance has not been tested due to the delay on completion.

4.4 1MW DAHAN TOWER PLANT REVIEW

4.4.1 Location

Based on criteria for CSP plant site selection, such as: solar resource, water resource, land, transportation, political importance, the Dahan plant has been located in the suburb of Beijing (North Latitude 40.4", East Longitude 115.9"), Dafutuo village, Badaling town, Yanqing County( fig26).

Figure 26 Location of 1MW solar power tower plant (the blue circle) 4.4.2 System design

The Dahan tower plant is composed of solar optical-thermal-power system, auxiliary boiler system and thermal storage system (see figure 27).

Figure 27 Schematic Dahan tower system

The table below shows the basic parameters about the Dahan tower plant.

DNI 1290kWh/m2/year Land area 53,360 m2 Nominal capacity 1MWe Heliostat aperture area 10,000m2 Heliostat number 100 Tower height 120m Receiver Cavity (5×5m), output 400 ºC /2.8MPa Heat transfer fluid Water/steam Thermal storage medium Saturated steam/oil (two stages),1h@100% Cooling method Wet cooling Turbine Steam turbine Table 14 Basic parameters of the Dahan tower plant

4.4.3 Equipment procurement

Procurement of the equipment for the Dahan plant has been divided in two groups:

 Commercially available items such as: steam turbine, generator, auxiliary boiler, and electric equipment.  Not commercially available in PRC equipment such as: heliostat, receiver and thermal storage device.

For the first, public bidding has been used and for the second invited bidding.

4.4.4 Stakeholders in the pilot project

The following stakeholders are involved in the plant engineering and building: Stakeholders Contract Remark

IEE-CAS Plant system design and Project leader and plant integration, operator, owner

Northwest Electric Power Design Design institute Design Institute (NWEPDI)

CHEC PMC Project management

Himin Solar Ltd Heliostat and installation Component supplier & constructor Hebei Construction & Solar tower constructor Investment Group Jiangsu Taihu Boiler Boiler & thermal storage Component supplier Company device

Hangzhou Steam Turbine Steam turbine Component supplier Company Xi’an Jiaotong University Water/steam receiver Component supplier

Table 15 Stakeholders identified in the Dahan plant building

4.4.5 Status of Dahan tower plant

Since the July 2011, Dahan tower plant has been put into commissioning experiments (fig. 28). The performance of the water/steam receiver supplied by Xi’an Jiaotong University has been tested, which generates 350°C, 2.15MPa steam and flows to the steam accumulator that has a volume of 100m3(fig. 29).With the same heliostats, the platform is testing the air receiver developed by the Institute of Electrical Engineering, Chinese Academy of Sciences with the metallic tower. By December 2011, the solar island and the conventional island haven’t been connected in total for the power generation. The 120m concrete tower has been capped (fig 30) and the peripheral structure is under construction. It is planned that the Institute of Electrical Engineering, Chinese Academy of Sciences will remove the water/steam receiver from the metallic tower to the 120m concrete tower for the permanent use. It’s expected that by May 2012 the installation of the water/steam receiver on the concrete tower will be completed.

Figure 28 Heliostats are tracking the sun

Figure 29 100m3 steam accumulator and deaerator

Figure 30 120m concrete tower in construction

4.5 ECONOMIC AND FINANCIAL ANALYSIS ON 1MWE DAHAN TOWER PLANT

Based on a bidding procedure, the total cost of Dahan plant, including equipment and construction is around CNY 32.1million. The cost breakdown can be seen in Figure 31.

Due to its nature, scientific research instead of commercial project, investment optimization is subordinated to R&D flexibility.

others 12%

power block heliostat field 20% 50%

thermal storage 7% tower 1% receiver 10%

Figure 31 Cost breakdown of the Dahan tower plant

An economic and financial analysis was made for the Dahan plant, including economic analysis from the point of Chinese society; financial analysis and cash flow analysis to estimate the average cost of electricity and suggested power sale price. The basic economic and financial assumptions used for the analysis are presented in the following table.

CURRENCY USED IN THE CALCULATION CNY Economic discount rate 12% Financial discount rate 8% Annual rate of inflation in PRC 0% Annual rate of devaluation 0% Price level 2010 Income Tax Ratio 25% VAT Tax Ratio 17% Local Tax Ratio 8% Starting year calculation year 0 Table 16 The basic economic and financial assumptions The key parameters for economic and financial analysis are presented in the following table, on which, the operation & maintenance costs are estimated to be 2% of the total investment (Dahan plant will be used as experimental platform instead of continuous running for power generation, therefore, at this stage, it is difficult to provide a more specific estimation).

Key Parameters for Economic and Financial Analysis Cost of Dahan plant (million CNY) 32.1 Operation & maintenance 2.0% of total investment Annual operation hours 1800 Table 17 Key parameters for economic and financial analysis

4.5.1 Economic analysis

The economic benefit is calculated from the fuel saving (coal fired power plant), saved operation and maintenance cost, capacity savings, as well as CO2 savings, SO2 savings and Suspended Particle Matter (SPM) savings.

The following table shows economic analysis results

Indicator Unit Value at Discount Rate 10% ENPV million CNY -28.66

Table 18 Economic analysis results

The 1 MW pilot project with government grant is focused to demonstrating the CSP technology and its technical viability. Based on the common project economic analysis method, it does not show economical or financial viability, as the capacity is too small to reach economic and feasible scale. However, the operational and technical performance experiences are vital for large commercial scale project in the coming future.

4.5.2 Levelized Cost of Electricity

Levelized cost of electricity (LCOE) is calculated based on 23 years of operation of the plant. NPVtotal cos t LCOE  NPVPowerGeneration

The Levelized cost of estimation also looks at scenarios with and without CDM benefit

The calculation results shows without CDM benefit, the LCOE is 1.79 CNY/kWh, however, with CDM benefit, LCOE is 2.2 CNY/kWh, thus, the 1 MW Dahan Plant will not be benefit from CDM, this is because the benefit from selling CERs at (97.12 CNY/ton is not enough to cover the CDM registration fee and transaction cost, due to the small scale of installed capacity.

4.5.3 Financial analysis

The financial analysis is calculated based on target FIRR at 8% to estimate the power sales price.

The financial analysis result shows that if power sales price is set to 2.3 CNY/kWh, the FIRR reaches 8.14%.

4.5.4 Return on Equity based on Cash Flow

Return on Equity (ROE) for an electricity sale price equal to 3.2 CNY/kWh is equal to 10%.

4.5.5 Suggested power purchase price

Based on the financial and cash flow analysis, the suggested power purchase price for 1MW Dahan plant should be 2.27CNY/kWh, this estimation is based on financial analysis and FIRR at 8%.

As this project is a technical demonstration project financed by government R&D grant, therefore ROE is not considered to determine the proposed feed-in-tariff.

The hypothesis analysis is to understand the economic and financial viabilities of the 1 MW pilot plant, and as in reality, no tariff applies for the R&D project.

4.6 MEASURES TO PROMOTE THE CSP DEVELOPMENT

4.6.1 Cost reduction

A barrier for CSP development is its higher cost than fossil fuel power, wind power and even than solar PV. Therefore, reducing the cost would be an important measure to promote its development. Cost reductions will occur with technology improvement, larger plant size and mass production.

When breaking down the cost of solar thermal power plant, it’s found that two items: heliostat field and power block add 62 % of the total investment. These two items have high percentages of manpower embedded and use large amounts of raw materials, such as steel, concrete and glass. Considering that manpower costs in PRC are much lower than in most Western countries like Spain, Germany or the USA, an estimated cost reduction of 40% investment can be considered for tower plants in PRC with respect to those in Western countries.

By comparing the cost of the Dahan plant with some other existing tower plants, it’s found that definitely the size matters. The larger the size is, the lower the unit cost is. A plant of similar technology and double power capacity doesn’t cost double, for instance PS10 and PS20 (Kistner, 2009). Several component´s relative costs decrease a little with a doubling in plant size, while others show a reasonable dependency on scale effects.

Components whose cost decreases slightly when doubling the plant’s size (50 to 100 MW):

 Solar field (SF) (97.5%)

Components whose cost decreases significantly when doubling the plant’s size (50 to 100 MW):

 Power block (PB) (81.1%)  Balance of plant (BOP) (76.6%)  Grid connection (GR) (65.0%)

Furthermore, there are specific costs which their relative weight is stable as for the thermal storage (TS), civil works (CW), or, e.g., water consumption during operation. Finally, the most important scale effects can be realized in project management (PM) and project development (PD), where the costs are quasi-fixed in absolute figures.

4.6.2 Political incentives

The development of renewable energy including the solar thermal power needs incentive supports from the government. The development of CSP in Spain is an example of the promotion role of political incentives (i.e. feed-in tariff).

PRC has taken the first step on incentive support of CSP. For the first commercial CSP plant, a grid connection price (0.9399 CNY/kWh) has been authorized via concession bidding. This low electricity price could frustrate the enthusiasm of the industry.

More proposals should be submitted to influence the decision makers either on the installation target or on the feed-in tariff. 5 SITE SELECTION & PREFEASIBILITY ASSESSMENT FOR 50 MW DEMO CSP PLANTS IN GANSU AND QINGHAI

5.1 BACKGROUND

A study has been carried out for the selection of the suitable site and technology for the first 50 MWe CSP plant in the PRC

The following activities have been carried out:

 An assessment of the CSP technologies currently available and the proposal of one or several of them for the pilot project.  An economic and financial study to determine the expected electricity generation costs.  Environmental and social impact studies.  Development of criteria to rank among several candidate sites both in Gansu and Qinghai.

For the site selection a set of criteria has been defined for the ranking of proposed sites. Those criteria are divided into the following groups:

 Technical criteria  Socio-economic and regional development criteria  Environmental criteria

The site selection has been undertaken from the point of view of a qualitative multi- criteria analysis.

At that financial assessment study, the full cost of the plant has been calculated in two different scenarios: considering the supply of all equipments from PRC, and considering a partial supply of equipments from other countries.

The estimated electricity generation cost has been calculated departing from the full plant cost above and considering several options:

 Possibility of getting ‘Clean Development Mechanisms’ (CDM) benefits or not.  Different possible loan conditions.

For the calculations, the following figures have been considered:

 Total investment cost of 1062.39 million CNY (for imported equipment) Estimated annual electricity production 88,600MWh for 50% probability P50 scenario.

5.2 KEY FINDINGS

A feasible site in the Gansu province (Jinta county) has been selected among four sites pre-selected by the Executing Agency and another one in Qinghai province (Golmud) among two pre-selected ones.

The four pre-selected sites in Jinta are located very close to each other, so only slight differences have been found. The same can be stated about the two places in Qinghai. Based on the technology survey carried out, the most suitable technology for this projects is the ‘parabolic trough collector’ using synthetic oil as heat transfer fluid (PTC) and, if possible, with a natural gas back-up boiler.

This is the only technology with enough commercial deployment and a long run experience to ensure the success for this first CSP project in PRC minimizing risks. As a very outstanding data, 2.300 MW out of 2.339 MW which are planned to be built in Spain until year 2013, are PTC technology.

Both social and environmental impact studies have been carried out for the two locations with positive results, being applicable the same findings for both.

From the social impact point of view, no negative effects are expected. As the projects will be built on the state-owned wasteland without residents, local government is the most important stakeholder and there is a firm support from that side.

Additionally, each project is expected to generate more than 500 temporary jobs during construction phase and around 50 permanent jobs during operation phase. This will contribute to decrease poverty in the area.

From the environmental impact point of view, special care must be taken in both project locations about management of hazardous materials.

For the proposed parabolic trough power plant, the heat transfer medium is diphenyl (synthetic thermal oil) which is listed as hazardous material in PRC The environmental permits to use the diphenyl will require a special procedure and an environmental management system during lifetime and decommissioning of the plant.

The thermal insulation material will be silicate fiber (the asbestos have been listed as forbidden used material). The environmental permits to use the silicate fiber will be conducted at the normal process. Both the diphenyl and the silicate fiber will require a proper disposal procedure at the operation and decommissioning phases.

5.3 RATIONALE OF A CSP PROJECT IN GANSU AND QINGHAI

PRC’s energy policy target is to reach a 15.4% renewable energy share by the year 2020, and 27.5% in 2050, respectively. The instruments to reach this goal range from the ‘Law of the People’s Republic of China on Renewable Energies’ to the political and financial support of research and development of renewable energy sources.

The Ministry of Science and Technology of the People’s Republic of China has listed CSP as an important research issue in the ‘Summary of National mid & long-term Science and Technology Development Plan’ (2006–2020).

Other signals of the active interest on CSP in P.R.C are the following:

 Government has included it in the 11th five-year plan and in the 12th five-year plan.  A first commercial power plant has got a tariff through bidding in Erdos, Inner Mongolia  Many major Utilities ,such as Huadian, Datang, Guodian or Guangdong Nuclear, have shown interest on CSP and are developing projects.have shown interest on CSP and are developing projects  PRC has developed renewable energy related legislation (grid connection, promotion, obligation to buy the energy) and environmental legislation creating a frame that has been good enough to attract investment in wind, solar PV and biomass, mainly, from local investors.

Additionally, the provinces of Gansu, Inner Mongolia, Qinghai, Xizang and Xinjiang have a good solar resource for CSP development, though all of them are far from end power users and are relatively underdeveloped.

Hence, it has sense to promote construction of a first commercial-size CSP power plants in any of the above mentioned provinces.

Figure 32Direct solar radiation map in PRC (kWh/m2/day)

Source: United Nations Environment Programs SWERA (Solar and Wind Energy Resource Assessment)

5.4 PROJECT SITES DESCRIPTION (SITE SELECTION RATIONALE DESCRIPTION)

The goal of this activity is the definition of criteria for ranking of proposed sites for the priority demonstration projects both in Gansu and Qinghai provinces.

The criteria are divided into the following groups:

 Technical criteria  Socio-economic and regional development criteria  Environmental criteria  The site selection will be undertaken from the point of view of a qualitative multi- criteria analysis.

5.4.1 Qualitative multi-criteria analysis

Each factor is ranked on a numerical scale of 0 to 3, with 0 the not feasible and 3 most attractive. The score of each factor can then be summed up to compare each candidate project site, and the weighted scores will support project developers to finally select the most appropriate site for individual projects. The candidate sites will be displayed in a table with their scores per criteria assigned. If any criterion is marked as ‘not acceptable’, the site will be rejected. Also in the case that Environmental Impact Assessment is negative the project will be rejected. It must be noticed that in both locations, Jinta and Golmud, the candidate sites are very close to each other, so there are only slight differences in the parameters to be evaluated. This makes the calculation of LCOE, for instance, not significant for the scoring process, being the experts experience a crucial tool to assess the locations.

5.4.2 Technical Criteria

The following technical criteria have been identified as relevant after expert analysis and stakeholders evaluation:

 Direct Normal Irradiation (DNI)  Wind Speed  Temperature  Inclement Weather Factors  Availability of Water  Terrain and Location  Grid Connection  Communications and Logistics  Availability of skilled workers

5.5 Socio-Economic Criteria

The following socio-economic criteria have been identified as relevant after expert analysis and stakeholders evaluation:

 Social acceptance.  Involuntary resettlement.  Water consumption  Occupation of special importance areas  Cultural impacts  Social Development.  Creation of Infrastructures  Security  Safety  Health 5.5.1 Environmental Criteria

The following environmental criteria have been identified as relevant after expert analysis and stakeholders evaluation:

 EIA approval  Fulfillment of environmental protection regulations  Water consumption  Avoid natural protected areas of ecological value  Emissions

5.5.2 Site Selection for Gansu

The selection has been carried out taking into account the information available and comparing the applied criteria for the four possibilities in Jinta (Gansu).

It must be repeated here the fact that the four candidate sites are very close to each other, so there are only slight differences in the parameters to be evaluated.

Jinta 1 is the winner followed by Jinta 2. These locations are quite similar, but following the general criteria these locations only differ in “average wind speed”.

Making a deeper analysis between similar categories, there are some differences:

Criterion JINTA 1 JINTA 2 Average wind speed (m/s) 2 3.2 Maximum wind speed (m/s) 18 20 Distance to the water source 4/8 3/6 (km) Area Available (ha) 5,100 20,000 Distance to a road (km) 2/20 3/24 Table 19 Differences between sites in Gansu

Considering the wind issue Jinta 1 is the clear winner with lower values.

The higher the average wind speed, the lower the optical efficiency of the solar collector. This happens because the wind deformates the whole collector structure, taking it out of the accurate Sun tracking position, so the concentrated radiation does not hit the receiver properly and thus increasing energy losses.

Taking into account the area available, both sites have enough surface area to grow (Jinta 1 has enough area to set 34 plants considering a necessary surface of 150 ha) therefore, although Jinta 2 has more available area, Jinta 1 is valid too.

Comparing the distance to the different services, the conclusion is: Jinta 2 is closer to the water source than Jinta 1 (this distance in economic terms means 400,000 CNY) but Jinta 1 is closer to a road than Jinta 2 (considering a 6 m width road, 1 km implies around 2,400,000 CNY), so Jinta 1 is the winner.

5.5.3 Site Selection for Qinghai

The selection has been carried out taking into account the information available and comparing the applied criteria for the two possibilities in Golmud (Qinghai). Qinghai 1 is the winner (27 points) followed by Qinghai 2 (26 points). These locations are quite similar, but following the more relevant criteria, these locations differ in the following:

CRITERIA QINGHAI 1 QINGHAI 2

DNI (kWh/m2yr) 2.200 2.100

Maximum wind speed (m/s) 22 24

Distance to the water source (km) Underground 0

Distance to the grid (km(KV)) 5(330) 35(330) Table 20 Differences between sites in Qinghai

Again, the differences between pre-selected sites are minor. Nevertheless, Qinghai 1 must be considered the best option for two reasons:

 A slightly higher DNI which will make the plant generate 5,5 GWh more electricity per year.  A much lower distance to the grid, so the initial investment can be reduced by 2.500 kCNY (30 km of electric line)

As far as the ‘maximum wind speed’ is concerned, both sites have poor conditions, which means that the plant will be shut-down a certain number of days per year because of the high wind, thus decreasing the amount of electricity generated per year.

Concerning the factor ‘distance to the water source’, Qinghai 2 has the water supply nearby and Qinghai 1 needs the drilling of a well to get the underground water. However, no further data have been supplied by the Executing Agency, only very positive messages about the feasibility of this solution, so it’s considered irrelevant in this comparison.

5.5.4 Gansu

Project location

‘Jinta 1’ site is located 4 kilometers to the east of Jinta County, Gansu province. The available area is 51 km2.

The relevant landmarks are:

 To the east , hills,  To the west the proposed Jiu Hang railway,  To the south is Shi Sheng Road and  To the north is Yang Jing Zi Wan farmland.  To the southwest, at 3 km Jiu Hang Provincial Highway and at 8 Km national Reservoir-Mandarin Duck Pond.

5.5.5 Qinghai

Project location ‘Qinghai 1’ alternative is located in east exit, north side of 109 National Highway, east of Golmud City.

Qinghai´s relevant landmarks are the following:

 To the west is located Golmud city. And 5 km east from Golmud we find a 330 kV substation.  To the south we find the 109 National Highway.  At its surroundings, there can be found a solar PV power plant under construction.

According to the urban and industrial planning for Golmud city, a large scale solar plant will be built on both sides of 109 National Highway from west to east.

The site is flat and open. Its slope is less than 5 ‰. Its average altitude is about 2870 meters and its available land area is higher than 6 km2.

Initially, it is not covered by minerals and valuable cultural relics. It has no of military use.

It is possible to build a new road which will connect to 109 National Road. Large equipments could be transported by railway and then delivered through 109 National Road to the site. There are no rivers, lakes or reservoirs, but there is groundwater instead.

5.6 PREFEASIBILITY ASSESSMENT

5.6.1 Technical

Once the decision about the proposed site has been made, it’s necessary to study the available CSP technologies and their degree of commercial deployment, and hence, the reliability for such a large investment.

A study has been carried out and, in the opinion of the international experts, the recommended technology for the first 50 MWe CSP plant in PRC is parabolic trough collector with synthetic oil as heat transfer fluid (PTC) and, if possible, a natural gas back-up boiler.

This is the only technology with enough commercial experience to ensure the success for this first CSP project in PRC minimizing risks (see next figure). As a very clarifying data, 2300 MW out of 2339 MW planned to be built in Spain until year 2013, are PTC technology.

Figure 33 Functional scheme of a PTC plant (Courtesy of Flowserve)

Other existing technologies have been demonstrated at pilot scale, but none of them at a so large commercial size. As per the experience of the consultants, it’s not advisable to use technologies not already up-scaled to 50 MW in this case. For CSP technologies, scalability is a key topic which has to be carefully considered under low risk conditions. As an example, all the first commercial plants using power tower technologies (water/steam) are sized under 20 MW.

The uncertainties must be kept at a minimum level, so it wouldn’t be advisable to bet for technologies with little or no commercial experience in the long term.

Concerning technology development at the PTC field, most models have very similar dimensions, following the standard of LUZ Industries LS-3 model, developed in the 80’s. Also, reflectors and receiver tubes are quite similar and exchangeable between most of the models existing in the market.

The main improvements on the drawing table concern reduction in weight and in assembly time on site. Taking into account that the first project will be closely observed by stakeholders and the public audience in general, it is proposed to select very well proven components with large commercial experience.

Of course, the experts propose to take advantage of the occasion to insert some full loops of promising Chinese prototypes.

In most Spanish projects, a natural gas backup boiler is included in the plant. Its overall contribution to the annual electricity production must be lower than 12% (or 15%, depending on the tariff adopted by the independent power producer).

The main advantage is to guarantee full power production even in the worst weather conditions, or when the electricity pool price is the highest. On the other hand, it’s a very important resource to avoid freezing of the heat transfer fluid, by keeping its temperature above a minimum safety value whenever ambient temperature is extremely low. This uses to happen in desert areas at night. In case that no gas system is integrated in the project, a higher number of solar loops will have to be included in the project, thus increasing the total investment cost.

On storage, it is a decision of the executing agency. Molten salt has been proven in Spain with successful results but it would introduce uncertainty for the first project in PRC and increase investment also.

5.6.2 Economical and Financial Analysis

5.6.2.1 Economic Assessment

Economic Assessment is conducted based on avoided coal fired power plant capacity, and avoid environmental cost, including CO2, SO2, and SPM (Suspended Particulate Matter)

Currency used in the calculation CNY Economic discount rate 12% Annual rate of inflation in PRC 0% Annual rate of devaluation 0% Price level 2011 Income Tax Ratio 25% VAT Tax Ratio 17% Local Tax Ratio 8% Starting year calculation 2011 Table 21 Key economic assumptions

Fuel Replacement in coal fired power plant Value Unit Average coal consumption 0.377 kg/kWh Coal quality 56000.0 kcal/kg Coal price 850.0 CNY per ton coal equivalent Value of fuel savings 0.283 CNY per kWh

Displaced O&M cost in coal fired plants Non-fuel variable costs in thermal power 0.012 CNY per kWh plant

Displaced investment in coal fired power plant Cost of coal fired plant (1000 MW incl. 6.0 million CNY per MW desulph.) Load carrying capability, 100.0% (base case) Displaced investment value per MW 5.00 million CNY Displaced investment value, total 0.01 million CNY Value expressed as energy charge 0.000 CNY per kWh

Avoided cost excluding SO2 & CO2 benefits 0.295 CNY per kWh Value of SO2 savings, 100 USD per tonne 0.006 CNY per kWh Value of CO2 reductions, 97.14 CNY per ton CER Value of SPM reductions, 35 USD per 0.006 CNY per kWh tonne Avoided cost including SO2 & CO2 benefits 0.431 CNY per kWh

Cost of production, state-of-the-art power 0.300 CNY per kWh plant Reduction in regional line losses 0%

CO2 emission 0.930920 tCO2e/MWh CER price 91.14 CNY/tonne Annual Energy Yield 88.644 MWh Table 22 Calculation of avoid coal fired power plant capacity in PRC

The economic benefit is calculated from the fuel saving (coal fired power plant), saved operation and maintenance cost, capacity savings, as well as CO2 savings, SO2 savings and SMP savings.

The economic analysis results are shown in the following table.

EIRR 2% ENPV (million CNY) -437.70 Table 23 Economic assement results

The economic analysis result shows the EIRR of the CSP plant is less than 12%, therefore, it is not economic feasible from Chinese Society point of view to build a 50 MW CSP plant to replace increased capacity of coal-fired plant, even considering environment benefits. However, the environmental benefit is estimated on the current base, it is expected the environmental cost for coal–fired plant will increase in the future, as well as coal price On the other hand, the investment cost of CSP will decrease as the technology improvement and capacity increase.

5.6.2.2 Financial Assessment

5.6.2.2.1 Financial assessment is carried out based on the following financial assumptions and data Currency used in the calculation Unit % Exchange rate CNY/US$ 6.5 Economic discount rate 12% Financial discount rate (Used Weighted WACC Average Cost of Capital (WACC) ratios for different funding options) Annual rate of inflation in PRC 5% Annual rate of devaluation 0% Price level 2011 Income Tax Ratio 25% Value AddedT Tax Ratio 0% Local Tax Ratio 8%

20 The baseline emission factor for North China Grid for Wind and Solar Energy Projects Starting year calculation 2011 Table 24 Financial assumptions WACC is the minimum return of a project to be able to payback loans and investors, and other creditors. The WACC with ADB financing is calculated as following table. WACC Calculation ADB Equity A. Amount L B. Weighting 80% 20% 100% C. Nominal cost 2.34% 10% D. TAX 25% 0% E. Tax Adjusted Norminal Cost ([ C x (1 – D ) ] 1.76% 10.00% F. Inflation Rate 0% 5% G. Real cost [ ( 1 + E ) / ( 1 + F ) – 1 ] 1.76% 4.76% H. Weighted Component of WACC (G x B) 1.40% 0.95% 2.36%

Table 25 Calculation of WACC (Weighted Average Cost of Capital) The ADB financing terms for the 50MW CSP project is shown as following table: ITEM Value Interest rate during construction period 1.34% Interest rate during repayment Period 2.34% Financial discount rate Equity debt ratio 2.36% WACC (20:80) Grace Period 3 Years Loan Tenor 20 Years Loan Disbursement Ratio 50:50 Equity Debt Ratio Scenario 1 20:80 Table 26 ADB financing terms

Capacity 50MW Technology type Parabolic Trough with gas back-up (10%) Net energy output 88.6 GWh/year Construction period 24 months Operation period 25 years Table 27 Technical parameters

Investment Cost (million CNY) 849.91 Annual Operation and Maintainance Cost (million CNY) 27.84

Table 28 Investment cost and annual operation and maintenance cost

Annual estimated production for 50% chance scenario is equal to 88,600MWh

Annual Energy Production Estimation Annual Energy Production (MWh) 88644 Annual Operation Output degradation 0.25% Over hold at 8 years output ratio from 99% nominal, after over hold Table 29 Estimated annual energy production

5.6.2.2.2 Benefit from Clean Development Mechanism (CDM)

The CDM is one of the "flexibility mechanisms" that is defined in the Kyoto Protocol. The flexibility mechanisms are designed to allow Annex B countries to meet their emission reduction commitments with reduced impact on their economies. An industrialized country that wishes to get credits from a CDM project must obtain the consent of the developing country hosting the project that the project will contribute to sustainable development. Then, using methodologies approved by the CDM Executive Board (EB), the applicant (the industrialized country) must make the case that the carbon project would not have happened otherwise (establishing additionality), and must establish a baseline estimating the future emissions in absence of the registered project.

Based on ‘Tool for the demonstration and assessment of additionality’ EB 39 Report Annex 10, the project has clear additionalities for CDM, hence the analysis also looks at CDM benefits, with 10 years credit period at CERs market price of 2011.

Baseline for Region 0.8413 TCO2/MWh (North West Grid) CDM registration and issues 0.2 US$CER cost CERs credited period Years 10

Total Credited period 10

CDM upfront cost US$ 50,000 CERs annual administration cost Annual CERs 2% Table 30 Assumptions of CDM benefit

5.6.2.2.3 Financial Analysis Results

The financial analysis looks at two price tariff cases, 1CNY/kWh and 1.1 CNY/kWh. The preliminary results show as following tables.

 Case 1 Tariff= 1CNY/kWh Without CDM With CDM WACC 2.36% FIRR (post-tax) 4.37% 5.00% NPV (MCNY) 209.45 274.57 Table 31 Financial analysis resuls for case 1. Tariff=1CNY/kWh

 Sensitivity Analysis

The sensitivity analysis looks at 10% variation for project cost (+10%), energy output(- 10%) and O&M cost (+10%), and combined. The following table shows the result of sensitivity analysis. Case FIRR (%) Project Cost Energy Output O&M Cost Combined Base +10% –10% +10% Case Without 4.37 3.56 3.12 3.92 2.09 CDM With CDM 5.00 4.15 3.69 4.57 2.63

Table 32 Sensitivity analysis for case 1 Tariff=1CNY/kWh

In the financial analysis results shown with 1 CNY/kWh tariff, FIRR is greater than WACC (2.36%), therefore, the project is financial feasible from ADB´s point of view and is able to pay back ADB´s loan.

 Case 2 Tariff =1.1 CNY/kWh Without CDM With CDM WACC 2.36% FIRR (post-tax) 5.36% 6.02% NPV (MCNY) 323.36 386.29 Table 33 Financial analysis resutls for case 2. Tariff =1.1 CNY/kWh

 Sensitivity Analysis

The sensitivity analysis looks at 10% variation for project cost (+10%), energy output(- 10%) and O&M cost (+10%), and combined. The following table shows the result of sensitivity analysis.

Case FIRR (%) Project Cost Energy Output O&M Cost Combined Base +10% –10% +10% Case Without 5.36 4.59 4.16 5.02 3.12 CDM With 6.02 5.19 4.75 5.69 3.64 CDM Table 34 Sensitivity anaylsis for case 2. Tariff =1.1 CNY/kWh

In the financial analysis results shown with 1.1 CNY/kWh tariff, the project is viable from ADB´s financing point of view. The compared results of the two cases are shown in the following figure. 7 6.02 6 5.32 5 5 4.37

4 With CDM Without CDM 3 2.36 2.36 WACC 2

1

0 Case 1: 1.0 CNY/KWh Case 2: 1.1 CNY/kWh

Figure 34 Prelimanary results of financial analysis

The figure shows with ADB´s financing terms, FIRR (with and without CDM) are greater than WACC, and the project is financially viable if the proposed tariff is at 1 CNY/KWh.

5.6.2.2.4 Comparation of Domestic Commercial Loan and ADB´s loan

Project’s financial viability is highly sensitive to the cost of financing. Financing from international development agencies is an important source to facilitate and accelerate deployment of CSP in developing countries. Low interest loans can be achieved from development banks, such as the Asian Development Bank, the World Bank, as well as grant from Global Environmental Facility. There are also some deployment funds to CSP, such as the Clean Technology Fund (CTF) or DESERTEC Initiative established by development agencies and private funds, these funds provide significant role to mobilize capital investment and expedite commercialization of the technology.

The following table compares lending terms from development banks, and commercial banks in PRC..

Type of Loan Interest Note Repayment Grace Period Rate Period (Years) (Years)

Chinese 6.8% - 5-15 2 years Commercial Loan construction

ADB Loan 2.34% 0.15% 25 3-5 commitment fee

Table 35 Comparation of lending terms

With Domestic Commercial Loan, the proposed tariff is at least 1.2 CNY/kWh to be financial viable, however, ADB´s financing terms are very favourable to return of equity. The ADB lending terms compared to normal commercial loan will lower the required tariff by up to 20% for the same equity return. Key Findings

 The 50 MW CSP is not considered as economic feasible from Chinese society point of view to replace increased capacity of coal fired plant, even considering environment benefits. However, the environmental benefit is estimated on the current base, it is expected the environmental cost for coal – fired plant will increase in the future, as more domestic and international pressure on GHG emission and local polutions, meanwhile the coal price is escalating at around 20% annually. On the other hand, the investment cost of CSP is expected to decrease as the technology improvement and capacity increase.  With ADB´s financing terms, if the proposed tariff is at 1.00 CNY/kWh, the project is financially viable (with and without CDM benefit).  ADB´s financing terms are very favourable to return of equity, the ADB lending terms compared to normal commercial loan will lower the required tariff by up to 20% for the same equity return.  With domestic commercial bank loan, the proposed tariff is at least 1.2 CNY/kWh to be financially viable.

5.6.3 Social analysis

5.6.4 Possible social impacts

In its construction and operation stages, the social impacts of a CSP project will likely be:

 Lead to population change including number, structure and distribution. A large-scale CSP project needs around 1000 workers to build and 50 workers to operate it, which will bring some job seekers, their families and relative services providers into the affected area. It could change the total population and its age, gender, education and employment structures in related areas.  Involuntary resettlement. The project construction (plant, road .) need land, which may require some people to migrate to other locations. The involuntary immigration will change their residence, way of living, living level and force them to adapt to the new environment around them.  Change some indigenous people life style. Due to the project, some people have chance to or oblige to (because of land loss) turn into workers from farmers, which will change their income, daily schedule and activities. Population flow from outside will bring some other impact to their life style, such as new culture and relationships.  Increase income of local residents and government, which is advantage to poverty reduction. The CSP project will bring new jobs to local residents which will increase their income and avoid them falling into poverty, and generate government revenue through taxes and fees which will increase the governmental capacity to improve public services and reduce poverty.  Change the availability of local infrastructure and public service. The CSP project may improve the transport by building new roads or increase the traffic volume by transporting heavy equipment (especially in construction stage). Additionally, the influx of more population with infrastructure needs may worsen the tension status of these public resources.  Change local community on its stability, services and facilities. New immigration will weaken the stability of local community where the CSP project is implemented, because it may increase the conflict between local residents and new comers. The community’s services and facilities may need to be distributed in a new way because of the new immigration’s coming.  Bring cultural impact on the religion and culture tradition of indigenous peoples. In Western PRC, there are many minorities who have their special religion and culture tradition. A CSP project probably brings some impacts to them. For example, CSP project may obligate people to go to another temple instead of going to the one that they usually go because of migration to other place.  Bring some fears and aspirations to local residents. Local residents may have some fears about their safety, the future of their community and the future of their culture. At the same time, the CSP project may bring some aspirations to local residents too, some benefit(increasing income, new jobs, new business, services improvement, living level improvement .).

Some of these impacts are positive, such as increasing income to local residents and government, and some of them are negative, such as involuntary resettlement issue. At the same time, most impacts could be both positive or negative depending on how they are managed.

As far as the proposed projects are concerned, the social impact study comes to similar conclusions that are summarized below:

5.6.5 Land used

The land is state-owned non-utilized wasteland without the cover of minerals or valuable cultural relics. It is also not ecologically protected and has no military use. Mostly is rock and gravel.

5.6.6 Demographic impact

In the stage of construction and operation, most workers will be local people. The number of new comers from other regions will be small. This project will not change the total population and its structure.

5.6.7 Involuntary resettlement

No involuntary resettlement is foreseen in this project.

5.6.8 Economic impact

The project will increase local GDP in the construction and operation stage.

5.6.9 Employment and income

This project will bring about 500 jobs during the construction stage and 50 jobs (typical figures supplied by Spanish plant promoters) during the operation stage. As a new industry, the wage of CSP workers will be higher than the average level of local area, so it will increase local average income and be helpful to reduce poverty.

5.6.10 Social acceptance issue

The project will be built on a state-owned wasteland without residents, so the local government is an important stakeholder, and there is a firm support from that side. No problems are expected about this issue. 5.6.11 Environmental Impact

For the proposed Jinta CSP project, the most important activity of environmental analysis is to conduct the relevant Environmental Impact Assessment (EIA).

5.6.12 EIA requirements for the Project

To ensure the project can meet ADB’s requirements on environmental safeguard, an environmental task have been assigned in the TA. The purpose of this element of the TA is preparing a Summary Initial Environmental Examination (SIEE) in accordance with ADB´s requirements as stipulated in the Environmental Assessment Guidelines (2003) and Safeguard Policy Statement (SPS 2009).

The preliminary findings and environmental concerns for Jinta site are the following.

5.6.13 Soil erosion

During the sites visit in October 2010, the consultants observed that there were many soil erosion prone cases in project sites. Both the FS and the EIA should also include the following requirements for soil erosion prevention:

 Design: During preliminary and detailed design, the mitigation measures proposed in the FS and EIA approved by the local Environmental Protection Bureau (WRB) should be incorporated into the EIA documents.  Responsibility for construction: All the civil works contract documents should include specific requirements on soil erosion prevention. The responsibilities of contractors regarding soil erosion prevention will be defined.

5.6.14 Biodiversity conservation and sustainable natural resources management

The impact assessment studies have assessed the signification of subcomponent impacts and risks on biodiversity and natural resources management. As an integrate part of project sites and the impacted areas, the assessments have been focused on the major threats to biodiversity, which included:

 Modified Habitats: The project implementation activities will not produce modified habitats, as the planned project activities will not occur in any threatened species habitats.  Natural Habitats: The project implementation activities are not placed in areas of natural habitat. No impact to natural habitats are likely to occur.  Critical Habitats: The project implementation activities are not planned for natural habitats areas. No impact to critical habitats are likely to occur.  Legal Protected Areas: The project implementation activities are not located within any legally protected areas.  Invasive alien species: The project implementation activities will not involve any invasive alien species.  Management and use of renewable natural resources: The project implementation promotes the management and use of renewable natural resources. The subcomponent functions are safeguarding the life-supporting capacity of air, water, and soil ecosystems. 5.6.15 Pollution prevention and abatement

The project implementation activities are not likely to produce relevant pollution. Even though, during the design and implementation stages of the project, the building companies must apply pollution control technologies and practices consistent with relevant PRC’s regulations and standards and international good practice for prevention and abatement of minimal impacts occurred at construction phase. The applications of chemicals must be managed within the controllable and safety level. The detailed information on mitigating the impacts will be presented at the EMPs (Environmental Management Programs) for each sub-component.

5.6.16 Management of hazardous materials and pesticide use

For the parabolic trough power plant, the thermal heat transfer medium is diphenyl which is listed as hazardous materials in PRC. The environmental permits to use the diphenyl will require special process and the orientated environmental management measurement must be prepared.

The thermal insulation material will be silicate fiber (the asbestos have been listed as forbidden used material). It is allowed the use of silicate fiber and it will be conducted as a normal process. Both the diphenyl and the silicate fiber will require proper disposal manners at both the operation and decommissioning phases.

No chemical pesticides shall be applied during the project implementation, and the other hazardous material applied doses controlled at low concentration level and under safety conditions. The project implementation activities will be at safe side on the management of hazardous materials and chemical materials.

5.6.17 Greenhouse gas emissions

The project implementation activities are not likely to consume large amount of fossil fuel energy. They are not likely to increase greenhouse gas emissions significantly. Potential sources of greenhouse gas emissions from sub-project works include machinery and vehicle exhaust during the construction phase.

Proper maintenance of vehicles and diesel equipment, and avoidance of unnecessary running of vehicle and equipment engines will reduce emissions. No vehicle that emits black smoke will be allowed to operate on-site. According to past similar construction works, greenhouse gas emissions from vehicles and machinery are likely to be low. As a result, induced decay of existing vegetation by the project activities is likely to be negligible, resulting in negligible volumes of carbon dioxide . During operation, 10% of the primary energy will be natural gas, this will be the major source of CO2

5.6.18 Health and safety

Due to the fact that hazardous materials are applied at very low concentration level and under safety conditions, the project implementation activities will not produce impacts on both occupational health and community health. Only for diphenyl, the special management measures of health and safety will be required.

5.6.19 Induced and cumulative impacts

No significant induced and cumulative impacts have been identified. 5.6.20 Physical cultural resources

The project implementation activities are not placed nearby any PRC cultural protected areas.

5.6.21 Conclusions and recommendations

The project sites are not used for agriculture or grazing, they are not located in any sensitive ecosystem, and they have no historical or cultural value.

The nature of the project sites coupled with the clean nature of solar power generation ensures that the project will not cause any significant, long-lasting environmental or social impacts during construction, operation or decommissioning. On decommissioning special care shall be taken on diphenyl and receiver tubes. Only minor and transient environmental disturbances would be expected at the project´s sites during construction and operation, and they will be minimized through implementation of appropriate environmental managements. After the EIAs for all the subprojects and other relevant information/data have been provided, the positive and negative environmental impacts resulting from implementation of this project will be analyzed and summarized, the final conclusions will be made accordingly.

The TA environmental consultant will provide technical support and advice to the EIA institutes to ensure that the EIA documents meet the PRC regulatory requirements, and produce the information that will fulfill the information gaps for the preparation of the Social and Envrionmental Impact Assesment SEIA (including examination of alternatives, public consultations and environmental economic analysis). The TA environmental consultant will monitor the progress of the preparation of the EIA documents for timely completion at the latest.

The TA environmental consultant and social consultant will prepare the SEIA based on the domestic EIA reports.

5.6.22 Risk analysis

In section 3.4.3 Risk, mitigation and contingency a global risk analysis is made, follows a specific risk analysis for Jinta project.

Risk associated to technology

Identified Risks Risk Mitigation Risk Contingency

Available water quality has Water quality can affect to to be verified through the Water-Steam cycle. specific tests before basic Inadequate water (with no design of the power plant. Improve the installations in treatment or badly done case of malfunction. treatment) can cause Design of the water corrosion of the treatment plant should be equipments. check to fulfill equipment specifications

Table 36 Risks associated to technology

Risks associated to weather Identified Risks Risk Mitigation Risk Contingency

Increase the requirements for materials and equipments. Increase preventive and Extreme low temperatures Define specifications for predictive maintenance. the equipment at basic engineering stage

Continuous cleaning. The mirror cleaning Create physical barriers requirements can be high (i.e. trees) to reduce Development of low water due to sand storms sandstorms effect. use cleaning systems and procedures

Develop security mechanisms (automatic As the plant will be located regulation of solar field) in a region near desert which protect equipments areas, sandstorms or other when inclement weather is Create physical barriers adverse weather detected. which protect installations conditions can cause of inclement weather. Installed physical barriers problems or damages on the solar field. Define specifications for the equipment at basic engineering stage

Table 37 Risks associated to weather

Risks associated to plant needs

Identified Risks Risk Mitigation Risk Contingency

Long term contracts with Shortage of gas supply suppliers and alternative Alternative suppliers suppliers.

The needs of qualified scientist, designers, Taking advantage of operators, specialized EPC international experience, International support from companies, financial design training courses companies with institutions, . can with international advice. experience. complicate or delay the Training of personnel on construction and operation advance. of the first plants.

Lack of qualified trainers Create training courses Hire foreign experts

Table 38 Risks associated to plant needs 5.7 SUGGESTIONS ON CSP INCENTIVE POLICIES Stimulus mechanisms, based on PRC and international experience are proposed in coherence with the installed capacity forecast, considering their past performance and to maximize profit for society. A proper combination and fine tuning with a long term vision is recommended. The incentive actions are proposed in epigraph ‘3.7 Key actions to promote and support CSP’ and ‘3.8 Action plan’.

5.7.1 Tariff or electricity price set up

In a first stage, project concession where government can reduce the risk by supplying basic services: land, grid connection, water, environmental impact clearance, will help to set up the first projects; care should be taken to avoid non qualified speculative bidders. This process is useful for the first commercial projects of each technology.

For some demo projects soft loans are a good mechanism to reduce the cost for society. sharing the risk with national government, supplying financing and reducing the financial costs through multilateral development banks such as ADB, and besides a technical assistance associated. Due to the special loan conditions and demo characteristics specific tariff should be in place.

Once the market is developed, feed-in-tariff can be set up, which will define a clear frame for pipeline development. It is convenient to reduce feed-in-tariff progressively to achieve the cost for society goals.

Finally, around 2030 CSP technology should be competitive, so no special support mechanism for commercially developed technologies will be necessary. Of course, for new technologies, the same stimulus mechanisms could be used.

5.7.2 Supply information and promote training

A basic element for CSP development is a good knowledge of solar resource. That is why it has been proposed generating reliable solar and weather data and making it publicly available. Reliable data sources reduce the risk and hence the cost of the energy produced.

Support training and capacity building through scholarships, programs, participation in international forum¸ to decrease capacity gaps.

5.7.3 Policy

Restrictions in hybridization with other fuels and size increases the cost of the energy produced. Nevertheless, regulation and fraud prevention has to be carried on for hybridization.

Regulate the connection to the grid of CSP, taking into account their stability in comparison with other renewable energy sources.

Regulate capacity factor, firm supply and a way to reward it to reduce spinning reserve costs and promote grid friendly energies such as CSP.

Develop a carbon and Renewable Energy Certificate (REC) market to internalize the costs and send proper signals to the market (clean-fossil fuels). 5.7.4 New technologies

CSP technologies have a large room for improvement and cost reduction. The dominant technology is Parabolic Trough (P.T.) but some others have a high potential, even P.T. can be improved.

As commercial projects need investments on the order of billion CNY, technology at lab scale and pilot projects must be supported using specific mechanism such as grants, soft loans, or public private R&D partnership depending on the stage of development.

Also supporting collaboration between public-private R&D centers and industry is a must.

5.7.5 Value chain development

PRC industry has competitive advantages but for the specific CSP components there are still some technology gaps.

In a first stage, support to commercial technologies has to be promoted but soon this should be followed by support to new more promising technologies.

5.7.6 International cooperation

PRC can extend the concept to neighbor countries either, as suppliers of energy (e.g. Mongolia) or as consumers.

Also promoting participation of PRC companies in international projects will lead to a profit for both PRC and the world, sharing experience and reducing energy costs.

5.7.7 Promote the development of High Voltage Direct Current lines

The regions with good solar resource in PRC are on the Western side of the country, while most of the electricity is demanded by the Eastern side.

PRC transport grid from West to East it is not prepared for the change in energy model, so It is necessary to develop high capacity transmission lines.

Figure 35 Incentive policies 6 ASSESSMENT AND STRENGTHENING OF INSTITUTIONAL CAPACITY

6.1 BACKGROUND

The successful global commercial development of solar PV and wind technologies has largely benefit from the effectiveness and efficiencies of institutions and groups, including policy makers, investors, project developers, manufactures and utilities. Assessment and strengthening of institutional capacity covers the review of institutional capacity at both, international and PRC levels for CSP development, gap identification for PRC, and recommended measures to enhance awareness of CSP power.

A catalogue of capacities needed for CSP is developed by stakeholders including policy makers, financing sector, project developers, industries and utilities.

6.2 KEY FINDINGS

The key findings are listed as follows:

 Since 1970´s the development of CSP in PRC has gone through 3 stages, namely early research stage (1979 to 2003), R&D demonstration phase (2004 to 2010) and commercial demonstration stage(from 2011).  Analyses of value chain of CSP indicated the existing institutional capacities in PRC: o The CSP value chain in PRC is integrated with the participation of an increasing number of players coming from the following groups: project developers, industrial sectors of materials and components, investors and owners, research institutions and governments. o An increasing number of project developers, power companies and CSP manufactures is an important driver to the CSP market in PRC. o CSP materials like steel, concrete and glass can be supplied by existing local producers in PRC. Additionally, the conditions are suitable for industrial production of molten salt for thermal energy storage. o Key components like receivers and heliostats have been developed by a few domestic companies in PRC. The production capacity has being built up to supply increasing CSP demonstration plans, though these products shall be industrially verified and improved. o CSP plant´s power block like steam generators, steam turbines and electronics can be manufactured by local large companies who are key manufacturers of conventional thermal power plants in PRC. o PRC lacks of experience on EPC and system integration . International companies can benefit to and from Chinese CSP market.  Assessment of institutional capacity gaps, which include: o Lack of development plan for CSP development o Lack of specific incentive policies targeted at CSP o Lack of experience on CSP design and construction and operation . o Lack of standards. o Lack of investment confidence o Lack of awareness in financing institutions  International capacity-strengthening programs carried out by international agencies, including Asian Development Bank, International Energy Agency, the World Bank, European Union, focus on technical information dissemination, policy network formulation and marketing development, as well as project development. The tasks also review international networks related with CSP development. International networks on CSP mainly including technical R&D network, such as IEA SolarPACES and Troughnet, and policy networks, such as REN21, International Renewable Energy Agency (IRENA) and CSP industry associations, such as European Solar Thermal Electricity Association (ESTELA) or Solar Energy Industry Association (SEIA).

Networks are an effective way for industry to share information on technology development, market initiative, policy lobbying and actions, as well as obtaining information and public awareness building. In the past decade, networks on CSP, either technical networks or industrial associations have emerged and expanded. International networks play a vital role in promoting CSP industry and have shown the following functions in promoting the CSP development worldwide:

 Effectively organize the large amount of information related to CSP.  Strengthen the voice of industry and disseminate information to the public and stakeholders.  Provide members with the resources they need to carry out their main activities, such as project investment and development.  Convening networks bring together different individuals and groups.  Promotion and development of Standards.  Help members to carry out their activities more efficiently and effectively.  National capacity, strengthening programs and national networks related with CSP development start to form up in PRC, an example is the National Alliance for Solar Thermal Energy. The Alliance is voluntarily constituted by enterprises, research institutions and universities/colleges involved in CSP related R&D, manufacture, services and investment. Till now, the members of the Alliance have been enlarged to 65, including 34 enterprises, 19 universities and 12 research institutes.  Recommended measures to enhance awareness of CSP power among stakeholders include: o Information dissemination, through: workshops, conferences, publications and study tours. Establishment of technical and commercial operation demonstration to potential project developers and players in CSP value chain. o Encouragement of participation and contribution to international networks on CSP21. o Establishment and enlargement of the scale of national networks. Although PRC has established national networks, it is still in early stage, and government and industrial support is needed to enlarge its scale and influence.

6.2.1 Catalogue of capacities needed for CSP

International experience (Spain and USA) shows that CSP development needs a well balanced institutional structure.

21 PRC is now active in international networks on PV. Devote efforts and budgets from industries and institutions have a positive effect on PV industry, market and even policy development

Figure 36 Insitutional estructure for CSP

6.2.2 Institution capacities needed for CSP

Following table illustrates institutional capacities needed for CSP

Stakeholders Institutions Functions and Capacity Required roles Policy makers Government Formulating policies  Understand the agencies and financial international incentives to technology stimulate CSP development trends national and  Understand the international potential market and markets, and industry provide public  Understand the job funding for opportunities for CSP technology  Understand the improvement financial and economic aspects of the technology  Familiar with the technology and market constrains  Understand policies schemes and financial incentives for renewable energy development

Investors and Investment Provide capital  Understand the financing Banks, investment or international sector commercial commercial loan for technology banks, private project financing development trends equity  Understand the risks investors, of technology and market  Understand the governmental policies on R.E. development Project Power Project  Familiar with CSP Developers Companies, development, technology and market Public or Conducting project  Experiences with Private design, feasibility project development Project study, financing,  Knowledge and developers construction, and capability on project operation and financing maintenance  Experiences on project operation and maintenance  Knowledge on the national electricity market and government policies Industry Manufactures, Equipment provider,  Grasp the key construction manufacturing and technologies, know- companies plant construction how,  Capability of large scale manufacturing  Capability of large scale engineering projects Utility Grid, Power Grid connection and  Understand the CSP Dispatch power technology centre transformation  Understand government policies Table 39 Institution Capacities Needed for CSP

6.2.3 Assessment of institutional capacities in PRC

6.2.3.1 Overview of CSP development in PRC

 Early Research Phase (1979 – 2003) Since the end of 1970’s, some research institutes and universities in PRC, e.g. Institute of Electricity Engineering of Chinese Academy of Sciences (IEE-CAS), Shanghai Mechanics College and Tianjin University, have engaged in fundamental research for CSP application, 1kW tower solar power modelling device and 1kW plate panel Organic-Rankine cycle solar power modelling device with low boiling point temperature medium were respectively set up in Tianjin and Shanghai. At the beginning of 1980’s, Xiangtan Electric-mechanical Plant developed 2 sets of 5 kW parabolic concentrating solar power generators, cooperated with Space Electronic company from USA. During the period of the 8th, 9th and 10th National Five-year S&T plans, the key technologies of CSP were listed as national key S&T projects and National Hi-Tech plan (“863 plan”) projects.  R&D and Demonstration Phase (2004-2010) In June 2004, a small parabolic trough receiver vacuum tube heat collector with high temperature were developed by IEE CAS, and Beijing Solar Energy Research Institute, and the Dish-Stirling technology was firstly adopted in IEE CAS High Temperature Experiment Field in Tong County of Beijing, which was jointly financed by “863 plan” in the period of the 10th Five-year plan, and Himin Solar Energy Group and Xinjiang New Energy Company. During the period of 2006-2010, a 1MW solar power tower demonstration project in Yanqing County of Beijing has been financed by the National 863 Plan, and implemented by IEE-CAS  Commercial Demonstration Phase (2011-) In July of 2010, the first Fresnel system with 2,300m2 area was built in Dezhou of Shandong province, by Himin Group cooperated with IEE CAS and CHEC. On December 28 of 2010, the groundbreaking ceremony of a 10MW CSP testing demonstration plant was held in Jayuguan of Gansu province, which is jointly invested by China Datang Corporation and Baoding Tianwei Group with total investment of 300 million CNY and 20 hectare of occupied land. In January 20 of 2011, the first concession bid for CSP demonstration project in PRC -- Inner Mongolia 50 MW trough CSP project was opened. China Datang Corporation Renewable Power Co., Ltd, who proposed 0.9399 CNY/kWh, has been the successful tender for the first full scale concession biding CSP project.

6.2.3.2 Institution capacity existing in PRC

Six echelons have been considered in the CSP value chain: project developers, materials; components; engineering, procurement and construction (EPC), operation and distribution. While there are also three cross-cutting activities, i.e. research and development (R&D), finance & ownership and political institutions, which are related to each stage in the value chain, serving technical support and development, financing, incentive policies and project approval.

In each echelon of CSP value chain PRC has companies or organizations and critical components. Some of them are well developed but, for the critical components, still, some further work is needed to reach international standards (support structure, receiver tubes, mirror, turbine, control system and integration and in the near future Operation and Maintenance).

In Table 40 is presented CSP value chain with company information based on the “National Alliance for Solar Thermal Energy” information established by the Ministry of Science and Technology (MOST) in October 200922.

Value Project Materials Components EPC Operation Distribution Chain Developer

Conceptual Detailed Operation & steel Mirrors/Reflectors Utility engineering engineering maintenance Siting Procurement T&D of glass Receiver electricity

22 Till May of 2011, the Alliance had 65 members from materials producers, key component manufacturers, project developers and domestic research institutions and universities ., which is together building industrialized and innovative capabilities for CSP development in PRC. General Construction concrete Support structure requirement Element molten salt Control System s of synthetic oil Connection piping copper Steam Generator Value Chain sliver Heat Storage sand Power block Pumps grid connect Essentia Finance & Ownership l Research & Development Partners Political Institution Table 40 CSP Value Chain

Value Project Developer Materials Components Chain

Concept Engineering Raw & Semi-finished Mirrors Receiver Support Structure China Huadian Shandong Jinjing Technology Co.,Ltd. Zhejiang Daming Glass Co., Ltd. IEE CAS Beijing Jingcheng Cailong Steel Structure CO., Lt China Huaneng Lanzhou Blue Sky Float Glass CO., Ltd. Rays Power Co., Ltd. Himin Solar Energy Jiangsu Henglida Machine Co., Ltd. China Datang Jiuquan Iron & Steel CO., Ltd. Lanzhou Blue Sky Float Glass CO., Ltd. Beijing Sandar Baotou Hydraulic Mechanical Plant China Guodian Zhejiang Wanxiang Group Huayuan New Energy Companies China Power Investment Corporation Xingjiang Baoan New Energy Mining Co., Ltd. Linuo Solar Thermal Group Co.,ltd. CGN Solar Energy Weifang Changsheng Nitrate Co., Ltd. Sunrain New Energy Lenon group Xiaxiang Yunli Chemical Co., Ltd. Huiying Group Hanas New Energy Group Lanzhou Dacheng Technology Co., Ltd. Shanghai Gongdian Beijing Tianruixing Vacuum Technology Tianwei(Chengdu )Solar Thermal Power Development Co., Ltd. Development Co., Ltd. Tianjin Solar& Environment Corp Beijing Kangtuo CAMDA

Components Value Chain Control System Molten Salt/Heat Storage Steam generator Power block & pumps System Integration co Beijing Tianyi Energy Technology Changzhou Pressure Container Testing Ins. Taihu Boiler Co., Ltd. Dongfang Electric Group Beijing Zhonghang general equipment Co., ltd. Penglai Electric Power Equipment Manufacturing Zhejiang Supcon Solar energy Changsha Boiler Co., Ltd. Shanghai Electric Group Companies Co. ,Ltd. Beijing Guodian Zhishen Control Technology Co., Ltd. Harbin Turbine Co.,ltd.. Shanghai Gongdian energy Nanjing Sciyon Automation Group Co., Ltd. Hangzhou Steam Turbine Nanjing Steam Turbine Co., Ltd. Xi'an Aero-Engine PLC CAMDA new energy

Value Chain EPC Operation Distribution Finance & Ownership Research & Development Poli tical Inst

China Huaneng China Huaneng State grid company China commercial Banks IEE CAS Tsinghua University National G China Datang China Datang China South Grid Company Local banks IET CAS Wuhan University of Technology NDRC China Guodian China Guodian China Development Bank Institute. of Metal Research, CAS Sun Yat-San University NEA CGN Solar Energy CGN Solar Energy International banks Shanghai Institute of Ceramics, CAS Beijing University of Technology MOF Company Asian Development Bank Changcun Ins .of Optics Fine Mechanical and Physics, CAS Xi’an JiaoTong University MOE The World Bank Technical Institute of Physics and Chemistry CAS Beijing University of Aeronautics & Astronautics MOST Investors & private entities Dongwuan University of Technology Price Burea

central and local governmental Local North China Electric Power University investments governmen Table 41 CSP Value Chain with company information Project developers

In recent years, CSP technology deployment has increased, following the steps of wind power and solar PV technologies in PRC. Driven by national renewable energy portfolio policy, five top power groups in PRC are leading CSP project development on the strength of capital and technical and human resources.

 China Huadian Engineering Co., Ltd., as one of the earliest involvers in CSP development, has built up a 200kW PT solar power experiment system, and made some progresses on receivers and integration technology for the PT plant. It has implemented preparation work on CSP projects in Jinta County of Gansu province and Golmud City of Qinghai province.  China Guodian Corporation has constructed a 180kW PT power testing plant in Turpan of Xingjiang Autonomous Zone, it went into trial operation, connected to the grid, in June 13 of 2011, and plans to further develop 150MW CSP projects till 2015 in Turpan.  China Datang Corporation started construction of a 10MW PT CSP pilot plant in Gansu at the end of 2010, jointly invested with Baoding Tianwei Group. China Datang Corporation Renewable Power Co., Ltd. bid on the first concession PT CSP project in PRC at the tariff of 0.9399CNY/kWh, which had been approved by NEA in September of 2011.  China Power Investment Corporation plans to develop 1000MW CSP demonstration project in Golmud, Qinghai province, the first phase of this plan started in May of 2011, with installed capacity of 10MW and total investment of 3.1 billion CNY, jointly developed by Huanghe Hydropower Development Co., Ltd. (a sub-company of China Power Investment Corporation) and Shanghai Gongdian Energy Co., Ltd.  China Huaneng Group has initiated R&D on 1.5MW CSP testing system, and plans 200MW up CSP projects in Xinjiang Autonomous Zone and 50MW CSP project in Lhasa, and intends to expand business into CSP manufacturing sector.

Besides, increasing number of large state-owned and local energy enterprises and CSP equipment manufacturers are getting involved in CSP project development in PRC.

 China Guangdong Nuclear Power Group (CGN) signed a memorandum of understanding with Solar Millennium on CSP cooperation in January of 2011, and started construction of a 50MW CSP project and experiment base in Delingha City, Qinghai province, in September of 2011. CGN Solar Energy Co., Ltd. plans to invest in four 50MW CSP projects in Wuwei and 50 MW in Jiuquan of Gansu province till 2015.  Hanas New Energy Group started construction of the parabolic trough solar and natural gas combined cycle power plant, with installed capacity of 92.5MW and total investment of 2.25 billion CNY, in October of 2011 in Ningxia.  Inner Mongolia Lenon New Energy Co. Ltd implemented preparation work for Inner Mongolia CSP project, i.e. Ordos 50MW concession project.  Baoding Tianwei Group plans 100MW CSP projects in Sichuan province, and it has allied with China Datang Corporation Renewable Power Co., Ltd. for 1.5MW CSP project in Gansu and 50MW CSP project in Ordos.  Shanghai Gongdian Energy Technology Co., Ltd. plans to build up a 100MW solar tower power plant.  Tianjin Solar and Environmental Technologies Corporation will set up a 6MW CSP plant and 130 MW block of new type dish CSP power block in Xizang.  Beijing Kangtuo Holding plans 550MW CSP plants in Inner Mongolia.  CAMDA Generator Works Co., Ltd. plans to invest 120 million CNY on CSP international cooperation platform. Around 4GW of CSP projects are in preparation in PRC.

Materials Production

Basic materials for a CSP plant are solar grade glass (white glass) for mirrors and receiver tubes, steel for the support structure, concrete and cement for civil works and heat storage, thermal oil for heat-transfer fluid (HTF), as well as insulating materials and steel for piping.

Steel, concrete and glass can be provided by domestic suppliers with sufficient productivity and competitive prices, as PRC is the largest producers of steel, cement and glass, accounting 47% of total raw steel, 55% of total cement and 50% of flat glass in 2009 in the world. Local suppliers of these materials in West China are now available, and new producers are expected to follow CSP market scale.

 Jiuquan Iron & Steel (Group) Co., Ltd., located in Gansu province, is one of key iron & steel companies in PRC Northwest and the member of “National Alliance for Solar Thermal Energy”, with annual productivity of 8 million ton of steel and 7 million ton of iron.  Lanzhou Blue Sky Float Glass Co., Ltd., as the largest float glass producer in Northwest China, has two float glass production lines and supplies glass products mainly in Gansu, Xingjiang, Qinghai, Xizang, Shaanxi and Inner Mongolia.  Shandong Jinjing Group, as one of key enterprises in Chinese glass industry and member of “National Alliance for Solar Thermal Energy”, produces 2-25mm thickness ultra clear glass for solar energy in high quality and excellent performances.

Molten Salt serves as a medium of thermal energy storage for the CSP plant to continually generate electricity at night or cloudy weather. Molten salt needs to be stable at 400-500 °C or even more, low corrosion, erosion and cost . So far, research has been done on formula of mixtures and property measurements and heat transfer experiments .

 The Energy Laboratory of Beijing University of Technology has developed more than 80 formulas of molten salt, and measured numerous parameters on thermal properties, which are the guideline on how to use molten salts in CSP plants and to realize industrialised production.  Sun Yat-sen University, South China University of Technology, Dongwan College of Technology . have also made related achievements.  Changzhou Pressure Container Testing Institute has done research on nitrate heat transfer (>550 °C）and materials for storage container for many years. There are no special producers of CSP molten salt till now in PRC, however the chemical plants are available to produce nitrate molten salt, which has been widely used in high temperature heating process for fertilizers and melamine and aluminum oxide, and materials like sodium nitrite, sodium nitrate and potassium nitrate.

 Weifang Changsheng nitrate Co., Ltd. in Shandong province is the earliest specialised producer of molten salt in PRC, supplies various products around PRC and exports to many countries.  Xiaxian Yunli Chemical Co., Ltd. produces series of nitrate with annual productivity of 30,000 ton.  Zhejiang Wanxiang Group is now mining sodium nitrate deposits in Shanshan County of Xingjian Uygur Autonomous Region, with intention to produce molten salt for CSP.

Key Components:

Mirrors are the element to reflect and concentrate solar radiation for a CSP plant, either flat (for towers, linear Fresnel systems) or bent (parabolic trough and dishes). Float glass, bending and mirror coating are standard processes of the glass industry, but precise requirements on solar mirrors make production process be complex and highly technical. There exists float glass lines for solar PV application in PRC, which can also serve for CSP plants, while emerging companies are also targeting this new market.

 Hehai University and Nanjing Chunhui Co., Ltd. collaboratively developed the heliostat which was used in Nanjing Jiangning 70kW solar tower power demonstration project.  IEE-CAS and Himin Solar Energy Co., Ltd. jointly developed many types of heliostats for solar tower power, of which 100 square meter of heliostat is now installed in Yangqing 1MW pilot project.  Zhejiang Daming Glass Co., Ltd. is constructing new production lines for parabolic mirrors and heliostats .  Rays (Beijing) Power Co., Ltd. has invested 2 billion CNY on construction of tough mirrors line and heliostats line in Chengdu (Shuangliu), with production capacity for 800 MW CSP installation, and plan to be involved in CSP system integration.  Lanzhou Blue Sky Float Glass Co., Ltd. is building up a CSP new material production base located in Lanzhou, including solar grade glass line, heliostat line and thermal bent glass line .

Receivers are the key element of a CSP plant to absorb the concentrated solar radiation. The trough receiver structure is composed of an inner metal tube and an outer glass tube. The seals metal-glass are highly technical, as they must have the same coefficient of thermal expansion for metal and glass. In the past decade, many efforts have been made on R&D of receivers in PRC.

 IEE-CAS and Himin Group developed a trough concentrator, 2.5m width and 12m long.  Beijing Sandar Solar Energy Technology Co., Ltd. developed a receiver with high working temperature at 350°C.  Huayuan New Energy Co., Ltd. in Dezhou of Shandong province developed a trough collector system at working temperature ranging from 200 to 300°C.  Linuo Solar Thermal Group Co., Ltd. and Tshinghua University cooperatively developed 4m length high temperature receiver, by solving glass and metal seals and developing high temperature coating up to 450°C. In addition, Linuo Group is constructing an industrialized base of medium and high temperature receivers, including a high temperature receiver project.  Lanzhou Dacheng Technology Co., Ltd. has developed 4m-long receivers for trough plant in 2011, with an annual productivity of 50,000 receivers available.  Beijing Tianruixing Vacuum Technology Development Co., Ltd. has successfully developed and run a trough heat collection device for steam generation in 2011. As a result, 2-3 Chinese-owned companies have grassed key technologies of receivers and capable of batch manufacturing till 2011, although their products still need to be industrially verified and improved through demonstration projects.

Huiyin Group has a R&D centre in Beijing and 10,000 square meter site for receivers production in Wendeng, Shandong province.

Control systems ensure precisely tracking of mirrors and automatically running of the CSP plant. A few electronic companies have been involved in this field.

 Changchun Institute of Optics, Fine Mechanics and Physics of CAS developed a polar axis tracking heliostat, with advantages of high concentration ratio and small change of tracking spot all day.  Beijing Tianyi Clean Power Technology Development Co. Ltd. developed trackers for heliostats and parabolic mirrors.  Zhejiang Supcon Solar energy Co. Ltd. focuses on the advanced solutions on precise control of the mirror field and tracking devices, and molten salt heat storage as well as modular design for the tower power plant.  Beijing Guodian Zhishen Control Technology Co., Ltd. has done frontier research on control of CSP plants for many years, and developed the first set of control devices for the China Guodian Corporation’s CSP testing power plant in Turpan.

System integration focuses on optimally integrating components for a CSP power plant. P.R.C´s companies lack of experience in this area..

 Beijing Zhonghang General Equipment Co. Ltd had independently developed a completed equipment of trough solar power system, and started construction of production base of parabolic trough CSP system in August of 2010, to manufacture 8 series of CSP equipment including support structure, reflectors, receivers, tracking devices, control systems, heat exchangers, steam generators and heat storage.  IEE-CAS has experience on system modelling, integration and design and control of the mirror field.  Changchun Institute of Optics, Fine Mechanics and Physics of CAS has set up the model for simulation of mirror fields and optimization of design.  Shandong Penlai Electric Power Equipment Manufacturing Co., Ltd. is the authorised agents of eSolar for 2000MW solar tower power facilities in PRC. Engineering, procurement, and construction (EPC) is responsible for the whole plant construction. Similar to system integration, EPC experience is in shortage for P.R.C contractors who are now mostly project developers.

Power block, steam generator and heat exchangers of a CSP plant use similar components as conventional thermal power plants. The main manufactures of steam turbines are the following companies in PRC  Dongfang Electric Group,  Shanghai Electric Group,  Harbin Turbine Co., Ltd.,  Hangzhou Steam Turbine Co., Ltd.,  Nanjing Steam Turbine Co., Ltd., and  Xi’an Aero-Engine PLC. The key manufactures of steam generators and heat exchangers in PRC are the following.  Taihu Boiler Co., Ltd.,  Changsha Boiler Co. Ltd.  Hangzhou Boiler Co., Ltd. .

Besides, international companies, like General Electric, Siemens, Alstom, ABB are also active in Chinese market.

R&D institutions

An increasing number of universities and institutes, including national key laboratories and engineering technology centres ., are getting involved in CSP R&D and demonstration in PRC, and have made progresses on coating materials, mirrors, receivers, tracking control, heat transfer, heat storage, system integration .

 IEE-CAS has been involved in and leads CSP R&D in PRC Since 1979 it has made achievements on heliostats, trough concentrators, dish concentrators, fresnel concentrators, high temperature receivers, heat absorbers, heat storage materials and system design as well as simulation. It has set up 1MW tower power plant and special testing platform and an experimented system in Yanqing of Beijing, under CSP demonstration project, 11th five year National Hi-tech R&D Program (863 program). It is now leader on the project “Basic research for high efficiency and scale up CSP” within the National Basic Research Program (973 Program).  Institute of Engineering Thermophysics, Chinese Academy of Science, took the lead in experimental work on parabolic trough heat collection elements, and jointly built the “CSP Testing Base” with CHEC in Langfang Hebei province. Also developed a dish for solar thermal use.  Wuhan University of Technology characterised with non-metal abio-material science has been involved in R&D of CSP key materials for many years, and set up related laboratories.  Solar Thermal Power Engineering Design Research Centre was jointly established by IEE CAS and China Power Engineering Consultant Group, based on advantages from both sides. CSP achievements in IEE-CAS and technical strength and rich experiences on power design in China Power Engineering Consultant Group.

Financial institutions

As CSP projects are capital-intensive, financing is relevant. There is some financing available for CSP projects as follows.

 National commercial banks and development banks, like Bank of China (BOC), Industrial and Commercial Bank of China Limited (ICBC), Agricultural Bank of China, China Construction Bank, China Development Bank, Bank of Communication, China Merchants Bank, Huaxia Bank, China CITIC Bank, China Everbright Bank, China Minseng Banking Corp. Ltd.,  Local banks, like China Guangfa Bank (“CGB”) , Shanghai Pudong Development Bank, Industrial Bank Co., Ltd., Bank of Shanghai, Xiamen International Bank, Shenzhen Development Bank, Bank of Beijing, Bank of Ningbo, Bank of Nanjing, Bank of Chengdu, Bank of Hangzhou, Bank of Chongqing, Bank of Nanchang, Bank of Qingdao, Bank of Lanzhou, Bank of Harbin.  The World Bank, Asia Development Bank and international investment banks.  Private enterprises and investors who are interested and active in CSP project development.  Central and local governmental fiscal investment.

Political institutions

Due to current higher cost and small scale of CSP application in PRC, governmental support, particularly financial and incentive policies, is important to promote CSP technology. The governmental department related to CSP projects are:

 National and local NDRC and energy administration, which is responsible for formulating national renewable energy development plan, making incentive policies of CSP, verifying and approving CSP projects .  National and local price bureau under national and provincial DRC, which is responsible for CSP tariff pricing.  National and local environment Ministry and departments, which is responsible for Environmental impact assessment of CSP projects.  National and local Land and resources bureaus, which are responsible for land use approval.  National and local science and technology ministry and departments, which are responsible for CSP R&D projects. The analyses of CSP value chain leads to the following findings:

 The number of Chinese companies in the CSP value chain in PRC is increasing: project developers, industrial sectors of materials and components, investors and owners, research institutions and governments. Institutional capabilities shall be strengthened to be competitive and linked to each other.  Project developers are an important driver to the CSP market in PRC.  CSP basic materials: steel, concrete and glass, can be supplied locally by existing producers in PRC. However, the production processes have to be improved to meet special requirements for CSP use. Industrial production of molten salt for CSP heat storage will be feasible when the market demand increases.  Key components like receivers and heliostats have been developed by a few domestic companies in PRC. The production capacity has being built up to supply increasing CSP demonstration plans, though these products shall be industrially verified and improved. Meanwhile, international companies will also compete in PRC market with strong competitiveness in technology, quality and performance .  Power blocks of CSP plants like steam generators, steam turbines and electronics can be manufactured by local companies or supplied by subsidiaries of international companies who are all well-known manufacturers of conventional thermal power plants in PRC and the world.  The experience on EPC and system integration is needed in PRC. This is an opportunity for international companies.

6.2.4 Gap Identification

Institutional capacities identified gaps are:  Lack of development plan for CSP technology. Government of PRC has published the 12th Five year plan, in which, renewable energy technologies, such as wind, solar and biomass, are the key technologies to be developed in the next 5 year. However, there has been no development plan or roadmap specific on CSP.  Lack of specific incentive policies targeted at CSP. PRC has issued a wind power price policy, which is so called standardized power price policy for wind power project, and concessional bidding process for grid connected solar PV projects. There are no specific incentive policies for CSP.  Lack of experience on CSP design and construction and operation.There is no utility-scale commercial CSP project in PRC, though Government of PRC just announced a 50 MW CSP project in the Inner-Mongolia region through concession bidding process. There are no established experiences on CSP design and construction and operation.  Lack of standards. No national standards have been developed and issued for key components of CSP in PRC.  Lack of investment confidence. For emerging CSP industry, developers/investors are now reluctant and less confident to invest CSP projects due to high capital cost.

The scale of CSP projects investment is far too large for small and private enterprises in PRC to get involved.

 Lack of awareness in financing institutions. PRC’s economy heavily depends on the bank loan, bank assets comprise 77% of all financial asset compared to 26% in the US. However, the banking system is still at the early business stage and lack of skills to identify the risky and profitable projects. PRC is now carrying out a banking system reform, which requires the banks to raise risk weighting for the loans in order to limit the bad debts, meanwhile, Chinese banks have very limited knowledge on the renewable energy and energy efficiency, this will increase the reluctances of capital investment to renewable energy and energy efficiency projects. Lack of awareness of CSP technology and development status in financial institutions is one of the main barriers of CSP development in PRC

6.3 FORMULATION AND IMPLEMENTATION OF A CAPACITY- STRENGTHENING PROGRAM

6.3.1 International programs on capacity strengthening

6.3.1.1 Asian Development Bank: Asian Solar Energy Initiatives

The Asia Solar Energy Initiative (ASEI) aims to identify and develop large capacity solar projects that will generate some 3,000 MW of solar power by mid-2013. ADB plans to provide $2.25 billion in finance to the initiative, which is expected to leverage an additional $6.75 billion in solar power investments over the same period.

The ASEI will make available a range of projects, and finance and knowledge sharing mechanisms, so as to attract commercial banks and the private sector to invest in these projects. In addition to direct financing, ASEI will set a target of raising $500 million from donor countries to "buy down" the high up-front capital costs of investing in solar energy, as well as design other innovative ways to attract private-sector investment. ASEI establishes and hosts the Solar Energy Forum, a high level international knowledge-sharing platform that tracks solar development projects, discusses new solar power proposals and incentive mechanisms, and organizes major conferences.

6.3.1.2 International Energy Agency

SolarPACES (Solar Power and Chemical Energy System) is an implementing agreement of the International Energy Agency on CSP. It started in 1977, and currently has 19 members: Australia, Austria, Algeria, Brazil, China, Egypt, the European Commission, France, Germany, Israel, Italy, Mexico, Republic of Korea, South Africa, Spain, Switzerland, United Arab Emirates and United States of America. It also welcomes non IEA members and developing countries to join the agreement. Its mission is to facilitate technology development, market deployment and energy partnerships for sustainable, reliable, efficient and cost-competitive concentrating solar technologies by providing leadership as the international network of independent experts.

As other Implementing Agreements of IEA, SolarPACES is organized around 5 active Tasks: Task I. Solar Thermal Electric Systems Task II. Solar Chemistry Research Task III. Solar Technology And Advanced Applications Task V. Solar Resource Knowledge Management Task VI. Solar Energy And Water Processes And Applications Complemented with a general task on the ‘Global Market Initiative’. IEA SolarPACES VISION

That concentrating solar technologies contribute significantly to the delivery of clean, sustainable energy worldwide.

IEA SolarPACES MISSION

To facilitate technology development, market deployment and energy partnerships for sustainable, reliable, efficient and cost-competitive concentrating solar technologies by providing leadership as the international network of independent experts.

IEA SolarPACES STRATEGY

The strategy is to coordinate and advance concentrating solar technology research by focussing on the next generation of technologies; provide information and recommendations to policy makers; organize international conferences, workshops, reports and task meetings in order to facilitate technology development and market deployment; provide opportunities for joint projects in order to encourage energy partnerships between countries; develop guidelines and support standards in order to increase the transparency of the market and reduce risks associated with project development; manage the undertaking of independent studies of strategic interest; leverage our activities with other IEA implementing agreements and renewable energy organizations. 6.3.1.3 The World Bank Group Program in Supporting CSP

Apart from conventional financial instruments, such as loan, guarantee, as well as IFC debt and equity through International Bank for Reconstruction and Development (IBRD), International Development Association (IDA) and International Finance Corporation (IFC), IBRD, IDA and IFC, the World Bank Group also provided non- lending supports and advices for CSP development such as regulatory and institutional capacity building; policy guidance, policy framework, transactional support and advice through its Climate Mitigation Financing Sources and Instruments, including:

Global Environment Facility (GEF)

GEF support policy implementation and pilot and demonstration of new technologies. For example, GEF provided US$ 49.8 million grant for Egypt Kureimat Integrated Solar Combined Cycle Project for IBRD project preparation, regulatory and policy support. The project also received bilateral funding, including loan and grant, from Japanese Bank for International Cooperation. The South Asia CSP Program of the World Bank Group includes activities of

 Assessment of solar generating targets  Analysis of financial Incentives and regulations  Assistance for removing CSP related grid bottlenecks  Inventory compilation of CSP suitable sites  Introduction of cost reduction strategies

Through the capacity strengthening programs, the World Bank Group has targets to define CSP projects in South Asia within a year.

Clean Technology Fund (CTF)

The Clean Technology Fund (CTF) is a multi-donor trust fund created in 2008 as part of the Climate Investment Funds (CIF) to provide scaled-up financing for the demonstration, deployment and transfer of low carbon technologies that have a significant potential for long-term greenhouse gas (GHG) emissions savings. CTF resources amount to approximately $4.5 billion (based on exchange rates on the initial CIF pledging date of September 25, 2008) pledged by contributors (Australia, France, Germany, Japan, Spain, Sweden, United Kingdom, United States). The CTF supports a selected series of investment plans that meet the criteria of significant GHG emissions savings, demonstration potential at scale, development impact and implementation readiness.

Middle East and North Africa presents the largest potential for CSP development, CTF has invested US$ 750 million on CSP in five countries including Algeria, Egypt, Jordan, Morocco and Tunisia, in the region, The CTF-supported investment plan will:

 Enable the region to contribute to global climate change mitigation.  Support deployment of about 1 GW of CSP generation capacity, amounting to a tripling of worldwide CSP capacity.  Support transmission infrastructure in the Maghreb and Mashreq for domestic supply and exports as part of Mediterranean grid enhancement, enabling CSP scale-up through regional market integration.  Leverage public and private investments for CSP power plants, almost tripling current global investments in CSP;  Support MENA countries to achieve their development goals of energy security,

The Investment Plan is designed around deployment of about 10–12 commercial scale power plants to be constructed over a 3–5 year time-frame to provide the critical mass of investments necessary to attract significant private sector interest, benefit from economies of scale to reduce cost, resulting in learning in diverse operating conditions, and manage risk.

The Energy Sector Management Assistance Program (ESMAP) is a global, multi-donor technical assistance trust fund administered by the World Bank and cosponsored by 13 official bilateral donors. ESMAP assists its clients – low- and middle-income countries – to increase know-how and institutional capacity in order to achieve environmentally sustainable energy solutions for poverty reduction and economic growth. ESMAP’s mission is driven by a Results Framework endorsed by its governing Consultative Group (CG) for the Energy Trust Funded Programs (ETFPs).

ESMAP has been providing Technical Assistance for CSP through its Renewable Energy Market Transformation Initiative. Regional Concentrating Solar Power (CSP) Scale-up Initiative in MENA region is overcome market barriers is to offer the industry a credible commitment to developing a large scale multi-country portfolio of projects on the assumption that such aggregation will induce the employment of mass production techniques that will lower costs and improve performance.

6.3.1.4 DESERTEC Initiatives

The DESERTEC Foundation was established on 20 January 2009 as a non-profit foundation with the aim of promoting the implementation of the global DESERTEC Concept "Clean Power from Deserts" all over the world.

Founding members of DESERTEC Foundation are the German Association of the Club of Rome, members of an international network of scientists as well as committed private individuals who have already been in October 2009, the non-profit DESERTEC Foundation founded the industrial initiative Dii GmbH together with partners from the industrial and finance sector. The task of the Dii is to accelerate the implementation of the DESERTEC Concept in the focus region EU-MENA. As shareholder, the DESERTEC Foundation closely cooperates with Dii and its other shareholders and partners en supporting the DESERTEC idea for a long time.

Dii GmbH has four core objectives which are to be achieved by 2012:

 Development of a technical, economic, political and regulatory framework for feasible investments into renewable energy and interconnected grids  Origination of reference projects to prove the feasibility of the DESERTEC Concept  Development of a long term roll-out plan for the period up to 2050 providing investment and financing guidance  Conduction of specific in-depth studies

6.3.1.5 European Commission, research and innovation program on CSP

The EU has been supporting the CSP sector for more than 10 years. Since 1994 (Fourth Framework Programme) the EU has spent some EUR 29 million for the development and implementation of CSP technologies. An additional 15 million EUR have been spent on supporting three major full-scale megawatt (MW)-size demonstration projects under the Fifth Framework Programme (1998-2002):

 PS10: an 11 MW solar thermal power plant in southern Spain  Andasol: 50 MW parabolic trough plant with thermal storage  Gemasolat: 15MW solar tower with molten salt storage

This contribution has had a multiplying effect by leveraging a large amount of private investment, at a rate of about EUR 10 million for each project funded by the EC.

The research projects that benefited from EU funding focused on:

 Validating the full-scale applications of different technological approaches and their economical viability (i.e. solar towers, parabolic troughs, dish/engine systems)  Raising operability and reducing costs of CSP, through designing and testing new components for solar dishes and developing innovative storage media (i.e. large insulated tanks filled with molten salt)  Researching hybrid solar technologies  Production of hydrogen using CSP  Supporting horizontal activities for strengthening the European infrastructure for solar science.

Currently, CSP research is one of the priorities of the Seventh Framework Program (FP7, 2007-2013). The European Commission will continue to support the scaling up of promising CSP technologies from research, development and demonstration scale to a pre-commercial feasibility phase in the multi-MW range (i.e. 25 MW for each project is assumed).

6.3.1.6 National Renewable Energy Laboratory of the US Department of Energy (USDOE)

With a renewed sense of urgency to commercialize renewable energy sources, the U.S. Department of Energy (DOE) is ramping up its CSP research, development, and deployment efforts. These efforts, which are leveraging both industry partners and the national laboratories, are directed toward the development of parabolic trough, dish/engine, and power tower CSP systems.

DOE’s goals include increasing the use of CSP in the United States, making CSP competitive in the intermediate power market by 2015, and developing advanced technologies that will reduce systems and storage costs, enabling CSP to be competitive in the baseload power market by 2020.

DOE plans to achieve these goals through cost-shared contracts with industry, advanced research at its national laboratories, and working with other government agencies to remove barriers to the deployment of the technology.

In 2008, DOE established a dozen contracts with industry through a competitive solicitation. The objectives of these contracts include the development of storage solutions, manufacturing approaches, and new system concepts for large-scale CSP plants. Each contract requires a minimum 25% cost share.

To continue its support and development of CSP systems, DOE released a solicitation in 2008 that will lead to additional innovations in advanced high-temperature heat- transfer fluids (HTFs) and thermal storage systems. DOE also supports ongoing solar resource assessment at its national labs, which continue to update and refine the satellite-derived, direct-normal incident (DNI) data sets. DNI tools, including a geospatial toolkit and an Internet map server, are developed to provide power plant developers and utilities with easier access to solar resource data. 6.3.2 International networks related with CSP Development

International network Starting Region covered Mission Activities and projects year IEA Solar PACES 1977 International, facilitate technology development, market  Technical R&D currently 16 member deployment and energy partnerships for  Shared Test Facilities www.solarpaces.org countries 23 sustainable, reliable, efficient and cost-competitive  Standards and Guideline concentrating solar technologies by providing Development leadership as the international network  Markets initiatives  Information Dissemination, Workshops and Conferences

European Renewable 2000 European An umbrella organisation of the European  Policy Research Energy Council (EREC) Renewable Energy renewable energy industry, trade and research  Technology development Industries associations active in the sectors of solar PVs,  Technology Network www.EREC.org small hydropower, solar thermal, bioenergy,  Regulations and Standards geothermal, ocean, concentrated solar power  Market developments and wind energy. EREC represents an industry with an annual turnover of EUR 70 billion and providing over 550.000 jobs.

Renewable Energy 2004 International policy REN21 is the global policy network that provides a  Policy dialogue Network 21 (REN 21) network forum for international leadership on renewable  Publications on Global Renewable energy. Its goal is to bolster policy development for Energy Status www.REN21.net the rapid expansion of renewable energies in developing and industrialized economies. Table 42 Summary of existing international network on CSP development

23 Member countries including United States, Mexico, European Union, France, Germany, Spain, Italy, Switzerland, UAE, IRAEL, Algeria, Austria, Australia, South Africa and South Korea and Egypt 6.3.3 Summary of national programs on capacity – strengthening

6.3.3.1 National Alliance for Solar Thermal Energy

In order to promote CSP technology and industry breakthrough, the National Alliance for Solar Thermal Energy was set up in September of 2009, under the support of the Ministry of Science and Technology of PRC, with the objectives of strengthening enterprises independent innovation capability and competitiveness for key technologies.

The Alliance is voluntarily constituted by enterprises, research institutions and universities/colleges involved in CSP related R&D, manufacture, services and investment . Till now, the members of the Alliance have been enlarged to 65, including 34 enterprises, 19 universities and 12 research institutes.

The Alliance main tasks for CSP technology are following:

 Develop 100MW CSP technology and trough vacuum tube with intellectual property.  Do Research and master 100 MW solar tower power technology  Set up trough concentrating heat absorption system and vacuum tube production lines  Formulate the standards for CSP technology  Set up general testing platform and  Others

6.3.3.2 Gansu Provincial CSP Innovation Strategy Alliance

Gansu provincial Concentrated Solar Power Innovation Strategy Alliance was set up in October 17 of 2010 in Lanzhou, to promote CSP application and related technology equipment in Gansu province and strengthen exchange and cooperation among CSP related enterprises in Gansu province and international and national institutions.

Organized by Gansu Provincial Industry and Information Commission, the Alliance is jointly established by 14 members including enterprises, universities and research institute, such as Dantang Gansu Power Generation Co., Ltd., Aviation 501 Institute, Langzhou Jiaotong University.

The targets of the alliance are as follows:

 Create innovation schemes based on enterprises, oriented by market and combined with industry and university and institutes together  Integrate and share innovation resources, and strengthen cooperative R&D  Break bottlenecks on common and key technologies for CSP industry  Speed up commercialization of R&D results by means of technology transfer  Strengthen competiveness of CSP industry  Train and exchange personnel  Cultivate CSP integrated industry  Others 6.4 MEASURES TO ENHANCE AWARENESS OF CSP POWER AMONG STAKEHOLDERS

6.4.1 Information dissemination

Lack of information on CSP state of art technologies, and experiences of commercial operation of projects and lack of awareness of CSP among stakeholders has been identified as one of the main Gaps for CSP development in PRC. Information dissemination needs to target at different stakeholders group and through different channels.

 Technical Information and Knowledge Targets at R&D research Institutes, industry associations and project developers and manufactures through technical conferences, seminars and publications and capacity building programs such as technical study tour, training, and joint research activities.  Information on Pilot and Commercial Project Operation including Technical Performance, Financial Information, Financing targets at project developers, financing institutes, policy makers, utilities and industry associations through professional website, publications, conferences, seminars and study tours.  Policies and Incentives 24 mainly targets at policy makers, financial institutions, and potential project developers, through workshops, seminars, publications and capacity building activities including trainings and study tours.  Public Awareness Building mainly targets at general public to raise awareness through media, newspapers, websites as well as information dissemination brochures.

6.4.2 Technical and commercial operation demonstration

Successful technical and commercial demonstration projects are an effective approach to raise awareness among all the stakeholders. So far, there are no successful technical fully commercial demonstration projects in PRC. International study tours and conferences, seminars on international CSP projects remains as necessary task for awareness building to stakeholders.

6.4.3 Encourage participation and contribution to international networks

Network is an effective way for industry to share information on technology development, market initiative, policy lobbying and actions, as well as obtaining information and building public awareness . In the past decade, networks on CSP, either technical networks or industrial associations has emerged and expanded. International networks play vital role in promoting CSP industries and have shown the following functions in promoting CSP development worldwide.

 Effectively organize the unmanageable amount of information to be used in a productive way  Strengthen the voice of industry and disseminate information to the public and stakeholders  Provide members with the resources they need to carry out their main activities, such as project investment and development  Convening networks bring together different individuals and groups.

24 ADB’s Large Scale Solar Power Development Workshop is a good example.  Promote and developing standards.  Help Members to carry out their activities more efficiently and effectively.

Lack of participation and contribution to international CSP networks is also identified as one of the barriers for building awareness to stakeholder, especially at the development and technical pilot stage. It is recommended for PRC to join and even contribute international CSP networks. The benefit from participating in international network has already shown up for Chinese solar PV and Solar Water Heater industry. 7 DISSEMINATION OF KNOWLEDGE PRODUCTS TO RELEVANT PROVINCES ON LESSONS LEARNED AND CHALLENGES IN CSP POWER DEVELOPMENT

7.1 SCOPE

Based on the technical assistance requirements, this task is divided in the following main activities:  Preparation of dissemination knowledge products.  Establishment of a knowledge products dissemination website  Preparation of CSP knowledge dissemination seminars  International study trip

7.2 KEY FINDINGS:  Public and relevant stakeholders welcome CSP technologies and projects if they become aware on their long run benefits.  Public dissemination can help to mitigate the barriers which may emerge during the development of CSP projects.  Public dissemination can help gaining supports to the CSP development from different stakeholders including public people, government authorities, R&D agencies, NGO, public media, commercial banks, investors, industries and relevant training agencies, .  Public dissemination needs the participation and supports from different stakeholders. The main conclusion is that the CSP knowledge and benefits disseminations are important to the development CSP in PRC and would bring profits not only to the developers but also to PRC and the global economy. It will lead to a mitigation of barriers in the process of CSP development especially in the early stage (PRC’s current situation). The consulting team and CHEC have found a set of efficient ways to execute dissemination. ADB capacity building and financial support can be a useful tool to reach this goal.

7.3 DISSEMINATION KNOWLEDGE PRODUCTS A CSP knowledge dissemination brochure (Figure 37) on CSP technologies and its development has been prepared by the consulting team and CHEC.

Figure 37 Cover of CSP dissemination brochure

The main contents of the brochure include: 1. Introduction 2. Basic concepts of solar energy 2.1 Solar Energy 2.2 Sunshine hours 2.3 Solar radiation intensity 2.4 Solar elevation angle 2.5 Solar elevation angle and Solar radiation intensity 3. Solar radiation 3.1 Direct solar radiation 3.2 Diffuse solar radiation 3.3 Total solar radiation 3.4 Factors affecting solar radiation intensity 4. Solar radiation distribution in PRC 5. Basic knowledge of solar thermal power generation 5.1 Solar thermal power generation principle 5.2 Tower type solar thermal power generation technology 5.3 Trough type solar thermal power generation technology 5.4 Parabolic dish type solar thermal power generation technology 5.5 Linear Fresnel type solar thermal power generation technology 6. The development of solar thermal power generation 6.1 Solar thermal power generation development process 6.2 Current condition of solar thermal power generation 7. Solar thermal power generation in China 8. Challenges of CSP development in China 8.1 Cost of investment and O&M 8.2 Technologies 8.3 Policies 9. Brief introduction of ADB CSP TA in China 9.1 ADB introduction 9.2 CHEC introduction 9.3 ADB CSP TA7402-PRC 9.4 Introduction to the CSP dissemination website

The brochure has been printed (attached in separated documents) and disseminated through various means during the TA process and it will be further disseminated to: other western provinces, relevant government agencies, and enterprises in some suitable ways.

7.4 CSP KNOWLEDGE DISSEMINATION WEBSITE A CSP knowledge dissemination website was created on 31st August 2010 within (TA 7402 PRC- Concentrating Solar Thermal Power Development). The website address is http://www.cstchina.com.cn/. The website is aimed to disseminate basic knowledge about CSP for public awareness and acceptance. The contents of the website include Basic Knowledge Products on CSP, CSP Industry News, TA Project Express, Project Company Introductions, Sharing Documents, ADB TA7402 Consulting Team, Contacting Us, Relevant links and Work Platform. The Dissemination Website Overview is shown in Figure 38.

Figure 38 CSP Knowledge dissemination website overview

7.5 CSP KNOWLEDGE DISSEMINATION SEMINARS Three knowledge dissemination workshops were held in Qinghai province and Gansu Province in October 2010 including two community knowledge dissemination workshops and one interim workshop. In the dissemination workshops, the consulting team have given presentations on the topics of General information about solar energy, General information about CSP in PRC and world, Brief introduction on ADB CSP TA, Introduction on CSP technologies, Introduction on CSP cost and financing schemes, Worldwide CSP investment subsidies models, CSP policies in PRC and worldwide. No Name Unit Title 1 Han Zhaosheng Jiuquan City Energy Bureau Vice Director 2 Ma Yuequn Jiuquan City Energy Bureau Dept Director 3 Li Chunxiang Jinta NPC Standing Committee Director 4 Wang Kai Jinta NPC Standing Committee Vice Director 5 Ren Xiaoming Jinta Government Director 6 Jiao Chengming Jinta Government Vice Director 7 Wang Zhengyu Jinta Political Consult. Conf. Director 8 Li Shengjin Jinta Political Consult. Conf. Vice Director 9 Cao Yanjun Jinta Government Director 10 Zhou Jianfeng Jinta DRC Director 11 Ying Keming Jinta DRC Director 12 He Guofu Jinta Environment Bureau Director 13 Wei Jingsheng Jinta Forest Bureau Director 14 Shi Changying Jinta Power Com. Vice GM 15 Zhang Dengyu Jinta Financial Bureau Director 16 Wei Jiming Jinta Land Resource Bureau Director 17 Wang Cunyan Jinta Construction Bureau Director 18 Xiang Ji Jinta Meteorological Bureau Director 19 Wan Haihong Jinta Government Vice Director 20 Li Fazhi Jinta DRC Vice Director 21 Ma liang Jinta Government Secretary 22 Ma Wenjing Jinta Government Secretary 23 Wang Cunguo Jinta Broadcast & TV Bureau Journalist 24 Zhang Lan Jinta DRC Engineer 25 Wu Yanhai Jiuquan City Energy Bureau Dept Director 26 Feng Wenke Jiuquan City Energy Bureau Engineer 27 Wang Tingxiang Jinta Water Resource Bureau Vice Director 28 Lu Xiaolong Jinta DRC Engineer 29 Li Reren Jinta DRC Engineer 30 Zhang Zheliang Jinta Government Engineer 31 Xiajun Jinta Government Engineer 32 Wang Feiyun Jinta Government Engineer 33 Liu Li Jinta Government Engineer 34 Liuguan Jinta Government Engineer 35 Luo Xin Jinta Government Engineer 36 Huang Dongfeng Zhejing Energy Institute Engineer 37 Linbao Tsinghua Univ. Professor 38 Lu Zhengwu Changchun Guangji Institute Senior Engineer 39 Zhang Suhua Guodian Nanjing Auto. Co Senior Engineer 40 Li Heping CHEC Vice GM 41 GLADDYS ADB Officer 42 PAT ADB Officer 43 DIEGO PSA GM 44 JORGE STA GM 45 Ma Chongfang Beijing Tech. Univ. Professor 46 Zhuli IT Power, UK Chief Represent. 47 Hu Jicai Wuhan Univ. Professor 48 Liu Huaiquan Chinese Academy of Sciences Researcher 49 Min Deqing CHEC Senior Engineer 50 Zhang Yibing CHEC Engineer

Table 43 Gansu Jinta CSP dissemination workshop participants list

Figure 39 Gansu Jinta CSP dissemination workshop No Name Unit Title 1 Wang Zheng Golmud Goverment Vice Mayor 2 Wuhai Qinghai Prov. Sci. & Tech. Bureau Vice Director 3 Li Xiaosong Golmud Salt Lake Group GM 4 Cao Zuo Qinghai Prov. Intel. Property Bureau Director 5 He Zhi Qinghai Prov. Sci. & Tech. Bureau Vice Dept. Director 6 Li Zhiguo Golmud Construction Bureau Vice Director 7 Liu Xiangsi Golmud Environment Bureau Vice Director 8 Zhang Chengshu Golmud Sci. & Tech. Bureau Vice Director 9 Zhang Lei Golmud Transport Bureau Vice Director 10 Li Gen Golmud Power Company Vice GM 11 Zhao Haiyu Golmud Forest Bureau Vice Director 12 Li Changlong Golmud DRC Energy Bureau Director 13 Kang Hentong Golmud Water Bureau Director 14 Wang Hongbin Golmud Tour Bureau Director 15 Xiao Li Golmud DRC Dept. Director 16 Zhu Zhengwei Golmud Econ. & Dev. Bureau Dept. Director 17 Yang Yong Golmud Land Resource Bureau Dept. Director 18 Huang Dongfeng Zhejing Energy Institute Engineer 19 Linbao Tsinghua Univ. Professor 20 Lu Zhengwu Changchun Guangji Institute Senior Engineer 21 Zhang Suhua Guodian Nanjing Auto. Co Senior Engineer 22 Li Heping CHEC Vice GM 23 Gladdys J. Santos- ADB Officer Nave 24 Naruchol Pat ADB Officer Phokawat 25 Diego Martínez PSA GM 26 Jorge Servert STA GM 27 Ma Chongfang Beijing Tech. Univ. Professor 28 Zhuli IT Power, UK Chief Represent. 29 Hu Jicai Wuhan Univ. Professor 30 Liu Huaiquan Chinese Academy of Sciences Researcher 31 Min Deqing CHEC Senior Engineer 32 Zhang Yibing CHEC Engineer

Table 44 Qinghai Golmud CSP dissemination workshop participants list

Figure 40 Qinghai Golmud CSP dissemination workshop

A Large Scale Solar Power Development Workshop was held in Beijing by ADB and National Energy Bureau from 9 to 10 June 2011. Two hundreds of participants from relevant national & international stakeholders had participated in the workshop. 40 speakers have given lectures on the topics of:  Introduction of ADB’s Asia Solar Energy Initiative (ASEI)  Large Scale Solar Power – Recent Development and Opportunities  PRC’s National Policies and Program  Global Solar Power (CSP & PV) Development Overview  Innovative CSP Application in Other Developing Countries- South Africa  The DESERTEC Concept: Clean Power from Deserts for a World with 10 Billion People  Concentrated Solar Power Development -Opportunities & Challenges  Jinta 50MW CSP Project in Gansu and 1.5MW CSP Pilot Project in Badaling  ADB’s CSP Activities in India  Key Challenges of CSP Project Development  Solar PV Development – Opportunities and Challenges  Grid Connected PV Development – Policies and Projects  Future of Distributed PV Applications  Integration of Solar Power in Electricity Grid – Role of Smart Grid  Challenges and Barriers for Grid Integration of Large Scale Solar Power  PRC’s Smart Grid Development  Rapid Deployment for Solar Power - Market Mechanisms and Innovative Policies  Right Tariff Policies – Experience from Europe  Market Mechanism for CSP in PRC  Impact of Low Cost Financing on CSP Projects – ADB’s Analysis  CSP Business Model in PRC – ADB & CCI Discussion Paper  Technology Advancement, Projects Development & Operation  Bridging the Finance Gap  The Way Forward

A Final Workshop of Concentrating Solar Thermal Power Development Project (Figure 41) was held at China World Hotel Beijing on 4th November 2011. Participants from ADB, Chinese government, CHEC, the Clinton Foundation, the DESERTEC Foundation, the ADB consulting team and other national and international stakeholders has presented the meeting and given lectures and discussions on the following topics:  CSP Road Map Potential: Key Finding and Proposed Actions  Impact of Roadmap for Large-Scale CSP Development in PRC  The DESERTEC Concept: Vision for PRC  Path Toward Grip Parity, Technology Evolution and Social and Environmental Impact  Overall Introduction To the TA Project : Project Background, Rationale and Scope  Lesson Learned From A Pilot CSP Tower Project  Project Overview and, Site Selection Criteria for CSP Project in Gansu and Qinghai  Pre-Feasibility Assessment of 50 MW Jinta CSP Project: Technical and Strategy  Pre-Feasibility Assessment of 50 MW Jinta CSP Project: Financial  Assessment and Strengthening of Institutional Capacity  CSP Knowledge Dissemination

Figure 41 Final workshop of concentrating solar thermal power development The consultants have also taken every possibility to participate some national and international CSP seminars to enhance the dissemination activities of CSP worldwide, including:  Mr. Diego Martínez Plaza, the international technical expert of this TA, has participated at the SEVENTH INTERNATIONAL FORUM ON SOLAR AND WIND ENERGY IN WESTERN CHINA, held in Lanzhou on 8 November, 2010 with an overall presentation on CSP Technologies and Deployment Status in Spain. He has also given a 2 day course on CSP at the International Solar Energy Centre of UNIDO/GNERI (Gansu Natural Energy Research Institute) in Lanzhou. Details are included at the website: http://www.unido- isec.org/enews/AboutUs/IntroductiontoISEC/index.html  Dr. Jorge Servert del Río and Professor Wang Zhifeng, the team leader and co-team leader of the ADB consulting team of this TA, had given speeches on Global Solar Power (CSP & PV) Development Overview, Technology Advancement, Projects Development & Operation, CSP -The Way Forward in PRC and Solar Power 2011 in PRC 8 CONCLUSIONS

The PRC has potential for CSP deployment, specifically in Gansu and Qinghai provinces, and CSP technologies would bring benefits not only to PRC but to the global economy. From the analysis carried out, grid parity could be achieved on 2030 if proactive actions are taken. It is also feasible that 15% of total electricity produced in PRC could be supplied using CSP in year 2040 if appropriate actions are taken.

CSP development can be a major driving force on local economy and energy production, reaching an installed capacity in PRC of 100 GW in 2030 and 400 GW in 2040. The installed capacity in Gansu could be as high as 20GW and Qinghai could reach 50GW, in the proactive scenario.

For Gansu, and Qinghai, taking into account their forecasted demand and wind energy deployment, it will be necessary to set up a high capacity transport grid to supply the demand located in the east as internal demand will not cover production. This also opens an opportunity for high energy demand companies in Gansu and Qinghai.

Gansu and Qinghai have a good solar resource but not the best in PRC Nevertheless, there is access to water supply, favorable topography, grid and transport. Overall, they are suitable areas for demo projects and future development.

CSP is a stable predictable source of energy that can stabilize other renewable energy sources such as wind and solar PV. In Gansu and Qinghai, there are plans to set up wind and solar PV power plants on the order of GW. This will not be feasible if no firm power is installed (such as CSP).

PRC has enough suitable land to supply 10 times 2030 forecasted demand of electricity using CSP. Respectively, Gansu and Qinghai hold 5% and 14% of total PRC suitable land for CSP.

Nowadays, CSP electricity generation costs are higher than fossil fuels or other sources of renewable energy, nevertheless, it has some unique features: availability of primary resource, dispatchability and potential for cost reduction.

CSP has been proven commercially in USA and Spain, creating a good track record. This experience can be used in PRC, profiting from the technology develop and learning from success stories and errors.

CSP development in PRC, due to its manufacturing and development capabilities, as shown in wind or solar PV, should lead to a decrease on investment costs and hence on the cost of the energy produced. However, initial support is needed to achieve momentum, creating a virtuous circle: pipe-line of projects-industry development, cost reduction. ADB´s building capacity and financial support is a useful tool to reach this goal.

PRC advantage on R&D and time to the market combined with appropriate policy and planning support can speed up the introduction of new generations of more efficient CSP plants and hybrid power plants (coal, combined cycles or biomass).

To supply all the electricity demand in PRC, Gansu or Qinghai in 2040: 150,000 km2, 2,400 km2 or 1000 km2 equivalent to 1.5%, 0.5% or 0.1% of their territory (using current technology) respectively, would be needed.

Nevertheless, Gansu or Qinghai can develop a CSP industry to export energy to other parts of the PRC In the present analysis, in 2040, to fulfill the proactive scenario of CSP energy production 65 TWeh and 174 TWeh would be produced respectively, the total suitable land required should be 2% in each province and 0.2 % or 0.3% of total land in each province. This would generate a yearly income around CNY 30 billion and CNY 80 billion respectively.

Pilot projects have a relevant role to play on showing the possibilities and capabilities of CSP to the government and industry. Also, they serve to create a critical mass of experts, components and engineering capabilities.

R&D needs collaborations and trust among different research institutes, universities and industries to reach optimal achievements.

Several candidate sites have been considered for the construction of a CSP 50 MWe pilot plant in Jinta (Gansu) and Golmud (Qinghai). A set of technical criteria have been defined and a comparison among the sites has been carried out. The outcome is the proposal of the most suitable site in Jinta. Another candidate site in Jinta poses very similar features and could be an alternative option.

Social and environmental aspects have been also considered and the result is that no problems are expected for any of them as it’s public land with no use nor any other value.

Concerning the CSP technology to be adopted for the pilot plant, a study has been carried out by the experts and the recommended technology is parabolic trough collector with synthetic oil as heat transfer fluid and, if possible, a natural gas back-up boiler.

This is the only technology with enough commercial experience to ensure the success for this first CSP project in PRC minimizing risks. As a very clarifying data, 2,300 MW out of 2,339 MW planned to be built in Spain until year 2013, are parabolic trough technology.

An economic feasibility study has been carried out, showing the minimal necessary financial conditions to make the project economically feasible.

Disseminate CSP benefits is relevant to the development CSP in PRC and it will bring profits not only to the developers but also to PRC and the global economy. It will lead to a mitigation of barriers especially in the early stage (PRC’s current situation). It will also lead to increase the supports to CSP from different stakeholders. The consulting team and CHEC have found a set of efficient ways to execute the dissemination. ADB´s building capacity and financial support can be a useful tool to reach this goal.

9 LIST OF FIGURES

Figure 1 Components of solar radiation on Earth’s surface (courtesy NREL) ...... 21 Figure 2 Schematic diagrams of the four CSP systems scaled up to pilot ...... 22 Figure 3 From design to commercial exploitation ...... 22 Figure 4 High-level CSP industry roadmap ...... 23 Figure 5 Cumulate installed capacity scenarios ...... 40 Figure 6 Energy mix following Chinese Academy of Engineering, ...... 41 Figure 7 Electricity production mix for PRC including CSP, source: (Chinese Academy of Engineering, 2011) and own elaboration...... 41 Figure 8 Suitable land for CSP (PRC, Gansu and Qinghai) needed land to supply 100% and 15% (proactive scenario) of the electricity in 2040 in PRC ...... 42 Figure 9 Needed investment for different scenario (equity and loan) ...... 43 Figure 10 Installed capacity for different technologies. Base Scenario ...... 44 Figure 11 Yearly increase of installed CSP capacity. Base Scenario ...... 44 Figure 12 Installed capacity for different technologies. Intermediate Scenario ...... 45 Figure 13 Yearly increase of installed CSP capacity. Intermediate Scenario ...... 45 Figure 14 Installed capacity for different technologies. Proactive Scenario ...... 46 Figure 15 Yearly increase of installed CSP capacity. Proactive Scenario ...... 46 Figure 16 Specific averaged investment for the technology mix in the scenario ...... 49 Figure 17 CSP energy forecast production for the 3 scenario ...... 50 Figure 18 Average LCOE, different scenario and supercritical coal power plant and total energy produced...... 51 Figure 19 Over-Cost for society for different scenarios by period and cumulative in comparison with supercritical coal ...... 52 Figure 20 Material requirements in Scenarios 1 ...... 53 Figure 21 Material requirements in Scenarios 2 ...... 54 Figure 22 Action plan. Government...... 57 Figure 23 Action plan. Utilities and National State Grid...... 59 Figure 24 Action pjukllan. Financial institutions. Universities and Research centers. .. 61 Figure 25 Technologies and R&D...... 62 Figure 26 Location of 1MW solar power tower plant (the blue circle) ...... 66 Figure 27 Schematic Dahan tower system ...... 67 Figure 28 Heliostats are tracking the sun ...... 69 Figure 29 100m3 steam accumulator and deaerator ...... 69 Figure 30 120m concrete tower in construction ...... 70 Figure 31 Cost breakdown of the Dahan tower plant ...... 70 Figure 32Direct solar radiation map in PRC (kWh/m2/day) ...... 76 Figure 33 Functional scheme of a PTC plant (Courtesy of Flowserve) ...... 81 Figure 34 Prelimanary results of financial analysis ...... 87 Figure 35 Incentive policies ...... 96 Figure 36 Insitutional estructure for CSP ...... 99 Figure 37 Cover of CSP dissemination brochure ...... 121 Figure 38 CSP Knowledge dissemination website overview ...... 123 Figure 39 Gansu Jinta CSP dissemination workshop ...... 125 Figure 40 Qinghai Golmud CSP dissemination workshop ...... 126 Figure 41 Final workshop of concentrating solar thermal power development ...... 128

10 LIST OF TABLES

Table 1 Characteristics of Concentrating Solar Power Systems ...... 24 Table 2 PRC SWOT Analysis ...... 27 Table 3 Risks associated to regulation ...... 30 Table 4 Risks associated to population and society ...... 31 Table 5 Risks associated to manufacturing industry ...... 32 Table 6 Risks associated to investors ...... 33 Table 7 Risks associated to technology ...... 34 Table 8 Risks associated to weather ...... 35 Table 9 Risks associated to plants needed supplies ...... 36 Table 10 Risks associated to grid ...... 37 Table 11 2020 target: 15% of non-fossil energy in Chinese energy mix, ERIAnalysis of land and investment constrains ...... 42 Table 12 Material requirement for a 50 MW plant with 7 hours storage ...... 53 Table 13 Stakeholders identified in the Dahan plant building ...... 66 Table 15 Basic parameters of the Dahan tower plant ...... 67 Table 14 Stakeholders identified in the Dahan plant building ...... 68 Table 15 The basic economic and financial assumptions ...... 71 Table 16 Key parameters for economic and financial analysis ...... 71 Table 17 Economic analysis results ...... 71 Table 18 Differences between sites in Gansu ...... 78 Table 19 Differences between sites in Qinghai ...... 79 Table 20 Key economic assumptions ...... 82 Table 21 Calculation of avoid coal fired power plant capacity in PRC ...... 83 Table 22 Economic assement results ...... 83 Table 23 Financial assumptions ...... 84 Table 24 Calculation of WACC (Weighted Average Cost of Capital) ...... 84 Table 25 ADB financing terms ...... 84 Table 26 Technical parameters ...... 84 Table 27 Investment cost and annual operation and maintenance cost ...... 84 Table 28 Estimated annual energy production ...... 85 Table 29 Assumptions of CDM benefit ...... 85 Table 30 Financial analysis resuls for case 1. Tariff=1CNY/kWh ...... 85 Table 31 Sensitivity analysis for case 1 Tariff=1CNY/kWh ...... 86 Table 32 Financial analysis resutls for case 2. Tariff =1.1 CNY/kWh ...... 86 Table 33 Sensitivity anaylsis for case 2. Tariff =1.1 CNY/kWh ...... 86 Table 34 Comparation of lending terms ...... 87 Table 35 Risks associated to technology ...... 92 Table 36 Risks associated to weather ...... 93 Table 37 Risks associated to plant needs ...... 93 Table 38 Institution Capacities Needed for CSP ...... 100 Table 39 CSP Value Chain ...... 102 Table 40 CSP Value Chain with company information ...... 103 Table 41 Summary of existing international network on CSP development ...... 116 Table 43 Gansu Jinta CSP dissemination workshop participants list ...... 124 Table 44 Qinghai Golmud CSP dissemination workshop participants list ...... 126

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