Al Senia | Apr 16, 2013

After years of fits and starts, utility-scale solar-generated power is finally poised to emerge from the shadows, propelled by a combination of technology breakthroughs, state renewable energy mandates and lucrative federal and state grants and tax incentives, according to many industry observers. This year promises to be a breakthrough one for solar generation, with a number of large projects coming on line.

“Solar generation is growing a lot,” said Dennis McGinn, president and chief executive of the American Council on Renewable Energy (ACORE). “It is now one of the most rapidly growing parts of the nation’s renewable energy portfolio. The price is coming down, and there is a lot more confidence within the investor community based on solar’s performance. The cost of (investment) capital is now more competitive.”

A number of significant utility-scale photovoltaic and concentrating solar power (CSP) projects are generating significant amounts of power this year, promising to catapult solar generation into the mainstream. These include Arizona’s Agua Caliente (280 megawatt) and Solana (250 megawatt) solar projects, Nevada’s Crescent Dunes (110 megawatt) generating station and California’s three-unit Ivanpah (400 megawatt) project, which will utilize 170,000 mirrors to generate electricity.

“The next three years are going to be very active,” said Mike Taylor, director of research for the Solar Electric Power Association. “We are seeing a lot of projects being put in place.”

Many of these utility-scale solar projects are located in the western desert regions and often involve large-scale projects and important technology breakthroughs.

As an example, the $2.2 billion Ivanpah project, being built by BrightSource Energy on 3,300 acres of California desert land near the Nevada border, will eventually utilize more than 170,000 mirrors to reflect the sun’s power into boilers located in three different 400-foot towers, heating water to produce steam to drive turbines. The plant is expected to produce about 400 megawatts by the end of this year. Such a design has never operated on such a large scale, but the project has attracted well-known investors such as Google and NRG Energy.

Many of the large-scale CSP projects are being aided by cash grants that provide renewable-energy developers with up to 30 percent of a project’s cost once it is completed. Offered as part of the 2009 economic stimulus package, the cash grants now have been replaced with tax credits of equal value.

According to a report in the Los Angeles Times, Ivanpah’s BrightSource investors will receive an  estimated $600 million in federal grants once the project ramps up, and other corporate investors could receive $600 to $700 million in tax breaks over a five-year period. Such incentives on a variety of solar projects guarantee investors solid returns, reduce capital costs and help attract Wall Street interest.

“The tax benefits have been essential and very helpful,” said ACORE’s McGinn. “They increased the attractiveness of solar because of the reduced costs. They led to increasing solar development and greater confidence.” McGinn added that confidence in utility scale solar projects also is growing because developers are taking a more professional approach to such projects. “There is more predictability, and they are taking more of a systems engineering approach, eliminating uncertainty and applying IT and sensor technology to provide real-time information.”

Michael Eckhart, global head of environmental finance for Citigroup, said the solar-generation industry, especially its photovoltaic segment, is benefitting from both the financial incentives and global trends. “Photovoltaics has its major U.S. incentive in place through 2016, so the industry has the certainty that it always wants,” he noted. “I believe the solar PV industry just recently passed the bottom of the valley. Demand in China will pick up very rapidly in 2013 and 2014 as the new policy regime sets in, growing to 15 to 30 gigawatts per year. This will have positive spillover effects in the U.S. as well.”

In fact, smaller photovoltaic generating projects have started to dominate the utility-scale solar generating  project landscape because costs have dropped dramatically and the technology is less risky to implement, according to SEPA’s Taylor. “Photovoltaic is seeing continued growth on the utility side of the market. The prices of photovoltaic panels are very, very low.” As a result, PV generation has become less expensive than CSP generation, Taylor said.

“We are seeing a niche of 10 megawatt to 50 megawatt PV projects going on line very rapidly. These projects have a smaller footprint, can be developed more rapidly and can be deployed faster. The sweet spot is really the medium-size photovoltaic project,” Taylor said.

In fact, SEPA anticipates seven PV projects totaling 2,024 megawatts to begin operating this year, mostly involving the major California utilities such as Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, all of which face strict state renewable energy mandates during the next few years. Another seven PV projects are expected in 2014. On the other hand, SEPA anticipates only Ivanpah’s three units and two other CSP projects generating a combined total of 752 megawatts to come on line this year. And just two new CSP projects, both in California, are anticipated next year.

“You are going to start seeing CSP projects being put in in smaller amounts,” said Taylor. “What is CSP’s path forward? Can they work to reduce costs? There are some real open questions.” We are not seeing a lot of new CSP projects because of the higher cost compared with photovoltaic technology, he said.

 

This story appeared first in the latest edition of EnergyBiz magazine

Copyright © 1996-2013 by CyberTech, Inc. All rights reserved.

To subscribe or visit go to:  http://www.energycentral.com

To subscribe or visit go to:  http://www.energybiz.com

http://www.energybiz.com/article/13/04/utility-scale-solar-energy-projects-coming-line