Virginia, USA -- When people think of ideal locations for concentrating solar power, they generally envision remote and dry deserts, like the Southwest. But with its Martin Solar Energy Center, Florida Power & Light (FPL) has shown that CSP can work in a humid and cloudy climate. Will that success bring more of the technology to the Southeast?
The question remains open. While it initially appeared more CSP was on it way, optimism has waned because of a combination of technological, political and market forces. First, the Southeast's climate continues to deter many developers. CSP's high temperature technology works best when solar energy is consistent. “From a geography standpoint, the Southeast is not a region where you would [expect to]see CSP move forward,” says Steve Kalland, executive director of the North Carolina Solar Center.
Second, FPL Martin has a unique advantage. It is not a stand-alone project, but a hybrid that operates in conjunction with an existing combined-cycle natural gas plant. This integration underlies its success. Because some of the infrastructure was already built, it was cheaper than a stand-alone CSP plant. Any new CSP in the Southeast is likely to also be hybrid. After all, it offers a potential 20 per cent cost advantage. And as natural gas prices continue to drop, hybrid systems will become even more cost-effective, according to Kalland.
But the hybrid cost advantage does not appear to be enough to get projects going. The Southeast is heavily vested in fossil fuel and nuclear, deeply cost conscious, and slow to adopt favorable green energy policies. And a handful of utilities control large parts of the energy market, making it difficult for independent power developers to compete. Couple that with the rapidly falling cost of crystalline PV panels, and CSP faces an uphill climb in the region.
A Weak Legislative Environment
CSP's slow going is due in part to lack of state and local government commitment to solar, according to Bruce Kershner, executive director of the Florida Solar Energy Industries Association. Favorable policy has been stymied over the years by administrative changes and political maneuvering. Strong legislation has been proposed, only to be rewritten and weakened as it made its way through the two branches of the state legislature, according to Kershner.
“We have a Republican House, Senate and Cabinet,” he says. “They are fiscally conservative people.” State leaders show little appetite for increasing rates to fund solar programs.
FPL won cost-recovery for the Martin Center. But new projects remain subject to state “least-cost” requirements. Avoided costs are low in the state - as they are in much of the Southeast - and natural gas fired plants are often a preferred new supply choice. Without guaranteed cost recovery, utilities have little incentive to invest in solar.
Further, the Southeast has a dearth of innovative renewable energy polices. State renewable portfolio standards (RPS) drive green energy development in large swathes of the nation by requiring that renewables be used to meet a certain percentage of electric demand. (Some states even have “carve-outs” requiring that part of the RPS be met specifically with solar energy.) About three-fifths of the states now have RPS requirements; the Southeastern states of Florida, South Carolina and Georgia are not among them. North Carolina is the exception among the Southeastern states in having an RPS. But the program is relatively slow to ramp up. The North Carolina RPS requires that 12.5 per cent of demand be met with renewable energy by 2021 (0.2 per cent specifically from solar). This is relatively weak compared with booming solar states like New Jersey, which requires 22.5 per cent renewables by 2021.
A handful of states also have - or are working on developing - solar renewable energy credit markets (SRECs), which allow utilities and sometimes competitive suppliers to meet RPS standards with credits. Rules vary from state to state, but typically utilities either produce their own credits or buy the SRECs from solar power generators. And if there are not enough credits available, they pay a non-compliance penalty to the state. The penalty is typically set high enough to encourage utilities to source energy to meet their RPS quota.
For example, in New Jersey, the 2010-11 RPS requirement for energy producers was 306,000 SRECs. Each SREC is valued at US$665 per MWh, and the penalty for non-compliance was set at $675 per MWh. By 2015, New Jersey's RPS solar requirement will rise to 965,000 SRECs for energy producers.
North Carolina has had an SREC program in place since 2010, but the program has been ineffective because the state did not set a compliance payment. Without a fine for failure to meet the RPS program, energy suppliers have no reason to follow the state's rules. Without rules, complicated and expensive new technologies, such as CSP, will not get built, says Kalland. “CSP is very policy-dependent, perhaps more than any solar technology because of its capital costs. We have to get a very specific framework in place to encourage utilities to invest in projects.”
Too Much Utility Control?
Another major roadblock for the SREC market in North Carolina, and for renewable energy development in the Southeast in general, is that a few large, investor-owned utilities tend to dictate the market. For example, Duke Energy and Progress Energy together provide 71 per cent of North Carolina's electricity. Both utilities have already met their North Carolina compliance needs for solar and have removed themselves from the SREC market for the next several years. This is a devastating blow for the state's SREC market - 71 per cent of its customer base has removed itself from the market.
In addition, industry liberalization never swept the Southeast, as it did other parts of the nation such as the Northeast, where solar is thriving. In these deregulated states, customers can leave the utility to buy supply elsewhere. However, green-leaning customers in regulated states have little leverage to pressure utilities into adding more renewable energy to their portfolios.
Solar Versus Solar
It isn't just public policy, low utility rates or lack of liberalization that is slowing the CSP market in the Southeast. Even in New Jersey, a poster child for US solar development, it is crystalline flat-plate PV that is capturing the market, not CSP.
PV is simply cheaper right now. “From an economic standpoint, it's hard to see CSP making a lot of sense in the Southeast when trying to compete with the cost of crystalline PV,” says Kalland. “If any solar gets built, it will be flat-panel PV.” North Carolina alone will install 100-120 MW of flat-plate PV this year and 90 per cent of renewable activity will come from flat-plate crystalline PV, according to Kalland. “If PV prices continue to drop, it makes the game that much harder for CSP companies to compete in order to get projects built,” he says. “It will take a legislative commitment to get the CSP market going.”
With crystalline PV providing many of the same benefits as CSP, including reduced emissions, it makes little sense for utilities to purchase a more expensive form of solar energy. “Utilities like the consistent energy output of CSP plants, but most think it is a more expensive way of meeting RPS requirement,” says Kalland.
More CSP than Ever?
But don't rule out the Southeast completely for further CSP. Many expect the CSP price point to drop as projects are built in other parts of the U.S. and around the world over the next several years. “As more projects get built, costs will get driven down,” says Kalland. “But realistically that is not coming anytime soon in the Southeast.”
CSP technology is also expected to undergo breakthroughs in performance and to improve storage capabilities for stabilizing the grid. But until there is a major technology advance and the price-point comes down, crystalline PV will continue to make the most economic sense, says Kalland.
So for now, the Martin Center stands as a model for CSP in the Southeast, but one unlikely to be quickly emulated until we see price, technology or policy change in CSP's favor.
Energy writer Reid Smith contributed to this article.
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