A national auction in Latin America this year could offer a lifeline to a renewable energy technology that seems to be entering terminal decline.
Chile is one of just two countries in the world that is likely to offer opportunities this year for developers of concentrated solar power (CSP) projects that use the sun’s heat to spin turbines that generate electricity, rather than using sunlight to generate electrons.
Although the country’s upcoming auction does not include a specific carve-out for CSP, it will reward low-carbon nighttime generation. That could favor CSP plants with multiple hours of molten salt thermal energy storage, said Jorge Moreno of Santiago-based consulting firm Inodú.
“It is correct to assume there will be a market opportunity of around 1,211 gigawatt-hours a year of CSP, assuming that it generates at night,” he said in an email.
Chile’s National Energy Commission is due to auction at least 2.2 terawatt-hours of capacity per year beginning in 2021, he said. Of this, just over 1.2 TWh have to be delivered between 6 p.m. and 7:59 a.m.
Nighttime delivery is a sweet spot for the newest generation of CSP plants, which use daytime solar to heat up massive vats of molten salt that power steam turbines after sundown.
The amount being offered in Chile’s auction could equate to between 150 megawatts and 280 MW of CSP capacity, depending on how the supply is determined, Moreno said. That would make Chile the world’s biggest potential market for CSP in 2021.
Only one other country, Spain, is planning to hold a CSP-friendly auction this year. Last year, the Spanish government issued a draft ministerial order to procure a minimum of 100 MW of new CSP capacity in 2021, with an allocation that increases by 100 MW a year up to 2025.
Only two markets offer tangible opportunities
Spain’s 2021-2030 National Energy and Climate Plan sets a target of procuring 5 gigawatts of new CSP capacity within a decade, all for nighttime energy supply. That’s a huge amount for an industry that today barely boasts 6 GW of operational capacity worldwide.
But Chile’s plans are potentially even more ambitious. Some projections from the National Electricity Coordinator include a 28 percent share of expected generation for CSP by 2040.
And last year, the head of new technologies and energy planning at the Chilean Ministry of Energy signaled that CSP could make up a quarter of the country’s generation mix by 2050. That would equate to around 10 GW of capacity, just based on what could be on offer in government auctions.
Elsewhere, Chile’s voracious copper mining industry is planning to get 63 percent of its electricity from clean sources by 2023, based on a forecast from the Chilean Copper Commission. Chile’s mining sector already has a history of CSP adoption.
Latin America’s first CSP plant, a $15 million, 10-megawatt parabolic trough facility, was built by Abengoa Solar in 2012 to supply power to El Tesoro, a copper and gold mine in Antofagasta.
CSP plants in the mining regions of the Atacama Desert would have the best solar conditions in the world.
Tapping into the Chilean market could be crucial to CSP plant developers such as Abengoa Solar and the EIG Global Energy Partners subsidiary Cerro Dominador, which is expected to bring Chile’s second CSP plant online in the coming months.
Competing with PV and batteries
That’s because, apart from Spain, no other country in the world is currently planning to procure CSP. The technology seems to have fallen from grace in the U.S., and recent growth markets, such as China and Morocco, are not believed to be considering further procurements.
Even in Chile, the opportunity for CSP development is far from a given. “There is no specific policy regarding the installation of CSP in Chile because the market is open and development of projects is related to its ability to be competitive,” said a Cerro Dominador spokesperson via email.
“The auctions are not assigned by technology at this time and depend on how competitive CSP offers are against other competitors.”
At the moment, those competitors are likely to be PV plants equipped with batteries. Moreno told GTM that rapidly falling battery prices might allow PV to match CSP on cost for nighttime generation with up to five hours of storage. But other experts disagree.
At Abengoa, for example, solar technology director Miguel Méndez Trigo said that CSP’s levelized costs would beat PV and batteries at between three and four hours of storage, “and even more so in a place like Chile where you have the best solar resource in the world.”
With Chile’s next auction expected in May, it won’t be long before this thinking is put to the test. And with few other markets to turn to, CSP developers will be hoping it holds true.