In the field of energy, the commitment by the Juncker Commission in 2014 to become “Nr. 1 in RES” has not been changed. However, it was never backed by any national commitments…
The technology leadership currently held by Europeans for STE is to defend not only for the benefit of Europeans but also understood as the firm European contribution to achieve a more sustainable development for all countries for the world. This implies already today a strong collaboration with many other countries endeavouring together to blend their respective assets for a common goal.
“We need to strengthen the share of renewable energies on our continent. This is not only a matter of a responsible climate change policy. It is, at the same time, an industrial policy imperative if we still want to have affordable energy at our disposal in the medium term. I therefore want Europe’s Energy Union to become the world number one in renewable energies.”
“An ambitious climate policy is integral to creating the Energy Union. Actions include the EU Emissions Trading System (EU ETS), strong but fair national targets for sectors outside the ETS to cut greenhouse gas emissions, a roadmap towards low-emission mobility and an energy policy which makes the EU world leader in renewables”.
Being a (market) leader implies meeting at least one of the following conditions:
Technology leading companies must constantly monitor their environment so to defend their leadership (unless they happen to act in a legal monopoly position, which is not likely to be the case any longer). To do this, companies can opt for 2 strategies:
STE is the only one or among the few technology sectors where European companies hold technology leadership due to a STE deployment program launched in Spain back in 2004.
This deployment initiative taken by the Spanish government led to the construction of some 50 STE power plants in Spain – a wise political decision that indeed fulfilled at that time the conditions for achieving leadership in a new renewable energy technology.
Spain and the other countries such as Germany, Italy, Denmark, France, etc. that participated in this wise STE deployment program since 2007 as developers and suppliers have built up not just excellency in solar research, but also an entire STE industry representing the whole value chain.
Today, the STE sector differs fundamentally from solar PV especially in the sense that there is no STE power plant built today in the world that does not use technologies developed by Europeans or where European entities are encouraging innovation.
Amid the global competition for technologies and markets, this is not a minor aspect, and Europe should indeed be interested in defending this position.
The STE must expand (first in a EU “home market” and also on world markets) before the new entrants overrun European industries.
How quick and how large energy markets develop in EU (or in any other market of the world) depends on:
The idea that European STE technology can be defended without giving to the technology immediate local applications is much of an illusion: R&D (should) follow market needs /technology leadership cannot be engineered in labs without corresponding markets. This is especially true for STE taking into consideration the crucial objective of cost reduction, for which incremental innovations will be easier to introduce to STE markets without further negative impact on costs.
Finally, the STE success story that started for Europe in Spain (due to the optimal solar resources of the country and the shared vision of both right (2004) and left (2007) wing political parties) was put at threat by retroactive changes of the legal framework about renewables from 2012 on.
Solar Thermal Electricity (STE), also known as Concentrating/Concentrated Solar Power (CSP), is a technology that produces heat by using mirrors to concentrate sunlight into a linear or central receiver, which brings the solar energy to a heat transfer fluid. This heat can be stored for hours or used right away to generate electricity – usually with a steam turbine – or as process heat for industrial application.
Solar thermal electricity generated from plants with thermal storage system deliver firm electricity on demand without additional cost – even after sunset.
STE is grid-friendly not only due to thermal energy storage, but also due to the mechanical inertia provided to the grid by conventional turbines, since solar thermal power plants produce solar thermal electricity in a similar way to conventional power stations – based on absolutely reliable technology.
Five main elements are required: a concentrator, a receiver, a heat transfer fluid, a storage system, and power conversion block. Many different types of systems are possible, including combinations with other renewable and non-renewable technologies. So far, plants with both solar output and some gas or biomass co-firing have been favoured in the US, North Africa and Spain. Hybrid plants help produce a reliable peak-load supply, even on less sunny days.
While substantial STE investments occur on world markets using EU technology and combining advantages of all RES technologies case-by-case in response to local needs, EU stopped investing in STE.
This led to a situation where - just as for any other energy technology - the STE sector in Europe is today depending on a political commitment by some countries to create the necessary boundary conditions (i.e. legislative and financing instruments) for achieving the agreed targets. This will also provide again sufficient confidence to investors for taking higher entrepreneurial risks in Europe.
The measures were in detail:
Followed in 2012 and 2013 by
The impact of these retrospective measures on the Cash Flow and Debt Service of the projects was from last December to February 2013 already a 37% income reduction that was simply impossible to be covered by the projects.
Main financial figures of the STE sector in Spain
The reality behind the Spanish Electric Deficit
The retroactive measures taken against STE plants by the Spanish government in 2012 - 2013 and consolidated in 2014 resulting in a massive change of the remuneration scheme for RES power plants have now been unanimously condemned by ICSID, the International Center for the Settlement of Investment Disputes. Among the 26 arbitration claims against these changes filed at the ICSID by several RES industries, the case of the STE industry (20 claims) stands out since these measures brought the deployment of STE to a stop in Europe and still negatively impact the business development of European companies holding worldwide technology leadership in STE technology.
Well known is that right after the STE plants were built, the revenue streams of plant operators were suddenly cut by a third(!).
Less known is that ahead of these cuts, the solar thermal sector had reached an official agreement with the Spanish government so as to keep a stable remuneration for previously constructed or awarded plants. By this agreement, the STE sector accepted delaying both the operation start of the plants and the remuneration regime “pool + premium” by one year compared to the initially authorized schedule. This resulted in savings for the Spanish system of around 1.4 billion € already between 2011 and 2013. While the STE sector scrupulously fulfilled its commitments (and effectively refrained from a 1.4 billion € income), the Spanish government did not comply with its obligations.
The main argument used by the Spanish government to defend the changes was that “entrepreneurs should have known that laws can be changed”. Indeed, all entrepreneurs knew and still know it, but the ICSID now arbitrated that such massive sudden changes of agreed rules may not occur in whatever way. The Spanish Ministry recently said in a press release regarding the arbitration award of ICSID that each arbitration is “different”. No doubt about that. However, the common denominator of further arbitration awards about the solar thermal sector (with still some 20 pending cases) will lie now in two undisputable facts: a) the abrupt retroactivity of the measures taken and b) the obvious breach by the Spanish government of an agreement with an industry sector. In addition, the assessment of the damages performed in this first ICSID sentence shows that the current remuneration scheme that was set to provide a “reasonable profitability” on investments of 7.4% is a fiction that even the experts presented by the Ministry recognized.
The Spanish government might now take this arbitration award as a good opportunity to consider whether it makes sense to wait for an expected “string” of negative awards due to the fact that most of the still-pending cases are from the STE sector or to be proactive and negotiate with both international investors and the STE industry an acceptable settlement solution.
Recent reports in major Spanish media mention that the Spanish Ministry is now likely to lobby the EU institutions for avoiding the payment of the ICSID sentence (128 M€) via a) declaring its own RE support schemes as a breach to EU State-Aid rules and b) stating that the Energy Treaty Chart would not apply within EU Member States. Furthermore, ESTELA also observes obvious hesitations from the Spanish Ministry of Energy to support and even spearhead a “STE initiative for Europe” worked out with the SET-Plan framework aiming at defending the STE technology leadership position held by companies in about 10 EU Member States – amid fears that non-European competitors might easily take advantage of a longer STE investment stop in Europe.
A political commitment (via e.g. a political declaration by several MS backed by the EU services or under the SET-Plan) to enhance cooperation on concentrated solar thermal technologies for power generation, heating, including for industrial purposes, solar chemistry and desalination.
Such a declaration should be actively promoted especially (but of course not exclusively) among those Member States having a direct stake in the sector.
In Europe, the combined effects of:
Last, but not least, the unbalanced ratio between manageable and intermittent resources will trigger alarming effects.
The main reason is that a deployment of variable generation sources up to a level beyond approximatively 30 % already tables the issue of sustainability of the energy transition itself. Variable generation sources will inject into the grid energy at the same time without a corresponding market demand. This results in:
Prior to assessing the "business as usual" vectors of any energy policy discussion in Europe, namely:
It is urgent to assess the implications of further delayed or withheld action for the sector in terms of:
Policy makers are the only mandated forces in charge of energy policy choices taking into account all their implications.
Policy-makers should embrace in their strategy the 3 dimensions of the energy transition:
Let’s take an example:
It is indeed a matter of urgency to debunk the erroneous perception in many national authorities, ministries, regulators, European institutions’ services that the potential benefits of a relaunch of this sector would be limited to those European countries where STE power plants were already built and/or having very good solar resources (Portugal, Spain, Italy, Greece).
The reality is very different: as true it is that the main European STE promoters in Europe as of 2016 are based in Spain (such as ACS Cobra, Acciona, Abengoa, Sener, TSK, Elecnor, etc.), this is just the most obvious outcome of the STE deployment program launched in Spain in 2007-2013. But the industry texture of the STE sector is sub-stantially wider.
There are at least 9 Member States with companies holding references in STE technology:
The current developers of STE plants do best efforts on all active markets to aggregate companies from other European countries via joint ventures, alliances and EPC contracts. Even if the following list of companies is not exhaustive, entities such as in Denmark (Aalborg), in the Netherlands (NEM), in Belgium (CMI, Enseval-Moret), in Italy (Ansaldo, Archimede, ENEL Green Power, Turboden, CCI-Orton), in Germany (Siemens, MAN, BASF, Schlaich Bergermann, Flaveg), in the Czech Republic (DOOSAN Sköda Power), in France (GE(former Alstom), ENGIE, Saint-Gobain, CNIM, etc.), in Portugal (EDP Inovacao) can be mentioned.
Besides supplies and services that are normally provided at least cost by local companies of the country where a plant is built (civil works, assembling on site, non-specific auxiliary services) there is a widespread distribution of STE competences and business potential for companies across at least 9 EU member States.
These companies hold references in STE technology, based for a substantial part on own R&D and are able to successfully compete on global STE markets - if politically supported by fair competition conditions and based in an own home (means in this case: European) market.
The most striking element that makes Morocco stand out among all STE deploying countries is the quality of the policy and institutional framework elaborated there to achieve 2 targets:
A decisive move was the creation of MASEN (Morocco)
The NOOR STE projects have achieved very competitive tariffs, among others due to the project structure adopted by Masen.
All this produced within few years impressive results, with last but not least much better financing conditions offered by a very wide range of major international financial institutions for the implementation of Moroccan Solar Plan that the ones any EU country would be granted!
The first of the NOOR Ouarzazate STE projects and the first stage of Morocco’s Solar Plan, NOOR I (150 MW parabolic trough project with 3 hours of energy storage), is connected to the grid since end 2015.
The second phase of the Solar Plan comprised two CSP projects procured concurrently:
And a further 250 MW will be added to Moroccan’s energy system next year. Most important feature of the decision-making process in Morocco is the fact that the solar generation shall be balanced up to a considerable amount of STE recognizing by that the complementarity between both solar technologies.
The Middle East is ramping up its plans for STE based projects and as a part of the Plan, Shams-I has been installed in Abu Dhabi. There are ambitious plans in Saudi Arabia and in several Arab Emirates. Currently 4 STE plants having 300 MW capacity are running successfully in South Africa and another half is on the way.
More recently, the Dubai authorities have outlined a three-year construction window for a 200 MW solar tower facility, the United Arab Emirates' second CSP plant. The Dubai Electricity and Water Authority (DEWA) is to award the contract for the project in the second half of 2017 and expects the facility to be online by April 2021. DEWA announced on 4 June the prices offered from four consortia for the 200-MW fourth phase of the Mohammed bin Rashid Al Maktoum solar park. The lowest bid for the Solar Thermal Electricity (STE) project came in at 9.45 US cents/kWh (approx. 8.4 €cts/kWh). Participating consortia were [ACWA Power (Saudi Arabia), Shanghai Electric (China), BrightSource (USA)]; [Alfanar (Saudi Arabia), Suncan (China)]; [Engie (France), SolarReserve (USA), Power China (China), Sepco3 (China)] and [Masdar (UAE), EDF (France), Abengoa (Spain), Harbin Electric (China)].
Three of the best bids offered by multi-national players are hitting or even below 10 €cts/kWh while the installed capacity in STE worldwide is just around 5 GW compared to nearly 500 GW for wind and 300 GW for PV. In other words, STE costs were divided by 3 in just 10 years (2007-2017) with just 1% of the market volume for wind and less than 2 % of the market volume of PV!
On 16 Sept, DEWA announced that the contract is awarded to a consortium comprising Saudi Arabia’s ACWA Power and China’s Shanghai Electric. The consortium bid the lowest LCOE of USD 7.3 cents per kilowatt hour (kW/h). The project will have the world’s tallest solar tower, measuring 260 metres. The power purchase agreement and the financial close are due to be finished shortly. The project will be commissioned in stages, starting from Q4 of 2020.
This comes already after SolarReserve offered 6.54 US cts/kWh in Chile in August 2016 for a STE 120-MW plant, where in addition to the best solar resource in the world, the country’s stable financial status along with US dollar denominated power contracts results in excellent financing and investment terms.
Recently, a new actor entered STE markets – China with a very active involvement of stated-owned/supported Chinese companies in the sector in various regions of the world with good solar resources.
In China, developers must overcome limited build experience and China’s severe weather challenges to meet tight construction deadlines set out in the country’s first large-scale deployment program.
China awarded a first batch of 20 STE projects in September 2016, including nine solar towers, seven parabolic trough plants and four Linear Fresnel plants. The projects must be completed by the end of 2018 to be eligible for the Feed-in-Tariff (FiT) of 1.15 yuan/kWh ($0.17/kWh). This gave developers just over two years to secure financing, select an engineering, procurement and construction (EPC) contractor, and construct the plant.
A two-year timeframe may be sufficient in more mature STE markets, but not in markets such as China, especially as wintertime in northwest of China brings extremely low temperatures which can prevent civil work for several months. such as the Western regions of Qinghai and Yunnan that can be hit by sandstorms and temperatures which can swing from -40°C to 20°C in one day,
China currently has a successful track record in developing and nuclear, fossil fuel, hydropower, PV and wind power plants, but there is little experience in large-scale CSP construction.
The main challenge is the lack of experience in system design and integration. China has many demonstration loops and systems, but now the minimal capacity [in the pilot program] is 50 MW. Going from 1 MW to 50 MW and 100 MW will not be easy.
China's operational STE plants are in Feb 2017:
EU policy should be aware that in order to shorten the learning curve and reduce project risks, local developers are now contracting experienced international STE consultants, such as:
Another major advantage for developers in China is the country's comprehensive supply chain, requiring minimal imports. Major components such as parabolic trough receiver tubes (heat collecting elements), reflectors, raw glass, molten salt and thermal oil, can all be supplied and installed already at relatively low cost. SunCan is currently developing a 100 MW solar tower in Dunhuang, in the Gansu province and a technology supplier for two 100-MW solar tower projects in Jinta and Yunmen, Gansu province. The company is also the EPC contractor for a 50 MW parabolic trough project in Delingha, Qinghai province.
The industrial threat on Europe of the market entrance of China into the STE market is likely to follow a similar development like the PV panel dispute linked to Chinas economy model (WTO case about "market economy").
The scenario is well known: it consists first in copying technology, then reproducing at lower costs, building up some project references via limited joint ventures with European companies and finally push European market actors out of their home and the world market via companies take-overs, mergers, etc.
The solar PV panel dispute has been by far the biggest trade controversy between the EU and China. Under the Climate and Energy Package 2020, the EU became the largest market for solar panel products, reflecting growing demand for renewable energy consumption.
China, meanwhile, has surpassed the EU as the largest solar panel manufacturer in the world. The lower prices of Chinese solar panels have encouraged installation of the solar system in EU Member States. A group of European manufacturers who felt marginalised by the pricing of Chinese exporters, however, lodged a petition to the European Commission against alleged unfair competition.
After an investigation, the EU imposed tariffs on solar panels imported from China, prompting the latter to immediately launch an anti-dumping probe on European wine. Since the EU is China’s biggest trading partner and China is the EU’s second partner, both parties decided to settle the dispute through negotiations instead of starting a trade war. In July 2013, the EU and China settled the solar panel dispute.
The main dispute was pricing. Chinese exports of solar panels enjoyed lower prices in the EU market, which, according to the EU solar industry, resulted from cheap loans and government subsidies. Following the introduction of the Five-Year Solar Plan by the Chinese government, the price of a Chinese solar module fell dramatically from 3€ per Watt peak (Wp) in 2008 to as low as 0.40€ per Wp in 2011.
Elsewhere, production costs of solar energy, a novel field, were also experiencing a market decline in production costs. Meanwhile, the manufacturing capacity of China’s solar-panel industry grew tenfold, and the surge in exports contributed to a 75% drop in world prices.
In July 2013, a settlement was reached between the EU and China. The agreement consisted of a minimum price of EUR 0.56 per Wp for panels until the end of 2015 and of a limitation of the export volume. Chinese companies were also allowed to export to the EU up to 7 gigawatts per year of solar products without paying duties. About 90 per cent of Chinese solar manufacturers signed up to the minimum price. According to Karel De Gucht, the EU trade commissioner, the price undertaking would “stabilise the European solar panel market and remove the injury that the dumping practices have caused to the European industry”. The EU PV makers, however, felt that the settlement was “not a solution but a capitulation”, and that the “EU commission decided to sell the European solar industry to China “under pressure”.
Since the trade relationship between the EU and China is admittedly too big to fail, settling the solar panel dispute can be considered successful for having avoided a trade war. It is crucial for both the EU and China to maintain good trade relations based on mutual benefit. However, differing trade interests with China of Member States have divided the EU in the negotiations. In facing the increasing bargaining power of China, a joint effort among the EU Member States is advisable.
For the PV solar manufacturing industry, global competition has resulted in reduced prices. The lower solar panel prices bring benefit to the customers, as well as the Member States that are promoting the adoption of renewable energy consumption by subsiding the installation of solar panels.
This current price level for PV panel points also – taking of course the off-taker needs - at the possibility of new hybrid plants STE/PV that would combine the key assets of both technologies (example in Chile)
Dialogue comes always first: The EU has a clear preference for resolving trade irritants with China through dialogue and negotiation. The existing EU-China trade related dialogues should be strengthened at all levels, their focus should be sharpened on facilitating trade and improving market access and their scope extended.
EU and China also have an interest in joining their efforts in international rule making and global standard setting bodies. The EU will actively pursue global supervisory and regulatory solutions, promoting open markets and regulatory convergence, and build on co-operation with China through EU-China regulatory dialogues. This will also help to ensure compliance of Chinese imports with EU standards for food and non-food products.
But where efforts fail, the Commission will use the WTO dispute settlement system to ensure compliance with multilaterally agreed rules and obligations.
Trade defence measures will remain an instrument to ensure fair conditions of trade. The EU is actively working with China with a view to creating the conditions which would permit early granting of market economy status (MES). Recent progress has been made on some of the conditions. The Commission will continue to work with the Chinese authorities through the mechanisms we have established and will be ready to act quickly once all the conditions are met.
Build a stronger relationship. A key objective of the negotiations for a new Partnership and Cooperation Agreement, which will also update the 1985 Trade and Co-operation Agreement, will be better access to the Chinese market for European exporters and investors, going beyond WTO commitments, better protection of intellectual property and mutual recognition of geographical indications.
On 12 May 2016, with an 83% overwhelming majority, the European Parliament passed a Resolution against dumping and the granting of MES to China. The Resolution is an important signal that the EU will not grant MES so long as China fails to meet its WTO obligations.
In December 2016, WTO will re-examine China's terms of membership and decide whether or not to grant market economy status (MES)
Under Section 15 of the Chinese WTO Accession Protocol, China can be treated as a non-market economy (NME) in anti-dumping proceedings. The definition of China as a NME allows importing countries to use alternative methodologies for the determination of normal values, often leading to higher anti-dumping duties.
The correct interpretation of Section 15(d) of the Chinese WTO Accession Protocol has come under debate, as well as whether the latter section stipulates the automatic granting of Market Economy Status to China after December 2016. This analysis looks at the debate regarding the interpretation of Section 15(d) and the current policy of selected WTO members with respect to China's Market Economy Status.
In case of a prolonged stagnation of the STE deployment in Europe, the competitiveness and the recognized excellence of European research centres involved in STE research will be negatively impacted.
As of 2017, the distribution of STE dedicated R&D facilities is as follows:
Laboratories working for STE research are distributed as follows:
In spite of having these R&D infrastructures managed under different national governance and funding schemes, they all are structurally depending on direct relations with the STE industry. Furthermore, the European Commission supports financially R&D projects under H2020 including the improvement of cooperation across these centres up to the potential setup of common research infrastructures for the sector.
Maintaining Europe without an own STE deployment program will question the need for and the further use of non-industry R&D facilities.
This will result in an attractive opportunity for non-European competitors to acquire knowledge bearers at low cost on labour markets.
Technology will also be acquired at the lowest costs in case of company takeovers.
It is just a matter of time until the absence of a European STE market severely impacts the mere existence of these knowledge and innovation centres.
Furthermore, the short-term priorities of R&D centres (all working under essentially national R&D plans and governance models) are sometimes far away of what industry considers as most promising technology. The STE industry calls for a better coordinated governance for the use of European R&D resources regarding existing and new R&D infrastructures as presented in the EU-Solaris project (2012-2016) and STAGE-STE project (2015-2018) acting as a bridge between research institutions and STE industry and gathering hundreds of high-level scientists and experts contributed to define several action lines along the entire value chain of the sector (material, performance optimization of components, etc.).
In the STAGE-STE project, STE research entities and industry have jointly delivered substantial input to the “Initiative for Global Leadership in Concentrated Solar Power (CSP) / Solar Thermal Electricity (STE)” that was recently approved by the SET-Plan. The practical implementation of this Initiative will soon bind in a coherent process across Member States several important research projects anticipated by STAGE-STE and already evaluated by the industry as most likely to bring a competitive / innovative advantage with the realisation of a First-of-A-Kind (FOAK) commercial project in STE in Europe.
As a closing conference, STAGE-STE will present the main projects results in the wider perspective of the current situation of the CSP/STE sector in Europe and the expected developments. This event will be organised on the 23rd January 2018 at the European Economic and Social Committee (EESC) in Brussels. The event will address:
To view programme and register to the event, please visit here: http://stage-ste.eu/workshop/