Investing in concentrated solar power: 22 gigawatts of CSP forecast by 2025
Investors looking for alternatives to fossil fuel energy as part of their portfolio could likely do no better than concentrating solar power, or CSP. Unlike solar photovoltaic energy, or PV, which converts solar energy into electricity using an inverter, CSP concentrates the heat of sunlight and uses that to heat a fluid to drive turbines.
Renewable energy continues to demonstrate that it’s the wave of the future, and webtools now offer investors a way to keep track of how corporate sustainability issues and governmental regulations might impact their retirement funds and investment portfolios. This trend, of exiting from fossil fuel energy sources and searching for alternatives, has reportedly risen 50-fold in a single year, to $2.6 trillion.
Divesting from “dirty” energy, once a radical proposition, now seems like not only a correct environmental decision, but is gaining recognition as a financial one as well. In fact, given new, stricter, and increasingly expensive governmental regulations on emissions from coal plants, oil refineries, and even freight transportation, it may be the only decision for the 71 percent of investors who describe themselves as interested in sustainable investing.
Nevertheless, some experts caution against getting out of fossil fuels entirely, and note that – in the absence of nuclear power – fossil fuels like coal form the baseload of power supplies needed in the U.S. as the population expands, electricity from renewable energy is variable, and electronic technology is taking a bigger and bigger bite of energy generation.
In spite of that, investment bankers like Goldman Sachs advise a move away from coal, forecasting that “peak” coal may be just around the corner, while peak demand – on a scale seen prior to the Great Recession – will never come back. This is particularly true, analysts note, because of the current and persistent deflationary cycle.
Skeptics argue the point, noting that the intermittent nature of renewables like solar and wind will never allow them to cost effectively function as baseload energy infrastructure, and nuclear energy – once a cornerstone of baseload – is rapidly approaching obsolescence. New construction is limited mainly to China and parts of Europe. Most U.S. nuclear power plants are pre-Three Mile Island (i.e., built before 1980), with an average age of 34 years, and will very soon need to be relicensed (past the 60-year mark) to keep operating until 2050. This declining role of nuclear energy is creating a squeeze for utilities to generate alternatives.
When the U.S. first began building nuclear reactors to generate power, the Nuclear Regulatory Commission estimated the lifespan of said plants at 40 years. The NRC has since upped that estimate, but safety experts and environmentalists argue that the policy is dangerous. One NRC official, Gregory Jaczko, resigned in 2012, ostensibly to pursue other opportunities but in reality because of opposition to his proposals to tighten safety regulations in the wake of the Fukushima disaster.
Energy experts’ objections to solar and wind should be viewed as valid by investors. In the absence of superior, commercial-scale energy storage technologies – i.e., lithium-ion or the even newer Tesla Powerwall – these renewable energy sources cannot reliably supplant baseload resources. CSP with molten salt or oil heat storage can. The current U.S. baseload consists of coal (39 percent), nuclear (19 percent), and natural gas (27 percent).
CSP shares some of the same characteristics that have given natural gas such as an edge over the last decade. Natural gas is cleaner burning than coal and can be used to supply energy during “peak” periods (i.e., during high demand periods associated with extreme heat or cold). Natural gas now represents more than 50 percent of new generating capacity. Were it not for environmental issues surrounding pipelines and natural gas recovery (namely fracking), the percentage might be even higher. Currently, 67 percent of the approximately 4,100 billion kWh of U.S. electricity generation is supplied by fossil fuels (coal, natural gas, and petroleum).
The good news is that utility-scale solar costs continue to fall, thanks to greater market penetration, scale of production, and the advantages of distributed energy and this has helped the emergence of technologies such as concentrated solar energy. For solar energy, these incentives translate directly into 70-percent less expensive power purchase agreements, or PPAs,-- cutting project costs cut in half – all driven by a drop in production costs-per-watt from about $6 in 2009 to less than $3 in 2014.
According to GTM Research, current PPA costs of $40 per megawatt-hour (MWh) in some parts of the country compare more than favorably to natural-gas power, whose costs for fuel alone can reach $40MWh: (GTM is the analytical arm of Greentech Media). As of October, the cost per kilowatt-hour (kWh) for utility-scale solar was $0.05.
In 2013, as this trend began, an executive at Xcel Energy (NYSE:XEL) noted the paradigm shift: suddenly, solar energy was at parity with fossil fuels, and it had made the cut on a “strictly economic” basis.
From a wider perspective, Scott Nyquist – Fortune Magazine author, energy insider, and self-labeled “oil guy” – is convinced that solar energy is the wave of the future.
Like other seasoned energy experts, he agrees that some form of fossil-fuel energy will always play a role in U.S. energy resources, but, “…solar energy will play a bigger role in our energy mix than many think.”
Moreover, CSP, which provides energy storage along with energy production, is likely to be at the head of that list within a decade. There are several reasons why, but first a brief explanation of CSP.
Concentrating solar power uses three systems: linear concentrating; dish/engine tower (typically using the Stirling engine); and power tower. All are simply variations on a thermodynamic principle. The first uses mirrors (or lenses) to concentrate sunlight to heat fluid. The steam from this heated fluid drives turbines that generate electricity. However, unlike solar photovoltaic power, or PV – solar panels, with or without backup, deep-cycle, lead-acid batteries (the current paradigm) – CSP can store the heat, or thermal energy, generated. The term “solar thermal” commonly refers to solar hot water heat.
Current storage mediums for CSP include molten salt or oil. Both are somewhat inefficient and thus hold back the emergence of CSP as not price competitive with fossil fuels, but also as a challenge to baseload sourcing (typically coal, nuclear and hydropower).
For example, in order for CSP to challenge coal, natural gas or nuclear, at a cost of $0.06 per kWh, plants would have to operate at more than 1200 degrees Fahrenheit (°F) or 650 degrees Celsius (°C), the current limit given the technology and the thermal natures of both salt and oil.
On Sept. 15, the government’s SunShot Initiative, aimed at making solar power ubiquitous, announced an additional $32 million in funding through Argonne National Laboratory – one of 17 national laboratories operated by the U.S. Department of Energy – to develop more thermally efficient storage methodologies for CSP.
In response, an Argonne team of researchers is currently exploring a heat storage material that both takes up and releases heat very rapidly. It is these sorts of high-temperature, phase-change heat storage and thermochemical solutions that will eventually allow the U.S. to meet 27 percent of its baseload energy needed by 2050, and to do so in an environmentally responsible manner.
Neither can rival Nevada’s Ivanpah solar project for output, at 377 MW, but both can provide up to 10 hours of electricity after the sun goes down using thermal storage from molten salt. Suggesting that it is just a matter of time and technology before CSP forms part of the backbone of U.S. energy supplies.
As of November 2014, the United States had more than 1,400 megawatts of power flowing from CSP plants, with another 390 slated for 2015. This 27 percent year-over-year growth, and the advancement of storage technologies, puts CSP solidly in the investment spotlight.
Companies to watch:
Solar Reserve, LLC, just now getting its feet wet in CSP production with molten salt storage capacity, has been SunShot-funded to develop compact, affordable, lightweight receiver panels capable of heating air – or molten salts and other corrosive, oxidizing fluids – to 750°C. This is 185°C hotter than current methodologies, thanks to silicon carbide ceramics.
Abengoa Solar (NASDAQ:ABY), a two-time Sun Shot awardee, is moving toward more efficient concentrator design and a heat transfer/storage material that can operate at 1,100°C or higher.
Brayton Energy, LLC, a private firm out of New Hampshire, is working on integrating a unique solar absorber and a metal hydride thermal energy storage (TES) system in a single, close-coupled plant.
NRG Energy (NYSE:NRG), a 2000 spinoff of Xcel Energy, is vested with BrightSource Energy, LLC, a private firm, in the building of Ivanpah (mentioned above). NRG has taken the energy world by storm since its divestiture, buying or developing more than 50,000 megawatts of energy. This Fortune 500 company is also heavily vested in clean, renewable energy.
Also keep an eye on GE (NYSE: GE), which recently coupled its in-house energy-efficiency and distributed-power technologies with its industrial internet platform to create Current. Current offers better integration of energy services like lighting, solar, energy storage, and electric-vehicle operation for large (and small) energy consumers.
Jeanne Roberts is an award winning freelance writer covering the environment, sustainability, social justice, health, politics, and the natural world. She has roots in the corporate world as a California reporter and a communications specialist at a large public utility and has spent the past 10 years working as an editor for a small-cap stock site, and as an environmental/political/social justice blogger for The Panelist, Celsias, Cooler Planet, DeSmogBlog, Energy Boom, SolveClimate.com, the Clean Tech Blog, EarthTechling, and various other online publications. Ms. Roberts has written a book on alternative energy sources, sustainable home building, and environmental initiatives for homeowners available on Amazon.