BrightSource’s Hidden Hills cancellation shows CSP under pressure

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BrightSource's cancellation of the 500MW Hidden Hills project announced last week demonstrates that the concentrating solar power (CSP) industry is under mounting pressure, if you pardon the steam generation pun.

In January, the company, based in Oakland, California, put its Rio Mesa project on hold indefinitely. Since last year, it has “suspended” a total of 1GW, leaving only Ivanpah (pictured), Solana West and Palen (rescued from the remains of Solar Millennium's bankruptcy) in the company's domestic pipeline. Only last month, BrightSource's CEO John Woolard said that there was room for growth for CSP in the US.

But it's not just BrightSource's portfolio that is feeling the effects of this downsizing. The implications for the CSP pipeline for the US are significant.
Carolyn Campbell, research associate at GTM Research, said: “This is an interesting trend. We hadn't seen a lot of projects being shelved up until this point apart from Solar Millennium. We'll have to watch going forward.

“If these projects aren't getting built now, I'm not expecting any further CSP announcements.

“Obviously the projects that are already expected online in the near future in 2013/2014 probably won't be pulled as construction and development activities are already under way. But further out, 2015/16/17 we may see a drop off in the pipeline.”

GTM forecasts that 351MW will come online in 2013, but revised its 2015 estimates to 400MW, down from 800MW at the end of last year.

Campbell said that the costs of CSP are proving difficult to compete with against PV – a much cheaper technology to meet state renewable portfolio standards.

“The CSP market is stressed in general and PV is so cheap,” she said. “A lot of states are meeting their short-term RPS requirements that there just really isn't a need for large-scale expensive capacity.

“It also appears that a lot of these projects have been slower than anticipated to actually get operating. We have been continually revising our forecasts down for projects that we expected to come online in certain years and haven't been able to achieve those timelines.”

PG&E mutually agreed to terminate the power purchase agreement for the Hidden Hills project. But will that void be filled with PV? Probably. But not necessarily from new submissions, which already outnumber accepted applications.

A spokesman for PG&E said that the utility company was not concerned about a shortfall in meeting its RPS requirements without the Hidden Hills project.

“We’re not concerned about a capacity gap,” he said. “We have figured all along that not every project would develop, and have contracted accordingly so that we will be able to meet our obligations for 2020 and beyond.”

Campbell said: “If PG&E were looking for additional request for proposals I doubt they would be looking at CSP unless it was for a different load profile. Based on the costs that we're seeing right now for PV it looks like an unrealistic option.”

Financing may also have played a part. Ivanpah also had the benefit of a US$1.6 billion Department of Energy Loan guarantee and a stellar equity backer, NRG Energy. The financing of its other projects is not so clear, but BrightSource most likely has less money than it would like after it withdrew its initial public offering last year.

Palen's US$3 billion price tag does not include storage, but Solana West will for the first time use BrightSource's molten salts storage system.

California's energy regulators are probably scratching their heads right now, wondering how to stop this CSP attrition and why they designed such a flaw into the RPS. PV, after all, is a one-trick, daytime-only show pony that performs brilliantly at peak demand during peak load.

Inclusion of a solar carve out for storage in the RPS would have gone a good way to addressing this issue, something that BrightSource was also perhaps too slow to develop.

Keely Wachs, BrightSource spokesman, wrote in a blog on the company's website that the company cancelled the project “due to challenges associated with the project schedule and uncertainty around the timing of transmission upgrades”.

Lack of storage was also a factor but changes to the engineer's blueprints would mean [too] long in the grind of the permitting process, he suggested.

“The contracts with PG&E did not originally include storage. Hidden Hills is a good site to deploy solar thermal with storage technology. However, such a change would require an amendment to the permit application and reopening of the evidentiary record to account for impacts associated with a new project footprint, including a layout of the solar field, storage equipment and reconfiguration of the power blocks.”

BrightSource's flagship project Ivanpah has proven that permitting is not quick or cheap. After all, it cost US$53 million just to preserve a small colony of desert tortoises.

The Cal Independent System Operator has already expressed concern about integrating 33% renewables onto the grid. CSP thermal storage would have plugged the gap, at least partially.

An NREL report published last month, Analysis of Concentrating Solar Power with Thermal Energy Storage in a California 33% Renewable Scenario, concluded that CSP has a much greater value to the grid than baseload or PV power.

Although more research needs to be done, it said: “When CSP is allowed to provide operating reserves, its operational value increased by about US$17/MWh (producing a total difference of US$22/MWh compared to the baseload resource and US$29/MWh compared to the PV generator). The ability to provide reserves appears to have a significant value, but will require a different operational approach for CSP – greater operation at part load and more frequent plant cycling. The additional costs of this operation, which were not evaluated here, could reduce the net benefits of CSP providing operating reserves.”

Frank “Tex” Wilkins, executive director of the CSP Alliance, said: “What is significant about this BrightSource announcement is that it's symptomatic of what's going on with the industry right now. There is a growing realisation of the importance of storage.”

The Hidden Hills project did not have storage but BrightSource's Solana West was the last project that the California Public Utilities Commission approved for the company on the condition that part of the project would have storage on it, said Wilkins.

“As far as the future is concerned, it doesn't make any sense to build CSP without storage, particularly for California where the CAL ISO is worried about flexibility,” he said. “With storage, these CSP plants act almost like a natural gas plant except you don't need the natural gas.”

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