For a long time, concentrating solar power (CSP) was seen as a cutting-edge renewables technology that would best meet South Africa’s energy security needs and support the creation of new industries and technology innovation.
CSP was the thing to do. It still is. It is one of the few new renewables technologies that are pregnant with the capacity for diverse innovations, provided somebody is willing to take the risk involved in developing the full potential of CSP. If these breakthroughs are achieved CSP, can compete with gas, coal and nuclear in terms of baseload in the next 10 to 15 years.
Large-scale CSP roll-out was first envisaged in the long-term mitigation scenarios as a renewables technology pathway that would help reduce South Africa’s emissions.
At least ten years ago, Eskom put forward plans to build a solar tower project with molten salt to increase the solar plant’s capacity factor. This is now being funded through the Clean Technology Fund and other soft loan schemes under a deal struck when the Medupi loan was concluded two years ago.
Stellenbosch University has been doing work on CSP for the last two decades at least. The initial Integrated Resource Plan envisaged large-scale roll-out to 2030, but this has been trimmed down to a meagre 1 000 MW.
Suddenly, CSP is no longer sexy. While developers are eager to up the ante on CSP, investors are not that eager. Two things have come to work against CSP: cost reductions in photovoltaics (PVs) and investor cold feet – given the financial crisis inflicting Western markets, investors are more risk averse.
In South Africa, the push to get cheap electrons into the grid as fast as possible and the State’s low appetite to provide loan guarantees for large CSP projects have stalled the pace at which CSP projects can be built in South Africa.
It is clear that just putting electrons into the grid is not enough to stimulate growth in CSP installed capacity, as CSP is currently not price competitive, compared with wind and PV, depending on the CSP technology option– of the four available– that one promotes and whether it comes with storage or not.
The general view is that CSP requires a lot more ramp-up and experience in the handling of the technology to assuage investor perceptions of technology performance risk and that the increased levels of complexity associated with the installation of solar power plants may lead to cost overruns.
In contrast, wind and PV are viewed as simpler to deal with, as both are mature and easier to ramp up because they are more modular.
Without exaggerating, wind and PV are like mass car manufacturing today – they are easy to roll off production assembly lines and pluck in the ground.
For countries looking to start new industrial ventures in wind and PV, these technologies have the do-it- yourself feel and involve far less effort and risk than CSP.
New technologies require significant government support in the form of research and development, tax write-offs and loan guarantees to ensure that the development of these technologies is done over the long haul.
Technologies that have yet to be proven on a large scale stir anxiety in already nervous investors, be they from the private sector or the public sector. It did not help that, in the US, government’s bet on a solar technology promoted by Solyndra through generous loan guarantees went pear-shaped.
The US government’s support was aimed not only at driving electricity generation from new renewables but also at making the US a leading pro- ducer of clean technologies, given the competition from China.
It is important that, when a country makes a strategic industrial choice, the level of effort and risk associated with developing the technology is understood.
CSP in South Africa requires a relook. The attempt to ramp up installed capacity on the back of the demand for electricity alone will not work unless the industrial case for CSP has strong economic justification and returns to back it.
CSP will continue to suffer from a lack of investor confidence, as investors are not willing to take the risk on their own, despite the fact that, two years ago, we saw strong market confidence in CSP, even though 90% of the pipeline of projects showed a tendency for troughs.
Sentiment has now shifted away from CSP. The CSP fraternity will have to do a lot more work than promise cost- effective renewables electricity when the technology development side and industrial case are still clouded in doubt.
The South African government is faced with the stark choice of investing precious funds in technology development for global breakthroughs, which it can ill afford, or waiting while others with better resources make these breakthroughs.
CSP has promise, but the industrial and economic cases have to be worked on. Further, innovative finance has to be secured from local and international sources to drive CSP’s technology development.
It is best also that the CSP fraternity makes the case watertight because, at present, there is a lot of fanfare and talking up of CSP. But CSP promoters should also be honest about the tech- nology performance risks and what it will take to iron them out.