The Most Important Energy Projects in the World


The future of energy is all about abundant, cheap, and clean power. Over the last few months of 2010 the U.S. Department of Interior’s Bureau of Land Management (BLM) and the California Energy Commission (CEC) approved 10 large-scale Concentrating Solar Power (CSP) projects totaling about 4,190 MW. (1) They include the largest single solar power tower (370 MW) and parabolic trough (1,000 MW) projects in history.

In terms of their collective impact on the future of energy, these Desert Power projects may well be the most important energy projects in the world today.

California Solar Valley – Back to the Future

Back in the 1980s Califonia had a solar boomlet led by a company called Luz. Nine CSP power plants collectively known as SEGS (Solar Energy Generating Systems) went up in the Mojave desert using parabolic trough concentrator technology. The SEGS power plants have a total of 354 MW and have generated about 0.7 TWh of electricity yearly over the last two decades. SEGS would fulfill San Francisco residential power needs for about 7 months of each year.

By 1990 SEGS generated about 90% of all the solar power in the whole world which made California the world’s largest solar market and technology developer. But development of new CSP plants came to a grinding halt. America didn’t build another large solar power plant until Nevada Solar One was built near Las Vegas in 2007, adding another 70 MW of solar power to the grid.

The newly approved 4.2 GW of Desert Power CSP will increase America’s solar CSP infrastructure by an order of magnitude. Solar power will significantly contribute to California’s Renewable Portfolio Standard (RPS) goal of 33% clean energy by 2020 and would make the United States the global market leader in Utility Scale solar CSP generation again.

4.2 GW is still tiny compared with the 13 TW (terawatts) of energy consumed around the world each year. Why do I think these desert power projects are so important?

Learning to Cut Costs by Half

Luz didn’t just build solar power plants in the eighties. As it built them its engineers learned to cut costs. Over five years in the 1980s, while building the SEGS plants, Luz cut the cost of solar electricity by 50% – from 28 c/kWh to 14 c/kWh, according to Joshua Bar-Lev, who was on the Luz team in the 1980s and is now is at BrightSource, Inc (Oakland, CA). SEGS plants now generate power at 9 to 12 cents per kWh. (America’s average power price is around 10 c/kWh.) (2)

Solar CSP is not the only set of solar technologies that is pushing costs down. Solar photovoltaic technologies have had exponential drops in costs since the 1970s. Solar PV prices have dropped as much as two-thirds over the last three years alone. (3)

As a result, photovoltaic power plants have already started to puncture grid parity in areas with high solar radiation. A 1MW Concentrating Photovoltaic (CPV) plant at Victor College in Southern California has generated solar power since the summer of 2010 at 8.5 cents per kWh – without subsidies, according to Nancy Hartosch of SolFocus (Mountain View, CA). This is less than the 10 c/Kwh that Americans pay on average (grid-parity). It’s also much less that the prices of more than 40 c/kWh that many pay during the peak summer heat.

Learning curves and cost-cutting are of course not unique to solar. There are several reasons why solar and many other industries have been able to continue to push cost curves down. Several of them actually reinforce one another:

  1. Learning Curves. The more we do something the more efficient we become at doing it. According to NASA industries like shipbuilding, aerospace, or repetitive electronic manufacturing have learning curves of 80%-95%.
  2. Innovation.  As the market grows in importance it attracts more talent and attention in Universities, Research Labs, and Corporations.  Increased research and development create new technologies and processes or improve existing products to grab a larger share of that growing market.  In my book “Solar Trillions” I wrote a case study on a startup company that developed a simple but ingenious component that promises to to cut solar power costs by 10% or 20%. (2) Even Google has announced it’s working on an innovative mirror for CSP plants. (3)
  3. Investments. The more the market grows the more suppliers across the whole solar value chain (from suppliers to customers to competitors) invest in new capacity and new products and services to meet the new demand.  They work with innovators and invest in in-house R&D and product development capabilities. Venture Capital flows into startup companies that create new technologies that cut costs even further.
  4. Scale.  Building a large-scale CSP solar plant is a construction project which consumes commodities like concrete, steel, and aluminum. The larger the purchase order of alumimum that a company makes the lower the unit cost that a company is going to get.
  5. Bankability. As more solar power plants come online, many bankers lose their fear of financing new plants.  The cost of capital for new solar power plants decreases – which further lowers the levelized cost of solar electricity.

The history of SEGS suggests that the builders of  4.2 GW of new CSP desert power plants in will cut the levelized cost of electricity (LCOE) of utility scale desert solar power by 50% over the next 5 years.

The Future of Energy – Making Legacy Energy Obsolete

This 50% cost shave means that by 2015 we will be talking about desert solar power costs on the order of 7 c/kWh. (Assuming that CSP cost of electricity in the Mojave desert are around 14 c/kWh, which is where Luz left off in 1990.)  This will undoubtedly be cheaper than two major forms of subsidized legacy power: new nuclear and natural gas. The few nuclear plants breaking ground today will already be obsolete by 2015 – years before they even start generating power.  Desert Power CSP will also be within striking distance of coal.

Cost-cutting would create a virtuous cycle of demand and investments in more solar power plants which would lower costs even more which would spur more demand and investments and so on.

How long can the solar industry keep up the desert power cost-cutting?  Can the solar industry cut costs another 50% between 2016 and 2020?  The Bureau of Land Management (BLM) has received requests to develop solar CSP plants totaling of 24,000 MW (24 GW) in California’s deserts. (2)  This does not include desert land to be developed elsewhere in the US Southwest, India, China, Spain, the Middle East and North Africa.  If this wattage is developed over the next decade and the cost curve follows solar history or matches industries such as shipbuilding, aerospace, or repetitive electronic manufacturing then we will be looking at another 50% cut in the solar LCOE. The cost of solar would then be on the order of 3.5 cents/kWh.

This would mean that by 2020 desert solar power will be cheaper than coal.

Put another way, by 2020 solar will be cheaper than the three major forms of subsidized dirty legacy power: coal, natural gas, and nuclear.  Solar, which is by far the most abundant source of energy on earth, will also the cheapest, thus helping to bring about a multi-terawatt clean and sustainable energy infrastructure. This is why the 4.2 GW of California desert power projects are key to the future of energy and the most important energy projects in the world today.

Endnotes:

(1) The California Energy Commission, Large Scale Solar Energy Projects,   http://www.energy.ca.gov/siting/solar/index.html

(2) “Solar Trillions – 7 Market and Investment Opportunities in the Emerging Clean-Energy Economy”, Tony Seba, 2010, http://tonyseba.com/books/solar-trillions/

(3) The New York Times, http://www.nytimes.com/2011/01/15/business/energy-environment/15solar.html

(4) NASA Learning Curve Calculator: http://cost.jsc.nasa.gov/learn.html

(5) CNET, “Google develops prototype mirror for solar energy”,  http://news.cnet.com/8301-11128_3-10460913-54.html



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