untitled

O N T E N T S

Executive Summary

.................................................................................................................

Setting the Context ............................................................................................................ 1

1.1 Operational Programs of the Global Environment Facility .................................................

1.2 CSP funding within Operational Program 7 ...................................................................

1.3 Lessons from past studies on the GEF solar thermal portfolio ..............................................

1.4 Aims of the Study .....................................................................................................

1.5 Scope of Work ........................................................................................................

Concentrating Solar Thermal Power (CSP) Development ...........................................................

2.1 Ongoing CSP market development worldwide ...............................................................

2.2 Technological paths of Concentrating Solar Thermal Power plants ...................................... 14
2.3 Cost reduction comparison of CSP technology ............................................................... 25

CSP Risk Analysis ............................................................................................................. 34

3.1  Technological risks related to the WB/GEF portfolio .......................................................   35
3.2  Financial/commercial risks related to the WB/GEF portfolio ............................................   39
3.3  Regulatory/institutional risks related to the WB/GEF portfolio ...........................................   43
3.4  Strategic risks related to the WB/GEF portfolio ..............................................................   45
3.5  Overall risk evaluation ...............................................................................................   49

The Status of the WB/GEF CSP Portfolio .............................................................................. 52

4.1 Status of the WB/GEF portfolio and possible development .............................................. 52
4.2 Status of the WB/GEF portfolio by country ................................................................... 54

Long-term CSP development scenarios for the World Bank/GEF ................................................ 63

5.1  “Scenario” discussion of strategic aspects for WB/GEF in the development of CSP ..............   64
5.2  The First Round: “Falling Dominos” ...............................................................................   67
5.3  The First Round: “Getting to the harbor” ........................................................................   68
5.4  The Second Round: “Wait and See” ............................................................................   70
5.5  The Second Round: “2-Track Approach” .......................................................................   71
5.6  The Second Round: “Specializing“ ..............................................................................   72

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Short- and long-term recommendations for the WB/GEF strategy for CSP

in the context of a long-term vision for CSP ............................................................................ 73

6.1  Long-term vision for CSP ............................................................................................   73
6.2  Criteria describing the success of a long-term CSP strategy ...............................................   79
6.3  New market initiatives and their relevance in a long-term strategy for CSP ...........................   86
6.4  The possible role of the Clean Development Mechanism in project ﬁ nancing:

How to cross the bridge toward competitiveness ............................................................ 88

6.5 Central questions for determining the role of the WB/GEF

in the realization of the CSP vision ............................................................................... 89

6.6 Answers to the questions addressing the short-term development

of the WB/GEF CSP portfolio .................................................................................... 91

6.7 Answers to the questions addressing the long-term development

of the WB/GEF CSP portfolio .................................................................................... 106

References

............................................................................................................................ 114

Annex 1

: Characterization of the Status of Important Ongoing CSP Projects Worldwide

(Description of each project according to a set of criteria) ................................................ 118

Annex 2

: The Framework for CSP in China ................................................................................. 139

Annex 3

: CSP Technology Options ........................................................................................... 143

Annex 4

: Characterization of the GEF Four-Country Portfolio (Description of each

of the four projects according to a set of criteria) ............................................................ 145

Egypt ............................................................................................................... 146

India ............................................................................................................... 159

Mexico ............................................................................................................ 167

Morocco .......................................................................................................... 174

Annex 5

: List of interviewed persons .......................................................................................... 183

Figures

Figure 1:

“Gap” identiﬁ cation in technology transfer ............................................................

Figure 2:

Short-term and possible medium- to long-term development

of CSP technology worldwide (yearly installed MWe) ............................................. 11

Figure 3:

Short-term and possible medium- to long-term development

of CSP technology worldwide (cumulative installed MWe) ....................................... 12

Figure 4:

Example of part load behavior of a steam turbine .................................................. 18

Figure 5:

Load curves used for the annual performance calculation ......................................... 20

Figure 6:

Results of annual performance calculation for ISCCS and CC .................................. 21

Figure 7:

Speciﬁ c CO

emissions for different sites, plant conﬁ gurations,

operational modes, and solar ﬁ eld sizes .............................................................. 22

vii

ONTENTS

Figure 8:

Solar LEC for different sizes, plant conﬁ gurations, operational modes,

and solar ﬁ eld areas ........................................................................................ 24

Figure 9:

Progress ratio for different producing branches ...................................................... 26

Figure 10:  Speciﬁ c investment costs of wind energy converters over time ...................................   27
Figure 11:  Speciﬁ c investment costs of photovoltaics as a function

of cumulative production volume ......................................................................... 27

Figure 12:  Development of installed wind capacity in Germany ...............................................  28
Figure 13:  Development of the worldwide installed PV capacity and annual growth rate ..............   28
Figure 14:  Enermodal Study—Experience curves for different assumptions on the progress ratio .....   29
Figure 15:  Development of levelized electricity costs and revenues from the

power exchange market referred to by LEC of fossil power plants (plant

project interest rate 8 percent) ............................................................................ 31

Figure 16: Comparison of the different market development assumptions

of the CSP studies in comparison with the German wind market

development and the GMI—goal (cost competitiveness after

cumulative installed power of 5 GW in 10 years) .................................................. 32

Figure 17: The strategic position of Group 2 countries for the development

of CSP technology (example of the Mediterranean area) ......................................... 66

Figure 18: Global GHG concentration stabilization proﬁ les (left) and emission

proﬁ les for stabilizing greenhouse gas concentrations at 550 ppmv

(S550e) and 650 ppmv (S650e) versus baseline emissions ..................................... 75

Figure 19:  Implementation of geothermal power plants worldwide ...........................................   77
Figure 20:  Four stages in the development of CSP ................................................................   79
Figure 21:   Market environment for the introduction of CSP technology ......................................   80
Figure 22:  Various ﬁ nancing mechanisms to cross the bridge toward competitiveness

and the role of carbon ﬁ nancing in such a ﬁ nancing strategy ................................... 88

Figure 23: Relative part load losses of the steam turbine for the daytimes when

solar ﬁ eld is not providing solar steam for different ISCCS plant sizes ........................ 104

Figure 24: Daily load curve of the Moroccan electricity system ................................................ 125
Figure 25: Growth in electricity demand ............................................................................. 125

Boxes

Box 1:

What is Technology Transfer? .............................................................................

Box 2:

OP 7 Objectives .............................................................................................

Tables

Table 1:

Overview and status of CSP projects worldwide (excluding WB/GEF projects) ...........

Table 2:

ECOSTAR study – cost reduction potentials due to technical improvements .................. 14

Table 3:

Sargent and Lundy—technical improvements for the trough

and the tower technology .................................................................................. 15

Table 4:

Overall risk evaluation for the WB/GEF solar thermal portfolio ................................. 49

ADB

African Development Bank

Australia

BMU

Bundesumweltministerium fuer Umwelt, Naturschutz und

Reaktorsicherheit (Federal Ministry for the Environment,

Nature Conservation and Nuclear Safety)

c/kWh

cents per kilowatt-hour

combined

cycle

CCGT

combined cycle gas turbine

CEA

Central Electricity Authority

CER

certiﬁ ed emissions reductions

CFE

Comisión Federal de Electricidad

(Federal Commision of Electricity)

CSP

Concentrating Solar Thermal Power

DNI

direct normal irradiance

DoE

U.S. Department of Energy

EEHC

Egyptian Electricity Holding Company

EPC

engineering, procurement & construction contract

ESCOM

South Africa Electricity Supply Commission

FERC

U.S. Federal Energy Regulatory Commission

GAIL

Gas Authority of India Limited

GDP

gross domestic product

GEF

Global Environment Facility

GHG

greenhouse

gases

GMI

Global Market Initiative (for Concentrating Solar Power)

GoI

Government of India

GoR

Government of Rajasthan

gas

turbine

gigawatts

GWh

gigawatt-hours

GWh

gigawatt-hours

electric

HRSG

heat recovery steam generator

HTF

high temperature ﬂ uid

IEA

International Energy Agency

INR

Indian

rupee

IPP

independent power producer

IREDA

Indian Renewable Energy Development Agency

IRR

internal rate of return

ISCC

Integrated Solar Combined Cycle

ISCCS

Integrated Solar Combined Cycle System

JBIC

Japan Bank for International Cooperation

KfW

Kreditanstalt für Wiederaufbau (German Development Bank)

kWh

kilowatt-hour

kWh

kilowatt-hour

thermal

KSC

Key success criteria

LEC

levelized electricity costs

LNG

liqueﬁ ed natural gas

MMBTU

million British thermal units

MNES

Ministry of Non-Conventional Energy Sources

MSP

medium-sized

project

million

tons

MToe

million tons oil equivalent

megawatt

MWe

megawatt

electric

megawatt

thermal

NEAL

New Energy Algeria

I S T

O F

B B R E V I A T I O N S

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

NREA

New and Renewable Energy Authority

OECD

Organisation for Economic Co-operation and

Development

O&M

operation and maintenance

ONE

Ofﬁ ce National de l‘Electricité/National Ofﬁ ce of

Electricity

Operational

Program

ORC

organic Rankine cycle

PCAST

U.S. President’s Committee of Advisors on Science

and Technology

PEF

Programa de Egresos de la Federación (Planning of

Expenses of the Federal State [of Mexico])

PIU

project implementation unit

PPA

power purchasing agreement

ppmv

parts per million by volume

progress ratio (of learning curves)

photovoltaics

R&D

research and development

RECs

renewable energy certiﬁ cates

RES

renewable energy sources

RfP

request for proposals

RPS

Renewable Portfolio Standard

RREC

Rajasthan Renewable Energy Corporation

RVPN

Rajasthan Rajya Vidyut Prasaran Nigam Limited

SEGS

solar electricity generating systems

solar

ﬁ

eld

SolarPACES

International Energy Agency Implementing Agreement

for Solar Power and Chemical Energy Systems

steam

turbine

STAP

GEF’s Scientiﬁ c and Technical Advisory Panel

STEG

solar thermal electricity generation

STPP

solar thermal power plant

TCF

trillion cubic feet

TEC

techno-economic

clearance

TWh

terawatt-hours

UNFCCC

United Nations Convention on Climate Change

The World Bank

xiii

X E C U T I V E

U M M A R Y

lobal warming is now widely considered a very
signiﬁ cant poverty and security issue. The associated
detrimental effects are likely to particularly manifest
themselves in many developing countries. Though

most of the anthropogenic emissions thought to be contributing to the
effect have historically come from the countries of the Organisation
for Economic Co-operation and Development (OECD), modeling
shows that in the future the bulk of emissions will come from coun-
tries such as India and China. It is therefore in the World Bank’s
interest to contribute to the identiﬁ cation and support of solutions
to GHG emission reduction.

The GEF’s Operational Program 7 (OP 7) supports the develop-
ment of technologies with low greenhouse gas emissions that are
not yet commercial, but which show promise of becoming so in
the future. In 1996, the GEF’s Scientiﬁ c and Technical Advisory
Panel (STAP) recommended high-temperature solar thermal power
technology as one of the renewable energy technologies that had
very signiﬁ cant cost reduction potential and potentially a high
demand from countries in the world’s solar belt. Concentrating
solar power (CSP) was viewed as the most cost-effective option
to convert solar radiation into electricity, and has been operation-
ally proven in California since the mid-1980s. Successively, four
solar thermal projects entered the GEF CSP portfolio with a grant
volume of $194.2 million in total managed by the World Bank:
(1) the Egypt Solar Thermal Hybrid Project in Kuraymat, Egypt; (2)
the India Solar Thermal Project in Mathania, India; (3) the Mexico
Hybrid Solar Thermal Power Plant Project in Agua Prieta, Mexico;
and (4) the Morocco Integrated Solar Combined Cycle Power
Project in Ain Beni Matar, Morocco.

Each project has encountered signiﬁ cant delays. Apart from an
unsuccessful attempt on behalf of the Indian project in 2003, no

requests for proposals (RfPs) have yet been issued from any of the
four projects until very recently. This suggests the difﬁ culties en-
countered have been predominantly associated with non-technical
issues, which are examined in this study.

Solar thermal electricity plants were introduced in California in the
1980s, but no new commercial-scale solar thermal electricity plant
has been commissioned in the last 12 years. This was primarily
due to insufﬁ cient ﬁ nancial incentives. Research and development
(R&D) has since led to improved solar ﬁ eld components and new
thermal storage concepts. In addition, operation and maintenance
experience has continued to emerge through the existing California
plants. However, past construction experience has been lost, and
there is a feeling outside the solar thermal industry that this is still
a relatively new technology with associated risk.

Over the last 12 months, the industry has been reinvigorated.
Several projects are presently under construction around the world.
Nonetheless, these projects have not reached the kind of critical
mass to suggest that the industry is now self-sustaining. In fact, the
industry is presently nascent, and as a result fragile. “Firm” projects
presently total less than 300 megawatts (MW), whereas several
thousand megawatts would be required for the industry to approach
commercial competitiveness. By comparison, wind energy—the
most successful renewable technology in recent times—is now
exceeding 60,000 MW of global installed capacity.

Solar thermal electricity offers a number of advantages when con-
sidered as part of a country or region’s energy generation options
mix. Solar energy is the world’s most abundant sustainable resource.
It represents an even larger resource because of the favorable
geography of many of the world’s developing countries. Solar
thermal, based on a hot ﬂ uid, can integrate well with conventional

xiv

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

thermodynamic cycles and power generation equipment, as well as
with advanced, emerging technology. It offers dispatchable power
when integrated with thermal storage, and thus good load matching
between solar insolation (exposure to sunlight) and the strong growth
(in many countries) in electrical demand during summer. The collec-
tor technology itself is constructed of predominantly conventional
materials—glass, steel, and concrete, and no fundamental scientiﬁ c
breakthroughs are required for the cost to continue to drop. There
is also the advantage that at a time when deep cuts to greenhouse
gas emissions are being called for, solar thermal can be installed in
large capacities, yet constructed of modular, repeated, well-known
components. However, this also raises perhaps the major barrier
for the technology at present. Depending on solar radiation levels,
the cost of electricity for a one-off plant is presently around 16 to
20 cents per kilowatt-hour (c/kWh), which might be acceptable
for some small applications (kilowatts or a few megawatts), but
difﬁ cult to justify for larger multi-MW installations.

This report determines that solar thermal electricity technology is
worthy of continued support. The beneﬁ ts of a successful industry,
particularly for developing countries, are signiﬁ cant. The technol-
ogy is not new, but stalled in its development path. All required
technology elements are essentially already in place. The major
outstanding issue is the need for cost reduction, and this study
concludes that there is no fundamental reason why the technology
could not follow a similar cost reduction curve to wind energy and
eventually be cost-competitive. However robust, long-term support
mechanisms will be required.

The major studies associated with cost reduction potential of
solar thermal electricity technology were reviewed in this study,
with some inconsistencies noted in a couple of them. The most
detailed and conservative of the recent studies predicts that com-
mercial competitiveness could be achieved with installations of
around 42 gigawatts (GW) (similar to wind capacity today), not
including allowance for any cost of carbon. This would represent
approximately 1 percent of the global installed power generation
capacity and require subsidies of about

€

12 billion. An allowance

for a carbon cost beginning at

€

7.50 per ton of carbon dioxide

(/t CO

) would decrease this capacity to 22 GW, and reduce

required subsidies to

€

2.5 billion. Cost reductions are expected to

come from a combination of plant scale-up (larger plants), increased
production volume, and technological innovation.

The ﬁ gure below plots the required CSP installation rate required
to achieve cost-effectiveness by 2020. It shows that the required
growth rates for solar thermal electricity to achieve cost-competitive-
ness are quite moderate compared to what wind, the fastest grow-
ing energy technology in the world, has achieved. The “probable
to ﬁ rm” represents a prediction based on an analysis of the status of
global CSP projects at present. The Global Market Initiative (GMI)
is a proposed industry target to reach 5,000 MW of installed CSP
by 2015. The growth from 2005 until 2009 is a prediction based
on those projects beyond the stage of formed consortia, and with
ﬁ nancial closure either in hand or imminent.

The table below lists known projects in progress (excluding WB/
GEF projects).

The major success factors required to create a sustainable solar
thermal electricity market are:

Targets

, initially speciﬁ c to CSP

Appropriate ﬁ nancial support

, again initially speciﬁ c to CSP,

including a mix of both investment and production credits

Supporting legislation and regulation

In all the above, it is important that two things are maintained within
the support framework:

5,000

10,000

15,000

20,000

25,000

30,000

Cumulative installed MW

35,000

40,000

45,000

50,000

GMI target to reach 5,000MW
by 2015
Probable to firm based on

present statu

1980

1985

1990

1995

2000

2005

2010

2015

2020

Global wind installed capacity

UMULATIVE

INSTALLED

CSP & W

IND

APACITY

XECUTIVE

UMMARY

Concept

formally

Consortia

ﬂ oated and pre-

formed—ready

Country and plant details

liminary assess-

to bid or RfP

Financial

Construction

Fully commissioned

(not including GEF projects)

ment conducted

ready to release

closure

commenced

and operating

Algeria 25 MW trough, ISCCS

2006/7 (Original

Possibly 2009

expectation

Sep

2005)

Arizona 1 MW trough ORC

(since April 2006)

Australia/Solar Heat and Power Pty Ltd,

(of ﬁ rst stage)

First stage under

38 MW Fresnel into coal-ﬁ red power station

commissioning

Australia/Solar Heat and Power Pty Ltd, 250

MW Fresnel, stand-alone with thermal storage

Australia 120 kW tower providing

2006

solar-reformed natural gas to a heat engine
China/Ordos 50 MW trough

India/Solar Heat and Power Pty Ltd,

5 MW, Fresnel

Iran 67 MW trough, ISCCS

Israel 100 MW trough

Italy/Empoli (2x 80 kW solar gas turbine

with waste-heat usage for air-conditioning)
Jordan 135 MW trough

(RfP 2001)

Nevada 64 MW trough

(February 2006)

Estimate March 2007

Portugal/Solar Heat and Power Pty Ltd, 5 MW

with potential to upgrade to 50 MW, linear Fresnel

Spain/ACS + SMAG, Andasol-1 50 MW trough

(June 2006)

Expected July 2006

Around late 2007

Spain/ACS + SMAG, Andasol-2

2006

Expected 2006

Around early 2008

50 MW trough
Spain/Abengoa, PS10 11 MW tower

Estimate

July

2006

(saturated steam)
Spain/SENER, Solar Tres 15 MW tower

(molten salt)

Spain/EHN+SolarGenix, 15 MW trough (HTF)

Spain/Iberdrola, 7x50 MW Trough (HTF)

Spain/HC, 2x50 MW Trough (HTF)

Spain/Abengoa, 2x 20 MW Tower, 1x 50 MW Trough

Spain/SMAG,50 MW ExtremaSol 1

Spain/5 MW trough with direct steam generation

(INDITEP)

Spain/Solar Heat and Power Pty Ltd, 5 MW, Fresnel

South Africa/100 MW Molten salt tower

NOWN

PROJECTS

PROGRESS

xvi

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Encouraging competition

. As costs drop over time, the level of

mandated support should be correspondingly reduced.

Providing certainty for investors. This technology requires not only
long-term price security, but also an assurance that rollout can
continue through subsequent plants if stated targets are met.

The following table shows the present status of the existing GEF
portfolio.

CSP technology does not currently contend with signiﬁ cant threats
from other zero emission technologies. In the case of other renew-
ables, their present contribution to global electricity supply is small,
and there is room for new technologies to emerge. In particular,
renewable resources are, by their very nature, geographically
diverse. This tends to support rather than diminish the principle of
encouraging a mix of energy options. Even in a particular region,

different technologies tend to ﬁ t different parts of the electricity
market. For example, photovoltaics can act ideally as distributed
generation, whereas CSP ﬁ ts centralized generation. Of the dis-
patchable non-hydro renewables, geothermal and bioenergy are
quite site-speciﬁ c, and thus resource-constrained, in the same way
that CSP is resource-constrained in some climates.

We can see three options for the World Bank at this point. They
are:

1. Pull out of CSP altogether and perhaps support a different, zero

GHG technology path under OP 7. Given the delays to date,
and quite likely some more hurdles to come, this would appear
an attractive option. However, the goals of OP 7 are worthy,
and it is important that a visible organization such as the World
Bank takes the lead in such issues. Of the zero GHG technolo-
gies that are technically feasible yet not yet commercial, CSP

Country/project

Status of project

Project structure

Expected schedule

India, 140 MW ISCCS incl. 35 MW

WB waited on letter of commitment from

Single EPC with O&M (5yrs). PPA with RVPN. Eventually, the project could not be timely

solar trough, site approximately

GOI, after which the already drafted RfP

Project owner RREC.

implemented due to inappropriate design

2,240 kWh/m

/year DNI.

(revised) could be released.

and location.

Egypt/Kuraymat, 151 MW ISCCS incl.

Financial closure agreed. Solar thermal part

Two EPC contracts. The solar island will be

Delays due to the splitting of the packages to

25 MW solar.

and CC at bidding stage.

an EPC with O&M contract; the CC island

be funded by GEF, NREA, and JBIC. Contract

will be an EPC contract with local O&M to

signature expected for early 2007.

be bid separately ﬁ nanced by NREA.

Construction might begin late 2007.

Possible begin of operation late 2009.

Mexico/El Fresnal near Agua Prieta,

November/December 2005: Approval by

The ﬁ nal owner of the plant will be CFE.

At this stage, bidding is expected for 2006,

Sonora State (site decision in March

the Treasury Ministry. The hybrid plant

They will undertake to provide the O&M.

construction to begin 2007, operation 2009.

2005, plant Agua Prieta II), originally

has been included in the PEF (Programa

(Previously, unsuccessful project

285 MW ISCCS but ﬁ nally increase CC to

de Egresos de la Federación) and

development under IPP scheme.)

560 MWe; Solar trough ﬁ eld 25–40 MW; approved by Congress.
Excellent solar site conditions (exact solar

Acceptance of the doubling of fossil capacity

data not available).

by the WB task team after technical

economic assessment by Sargent and Lundy

(May 2006) and a consultancy by

Spencer

Management.

Morocco/Ain Beni Mathar 240 MW ISCCS, EPC with O&M (5 years). Option exists to

Owner of plant will be ONE. Total cost

EPC with O&M contract for the project

including 30 MW trough. Expected

renew O&M contract after 5 years. Bids

expected approx

€

213M, including connection expected to be signed by the end of 2006,

production from ISCCS 1,590 GWh/year, received May 2006. Ongoing evaluation

to infrastructure.

€

43M from GEF, and

€

34M and at the latest in January 2007.

of which approx 55 GWh/year solar (3.5

process.

from ONE. Balance of

€

136.45M from

Expected start of operation of the plant is

percent solar contribution).

African Development Bank as soft loan.

mid 2009 (construction time 30 months).

RESENT STATUS OF THE EXISTING

GEF

PORTFOLIO

xvii

XECUTIVE

UMMARY

is a lead candidate. If the goals of OP 7 are to be pursued, as
they should, other technology paths may prove more frustrating,
and ultimately less rewarding, than CSP.

2. Provide minimalist support to the present portfolio and “wait and

see.” The CSP industry, beginning again in earnest, is presently
fragile. Against the thousands of megawatts needed for CSP
to reach cost-effectiveness, the 120 MW of WB/GEF projects
will not, of themselves, lead to any signiﬁ cant reduction in the
underlying cost of the technology. Wind technology grew in the
OECD countries before it was cheap enough to be used on a
large scale in the developing countries. The same could be done
for CSP. This would be an easy solution, but with the industry
on a cusp, such a decision could be responsible for tipping the
industry toward a demise. Though 120 MW is small against
thousands of megawatts, it is quite large against the present
300 MW or so of possible-to-ﬁ rm projects in OECD countries.
These four projects are instrumental for the following reasons:

They are important to the global CSP industry as they

constitute a signiﬁ cant percentage of planned projects at
present, especially if three or four proceed. Inevitably, some
will not proceed, so the more that are planned, the more
robust will be the early implementation phase. They provide
momentum and continuum to the global industry, which in
turn will provide beneﬁ ts to the developing countries when
future projects are developed.

The developing countries with good exposure to sunlight

(insolation) could play a more signiﬁ cant role in CSP than in
wind. We have not conducted a quantitative analysis, but
there is at least anecdotal evidence to suggest that direct
beam solar radiation is a larger ratio than wind when com-
pared to the resources of the OECD countries.

They will reveal at an early stage any major impediments to

successive plants. Some of these have already been revealed
and are discussed in this report.

3. Provide strong support to the present portfolio, embark on parallel

paths toward supporting more projects, and work pro-actively
to promote the technology globally, with the idea that global
progress beneﬁ ts the World Bank portfolio.

This study suggests a combination of 2 and 3 above as the rec-
ommended path. This essentially allows a prudent, active support
of the technology, but with appropriate exit strategies if various
milestones are not met. We do not advocate that the developing
countries take a lead share of the risk in developing the CSP market.
But the strong solar resource in many of the developing countries,
and the relative simplicity of CSP technology, suggests developing
countries should take a more proactive role than other emerging
energy technologies. However, we do advocate a role in parallel
with present global developments.

A strategy ﬁ rst requires a vision. The following is proposed—

“CSP

should be supported to encourage a rapid growth phase to the point
that it plays a key role in the electricity supply mix of developing
countries where there is a good solar resource.”

The table below recommends a phased strategy for the World Bank
to pursue, with inherent exit paths. The four phases are explained
in the CSP cost reduction curve below.

The key issues and recommendations are:

Make the request for proposal (RfP) speciﬁ cations concerning the

solar ﬁ eld more ﬂ exible. They should allow bids from alternative
collector types and encourage storage.

We would strongly recommend that the bid not specify a

particular solar ﬁ eld capacity, but rather a minimum threshold,
with the capacity offered an assessment criteria. The resulting
competition will ensure the maximum capacity possible is offered
for the ﬁ nance available.

The issue of integrated solar combined cycle systems (ISCCS)

versus stand-alone solar is not critical from a technical basis.
Ultimately, larger solar contributions are desirable, but in these
early days, it is important for operation & maintenance (O&M)
experience to be gained in these countries, and a 200,000
m

ﬁ eld will yield similar levels of O&M expertise whether it is

attached to a stand-alone Rankine cycle or to a Rankine cycle
as part of a combined cycle plant. There are likely to be some
early “teething’ problems with ISCCS, simply because it hasn’t
been done before, but should present no problem with good
engineering.

xviii

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

The single engineer, procure, construct (EPC) approach pre-

sented some issues when these projects were ﬁ rst mooted, but
with strong consortia now in place as a result of activities in
other countries such as Spain, the handling of liabilities within
the consortium should be possible.

The two-EPC approach in Egypt—that is, a solar ﬁ eld EPC

contract and a combined-cycle EPC contract—is not new in
the power industry. Many power stations are constructed with
multiple parallel contracts. However, it will tend to limit the ﬂ ex-
ibility of the technologies that can be offered. The liability for

Key Success
Criteria (KSC)

Comment

Importance

Response to RfPs

Critical that a good number of bids are received from robust consortia.

Crucial

Contracts signed for at least two projects Having less than two projects proceed to contract signature would represent a relative failure

of the portfolio. More than two would indicate a healthy CSP portfolio and a good reason to continue.

High

Continuing CSP project activity in other

Though the WB has no control over projects in other countries, it would be prudent to maintain

Medium to high (unless global

countries and ﬁ rst plant installations

a watching brief to ensure the WB/GEF portfolio is not advancing in isolation. This is not so crucial to

CSP activity ceases)

the existing portfolio, but failure of this criteria would prevent movement to Phase 2.

Reallocation of balance of GEF funds

If one or two of the four projects are not successful (based on missing key deadlines without due

Medium

cause), and the above three KSCs have been met, it is recommended that the balance of funds be

reallocated by a competitive call for proposals. It is likely that bidding countries—such as Algeria,

Iran, Jordan, and China—would already have signiﬁ cant progress on their projects.

Continuing emergence of CSP

CSP market development is a long-term process. It will be on the order of 1 year before construction

High

projects in other countries

commences on the ﬁ rst WB/GEF project, a further 2 years until operation commences—realistically

a minimum of 4 years from now until there is a good level of operational data. This affords a good

opportunity for the WB to assess CSP progress internationally.

Successful operational performance

By this time, some good operational data will be emerging from the GEF portfolio, as well as a

High

of Phase 1 WB/GEF projects

number of plants in other countries.

Evidence of legislated ﬁ nancial

Many countries have renewable energy policies and targets, but only ﬁ nancial incentives that have

Medium to high

support mechanisms for CSP

the backing of legislation are useful for bankable documentation. Given that in Phase 2 there is still

a considerable ﬁ nancial gap to be ﬁ lled, it is desirable that target countries are showing commitment

to a domestic CSP industry.

New portfolio of WB projects

If the above KSCs have been satisfactorily met, a new competitive call for proposals should be

High

successfully commenced

launched. The timing will be dependent on the above KSCs.

Emergence of key countries/regions

By this time, key countries or regions will have begun to emerge. It is important that countries are

High

taking the initiative to the World Bank rather than what has to this point tended to be the other

way round. If this interest is not shown, it would be a moot point as to whether the WB should

be pursuing them.

Contribute to development of local

As more plants are destined for developing countries, local solar component manufacturing expertise

Medium to high

manufacturing and operating experience should emerge. It is not, for example, a very expensive matter to set up a tube manufacturing facility.

In addition, if a region such as the Mediterranean emerges, a Mediterranean team (cross-country) of

expertise in construction could make sense.

WB/GEF part of a global CSP fund

If the CSP market has reached this stage, a huge mobilization of funds will be in progress. A global

Medium to high

CSP fund would be an attractive means of helping to leverage WB/GEF funds. The GEF contributions

could be partitioned within the fund to remain with developing countries.

Contribute to the sustainable

Economic (employment, manufacturing) and environmental (international recognition for spurring a

Medium to high

development of a country/region

new renewable technology) beneﬁ ts should have begun to emerge.

Phase 1

Phases 3 & 4

Phase 2

HASED STRATEGY FOR THE

ORLD

ANK TO PURSUE

1.1 O

PERATIONAL

ROGRAMS

THE

LOBAL

NVIRONMENT

ACILITY

Mitigating climate change and achieving stabilization of atmo-
spheric concentrations of greenhouse gases—the objective of the
United Nations Convention on Climate Change (UNFCCC)—will
require deep reductions in global emissions of energy-related
carbon dioxide emissions. Developing and deploying new, low-
carbon energy technologies will thus be needed, in particular
in developing countries where the largest growth in emissions is
expected to occur.

The Global Environment Facility (GEF) has operational programs
that promote the deployment of renewable energy (Operational
Program 6, or OP 6) and energy efﬁ ciency (Operational Program
5, or OP 5) by assisting in the removal of barriers to the use of
energy efﬁ cient technologies and commercial or near-commercial
renewable energy technologies. The objective of these programs is
to lay the foundation for increased public and private investments in
renewable energy and energy efﬁ cient technologies (STAP, 2003;
Mariyappan and Anderson, 2001). An operational program is a
“conceptual planning framework for the design, implementation,
and coordination of a set of projects to achieve a global environ-
ment (that) organizes the development of country-driven projects
and ensures systematic coordination between the implementing
agencies and other actors.”

Operational Program 7 (OP 7) is devoted to “reducing the long-
term costs of low greenhouse gas-emitting energy technologies.”
Its objective is to reduce greenhouse gas emissions by accelerat-
ing technological development and increasing the market share
of low greenhouse gas-emitting technologies that have not yet
become commercial, but which show promise of becoming so in

the future. To achieve this objective, GEF promotes technologies
through ﬁ nancing demonstration projects with a view to bringing
down energy costs to commercially competitive levels, through
technological learning and economies of scale.

Under Operational Programs 5 and 6, the GEF funds the incre-
mental cost of barrier removal; under Operational Program 7, it
funds the incremental cost of the technology.

1.2 CSP

FUNDING

WITHIN

PERATIONAL

ROGRAM

The GEF’s Scientiﬁ c and Technical Advisory Panel (STAP) believes
that OP 7 should be an important element in GEF operations. In
particular, two technologies—grid-connected photovoltaics and
solar thermal technologies—are thought to have comparative
cost advantages because of high solar insolation in developing
countries.

Solar thermal technology has been demonstrated in the state of
California over the past 15 to 20 years. However, the integration
of solar thermal technology with a combined cycle gas turbine
(ISCCS)—the choice to date for a hybrid system in the WB/GEF
solar thermal portfolio—has not been demonstrated. Such integra-
tion has advantages and disadvantages, which are discussed more
fully in Chapters 2 and 3.

In 1996, GEF’s Scientiﬁ c and Technical Advisory Panel (STAP)
recommended high temperature solar thermal power technology
as one of the renewable energy technologies that had very sig-
niﬁ cant cost reduction potential and potentially a high demand
from countries in the world’s solar belt. Concentrating solar power

E T T I N G

T H E

O N T E X T

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

(CSP) was considered the most cost-effective option of converting
solar radiation into electricity; it had been operationally proven
in California since the mid-1980s. However, no follow-up invest-
ments were made when California terminated a favorable tax
policy, and the industrial development slowed down consider-
ably. Any activity that did continue consisted mostly of research
and development programs in Europe and the United States and
considerable efforts to revive the technology on the part of the
solar industry.

The Mathania solar thermal power plant in India was the ﬁ rst to
enter GEF’s Operational Program 7 in 1996 as part of a larger
strategy. In this larger strategy, the proposed project in India was
expected to be the ﬁ rst in a series of multi-country investments that
together would facilitate the commercialization of solar thermal
technology. Similar projects in Mexico, Morocco, and the United
States were in advanced stages of preparation. Additional solar
thermal projects were under consideration in Egypt, Tunisia, Israel,
Jordan, Spain, Italy, and Greece (Crete). Other countries in the high
insolation regions of Africa had also shown interest. While not all
of these projects were expected to materialize in the near term, up
to four projects, including the initiative in India, were anticipated to
be developed by 2001. The combined effects of these projects, it
had been concluded, would be to accelerate the process of cost
reduction, demonstrate the technical performance of the technology
in a wider range of climate and market conditions, and create a
sustainable market for parabolic trough solar thermal technology.
Subsequently, the GEF approved two more projects for OP 7,
namely those under development in Mexico and Morocco, with a
fourth project in Egypt. Presently, the WB/GEF solar thermal portfo-
lio consists of projects in four countries—Egypt, Morocco, India, and
Mexico—with a total solar capacity of approximately 120 MW
and a total WB/GEF commitment of around $200 million. It is
expected that these projects would help benchmark the costs of
technology and contribute to an understanding of the institutional
and regulatory requirements for this and other advanced renewable
energy technologies in developing countries.

Apart from these four projects, GEF-supported project preparations
exist in Brazil and South Africa. South Africa’s utility ESCOM has
undertaken a feasibility study for a 100 MW solar tower. Other
countries have shown interest in receiving GEF support for similar
plants, including Algeria, Iran, Jordan, and China.

To date, the number of OP 7 projects supported has been small
(not just CSP) and the achievements limited. OP 7 has proven to
be a difﬁ cult portfolio to develop.

1.3 L

ESSONS

FROM

PAST

STUDIES

THE

GEF

SOLAR

THERMAL

PORTFOLIO

All four solar thermal projects in Mexico, Morocco, Egypt, and India
have experienced implementation problems. These four projects
were reviewed in 2001 by Mariyappan and Andersen. Apart from
highlighting common implementation problems (power sector restruc-
turing, general difﬁ culties of IPP projects in emerging markets) as a
reason for delay, the report alluded to three OP 7 speciﬁ c issues:

i. The contradiction between the drivers of economic develop-

ment in developing countries, i.e. poverty alleviation, and
those of the developed world, i.e. environmental concerns,
generates a mismatch of global expectations and local willing-
ness-to-support these projects.

ii. There has been insufﬁ cient dialogue between GEF and the CSP

industry during project design, adoption of the CSP strategy,
and project implementation.

iii. GEF has remained the only signiﬁ cant funding source

for these

CSP plants.

These issues continue to be at the center of the strategic discussion
on CSP.

In May 2004, GEF published a status report on the solar thermal
portfolio (World Bank, 2004) and argued that the portfolio offers
a variety of lessons related to project preparation, co-ﬁ nancing,
procurement, and progress toward cost reduction.

Project preparation:

Initially the four projects were prepared

as independent power projects (IPPs), but have since been

We note that international funding organizations such as KfW, JBIC, and

ADB have offered soft loans, and that national bodies such as the Govern-
ment of India or ONE in Morocco have offered smaller grants.

HAPTER

1 – S

ETTING

THE

ONTEXT

changed and are now being developed as public sector power
projects. This lack of success of the IPP approach appears to
be not only the result of risk aversion to integrated solar thermal
and combined cycle technology in the private sector, but also a
general global decline in IPP interest in developing countries.

Co-ﬁ nancing:

Securing full co-ﬁ nancing is a key feature, as the

four projects are now being developed as public sector power
plants.

Procurement:

There are a limited number of global consulting

ﬁ rms and suppliers in the solar thermal industry. In the WB/GEF
projects, the solar contribution of the integrated solar combined
cycle technology is in the 5 percent range, and consequently
the lead for these hybrid projects would be taken by mainstream
power generation ﬁ rms. Risk perception by the bidders and risk
reduction strategies would be a major barrier to overcome.

Progress toward cost reduction: Experience to date has certainly
helped identify the issues in preparing and structuring solar
thermal projects in developing countries, but progress toward
cost-reduction can only be evaluated with a fair degree of
conﬁ dence after contracts have been negotiated and awarded
to selected bidders, and particularly after operation has com-
menced.

Further lessons learned have been put forward by Cédric Philibert
(2004) of the International Energy Agency:

Lesson 1:

International collaboration may help, but domestic

policy decisions remain decisive.

Lessons 2&3:

In technology transfer, non-ﬁ nancial barriers must

not be underestimated; developing new, large-scale technolo-
gies in developing countries only may not work.

Lesson 4: Sharing the necessary “learning investments” might
be a good idea.

An interpretation of these four lessons, as well as those lessons
presented earlier in this section, is that technology transfer in devel-
oped countries has its own set of challenges. However, technology
transfer into developing countries is very likely to face even further

challenges, including a lack of appropriate policy, legislation,
institutional structures, human resources, (venture) capital resources,
and industrial partners willing to consider new technologies. In
general, economic and institutional barriers rather than technol-
ogy availability are more apt to be the cause of failure to transfer
technology (see the brief review of deﬁ nitions related to technology
transfer in Box 1).

1.4 A

IMS

THE

TUDY

The main objective of this assignment was to assess the strategy
being followed by the Bank/GEF for solar thermal power technol-
ogy in light of:

1. The current state of technology, costs, and market develop-

ment;

2. The difﬁ culties experienced by the GEF co-ﬁ nanced projects, as-

sessing the three primary risks facing the Bank/GEF portfolio:

a. Limited industry response,

b. Uncertainty of meeting the cost and performance targets,

and

c. Uncertainty of sustainability and replicability arising from the

absence of long-term country or international commitments;

3. The original objectives of the portfolio.

1.5 S

COPE

ORK

According to the aims of the investigation, the following three tasks
were carried out and are presented in the following chapters:

Task 1—Summary of Solar Thermal Technology Growth:

Brief

summary of the development of the CSP technology thus far (in-
cluding the current international experience in the implementation
of solar thermal power projects), the technological improvements
and cost forecast scenarios (results described in Chapter 2 and
Annexes 1–3).

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

1: W

HAT

TECHNOLOGY

TRANSFER

The term “technology transfer” tends to mean different things to different entities, generally giving ﬂ exibility to individuals and organiza-
tions within their practices. However, most broad deﬁ nitions include (Lawrence-Pﬂ eeger et al, 2003):

technology—as an idea, practice or object resulting from research, as well as an embodiment of the technology;

the movement of technology into a setting where it can improve a product or process in some way; and

an entire process involving facilitators at different steps, including those who create the technology, those who incorporate the technol-

ogy into a useful product, service, tool or practice, and those who further develop the technology for commercialization and use.

In the context of the above deﬁ nition, the WB/GEF can be viewed as a facilitator in the transfer of technology.

The United Nations Environmental Programme’s (UNEP) Intergovernmental Panel on Climate Change (IPCC, 2000) deﬁ nes the term “tech-
nology transfer” as a broad set of processes covering the ﬂ ows of know-how, experience, and equipment for mitigating and adapting to
climate change among different stakeholders such as governments, private sector entities, ﬁ nancial institutions, and NGOs. The broad
and inclusive term “transfer” encompasses diffusion of technologies and technological cooperation across and within countries. It covers
technology transfer processes among developed countries, developing countries, and countries with economies in transition. It comprises
the process of learning to understand, utilize, and replicate the technology, including the capacity to choose and adapt to local conditions
and integrate it with indigenous technologies.

The transfer of technology may be limited because of existing barriers, barriers that may arise at each and any stage of the process of
technology transfer. These barriers vary according to the speciﬁ c context, for example from sector to sector, and can manifest themselves
differently in developed countries, developing countries, and countries with economies in transition.

The U.S. President’s Committee of Advisors on Science and Technology (PCAST, 2003) investigated the processes associated with the
transfer of technologies. Based on their investigations, a diagram describing this process of technology transfer via a value chain has
been developed (Figure 1).

The PCAST depiction of the technology
transfer process highlights the gaps or bar-
riers that need to be overcome before a
technology is deployed successfully on a
widespread scale. Included in the PCAST
value chain technology transfer process are
the potential sources of funding that can be
accessed to cover the various stages of the
value chain. It should be noted that GEF fund-
ing is viewed as a possible source of funds
from demonstration, through buy-down, and
into the widespread deployment of a technol-
ogy. The value chain process as depicted in
Figure 1 can readily be broadened to include
the developing countries and countries with
economies in transition. Also worthy of note
is PCAST’s view of the role that GEF could
play in technology transfer.

Value Chain

Proposals for “filling the gaps”

Lab/Bench scale

DOE/EPA

DSF (GEF or in country)

CETO (via GEF)

USAID/DOE/EPA

Trade Agencie

GEF

MDBs

Pilots

Small

# of units deployed

Medium

Commercial scale

MW/plan

$/units

Source:

PCAST (2003).

Figure 1: “Gap” identiﬁ cation in technology transfer

his chapter describes ongoing CSP developments world-
wide; the technological paths of concentrating solar
thermal power plants; and projected cost reductions for
CSP technology due to recent technology improvements,

scale effects (larger plant size), and volume effects (accumulated
capacity). This provides the necessary background for the evalu-
ation of the WB/GEF CSP portfolio and the future development
of CSP.

2.1 O

NGOING

CSP

MARKET

DEVELOPMENT

WORLDWIDE

The solar electricity generation systems (SEGS) plants of Southern
California are well-known for their many successes, not the least of
which was their ability to be constructed relatively quickly and to
meet the constraints associated with various ﬁ nancial incentives. It
is also well-known that no signiﬁ cant commercial plants have been
built since the last SEGS plant in 1990.

Since that time, developers and researchers have been busy im-
proving the various components of the technology, not only in solar
research institutions but also importantly in the ﬁ eld, making use
of the SEGS plants themselves. In fact, the SEGS V ﬁ eld was used
for the purpose of testing an improved collector for the Andasol
project in Spain (SKALET loop) under real conditions. Operation
and maintenance costs have dropped through improved compo-
nents and practices. Importantly, these improvements have been
measured in the ﬁ eld, not just in desktop studies. The nine SEGS
plants were constructed with an investment cost of $1.2 billion,
all private capital. More than 13 TWh of solar electricity were
produced from these plants by 2005, with electricity sales of over
$2 billion. These projects were successful as a result of favorable

Federal Energy Regulatory Commission (FERC) regulations, tax
credits, and attractive time-of-use tariffs (14 c/kWh on average
and up to 36 c/kWh during summer peak).

The sudden loss of all of the favorable conditions in the early 1990s
left no incentives in either the OECD or developing countries. A
shortcoming of that period is that no legacy or supporting framework
was left behind despite all the investment activity. This meant that
the only CSP players left to further the CSP technology after the
SEGS plants had been built were the component manufacturers
themselves. The SEGS operating companies were mainly concerned
with operating what was there, not expansion.

The power manufacturing industry was facing stiff competition at
the time, so margins were very tight, with no room to support the
development of CSP, especially when there were no incentives in
place. Deregulation was occurring in the power industry all over
the world, and the resulting competition, along with only a ﬂ edg-
ling green power market at the time, meant that utilities could no
longer afford to support projects that promised long-term strategic
value but uncompetitive short-term returns. Wind power began to
grow at this time, as units could be installed in small manageable
capacities with a limited ﬁ nancial risk.

Up until a couple of years ago—as interest in Spain, Arizona, and
the GEF projects emerged—there were about two to three times
more CSP researchers than industry personnel. This strong R&D inter-
est has kept the technology progressing during the hiatus period;
however, the industry is likely to stagnate unless the technological
advances that have emerged since 1990 are put into practice.

The industry also has developed a much better understanding of
real-world project ﬁ nance, as well as other project factors such as

O N C E N T R A T I N G

O L A R

H E R M A L

O W E R

(CSP) D

E V E L O P M E N T

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Concept

formally

Consortia

ﬂ oated and pre-

formed—ready

Country and plant details

liminary assess-

to bid or RfP

Financial

Construction

Fully commissioned

(not including GEF projects)

ment conducted

ready to release

closure

commenced

and operating

Algeria 25 MW trough, ISCCS

2006/7 (Original

Possibly 2009

expectation

Sep

2005)

Arizona 1 MW trough ORC

(since April 2006)

Australia/Solar Heat and Power Pty Ltd,

(of ﬁ rst stage)

First stage under

38 MW Fresnel into coal-ﬁ red power station

commissioning

Australia/Solar Heat and Power Pty Ltd, 250

MW Fresnel, stand-alone with thermal storage

Australia 120 kW tower providing

2006

solar-reformed natural gas to a heat engine
China/Ordos 50 MW trough

India/Solar Heat and Power Pty Ltd,

5 MW, Fresnel

Iran 67 MW trough, ISCCS

Israel 100 MW trough

Italy/Empoli (2x 80 kW solar gas turbine

with waste-heat usage for air-conditioning)
Jordan 135 MW trough

(RfP 2001)

Nevada 64 MW trough

(February 2006)

Estimate March 2007

Portugal/Solar Heat and Power Pty Ltd, 5 MW

with potential to upgrade to 50 MW, linear Fresnel

Spain/ACS + SMAG, Andasol-1 50 MW trough

(June 2006)

Expected July 2006

Around late 2007

Spain/ACS + SMAG, Andasol-2

2006

Expected 2006

Around early 2008

50 MW trough
Spain/Abengoa, PS10 11 MW tower

Estimate

July

2006

(saturated steam)
Spain/SENER, Solar Tres 15 MW tower

(molten salt)

Spain/EHN+SolarGenix, 15 MW trough (HTF)

Spain/Iberdrola, 7x50 MW Trough (HTF)

Spain/HC, 2x50 MW Trough (HTF)

Spain/Abengoa, 2x 20 MW Tower, 1x 50 MW Trough

Spain/SMAG,50 MW ExtremaSol 1

Spain/5 MW trough with direct steam generation

(INDITEP)

Spain/Solar Heat and Power Pty Ltd, 5 MW, Fresnel

South Africa/100 MW Molten salt tower

ABLE

1. O

VERVIEW

AND

STATUS

CSP

PROJECTS

WORLDWIDE

(

EXCLUDING

WB/GEF

PROJECTS

)

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

regulatory regimes, permitting requirements, performance warran-
ties, risk factors, liabilities, and tender documentation.

There are today signiﬁ cant bankable projects emerging around the
world (see Table 1).

The following plots can be established from Table 1. The projects
considered „possible to ﬁ rm“ are those projects that are beyond
the „consortia formed, ready to bid“ stage, plus the GEF projects.
Beyond those known projects, the best that can be done is predic-
tive. Perhaps the most advanced long-term program presently in
place that aims to progress CSP technology is the Global Market
Initiative (GMI) (see Chapter 6, section 6.3).

The objective of the GMI is to facilitate and expedite the building
of 5,000 MWe of CSP worldwide over the next 10 years. This
initiative represents the world’s largest, coordinated action in his-
tory for the deployment of solar electricity. It aims to do this by,
among other things, promoting the introduction of incentives and
schemes in participating countries to provide the necessary frame-
work for projects to proceed. This projection was also integrated
into the plots, assuming linear growth in installed capacities up
to 2015.

Table 1 shows that over 700 MW of solar thermal projects are
under differing degrees of development in Spain. This is a direct
result of the new Royal Decree 436/2004, which provides the
following:

Grants same tariffs for PV and CSP from 100 kW to

50 MW.

A premium on top of the electricity pool price of

€

0.18/kWh,

which roughly equates to a total price of

€

0.21/kWh.

Bankable with 25 year guarantee.

Annual adaptation to electricity price escalation.

12 to 15 percent natural gas backup allowed to grant dispatch-

ability and ﬁ rm capacity.

After implementation of ﬁ rst 200 MW, tariff will be revised for

subsequent plants to achieve cost reduction.

Algeria has implemented a feed-in tariff that provides a premium of
up to 200 percent (based on a scale linked to solar contribution)
for CSP plants backed by natural gas. For example, if the solar

IGURE

3: S

HORT

TERM

AND

POSSIBLE

MEDIUM

LONG

TERM

DEVELOPMENT

CSP

TECHNOLOGY

WORLDWIDE

(

CUMULATIVE

INSTALLED

)

Source:

Authors.

Cumulative installed MW

GMI prediction to reach 5,000 MW by 2015
Probable to firm based on present status

1980

1985

1990

1995

2000

2005

2010

2015

2020

Cumulative Installed CSP

2,000

4,000

6,000

8,000

10,000

12,000

IGURE

2: S

HORT

TERM

AND

POSSIBLE

MEDIUM

LONG

TERM

DEVELOPMENT

CSP

TECHNOLOGY

WORLDWIDE

(

YEARLY

INSTALLED

)

Source:

Authors.

MW installed each year

MW installed annually

Probable to firm based on present status
GMI prediction to reach 5,000 MW by 2015

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

GEF projects

200

400

600

800

1,000

1,200

1,400

1,600

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

share is greater than 25 percent, the price that would be received
for all electricity generated by the plant would be three times the
market price (see Algeria country sheet in Annex 1 for more detail).
The introduction of this feed-in law has led to the development of
the Algeria CSP project.

In the United States, the DoE has a goal to deploy signiﬁ cant CSP
plants in the Southwest. This is known as the 1,000 MW CSP
Southwest Initiative. In June 2004, the Western Governors’ As-
sociation at their annual meeting in Santa Fe resolved to diversify
their energy resources by developing 30 GW of clean energy in
the West, including a declaration to “establish a stakeholder work-
ing group to develop options for consideration by the governors
in furtherance of the 1,000 MW Initiative. The 64 MW Nevada
plant is already under construction and the 1 MW Arizona ORC
is producing electricity since April 2006.

The main conclusion from this project activity is that the WB/GEF
portfolio is not evolving in isolation, but is part of increasingly inter-
connected developments in both OECD and developing countries
that might trigger the take-off of the solar thermal technology. This
nascent global solar thermal power market is evolving through
programs and legal frameworks. The quick response of project
developers to these market signals makes it clear the technology
is ready to proceed.

2.2 T

ECHNOLOGICAL

PATHS

ONCENTRATING

OLAR

HERMAL

OWER

PLANTS

Like conventional power plants, a solar thermal power plant consists
of a heat generating unit and a unit that converts heat into electricity.
Whereas in conventional power plants the heat is being provided
by burning fossil fuels or by nuclear decomposition processes, a
solar thermal power plant uses large mirror ﬁ elds to concentrate
the sunlight onto a focal line (e.g. parabolic trough collectors) or
a focal point (e.g. solar tower). Annex 2 provides an overview of
solar collector technologies.

In this section, the technological developments and improvements
will be described for the different collector technologies, and
different power cycle integration variants will be presented and
discussed.

2.2.1 S

OLAR

COLLECTOR

IMPROVEMENTS

A number of important studies have been carried out recently that de-
scribe and evaluate the technical improvements of collector concepts
and components, including Sargent and Lundy (2003), DLR and
others (ECOSTAR, 2005), and Kearney and Price (forthcoming).

These studies have examined the cost reduction potential for solar
thermal power plants that will result from technical innovations.
Improvements of component and system efﬁ ciencies of CSP tech-
nologies and their potential cost reduction effect have been taken
into consideration. Whereas the ECOSTAR study was carried out
by European R&D institutions with the objective to set guidelines
for public R&D funding for CSP technology and to streamline R&D
efforts in the European countries, the Sargent and Lundy study has
a more U.S.-like perspective and is primarily aimed at predicting
future cost reduction of solar thermal power technology based on an
engineering approach (as opposed to learning curve approaches;
see Chapter 2, section 2.3.1). Kearney and Price have conducted
a more detailed and speciﬁ c analysis of the particular components
contributing to a solar ﬁ eld.

The Sargent and Lundy study analyzes the parabolic trough and
solar tower technologies, and bases its cost reduction forecasts on
the existing cost and performance experience from the nine Cali-
fornia trough plants (SEGS) and the two pilot tower plants (Solar
One, Solar Two). In a long-term perspective, the study predicts
lower costs for the tower technology.

The ECOSTAR study analyzes trough, tower, Fresnel, and dish tech-
nologies in different conﬁ gurations. The objective of the ECOSTAR
study is not to compare different technologies. It believes that market
forces will decide if one technology will rule out other technolo-
gies. The objective of the study was to elaborate which technical
improvements (materials, components, system integration) will lead
to which cost reduction effect for each technological path.

The Sargent and Lundy study distinguishes the development goals
according to technical improvements that have already been
realized over the last decade due to continuous R&D in CSP,
and future technical development forecasts until 2020. The main
technical improvements as seen by Sargent and Lundy are given
in Table 3.

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

ABLE

2: ECOSTAR

STUDY

–

COST

REDUCTION

POTENTIALS

DUE

TECHNICAL

IMPROVEMENTS

Parabolic Trough

Tower

Linear

Fresnel

Dish

Innovative structures

Larger heliostats above 200 m

Linear Fresnel collector ﬁ eld

Mass production for 50 MW

(up to 28 percent)

(up to 12 percent)

(up to 3 percent)

(38 percent)

Front surface mirrors

Larger module size

Thermal storage

Brayton instead of Stirling cycle

(up to 19 percent)

(up to 15 percent)

(up to 12 percent)

Advanced storage

Ganged heliostats

Reduced pressure losses

Improved availability and O&M

(up to 18 percent)

(up to 8 percent)

(up to 7 percent)

(up to 11 percent)

Reduced pressure losses

Advanced storage

Dust repellent mirrors

Increased unit size

(up to 16 percent)

(up to 10 percent)

(up to 7 percent)

(up to 9 percent)

Dust repellent mirrors

Increased ﬂ uid temperature

Reduced engine costs

(up to 16 percent)

(up to 6 percent)

Increased solar ﬁ eld outlet temperature

Increased engine efﬁ ciency

(up to 15 percent)

(up to 6 percent)

with thermal oil as heat transfer ﬂ uid and direct steam generation (DSG)

reference: Trough with DSG

parabolic dish concentrators in combination with a Stirling engine today realize the highest LEC compared to the other collector concepts.

Source:

Authors based on DLR and others (2005).

ABLE

3: S

ARGENT

AND

UNDY

—

TECHNICAL

IMPROVEMENTS

FOR

THE

TROUGH

AND

THE

TOWER

TECHNOLOGY

Parabolic Trough

Tower

Receiver coating (solar absorptance, infrared/heat irradiance)

Increasing heliostat size (up to 148 m

)

Receiver glass envelope transmittance

New primary mirror technology with thin glass or thin ﬁ lms

New front surface reﬂ ectors

Cost-effective support structure

Receiver reliability

Self-cleaning glass

Reduced parasitics (SF pumping etc.)

Drives for mirror tracking

Heat storage (up to 12 hrs)

Solar ﬂ ux monitoring in the receiver

Solar ﬁ eld support structure (main solar ﬁ eld cost driver)

Improved receiver design

Higher operating temperature (up to 500°C)

Reduced start-up time and improved operation strategies

Self-cleaning glass

Improved heat transfer ﬂ uid and storage

Larger plant sizes

Reduced operation and maintenance costs

with thermal oil as heat transfer ﬂ uid. No direct steam generation (DSG) considered

only molten salt technology considered.

Source:

Authors based on Sargent and Lundy (2003).

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

The drawback of cost forecasts based on the assessment of future
technological innovations and improvements is the fact that only
today’s technological know-how can be considered. New tech-
nological trends may come up and replace a current technology.
In this context, Fresnel collectors as a technological simpliﬁ cation
of parabolic trough plants are not considered in the S&L study, nor
are other receiver technologies in the tower technology like the
pressurized air receiver, which in the future might produce lower
LEC due to very high solar efﬁ ciencies (thus smaller solar ﬁ elds) by
feeding the solar heat directly into a gas turbine.

Besides the difﬁ culty of predicting long-term technological paths,
it is not clear which technologies will be accepted by the market;
that is, whether investors will progressively implement technical
innovations or be more prudent and use proven technology. In
Chapter 2 (section 2.3.2), the CSP cost reduction potential will
be analyzed applying the learning curve concept.

2.2.2 Power Cycle integration concepts

The heat generated in the solar absorbers is subsequently used for
electric power generation. In this section, different concepts for
the integration of solar collectors into conventional power cycles
are presented. On the technical side, the difference between
these concepts is the collector integration within the thermody-
namic cycle and the degree of hybridization with fossil power
generation (the solar share). From a strategic point of view, each
concept is suitable for different goals, such as market introduction
of solar collector technologies or long-term options. The different
concepts for collector usage can be subdivided into the follow-
ing categories:

Solar Live Steam in hybrid Rankine plants (Option 1)

In this arrangement, the solar ﬁ eld provides superheated steam for
use in a Rankine cycle. These plants can be operated in hybrid
mode with any type of steam plant for fuel saving. Depending on
plant operation mode and solar ﬁ eld size, the solar share of such
hybrid systems can vary over a wide range. The SEGS plants in
California are examples of this conﬁ guration (they are able to
use up to 25 percent natural gas). Coupling a solar ﬁ eld with
a conventional coal-ﬁ red power plant can lead to even higher
environmental beneﬁ ts, because a carbon-intensive fuel being

converted at relatively low efﬁ ciencies (compared to a CC plant)
can be saved whenever solar steam is available.

“Solar-Only” Rankine plant (Option 2)

A “solar-only” Rankine plant has the same underlying power-block
concept as the hybrid Rankine plant, but without a fossil-fuel steam
generator. It is noted that there may be an argument for small levels
of fossil back-up used only for keeping the turbines available for a
“hot start” following short insolation reductions and for pre-heating
prior to start-up. Preferably, such plants would be equipped with
heat storage of a few to several hours in order to increase the full
load operating hours of the plant. Storage can not only lead to
lower electricity generation costs, but improved dispatchability,
which provides beneﬁ ts to the grid. Although this concept is envi-
ronmentally the most desirable plant conﬁ guration, storage costs
need to be reduced further.

Solar Gas turbine combined cycle (Option 3)

Due to the high concentration factors, solar towers (central receivers)
and dishes can produce very high temperatures (above 1,000°C)
for use directly in gas turbines or to complement the gas turbine
combustion chamber. This offers the possibility of a solar-driven
combined-cycle with correspondingly high efﬁ ciencies. In the me-
dium to long term, this technology has very promising prospects
because of the high efﬁ ciencies and the related savings in solar
ﬁ eld investment.

Combined Heat and Power solar plant (Option 4)

Similar to conventional combined heat and power, in this option a
solar thermal electricity plant is combined with a lower temperature
thermal application such as sea water desalination or air condition-
ing. Co-ﬁ ring is also possible. Due to the double use of the solar heat
for power and heat generation, total efﬁ ciencies of up to 80 percent
can be achieved. Generally, any kind of thermal power plant (also
CC, ISCCS, or fossil steam plants) can in general be designed such
that subsequent heat-driven processes can beneﬁ t from the plant’s
waste heat. In order to supply reasonable temperatures to these
processes, a certain power drop on the electric power side has to
be accepted. In the long run, this concept will be a very attractive
solution where cooling applications are beneﬁ cial (e.g. in hotels)

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

and especially for locations where drinking water is scarce—a
problem many hot countries are suffering from, and which in many
cases will be further exacerbated by global warming.

Integrated solar combined cycle (ISCC) (Option 5)

The Integrated Solar Combined Cycle System (ISCC) was initially
proposed as a way of integrating a parabolic trough solar plant
with modern combined-cycle power plants. The basis of this plant
type is a combined cycle plant consisting of a high-temperature
gas turbine and a bottoming steam turbine. The steam for the steam
turbine in an ISCCS plant is provided by two heat sources: the heat
recovery steam generator using the exhaust gas of the gas turbine
and the solar ﬁ eld. It is important to note that in this conﬁ guration
the solar is used at the steam turbine cycle efﬁ ciency, not the higher
combined cycle efﬁ ciency as with Option 3. The size of the steam
turbine in an ISCCS is larger than it would be in a conventional
combined cycle.

The three main advantages of this concept are:

higher solar shares than in solar feed water preheating

no solar energy losses due to daily plant start-up and shut-

down

the incremental costs for a larger steam turbine are less than the

overall unit cost in a solar-only plant.

The main drawback of the technology is the part load losses during
operating hours when there is no solar energy input (see Figure 4).
Therefore the interdependencies of steam turbine oversizing, steam
turbine part-load behavior, solar ﬁ eld size, solar irradiance, plant
site, plant operation mode, and possibly solar heat storage or duct
burner have to be carefully considered in a project-speciﬁ c overall
system analysis in order to ensure that the solar ﬁ eld will provide
its full economic and environmental beneﬁ ts.

Solar Feed Water Preheating (Option 6)

In this option, solar thermal heat is used for preheating feed-water
in large-scale conventional Rankine plants, substituting steam that
would otherwise be bled from the turbine. Additional electricity can

be generated, or fossil fuel saved, depending on the operation
mode. This concept is well-suited for market introduction of new
collector types, since it reduces the risk by lowering the investment
costs that would otherwise be needed for a new steam cycle
(approximately $10 million for a 5–10 MWe solar ﬁ eld). Further
advantages are the possibility of using existing plant infrastructure
and good solar heat conversion efﬁ ciencies from solar irradiation
to net solar electricity (Morin and others, 2004). The solar ﬁ eld
can also be installed in phases. The drawbacks include its small
solar share (around 1 percent), which is why this concept is only
attractive for market introduction.

Solar Process Heat Applications (Option 7)

The slow pace of CSP market introduction is mainly related to the
very large investments related to this type of renewable energy
technology. Solar process heat applications are one way to lower
this hurdle, since the initial investment will decrease by a factor
of 10 to100. Typical process heat applications are in the range
of 200–1,000 kWth for the cooling of buildings or refrigerators.
CHP applications are a wise market introduction strategy for new
collector types and suppliers, since such applications can be con-
sidered as the ﬁ rst step toward large-scale solar thermal power
applications. This concept might be attractive to the GEF and the

IGURE

4: E

XAMPLE

PART

LOAD

BEHAVIOR

STEAM

TURBINE

Source:

E.ON Engineering (modiﬁ ed original data).

Relative part load efficiency

100

40%

50%

60%

70%

80%

90%

100%

Thermal load of the Steam Turbine (%)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

World Bank if future CSP funding sources signiﬁ cantly decrease.
By promoting such projects, WB/GEF could spur the competition
in the CSP sector, because under current conditions (e.g. in Spain)
it is very difﬁ cult for any new players to enter the CSP market.

These concepts will be further discussed and compared in section
2.2.4.

2.2.3 ISCCS—evaluation of performance, cost, and
CO

beneﬁ ts

The ISCCS concept has been of interest to the solar community
for some time, and has been the subject of a number of studies
(Stein, 2000; Dersch, 2002). In 2002, the International Energy
Agency’s SolarPACES implementing agreement carried out a study
(Dersch et al., 2002) on thermodynamic modeling of ISCCS plants
in comparison with combined cycle as well as SEGS-type (hybrid)
plants in order to evaluate the performance, cost, and CO

effects

of the ISCCS concept. Its main results are presented here.

Assumptions

A base solar ﬁ eld size corresponding to a 50 MW SEGS plant in
Barstow, California, was used for the calculations (270,000 m

IGURE

5: L

OAD

CURVES

USED

FOR

THE

ANNUAL

PERFORMANCE

CALCULATION

Source:

Dersch et al. (2002).

Load (%)

Hour of day (h)

ISCCS

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

22 23 24

100

solar dispatching
scheduled load profile

Gas turbine

Steam turbine (fossil fired)

Steam turbine fired
by Solar Field

Load (%)

Hour of day (h)

SEGS

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

22 23 24

100

solar dispatching
scheduled load profile
(burning of fossil fuel
during night time)

Load (%)

Hour of day (h)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

22 23 24

100

free load (solar dispatching)
scheduled load profile

For the scheduled load: if no solar energy is available the fossil back-

up-burner is used (ISCCS and SEGS plant). In the solar dispatching mode
no fossil back-up is used.

IGURE

ESULTS

ANNUAL

PERFORMANCE

CALCULATION

FOR

ISCCS

AND

Source:

Dersch et al. (2002).

annual electricity production

(Gwh/a)

solar share

Cal.

Spain

Cal.

Spain

Cal.

Spain

3,000

2,500

2,000

1,500

1,000

500

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

ISCCS

with storage

Output, Solar Dispatching
Solar Share, Solar Dispatching

Output, Scheduled Load
Solar Share, Scheduled Load

5.6%

4.1%

3.4%

2.0%

9.4%

9.0%

6.4%

5.4%

0.0%

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

The load curves of all plants were assumed to be identical in the
ﬁ rst scenario. The second scenario considered solar dispatching
load (see Figure 5). All three investigated plant concepts are
sized such that the annual electricity output remains the same for
the scheduled operation. As a consequence, the sizing of the gas
and steam turbine capacities are different for the pure CC and the
ISCCS plant (CC: GT has 201 MW, ST has 109 MW; ISCCS:
GT has 162 MW, ST has 148 MW). The calculations have been
carried out for a site in Spain (DNI: 2,023 kWh/(m

a)) and the

Californian site in Barstow (DNI: 2,717 kWh/(m

a).

Results

The main results of the annual electricity calculations were that
without solar heat storage the solar share ranges between two
and six percent depending on plant site and operation mode (solar
dispatching or scheduled load). With storage, the solar share can
be increased up to almost 10 percent.

Figure 7 shows CO

emissions of all analyzed plant concepts.

All analyzed ISCCS concepts (regardless of sites, storage, duct

IGURE

7: S

PECIFIC

EMISSIONS

FOR

DIFFERENT

SITES

PLANT

CONFIGURATIONS

OPERATION

MODES

AND

SOLAR

FIELD

SIZES

Source:

Dersch et al. (2002).

kg CO

/ kWh

solar field area in m

a) Solar dispatching without thermal storage

270,320

305,200

340,080

374,960

0.5

0.4

0.3

0.2

0.1

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Reference CC

kg CO

/ kWh

solar field area in m

b) Solar dispatching with thermal storage

427,280

462,160

497,040

531,920

0.5

0.4

0.3

0.2

0.1

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Reference CC

kg CO

/ kWh

solar field area in m

c) Scheduled load without thermal storage

270,320

305,200

340,080

374,960

0.5

0.4

0.3

0.2

0.1

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Reference CC

kg CO

/ kWh

solar field area in m

d) Scheduled load with thermal storage

427,280

462,160

497,040

531,920

0.5

0.4

0.3

0.2

0.1

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Reference CC

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

burning, load scheduling) show lower CO

emissions than the

reference CC plant. However, the CO

emission difference of an

ISCCS plant compared to a CC plant is small due to the relatively
small contribution of the solar ﬁ eld. The calculations were carried
out under the same constraints, including the use of a reference
plant site. Different ambient conditions can have a considerable
impact on the total plant performance.

Lower ambient humidity, higher ambient temperature, and the use
of dry cooling instead of wet cooling (if sufﬁ cient cooling water
was unavailable) lead to a decrease of the total plant efﬁ ciency
such that the beneﬁ cial solar impact can be outweighed by the
less favorable plant site conditions. A poor site or poorly designed
plant can result in higher CO

emissions from the ISCCS plant

than from a pure CC plant. Lower ambient pressure (due to higher
altitude) also has a negative effect on the total plant output, but
the plant efﬁ ciency and thereby the CO

emissions will not be

negatively affected.

In this study, the calculated performance of the SEGS plants show
that when operated under load scheduling mode, the speciﬁ c
CO

emissions rise because of the use of gas in a lower efﬁ ciency

steam cycle. However this modeling was carried out merely for
the purposes of illustrating a point in the study concerning opera-
tional modes under similar constraints. In practice, a SEGS plant
with gas co-ﬁ ring would under real conditions not be used for 24
hour-operation. Intermediate load operation or solar dispatching
mode would considerably improve the CO

.balance of the SEGS

concept. When operated in solar dispatching mode, the SEGS
plants of course show zero CO

emissions.

In most cases, the ISCCS conﬁ gurations showed lower LEC than
the SEGS plants (under comparable economic constraints

, see

Figure 8). The reason for this is that the incremental cost of a larger
steam turbine is much lower than building a stand-alone power
block for a SEGS plant.

2.2.4 Summary—technological paths

The description of collector innovations (in section 2.2.1) is intended
to provide an insight into CSP technology developments and to pro-
vide a basis for the technology-related cost reduction forecasts that
contribute signiﬁ cantly to overall cost reduction. According to Sargent

and Lundy (2003), 54 percent of the future CSP cost reduction is
attributable to technological innovations, with the balance attribut-
able to plant scale-up and increasing production volume. It is not the
intention to pick the winning technology or development path.

Looking at the potential of the different power cycle integration
concepts (sections 2.2.2 and 2.2.3), in the mid- to long term,
higher solar shares are obtained via the options where solar heat
directly drives a turbine (options 1, 2, 3, and 4). Even if the plants
are designed for hybrid operation, the solar share can be increased
later during the plant’s lifetime, e.g. when collector costs will have
decreased or fuel prices increase.

From a longer-term perspective, the solar contribution of the ISCC
(and solar feed water preheating) cannot be extended beyond
a certain level. However, as long as countries build fossil CC or
Rankine plants anyway, equipping these plants with a solar ﬁ eld
is a signiﬁ cant contribution to GHG emission reduction. On the
one hand ISCCS and solar feed-water preheating are well-suited
for market introduction of new solar collectors because the addi-
tional marginal investment for the conventional plant components is
relatively low (or zero). There are also areas of overlap, and thus
cost reduction potential, with the plant infrastructure and project
implementation costs. For developing countries especially, where
the primary need is electricity (not necessarily green electricity),
the combination of solar energy together with a large-scale fossil
power plant can, in the technology introduction stages, be much
more attractive than stand-alone solar plants. ISCCS is a good
conﬁ guration for creating experience with the CSP technology under
the same operating conditions as in solar-only plants.

2.3 C

OST

REDUCTION

COMPARISON

CSP

TECHNOLOGY

The aim of any electricity producing technology must be to realize
competitive electricity generation costs. Several studies have ex-

Constant real discount rate: 6.5 percent, plant lifetime: 25 years, fuel price

1.26 USc/kWh, annual fuel price escalation: 2 percent, annual inﬂ ation
2.5 percent, SF + heat exchanger $220/m

, CC speciﬁ c investment cost:

$550/kW, additional power block costs due to SF: $600/kW.

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

amined the future cost reduction potentials for solar thermal power
generation technology. The most important studies in this context
are Enermodal (1999), DLR (2004), Sargent and Lundy (2003),
DLR and others (2005), and Kearney and Price.

Whereas section 2.2.1 the studies using engineering approaches
were discussed, this section evaluates the studies applying the
learning curve concept.

The experience curve approach developed by T.P. Wright (1936)
and the Boston Consulting Group (1960) assumes that each dou-

bling of the cumulated production of any kind of product results in
a speciﬁ c cost reduction by a so-called learning factor (typically
20 to 30 percent).

The progress ratios

of a large variety of products from the electron-

ics, mechanical engineering, paper, steel, aviation, and automotive
sectors were analyzed in a study by the IEA (2000):

IGURE

8: S

OLAR

LEC

FOR

DIFFERENT

SIZES

PLANT

CONFIGURATIONS

OPERATION

MODES

AND

SOLAR

FIELD

AREAS

Source:

Dersch et al. (2002).

Solar LEC in cEuro/kWh

solar field area in m

a) Solar dispatching without thermal storage

270,320

305,200

340,080

374,960

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Solar LEC in cEuro/kWh

solar field area in m

b) Solar dispatching with thermal storage

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

427,280

462,160

497,040

531,920

Solar LEC in cEuro/kWh

solar field area in m

c) Scheduled load without thermal storage

270,320

305,200

340,080

374,960

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

Solar LEC in cEuro/kWh

solar field area in m

d) Scheduled load with thermal storage

ISCCS, California
ISCCS, Spain

SEGS, California
SEGS, Spain

427,280

462,160

497,040

531,920

The progress ratio r is deﬁ ned as the complementary to the learning factor

l, that is: r=100 percent-l

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

2.3.1 Cost reduction and growth rates of other
renewable energy technologies

In order to narrow down the perspective from general technology
cost reduction to renewable energy technologies, wind energy
and photovoltaics are analyzed with respect to two main implicit
assumptions of learning curves: (1) the speciﬁ c cost reduction; and
(2) market development.

The next two graphs show the speciﬁ c cost reduction curves expe-
rienced by wind energy converters and photovoltaics.

The next two graphs show the experienced market growth for wind
energy converters and photovoltaics:

2.3.2 Experience curve concept applied to Solar
Thermal Power Generation

Of the above-mentioned studies, the Enermodal study and the
Athene model use experience curve approaches to assess the future
costs of solar thermal power generation.

IGURE

9: P

ROGRESS

RATIO

FOR

DIFFERENT

PRODUCING

BRANCHES

. T

HEIGHT

THE

COLUMNS

REFLECTS

THE

NUMBER

OCCURRENCES

(

DISTRIBUTION

)

Source:

OECD/IEA, 2000, Experience Curves for Energy Technology Policy, Figure 1.3, p.

14.

Frequency

Progress ratio (%)

55–56

59–60

63–64

67–68

71–72

75–76

79–80

83–84

87–88

91–92

95–96

99–100

103–104

107–108

IGURE

10: S

PECIFIC

INVESTMENT

COSTS

WIND

ENERGY

CONVERTERS

OVER

TIME

Source:

Ragwitz (2005).

Specific investment costs (DM/kW)

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2002

2000

2004

2006

2008

2010

Onshore
Offshore

IGURE

11: S

PECIFIC

INVESTMENT

COSTS

PHOTO

VOLTAICS

(

OLLAR

PER

WATT

PEAK

POWER

)

FUNCTION

CUMULATIVE

PRODUCTION

VOLUME

(

GIGAWATT

PEAK

POWER

)

Source:

Duke (2002).

Price (2000$/Wp)

1.E –04

1.E –03

1.E –02

1.E –01

1.E +00

1.E +01

$0.1

$100.0

$10.0

$1.0

cumulative PV production (GWp)

1976

2000

transition to thin-

film experience

curve

Al-PV Experience Curve

=0.99

PR=0.80

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

Enermodal (1999): Cost Reduction Study for Solar Thermal
Power Plants

The Enermodal study uses the speciﬁ c investment costs per installed
capacity ($/kW) as a reference measure. This reference number
does not seem appropriate to forecast cost reduction for solar ther-
mal power plants because larger solar ﬁ elds in combination with
heat storage can lead to lower levelized electricity costs due to a
higher plant capacity factor, even though the speciﬁ c investment
costs increase. The second point of note in the approach used by
the Enermodal study is the fact that it uses the cost of the ﬁ rst plant
out of the nine existing parabolic trough plants as the starting point
of the learning curve instead of using a linear regression function
of all reference plants (see Figure 14). Therefore the cost of the
ﬁ rst plant determines strongly the cost forecast for future technology
deployment. The third point of note in the methodology is the fact
that the numbers used for the experience curve differ strongly from
the numbers given in the text, which correspond exactly to the
values given in the Pilkington study (1996).

IGURE

12: D

EVELOPMENT

INSTALLED

WIND

CAPACITY

ERMANY

Source:

BMU (2004).

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 200

2003 2004

2,000

8,000

6,000

10,000

12,000

14,000

16,000

18,000

4,000

310

6112

IGURE

13: D

EVELOPMENT

THE

WORLDWIDE

INSTALLED

CAPACITY

AND

ANNUAL

GROWTH

RATE

Source:

Quaschning (2004).

Cumulated power (MW)

Annual growth rate

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

500

10%

15%

20%

25%

30%

40%

35%

2,000

1,500

2,500

3,000

1,000

Annual growth rate

Others
IEA w/o Germany
Germany

IGURE

14: E

NERMODAL

TUDY

—E

XPERIENCE

CURVES

FOR

DIFFERENT

ASSUMPTIONS

THE

PROGRESS

RATIO

(

RED

CROSSES

REPRESENT

VALUES

GIVEN

THE

TEXT

THE

STUDIES

FOR

THE

NINE

ALIFORNIAN

SEGS

PLANTS

)

Source:

Enermodal (1999): Cost Reduction Study for Solar Thermal Power Plants.

Plant Capital Cost (1,998$/kW)

Cumulative Power Plant Capacity Installed (MW

)

100

1,000

10,000

100,000

1,000

10,000

Medium-term

Case 10

SEGS IX

Long-term

Case 10

New 200 MW

Ranking (Case 4)

0.92

SEGS
0.88
0.85

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

DLR (2004): Scenario model “Athene”

This study assumes as a starting point the empirical values from the
existing parabolic trough plants. But for the future cost reductions,
it is explicitly mentioned that all solar thermal power technologies
are included. Technological variants and improvements as well as
competition are essential preconditions of the experience curve
model.

Cost reduction in this study is split into four categories:

Improving efﬁ ciency (from 13.2 percent today to 17.0 percent

in 2025)

Learning effects due to volume production

collector costs, surface-speciﬁ c progress ration (PR) is 0.9

thermal energy storage (up to 12 hrs), capacity-speciﬁ c

PR=0.88

steam cycle components from 850

€

/kW down to today’s

conventional plant costs of 740

€

/kW, PR=0.94

Economies of scale due to larger units (up to 200 MWe):

doubling capacity leads to 15 percent cost reduction

The annual operation and maintenance costs will decrease

proportionally to the reduction of investment costs (2.5 percent
of investment).

Further assumptions of this model are:

No CO

-allowances considered, respectively carbon price

increasing from initially 7.5

€

/t CO

to 30

€

/t CO

in 2050

Plant life time: 25 years

Internal plant project interest rate: 8 percent (in real terms)

Solar Resource DNI=2350 kWh/(m

a) (favorable sites for

solar thermal power generation range between 1,800 and
2,900 kWh/(m

a).

Market growth of 23 percent p.a. (IEA references: wind

(1971–2000) 52 percent p.a., PV 32 percent), (implementation
of 5,000 MW till 2015 corresponds to GMI goal).

Fossil Reference LEC (IEA) with same number of annual operating

hours as STPPs

Fuel prices increasing by 0.52 percent p.a. (IEA)

As a result of the assumptions given above, the cost reduction
forecasts of the Athene study are given in the following graph:

According to the Athene study, the cost competitiveness of solar
thermal power generation will be reached in 2025. The total
necessary subsidies account to 12 billion

€

, which corresponds

to a total installed capacity of 42 GW

, not taking into account

trading. If the above-mentioned carbon prices are included,

cost competitiveness will be reached in 2023. The total necessary

IGURE

15: D

EVELOPMENT

LEVELIZED

ELECTRICITY

COSTS

AND

REVENUES

FROM

THE

POWER

EXCHANGE

MARKET

REFERRED

LEC

FOSSIL

POWER

PLANTS

(

PLANT

PROJECT

INTEREST

RATE

PERCENT

)

Source:

Economic model from DLR (2004), authors’assumptions.

Note:

The continuous line includes Emission Reduction Credits (ERC) of initially 7.5

€

/t CO

increasing

to 30

€

/t CO

in 2050.

2000

2005

2010

2015

2025

2020

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.10

0.11

0.12

Revenue and LEC [Eu/kWh]

Revenues incl. ERC

LEC d=8%
Revenues

HAPTER

2 – C

ON CE N TRA TI N G

OLA R

H E RM A L

OW E R

(CSP) D

E V E LOP M E N T

investment will thereby be signiﬁ cantly reduced to

€

2.5 billion,

respectively 22 GW

The implicit assumption is that the number of full-load hours is
constantly increased due to larger thermal energy storages (see
also the “steps” in fossil reference price) up to 6,500 hours per
annum (12 hours thermal storage). However, in some cases it
may be more economical to aim at producing only peaking to
mid-load-power for the period when power tariffs on the electricity
market are highest (smaller energy storage), which in turn could
justify lower thermal storage.

The Athene model is a very thorough assessment using many
validation points from experienced facts and developments. The
assumptions used are generally conservative. In this context, the
Athene scenario may be considered as a very conservative scenario
for CSP cost and market development.

2.3.3 Cost Reduction—Summary

All studies referenced, including the GMI-based market develop-
ment in Chapter 2 (section 2.1), assumed a conservative global
CSP market development compared to the actual deployment of
wind energy, even in a single country (Germany).

It has to be

stated as well that many of the countries in the world’s sunbelts
lack the ﬁ nancial resources to ﬁ nance solar energy. With present
global CSP market movements re-emerging, there is no funda-
mental reason why technology growth similar to wind energy is
not feasible.

The main messages from the comparison of cost projection studies
are:

The technology has the potential to be cost-competitive within

10 to 25 years, and has the potential to be a signiﬁ cant
electrical power option for developing countries, which often
have abundant solar resources. With hybridization and thermal
energy storage, solar thermal power is dispatchable power that
helps to support grid stability.

Should GEF promote CSP investments now in developing coun-

tries and not once the technology has moved further down the
learning curve?

The GEF projects will contribute to OP 7’s goal of “reducing

the long-term costs of low greenhouse gas-emitting energy tech-
nologies” if at least two or three are successfully deployed and
operated. However, the projects in the current portfolio will not
have a signiﬁ cant cost-reduction impact on the underlying cost of
the technology. It is difﬁ cult to quantify the cost reduction effect
of the four projects: In the beginning of the portfolio’s history, it
seemed that it would be one of the GEF plants that would be the
ﬁ rst to be built after the California SEGS plants. However today,
with other commercial CSP activities evolving, other projects

Another comparison basis of the necessary effort would be the required

subsidies on the basis of the reference LEC by correcting the GW-num-
bers by the speciﬁ c investment ($/kW), equivalent full-load hours (h/a),
and O&M costs ($/a). The result would remain in the same order of
magnitude.

In this context it has to be mentioned that the global wind market cor-

responds to approximately three times the German installations.

IGURE

16: C

OMPARISON

THE

DIFFERENT

MARKET

DEVELOPMENT

ASSUMPTIONS

THE

CSP

STUDIES

COMPARISON

WITH

THE

ERMAN

WIND

MARKET

DEVELOPMENT

AND

THE

GMI-

GOAL

(

TARGET

MULATIVE

INSTALLED

POWER

5 GW

YEARS

ACHIEVE

COST

COMPETITIVENESS

)

Source:

Authors.

Cumulated installed power in GW

year

S&L opt.
S&L pess
Enermodal
Pilkington

Athene

Wind Germany
GMI - based (see above)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

will come in ﬁ rst. Therefore the question is, which part of the
cost reduction curve will the GEF projects inﬂ uence? In theory,
the cost reduction effect will be largest for the ﬁ rst plants built.
In practice, much of the early cost reduction will result from a
reduction of the risk premium as design, construction, and O&M
experience is gained. The developing countries in particular
experience an additional premium due to the perceived added
difﬁ culties of carrying out large projects using new technology.
This is another cost reduction area that the GEF projects can
impact in a positive manner.

Affordable technology and climate protection are goals ofﬁ -

cially supported by many developing countries with good solar
resources. In order to meet these goals, GEF and the World
Bank should support the implementation of climate-protecting

renewable energy in developing countries. Whereas the OECD
countries can afford subsidizing power technologies on a large
scale, developing countries usually are not able to do so. By
supporting the implementation of the ﬁ rst CSP pilot plants,
WB/GEF will help create technology trust and institutional
learning and thereby reduce the hurdle for subsequent market
entry. The solar ﬁ elds of solar thermal power plants contain many
components that can be locally manufactured, such as concrete
foundations or standard steel components or, depending on
the solar technology and the project country, mirrors. Last, but
not least, the erection of the plants—as well as operation and
maintenance—represent sustainable development aid through
job creation. These macroeconomic aspects of value creation
in the countries of destination are not considered in the above
cost studies.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

3.1: T

ECHNOLOGICAL

RISKS

THE

WB/GEF

PORTFOLIO

Risk

Valuation

Mitigation

Non-optimal choice of location

If the hybrid plant site is to be adapted for a solar ﬁ eld, risk results

This risk can be mitigated by careful plant and site evaluation.

from additional costs (e.g. constructing gas pipeline) or a drop in total

To a certain degree additional costs can be justiﬁ ed by the market

plant electricity due to poorer plant cooling, reduced air density at

introduction of a technology (gaining experience in technology,

higher locations, or hotter sites (lower gas turbine output). As a

institutions, industry, O&M are considered to be superior goals).

consequence, these electricity losses may outweigh the energy yield

of the solar ﬁ eld.

Morocco: good insolation levels. Losses in power plant output due to

India: examine other revenue streams for potential use of the gas

height of location (900 m). Infrastructure for water/natural gas

pipeline. Investigate nearby recent oil discovery for gas. Investigate

available.

alternative

nearby

locations.

Egypt: good insolation levels. Infrastructure for water/natural gas and

transmission is available

Mexico: the two currently discussed plant sites in Sonora offer ideal

conditions for the solar ﬁ eld.

India: ﬂ at site and transmission available. Some infra-structural work

needed to provide water. Current non-availability of gas infrastructure

(gas pipeline). Reasonable insolation levels.

Environmental beneﬁ t low or

The CO

emission reduction actually achieved is rather low compared

Not very important issue at the current stage of early market

non-existing due to the ISCCS

to a combined cycle reference: 5 to 10 percent solar share in the

introduction. However, once detailed project design is known, detailed

concept

overall production; decreased efﬁ ciency of the steam generator.

environmental calculations should evaluate weaknesses (including

sensitivity calculations for non-optimized plant operation).

Insufﬁ cient experience with

Key technologies most likely to be used for the WB/GEF portfolio

Analyzing on-ﬁ eld efﬁ ciency etc. in order to convince investors of the

CSP technology

(solar trough technology, combined cycle, no thermal storage) are

technical feasibility (e.g. 4,360 m

test loop SKAL-ET at Kramer

very well known and have a long track record (only concerning

Junction in California to convince the Spanish company ACS to invest

operation, however, not new construction and development).

in the AndaSol 1 and 2 plants in Spain).

Parabolic reﬂ ectors have been tracing the sun for 20 years at the

Secure valid warranties from manufacturers and EPC (in practice one

Californian SEGS plants (from 1986 to 2005 they have generated

of the most critical points in real project development).

nearly 13 TWh).

Steam cycle is conventional Rankine cycle.

Heat exchanger is the interface between solar ﬁ eld and combined

cycle –> proven technology).

Thermal storage new and

Most likely no storage in any of the WB/GEF plants, although for the

Thermal storage can improve the efﬁ ciency and the solar share of

non-experienced technology in

Indian project a bonus was to be awarded for a thermal storage proposal.

the ISCCS. Storage technology based on molten salt (7.5 hours) is

the required size

part of the new Andasol 1 and 2 plants ((2x50 MW) starting operation

in Spain in 2006/2007.

Thermal storage known in chemistry and in smaller dimensions from

Another layout with an extra steam turbine or buffer heat storage

the “Solar Two” project (power tower in the U.S.).

may be worth analyzing.

HAPTER

3 – CSP R

ISK

NALYSIS

Problems arising at the technical

The WB/GEF plants would be the ﬁ rst ISCCS plants; the Spanish plants

Interface occurs at the steam generator in a standard conﬁ guration

interface between the solar

(maximum 15 percent solar) as well as possible plants in the US are

through a heat exchanger. Major complications are unlikely.

component and the fossil component

not ISCCS plants.

In the ISCCS, determining the exact electrical contribution (gas or solar)

One method is to determine the actual (rather than design)

is quite complex. Especially in the shared responsibility model (solar

performance during commissioning tests, so that an accurate set of

ﬁ eld – CC), responsibility questions might arise if the plant does not

offset curves can be generated for each off-design parameter (such as

meet its forecasted output.

ambient temp., relative humidity, steam inlet conditions, condenser

pressure, etc). Any additional MW generated above the calculated

output at a given set of conditions is attributable to the solar ﬁ eld.

Power plants degrade over time, heat exchanger fouling coefﬁ cients

There are probably enough periods of time when the solar ﬁ eld is not

increase over time, operational parameters change over time, such as

contributing (night, clouds), to be able to periodically reconﬁ rm the

feed water heaters going out of service.

CC performance.

Non-optimized operation of

Possible in the case of Egypt given the fact that there will be no turnkey

The solar portion will be done through one stage bidding while the

the ISCCS plant

supplier but two separate suppliers for the solar and the fossil parts.

CC portion will be done in two stages. The selected bidder and its

design for the solar portion will feed into the second stage of bidding

for the CC portion as a way to ensure that the interface is optimized.

In addition, a consultant will be hired to ensure that the design and

implementation of the project as a whole will run smoothly, especially

when it comes to the interface.

Complete failure of the solar plant

Complete failure of the solar ﬁ eld might occur at several points during

In order to cope with non-compliance in power purchasing agreements,

construction (e.g. due to bankruptcy of the solar supplier) or during

the gap must be made up by ﬁ ring a duct burner to avoid penalties.

operation (e.g. due to damage to the mirrors by hail etc., but this

The duct burner (also called supplementary ﬁ ring) is a well-known

unlikely).

addition to combined cycles, enabling a boost during periods of high

electricity prices. Given the fact that the solar share is small, the loss

is limited. Without a power purchasing agreement, there would only

be a commercial loss. If there is a single plant owner, the attributable

loss would be calculated for accounting purposes more than penalty

purposes.

3.2: F

INANCIAL

COMMERCIAL

RISKS

THE

WB/GEF

PORTFOLIO

Risk

Valuation

Mitigation

Low interest in bidding by industry

In case bidding conditions are too restrictive and unattractive to

Greater integration of industry in the bidding process, both CC

companies, the industry response to the call for bids might be very

and solar suppliers.

limited (e.g. India, Mexico in the ﬁ rst round).

Insufﬁ cient ﬁ nancing secured for

Morocco: preferential loan from the ADB, the GEF grant and equity

Downward adjustment of the required solar capacity in case of cost

the WB/GEF projects

from ONE should fully cover the ﬁ nancing required. An unresolved issue

over-runs during the bidding procedure.

is how to compensate the power loss due to a sub-optimal plant site,

possibly by smaller dimensioning of the solar ﬁ eld so that the excess

costs due to the solar ﬁ eld are fully covered by the GEF grant.

(continued on next page)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Egypt: Financing settled so far by JBIC, NREA to ﬁ nance local costs,

with a potential for IBRD funding for any gaps that may arise.

Mexico: ﬁ nancing (besides the GEF grant) is to be provided by CFE or

the Mexican Treasury ministry. The rated power will be ﬁ xed. The

company offering least-cost-LEC will win the bid. This leaves the

question of exact investment costs open.

India: preferential loan from KfW and the GEF grant is not sufﬁ cient to

For India, gap in capital cost could be minimized by allowing solar

cover the required capital cost, nor the local LEC to cover the gas and

component of ISCCS to receive same tariff as wind Indian

O&M price. Additional ﬁ nancing required.

Rupee (INR3.3). A cost gap would still remain, which would have to

be ﬁ lled by, e.g. government subsidization. This could be justiﬁ ed by

the other beneﬁ ts gas supply could bring to the region.

10.

Exposure to fossil fuel price

If a combined cycle plant is to be installed, the ISCCS approach helps

Storage technology can signiﬁ cantly increase the solar share.

increases (in particular gas price

to reduce exposure to gas price ﬂ uctuations on a per MWh produced

Storage (based on molten salt; 7.5 hours) will be part of the new

increases)

basis. Compared to a solar-only plant, disadvantage of the ISCCS

Andasol 1 and 2 plants (2x50 MW) starting operation in Spain in

approach.

2006/2007.

Morocco: risk low due to long-term nature of contracts (“droit de

passage”). However, the Moroccan government could levy part of

the ﬁ nancial advantage on ONE.

Mexico has strong gas-CC expansion strategy. ISCCS helps to mitigate risk.

India: gas use for electricity generation is expected to increase here;

however indigenous gas resources are not strong. In addition, India has

a strong commitment to hydro. Solar can help reduce the exposure to

high gas prices and low water ﬂ ows during drought.

11.

Non-guaranteed power purchase

Increasingly, due to the electricity market liberalization, no long-term

Frame for preferential feed-in of renewable electricity (for hybrid

(relevant for IPP approach)

power purchasing agreements are granted to the company that runs

electricity from ISCCS above a certain share).

the ISCCS plant in concession, increasing the risk to companies.

Risk comparatively small in markets with growing electricity demand.

Longer periods of bankable tariff support for CSP so that, as in Spain,

the upfront capital is underwritten by the revenue stream.

12.

Weak ﬁ nancial position of off-taker

Higher ﬁ nancial risks for banks (e.g. case of Nevada – now overcome;

In the Nevada case, recent legislation changes made it possible for

case of Algeria where the off-taker is Sonatrach, the strong national

the renewable contracts signed by the utility to be protected. This

hydrocarbon company, who will sell on to the ﬁ nancially weaker

solution is difﬁ cult to provide on a wider basis.

electricity supply company).

Back-to-back guarantees from state/WB

13.

Additional ﬁ nancial risk for the solar

The reason for combining the O&M contract with the EPC contract is

It is considered prudent that the ﬁ nal owner of the plant receives some

supplier (but also the main EPC

to instill the ﬁ nal owners with conﬁ dence that the ﬁ eld will perform

assurance as to performance over a period of time. There may be an

contractor) due to combined EPC

as desired prior to them taking ownership.

opportunity to minimize the risk for the solar supplier by having the

and O&M contracts

owner (if a utility) carry out the O&M, if the owner is prepared to

bear the associated risk.

Risk

Valuation

Mitigation

HAPTER

3 – CSP R

ISK

NALYSIS

(continued on next page)

The EPC contractor will generally have built in a factor for technical risk.

(Consider separate O&M contracts if conﬁ dence in the performance

There is also a factor built in for O&M risk, which increases the overall

of the plants allows it.)

price.

Generally, the O&M contract is smaller in volume than the EPC contract.

Often the O&M and EPC contractors are different companies. In the case

of combined EPC + O&M, the liability of the O&M contractor is then for

the overall project volume.

14.

Unusually high level of guarantees

In the case of India, up to 20 percent of the investment was required

Discuss the required amount of security at an early stage.

required from the national side

as a guarantee until the end of the O&M contract because the

technology involved was new. This forces companies either to raise their

Risk sharing among turnkey contractor, ﬁ nancing organizations, and at

margins or to wait ﬁ ve years before they can expect the return.

national level.

15.

Full liability for the contractor of the

Despite the fact that the technical risk of the solar plant not performing

Careful study of limited liability requirements of the turnkey provider

solar thermal component for the

is limited (see above), the ﬁ nancial risk is high for the smaller solar

and the solar provider.

whole ISCC

supplier but also for the turnkey provider if the failure of the solar plant

is considered a reason to reject the combined cycle plant. Civil work and

Investigation of replacement solutions and cost.

the combined cycle by far the largest share in the investment.

Demonstration of critical components.

16.

Risk pricing by bidders

Risk pricing by bidders might occur at an early stage of CSP

Reduction in the size of the solar component.

development when there are a lot of uncertainties.

Ensure competition (possibly including solar tower).

17.

Insufﬁ cient protection of

Concern has been raised that in a single EPC arrangement, there would

This will need to be dealt with using conventional legal mechanisms—

intellectual property

have to be signiﬁ cant sharing of know-how and experience both from

this situation is commonplace in collaborative relationships.

the CC supplier to the solar ﬁ eld supplier, and vice versa to enable the

overall plant to run optimally. There was a concern that either party could

deal with other partners in future projects and share the information

acquired. This brings up the issue of the contractual relationship

(conﬁ dentiality agreements) and clauses on future freedom to operate.

It is important that the overall plant run optimally and reliably to beneﬁ t

the reputation of both the CC supplier and the solar ﬁ eld supplier.

3.3: R

EGULATORY

INSTITUTIONAL

RISKS

THE

WB/GEF

PORTFOLIO

Risk

Valuation

Mitigation

18.

Lack of incentives to maximize

Since the plant operator gets an initial grant; from his short-term

Ensure incentives/obligations to operate the solar ﬁ eld in the form of

operation of the solar ﬁ eld

perspective, the operation of the solar ﬁ eld only makes sense if O&M

penalties on a kWh-basis (below design operation).

costs are below the selling price of the electricity. If the solar ﬁ eld causes

(unexpected) problems with respect to the CC operation, non-usage of

the solar ﬁ eld might be the consequence.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

19.

Loss of conﬁ dence in potential

In principle, difﬁ culties with the WB/GEF portfolio and delays were

The WB/GEF portfolio needs one rapid success in order to restore

project developers due to lengthy

to be expected as a new technology is combined here with the more

conﬁ dence of investors and companies who have participated in bids

bidding procedures

difﬁ cult environment of developing countries. Therefore, the time frame

in the past.

is not really a surprise. Several years were lost with the unsuccessful

IPP

approach.

Frame conditions have changed (higher general energy prices, ongoing

The portfolio requires higher priority and shorter decision lines in the

projects in Spain and the U.S.), which advocates pushing through the

WB/GEF hierarchies. It represents one third of GEF’s climate

current

portfolio.

change

budget.

Concentrate efforts to convince investors and ﬁ nancial institutions.

20.

Loss of conﬁ dence in project

Pushing a new technology is a hurdle companies only take if the related

Rapid implementation of at least the ﬁ rst of the WB/GEF projects.

developers due to missing long-term

risks are adequately compensated and/or long-term perspectives of

assurance of CSP market growth

the market are attractive.

Due to today’s favorable conditions in other parts of the world

Common discussion and development of a long-term view of CSP

(e.g. Spain, U.S., Algeria), this problem seems less dramatic than it

(including information, dissemination, and public discussions in strategy

did a few years ago.

workshops).

21.

Lack of supportive-framework for

All of the WB/GEF countries have a certain frame for renewables with

Investigate suitable mixes of ﬁ nancing and support structures for future

renewables, in particular CSP

ambitious targets, R&D etc. However , in general, national ﬁ nancial

promotion of CSP technology such as soft loans + renewable portfolios,

support is limited to the provision of own funds for the main electricity,

(low-level) feed-in tariffs adapted to the ﬁ nancial context of developing

which limits the further expansion of the renewables technology until it

countries, Clean Development Mechanisms.

is competitive with the main market technology.

For future projects, national RES goals and frameworks should be a

primary criterion for choosing a country to support in order to increase

the likelihood of a multiplication effect of the ﬁ rst plant.

Consider market barriers (“OP6 –type barriers”) also in technology

simulation projects such as under OP 7.

22.

Lack of competitive electricity

Opening electricity markets can have negative and positive impacts on

This is a bigger issue than that just facing CSP. The issue for CSP is to

market

structures

the development of new technologies such as CSP: on one hand, it

create a framework in which it can compete against fossil fuels and

might squeeze out the surplus of the main market operators that is

other renewable technologies.

needed to embark on such a technology. It might also lead to higher

uncertainties (e.g. during market transitions or when PPAs are no

Create security in tariffs and allow for attractive returns.

longer available). On the other hand, within the framework of

interlinked markets, CSP might have a better chance (e.g. electricity

exports from Algeria, or the whole of Northern Africa to Europe).

Risk

Valuation

Mitigation

HAPTER

3 – CSP R

ISK

NALYSIS

3.4: S

TRATEGIC

RISKS

THE

WB/GEF

PORTFOLIO

Risk

Valuation

Mitigation

23.

Risk in mandating a particular

Opportunities

integration conﬁ guration such as

In the short run, it is more important to get the ﬁ rst WB/GEF plants

Accurate and comprehensive instrumentation is required to measure the

ISCCS and its future impact

running than to achieve a maximum CO

reduction.

contribution to electricity generation in an ISCC, which may not be

Even though ISCCS may only have around 5 percent or less of solar

available in all plants.

contribution, this is still 30 MW (around 200,000 m

), and the same

amount of solar ﬁ eld O&M experience and know-how will be gained

either

way.

A prime requirement for developing countries is the additional capacity,

ISCCS is, in the medium to long-term, not the ﬁ rst choice, but for

rather than a speciﬁ c need for peak power as in many developed

further developments in the short term, it mightt be the only acceptable

countries. Most of the developing countries are suffering from low

option for solar thermal power from a developing country’s perspective.

reserve margins in available power (e.g. 6 percent in Mexico). The

However, thermal and ﬁ nancial calculations should carefully consider

advantage of ISCCS is that a one-off project results in both signiﬁ cant

whether the ISCCS option really has the lowest cost, or whether the

additional capacity plus the solar contribution, whereas STR + CC

compromises to be made between the solar and the fossil parts

requires the planning complexity of two projects with the chance that

increase costs to a point where options with larger solar fractions

one will fail.

become comparable in costs. Environmental beneﬁ ts are to be

checked ex-post for the ﬁ rst plants.

Constraints

Limited overall GHG beneﬁ ts compared to a solution involving stand-

alone solar thermal Rankine (STR) + conventional combined cycle (CC),

especially if the ISCC’s design is not optimized for low CO

emissions.

Limited public acceptance in developed countries and international

funding

organizations.

ISCCS might require compromises between the solar and the fossil parts,

which hamper the performance of one or the other and result in a sub-

optimal overall performance (e.g. dry and sunny location versus lower

performance of the CC due to high outside temperatures and lack of

cooling water; location constraints due to the availability of natural gas,

power losses etc.).

Upgrading the low solar share in an ISCCS plant later during the plant’s

lifetime is not possible from today’s technological perspective.

Moving from the ISCCS technology route with a low share of solar to a

solar thermal technology with a larger share of solar or a solar-only

technology route is not a gradual process but represents a technology

change (otherwise the steam generator has an increasingly degraded

performance).

24.

Risk in mandating the trough

According to the Sargent and Lundy study (2003), tower technology

As much freedom as possible should be left to the bidders. Competition

technology compared to tower,

has the larger potential for cost reduction in the longer term. On the

speeds up cost reduction. Therefore the bidding should not be focused

dishes, or Fresnel collectors for

other hand, there may be a limit to the size of the plant due to the

on the trough technology but be technology-independent (CSP). A

future developments

difﬁ culties of focalizing the light on the tower over large distances.

security criterion might be bidding companies/consortia ﬁ nancially

strong enough to bear the risk of non-operation.

(continued on next page)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

25.

CSP might take up market shares

Other renewable energy sources allow an incremental growth in

Storage technology should be introduced, perhaps only in future project

more slowly than other renewables

contrast to CSP with generally large steps of several tens of MW so

developments. In the current round of WB/GEF, introducing project

options (incl. PV and wind)

they can be more easily adapted to ﬁ nancing constraints and small

storage might cause additional delays in the realization of the projects.

investments. This reduces the overall risk exposure of an investor.

Compared to PV and wind, CSP has a storage possibility.

Levelized electricity costs for most CSP technology routes are (still)

Solar dish technology is similar to other renewables as it allows

very much below those of PV.

incremental add-ons in the kW range compared to the main CSP

technologies of trough and tower. Although levelized electricity costs are

highest with this technology (dishes are hardly competitive today with

), it could be worthwhile investigating its potential in smaller

projects in developing countries given the incremental nature of this

technology.

26.

Concepts chosen not ﬂ exible

If ﬁ nancing constraints are an issue, one solution might be to construct

Investigate modular concepts that allow additional capacities to be

enough with respect to future

a solar power plant over a number of years. With the ISCCS concept

added once additional ﬁ nancing is available without increasing costs

plant extensions

this is more difﬁ cult to implement and more costly: with an ISCCS,

considerably. This is not possible with ISCCS given the fact that the

any delays in the solar ﬁ eld do not have to delay the combined cycle,

steam turbine needs to be designed to an optimal point of use.

even though the combined cycle will operate less efﬁ ciently using duct

burning or a partly loaded steam turbine until the solar ﬁ eld is fully

installed. The solar contribution could be extended over time by adding

mirrors with corresponding storage.

27.

Dependency on single supplier of

Currently only Flabeg manufactures such mirrors.

Evaluate bottlenecks that might occur if construction of a number of

key elements

plants coincides. However, Flagsol believes two 50 MW plants of the

Andasol type with 500,000 m

can be fabricated in a year, with a

third being possible with a new furnace within six months.

With ﬁ nancial support by the German Ministry for the Environment,

Bending is the time consuming process rather than the glass production

Solar Millenium and Schott have successfully developed improved

(glass production takes only 9 days for the Andasol plant). In principle,

receiver tubes (now there are globally two commercial tube suppliers).

mirror bending could be offered by other companies too and is a

question of CSP market development (motivation for competitors to

enter

the

market).

All other elements are more or less standard.

Guarantee access to fabrication train for mirrors.

Risk

Valuation

Mitigation

On the other hand the Ecostar study (DLR, 2005) shows that this technology has a considerable future cost reduction potential (see Table 2).

HAPTER

3 – CSP R

ISK

NALYSIS

3.5 O

VERALL

RISK

EVALUATION

The following table presents the compilation of the different risks
and their evaluation across the four risk categories (technological

risks, ﬁ nancial/commercial risks, regulatory/institutional risks, and
strategic risks), the main level of impact (project success; WB/GEF
program success; global technology evolution) and the main actors
for risk mitigation.

ABLE

4: O

VERALL

RISK

EVALUATION

FOR

THE

WB/GEF

SOLAR

THERMAL

PORTFOLIO

Main level

Main body for

Risk

Risk Level

of impact

risk mitigation

Technological risks related to the WB/GEF portfolio

❶

Non-optimal choice of location

❶

National

level

Environmental beneﬁ t low or non-existing due to the ISCCS concept

❷

❸

Plant

designer/operator

Insufﬁ cient experience with CSP technology

❶

❷

Equipment

suppliers

Thermal storage in the required size new and non-experienced technology

❶

❸

Equipment

suppliers

Problems at the technical interface between the solar component and the fossil component

❶

Plant

designer/operator

Non-optimized operation of the ISCCS plant

❶

Plant

designer/operator

Complete failure of the solar plant

❶

Plant

designer/operator

Financial/commercial risks related to the WB/GEF portfolio

❶

❷

Low interest in bidding by industry

❷

National level – WB/GEF

Insufﬁ cient ﬁ nancing secured for the WB/GEF projects

❶

National level – WB/GEF

10.

Exposure to fossil fuel price increases (in particular gas price increases)

❷

National

level

11.

Non-guaranteed power purchase

❸

National

level

12.

Weak ﬁ nancial position of off-taker

❶

National

level

13.

Additional ﬁ nancial risk for the solar supplier (but also the main EPC contractor)

due to combined EPC and O&M contracts

❷

National level – WB/GEF

14.

Unusually high level of guarantees required from the national side

❶

National

level

15.

Full liability for the contractor of the solar thermal component for the whole ISCC

❷

National level – WB/GEF

16.

Risk pricing by bidders

❷

Bidders – National level

17.

Insufﬁ cient protection of intellectual property

❶

Bidders

Reglatory/institutional risks related to the WB/GEF portfolio

❷

❸

18.

Lack of incentives to maximize operation of the solar ﬁ eld

❶

National level – WB/GEF

19.

Loss of conﬁ dence in potential project developers due to lengthy bidding procedures

❷

National level – WB/GEF

20.

Loss of conﬁ dence in project developers due to missing long-term assurance of CSP market growth

❷

❸

National level – WB/GEF

21.

Lack of supportive-framework for renewables, in particular CSP

❷

❸

National level – WB/GEF

22.

Lack of competitive electricity market structures

❷

❸

National

level

Strategic risks related to the WB/GEF portfolio

❸

23.

Risk in mandating a particular integration conﬁ guration such as ISCCS and its future impact

❸

National level – WB/GEF

24.

Risk in mandating the trough technology compared to tower, dishes, or Fresnel c

ollectors for future developments

❸

National level – WB/GEF

25.

CSP might take up market shares more slowly than. other renewables (incl. PV and wind)

❷

❸

National level – WB/GEF

26.

Concepts chosen not ﬂ exible enough with respect to future plant extensions

❸

27.

Dependence on single supplier of key elements

❷

❸

Equipment

suppliers

Legend:

Importance of risk:

: low risk;

: medium risk;

: high risk

Main level of impact:

❶

project success;

❷

WB/GEF programme success;

❸

global technology evolution

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

An overall impression of the risk is provided for each of the four risk
categories. It appears that the regulatory/institutional risks present
the highest risk level for the portfolio as a whole. Technological risks
are less relevant for the overall portfolio (but might have an impact
at the level of individual projects), while ﬁ nancial/commercial risks
might be relevant both at the level of the individual projects and
to some degree for the WB/GEF portfolio as a whole. Strategic
risks are equally high but only relevant in the longer term, and may
be mitigated by a more diverse development of the general CSP
market compared to the WB/GEF portfolio, which relies solely on

the ISCCS technology route. Strategy risks, by deﬁ nition, mainly
affect the global technology evolution.

Table 5 shows where the most critical points are in the project de-
velopment trees. While project delay is the general consequence
in the pre-bidding stages, the bidding process itself accumulates the
most critical short-term risks. These result either in further substantial
project delays if the whole process has to be redesigned (shift from
the IPP approach to a public EPC/O&M ﬁ nancing), or in project
abortion in the worst case.

ABLE

5: T

CRITICAL

POINTS

THE

PROJECT

DEVELOPMENT

TREE

Step in project development tree

Risk

Damage in case of risk event

Project idea and ﬁ rst evaluation

project delay

Feasibility study

project delay

Prequaliﬁ cation of bidders

project delay

Development of detailed bidding procedure (EPC, O&M)

donors/national bodies damaged in credibility

Financial close

9, 19

project delay

Bidding process

8, 11 (IPP), 12, 13, 14, 15, 16

project abort/project delay

donors/national bodies damaged in credibility

Contract 17

project delay

Construction 27

project delay

Operation

1, 2, 3, 4, 5, 6, 7

technology line (e.g. ISCC) and possibly whole CSP

line damaged in credibility

De facto project abort; technology line (e.g. ISCC) and

possibly whole CSP line damaged in credibility

Technology replication

10, 20, 21, 22, 23, 24, 25, 26

Replication endangered

his chapter brieﬂ y describes the status of the WB/GEF
portfolio and its possible development. For more details,
see Annex 4.

4.1 S

TATUS

THE

WB/GEF

PORTFOLIO

AND

POSSIBLE

DEVELOPMENT

The team made personal visits to each of the GEF project countries,
interviewing key players and decision makers, as well as conduct-
ing follow-up interviews and discussions by phone/email to clarify
the points and issues raised. The interviewed people are listed in
Annex 5. A detailed assessment of each project—status, key is-
sues and recommendations, energy infrastructure, and institutional
framework—is contained in Annex 4. This section summarizes some
of the key ﬁ ndings and issues relating to the projects.

Each project is at a different stage of delivery, and all have encoun-
tered various obstacles along the way (see Table 6). The Indian
Mathania project was the ﬁ rst to receive approval in principle from
GEF. The Mexican, Moroccan, and Egyptian projects beneﬁ ted
perhaps from the prior experience of India in terms of the bid docu-
ments and bidding procedure, and the dealings with the World
Bank and GEF. However, each country has its own institutionalized
routes through government. Speciﬁ c issues and difﬁ culties are dealt
with in Annex 4. Overall though, each country shows a high level
of enthusiasm and desire to progress with their projects. The fol-
lowing views are pertinent to the overall portfolio.

A certain amount of confusion has arisen from the wealth of LEC
ﬁ gures that appear around the world in papers, at conferences, and
independent evaluations. Quite often, the LEC ﬁ gure is discussed
with little regard to the assumptions and robustness of the underly-

ing calculation. For example, ﬁ gures of 12–14 c/kWh are often
purported to be the benchmark LEC set by the SEGS plants, when
in reality the agreed energy price for those SEGS plants depended
on maximizing return with due regard to time-of-use tariffs, the
various incentive schemes in place at the time, and the speciﬁ c
requirements of the investors. They do not necessarily equate with
the conventional method of calculating LEC—put simply, cost of
capital + O&M (with or without tax, depreciation, etc. included).
The other signiﬁ cant factors are the level of insolation under which
they were calculated, and the currency upon which they were
based. It is not appropriate, for example, to apply the exchange
rate between the euro and the Indian rupee to the whole of the
LEC and expect to have an accurate idea of LEC in India. Different
parts of the capital are sourced at different rates, and some of the
labor will be at local rates.

Individual techno-economic feasibility studies are needed and have
been conducted for these four projects (including a very recent one
for Mexico). These ensure that all factors are considered. They also
take local factors into account. For example, the Indian RfP set
speciﬁ c limits on the levels of euro and dollar that could be used
toward the EPC ﬁ nancing.

It is possible that an element of over-optimism surrounded the projects
of this portfolio at an early stage. When the detailed feasibility
assessments were carried out, including all the local factors plus
risk factors of performance, ﬁ nance and insurance, the ﬁ nal price
went up instead of down, which made things more difﬁ cult for the
decision makers at the political level. However, this is not a unique
scenario for a new, or relatively new, technology.

In addition, the projects were initially predicated on the basis of
an IPP structure, where all the difﬁ culties and risks of raising ﬁ nance

H E

T A T U S

O F

T H E

WB/GEF

CSP P

O R T F O L I O

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

and ensuring performance were to be borne by large organiza-
tions. When this had to be revised for EPC with O&M contracts,
many more institutional and governmental factors came into play,
which has resulted in delays.

It would be naive to believe that additional delays of some form
or other affecting one or more projects will no longer occur. We
believe ﬁ rm dates now need to be set for each project after con-
sultation with each country.

4.2 S

TATUS

THE

WB/GEF

PORTFOLIO

COUNTRY

4.2.1 WB/GEF project in Egypt (Kuraymat)

Project history

The chronology of the Egypt/Kuraymat project is as follows:

April 2004

Pre-qualiﬁ cation and bidding documents com-
pleted. In parallel, NREA was investigating
potential sources of ﬁ nancing, including JBIC.

June 2004

Government of Egypt makes ofﬁ cial request to
JBIC to ﬁ nance the project.

ABLE

6: S

UMMARY

GEF

PROJECT

STATUS

Country/project

Status of project

Project structure

Expected schedule

India, 140 MW ISCCS incl. 35 MW

WB waited on letter of commitment from

Single EPC with O&M (5 years). PPA with

Eventually, the project could not be timely

solar trough, site approx

Govt of India, after which the already-

RVPN. Project owner RREC.

implemented due to inappropriate design and

2,240 kWh/m

/year DNI.

drafted RfP (revised) could be released.

location.

Egypt/Kuraymat, 151 MW ISCCS incl.

Financial closure agreed. Solar thermal

Two EPC contracts. The solar island will be

Delays due to the splitting of the packages to

25 MW solar.

part and CC at bidding stage.

an EPC with O&M contract; the CC island

be funded by GEF, NREA and JBIC. Contract

will be an EPC contract with local O&M to

signature expected for early 2007. Construction

be bid separately ﬁ nanced by NREA.

might begin late 2007. Possible begin of

operation

late

2009.

Mexico/El Fresnal near Agua Prieta,

November/December 2005: Approval by

The ﬁ nal owner of the plant will be CFE.

At this stage, bidding is expected for 2006,

Sonora State (site decision in March

the Treasury Ministry. The hybrid plant has

They will undertake to provide the O&M.

construction to begin 2007, operation 2009.

2005, plant Agua Prieta II), originally

been included in the PEF (Programa de

(Previously, unsuccessful project

285 MW ISCCS but ﬁ nally increase

Egresos de la Federación) and approved

development under IPP scheme.)

CC to 560 MWe; Solar trough ﬁ eld

by Congress.

25–40 MW; Excellent solar site

Acceptance of the doubling of fossil

conditions (exact solar data not available). capacity by the WB task team after

technical economic assessment by Sargent

and Lundy (May 2006) and a consultancy

by Spencer Management.

Morocco/Ain Beni Mathar

EPC with O&M (5 years). Option exists to

Owner of plant will be ONE. Total cost

EPC with O&M contract for the project expected

240 MW ISCCS, including 30 MW trough. renew O&M contract after 5 years. Bids

expected approx

€

213M, including

to be signed by the end of 2006, and at the

Expected production from ISCCS 1,590

received May 2006. Ongoing evaluation

connection to infrastructure.

€

43M from

latest in January 2007.

GWh/year, of which approx 55 GWh/year process.

GEF, and

€

34M from ONE. Balance of

Expected start of operation of the plant is

solar (3.5 percent solar contribution).

€

136.45M from African Development

mid 2009 (construction time 30 months).

Bank as soft loan.

HAPTER

4 – T

TATUS

THE

WB/GEF CSP P

ORTFOLIO

August 2004

JBIC sends fact-ﬁ nding mission, shows interest,
but requests the splitting of the CC and solar
packages as well as a halt of 5 months on the
procurement process to allow for JBIC’s pro-
cessing and approval of the ﬁ nancing. World
Bank team expresses its reservations on the
two-package approach, given the signiﬁ cant
additional risks (integration, management and
accountability) it poses to the client.

March 2005

Government of Egypt decides to split the CC
and solar packages in order to obtain JBIC
ﬁ nancing.

March 2006

The prequaliﬁ cation process for the solar thermal

part (March 2006) resulted in four prequaliﬁ ed
bidders.

Future development according to current planning:

The project experienced delays due to the splitting of the packages
to be funded by GEF and JBIC, which required a certain change
in scope.

February 2007 Contract signature expected.

Late 2007

Construction might begin.

Late 2009

Possible beginning of operation (assuming 30
months construction time).

4.2.2 WB/GEF project in Mexico (Sonora)

Project history

The chronology of the Mexico/Sonora (previously Mexicali) project
is as follows:

1986

The Mexican electricity sector was opened
to competition in a limited way. New types
of projects emerged: financed built-transfer
projects OPF corresponding to EPC, CAT and

Independent Power Producers (PIE Productores
Independientes de Electricidad).

1995–96

Spencer Management Associates (SMA) under-
took an evaluation of ISCCS plants under IPP
ﬁ nancing scheme in cooperation with CFE.

Oct. 1998

Meeting on “solar thermal dissemination mission”
sponsored by IEA SolarPACES, CFE and others.
Interest was shown by all sides for a possible
solar thermal project as part of CFE’s expansion
plan.

Aug.–Nov. Technical and economical feasibility study
1999

carried out by SMA for integrating parabolic
trough solar ﬁ eld into a gas turbine combined
cycle plant at Cerro Prieto near Mexicali, Baja
California Norte.

Dec. 1999

Mexico solar thermal hybrid project entered the
GEF program (with GEF grant of $49.3 million)
as an IPP project at a speciﬁ c site in Mexicali,
Baja California Norte, to be procured in con-
junction with the planned Mexicali II Combined
Cycle Gas Turbine (CCGT) Project IPP.

March 2002

“Call for Bids” on an IPP basis was published.
The solar ﬁ eld was an option for the combination
with a CC plant.

April–March

After several postponements of the deadline

2003

for the “call for bids,” the bidding process was
halted after the visit of Laris Alanís (CFE director)
to the World Bank. It became clear that there was
an irresolvable “the hen or the egg” problem: the

http://gaceta.diputados.gob.mx/Gaceta/58/2002/feb/20020213.

html

Thematic Review of GEF-ﬁ nanced solar thermal projects, October

2001.

World Bank to GEF Council, April 2004.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

World Bank could not commit its grant funding
before knowing the identity of the winning bidder,
while CFE could not ﬁ nalize the bidding process
before the ﬁ nancing was secured. It also has to
be stated that there were not only problems on
the ﬁ nancing side, but also the industry response
to the published bidding was very limited.

For the further ISCCS project development, it was
decided that an EPC scheme with CFE as WB
grant recipient should be pursued. The solar ﬁ eld
would no longer be an option but compulsory.

Oct. 2004

Finalizing of a feasibility study for Mexicali II
(Baja California Norte) including Sargent and
Lundy as the World Bank’s consultants and social
and environmental specialists.

Nov. 2004

The plant location was changed to Sonora state
(Agua Prieta Site). CFE’s explanation was that the
power sector expansion plan would not allow
further delays related to the implementation of
the solar ﬁ eld.

March 2005

Inquiry from CFE to the World Bank if the Bank
would still support an ISCCS plant with a solar
ﬁ eld integrated into a 500 MW instead of a
250 MW plant.

May 2006

A technical economic study by Sargent and
Lundy and a consultancy by Spencer Manage-
ment, of the 500 MW CCGT concluded that
“the bigger the host of CCGT is, the greater the
conversion efﬁ ciency and the solar energy col-
lected” and explained that “the reasons for the
outstanding output is due to two factors i) higher
efﬁ ciency of the thermal 2x2x1 arrangement and
ii) the 500 MW thermal plant results in a lower
drop in efﬁ ciency during night hours, when the
solar ﬁ eld is not operating.”

By June 2005

Completion of technical and economical evalu-
ation by CFE.

June 2005

Presentation to the Treasury Ministry.

Nov.–Dec.

Approval by Treasury ministry.

2005

Jan. 2006

The hybrid plant has been included in the PEF
(Programa de Egresos de la Federación) and
approved by Congress.

Future development according to current planning:

June 2006

Invitation for tenders (published).

Sept. 2006–

Start construction.

Jan. 2007

April 2009

Grid connection of the plant.

4.2.3 World Bank/GEF/KfW project in India
(Mathania)

Project history

The chronology of the India/Mathania project is as follows:

1988

Project report to the Government of India (GoI)
on a 30 MW solar thermal power plant. GoI
approved India for a demonstration project.

1989 Land

allocated.

1990

Working group ﬁ nalized the parabolic trough
preference for design.

1991

Revised feasibility study report in view of cost es-
calations and tariff revision to Central Electricity
Authority (CEA) for techno-economic clearance
(TEC).

1992

CEA dropped project, ﬁ nding it techno-economi-

cally non-viable.

HAPTER

4 – T

TATUS

THE

WB/GEF CSP P

ORTFOLIO

1993

Prime Minister’s Ofﬁ ce intervened, steering com-
mittee was constituted.

1994

BHEL and Solel prepare detailed project report
for 35 MW solar.

1995

Proposed to GEF and KfW for funding; compre-
hensive feasibility report prepared by Engineers
of India and Fichtner; found 140 MW CC with
35 MW solar most viable.

1996

Possibility of implementation by IPP with private
equity explored; GEF grant of $49 million
agreed to in principle.

1997

Rajasthan State Power Corporation Ltd formed
especially for the Mathania ISCCS project.

1998

Detailed project report (with naphtha as fuel)
submitted to CEA for TEC.

1999

CEA approved, KfW appraised, EPC with O&M
approach decided on.

2000

GoI decision facilitates grant funding; Fichtner
Solar appointed as consultant.

2001

Pre-qualiﬁ cation process completed; high price
volatility of naphtha results in changeover to R-
LNG; revised pre-qualiﬁ cation process initiated.

2002

Pre-qualiﬁ cation ﬁ nalized with LNG as fuel;
RfP document ﬁ nalized; project agreement and
separate agreement signed; heads of agreement
for gas supply signed with GAIL; RfP issued.

2003

Protracted negotiation with potential bidders fails
to secure a bid.

2004

Fichtner redrafts RfP ready for release mid-2004,
but prior to release World Bank requests a letter
of commitment to the project from Government
of India.

Letter from GAIL (India Ltd) to Rajasthan Renew-
able Energy Corporation (RREC) (March 16
2004) stating that the agreed gas price would
be INR270.47/MMbtu, including transmission,
and escalating at 5 percent per year (note RREC
modeling assumes 5 percent per year for ﬁ rst 5
years, then ﬁ xed).

Principles and terms and conditions for PPA
agreed upon by Discoms and RREC on 16th
August 2004.

Letter from CEA to Government of Rajasthan con-
ﬁ rming LEC of INR2.62/kWh (current modeling
shows 2.82) and suggesting that it would be
“desirable that the concerted efforts be made to
implement the project at its earliest” (September
3, 2004).

2005

MNES informed of new large gas/oil ﬁ nd near
Mathania.

Future development according to current planning:

At the time of the study, the consultants had recommended that (i)
the GoI needed to reply to the World Bank letter of 2004 stat-
ing the government’s commitment to the project proceeding and
to meeting the requirements stated therein, and that (ii) there be
a resolution of the balance of funding from KfW. Eventually, the
project could not be implemented in a timely manner due to inap-
propriate design and location.

Additional information/discussion of the Indian project

In March 2003, the STAP Brainstorming Session on OP 7 (STAP
2003) reported that the likelihood of success for the Indian project
was 30 percent, due partly to the complicated process to that
date, and the risk to industry players. In the intervening period, we
believe the chance of success has risen.

gas and PPA agreement principles, terms and conditions have

been agreed to;

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

a modiﬁ ed bid document has been prepared in draft form (we

have been unable to view this document);

all clearances are now in place;

the CEA, which dropped the project on the grounds it was

“techno-economically nonviable” in 1992, has recently (Sep-
tember 3, 2004) written to the Government of Rajasthan stating
that it would be “desirable that the concerted efforts be made
to implement the project at its earliest”.

The document “principles of PPA” dated September 16, 2004,
has been modiﬁ ed from that agreed to in June 2001. It includes
the following:

The determination that there will be “no ﬁ nancial burden on the

Discoms (distribution companies) because the tariff is well below
the cost of generation compared to new coal-based power
plants and within the price-band of procurement of power by
the utilities.”

States that the risk involved with a “take or pay” gas contract

will be covered by a back-to-back arrangement under the PPA.
Furthermore, if the plant load needs to be reduced on request
from Discoms, there will be compensation paid for ﬁ xed charges
and take or pay obligations of the gas supply contract. The
problem was exacerbated when the GoR directed in 2001 that
the ISCCS plant would be outside the purview of merit order
dispatch.

Notwithstanding occasions when there will be no choice but to

ask the plant to shut down, every effort will be made to keep
the solar part going when radiation is available by ensuring the
part load of the CC remains high enough to enable the solar
ﬁ eld to operate (albeit at part-load conditions).

The latest costing spreadsheet (June 2004) shows a ﬁ rst year energy
cost of INR 2.49/kWh, and 20 year average LEC of INR 2.82/
kWh (taking into account: $45 million GEF grant, INR 500 million
GoI grant, and INR 500 million GoR grant). The total project cost,
including IDC, is INR 8,226.87 million. This is based on a gas
price of INR 270.47/Mmbtu, a water price of INR 20/1,000
Cuft, and O&M at 1 percent of total project cost for ﬁ rst 2 years,

then 2.5 percent in year 3 with 4 percent escalation following.
These costs have been worked out on the basis of a total plant
output of 155 MW, with 30 MW solar block. The annual electrical
output of the plant is 916 GWh, including 63 GWh estimated
from the solar block.

Note that it was conveyed to us that the present pool price is
INR2.1–2.2/kWh, depending on the hydro situation, but imported
electricity to the State of Rajasthan is around INR4–5/kWh. Cur-
rently, Rajasthan imports much more electricity from other states
than would be generated by the Mathania plant. The electricity
generated by Mathania will essentially be a cheaper substitute for
currently imported electricity.

Based on these ﬁ gures, the solar electrical capacity factor is 24 per-
cent. This seems high for an insolation regime of 2,240 kWh/m

yr DNI, even allowing for the advantages of ISCCS in terms of start-
up and transients. However, even if a 20 percent capacity factor
were assumed to allow for ﬁ eld availability, the LEC only goes from
2.82 to 2.85. This is another of the effects of ISCCS—it desensitizes
the overall LEC to solar performance (in both directions).

With regard to gas supply, RREC has informed MNES about the
biggest inland gas and oil reserve found in Jaisalmere and Barmer,
which is about 150–170 km from the Mathania site. Cairns
Energy, UK, will operate oil and gas rigs. This is closer than the
present 425 km, and if supplies are conﬁ rmed, should result in a
cheaper gas price. However, it is understood that the “GoR has
entered into a gas cooperation agreement with GAIL for assess-
ment of potential demand in the industrial sector, transport sector
and domestic sector on the pipeline route, which will further bring
down the transport charges to Mathania project on progressive
development of demand potential.” There is also potential for the
possibility of further extension of the pipeline from Kota-Mathania
to Ramgarh (Ramgarh Gas and Power) due to the potential for
industrial towns along the way.

Though these gas options provide the possibility for cheaper gas,
they also give rise to further project delay while the optimum op-
tion is being sought. A preferred route needs to be established as
soon as possible. The study could be conducted while bids were
being assessed. Then construction of the new pipeline needs to
be started so that gas ﬂ ows will have been established prior to

HAPTER

4 – T

TATUS

THE

WB/GEF CSP P

ORTFOLIO

construction completion of the ISCCS. This completion date will
need to be enforced by penalties for late delivery.

There seems to have been a differing view over time as to the
capacity of the solar portion. Figures up to 35–40 MW of solar
have been circulated, but the latest cost spreadsheet was based
on 30 MW. This seems a sensible choice if the reluctance of the
GoI to sign off is due to cost. It makes the technical integration
easier, with less manipulation of an otherwise optimized combined
cycle required. It also improves the overall GHG performance of
the ISCCS as off-design operation is closer to the ideal (the steam
turbine is better dimensioned so duct-ﬁ ring or the level of part-load
operation is reduced). The arguments by RREC appear to make
this capacity quite competitive in terms of LEC versus the imported
price of electricity. However, we would recommend consideration
of the following option for the next RfP.

The next RfP should include additional assessment criteria with a
signiﬁ cant weighting that considers the size of the ﬁ eld (or solar
GWh

) offered. There should still be a minimum required ﬁ eld size

(in the original RfP this cut-off was 50 GWh

below which the bid

would not be considered). But this should be a lower ﬁ gure, to be
determined through consultation. This would mean that bids could
be differentiated on the basis of the solar ﬁ eld size, prompting
competition on both the quality and quantity of solar offered.

Paradoxically perhaps, the ultimate outcome for GEF is likely to
improve if the solar expectation is reduced. The solar ﬁ eld, which
is modular in design, will generate as much experience and know-
how as a larger one. And though the solar capacity would be less,
the number of solar MW is to some extent arbitrary. In the broad
scheme of things, which is ultimately what OP 7 is concerned
with, the technology and the industry would be better served by
a successful project. There is more chance of a successful industry
being spawned by a successful 25 MW than by a risky 30 MW,
or even by a proposed 35 MW that never proceeds because it is
too expensive. By 2015, no one will be concerned that the very
ﬁ rst project was a few MW less than originally intended.

One of the delays in 2003 when no bids were received was due to
the fact that there was no clear deﬁ nition of who would bear the risk
liability. We were informed the risk issues have since been resolved
and tender documents revised. Currently risk is being shared by

the whole consortium of contractors. The second issue raised by
MNES was involvement of very few contractors in the project and
the revised proposal has a consortium of contractors/participants
to address this issue. The Department of Economic Affairs fully
supports this project and will ultimately approve it. Currently, the
decision for this project rests with MNES.

The original project was approved by the central government,
but there was a change of government after the last election in
late 2004. The new central government revised the whole project
again and approved it in principle, but the formal decision is still
outstanding. The ﬁ nal decision is to be made by MNES (Ministry of
Non-conventional Energy Sources). Ofﬁ cials from the MNES have
personally visited the Mathania site and approved the project in
principle. The chief minister of Rajasthan wrote to the prime minister
(around February 2005) to speed up the process, but no reply
has been received as yet. RREC believe formal approval could
be gained any day.

Ofﬁ cials from the Rajstahan Vidyut Vitran Nigam stated that they
fully support the project and will purchase electricity subject to the
Rajasthan Regulatory Commission setting the price.

4.2.4 World Bank/GEF project in Morocco
(Ain Beni Mathar)

Project history

The chronology of the Morocco/Ain Beni Mathar project is as
follows:

1999

Idea for the Moroccan project started in 1999.
The Morocco project entered the GEF work
program in May 1999.

2000

Assistance by Fichtner Solar for the design of
bidding documents under an IPP scheme.

Feasibility study report (while IPP scheme in-
tended).

2002

The Moroccan electricity sector started to open
to competition in a limited way (smaller con-

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

sumers remain captive). Process still ongoing in
2005.

2003

Publication of the IPP call in 2003; organization
of a workshop with interested companies. But
not enough consortia interested in the bid (pos-
sible reasons: technology uncertainties, market
uncertainties, lack of long-term PPA).

2003

Change to public ﬁ nancing as public EPC with
O&M the same year.

Revised feasibility study report according the
public EPC scheme.

2004

Prequaliﬁ cation procedure in 2004, bidding
and evaluation in 2005.

2005

Fichtner Solar redrafts RfP ready for release mid-
2005.

May 2006

Two out of four pre-qualiﬁ ed bidders submitted
a technical and a commercial proposal and
the bids were open on May 10, 2006. Faced
by a shortage of capacity, ONE is considering
asking the bidders for an increase in the size of
the combined cycle power plant. No decision
has been reached yet.

Future development according to current planning:

Dec. 2006

Bidding and evaluation of the bids.

Jan. 2007

Contract signature.

Feb. 2007

Construction is to begin

Dec. 2008–

Plant starts operation.

Jan. 2009

he original interest of the World Bank and the Global
Environment Facility in CSP technology was due to the
signiﬁ cant contribution that CSP could potentially make
toward meeting the rapidly increasing energy demands of

the developing world. It is evident that the WB/GEF portfolio in
itself—with at best around 120 MW solar thermal power capac-
ity at the end—is not able to signiﬁ cantly reduce the costs of CSP
technology, and was never intended to do so, although this issue
is mentioned as an aim for the WB/GEF portfolio. The institutional
learning aspects, which cannot be so easily measured quantitatively
as levelized electricity costs (LEC), have by far been more important
than the possible cost reduction. It is also important to underline that
the commitment of the GEF on the CSP technology was important
in ﬁ nancial terms given that the GEF funds for the project portfolio
represent roughly one-third of its annual budget for climate change
issues in recent years.

Given this important engagement and the stated objectives of the
WB/GEF portfolio, it is legitimate to consider the long-term con-
tribution of the CSP portfolio and possible evolution of a long-term
strategy by the WB/GEF, independent of any shorter-term focus
of large organizations. Short-term focus may yield premature re-
sponses, driven by failures, pressure from alternative development
routes, or up-coming issues “à la mode.” Nevertheless, it is clear
also that a complex issue

such as the introduction of CSP tech-

nology in developing countries needs more time than just the time
of the realization of a portfolio of four projects. It is therefore not
surprising that the portfolio encountered the difﬁ culties and delays
that have been observed so far.

The main question for the WB/GEF today is whether the effort
necessary to continue the support for the joint development of technol-
ogy and structures is worthwhile, or whether the exceedingly slow

progress of the portfolio thus far makes it difﬁ cult for the WB/GEF to
further pursue CSP technology, quite apart from the short-term aspect
of bringing the currently existing portfolio to a successful end.

With such heterogeneous interests, it is valuable to consider the
implications of different scenarios, both in the short and the long
term, before providing recommendations on a market strategy within
and beyond the currently existing portfolio in Chapter 6.

5.1 “S

CENARIO

”

DISCUSSION

STRATEGIC

ASPECTS

FOR

WB/GEF

THE

DEVELOPMENT

CSP

This section explores, in the form of different scenarios, the possible
consequences and impacts of decisions made at the WB/GEF for
CSP technology. It is not the intention to provide a judgment on one
or the other option, but to simply depart from the present situation
and explore the likely impact of other choices.

O N G

T E R M

CSP

D E V E L O P M E N T

S C E N A R I O S

F O R

T H E

O R L D

A N K

/GEF

Not so much complex from the technological side, given the fact that

the components for CSP technology are already well-proven, including in
large projects, but from the fact that one combines the development of a
new technology of a certain scale with the inadequacy of existing structures
in the developing world to try to bring the technology to a more mature
stage. The scale of the CSP technology is an important aspect in this, and
proper to CSP, as is the aspect that CSP development in industrialized
countries has so far not contributed to introduce sufﬁ cient amounts of power
capacity to reduce costs and to establish an industry. With smaller scale
technologies such as PV or wind, similar problems exist for the combined
development of technology and structures in the developing world, but the
two aspects previously mentioned have greatly reduced the importance
of these technologies.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

For the purpose of representing short- and long-term aspects, the
scenarios are divided into two groups:

The “First Round.” This group of scenarios treats short-term aspects

and in particular the current WB/GEF portfolio and the impact
of decisions on the portfolio on the ongoing CSP developments
around the world. Within the ﬁ rst round, the following two
scenarios are considered:

“Falling Dominos.”

This scenario assumes that the WB/GEF

portfolio would be canceled as a whole due to the delays
accumulated so far, as well as the recognition that WB/GEF
might have underestimated the time it takes to get the technol-
ogy to the market in the developing world with inadequate
structures to promote renewables and without parallel efforts
in industrialized countries.

“Getting to the harbor.”

This scenario assumes that the

WB/GEF portfolio would be partially or totally realized
during the next two years.

The “Second Round” assumes a (more or less) successful termi-

nation of the ﬁ rst round and considers options for WB/GEF for
further activities. This is inscribed in a longer term vision of CSP
development, including both the development of the technology
and of suitable structures.

“Wait and See.”

This scenario is based on the recognition

by WB/GEF that as long as the costs for CSP have not
come down to levels close to being competitive with fossil
power generation, and as long as the political frame for re-
newables and CSP in developing countries is not advanced
enough, further support to CSP is not likely to have much
impact.

“2-Track approach” (CSP in industrialized + developing

countries).

This scenario is based on the recognition by

WB/GEF that CSP will not develop simply in regions other
than industrialized Southern countries, at least not on the
short term, but requires further support and development at
the international level in order to open up rapidly the second
track.

“Specialising.”

This scenario is based ﬁ rst on the recognition

by WB/GEF that the large scale promotion of CSP might
exceed its ﬁ nancial and institutional capacities, and second
on the recognition of the fact that CSP is to play an important
role in the power mix of developing countries. This requires
specialization of the WB/GEF support on particularly
sensitive issues for the future development of CSP in those
countries.

It is also suitable for such scenario development to classify the
countries according to their possible interests in CSP technology
into three groups:

Group 1 countries.

Industrialized countries with suitable climatic

resources for CSP technology and highly developed economies
that have already set up a comprehensive framework to promote
renewables or that could potentially do so (southern Europe,
southwestern United States, Israel)

Group 2 countries.

Countries that are or will sooner or later be

connected to Group 1 countries, and among themselves, for
power exchange (Northern Africa and Mexico

). Figure 17

clearly illustrates the importance of this issue with the example
of the Mediterranean rim. There are a variety of developments
going on that make this „ring“ more likely to happen in the
future than in previous times. Such aspects concern the open-
ing of electricity markets, although to various degrees in North
African countries, the establishment of physical links for power
exchange among North African countries themselves as well
as toward Spain and Italy. CSP can potentially play an im-
portant role in this power exchange. However, the implication

This grouping is derived from a similar classiﬁ cation proposed in the

Global Market Initiative (GMI). There was an intensive debate at one of
the workshops organized in the course of this project regarding whether the
distinction between Group 2 and Group 3 is not too artiﬁ cial. However,
looking at the map presented on the interlinkage of the Mediterranean
area and its potential large impact, it appears useful to consider these
two groups separately.

Mexico is an OECD country, but still has some characteristics of a

developing country caused in part by the large split in wealth within the
population.

HAPTER

5 – L

O N G

T E R M

CSP

D E V E L O P M E N T

S C E N A R I O S

F O R

T H E

O R L D

A N K

/GEF

of such a power ring goes well beyond the mere importance
of electricity exchange: it contains elements of political

and

societal development around a project of common interest, as
well as economic development by setting up local production
structures for important components of technologies and prod-
ucts, such as for CSP technologies. Structures of this type exist
with the so-called “maquiladoras,” manufacturing companies
of small to large size along the Mexico-United States border,
cooperating intensively with companies in the United States.

Depending on the success or failure of the ﬁ rst round of CSP
development, this group of countries appears as strategic in
the future development of CSP. For the moment, given the
somewhat more hesitant development of CSP in the Southwest
United States as compared to the development in Spain; the
impression that the North African WB/GEF CSP projects
have the highest chance of being realized; and the stage of
the ISCCS project proposed outside the WB/GEF portfolio in
Algeria, as well as the CSP activities in Jordan, Iran, and Israel
suggest that the Mediterranean area is a key region for future
CSP development, given the institutional learning accumulated
so far for CSP in these countries as well as in the international
funding organizations.

Group 3 countries.

These developing countries are not close

to the electricity grids of Group 1 countries. This comprises
important countries like India, China, Brazil, and South Africa,
where the driving force is essentially the tremendous need for
new electricity generation capacity. The motivation to invest
in CSP might be different and focused on the national context
rather than on the interaction with other countries.

5.2 T

IRST

OUND

: “F

ALLING

OMINOS

“

This scenario, dealing with shorter term aspects, assumes that
the WB/GEF portfolio would be canceled as a whole in a short
frame of time due to the delays accumulated so far as well as the
recognition that WB/GEF might have underestimated the time it
takes to get the technology to the market in the developing world
with inadequate structures to promote renewables and without
parallel efforts in industrialized countries. As a consequence,
there could be negative impacts on all three groups of countries,
though with different degrees. In some countries, such as Spain,

which has a solid policy framework for CSP in place, it appears
less likely that there would be an impact of a WB/GEF decision
to phase out the portfolio, although in the longer term (Spain has
a decision point concerning the continuation of its favorable sup-
port frame for CSP once 500 WM are reached), some impact
cannot be excluded.

IGURE

17: T

STRATEGIC

POSITION

ROUP

COUNTRIES

FOR

THE

DEVELOPMENT

CSP

TECHNOLOGY

(

EXAMPLE

THE

EDITERRANEAN

AREA

)

Political relationships among countries in North Africa, for example

among Morocco and Algeria, continue to be difﬁ cult for a variety of
historic reasons. However, there are encouraging efforts and symbols to
overcome these divisions. Potentially, in the longer term North Africa can
parallel the European Union.

The development of such structures is not without problems for the Group

1 countries, given the high levels of unemployment in some of them and
the pressure from the population to protect national employment; see for
example the recent discussion in Europe after the opening of the EU toward
the Eastern countries and the subsequent transfer of production plants to
these regions and the social consequences in the old EU. On the other
hand, it is unlikely that the development of a North African Union would
not present in some stage of its development such features.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

5.3 T

IRST

OUND

: ”G

ETTING

THE

HARBOR

“

This scenario, also dealing with shorter term aspects, assumes that
the WB/GEF portfolio would be partially or totally realized

during

the next two years. The timeframe of two years appears reasonable

in order to provide enough time for the projects to progress. It is
difﬁ cult to conceive that the WB/GEF portfolio should exceed this
time frame up to contract signature given the fact that the catalyser

Comments:

Critical moment in time for CSP: a

variety of projects are in a phase of
consolidation Other projects in a phase
of stabilization.

The WB/GEF portfolio represents a
relatively small installed solar capacity of
around 120 MW; nevertheless important
amount of solar technology, given the
early stage of the industry and the few
plants under construction.

The WB/GEF projects represent with
Algeria, the only ISCCS plants currently
in some advanced stage.

Possible Impacts:

Strong impact on Group 1 countries

partially unlikely: solid policy frame
in Spain; Arizona quite advanced. But
further developments, e.g. in Nevada,
California, Israel slowed down. The
CSP market loses the chance to get a
broader base to be less dependent on
promising but early-stage market devel-
opments in Spain and other countries.

Impact in Group 2 countries (Algeria)
and Group 3 countries larger: “If
even the countries supported by
WB/GEF cannot do it, we can’t do
it either”. CSP technology—being
a very important technology for GHG
reduction in the countries of the world‘s
sunbelts—might not at all or only
after 20 years be applied in de-veloping
countries. ISCCS technology particularly
threatened.

No realization of important learning

effects with the solar suppliers, and
in particular the consortia (compris-
ing solar suppliers and suppliers of
conventional CC technology) that
propose ISCCS technology. This could
have negative consequences for the
future cooperation of such consortia on
plants with larger share of solar thermal
generated electricity.

Credibility/reliability of GEF and World

Bank at stake, at least within the CSP
community.

By 2010 at best 500 MW installed CSP

All WB/GEF CSP

Negative Impacts on all groups of

projects canceled

countries (delay; projects canceled)

The expression “has been realized” means in this context that the sig-

nature of the EPC contract with the successfully bidding consortium has
occurred, not the fact that the plants have been built. This takes typically
another 2−3 years.

All 4 WB/GEF CSP passing
in next 2 years

2–3 WB/GEF CSP passing
in next 2 years

Comments:

The frame for CSP technology take-off
is currently the most favorable in years
(development in Spain; international
energy price environment).

“Psychological” impact of 4 or only
2–3 WB/GEF projects realized probably
quite similar on the different groups of
countries. Realizing only one project
out of four would not be sufﬁ cient to
characterize the portfolio as a success;
it would at best be perceived as “saving
face”.

Revision/cancellation of 1–2 projects:
Question of alternatives? Alternative
technology lines to ISCCS concept, see
next page (time delay?) Support to
more motivated countries (preferentially
in Group 2) with good projects and the
willingness to set up suitable support
structures.

Environmental impact (CO

) of the

WB/GEF portfolio small (ISCCS plants).
Success aspect more important than
environmental expectations.

Projects passing in Group 1 and
2 countries, and some projects in
Group 3 countries by 2010

Possible Impacts:

In total about 1,000 MWe CSP installed
or in construction by around 2010
(Spain 500 MW, Nevada 50 MW,
California, Israel 100 MW, Algeria 25
MW in ISCC, South-Africa: 100 MW,
Iran, Jordan,…, WB/GEF 120 MW in
ISCC).

Progress on cost curve not yet enough
but noticeable

Successful examples of projects in Group
2 and possibly Group 3 countries.

Different technology lines in the phase
of realization (including the ISCCS
technology line in the WB/GEF portfolio
and in Algeria), opening up options for
future choices.

IRST

OUND

: F

ALLLING

OMINOS

IRST

OUND

: G

ETTING

THE

ARBOR

HAPTER

5 – L

O N G

T E R M

CSP

D E V E L O P M E N T

S C E N A R I O S

F O R

T H E

O R L D

A N K

/GEF

function in a now more favorable environment for CSP might have
passed, either due to sufﬁ cient progress in Group 1 or due to a
slowing down of CSP activities worldwide once again. One pos-
sibility to speed up the operations could be a transfer of the CSP
portfolio to the IFC.

It is important to underline that the environment for CSP develop-
ment is currently indeed different from the one a few years ago:
sometimes, while reading statements made a few years ago by
supporters of the CSP technology, some critics of the engagement
on CSP have the impression of “déjà vu,” when it comes to current
statements on development of CSP in industrialized countries as
well as the imminence of the WB/GEF portfolio and other projects
in developing countries being realized.

Although it is clear that even today it is not unlikely that there is
a part of “principle hope” with respect to the speed with which
changes occur, it is undeniable that two important frame elements
for CSP have changed in the last two years: (1) the general en-
ergy price environment is one of strong tensions on prices; and
(2) the development and the policy frame in Spain is a hard fact,
although even for these two elements reverses or delays are not
fully excluded (short-term collapses of energy prices due to reces-
sion in important countries or speculation; delays in the realization
of current projects and the starting of new projects in Spain). As a
consequence there could be positive impacts on all three groups
of countries, with most impact on Group 2 countries. The basic
requirement for the realization of this scenario is that the WB/GEF
promotes very actively at the conclusion of the contracts for the next
months. Otherwise, keeping contract signature within a delay of
two years will not be possible.

In the case of the revision/cancellation of one or two projects,
and the wish of the WB/GEF to support further this important
technology, the following alternative technology lines to the ISCCS
concept might be considered:

Market introduction for industrial process heat applications based

on concentrator solar

Small-scale solar combined heat & power plants (heat for absorp-

tion chillers (e.g. air conditioning), process heat or sea water
desalination (the latter one becoming an increasingly important

in some cases dramatic issue in many countries with good solar
resource).

Feed-water preheating in fossil steam plants: promoting also

other than parabolic trough collector types (e.g. tower, dish,
Fresnel) by a technology-unspeciﬁ c bidding procedure, feed-
water preheating leads to good solar efﬁ ciencies, good ratio
of funding and solar-MWh because of reduced investment.
Existing plant (infrastructure) might be used.

5.4 T

ECOND

OUND

: ”W

AIT

AND

“

This scenario, dealing with longer term aspects, is based on the
recognition by WB/GEF that as long as the costs for CSP have not
come down to levels close to being competitive with fossil power
generation,

and as long as the political frame for renewables

No WB/GEF activities in Group 2
or Group 3 countries until costs
for CSP are lowered

Comments:

CSP electricity cost reduction continues
toward break-even with fossil generation
by 2015–20.

Competition from other renewables in
Group 2 and 3 countries (wind, PV,
concentrating PV, geothermal). But CSP
has some advantages: 1) dispatchability
(due to storage and/or hybrid ﬁ ring) 2)
local industry promotion/job creation 3)
sea water desalination.

WB/GEF working on improvement
of the policy frame for CSP in some
countries.

Group 1 countries going ahead;
realization of projects in Group 2
and 3 countries left to the market
and possibly other international
funding organizations

Possible Impacts:

Little impact in Group 1 countries

Delays in the replication of projects in
Group 2 and 3 countries from the ﬁ rst
round.

CSP will loose market shares to other
renewables in Group 2 and 3 countries,
perhaps even to more expensive
renewables such as PV.

ISCCS technology line abandoned
except for Algeria.

By 2015 not more than 2,000 MW
installed.

Considering nevertheless that gas prices are on the rise for power

generation even if contracts for gas delivery tend to have very long run-
ning times.

ECOND

OUND

: W

AIT

AND

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

and CSP in developing countries is not advanced enough, further
support to CSP is not likely to have much impact. This means es-
sentially taking a break on the technology for the next ﬁ ve years
and reconsider activities in the light of the development occurred
by then. This attitude raises a variety of questions:

with respect to the long-term requirements as well as the con-

stancy needed from the side of a funding organisation like the

GEF to promote such a large scale technology as CSP in the
developing world;

the relevance of this technology in the future power generation

mix of the developing world in general, and in comparison to
other renewable energy sources in particular

the necessary preparation of the policy frame in developing

countries before such a large-scale technology can be taken
up

WB/GEF supports further
motivated Group 2 and 3
countries

Comments:

Question of the technology choice,
if any choice to be made „...(ISCCS
plants may be excluded because of low
and unexpendable solar shares (<20
percent)”.

More critical on environmental perfor-
mance? (ISCCS technology).

Revision of the bidding procedures
(complexity, liability issues: e.g. what
is an adequate liability for the solar
component in the case of ISCCS technol-
ogy).

Question of the most successful business
model (public EPC versus private IPP
investments).

Type of ﬁ nancing instrument (GEF
grants, soft loans, Clean Development
Mechanism)?

Requests on the policy frame for renew-
ables/CSP of the hosting country?

Requests on the structure of the electric-
ity sector in the hosting country?

Question of the focus on Group 2 coun-
tries given the prominent role of these
countries for CSP at an intermediate
stage of technology take-off.

Linking up with the Global Market Initia-
tive.

Group 1 countries going ahead,
Group 2 and 3 countries taking
up in parallel

Possible Impacts:

Realistically ~4 projects (perhaps ~8
if continued cost reduction from ﬁ rst
round).

Strong CSP development in Group 1
countries as a basic requirement for
the justiﬁ cation of such an important
commitment. Possibly stronger signs
of development from countries such as
Italy, Israel, and the U.S. where devel-
opment is still slower or nonexistent
compared to Spain.

Concentration on Group 2 countries as
a key group at the intermediate stage
of development of the CSP technology
(previously successful WB/GEF group
2 countries and new countries such as
Algeria, Jordan, Iran).

Mitigation of the risk that the few CSP
market nations might fail to successfully
make the CSP market run (see above).

Concentrate on technologies that allow
a ﬂ exible extension of solar capacities
as ﬁ nancial means become available.
ISCCS continues depending on the
interest of the host country, but more
technology options realized in develop-
ing countries.

By 2015, more than 2,000 MW
installed, in case of a very favorable
development up to 5,000 MW.

WB/GEF supports further moti-
vated Group 2 and 3 countries
but only in a specialized way

Comments:

Support technologies particularly
well adapted to some of the Group 3
countries.

Enhancing the application of smaller
scale CSP (dishes?) to alleviate the
problem of the large initial steps to
enter CSP, even if speciﬁ c costs higher.
Small direct impact on the overall
installed MW.

Concentrating on other technology
routes such as a larger market introduc-
tion of CSP technology for small-scale
CHP in industrial and other ap-plications.

Concentrating on countries with
problematic water supply (not all CSP
technologies equally suitable).

Concentrating on regions with weaker
grids.

Activities to improve the frame for CSP
(non-technical) and to reduce liability
problems in particular cases by suitable
guarantees.

Linking CDM activities and CSP support
(carbon pricing alone cannot bring suf-
ﬁ cient support unless costs of CSP have
fallen further).

Group 1 countries going ahead,
Group 2 and 3 countries taking
up in parallel

Possible Impacts:

Longer-term “preparation of grounds”
for the faster take-off of the CSP
technology thereafter.

No large-scale CSP projects with
WB/GEF involvement. Projects in Group
2 and Group 3 countries mainly market
driven or driven from the national level
/ other in-ternational ﬁ nancing sources.

ISCCS technology line abandoned ex-
cept for countries with speciﬁ c interests
such as Algeria.

Impact on installed MW com-paratively
small.

By 2015, not more than 2,000 MW
installed.

ECOND

OUND

: 2-T

RACK

PPROACH

ECOND

OUND

: S

PECIALIZING

HAPTER

5 – L

O N G

T E R M

CSP

D E V E L O P M E N T

S C E N A R I O S

F O R

T H E

O R L D

A N K

/GEF

5.5 T

ECOND

OUND

: ”2-T

RACK

PPROACH

“

This scenario, also dealing with longer term aspects, is based on
the recognition by WB/GEF that CSP will not develop simply in
regions other than industrialized Southern countries, at least not on
the short term, but requires further support and development at the
international level in order to open up rapidly “the second track.”
Such a second track raises inevitably the question whether the GEF
can raise again a substantial fraction of its climate change budget
and justify this internally as well as to the GEF donors. In turn, this
question can only be answered once the GEF has reﬂ ected on the
importance of the development of CSP for the power supply of
developing countries. It also raises the question of lessons learned
from the ﬁ rst round with respect to the institutional settings and the

long-term interest in the countries taking up the technology, questions
of technology choices, etc.

5.6 T

ECOND

OUND

: ”S

PECIALIZING

”

This scenario, dealing with longer term aspects, is based on one
hand on the same assumptions as the “wait-and-see” scenario
described previously (that is, the recognition by WB/GEF that
the large-scale promotion of CSP might exceed its ﬁ nancial and
institutional capacities), and on the other hand on the recogni-
tion of the facts described in the “2-Track Scenario;” that is, the
important role that CSP is to play in the power mix of developing
countries. This requires specialization of the WB/GEF support on
particularly sensitive issues for the future development of CSP in
developing countries.

his chapter tries to narrow the different scenarios considered
in the previous chapter. It starts with the statement of the cen-
tral objective of a long-term vision for solar thermal power
and develops a set of success criteria for the establishment

of such a long-term vision. This vision does not imply a unique
strategy and a unique actor to realize it, but (possibly harmonized)
efforts from different actors, including WB/GEF, in both developed
and developing countries. The chapter then provides answers for a
variety of questions aiming et the role and consistency of WB/GEF
actions on CSP departing from the present portfolio up to long-term
aspects of WB/GEF involvement in CSP.

6.1 L

ONG

TERM

VISION

FOR

CSP

Proposed long-term vision for solar thermal power in developing
countries:

CSP should be supported to encourage a rapid growth phase to
the point that it plays a key role in the electricity supply mix of
developing countries where there is a good solar resource.

This vision is based on the following observations. A more detailed
rationale for these reasons is provided below in the form of hypoth-
eses. The corresponding hypotheses are mentioned in brackets.

1. In order to maintain climate change within acceptable limits, CSP

power plants must, in combination with other renewable power
options, increasingly replace fossil infrastructure in developing
countries that would build up in those countries and create a
lock-in for at least three decades (

Hypothesis 1

). Promoting CSP

ﬁ rst through small-scale applications in order to lower cost and
then return to the bulk power market with a more competitive

CSP technology cannot fulﬁ l this target given the time frame
involved (

Hypothesis 2).

2. Due to promising cost-reduction prospects (Hypothesis 3

), dis-

patchability and local industry beneﬁ ts, CSP is considered one of
the most promising technologies for deep cuts in GHG emissions
in countries of the world’s sunbelt. Other renewables except geo-
thermal, which appears complementary to CSP, and potentially
wind energy, cannot ﬁ ll in the gap rapidly enough (however, wind
suffers from the problem of dispatchability) (

Hypothesis 4).

3. Although today the economic perspective is prevailing in many

developing countries, and although the way will certainly be
long toward general acceptance of the fact that, despite the
historic emissions of the developed world, a large contribution
to the GHG problem will growingly come from the developing
world, developing countries start to realize that climate change
will threaten their development before they can reach the level
of the developed world. Correspondingly, many of them take
ﬁ rst steps toward renewable targets and frameworks, which will
help to promote CSP in suitable countries and in a suitable mix
with other renewables (Hypothesis 5).

4. Exporting electricity from renewables from the sunbelt may con-

stitute an important incentive for some developing countries to
introduce CSP plants. This is, however, not to be promoted without
precaution: Given the strong growth in electricity demand in devel-
oping countries mentioned under (1), renewable power must ﬁ rst
be directed toward reducing GHG emissions from power genera-
tion in their own country. Two regions, the Mediterranean/Near
East area and Mexico have—in the longer term—the potential
to export additional solar electricity to the Northern industrialized
countries (United States and Europe) in order to replace fossil

H O R T

A N D

L O N G

T E R M

R E C O M M E N D A T I O N S

F O R

T H E

WB/GEF

S T R A T E G Y

F O R

CSP

I N

T H E

C O N T E X T

O F

L O N G

T E R M

V I S I O N

F O R

CSP

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

fuel generated electricity there, to lower GHG emissions, and
to develop a common project narrowing the development gap
between both the participating parties (Hypothesis 6).

The central objective is underpinned by the following accompany-
ing hypotheses:

Hypothesis 1: Now is the right time for CSP to increasingly replace
new installations of large centralized fossil power stations

Electricity demand is currently growing in many countries of

the sunbelt at a rate of 6 to 7 percent annually, especially in
developing countries. Even considering the strong necessity for
electricity saving measures in these countries, which are often
not considered, large new electric capacities are required
(IEA, 2003 and 2004). These capacities will be built in the
next 20 years and will remain for at least 30 years—until the
middle of this century—which will create a technology lock-in
in the developing world. What is problematic about such a
technology lock-in? According to current science, it is important
to stabilize GHG concentrations in the atmosphere at levels
of 550 parts per million by volume (ppmv) in order to not ex-
ceed a 2° C global temperature increase. This level requires
a peaking of world GHG emissions in the middle of the next

decade (Figure 18). Other emission paths allow an increase
of concentration levels to 650 ppmv. Even if there are doubts
whether this concentration level is not already far too high, this
is still a considerable distance from the baseline development
with levels close to 1,000 ppmv, increasing well into the next
century. Also in the 650 ppmv scenario world emissions need
to peak in 2030, requiring considerable efforts up to then. It
follows from this reasoning that if the occasion is not used to
replace at least part of the fossil power plants to be built in the
next 25 years with CSP power, they will still be an important
source of greenhouse gases up to the middle of this century.

2000

2020

2040

2060

2100

2080

100

200

300

400

500

600

700

800

900

1,000

ppmv

year

S650e

baseline
S550e

GHG Emissions (GtCo2-eq)

1970

1990

2010

2030

2050

2070

2090

S550e

S650e

Baseline

IGURE

18: G

LOBAL

GHG

CONCENTRATION

STABILIZATION

PROFILES

(

LEFT

)

AND

EMISSION

PROFILES

FOR

STABILIZING

GREENHOUSE

GAS

CONCENTRATIONS

550

PPMV

AND

650

PPMV

VERSUS

BASELINE

EMISSIONS

(

CURVES

LABELLED

S550

AND

S650

THE

GRAPH

)

Source:

Criqui

et al.

, 2003.

See the Policy Recommendations for Renewable Energies of the Bonn Inter-

national Conference for Renewables (2004): “As developing countries work
to expand and modernize their energy systems, and industrialized countries
work to replace their ageing systems and meet rising demand, societies face
a unique opportunity over the next few decades to increase investments in
renewable energies. Over the next 30 years, global investments in energy-
supply infrastructure are projected to be $16 trillion. The opportunity is to
orient a large and increasing share of these investments toward renewable
energy, in order to advance the transition to a global energy system for
sustainable development. On the other hand, if these investments continue
as business as usual, mostly in conventional energy, societies will be further
locked into an energy system that is incompatible with sustainable develop-
ment and that further increases the risks of climate change.”

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

In this case, even the 650 ppmv level is very unlikely to be
reached. The importance of developing countries in climate
change stems from the fact that their share in energy-related
carbon dioxide emissions will increase from 37 percent in 1995
to 45 percent in 2025 and 66 percent in 2050 (Criqui

et al.

2003). In addition, a delay of institutional and technology learn-
ing for the implementation of solar thermal power plants in the
coming years in developing countries could hamper a stronger
growth of solar capacities even in the second generation of
power plants beyond 2030.

Hypothesis 2: Small-scale CSP applications do not correspond
to strongly growing electricity needs in developing countries

Niche or small-scale applications for solar thermal power will

certainly contribute to develop the market in the longer term and
are also necessary to contribute to the diversiﬁ cation of technolo-
gies (e.g. development of solar dishes or Fresnel collectors), but
would not develop fast enough to introduce solar thermal power
on the market in a time when the electricity infrastructures in the
developing countries are essentially built up. In addition, they
would rather satisfy different target groups as compared to the
bulk power generators, in particular industrial CHP applications
or solar thermal applications in remote areas.

Hypothesis 3: After many years of technology improvement
through R&D, now CSP markets are needed

Electricity generation costs from CSP have been at a level compa-

rable to wind energy in the late 1980s. This is one of the reasons
why the technology was considered interesting for developing
countries, as it was expected that costs could be brought down
quite soon to competitive levels. The costs of CSP have poten-
tially been brought down in the last decade since the ﬁ rst plants
in California by further R&D, but now steady and sustainable
implementation is needed to establish optimized fabrication
infrastructure as well as institutional and business procedures.

Hypothesis 4: CSP is the most promising renewable energy
source for developing countries in the world’s sunbelt

There are no serious renewables alternatives to solar thermal

power in the developing countries in the sunbelt. Wind energy

is in principle a competitor for solar thermal power, due to
its advanced maturity among the renewable energy sources
together with hydropower, but needs a “stabilizing partner” in
the power mix in particular as long as countries are not well
interconnected. Technical progress,

power network intercon-

nection on a larger scale, improved information/communication
technologies for distributed power generation, improved weather
forecasts and a well-balanced power mix with renewables
that compensate each other’s weaknesses in a given country
constitute important strategies to reduce the non-dispatchability
of wind, but will need considerable time to be implemented. In
addition, hot summers with extended dry periods impact strongly
on the power generation from wind converters, as experienced
for example in Spain in the dry summer months of 2003.
Hydropower often has a similar trend to fail in hot summers,
similar to wind. Increasing temperatures due to the greenhouse
effect will further aggravate this problem. In principle, biomass
generated electricity as well as PV (including hydrogen gener-
ated from PV at the longer term) could be such a partner for
wind. However, in the sunbelt, biomass is not abundant and PV
is, in the short run, still too expensive and mainly an option for
rural electriﬁ cation, hence a complement to bulk generation of
solar thermal electricity. Like wind energy, PV also suffers from
a lack of dispatchability. This might be strongly reduced in the
combination of both technologies, but PV still has a way down
the cost curve before it can fulﬁ l the role of complementing wind
in the power mix. Geothermal energy is an already well-proven
technology with comparatively low electricity generation costs.
Geothermal energy is mainly available at economic levels in the
“ring of ﬁ re,” which includes most countries of the Paciﬁ c Rim
(Figure 19). Given this occurrence, geothermal energy is in many

This statement should not shadow the tremendous progress going on in

the dispatchability of wind. Wind energy has made considerable progress
with respect to availability in the past ten years: even in sites with wind
speeds of 22 km/h, the charge factor (number of full operation hours per
year) has passed from 1,600 (18 percent) to 2,400 hours (27 percent)
per year. On average, in the European Union, the wind converters produce
during 3,000 h/year (34 percent) as compared to 20 percent in 1995,
and the newest 5 MW machines approach 40 percent. Wind speeds to
be used extend now from 9 to 100–120 km/h as compared to 14-–79
km/h a decade ago (Science and Vie, 2005).

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

respects, on a worldwide level, complementary to CSP, although
in some countries the technologies could be in competition (in
particular for example in Mexico, which has already installed
several geothermal power plants). Tidal and wave energy is in
a more early stage of development as compared to CSP.

Hypothesis 5: Developing countries are increasingly favoring
RES due to increasing fossil fuel prices and climate change

Power plants that are built in the coming years and decades

will face a changing environment as compared to the last 20
years, such as growing fossil fuel prices in particular for natural
gas. Partly this will be compensated for by increased exploration
efforts for fossil fuels and better exploitation of existing resources,
but access to cheap gas will be a central element of competition
among all countries. There will also be an increasing attitude
of developing countries to consider climate change seriously
because it constitutes a threat to their existence, at least their
development, and in particular for regions in the sunbelt that are
close to desert areas with a tendency to expand due to climate
change (see the declarations of a variety of developing countries
at the Bonn International Conference for Renewables, 2004).

Hypothesis 6: CSP electricity export represents an important
long-term option for some developing countries

Industrialized countries have also important resources for solar

thermal power, however, less than the developing countries in the
solar belt. This varies between the countries. While the United
States and Australia have in principle enough of their own solar
thermal resources to cover larger needs for electricity in their
own country (see for example Price, 2005), Europe might only
cover a few percentage points of its own electricity needs with
solar thermal power. Japan has even more limited domestic solar
thermal power potential. In such cases, importing clean electricity
from the sunbelt region can be an important reduction option for
industrialized countries. Hence the need to develop electricity
exchange based on CSP. However, this should not occur at the
expense of covering a country’s own needs and/or should con-
tribute to regional development and cooperation. As long as a
country’s own needs are not covered by clean electricity, tradable
solutions

could constitute a suitable approach also. This sup-

poses, however, the installation of an international trading system,

which currently is only the case with CDM. Physical exchange of
electricity between adjacent developed and developing regions
can also generate additional beneﬁ ts as compared to tradable

IGURE

19: I

MPLEMENTATION

GEOTHERMAL

POWER

PLANTS

WORLDWIDE

Source:

World Bank (http://www.worldbank.org/html/fpd/energy/geothermal/markets.htm)

Tradable solutions constitute an alternative to physical export of green

electricity by unbundling the environmental attributes of a unit of renewable
energy from the underlying electricity. Possible trading solutions are in par-
ticular renewable energy certiﬁ cates (RECs) and certiﬁ ed emission reductions
(CERs) (under the CDM). The development of tradable certiﬁ cate programs
is driven by the implementation of legislation known as renewable portfolio
standards (RPS). RPS typically mandate that each retail power supplier obtain
a certain percentage of its total annual energy sales from renewable sources.
An important issue in developing a robust international market for renewable
certiﬁ cates is the ability to track both the certiﬁ cates and greenhouse gas
emission reduction credits. For RECs, electronic issuing and tracking systems
have been developed in parts of North America, the European Union, and
Australia to support the development of RECs as a compliance and market
tool. A pilot project has also been carried out to develop RECs to ﬁ nance
renewable energy projects in Brazil, China, and South Africa (http://www.
reeep.org/groups/TRECS). In the European Union, there is currently a dis-
cussion to link Mediterranean countries to the EU Renewables Directive from
2001 which could imply a trading solution but also a feed-in tariff for those
countries. RPS have so far shown much less impact on the development of
renewables as they make investments in renewable electricity plants more
risky. Therefore, the emergence of additional investments in the renewable
market may take more time with this system than with other systems that
guarantee a ﬁ xed premium price for the renewable electricity.

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

solutions, such as increased network stability (allowing larger
amounts of renewable electricity in the respective countries) or the
contribution to interregional stability, which can be an important
element in the Mediterranean/Near East area.

Several global visions for CSP have been formulated quantitatively
in recent years, in particular (see also the discussion in Chapter
2, section 2.1):

The Global Market Initiative, with the objective “to facilitate and

expedite the building of 5,000 MWe of CSP worldwide over
the next ten years” (GMI, 2003).

The Greenpeace/ESTIA study (2003) that projects “that by

2040 the proportion of global electricity demand which could
be satisﬁ ed by solar thermal power will have reached a share
of 5 percent. This is on the assumption that global electricity
demand doubles by that time, as projected by the Interna-
tional Energy Agency.” For 2015 the study projects around
6,000 MW (of which 25 percent in developing countries), for
2020 around 21,500 MW (of which 30 percent in developing
countries).

The ATHENE scenarios in the SOKRATES project (DLR, 2004),

which envisage the installation of around 5,000 MW by 2015,
15,000 MW by 2020, and 42,000 MW by 2025. The
share of developing countries is higher in this study (at around
50 percent already in 2025) due to a lower installed capacity
in the United States as compared to Greenpeace/ESTIA.

6.2 C

RITERIA

DESCRIBING

THE

SUCCESS

LONG

TERM

CSP

STRATEGY

Any successful strategy aimed at the realization of the above-de-
scribed vision should accompany the various stages of the develop-
ment of CSP along the cost reduction curve (see Figure 20) with
different elements of support adapted to the advancement of the
market for the technology.

The four parts in the cost reduction curve are brieﬂ y described as
follows. The curve assumes cost competitiveness around 20 years
from now in 2025, which appears a realistic target.

Part 1 of the cost reduction curve

: Creation of technical and

institutional experience. Small number of new units (in addition
to the Californian SEGS plants), a few hundred MW. Creation
of conﬁ dence, lowering of risk factors applied to ﬁ rst plants, ﬁ rst
“pilots” in developing countries. Corresponds to the realization of
a few plants in Spain, the United States, and some of the WB/
GEF projects as well as of the ﬁ rst Algerian plant by 2010.

Part 2 of the cost reduction curve

: Generation of a market

(total installations of 500–2,000 MW). Diversiﬁ cation in tech-
nologies, certain degree of cost reduction, but still far away
from economic margins. Target of perhaps 15–20 percent of
capacities installed in developing countries. Financing driven in
industrialized countries by feed-in tariffs and renewable portfo-
lios, in developing countries by a mixture of grants, preferential
loans and national ﬁ nancing as well as a dedicated CSP fund
(see below).

Part 3 of the cost reduction curve

: Early phase of a growing

mass market (total installations of 2,000−7,000 MW). Sub-
stantial decrease in costs due to scale and volume effects, costs
approaching competitive ranges but not yet generally cost-effec-
tive. Target of perhaps 20 to 25 percent of capacity installed

IGURE

20: F

OUR

STAGES

THE

DEVELOPMENT

CSP

Source: Authors.

CSP
Fossil alternatives

LEC (cUS/kWh)

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Generation of
a CSP market

Early CSP

mass market

Near competitive and

competitive market

Creation of techinical

and institutional

experience

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

in developing countries. In some applications, however, even
without subsidies, ﬁ nancing in developing countries through
carbon pricing and (premiums from exports), national ﬁ nancing,
private investors.

Part 4 of the cost reduction curve

: Development of a mass

market (near competitive and competitive market). Installed
capacities: 7,000–25,000 MW. Further decrease in costs
due to volume effects and R&D. Target of 30 to 40 percent of
capacity installed in developing countries. This is a stage that
is currently reached by wind, but with a still comparatively low
share of the developing world (by the end of 2004 around
47 GW of wind were installed worldwide, of which around
8.5 percent in the developing world).

A successful strategy must further take into account that the main
purpose is not to realize individual projects but to secure the
development of a market. For this, the strategy must integrate the
expectations of important market players that constitute the market
environment for the CSP technology (Figure 21).

The third major issue is that a market introduction strategy must
cope with the main barriers to the technology. For CSP, barriers in
the developing countries are relevant, such as:

Lacking ﬁ nancial means to support more expensive renewables

in an early phase in order to cover the rapidly growing electricity
demand;

Lacking institutional frames for renewable energy sources and

lacking competition on electricity markets;

Suspicion toward a technology “that is even not used in the

developed world.”

Table 7 translates these general requirements in a list of success
criteria for a suitable CSP strategy that may realize the vision de-
scribed in section 6.1. The criteria are further described according
to the phase of the cost reduction curve where they mainly act,
possible OP 7 objective to which they are linked (see the following
box), the scenarios of the second round described in Chapter 3 to
which they are relevant, as well as the importance of the criteria
in an early stage of market development.

Table 8 describes the different roles that CSP could take in the
power system of the different countries/regions (where solar ther-
mal energy is most promising) according to criteria 3 described
above. This role is important for the economics of CSP in the shorter
term and for the acceptance of the whole technology line in the
longer term. It also might determine the choice of the technology.
Solar-only technologies might be preferred in principle, but there
are various functions that might favour ISCCS as the preferred
technology in a country.

6.3 N

MARKET

INITIATIVES

AND

THEIR

RELEVANCE

LONG

TERM

STRATEGY

FOR

CSP

The following brieﬂ y describes two important new market initia-
tives, which have in common that they try to integrate the different
stakeholders relevant for the development of a technology and take
into account the regulatory/institutional framework, thus meeting

IGURE

21: M

ARKET

ENVIRONMENT

FOR

THE

INTRODUCTION

CSP

TECHNOLOGY

Source:

Haeussermann (2005).

Big projects

need big money

It is about markets, not

projects

Markets need

perspectives and fantasy

for the future

Smaller solar-only plant

designs could attract

more players

Regulatory

Authority

Equity

Investors

Lead Investor

Utility

Technology &

Knowhow

Gas

Supply

Construction

Oversight

Loans from

Financing Bank

PPA / Secured

Feed-in

O&M

Power

Plant

Market Environment

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

2: OP 7

OBJECTIVES

The main OP 7 objective is “to reduce greenhouse gas emissions from anthropogenic sources by increasing the market share of low
greenhouse gas emitting technologies that have not yet become widespread least-cost alternatives in recipient countries for speciﬁ ed
applications.” Underlying this objective is the basic aim of the GEF, which is to promote technologies directed to non-Annex I countries.
The GEF document describing OP 7 objectives assumes that “the objective will be achieved by GEF’s promotion of such technologies so
that, through learning and economies of scale, the levelized energy costs will decline to commercially competitive levels.” However, it
also admits that “programmatic beneﬁ ts also can result from structured learning from projects implemented.” This major objective is ac-
companied by a variety of other requirements laid on the GEF by the Conference of the Parties of the UNFCCC. For example, projects:

a) are country driven and in conformity with, and supportive of, national development priori ties;

b) are consistent with and supportive of internationally agreed programs of action for sustainable development;

c) transfer technology that is environmentally sound and adapted to suit local conditions;

d) are sustainable and lead to wider application;

e) are cost-effective (not relevant for OP 7 technologies at the beginning);

f) strive to leverage other funds; and

g) mitigate climate change.

With respect to CSP, OP 7 emphasizes “the proven parabolic trough variant for electric power generation” but leaves open the choice
of other technologies for support in the future.

With respect to resources, the GEF concludes that “given the long lead times for the development and deployment of highly capital in-
tensive backstop technologies, as well as the time required to move down learning curves, time horizons for the achievement of program
objectives will typically be on the order of decades. The technologies identiﬁ ed under this program will require the security of funding
and long-term commitment of GEF support. Analysis of indicative project pipelines and estimates of minimum “critical mass” of support
for the various technologies under this program suggest an initial requirement of $100 million per year in GEF grant resources, gradually
rising to $200 million per year over ﬁ ve to ten years as investment demand and absorptive capacity grow. One analysis of the median
amount of resources required to induce cost reductions in just one of the technology applications listed in the operational program (for
large-scale electricity production using PV cells) is around $3.3 billion,

about half of which would be for applications in developing

countries. It is therefore clear that the GEF should choose technologies for this operational program where it can leverage resources of
other players as well.

This is in good compliance with the Athene cost reduction forecast (see

chapter 2.3.2): 2.5 million

€

(under the assumptions of an internal project

revenue rate of 8 percent and CO

-trading)

Section based on “ The Concentrating Solar Power Global Market

Initiative”

some of the most important criteria for successful market creation
mentioned previously. The ﬁ rst, the Global Market Initiative (GMI)
is speciﬁ cally directed toward CSP; the second, EM Power, ad-
dresses renewable electricity (RE) more broadly.

6.3.1 Global Market Initiative (GMI)

The goal of this coordinated action, called the CSP Global Mar-
ket Initiative (GMI), is to facilitate and expedite the building of
5,000 MWe of CSP power worldwide over the next ten years

up to 2015. Furthermore, the GMI claims that by then full com-
petitiveness with conventional power generation will be reached.
For this purpose, a visible, reliable, and growing market for solar

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

ABLE

AIN

SUCCESS

CRITERIA

FOR

CSP

STRATEGY

Criteria

most

important for

Ranking of

position

1–4

OP 7 objective

Criteria relevant

criteria from an

in cost

linked to

for Chapter 5

early market

Main success criteria for CSP strategy

reduction curve

criteria

scenario

perspective

Ensure increasing participation of developing countries in CSP development

1-3

Main objective

“Two-Tracks”

very important

Spur CSP market deployment in industrialized countries

1,2

“Two-Tracks”

Wait

and

See”

Make sense for the country‘s power market (see Table 8)

1,2

“Two-Tracks”

“Wait

and

See”

Include successful market creation policy measures

2,3

Main objective

all

Serve economic development of countries/region

1-4

all

Contribute to building up of local institutional experience

Main objective

all

Create renewables frame in developing countries

2,3

“Two-Tracks”

Mobilize sufﬁ ciently large funds

“Two-Tracks”

Promote CSP electricity production instead of CSP investments

1-4

a) b) e) f) g)

all

Mobilize private investment

2-4

“Two-Tracks”

Promote technology diversity

“Two-Tracks”

Enhance previous country experience with CSP

2,3

“Two-Tracks”

Contribute to building of local manufacturing experience

3,4

all

Contribute to the sustainable development of a country/region

(note see below)

3,4

c) d)

all

Reduce environmental impact

2-4

“Two-Tracks”

Assure acceptability of technology in regions to which CSP electricity is exported

3,4

d) g)

“Two-Tracks”

Promote small- and large-scale applications of the technology

3,4

“Specializing”

less

important

Notes:

including social and economic dimensions in addition to the environmental dimension. Enhance capacity of the country/region to integrate different aspects

In developing countries only relevant for phases 2-4 in the cost reduction curve, in industrialized countries also for 1

Small-scale development alone is not sufﬁ cient to achieve the goal in a sufﬁ ciently short time to lower costs for CSP. Targeted rather at speciﬁ c applications. Volume is needed.

See Figure 20

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

thermal power with normal risk levels must be established in order
for project developers and CSP equipment suppliers to make the
needed long-term investments to achieve acceptable investment
costs, and hence competitive rates. The following policy areas will
have the greatest impact on the use of concentrating solar power.
Each country or state participating in the CSP GMI will contribute
with the following policy measures:

Targets

: As the overall goal of the CSP GMI is 5,000 MWe to

reach cost competitiveness by 2015, national and/or regional
targets will be set for CSP capacity. These targets may be a
speciﬁ c number of MW over a certain period of time, or may
be a percentage of CSP within the new capacity to be built over
a certain period of time, as in Renewable Portfolio Standards.

Tariffs

: The level of revenue for CSP projects needs to be

adequate to encourage private sector investment and provide
a stable investment climate. This can be achieved by feed-in

tariffs, production tax credits, or public beneﬁ t charges speciﬁ c
for CSP. These supports will be designed to reduce over time
as the CSP technology becomes competitive in the power
market after 5,000 MWe of CSP has been built by 2015.
Coordination with participating neighboring countries, states,
or regions with preferential tariff schemes will allow CSP-based
electricity imports from high solar radiation areas (and therefore
lower electricity costs). The use of long-term power purchase
agreements or similar long-term contracts with creditworthy off-
takers, or equity ownership by public organizations will build
the conﬁ dence of investors and ﬁ nancial institutions.

Financing

: Cooperating bilateral and/or multilateral ﬁ nan-

cial institutions will ensure that project-related ﬂ exible Kyoto
instruments such as Clean Development Mechanisms and
Joint Implementation Actions become applicable to CSP and
ensure that the mechanisms are bankable. The establishment
of national or regional loan guarantee programs via existing

ABLE

8: P

OSSIBLE

ROLE

CSP

DIFFERENT

COUNTRIES

REGIONS

WITH

SUITABLE

SOLAR

RESOURCES

Function

Country/Region

Technology selection criteria

Technology implications

Local industry promotion

Spain, Italy, Greece, Egypt

Share of local manufacturing

CSP in general, espe-cially Fresnel collectors

(foundations, steel, glass industry)

because of high local value creation (due to

larger share of simple collector components)

Environmental protection

Spain, Italy, U.S.

Environmental impact

Solar only or SEGS

Noon peaker

Israel, Egypt, Jordan

Local daily power load characteristics

Solar only or SEGS

Evening peaker

North Africa, South Africa

Local daily power load characteristics

Storage technology or ISCC

Summer noon peaker

Spain, U.S.

Local yearly power load characteristics;

Solar-only options (including storage)

power mix (wind; hydro)

or SEGS

Diversiﬁ cation of power mix

Morocco, China, Mexico

Fit to power generation mix

Solar only or SEGS; ISCCS technology

(if own gas resources or large amount of

needed)

Fuel Saver

Mexico (to prolong national gas resources

Combination with natural gas or coal

Feed-water preheating but also ISCC

or to reduce inefﬁ cient coal use),

South

Africa

Exporter of Gas/Green Electricity

Algeria, Iran

Combination with natural gas

ISCCS technology

Remote Power Producer

Remote regions with larger electricity

Quality of energy service

Small-scale CSP

demand that cannot be satisﬁ ed by PV

Transmission Stabilizer

Crete

Quality of energy service

Storage technology

Source:

Geyer (2005); authors’ own additions.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

windows at multilateral banks, national lending programs,
and global environmental programs (such as GEF, UNEP, and
UNDP) will further reduce the inherent risk of introducing new
technology for private sector banking institutions. Investment tax
credits, which stimulated the ﬁ rst 354 MWe of CSP plants in
the United States, should be maintained, and production tax
credits similar to those that have stimulated the growth of wind
power in the United States should be made available to CSP
plants. Cost-shared development of transmission lines between
regions with excellent solar resources and urban load centers,
even across borders of participating countries and regions,
will optimize the development and exploitation of all regional
resources.

Regulation: Limitations on CSP plant capacity or operating strat-

egies that make the technology introduction more costly need
to be avoided. Legal restrictions and barriers to allow more
cost-effective connections of CSP plants to the electric grid at
the end user (customer), distribution, and/or transmission points
shall be identiﬁ ed and eliminated.

6.3.2 EM Power: A new approach to OP 7?

An initiative is under development, involving UNEP and KfW, that
could be a new model for support to near-commercial energy
technologies. The proposal is technology neutral, and looks at how
markets function. It started with PV-hydro applications, and now also
includes distributed PV and CSP. The aim is to facilitate collabora-
tive market development and transformation on a regional level. It
is a partnership project that will explore market aggregation tools
and identify investment opportunities. The idea is to work with the
industry and OECD countries and try to bring partners together,
and build regional capacity (in ﬁ nancing, contracting etc.). GEF
could facilitate market aggregation for a speciﬁ c RE (renewable
electricity) or technology application. The problem, though, is not
being able to spend money in developed countries and to get the
motivation of OECD countries. Information is being collected on
market aggregation tools, such as forward procurement and dual
betting (bundling of ﬁ nancing for RE and conventional, which lowers
the transaction costs). Firstly, a market has to be created before it
can be aggregated. The proposal is that GEF sponsors a few pilot
medium-sized projects (MSPs), and links them up with investment,
scaling up the effects.

6.4 T

POSSIBLE

ROLE

THE

LEAN

EVELOPMENT

ECHANISM

PROJECT

FINANCING

: H

CROSS

THE

BRIDGE

TOWARD

COMPETITIVENESS

As mentioned in the previous section, the Clean Development
Mechanism can play an important role in the further development
of CSP (although currently there is no easy way to combine GEF
and CDM), in particular once costs have come to a level where

IGURE

22: V

ARIOUS

FINANCING

MECHANISMS

CROSS

THE

BRIDGE

TOWARD

COMPETITIVENESS

AND

THE

ROLE

CARBON

FINANCING

SUCH

FINANCING

STRATEGY

Source

: Authors.

today

2015/2020

Soft loans?

GEF?

IPP?

CDM (CDM financing could help

to cover some fractions of the over-

costs once those have reached

lower levels)

National financing through

promotion mechanisms

for renewables?

Combination of various

financing sources in a CSP

fund, initially dedicated to a region

GEF Funds. No

cumulation possible

with CDM financing

CDM financing could

help to cover substantial

fractions of the overcosts

once those have reached

lower levels

Turnkey

Contract EPC

Section based on the Report of the STAP Brainstorming Session on Op-

erational Program 7, Washington, D.C., March 10–11, 2003. Information
from a presentation by Peter Hilliges, GEF Secretariat.

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

the additional ﬁ nancing expected from CDM projects could con-
tribute substantial fractions to the project ﬁ nancing. Currently, the
contribution would be typically several million dollars with a need
for additional ﬁ nancing of around $50 million, corresponding to
the amount of the grants in the current GEF portfolio.

6.5 C

ENTRAL

QUESTIONS

FOR

DETERMINING

THE

ROLE

THE

WB/GEF

THE

REALIZATION

THE

CSP

VISION

In view of the vision formulated previously and the criteria describing
a successful strategy for the realization of such a vision, the World
Bank has to answer a variety of questions addressing its implica-
tions for CSP and technology choices at different time horizons.
The long-term questions concern both strategic questions as well
as operational questions.

6.6 A

NSWERS

THE

QUESTIONS

ADDRESSING

THE

SHORT

TERM

DEVELOPMENT

THE

WB/GEF CSP

PORTFOLIO

After having reviewed the current WB/GEF portfolio in the frame
of the long-term vision and the corresponding success criteria de-
veloped in Chapter 6 (sections 6.1 and 6.2), the current chapter
provides answers to the questions addressing the short-term develop-
ment of the WB/GEF CSP portfolio raised in section 6.5. A third

ABLE

9: E

XAMPLE

CDM

FINANCING

FOR

CSP

Project

Investment: $250

million

Installed capacity:

100 MW solar only power station

Generation

430 GWh electricity/year

CDM component

Baseline:

Coal-ﬁ red power plant (1.1 t CO

/MWh)

CER generation

475,000 t CO

/year

Additional revenues

$4.7 million/year (over crediting life of 20 years, $10

/t CO

)

Split up of revenues

Conventional electricity sale 6 cents/kWh

CER sale

Source

: Authors, based on Sutter (2002)

The value of $10 used by this author appears as high. Typical CER

prices are on average rather $5 than $10, although it must be empha-
sized that present CDM projects might be the most proﬁ table ones. On the
other hand, there is also scope for system learning, which would mitigate
increasing CER prices.

section then addresses in detail the chances/risks of each of the
four WB/GEF projects to reach realization (question (9)).

6.6.1 The current WB/GEF portfolio in the frame of
the long-term vision

This section investigates the extent to which the current WB/GEF
portfolio is “in line” with the long-term vision and the criteria for a
successful overall long-term strategy developed in sections 6.1 and
6.2, or whether there are individual characteristics of the current
portfolio that contradict the development of a long-term strategy.
For this purpose, the current portfolio is evaluated below against
the list of criteria set up previously.

From the comparison with the list of success criteria it follows
that:

The present portfolio is to a satisfactory degree in line with the

requirements for the further development of a successful promo-
tion strategy for CSP along the cost reduction curve. The strategy
has certainly helped to keep the CSP technology up during the
past years; it has contributed considerable funding to the initial
stage of the cost reduction curve (however, conclusion of this
stage is necessary with at least a partial success of the portfo-
lio), and it has generated considerable institutional learning. As
such, it can be considered a partial success (under condition of
ﬁ nalization).

The weakest point seems to be the fact that currently no incen-

tives are given to actually operate the installed solar ﬁ elds in the
ISCCS plants. In case the solar ﬁ eld causes unexpected trouble
or the O&M costs of the solar ﬁ eld exceed the remuneration from
the solar electricity sales, it seems quite possible that the solar
ﬁ eld will not be operated. Penalties on a kWh

-basis for the

solar ﬁ eld might be a possibility to mitigate that weak point.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

ABLE

10: Q

UESTIONS

ADDRESSED

THE

SHORT

AND

LONG

TERM

CSP

STRATEGY

THE

WB/GEF

Questions addressing the short-term development of the WB/GEF CSP portfolio

1. Can the rationale to include CSP in the OP 7 objectives be conﬁ rmed?

2. Should the WB/GEF portfolio of CSP plants be continued as a whole, in parts, or should it be stopped?

3. Are there particular conditions for the continuation of the portfolio?

4. Are there alternative possibilities for disbursement of the WB/GEF grants to promote CSP in one or two of the four selected countries, in particular in case of project failure?

5. Was the ISCC/solar trough technology the right selection for the WB/GEF portfolio?

6. Should there rather be a single or a two-EPC approach (combined or separate EPC for the fossil combined cycle and the solar part of the plant)?

7. Should the pending bidding procedures show ﬂ exibility with respect to the size of the solar ﬁ eld in order to be ﬂ exible with respect to cost uncertainties?

8. What are the opportunities for successive plants?

9. What are the chances/risks of each of the four WB/GEF projects to reach realization?

Questions addressing the long-term development of the WB/GEF CSP portfolio

Strategic questions

10. Which strategy choice as discussed in Chapter 5 (sections 5.4 to 5.6) (“Wait and See”, “2-Track-Approach”, “Specialization”) should be adopted in case of successful/unsuccessful
termination of the current portfolio? What would be the outcome of such an engagement?

11. Should a future WB/GEF strategy concentrate on regions with the best chance to create volume markets ?

12. What are the requirements on the composition of any future portfolio for CSP in order to ﬁ t the development toward the realization of the CSP vision described in Chapter 6 (section 6.1)?

Operational questions

13. Should a future engagement continue to promote ISCC? Should it promote a broader range of technologies; if yes, which?

14. Which funding mechanisms appear as most suitable to promote CSP in the future? Should WB/GEF bundle forces with more actors to reach a critical mass? In particular, how can the
technology best be promoted in developing countries?

15. What amount of support is necessary for any following step?

16. What could be the potential GEF engagement in case of reduced available CSP funding?

Another weak point is to generate a stronger link between the

development of a frame for renewables in the countries and
the evolution of CSP technology. Both are largely disconnected
in the WB/GEF portfolio countries, whereas in Algeria, for
example, the connection is explicitly made. This point is linked
to the previous one.

One other weak point in the comparison appears to be the

interface from the currently ongoing activities in the phase
of institutional and technical learning to a full-ﬂ edged market
development strategy as necessary for the next phase where a
market has to be generated.

Private sector investment was not present in the ﬁ rst phase of

market development, although a suitable replacement was found
with the public EPC approach. However, the next phase must
involve more private investment.

6.6.2 Short-term recommendations for the WB/GEF
Portfolio

This section provides answers to the questions raised in section 6.5
addressing the short-term development of the WB/GEF CSP port-
folio. It gives general and project-speciﬁ c recommendations for the
WB/GEF portfolio and looks at implications for the CSP strategy.

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

ABLE

11: E

VALUATION

THE

CURRENT

WB/GEF

PORTFOLIO

AGAINST

THE

SET

SUCCESS

CRITERIA

FOR

LONG

TERM

STRATEGY

FOR

CSP

Strong/weak/medium

Criteria

Relevance in the current WB/GEF portfolio

point in portfolio

1. Ensure increasing participation of developing countries

Important issue in current portfolio. However, weak point in so far as

Medium

in CSP development

no mechanism in place that generates further interest. Successful

termination of the larger part of the WB/GEF portfolio will generate

conﬁ dence for other developing countries to enter at part 2 of the cost

reduction curve or to continue the experience from part 1.

2. Spur CSP Market Deployment in industrialized countries

Not taken into account. Only indirectly accessible to WB/GEF; can

Medium

be inﬂ uenced through a parallel development of the market in

developing

countries.

3. Better understand the country’s power market

Given to a certain degree, but limited.

Medium

4. Include successful market creation policy measures

Only partially taken into account through grants and preferential loan. Weak

Lack of a strategy extending in particular from part 1 to part 2 of the

cost reduction curve. Originally this strategy was there in the form of

larger amounts of grants, but it is questionable whether grants would

be the best means to move on to the next phase. For the future, it

will be more effective to fund MWh instead of MW (see also

description of a CSP fund in section 6.3).

5. Serve economic development of countries/region

In the frame of the size of the WB/GEF projects, once realized they

Medium

will certainly have an economic impact on the region concerned

(even considering the solar part alone).

6. Contribute to building up of local institutional experience

Important issue of the current WB/GEF portfolio.

Strong

7. Create renewables frame in developing countries

The current strategy provides for little incentives for the current to

Weak

consider a wider frame for CSP. The frame for renewables is also

developing in parallel, but there is no straight link between the

renewables frame and the CSP strategy in the countries, as for

example established in Algeria.

8. Mobilize sufﬁ ciently large funds

GEF funds provided are considerable. However, no strategy discussed so

Strong

far how to move from part of 1 of the cost curve to part 2 (Figure 20)

9. Mobilize private investment

Not successful so far (failure of the IPP approach). However, so far a

Weak

fairly successful replacement solution was found with the public

EPC

approach.

10. Promote technology diversity

Not considered so far. The main focus was right from the beginning on

Medium

troughs as the most experienced technology by the time. The selection

of four ISCCS plants might have been determined by the country choice

for large capacity increase. Important issue for part 2 of the cost

reduction

curve.

11. Enhance previous country experience with CSP

Not an issue in Part 1 of the cost reduction curve.

—

12. Contribute to building of local manufacturing experience

Larger fractions of the plants will be built by local companies, in

Medium

particular all construction work. Concerning solar components, given

the small volumes involved so far, the presence of suppliers in

industrialized countries, no local manufacturer has arisen so far

(continued on next page)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

1. Can the rationale to include CSP in the OP 7 objectives be
conﬁ rmed?

The context for the recommendations in this section is the original
objective of OP 7—to increase the market share of low greenhouse
gas-emitting technologies that are not yet commercial, but which
show promise of becoming so in the future. In view of strongly grow-
ing energy demand in the developing world, increasing global envi-
ronmental concerns regarding energy provision, fuel security issues
including domestic supply constraints, and an increasing likelihood
of some form of global trade on carbon emissions (including targets
in all countries also in the developing world), we strongly believe
the OP 7 objectives are responsible, timely, and necessary.

There are numerous avenues for manifesting these objectives, some
of which have already been pursued under OP 7 such as biomass
and fuel cells. From an overall perspective, we believe CSP is a
technology worth pursuing under the objectives of OP 7 as it meets
all important criteria:

Solar energy is the world’s largest sustainable energy re-

source

Solar energy is abundant in many developing countries

Solar thermal is positioned favorably in terms of technology

development—no exotic material breakthroughs are required,
and it comprises thermal processes that are well-understood

Solar thermal integrates well with other thermal processes,

thermodynamic cycles, and conventional power generation
equipment

There remains room to “stretch” the technology

Operation and maintenance issues can be undertaken relatively

easily and without too much dependence on an incumbent sup-
plier

Solar thermal electricity plants can be installed in large “chunks,”

which means it is one of relatively few renewable technologies
that can make the necessary deep cuts in GHG emissions.

Solar plants can be designed to be dispatchable

We see that solar thermal electricity offers prospects that have much
strategic value for the countries that take up the technology, and
thus forms an important part of the technology mix to be pursued
under OP 7, which itself is a critical element toward the worldwide
deployment of low GHG-emitting technologies. The rationale is
discussed below.

2.Should the WB/GEF portfolio of CSP plants be continued as a
whole, in parts, or should it be stopped?

We would encourage the World Bank and GEF to proceed with
each of the present projects. First, we believe they are crucial

Strong/weak/medium

Criteria

Relevance in the current WB/GEF portfolio

point in portfolio

13. Contribute to the sustainable development of a country/region

The contribution to the overall sustainable development of the current

Medium

portfolio is limited to the direct economic and environmental impact

(see below). Criteria less important in Part 1 of the cost reduction curve.

14.

Reduce environmental impact

Is in principle the case but depends on the quality of the plants realized

Unclear at present

(issue of the larger steam boiler with larger partial load losses in ISCC).

Criteria of less importance in Part 1 of the cost reduction curve.

15.

Ensure acceptability of technology in regions to which

So far no export of electricity is foreseen for any of the 4 WB/GEF projects

—

CSP electricity is exported

given that this is essentially an interesting option for gas suppliers such as

Algeria who want to sell electricity from combined cycles in combination

with solar thermal power. Criteria of less importance in Part 1 of the cost

reduction

curve.

16.

Promote small and large-scale applications of the technology

Criteria of less importance in Part 1 of the cost reduction curve given that

—

the technological diversiﬁ cation is more an issue of part 2 of the cost curve

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

to building momentum in the solar thermal industry. Second, by
proceeding, future projects in those countries are likely to beneﬁ t
from the leverage applied now. It is likely that by the time these
GEF projects begin operation, and any subsequent projects are
formulated, new projects will have commenced around the world,
leading to cost reductions. These cost reductions won’t be enough
to avoid the need for gap funding (whether in OECD or developing
countries), but the gap will be less, and perhaps acceptable.

We would liken the process to falling dominoes. It only takes one
domino to “miss the mark” and halt the ﬂ ow. Multiple, well-designed
projects with gaps that are not stretched to their limits are more
likely to give rise to a continuous stream of new projects.

At the very least, each project should be given the opportunity to
proceed the release of the RfP, as the cost to get to this point will
be relatively small against the opportunity it affords to discern the
level of interest.

In the course of writing this report, the question has been raised
whether the present portfolio context is not similar to a few years
ago, when hopes were high for an immediate realization of WB/
GEF projects that have not materialized so far. However, there are
substantial differences in the context now, such as a considerably
higher energy price context, concrete CSP projects coming up in
the developed world, and stabilization of the business model (move
from the IPP approach to public EPC).

3. Are there particular conditions for the continuation
of the portfolio?

Given the time elapsed for the project portfolio, the countries with
pending projects must commit to ﬁ rm timelines that it must meet
in order to keep the GEF grant available. The key dates for the
countries to adhere to are (a) release of RfP (i.e. must have passed
“non-objection”); (b) assessment of bids and presentation of pre-
ferred bidders to WB; and (c) signing of contracts.

Such timelines need to be discussed and ﬁ xed with each of the
four countries individually. From the current perspective, it appears
realistic that by the end of 2007 the Moroccan project—as well
as the projects in Egypt and Mexico—could have reached the
contract signature stage.

4. Are there alternative possibilities for disbursement of the WB/
GEF grants to promote CSP in one of the four selected countries,
in particular in case of project failure?

The team has considered alternative possibilities for disbursement
of the GEF grants, in particular providing a smaller contribution
toward the capital cost of the project and maintaining some for
“other activities to promote CSP in the country.” Other activities
could help to improve the chances of subsequent projects in those
countries, and might include setting up in-country fabrication facili-
ties for mirrors or tubes and the establishment of “expert teams”
of local skilled labor. However, we don’t believe this money will
be well-spent given the tenuous chance of immediate subsequent
projects in those countries.

There was also the possibility of splitting the grant into two smaller
grants to fund two smaller projects, but, as discussed above,
there are ﬁ xed costs that are relatively independent of capacity
associated with such power projects, and it would be likely that
instead of one 25 MW solar ﬁ eld one would end up with two
10 MW solar ﬁ elds (or two 12.5 MW solar ﬁ elds with higher
LEC’s) without the beneﬁ t of contributing to a cost reduction in the
technology. There would also be the risk that one of them would
not proceed.

In the case of the revision/cancellation of one to two projects, and
the wish of the WB/GEF to support further this important technol-
ogy in the given country without looking for alternative sites, the
following alternative technology lines to the ISCCS concept might
be considered:

Market introduction for industrial process heat applications based

on concentrator solar.

Small-scale solar combined heat & power plants (heat for ab-

sorption chillers (e.g. air conditioning), or process heat or sea
water desalination (the latter becoming increasingly important
in many countries with good solar resources).

Feed-water preheating in fossil steam plants: promoting tech-

nologies other than parabolic trough collector types (e.g. tower,
dish, Fresnel) by a technology unspeciﬁ c bidding procedure.
Feed-water preheating leads to good solar efﬁ ciencies, good

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

ratio of funding and solar-MWh because of reduced investment.
Existing plant (infrastructure) might be used.

5. Was the ISCC/solar trough technology the right selection for
the WB/GEF portfolio?

The question has arisen as to which is the better conﬁ guration—
SEGS or ISCCS? Our contention is that it is a matter of “horses for
courses.” Technically, both options are feasible, as is the option
of integration into a coal-ﬁ red Rankine cycle. One of the major
issues that arise is one of perception—that in an ISCCS plant there
may only be a solar contribution of some 6 percent. In reality, a
30 MW solar ﬁ eld in either conﬁ guration will still generate ap-
proximately the same GWh/yr of solar electricity, and bequeath
the same level of O&M experience, through having to maintain
some 200,000 m

of solar array.

There is a more pressing need for MW than for solar plants in the
developing countries of this portfolio. There is also a signiﬁ cant
non-technical lead time associated with any new project—permits,
authorities, contract administration, etc.—regardless of the project
capacity. Given that there is less than a 100 percent chance that
all proposed power generation projects will proceed, the hybrid-
ization of solar with combined cycle both helps to meet the power
needs of that country while simultaneously deploying a solar ﬁ eld,
a ﬁ eld that may just have been deemed “too hard” if for the sake
of only a 25–30 MW plant.

The ISCCS conﬁ guration has not been tried before, and thus it is
probably inevitable that some teething troubles will emerge. If sound
engineering is applied, we believe that enough is known about
solar ﬁ eld operation, and enough about combined cycle operation,
that any problems that may arise are not likely to be fundamental in
nature, but rather to do with optimizing energy ﬂ ows, particularly
under transient solar conditions.

ISCCS makes particularly good sense in the following context:

if the country aims at exporting gas through the combination

with clean solar energy (e.g. Algeria);

if the country wants to build fossil plants in areas suitable for solar

thermal plants (e.g. Morocco); however, one should carefully

consider hampering the performance of the combined cycle plant
in the case of a non-optimal location due to the solar plant;

if the country can save on old inefﬁ cient coal-ﬁ red power plants

by the combination with solar thermal (e.g. Mexico);

if the country has a strong need for increasing the installed MW

due to strongly increasing demand and combination of solar and
combined cycle does not create additional delay (in principle
Egypt, but delays were caused by the contractual separation
of the two plants while technically they are combined).

So the answer to the question posed on the ISCCS technology is
not a frank yes, but there are some arguments that point to ISCCS
as a suitable solution for the current phase of market introduction.
Nevertheless, the ISCCS choice has introduced a variety of ad-
ditional problems that have delayed project realization (e.g. the
question of a single or two EPC contracts for the fossil and the
solar part, see below; the question of mutual liability between the
two project parts etc.)

The other technology issue is that of the solar ﬁ eld—trough, tower,
Fresnel, dish? The trough using a heat transfer ﬂ uid is certainly the
most advanced, and for the most advanced projects in the portfolio,
particularly Morocco, we would advocate staying with the existing
project as formulated. However given that these projects are early
in the cycle for the technology, it is important that the best options
be given the opportunity to emerge.

We would strongly suggest that consideration be given to not
specifying troughs for the remaining projects (presently it is not
speciﬁ ed for Egypt), but rather leaving the technology selection
up to the bidders. We believe this will lead to a greater number
of bids, improving the competition. Though the tower technology
providers would probably balk at installations greater than 50 MW,
25–30 MW should be within their capacity.

6. Should there rather be a single or a 2-EPC approach (combined
or separate EPC for the fossil combined cycle and the solar part
of the plant)?

In the absence of IPP approaches to this portfolio, the issue of
single EPC (to cover the whole ISCCS turnkey project) versus two

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

EPC (one contract to cover the combined cycle, and the other to
cover the solar ﬁ eld) has arisen. In power projects, single turnkey
projects (made up of multiple sub-contracts) are common, but power
projects comprising multiple EPC contracts (boiler, turbine, cooling,
etc) are not uncommon either. An ISCCS project combines a well-
known technology (combined cycle) with the less well-known solar
ﬁ eld. There are a number of large well-established combined cycle
suppliers, but few solar suppliers. The resulting imbalance led, in
the past, to some conﬂ icts over the balance of risk. However, with
larger consortia now emerging (as a result of the Spanish activi-
ties) that are willing to take on the whole project, the single EPC
approach appears favored.

There is no fundamental reason why the two-EPC approach is
unworkable, however it does raise some difﬁ culties. In particular,
the design of the cycle, particularly the interface between the
solar and the heat recovery steam generator (HRSG), needs to be
well deﬁ ned in the speciﬁ cations, requiring a detailed design and
optimization study. In the single EPC, the consortium carries out the
optimization as part of the bid. The issue that arises, however, is if
the project is built as speciﬁ ed and does not perform, the liability
must rest with the designer of the speciﬁ cations.

This approach also limits the ﬂ exibility of the solar ﬁ eld offers.
This is because the speciﬁ cations for the HRSG (steam generator)
will need to know the thermal contributions and the temperatures
that will come from the external heat source (solar ﬁ eld). These
will need to be speciﬁ ed so the various heat exchangers in the
HRSG can be sized appropriately. For example, the superheater
will need to be oversized to accommodate the additional super-
heating required (given that troughs using heat transfer ﬂ uid are
limited to around 370°C steam temperature, yet the steam turbine
requires perhaps 500°C). However, when the solar ﬁ eld is not
operating, the superheater area is too great, and thus signiﬁ cant
desuperheating is needed (an efﬁ ciency loss). Superheater area
is a ﬁ xed parameter deﬁ ned by the operating temperature of the
solar ﬁ eld. For example, if the superheater area was designed
for 370°C to enable troughs using htf to comply, it would be
an excessive area for a tower that could supply the full 500°C.
The end result is that the HRSG ends up being designed to suit a
particular solar temperature, and thus is optimized for a particular
collector.

7. Should the pending bidding procedures show ﬂ exibility with
respect to the size of the solar ﬁ eld in order to be ﬂ exible with
respect to cost uncertainties?

The team has only been able to view one set of RfP documents—the
original ones from the aborted bid process for India. Those docu-
ments speciﬁ ed a ﬁ xed solar ﬁ eld aperture size (220,000 m

3 percent) for the troughs. Given that the grant from GEF is also
a ﬁ xed amount, there is no ﬂ exibility should costs come in higher
than originally anticipated when these projects were originally de-
veloped. Given these are ﬁ rst-off projects in developing countries,
the risk margin is likely to be high, resulting in the possible situation
where all the bids come in either too expensive for the ﬁ nance
available, or non-conforming (reduced ﬁ eld size).

The capacity of these ﬁ rst projects is to some extent arbitrary. It is
unlikely that in ten years time the issue of whether the ﬁ rst ISCCS
project comprised 25 or 28 MW of solar will be an issue. What
will be an issue, however, is whether the GEF projects failed to
get past the RfP process as a result of overly restrictive bidding
requirements, and, if they did proceed, whether they operated
successfully.

We suggest the bid documents allow for a minimum threshold
capacity requirement for the solar ﬁ eld, but make the offered solar
capacity one of the assessment criteria. The resulting competition
will help ensure the maximum capacity possible is offered for the
ﬁ nance available. Most importantly, it would allow the bidders to
develop, and feel comfortable with, their own risk proﬁ le.

It does raise additional complications as to how the bids are assessed.
The documents would need to provide clear guidance as to the
weightings given to different assessment criteria—overall LEC, peak
solar capacity, solar $/MWh

, etc., in much the same way as the

2002 Indian bid documents gave priority to thermal storage, etc.

In single EPC contracts where one turnkey price is offered, the
break-out cost of the solar ﬁ eld itself will not be known, and even
were it requested, there would be the tendency to ofﬂ oad some of
the solar ﬁ eld cost against the combined cycle power block cost to
make the solar ﬁ eld appear more attractive on a $/MWh

basis.

The dual-EPC approach has the advantage that each component
is bid separately and competitively.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

8. How are the opportunities for successive plants?

The World Bank has asked “what is the likelihood of these four
plants contributing to the development of a momentum that sees
subsequent plants being installed?” And as a corollary, why pursue
this GEF portfolio of 4 x $50 million

projects if the chance of fol-

low-up plants is slim? There are a number of factors impacting on
this issue, but perhaps the key one is the expected cost reduction
curve. Depending on the particular model and assumptions used
(see section 2.2) some thousands of MWs are required before the
technology is competitive with conventional fuels. This means that
subsequent plants are only likely to be built if some other form of
ﬁ nancial incentive is available—grants, renewable portfolio stan-
dards, renewable feed-in laws, etc. The other possibility is that the
necessary cost reductions occur as a result of a signiﬁ cant rollout in
the OECD countries, the beneﬁ ts eventually feeding through to the
World Bank countries. The latter is quite possible, but could take
on the order of ten to twenty years. Perhaps the most reasonable
chance of subsequent plants is some combination of the above in
a suitable CSP fund starting in a given region such as the Mediter-
ranean/Middle East region (see discussion below).

The rollout in the OECD countries is still in its infancy, although
there are in particular robust incentives in Spain, and emerging
activity in the United States, to help underwrite signiﬁ cant deploy-
ment activity. Nonetheless, at this point in time, there are less than
300 megawatts of what we would regard as relatively ﬁ rm project
prospects. Arguably, technology and industry maturity could be
said to have been reached before commercial competitiveness
was achieved—perhaps after a couple of thousand MW—and
there would be a greater degree of certainty that competition and
corresponding momentum would help to roll the industry forward to
commercial competitiveness. Once 2–3,000 MW was installed,
much as for wind, there would be much more data available to
plot the cost reduction curve and provide a degree of certainty
for investors. At this point, the industry is totally reliant on external
ﬁ nancial incentives; if existing ones were to be removed for any
reason, the industry would stop, just as the removal of incentives in
California halted the continued progression of the SEGS plants.

The most attractive ﬁ nancial incentives are in Spain. However,
these presently only apply to the ﬁ rst 200 MW. Beyond that, there
is an expectation they would reduce in line with a (to-be-speci-

ﬁ ed) cost reduction target. However, given that the Royal Decree
was essentially put in place to support Spanish industry, and at
this point Spanish industry has taken the lead role in the projects
proposed, there would appear to be a good chance of continued
support. The only other strong support in OECD countries for solar
technology is via a small number of Renewable Portfolio Standards
(RPS)’s in the United States, although we feel that something like
the Southwest United States CSP Initiative needs to be conﬁ rmed
with strong ﬁ nancial incentives attached for a robust CSP market
to develop there.

At this point, the industry still appears fragile. However, once
construction is well under way for a few projects in Spain and
the Nevada project, a cusp will have been reached. It is more
the number of projects than the total MW under construction that
will help to move the industry beyond the cusp (part 1 of the
cost reduction curve, see Figure 20) and into the beginnings of
a more robust rollout (part 2 of the cost reduction curve). In other
words, six 30 MW projects are deemed to be of more value
than a single 360 MW project. More projects spread over more
countries will ameliorate the risk associated with reliance on one
country’s incentive, and also the risk of one or more projects not
proceeding. It will also help build the proﬁ le and the perception
of widespread activity.

From this point of view, an announcement of at least 1 or 2 GEF
projects in the next 12 months becomes quite crucial. We do not
feel that the existing portfolio would beneﬁ t from any signiﬁ cant
change to the way the funding is made available to the projects.
The best chance of success is to make the funding available as
an upfront grant, as is presently the case. Holding a retainer until
certain performance milestones are met would not be necessary,
as performance penalties are covered in the bid documents.

From the overview of the mid-term expansion plans for the electric-
ity sector, it appears that with the exception of Egypt none of the
other countries in the portfolio have concretely integrated further
CSP plants into their expansion plan. Morocco has established a
certain number of sites that are suitable for further CSP plants. This

the exact amount is $194.2 million

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

is understandable to a certain degree given the awaiting for the
ﬁ rst plant. Most likely, with the experience of the ﬁ rst plant, and the
experiences in countries like Spain, further CSP plants would be
considered in a few years as options. However, by then economic
conditions will dominate the decisions.

6.6.3 Speciﬁ c recommendations on the four WB/
GEF projects

9. What are the chances/risks of each of the four WB/GEF
projects to reach realization?

Egypt

Egypt is currently a net exporter of energy through its reserves of oil
and natural gas, which provides valuable foreign income. However,
the Egyptian Government does recognize that these reserves of
oil and gas do have a ﬁ nite life. The Egyptian Government further
recognizes that it has good renewable energy resources such as
wind and solar insolation that can be exploited. Additionally, the
Egyptian Government has as one its primary objectives the expan-
sion of its manufacturing industry, which includes the manufacture
of components for its energy sector. The government recognizes
that expansion of the manufacturing sector is dependent on the
development of local know-how and intellectual capital. Finally,
the Egyptian demand for electricity is growing and new generation
capacity has to be continuously installed.

Importantly, the government recognizes that the GEF grant has
provided the catalyst to explore the application of solar thermal
technologies.

Two issues that had introduced delays in the project course over
the last year were:

An agreement had to be reached between NREA and the World

Bank with regard to incremental costs not only covering capital
costs but also operation and maintenance costs (agreement was
reached mid-May 2005 that the GEF ﬁ nancing will cover the
incremental O&M costs).

Resolution of concerns regarding the JBIC request to split the

existing bid documents into two, one for the solar island and

the other for the combined cycle island. This issue was ﬁ nally
accepted by the World Bank and Fichtner Solar prepared the
two bid documents.

It is within this context that the following is recommended for
Egypt:

1. The RfP does allow bids for a broad range of collector technolo-

gies (trough, dish, tower, Fresnel). This will stimulate the level
of interest in the Egyptian project and reduce the probability of
no successful bidders being found.

2. Flexibility must be allowed to explore the consequences of

JBIC’s request for two bid documents; careful management of
timelines to execute the project must be maintained. Although
this approach has many unknowns (see the discussion in section
6.6.2), it is an occasion to learn about a different institutional
arrangement for the contract.

3. To stimulate Egyptian interest in implementing further solar thermal

power projects, we recommend that the World Bank seriously
consider a role in facilitating:

Egypt’s establishing a renewable energy fund to ﬁ nance
future solar thermal project. Such a renewable energy fund
could be ﬁ nanced through a small levy on oil and gas that
is exported, similar to the procedure in Algeria.

Surveying local equipment suppliers/contractors to establish
what components may be provided locally and to inform
such suppliers and contractors of the opportunity of further
projects.

Establishing how best to develop local know-know and
intellectual capital. Local know-how enables wider choices
to be made and increases the probability of new technolo-
gies being accepted by all stakeholders, in particular local
stakeholders.

How best to integrate any Egyptian solar thermal project into
a Mediterranean basin power pool. Such a power pool has
the potential to provide Egypt with foreign income and allows
Egypt to retain its position of being a net energy exporter.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

How best Egypt can secure any beneﬁ ts from mechanisms
such as the Clean Development Mechanism.

(4) It was speciﬁ cally requested by those interviewed in Egypt that
the World Bank keep the ISCCS stakeholders in Egypt, Morocco,
Mexico, and India informed of developments in the various countries
through regular newsletters, and seriously consider facilitating an
international meeting at a convenient venue where the four coun-
tries and other interested countries can compare experiences and
developments. Such an international meeting will facilitate future
dialogue among the four countries and reduce the communications
load off of the WB.

India

At the time of the study, the consultants had recommended that (i) the
GoI needed to reply to the World Bank letter of 2004 stating the
government’s commitment to the project proceeding and to meeting
the requirements stated therein, and that (ii) there be a resolution of
the balance of funding from KfW. Eventually, the project could not
be implemented in a timely fashion due to inappropriate design
and location. In case the project is brought forward again, the
following remarks might be considered:

The RfP should be modiﬁ ed to allow a broad range of collector

technologies to be bid (trough, dish, tower, Fresnel) to supply
steam to the steam cycle. This will help improve the level of
interest in the Indian project, and make less likely the situation
where no successful bidders can be found.

The RfP should be modiﬁ ed such that there is a minimum threshold

of required solar capacity (perhaps around 23 MW), but which
encourages bidders to compete to offer the most solar MW (or
better still GWh) for the available grant. This will help reduce
the possible situation where no bids are received because the
ﬁ xed grant is not enough to cover the mandated ﬁ eld size.

A timeline with speciﬁ c dates will depend on the above issues

being resolved. However it is suggested that the Moroccan
project be given time to release RfP’s ﬁ rst to at least get one
project successfully under way. Given the signiﬁ cant time
gap in this project, a new call to pre-qualify bidders will be
needed.

The gas supply issue has plagued this Mathania project from the

outset. Discussions in India suggested an alternative supply point
requiring a much shorter pipeline; this is now the new preferred
option. In addition, some preparatory work has been carried
out to investigate alternative uses for the gas and revenue pos-
sibilities along the pipeline. This situation needs to be clariﬁ ed
and conﬁ rmed in a letter to the World Bank.

We have seen little technical evidence to support Mathania’s

selection as the preferred site for this ﬁ rst Indian project. How-
ever, various stakeholders suggested it might be unwise to open
up this issue to any signiﬁ cant degree as it could lead to further
procrastination, and thus quash any project altogether. In any
case, it was pointed out, the permits are in place and most of
the infrastructural and resource requirements are now starting to
come together for Mathania. However, other stakeholders con-
sidered there were better sites available and that these should
be explored. Integration with the Jaiselmer 110 MW combined
cycle was mentioned, but the existing steam turbine would need
resizing to accommodate a 30 MW solar ﬁ eld, or a smaller solar
ﬁ eld. The Mathania solar resource of 2,240 kWh/m

/yr is only

an average site by world standards. We would be reluctant to
recommend a detailed investigation of alternative sites, however
there could be value in ensuring that in the last decade—since
Mathania was selected—a better site has not emerged. We
would suggest a short assessment with very tight deadlines of no
more than two or three other sites that might host such a plant.
The onus would need to be on the other sites to prove themselves
more attractive than Mathania’s present status, and also that
they could make up the lost time. This could perhaps form part
of the required response to the World Bank. One advantage
this would have is to effectively lay the groundwork for a more
ﬂ exible technology response, as recommended above.

Mexico

Long-term prospects of CSP in Mexico

Mexico has excellent solar insolation conditions, a growing electric-
ity demand, and a growing dependence on natural gas imports.
Solar thermal power plants can help mitigate the country’s risk
related to volatile fuel prices. Further arguments to introduce CSP
in Mexico are the fact that CSP can be used to substitute Mexico’s

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

expensive peaking power plants, which would justify higher solar
LEC. Furthermore, the local industry will proﬁ t from the CSP mar-
ket. A Mexican company has already provided structures for the
Californian SEGS collectors. In the future, over 50 percent of the
solar ﬁ eld investment and O&M can be provided by the Mexican
national economy (Spencer Management Associates, 2000).

Near-term prospects of CSP in Mexico

The country has in place legislation mandating a least-cost obliga-
tion for electricity generation technologies. The arguments as to
why Mexico would proﬁ t from CSP technology would have to be
recognized by Mexican political authorities with the consequence
of developing a legal framework that fosters CSP deployment in
the country (ideally in the form of feed-in-tariffs). Currently, a new
law for the promotion of renewable energies in the country is in
preparation. According to CFE, it might take one to two years
before this law is approved. This law will foster solar and wind
projects in the future. It is not yet clear how this law will comply
with the least-cost requirement, which is also ﬁ xed by law. As a
consequence the question of whether, in the near term, Mexico will
be able to invest domestic capital into further multiple solar thermal
power projects is not yet known.

Recommendations on the Mexican project

Given the fact that in the long run, the country will proﬁ t from CSP
technology and that CFE shows strong interest in the current ISCCS
project, it is recommended to maintain the WB/GEF support of
the project. CFE will gain valuable construction and especially op-
erational experience with such a plant. With this CSP experience,
the country would be much more likely to invest in this technology
at a later point.

Mexico’s new plan to equip a 560 MW CC instead of a 250 MW
plant with a solar ﬁ eld, thereby diluting the solar share to approxi-
mately 50 percent of its original contribution, should not be grounds
(from an energy, ecological, or economic point of view) to cancel
project support. The 560 MW CC would be built anyway and,
with the same solar ﬁ eld size, more solar electricity is actually gener-
ated (Figure 23). This is because during the hours when the solar
ﬁ eld is not operating, there are thermodynamic advantages due
to the solar ﬁ eld now representing less of an off-design imposition.

Recent further developments for this plant and the recent Sargent
and Lundy study (2006) have shown that the doubling in size of the
fossil component is not a decisive argument against this plant.

We are unsure if the same methodology has been used to model
annual output in both the Sargent and Lundy (2003) feasibility
study and the earlier Spencer (2000) study, and for clariﬁ cation
suggest this be reviewed.

The dilution of the solar share of the plant does not appear to be
a decisive argument against the 500 MW plant because high
solar shares are not among the advantages of the ISCCS concept
anyway. ISCCS is a good concept to boost a CC that would
anyway be built with a comparatively huge amount of renewable
energy (compared to other forms of solar energy usage).

One critical point with respect to the ISCCS concept in general, but
especially in combination with a larger combined cycle, is the fact
that sufﬁ cient incentives will be in place in order to ensure that the
solar ﬁ eld will actually be operated. Such motivation is especially
strong when the remuneration of the solar electricity occurs on a
kWh basis. However, in this case, an upfront grant covers the ex-

IGURE

23: R

ELATIVE

PART

LOAD

LOSSES

THE

STEAM

TURBINE

FOR

THE

DAYTIMES

WHEN

SOLAR

FIELD

NOT

PROVIDING

SOLAR

STEAM

FOR

DIFFERENT

ISCCS

PLANT

SIZES

Source:

part load characteristics: E.ON Engineering (see ﬁ gure 4); interpretation and transfer to ISCCS:

Gabriel Morin.

500 MW: ST operation when no
solar energy available

250 MW: ST operation when no
solar energy available

40%

50%

60%

70%

80%

90%

100%

Relative part load efficiency

Thermal load of the Steam Turbine (%)

100

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

cess solar costs. Possibly such incentives might be provided in the
form of penalties if the solar ﬁ eld is not working according to the
design conditions (penalties on kWh

basis for the solar ﬁ eld).

A different plant concept was discussed at the World Bank CSP
Workshop (April 20, 2005)—the integration of a solar ﬁ eld into an
existing coal-ﬁ red Rankine plant owned by CFE. Such a combination
will have a much higher CO

-emission beneﬁ t by displacing coal

rather than natural gas, when the solar ﬁ eld is used as a fuel saver.
Technically/thermodynamically, the solar ﬁ eld would ﬁ t well into
the Rankine cycle. If the GEF, the World Bank, and CFE are ﬂ exible
enough to change to this non-ISCC concept, further examination
of this hybrid concept is strongly recommended.

In any case, we recommend that CFE, the World Bank, and GEF
agree upon a common project plan for further project implementa-
tion, including meetings and/or reporting after each milestone to
avoid institutional problems encountered in the past (delays due to
low project priority, unclear procurement guidelines).

Morocco

The Morocco project appears from the current perspective the most
advanced of the four WB/GEF projects, although the Moroccan
request to increase the CC capacity due to power shortage could
introduce further delay. It is therefore a key project in the portfo-
lio and important for the whole GEF program that this project is
strongly promoted and supported, even in the most difﬁ cult phase
still ahead, the bidding process. The World Bank should therefore
pay particular attention to the Morocco project so that delays are
kept to a minimum and the deadlines as proposed currently, with
contract signature by January 2007, are respected. This could set
a sign for the other projects in the portfolio (lead function). Internally,
this requires for the World Bank a tough follow-up of procedures.
Problems arising in the bidding procedure might arise from the
fact that bidding companies, not yet trusting the establishment of
a market, might add risk factors to the price that could bring the
price beyond the currently foreseen ﬁ nancing. From the current
perspective, this risk appears limited (larger share of well-known
conventional components with known costs due to the ISCCS ap-
proach, ﬁ nancial calculations taking into account such a risk to
some degree, the development in Spain that might share the “risk
of the ﬁ rst plant”), but not fully excluded. In case of substantial

cost overdraw, a rapid compromise should be discussed with the
participating companies.

6.7 A

NSWERS

THE

QUESTIONS

ADDRESSING

THE

LONG

TERM

DEVELOPMENT

THE

WB/GEF CSP

PORTFOLIO

This section provides answers to the questions addressing the long-
term development of the WB/GEF CSP portfolio raised in section
6.5 (both questions related to strategy and operational questions).
From the previous description of a long-term vision for CSP and of
the success criteria for a strategy to introduce CSP in developing
countries in particular, one can deduce several recommendations
that are important for the future development of the WB/GEF CSP
portfolio in order to ﬁ t such a successful strategy:

6.7.1 Strategy recommendation

The options discussed here for part 2 of the cost reduction curve
assume that the current portfolio has some reasonable implementa-
tion success (at least 2 projects).

10. Which strategy choice as discussed in Chapter 5 (sections 5.4 to
5.6) (“Wait and See”, “2-Track-Approach”, Specialization”) should be
adopted in case of successful/unsuccessful termination of the current
portfolio ? What would be the outcome of such an engagement?

The “Wait and See” strategy (see Chapter 5, section 5.4) is
incompatible with the success criteria and OP 7 main objective:

The “Wait and See” strategy described in section 5.4 does not
fulﬁ l Criteria 1 in that it delays the introduction of solar thermal
technology beyond the point when a lot of the power generation
infrastructure of developing countries will be in place. It is also in
contradiction to the main objective of the OP 7 to promote GHG
technologies that will make a major contribution to the reduction of
greenhouse gas emissions in developing countries. This objective
remains entirely valid in the light of the arguments provided at the
beginning of this chapter.

Pursuing the “Specialization” strategy now will for some decades
only lead to a limited contribution to a path toward reduced CO

emissions

: It is unlikely that a strategy based on small-scale promotion

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

of CSP technology would be able to lower the cost sufﬁ ciently rapidly
in order to allow for a stronger penetration of the bulk electricity mar-
ket. Hence the “Specialization” strategy considered in the previous
chapter cannot replace the “2-Track-Aproach” in order to promote
quickly enough the penetration of CSP power before fossil alterna-
tives lock down the path toward reduced CO

emissions for some

decades. However, in the absence of a more ambitious strategy, it
can constitute a suitable means to keep interest in CSP at a minimum
level or to complement possible more comprehensive strategies from
other actors (for more details see answer to Question (16)).

Future GEF Strategies must rely on a 2-Track-Approach:

It follows

that the main strategy must rely on a 2-Track-Approach promoting
the technology in both the developing and the developed countries
and to accompany it along the cost reduction curve with different
strategies.

11. Should a future WB/GEF strategy concentrate on regions with
the best chances to create volume markets?

For the

ﬁ rst phase

of the cost reduction curve (in which we are cur-

rently and which establishes technical and institutional experience),
it appears as adequate that there was a broad consideration of
countries/regions, as the main aspect was the creation of technical
and institutional experience. The second phase of the cost reduc-
tion curve should concentrate on regions with the best chance to
create volume markets (Criteria 4) in the shortest time and should
not disperse efforts. However, technology promotion might mean,
at a given point of the cost curve, to focus on a given region. Such
countries/regions are from the current perspective:

The

Mediterranean area and the Middle East.

The main reason

for this conclusion is this region fulﬁ ls partially or fully a variety
of the above-mentioned criteria such as Criteria 1 (if the current
WB/GEF portfolio and the ISCCS project in Algeria are success-
ful), Criteria 2 (recent development in Spain and partially Italy
and Israel; to be enhanced in Greece), Criteria 3 (in particular
for example in Algeria but for the whole of the North African
region up to Iran due to the nascent power interconnection of
those countries with Europe and among themselves as well as
the growing electricity demand at noon and power technology
diversiﬁ cation issues), Criteria 7 (currently only in Algeria), and
Criteria 12 (if the current WB/GEF portfolio is successful).

A successful strategy in this area must enhance the partially
fulﬁ lled criteria in other countries and in particular (1) stabilize
and increase the participation of the European Mediterranean
countries and Israel; (2) replicate the current WB/GEF portfolio
in Morocco and Egypt; (3) support the current efforts in Algeria;
(4) activate stronger support for the CSP efforts in Jordan and
Iran; and (5) investigate for other countries in the region without
current CSP strategy but suitable solar resources the possibil-
ity to develop a CSP strategy (e.g. Libya or possibly African
countries further to the South, see Trieb, 2005). According to
Criteria 3, the technology chosen must best ﬁ t the requirements
of power sector development. In some or all cases, this might
be ISCCS technology, either because it best ﬁ ts the needs of
the economy (Algeria) or because it ensures the largest solar
capacity installed at the lowest price combined with an overall
large fossil capacity covering the rapidly growing demand in
the region. Diversiﬁ cation of technologies (Criteria 11) appears,
nevertheless, also relevant for the developing countries in the
region, although initially it can be assured by the developed
countries such as Spain, which have a different weighting of
the criteria in the early stage of the cost reduction curve, in
particular Criteria 15 (environmental impact).

China. Due to the sheer volume of demand including for renew-
able energy sources, the exemplary recent approach to create
an institutional frame for renewables, and the nascent efforts
to create its own manufacturing base for the technology. This
region appears interesting despite not having the most optimal
solar resources and a larger distance between consumers and
suitable areas in the country (Huang, 2005).

Other countries/regions as compared to the previous two markets
(Mediterranean/Middle East and China) might have also their logic
to develop CSP, but they require additional arguments to concentrate
on in the second phase: Mexico

could gain interest from a strong

A detailed scenario analysis of the renewables needs and CSP needs,

in particular for the Mediterranean area and the Middle East, is carried
out by Trieb (2004).

Mexico’s long-term-prospects of solar electricity export (to the U.S.) are

less promising compared to North Africa and Middle East (to Europe)—be-
cause the U.S. itself has huge solar resources (irradiation and land) in
contrast to Europe.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

uptake of CSP in the Southwest United States or from a strong national
strategy for CSP. India, like China, is a market of its own, but is ham-
pered by the complexity of the decision levels that are manifested in
the current WB/GEF portfolio. A minimum requirement for this market
to be considered is a successful implementation of the corresponding
current WB/GEF project. South Africa is for the moment an isolated
market and has little real interest to develop CSP given the strong
role of coal. Possibly feed-water preheating in combination with coal
could be a viable strategy for this country, as well as combination
of existing low-efﬁ ciency coal plants with solar.

12. What are the requirements on the composition of any future
portfolio for CSP in order to ﬁ t the development towards the realisa-
tion of the CSP vision described in Chapter 6 (section 6.1)?

At a minimum four CSP plants should be promoted by the GEF
within the second phase of the cost reduction curve:

For the second

phase of the cost curve, it can be estimated from the above that for
the developing countries about 200 to 300 MW of solar thermal
power are to be installed by about 2015. Of this, about 90 MW
might be provided in phase 1 (at least two WB/GEF projects
and Algeria succeeding). The second phase should consist of—at
a minimum—another four projects in the Mediterranean/Middle
East region. Out of these projects, each one in the range of 30 to
50 MW, two might concentrate on the countries of phase 1, which
have most advanced in the development of the frame for renewables
and developed further their power sector expansion strategy to
include CSP. Another two projects might be built in Jordan and Iran,
which are to some degree advanced with their strategy, although
the interest of CSP for their power sector must be demonstrated in
detail. Additional small amounts of ﬁ nancing would be required to
investigate CSP and prepare the grounds for further implementation
in other countries in the region. The total funding required for the
second phase of the cost reduction curve (developing countries
only) might be around

€

200 to

€

300 million.

6.7.2 Operational recommendations

13. Should a future engagement continue to promote ISCC? Should
it promote a broader range of technologies; if yes, which?

Promote a broader range of technologies (power cycle integration
and solar thermal collectors):

The ISCCS concept is an attractive

option for developing countries to include solar energy into the
existing power market expansion plans. On the other hand, it is
also reasonable to focus on parabolic trough technology, being
the most experienced CSP technology so far. However, in the
long run,

the promoted technology options should be wider

(see power cycle integration options in section 2.2.2 and solar
collector types in Annex 3), in order to spur further competition
and to adapt to individual needs/inquiries of the countries of
destination.

14. Which funding mechanisms appear as most suitable to promote
CSP in future? Should WB/GEF bundle forces with more actors to
reach a critical mass. In particular, how can the technology best
be promoted in developing countries?

Provide future grants for production (MWh) instead of investments
(MW):

It is also questioned whether an investment grant strategy

might provide the right frame for the market (see also ﬁ nancing
mechanisms below). In particular, it must be emphasized that in
the current portfolio grants are given for investments and not for
production. It is therefore not assured that the solar plants effectively
produce over a larger number of years. Therefore feed-in-tariffs
with MWh instead of MW as funding basis should be considered
(criteria 12). In this context, we favor a discussion about operating
future CSP plants under the IPP scheme in sufﬁ ciently liberalized
markets. The commitment of the plant operator would also be lever-
aged by the fact that the total plant ﬁ nancing has to be provided.
The plant operator would get its electricity remuneration in a strong
currency (e.g. $/MWh), potentially with a GEF implementing
agency (e.g. the World Bank) as the electricity buyer. The GEF
implementing agency would in turn place a contract with the local
electricity supplier, reducing its ﬁ nancing risk by paying a premium
on top of the local market price. This again would motivate the IPP
contractor to produce electricity in accordance with the electricity
price/demand.

In particular for the Mediterranean region funding mechanisms
based on electricity production are discussed:

And partially even for the short term (current portfolio) by including solar

tower or potentially a solar hybrid steam plant in the case of Mexico.

HAPTER

6 – S

HORT

AND

LONG

TERM

RECOMMENDATIONS

FOR

THE

WB/GEF

STRATEGY

FOR

CSP

THE

CONTEXT

LONG

TERM

VISION

FOR

CSP

Global Market Initiative for Concentrating Solar Power (GMI):

GMI (2003)

describes an initiative to formulate a fair scheme

that accounts for both improved tariffs for clean energy gener-
ated in the developing countries and to allow a beneﬁ t from
enhanced feed-in tariffs for energy that is imported into close-by
industrialized countries. According to GMI (2003), the ﬁ nan-
cial cost gap can be further reduced through a blend of clean
development mechanisms (CDM such as carbon tax credits, if
bankable), and preferential ﬁ nancing, such as the European
Union’s infrastructural support program, the Mediterranean
Development Aid (MEDA) Programme.

Financing Instruments for the Market Introduction of Solar Thermal
Power Plants—the Scenario Model Athene (DLR 2004):

DLR

(2004) describes with their ATHENE model a comprehensive ap-
proach regarding how project ﬁ nancing can be assured through
the development of a fund for the market introduction of CSP.
Such a fund could be developed further later on to accompany
the introduction of phase 3 and 4 of the cost reduction curve.
This approach can provide guidance on how to develop, for
example, a Mediterranean/Middle East-centered fund. The aim
of the vision developed by DLR (2004) is, as described above, to
implement 5,000 MW CSP worldwide by 2015 and more than
40 GW by 2025. Several funding mechanisms are combined
in order to lower considerably the additional costs of initially

€

145 billion (required with a 15 percent internal rate of return).

Such a fund could provide, in analogy to feed-in tariffs such as
in Spain (for CSP) or Germany (for other types of renewables),
long-term power purchasing agreements in hard currency in such
a way that the risk perception due to the reliable PPA could be
signiﬁ cantly reduced. As a consequence, the investors’ expected
internal rate of return of the projects will be reduced from 15
percent down to 8 percent.

Through such a mechanism alone,

the additional costs of the market introduction are calculated to
be lowered to about

€

12 billion. Comprehensive risk reduction

is provided in the form of government export and credit guaran-
tees as well as machine insurance and insurance against natural
disasters through the re-insurance branch. According to the fund
idea developed with the ATHENE model, the additional market
introduction costs are lowered to about

€

2.5 billion if the carbon

pricing is added, with a carbon price increasing from initially
7.5

€

/t CO

to 30

€

/t CO

in 2050. If every project receiving

ﬁ nancing from the fund revolves a unique fee of

€

21 million

to the fund, the market introduction cost is lowered to

€

1.75

million. Under these conditions by 2015 and with 5,000 MW
installed power a price can be achieved that can be covered
from the electricity sales and carbon ﬁ nancing. Starting in 2023
with an installed power of 20 GW, a cost level is reached that
covers cost also with conventional project ﬁ nancing and carbon
ﬁ nancing. Starting in 2030, solar power plants would also be,
according to the calculations, cost-competitive without carbon
ﬁ nancing. It must be emphasized that the ATHENE approach is
a rather conservative approach to estimate cost competitiveness
(see also Chapter 2, section 2.1.2). If the market introduction
is realized according to the calculations of the ATHENE model,
the

€

1.75 billion in initial market ﬁ nancing ﬂ ows back to the

fund with an internal rate of return of 4 percent and will achieve
a surplus between 2020 and 2050 of about

€

8 billion. Such

revenues could be used to pay the initial market ﬁ nancing
back or to increase, as an ex-post dividend, the internal rate
of return of the individual projects. If the carbon price would
be only 30 percent of the model estimates, the fund would still
revolve but without interest. For the implementation of the CSP
strategic goals, it is recommended that the GEF in the future
organize its CSP funding according to the above-mentioned
fund in order to reduce risk and thereby signiﬁ cantly reduce
the technology’s market introduction costs. On the other hand,
the environmental and economic beneﬁ t of the funding will be
signiﬁ cantly enhanced by motivating the power producers to
produce MWh instead of MW.

GMI (2003) emphasizes that to some extent, the large tariff differences

between ostensibly cheap fossil-based bulk power and solar-generated
power are due to subsidies granted implicitly or explicitly for fossil fuel in
some countries. This inﬂ ates the subsidies needed to cover the apparently
higher cost of CSP power. Therefore, access to favorable tariffs from solar
thermal electricity importers could be offered while reducing subsidies on
fossil power production in solar thermal electricity exporters to minimize
net funding.

Given the fact that this is not equity interest but project IRR with mixed

ﬁ nancing (debt and equity), the used interest rate of 15 percent appears
rather high. Nevertheless, the ﬁ nanciers’ expectations on the IRR directly
depends on risk perception. All mentioned ﬁ nancing risks can signiﬁ cantly
be reduced by such a fund in a way that 8 percent (in real terms) appears
as a realistic if not conservative assumption.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

15. What amount of support is necessary for any following
step?

Necessary GEF (and other donor) CSP engagement accounts to
$44 million on an annual average up to around 2025:

Under the

assumption that 35 percent of the CSP installations by 2025 will
be installed and operated in developing countries, the cumulative
subsidies would account to

€

875 million

, or $1.12 billion.

it is further assumed that 30 percent of this amount will be borne
by countries like Algeria from its own national means, an amount
of

€

610 million ($786 million) has to be ﬁ nanced by international

funding. If the GEF is supposed to ﬁ nance this part, on an aver-
age $44 million of annual CSP funding would be necessary. This
includes CO

emission trading (through CDM). In case the CO

emission trade is not taken into account, the necessary annual
average CSP funding amounts to $189 million.

16. What could be the potential GEF engagement in case of
reduced available CSP funding means?

Potential GEF engagement in case of reduced available CSP
funding means:

Although the original OP 7 objectives consider as

likely decades for the promotion of the target technologies with a
considerable annual funding, all-in-all the grants really available
from the GEF fund for future CSP development stay behind initial
expectations and the estimated requirements. In case the required
large-scale funding (Criteria 8) exceeds the ﬁ nancial perspectives
of the GEF, we suggest the following two alternatives:

The GEF should try to join forces in the ﬁ eld of renewable en-

ergy deployment in developing countries in order to establish
such an above-mentioned fund with the participation of differ-
ent stakeholders. Potential co-funding organizations are export
and development banks like KfW, JBIC, African Development
Bank, Asian Development Bank, and national development aid
programs, especially if allowing for the promotion of RES.

In the case of signiﬁ cantly reduced ﬁ nancial means for future

CSP projects in combination with the wish of the WB/GEF to
support further this important technology, the following technol-
ogy lines (alternative to the ISCC) concept might be considered
(see also Chapter 2, section 2.2):

o Feed-water preheating in fossil steam plants (approximate

invest: $10 million for 10 MWe): also promoting other than
parabolic trough collector types (e.g. tower, dish, Fresnel)
by a technology-unspeciﬁ c bidding procedure. Feed-water
preheating leads to good solar efﬁ ciencies, good ratio of
funding and solar-MWh because of reduced investment.
Existing plant (infrastructure) might be used.

o Small-scale solar combined heat and power plants (heat

for absorption chillers (e.g. air conditioning), process heat
or sea water desalination (the latter becoming increasingly
important in many countries with good solar resources).

o Industrial process heat applications of 200–1,000 kW

(based solar concentrators).

For the implementation of such small-scale CSP projects, the

following tendering strategy might be interesting. Preliminarily, a
set of criteria (compare also criteria in Table 7) to be met by the
projects have to be deﬁ ned by the WB/GEF. For example:

o Multiplication effect (the project suggestion should make clear

that it is a pilot project that will induce several successors of
its kind)

o Environmental beneﬁ t

o Cost-effective use of GEF-funding (possibly based on a cri-

terion like solar MWh per $)

o Social beneﬁ t (the project should prove that it will have a

positive impact on social and economic aspects)

Under the assumption of a project IRR of 8 percent without revolving

fee of 21 million

€

Exchange rate (May 10, 2005)

€

1 = $1.2835.

German Federal Ministry for Economic Cooperation and Development

(BMZ)/KfW Entwicklungsbank

Special Facility for Renewable Energies and

Energy Efﬁ ciency

(budget of

€

500 million over ﬁ ve years for soft loans for

RES projects in developing countries.)

BMU (German Ministry for the Environment, Nature Conservation

and Nuclear Safety). 2004. “International Action Programme
of the “Renewables 2004.” International Conference for Renew-
able Energies, Bonn, Germany, August 30, 2004.

BMU (German Ministry for the Environment, Nature Conservation

and Nuclear Safety). Personal communication from Ludger
Lorych.

Bonn International Conference for Renewables. 2004.

Con-

ference Report. Outcomes & Documentation – Political
Declaration / International Action Programme/Policy Rec-
ommendations for Renewable Energies

, Conference Sec-

retariat, Deutsche Gesellschaft für Technische Zusam-
menarbeit (GTZ), Bonn, Germany, June 1–4, 2004.
www.renewables2004.de

Criqui, P., and others. 2003.

Greenhouse Gas Reduction Pathways

in the UNFCCC Process up to 2025—Technical Report

. Study

Contract: B4-3040/2001/325703/MAR/E.1 for the DG
Environment.

Dersch, J., and others. 2002. “Trough integration into power

plants—a study on the performance and economy of in-
tegrated solar combined cycle systems.” Proceedings of
11th SolarPACES International Symposium on Solar Thermal
Concentrating Technologies, Zürich, Switzerland, September
4–6, 2002.

DLR (German Aerospace Center). 2004. “Financing Instruments for

the Market Introduction of STTPs—Scenario Model ‘Athene.’”
BMU-funded study SOKRATES, December 2001–December
2003, Final Report 2004.

DLR and others. 2005.

European Concentrated Solar Thermal

Road-Mapping (ECOSTAR)

. Pitz-Paal, R.; Jürgen Dersch, J. and

Milow, B. (eds). EU-funded study SES6-CT-2003-502578,
December 2003–February 2005. Stuttgart: Deutsches Zentrum
für Luft- und Raumfahrt e.V. DLR.

Enermodal. 1999.

Cost Reduction Study for Solar Thermal Power

Plants

. Kitchener, Ontario: Enermodal Engineering Limited.

Gelil, I.A. 2002. “Energy Situation in Egypt, Efﬁ ciency Perspec-

tives.” Paper presented at the Egypt Energy Day. World Energy
Council WEC Executive Assembly, Cairo, 24 Oct. 2002.
(http://www.worldenergy.org/wec-geis/global/downloads/
eacairo/prsn001024Gelil.pdf)

Häussermann, V. 2005. “General risks involved with CSP Invest-

ments – View from Investors Perspective.” Paper presented at
the World bank/GEF Seminar on CSP Projects, Washington,
D.C., April 20, 2005.

IEA (International Energy Agency). 2000.

Experience Curves for

Energy Technology Policy.

(http://www.iea.org/textbase/

nppdf/free/2000/curve2000.pdf)

IEA (International Energy Agency): 2003.

World Energy Investment

Outlook.

Paris: IEA.

IEA (International Energy Agency). 2004.

World Energy Outlook

2004

. Paris: IEA.

IPCC (Intergovernmental Panel on Climate Change). 2000.

Meth-

odological and Technological Issues in Technology Transfer.

Cambridge: Cambridge University Press.

E F E R E N C E S

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Duke, R. 2002.

Clean Energy Technologies Buydowns: Eco-

nomic Theory, Analytic Tools and the Photovoltaics Case

. Ph.

D. dissertation presented to the Faculty of Princeton University,
November 2002.

GEF. “Operational Program number 7—Reducing the long-term

costs of low greenhouse gas-emitting energy technologies.”
(www.gefweb.org)

Geyer, M. 2005. “Role of CSP Market Deployment in Developing

Countries for the Future CSP Development.” Paper presented at
the World Bank/GEF Seminar on CSP Projects, Washington,
D.C., April 20, 2005.

Global Market Initiative (GMI). (http://www.solarpaces.org/GMI.

HTM)

Greenpeace/ESTIA. 2003.

Solar Thermal Power 2020—Ex-

ploiting the Heat from the Sun to Combat Climate Change

Amsterdam/Birmingham: Greenpeace/European Solar Thermal
Power Industry Association (ESTIA).

Huang, Ming. 2005. “China and CSP activities.” Paper presented

at the Worldbank/GEF Seminar on CSP Projects, Washington,
D.C., April 20, 2005.

Kearney, D., and H. Price. Forthcoming. “Recent Advances in

Parabolic Trough Solar Power Plant Technology.”

Lawrence-Pﬂ eeger, S. and others. 2003. “Facilitating technology

transfer of federally funded R&D.” Arlington, VA: RAND Science
and Technology Policy Institute.

Mariyappan, J., and D. Anderson. 2001. “Thematic Review of GEF-Fi-

nanced Solar Thermal Projects.” Monitoring and Evaluation Working
Paper 7. Washington, DC: Global Environment Facility GEF.
http://thegef.org/ResultsandImpact/Monitoring___Evalua-
tion/Evaluationstudies/WP_7.pdf

Ming, H. 2005. “China and CSP activities.” Paper presented at

the Workshop on CSP promotion strategy of the GEF and the
World Bank, Washington D.C., April 20, 2005.

Morin, G., and others. 2004. “Plug-in Strategy for Market Intro-

duction of Fresnel-Collectors.” Proceedings of 12th SolarPACES
International Symposium on Solar Thermal Concentrating Tech-
nologies, Oaxaca, Mexico, October 6–8, 2004.

Pacudan, R., and M.K. Lee. 2003. “Overview of the CDM

market and CER prices.” Roskilde: UNEP RISØ Cen-
tre on Energy, Climate and Sustainable Development.
http://www.rtcc.org/html/articles/cdm/unep-cdm.htm

PCAST (The President’s Council of Advisors on Science and

Technology). 2003.

Report on Technology Transfer of Federally

Funded R&D – Findings and Proposed Actions

. Washington,

DC: Executive Ofﬁ ce of The President’s Council of Advisors on
Science and Technology

Philibert, C. 2004.

International Energy Technology Collaboration

and Climate Change Mitigation, Case Study 1: Concentrating
Solar Power Technologies

. Paris: International Energy Agency.

Pilkington Solar International GmbH. 1996.

Status Report on Solar

Trough Plants—Experience, prospects and recommendations to
overcome market barriers of parabolic trough collector power
plant technology

, Koeln: Pilkington Solar International GmbH.

Price, H. 2005. “Status of CSP Technology and CSP Projects in the

US.”. Presentation at the WB/GEF Workshop on Solar Thermal
Power Generation, Washington D.C., March 18, 2005.

Quaschning, V.:

Projektion der Kosten und Anteile von Solarstrom

zur Stromversorgung im Jahr 2025

, Tagungsband des 20.

Symposiums Photovoltaische Solarenergie—Kloster Banz, Bad
Staffelstein 9.–11. März 2005. Regensburg: Ostbayerisches
Technologie-Transfer-Institut e.V. (OTTI), Page 448–453.

Ragwitz, M. Fraunhofer. 2005. Personal communication.

Sargent and Lundy. 2003.

Assessment of Parabolic Trough and

Power Tower Solar Technology Cost and Performance Forecasts.
Chicago: Sargent and Lundy LLC Consulting Group.

Sargent and Lundy. 2004. Feasibility Study of Integrated Solar

Combined Cycle System (ISCCS) Mexico

. Report prepared for

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Country/Location Algeria/Hassi

R’mel

Type of technology

Parabolic trough integrated with a combined cycle plant

Technical parameters

130 MW combined cycle, with a gas turbine power on the order of 80 MW and a 75 MW steam turbine. 25 MW solar ﬁ eld, requiring a surface of around 180,000 m

parabolic mirrors. Addition of a desalination plant fore-seen. Originally the following conﬁ gurations were considered: Size 150 MW (combined cycle 107 MW net, solar ﬁ eld

43.6 MW net).

Business model

BEA-NEAL partnership guaranteeing one-third of the capital, beyond which the remainder would be guaranteed by a foreign investor at a minimum of 51 percent and the

EIB with a proﬁ t-sharing loan (QUASI EQUITY). BUILD OWN OPERATE contract or BOO/BOT, “non-recourse.” Sonatrach will buy the electricity (NEAL: a company set up by

SONATRACH, SONELGAZ and SIM to carry out projects that make use of renewable en-ergy. Sonatrach: National company for the production, transport and commercializa

tion of hydrocarbons. Sonel-gaz: Electricity and Gas Company of Algeria. BEA: Banque Extérieure d’Algérie).

Liability provisions

Status of plant

Invitation for expressions of interest launched on June 8, 2004. The publication of the bidding was originally planned for September 2004, with contract award December

2004 and project start by September 2005. A Request for Proposals was issued in May 2005 by the New Energy Algeria (NEAL) to construct, ﬁ nance, exploit, and

maintain a hybrid solar/gas power plant of 150 MW at the site of Hassi R’mel. A visit to the site and the data room took place on July 4, 2005. The interested consortia

have (until October 5, 2005) been invited to submit a technical proposal. An investor has been retained for construction, exploitation, and commercialization.

Expected project time schedule

Expected start of construction 2006/2007.

Project developer/Prequaliﬁ ed devel-opers

NEAL is the project developer. Following the invitation for expressions of interest, the following companies declared their interest: CME and General Electric (USA), ACS

COBRA (Spain), LAVALLIN (Canada), SIEMENS and Solar Millennium (Germany), MITSUI-JGC (Japan), ALSTOM (France), BLACK & VEATCH (Great Britain) and BRC

(Algeria).

Financing structure

Aggregate investment: $177 million (of which EPC $143.9M, intercalary interests $12M, preliminary costs $0.5M, contingency $4.3M, customs taxes $5.3M).

Investments of nearly $140 million will be contributed by the German investment bank KFW in preferential rate loans and the European Investment Bank (EIB). The BEA

will syndicate with the EIB the portion in Dinars.

Final owner of plant

Foreign investor or consortium

Institutional frame for renewables in host

Algeria has set up a national program for the promotion of renewable energy sources in the frame of a sus-tainable development up to 2020 (5-years program) (Law

N° country 04-09 of 14 August 2004 relative to the Promo-tion of Renewable Energy Sources in the frame of Sustainable Development).

Quota system for renewable energy sources with a tender procedure (The promotion shall occur “in coherence with the principle of competitiveness”). Later on, green

certiﬁ cates for renewable energy sources are envisaged but no structure for Green certiﬁ cates is in place so far.

The decree N° 04-92 of 25 March 2004 “on the costs of diversiﬁ cation” aims at bringing the share of electricity produced by the renewable energies to 5 percent of

the total electricity to be produced by 2010, by introducing incentive measures for all the branches of energy used to produce electricity. Premiums for each kWh from

renew ables and cogeneration (see below), including an obligation to the network operator to connect renewable energy sources to the grid within economic acceptable

limits. In accordance with the law N° 02- 01 of February 5, 2002 (art. 98), the costs of diversiﬁ cation are integrated in the tariffs. In addition: creation of a “national

observatory for the promotion of renewable energy sources.”

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Type of renewables

Premiums

(expressed as a percentage of the electricity price per kWh deﬁ ned by the market operator)

Electricity from solar thermal – natural 200 percent if the contribution of solar energy represents a minimum of 25 percent of the total primary energy,180 percent

gas hybrid plants

if the solar share is 20 to 25 percent, 160 percent if the solar share is 15 to 20 percent, 140 percent if the solar

share is 10 to 15 percent,100 percent if the solar share is 5 to percent, no premium below 5 percent.

Electricity from solar only

300 percent

(PV or solar thermal)

Electricity from wastes

200 percent

Hydropower

100

percent

Wind power

300 percent

CHP

160 percent (the production capacities should not exceed 50 MW).

Source: Executive Decree N° 04-92 of 25 March 2004 relative to the diversiﬁ cation costs of electricity production (Articles 12–17).

In the case of the presently planned plant at Hassi R’mel, the solar output is expected to be 11 percent of the total plant output: This would lead to a production premium

of 140 percent on the conventional price estimated at 2.2 c/kWh.

Institutional frame in host country

Electricity is currently growing at around 4 percent a year. The additional requirements in production capacity are estimated at 6,000 MW for the period mentioned. The law

for the electricity market

02-01 on electricity and distribution of gas from February 2002 has liberalized the electricity sector by opening production and distribution to competition. This law is in the

perspective of an interconnected and liberalized Euro-Maghreb market comprising the neighbors of Algeria and the closest European countries (signature of the Rome agree

ment in December 2003 by three Maghreb countries and the European Commission in view of a common electricity market starting 2006). This

law also foresees the integration of renewable energy sources in the energy mix of the country.

In this perspective, Algeria is following up a “Project 2000 MW” comprised of three elements:

a ﬁ rst set of power plants destined to the internal market with a capacity of 800 MW;

a second set of power plants destined to the export market with a capacity of 1,200 MW;

under-sea connection cables with a minimum capacity of 2,000 MW linking Algeria to Spain to reach the European markets.

IIn addition, Algeria investigates the possibility of a second project of 500 to 1,000 MW destined also to electricity export via an under-sea cable that links Algeria to Italy

(Sardinia).

Key governmental institutions and

The contribution of revenues from oil and natural gas was 55 percent of the state budget, 97 percent of foreign currency inﬂ ow, and about 40 percent of GDP. Algeria has

their interests

an interest to export gas, but also a need to diversify the economy. Ninety-ﬁ ve percent of Algeria’s exports go to Europe.

One main objective for Algeria, being a producer for gas, is to export this energy carrier, in particular to Europe (Algeria envisages increasing gas exports to 100 billion m

in 2010 and to 120 billion m

in 2020. As Europe, for diversiﬁ cation reasons has set limits on gas imports from Algeria, exporting gas through the generation of electricity

constitutes a second road to exporting gas. Combining with solar helps to make the electricity exports more acceptable to Europe in the view of Algeria.

During the last two decades, Algeria has been suffering from droughts and a lack in water due to both the droughts and the increase in the Northern population, living

standards, and its industrialization. For this reason, water desalination becomes an important issue to which solar thermal power plants could provide solutions.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Tariff structure in country

The tariffs are administered in the expectation of the electricity market liberalization.

Near-term strategy for CSP in the country

Algeria has considered, in addition to the presently planned ISCCS plant, the following two options, but no con-crete plans exist for the moment: (1) Size 306 MW (com

bined cycle 258.8 MW net, solar ﬁ eld 54.1 MW net. (2) Size 400 MW (combined cycle 363.4 MW net, solar ﬁ eld 71 MW net).

Otherwise, since the launch of the electricity market reform in 2002, the following two IPP projects are in the phase of realization:

Project Kahrama at Arzew 321 MW: combined cycle unit coupled to a seawater desalination unit of 90,000 m

/day. Total project cost is $400 million. Financing is

assured to 80 percent by the company Black & Veatch and to 20 percent by the Algerian Energy Company (AEC), a mixed Algerian company between Sonatrach and

Sonelgaz.

Project Sharikat Kahraba Skikda (SKS) 824 MW: combined cycle unit. Total project cost is $460 million. Financing is assured to 20 percent by the company SNC

Lavallin and to 80 percent by the Algerian Energy Company (AEC).

The operation for the two projects is expected for 2005. In addition, for the following project a call for a joint venture has been launched:

Project de Hadjerat Nouss – bidding call – 1,400 MW: interest was manifested from two main international groups, the Canadian group SNS Lavallin and the German

company Siemens, which have been prequaliﬁ ed on a technical level. Financing shall be assured through a minimum foreign investment of 51 percent and the remain

der from public Algerian companies (SONELGAZ, SONATRACH and AEC).

Project Sharikat Kahraba Berrouaghia 400–500 MW (EPC won by Siemens).

View of the country on a mid-term

Algeria envisages 500 MW generating power from renewables for local use in 2010 and further strongly in-creasing power generation both for local use and for export

strategy for CSP with possible future

from 2010 to 2020. The ﬁ rst electric cables linking Algeria and Europe are currently investigated or in the starting phase.

options (5–10 years)

Year

Renewable Energy Capacities (MW)

Local

Export

2010

500

200

2015

1,000

400

2020

1,500

6,000

The ﬁ rst 500 MW for local production are supposed to be 400 MW solar thermal capacity (corresponding to 2,200 MW hybrid plants, and to 100 MW wind energy and other renewable energy sources. Investment costs
will be of the order of $2 billion. After 2015, Algeria believes that it will be possible to construct solar-only CSP, as they will be competitive with the combined cycle plants.

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Country/Location Australia,

Liddell

Type of technology

Linear Fresnel preheating feedwater for large coal-ﬁ red power station

Technical parameters

A staged project with up to 135,000 m

to provide 285°C/70 bar steam to the feedwater cycle of a 500 MW steam turbine. Solar Heat and Power Pty Ltd. (SHP)

calculates this is equivalent to 38 MWe.

Business model

EPC for solar ﬁ eld

Liability provisions

Status of plant

First 1 MW

completed, and contract for 2

stage in process of being signed

Expected project time schedule

38 MWe operating by 2007

Project developer/Prequaliﬁ ed developers

Solar Heat and Power Pty Ltd. (SHP)

Financing structure

Grants from Australian Govt. where available plus capital raised through semi-public offering

Final owner of plant

Macquarie Generation

Institutional frame in host country

The State of New South Wales (NSW)—where this project is located—has a deregulated electricity structure, with generation supply bid competitively into a pool. Genera

tors are separate organizations to the retailers, distributors, and transmission companies, so power purchase agreements for the generated electricity are required. The coun

try has in place a mandatory renewable energy target (MRET), which requires electricity retailers to purchase renewable energy certiﬁ cates equivalent to a small proportion

of their sales each year. These are purchased competitively; certiﬁ cate prices are presently around the AU3.5c/kWh level. With pool prices around the same level, the

maximum price available to renewables projects from this scheme is around AU7-8c/kWh. In the state of NSW, there is also the opportunity to gain NGACs on top of the

RECs worth approximately AU1c/kWh. An energy white paper was released by the Australian Government in late 2004 that offers support through grants for both renew

ables R&D and large-scale energy projects, which have a signiﬁ cantly reduced GHG signature.

Key governmental institutions and

Australian Greenhouse Ofﬁ ce; Ofﬁ ce of the Renewable Energy Regulator; NSW Department of Energy, Utilities and Sustainability.

their interests

Tariff structure in country

For most of the country, electricity is sold into a pool with successful bidders receiving the price of the last successful bid. In the main electricity markets, this means pool

prices of around AU3.5c/kWh for most of the year. Most organizations use a combination of pool and contract pricing.

Near-term strategy for CSP in the country

There is no speciﬁ c target or goal for CSP in the country. Renewables are presently bid against each other, so it is the cheapest renewable project that proceeds. Over the

three years of operation so far, the main winners have been wind, solar hot water, and hydro, and to a lesser extent landﬁ ll biogas.

View of the country on a mid-term

The abundant availability of cheap good quality coal, followed by natural gas, makes it very difﬁ cult for renewables to compete in Australia without a renewables program

strategy for CSP with possible future

such as MRET. Because MRET essentially means only the cheapest renewable project will proceed, CSP will have a difﬁ cult time until it can meet the price of wind, which is

options (5-10 years)

presently around AU7-8c/kWh. There still appears to be availability of good wind sites. Good solar sites are abundant, and hybridizing with coal-ﬁ red plants (and to a lesser

extent gas-ﬁ red plants) seems the most attractive proposition in the near term. Long-term thermal storage is being actively investigated, which could then open up many

opportunities as the reliance on nearby fossil fuel would no longer be a limitation.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Country/Location Iran/Yazd

Type of technology

ISCCS

Technical parameters

Total plant capacity proposed 430 MWe; Peak solar input 67 MWe; air cooled condenser; Annual DNI 2,500kWh/m

/yr

Business model (as per 2002 pro-posal

Intended to repower existing gas turbines with extension owned by IPP

when GEF funding had been anticipated)

Status of plant

Feasibility study undertaken; Consultancy Services let to Moshanir Power Engineering Consultants January 2001 for upgrading 2 GT’s to a combined cycle power plant and

adding a solar ﬁ eld with aperture area of 366,240 m

. At this stage, tender documents have been prepared.

Expected project time schedule

Would like to progress asap

Project developer

Information not supplied

Financing structure

Total project cost of $322 million (incl existing GT’s $67 million) comprising $150 million Iranian Ministry of Energy, $50 million GEF (note this is not a GEF project),

$55 million balance from soft loans (note $10 million imbalance)

Final owner of plant

Information not supplied

Key governmental institutions

The Islamic Republic of Iran is interested in large-scale exploitation of its solar resource by CSP. The principle rationale is the government’s strategic goal of diversiﬁ cation

and their interests

of its power production base and the promulgation of the country’s oil and gas reserves. The Iranian Power Development Company (IPDC) has and will play a key role in

any CSP plant in Iran.

Tariff structure in country

Information not supplied

Near-term strategy for CSP in the country

The country has indicated its strong interest by initiating preparatory work toward a large CSP plant. Previously Iran has helped sponsor (by the Energy Ministry and the

Electric Power Research Center, now named NIROO Research Institute) and organize the “First German-Iranian Seminar on Solar Thermal Power Plants” (1993), a joint

Iranian-German Expert Group on Solar Thermal Power conducted a concept study for a 100 MW Solar Thermal Power Plant. In 1996. IPDC contacted GEF to investigate the

possibility of support. GEF responded that a more thorough feasibility study was needed as the basis for potential commitment of grant support. This study was carried out

by NIROO, FLABEG Solar, and Fichtner Solar. Of a number of sites, it determined Yazd to be preferred with 2511kWh/m

/yr DNI. Approximately 9km

of land has already

been purchased by the Yazd utility. Water is limited and thus dry cooling was selected. Three older 64 MW gas turbines (KWU V93.1) and two new Alstom gas turbines

(PG9171E) have already been installed and put into operation in 2000. A consultancy has been awarded to convert 2 GT’s into an ISCCS. The feasibility study showed an

investment of $115 million would result in an additional net electricity generation of 964 GWh/yr and upgrade the plant efﬁ ciency from 32.2 percent to 50.2 percent. The

solar ﬁ eld, costing around $138 million, would further improve annual average efﬁ ciency to 53.1 percent.

View of the country on a mid-term

Iran is one of the world’s largest players in the petroleum market. With global concern over medium-term supplies

strategy for CSP with possible future

of petroleum, prices on the world market are high. It is in the national interest to conserve domestic supplies so more is available for export. CSP offers a large opportunity

options (5–10 years)

to reduce domestic consumption of petroleum products, as well as diversifying the resource base. There is interest in the job creation possibilities resulting from CSP plants

and a local CSP industry.

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Country/Location Israel,

Asharim

Type of technology

Trough (oil) Rankine cycle

Technical parameters

100 MW initially, up to 500 MW if ﬁ rst successful.

Business model

IPP in a BOO arrangement; PPA with IEC.

Status of plant

Preferred site selected.

Expected project time schedule

Information not supplied.

Project responsibility

Israel Electric Company

Financing structure

$250 million for 100 MW, expected to yield LEC of 9c/kWh

Final owner of plant

IPP

Key governmental institutions and

Public Utilities Authority (Electricity) responsible for setting strategic targets such as the national need for CSP to be developed. Israel Electric their interests Authority (IEA) is

a special commission that has responsibility for approving market price. When a new technology such as CSP is suggested to be integrated for strategic reasons, the cost

of CSP must be included in the total cost mix, and the marginal additional cost spread over the generation mix with only a small price increase to the public. The National

Council for Planning and Construction provides authority for plants such as this to proceed.

Tariff structure in country

The Public Utilities Authority has decided to issue premiums for the production of renewable electricity.

Near-term strategy for CSP in the country

It is reported that the IEC approved in principle the construction of a 100 MW CSP plant with a $250 million investment cost. The IEC approved this on the basis that IEA

approves additional higher cost to the public.

View of the country on a mid-term

Information not supplied

strategy for CSP with possible future
options (5–10 years)

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Country/Location

South Africa, near Upington in the Northern Cape Province

Type of technology

Solar tower

Technical parameters (installed MW, etc.)

Gross electrical rating: 110 MWe

Net output approximately 100 MWe

Plant design life 35 years

Annual DNI = 2.95 MWh/m

Business model (EPC, separate EPC

Not yet determined.

for solar and fossil, IPP)

Liability provisions (in particular for hybrid)

Not yet determined.

Status of plant

ESCOM undertook a prefeasibility study on CSP technologies. In the ﬁ rst task, fourteen CSP technologies and/or variations were to be studied further. Information on the

technologies was compiled from published literature and where possible from demonstration facilities or operational plants. The technologies were screened in terms of a list

of selection criteria. The screening process identiﬁ ed two technologies, solar trough and central receiver technologies, as possible near-term options to be evaluated further.

The second task comprised the compilation of a typical meteorological year (TMY) data ﬁ le for a reference site, as well conducting a strategic environmental assessment

(SEA) for the Northern Cape Province of South Africa as the most suitable location for possible CSP plants.

Using Upington as a reference site for the plant locations, annual simulation models were developed to predict the performance and costs of the two CSP technologies,

identiﬁ ed through the screening process as task 3. Pilot plant designs were developed around 100 MWe systems and optimized to provide the lowest levelized energy cost

(LEC) for the location. Long-term cases were also evaluated to provide an indication of the lowest possible energy costs that could be expected with future development.

ESCOM also investigated what industry, mainly South African and to some extent international, could supply on a cost-effective basis toward the construction of a solar ther

mal plant. One of the major ﬁ ndings that emerged was that SA industry was not geared to manufacture troughs for a one-off plant and with no guarantees of further plants

industry felt it far to risky to invest in production facilities for a one-off plant. However, it emerged that there were less risks associated with the local manufacture of a

central receiver. This inﬂ uenced ESCOM’s decision toward the further investigation into central receiver option.

ESCOM furthermore undertook a full technical engineering study, based on conditions for the Upington region.

Expected project time schedule

To be established.

Project developer/Prequaliﬁ ed developers

Likely to be ESCOM.

Financing structure

To be established.

Final owner of plant

To be established.

Institutional frame in host country

With the adoption of the white paper on energy policy of 1998, the SA government has sought to integrate its broad policy frameworks, with the need to provide policy

stability for investors, suppliers, and consumers in the sector. Recognizing the potential role that the energy sector could play in achieving national growth and development

aims, the following ﬁ ve key objectives are identiﬁ ed in the white paper:

Increasing access to affordable energy services;

Improving energy governance;

Stimulating economic development;

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Managing energy-related environmental impacts;

Securing supply through diversity.

These objectives reﬂ ect the need for achieving a balance between sustainable development, economic growth, environmental management, and security of supply issues in

the energy sector. Fundamental to achieving these objectives is the creation of a suitable environment for encouraging competition, coupled with focused regulation to

ensure a self-sustaining industry ultimately serving to beneﬁ t the broader economy and energy consumers.

In September 2004, the updated National Integrated Resource Plan (NIRP) was published by the National Electricity Regulator (NER). This is a process of planning that is

revised every year based on the projected demand.

Capacity needs

: South Africa is expected to experience sustained growth in electricity demand under-pinned by growth in industrial, mining, and commercial sectors.

The NIRP has estimated that about 2,640 MW of new peaking generation capacity will be required between 2006 and 2010. These require-ments for new capacity are

over and above the need to return to service the mothballed coal-ﬁ red power plants as currently planned by ESCOM.

The key strategic objectives of the SA government pertaining to meeting the new peaking generating capacity are:

Meeting new generation capacity requirements;

Introducing private sector participation in the generation sector;

Enhancing security of supply through fuel diversity;

Accessing private sector ﬁ nancing and informing policy decisions on public versus private sector procurement;

Enhancing black economic empowerment (BEE) in the energy sector; and

Maintaining low-cost electricity.

The white paper on renewable energy was approved in November 2003 by the SA cabinet. The aim of the policy is to create the conditions for the development and com

mercial implementation of renewable energy. This includes:

Ensuring that economically feasible technologies and applications are implemented through the development and implementation of an appropriate program.

Ensuring that an equitable level of national resources are invested in renewable technologies given their potential and compared to investments in other energy supply

options.

Addressing constraints on the development of the renewable energy industry.

The Department of Minerals and Energy has translated this white paper on renewable energy into a practical strategy with clear implementation plans for 2004–13. Renew

able energy will be used for power generation to the grid and for water heating. Non-grid applications will be integrated in the electriﬁ cation program and research and

development. Bio-fuel technologies will be initiated as part of the strategy.

It is in this context that the SA government is committed to this renewable energy policy document, which is intended to give much needed thrust to renewable energy. This

policy envisages a range of measures to bring about integration of renewable energies into the mainstream energy economy.

To achieve this aim, the government is setting as its target 10,000 GWh (0.8 Mtoe) renewable energy contribution to ﬁ nal energy consumption by 2013, to be produced

mainly from biomass, wind, solar, and small-scale hydro. The renewable energy is to be utilized for power generation and non-electric technologies such as solar water

heating and bio-fuels. This is approximately 4 percent (1,667 MW) of the projected electricity demand for 2013 (41,539 MW).

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Some of the main beneﬁ ts of the renewable energy white paper will be renewable energy for rural com-munities, far from the national electricity grid, remote schools and

clinics, energy for rural water supply and desalination, and solar passive-designed housing and solar water heating for households in urban and rural settings and commercial

applications. Large-scale utilization of renewable energy will also reduce the emissions of carbon dioxide, thus contributing to an improved environment both locally and

worldwide.

Key governmental institutions and

The key institutions that inﬂ uence the electricity sector, including ESCOM in adopting new technologies such as solar thermal systems are:

their interests

The Department of Minerals and Energy (DME). The DME establishes energy policy and legislation as well as provides direction, through planning processes, as to what

course of action is needed to meet energy policy objectives.

The Department of Science & Technology (DST). The DST together with DME has formulated an energy research and development strategy for SA. One of the areas identi-

ﬁ ed for R&D is renewable energy.

Department of Public Enterprises. ESCOM, as a public enterprise, reports directly to this department.

The National Electricity Regulator (NER). The NER sets tariff prices as well as granting licenses for electricity production. Any new electricity generation facility will need to

ensure that it complies with regulations as managed by the NER.

Expected LEC (in SA Rands)

In the prefeasability study, full component costs & maintenance cost ﬁ gures were determined for the base case plants. These ﬁ gures were used to calculate the cost of

production over the plants’ lifetimes. A com-parison was done for the trough and tower technologies

Parameter

Trough

Tower

Capacity,

MWe

100

Annual capacity factor

0.4

0.51

Winter Peak Capacity Factor

0.87

0.98

Summer peak capacity factor

0.86

Capital cost (1000 Rand/kW)

22.5

22.2

Annual O&M costs (million Rands)

24.2

19.0

LEC

(Rand/kWh)

0.5

0.39

Near-term strategy for the country

CSP will cost more than ESCOM’s current price of coal-based power for the foreseeable future, but could still represent an attractive power source because of environmental

and economic beneﬁ ts.

Mid-term strategy for the country

See above.

with possi-ble future options
(maybe 10 years)

Suggested approach to improve

Coal Resource/Reserve

chances of CSP success in South Africa

South Africa’s current coal resource/reserve information (of 55 billion tons of reserves and 115 billion tons of resources) is based on the Bredell report of 1987. In the light

of South Africa being a major producer, user, and exporter of coal in the world, and therefore largely reliant on coal for its medium- to long-term economic development,

it is essential that the potential of the remainder of the country’s coal resources and reserves be evaluated. The major question that needs to be answered is: “To what

extent are the current coal resources and reserves sufﬁ cient to supply the future needs of the various coal-consumption sectors, of which the coal export sector is one of the

most important?” In this light it is important to establish a national inventory on coal resources and reserves.

Country/Location

South Africa, near Upington in the Northern Cape Province

(cont.)

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

It is the responsibility of the government (as is the case throughout the world), and particularly that of the Department of Minerals and Energy, not only to reevaluate the

amount of coal available in the national coal resource/reserve base, but also the amount of coal that has already been mined out, as well as the rate at which future

exploitation will take place. For this purpose, the Department of Minerals and Energy has awarded a contract to Miningtek (a division of the Council for Scientiﬁ c and

Industrial Research) to un-dertake the investigation.

Coal is the second largest earner of foreign exchange in South Africa today. Coal energy is used by dif-ferent sectors of the South African economy. Coal composition is a

complex structure of organic and inorganic components, which determine its speciﬁ c characteristics. The efﬁ cient utilization of coal reserves demands the production of differ-

ent but very speciﬁ c saleable products to satisfy market requirements.

The outcome of this study is very likely to inﬂ uence decisions on how the remainder of SA’s coal reserves will be utilized.

Coal Discards

South Africa generates approximately 60 million tons per annum of discard coal, which is estimated to have already accumulated to more than 1 billion tons. These large

amounts of carbonaceous material impact negatively on the environment; in addition, they contain signiﬁ cant amounts of usable coal. Discard coal is therefore a major

concern to the Department of Minerals and Energy regarding potential future environmental impacts. It poses the challenge of being a major resource that provides an

economic op-portunity through its utilization.

In 2001, the Department of Minerals and Energy commissioned a survey to establish an inventory of dis-card and duff coal in South Africa. This resulted in the publishing of

the National Inventory on Discard and Duff Coal.

In the context of this project, the primary stakeholders interviewed were:

Dept of Minerals and Energy - DME

Dept of Science & Technology - DST

ESCOM (South Africa Electricity Supply Commission)

The primary objective of the SA government is to alleviate poverty by creating an enabling environment for socioeconomic development. This is primarily to be achieved

through promoting local manufacturing enterprises and through the expansion of local expertise.

A major barrier to the implementation of new technologies is the lack of knowledge and awareness of the technology in the host country. Here a “critical mass” of know-

ledge and expertise is required.

Key issues to be considered in developing local knowledge and expertise are:

(a) Knowledge transfer precedes technology transfer;

(b) Knowledge enables wider choices to be made and increases the probability of new technologies being accepted by all stakeholders;

(d) Human pride and dignity need to be taken into account.

Regarding barriers to solar thermal technologies in developing countries, technology transfer is made up of two legs, technology push and market-pull. As far as technology

push is concerned, this is well-established, understood, well-resourced, and well-organized. This issue has been heavily inﬂ uenced by stakeholders, who are mostly from the

developed

world.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

A shortcoming with the stakeholders from the developing world is that, having a sound technology-push strategy, they do not have a sound market-pull strategy. A market-

pull strategy has to be formulated with stakeholders from the developing world. Without active participation and “champions” from the developing world, the transfer of

solar thermal technology into this environment will be difﬁ cult.

Critical success factors for SA in the ﬁ eld of solar thermal energy

Establish how solar thermal technologies can contribute toward meeting the objectives of the Millennium Development goals;

Implement SA’s energy policy, taking into account that SA’s coal reserves have a limited life;

Implement the energy efﬁ ciency policy with encouragement on the utilization of clean coal tech-nologies;

Within the context of the renewable energy and energy efﬁ ciency policy, encourage the exploita-tion of SA’s renewable energy resource to meet the targets that have

been established by govern-ment;

Develop local expertise, know-how, and intellectual capital; and

Establish local manufacturing enterprises to take advantage of solar thermal projects.

Country/Location

South Africa, near Upington in the Northern Cape Province

(cont.)

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Country

Spain/Andasol 1 & 2

Spain/PS10

Type of technology

Solar only trough (oil htf)

Central receiver (tower) with saturated steam receiver

Technical parameters

2 x 50 MWe oil troughs with 7.7 full load hrs molten salt storage;

11 MWe gross; 23 GWh

(gross)/yr; 15 MWh sat steam thermal storage

2 x 179.1 GWh/a

(25 min at full load)

Business model

EPC Consortium

EPC

Status of plants

SKAL-ET loop tested in SEGS V; all permitting applica-tions submitted; nearly

Abengoa (Inabensa), CIEMAT, DLR, Fichtner re-ceived

€

5M for preparatory

all land secured (problem with needing to acquire many small allotments;

work; construction under way

tenders called for loans, strong response, ﬁ nal deal being considered

Expected project time schedule

Commence construction mid- to-late 2006, commence operation approximately

Expected to be operational by July 2006

24 months later

Project developer & owner

Milenio Solar S.A., AndaSol-2 S.A. (now held 70 percent by ACS Cobra,

IPP Sanlucar Solar S.A.

30 percent by Solar Millenium)

EPC led by Solucar Energia S.A.

Financing and project structure

EPC price 2 x

€

260 million

Total capital investment cost

€

33 million

Solar 2004, Paul Nava, Flagsol

Country Spain/Solar

Tres

Spain/EuroSEGS

Type of technology

Tower with molten salt

Trough (oil htf)

Technical parameters

15 MWe, approx 240,000 m

(heliostats) considering 16hrs full load

15 MWe, 95,880 m

, originally proposed to use two different types of solar

thermal storage, 78.8 GWh

/yr

collector, solar radiation at this site poor compared to other sites in Spain

Business model

IPP

Banks

Permitting

Entities

European

Comission

Insurances

Grid

Operator

(REE)

O&M

Company

Solar Field

Engineering

Power Block

BOP

Engineering

HTF System

& Storage

Solar Field

Components

Turbine &

BOP

Milenio Solar S.A.

(AndaSol.S.A)

EPC Consortium

O&M

Costs

Permits

Debt Ser

vice

Cred

Equity

Dividends

bventions

Liability

Premium

Tariff

Electricity

O&M

Appl

ications

Investors

Spanish industry

Solar Millennium AG

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Status of plants

Activity in this project has recommenced with the an-nouncement of the

Prefeasibility study, site assessment, pre-engineering of power block and

new tariffs in Spain

solar ﬁ eld all completed

Expected project time schedule

Operational in 2006

Not known

Project developer & owner

Ghersa, assisted in technical design by Boeing and Nexant (these

EHN

three companies have formed Solar Tres)

Financing and project structure

2002 estimate: $72 million

2002 estimate: $45 million

Key governmental institutions and their interests

Tariff structure in country

Spain has introduced the most attractive tariffs for CSP in the world. The Royal Decree 436-2004 allows for tariffs up to

€

0.21/kWh, allows 12 to 15 percent gas

backup for purposes of dispatchability and ﬁ rm capacity, is secure for 25 years (to provide necessary bankable guarantees), and allows for annual inﬂ ation escalation. The

tariff is in place for the ﬁ rst 200 MW, after which the tariff will be reviewed downward to follow the expected cost-reduction curve.

Near-term strategy for CSP in the country

Spain has set in place a suite of support mechanisms that will help support a range of renewable energy technologies. It is understood that the increase in tariffs from

€

12 to 18cents/kWh and other associated changes has helped to provide the necessary ﬁ nancial cover for the risk premium on these ﬁ rst projects. The speciﬁ c tariffs to

support CSP, including the associated support of bankable timeframes and sensible allowance of gas, sees Spain as one of the leaders in promoting CSP projects.

View of the country on a mid-term strategy

As various capacity points for CSP are achieved, the tariff premium will drop to suit a cost reduction path. This is a sensible approach; however, the technologies that miss

for CSP with possible fu-ture options

out on the ﬁ rst 200 MW installment will have to accept a lower premium.

(5–10 years)

Country

Spain/Andasol 1 & 2

Spain/PS10

(cont.)

NNEX

–

HARACTERIZATION

THE

TATUS

MPORTANT

NGOING

CSP P

ROJECTS

ORLDWIDE

Country/Location

USA, Nevada

USA, Arizona

Type of technology

trough + Rankine cycle

trough + organic Rankine cycle

Technical parameters

64 MWe (net) (increased from originally 50 MW)

1 MWe, 2,000 MWh annual generation, O&M 2.91c/kWh, 95 percent plant

availability,

10,346m

aperture

Business model

EPC

Status of plant

Construction commenced February 2006, start-up expected March 2007

Construction commenced March 2004, start-up April 2006

Project developer/Prequaliﬁ ed developers

Solargenix is project developer; four large compa-nies bidding for EPC contract

Project team is APS as the utility, Ormat for the turbine, and Solargenix for the solar

ﬁ

eld

Financing structure
Final owner of plant

Key governmental institutions

Much of the renewable energy policy drive and framework is being provided by the individual states. There are a variety of incentives available for renewable energy driven

and their interests

by consumer demand and renewable energy portfolio standards (see U.S. map below). In Arizona, the standard goes further to specify that 60 percent of the RPS must be

solar

electric.

Tariff structure in country

The retailing of electricity in the U.S. is increasingly being carried out by companies that stretch across the traditional state boundaries, with signiﬁ cant interstate wheeling of

electricity and gas. The market is highly competitive, with many green energy schemes available on a voluntary basis to consumers.

Near-term strategy for CSP in the country

Continued development of renewables in the U.S. will be inﬂ uenced largely by statutory requirements based on regulation or legislation. The major policy driver at pres

ent for CSP in the U.S. is the “1,000 MW CSP South West Initiative” as part of the Western Governors’ Association resolution to diversify energy resources by developing

30 GW of clean energy in the U.S. West. A comprehensive study of CSP options for New Mexico has just been completed. The Southwest is a rapidly growing area with a

corresponding need for increased power. As this is also the country’s sunbelt, there are good opportunities for CSP if appropriate incentives are available.

View of the country on a mid-term strategy

The U.S. has a long history in CSP development, and since the last SEGS plant was built has continued with R&D and O&M cost reduction programs. The next stage for

for CSP with possible future options

CSP in the U.S. will depend on the technical success of the Nevada and Arizona plants, the continued activity in Spain and elsewhere, the success of the Global Market

(5–10 years)

Initiative for CSP, and the emergence of mandated requirements to speciﬁ cally support solar electric technologies. Under the present RPS of the four states (NM, CA, AR,

NV), there would be a total of 4,926 MW of renewable capacity required by 2008 and 7,297 MW required by 2015. There are 37,099 MW of additional power genera

tion required in these four states over the net three to ﬁ ve years, of which 87.6 percent is natural gas. There is an estimated 7,858,560 MW of solar capacity potential

from these four states based on available land area near to infrastructure. The combination of sun, gas, sites, and power demand, particularly summer demand, ensures

there are strong opportunities available for CSP in the Southwest.

N N E X

H E

R A M E W O R K

F O R

CSP

I N

H I N A

Country China

Business model

Feb 28, 2005 – National Congress of China endorsed the Renewable Energy Law in the form of feed-in-tariffs.

Institutional frame in country

Thermoelectric power accounts for 75 percent of China’s electrical energy generation, and coal represents the bulk of the primary raw material.

Growing electricity needs, energy shortage, Kyoto Protocol and air pollution in metropolitan areas have led to electricity strategies based on

nuclear energy and RES.

Near-term strategy for Renewables

At the Renewables2004 Conference in Bonn, Germany, China committed itself to build up renewable energy, aiming for:

in the country

(1) 60 GW

by 2010 RES;

(2) 121 GW

by 2020 RES; and

(3) RES for heat supply and biofuels.

China’s RES goals are also implemented in national frameworks on a ﬁ ve- and ﬁ fteen-year basis in the “New and renewable energy industry

development.”

As an instrument to implement these ambitious goals, a “Feed-In-Law for Renewables” was endorsed on Feb 28, 2005. The goals of this law

are

to:

(1) Conﬁ rm the important role of renewable energy in China´s national energy strategy;

(2) Remove barriers to the development of the renewable energy market;

(3) Create market space for renewable energy;

(4) Set up a ﬁ nancial guarantee system for renewable energy; and

(5) Create a social atmosphere conducive to renewable energy.

This law is considered as a strategic investment not only in clean energy, but also as a strong future business opportunity for China. The utility

companies will surcharge the extra cost to the end users. The law has not yet come into force. The State Council will set the feed-in-tariffs at

the beginning of 2006 according to different regions and different types of renewable energy resources.

Near- and long-term strategy for CSP

Especially in the Southwest of the country, solar conditions are favorable to CSP.

in the country

The Chinese Academy of Science is developing different types of solar collectors for use in solar thermal power collectors. China already is the

largest producer of low-temperature solar collectors for water heating in the world. and has interested companies to start CSP activities in

China for the local and the export market.

It is not yet clear if and how CSP will be considered in the Renewable Energy Law. A ﬁ rst—possibly GEF-co-ﬁ nanced—commercial pilot

project would increase awareness of CSP technology in China. Under China’s favorable RES conditions, a pilot project could induce a signiﬁ cant

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

multiplication effect for CSP market development. In the long term, CSP as a dispatchable power source can to some extent be a safe and

clean alternative to nuclear energy.

The Solar Millenium AG, Germany, announced in May 2006 the development of solar thermal power plants for the Chinese market. For this

purpose, a framework agreement for the realisation of solar thermal power plants with a total power of 1,000 MW up to 2020 was signed

with regional companies (total investment $2.5 billion). The ﬁ rst plant (50 MW) will be completed soon in Inner Mongolia (estimated costs

$1,62.5 million). Solar Millenium, with the Inner Mongolia Ruyi Industry Co Ltd, is conducting a feasibility study for the project in Ordos of

the northern Inner Mongolia Autonomous Region. Preparatory work will be completed for construction to begin by the end of the year 2006.

About 20 to 30 per cent of the total spending will be ﬁ nanced by investors, with the remaining coming from bank loans. Chinese experts

estimate that the Ordos solar plant would sell its electricity for 18.8-20c/kWh to the grid companies. During the next four years, 200 MW

solar thermal power plants will be constructed. Prior to the framework agreement, investigations on possible locations were carried out in

three Chinese provinces in cooperation with the Ministry of Energy (autumn 2005). China has also integrated solar thermal power plants in

the new Five-Year-Plan. Since January 2006, a new law will promote the implementation of renewables (10 percent renewables electricity by

2010, or 100,000 MW).

Solar Resources in China (DNI-map, Source):

Country China

(cont.)

OLAR

COLLECTOR

TECHNOLOGIES

Parabolic Trough Systems

Steam cycle power plants with up to 80 MW capacity using
parabolic trough collectors have been in commercial operation
for more than 15 years. Nine plants with a total of 354 MW of
installed power are feeding the Californian electric grid with 800
million kWh/year at a cost of about 10–12ct/kWh. The plants
have proven a maximum efﬁ ciency of 21 percent for the conver-
sion of direct solar radiation into grid electricity. While the plants in
California use a synthetic oil as heat transfer ﬂ uid in the collectors,
efforts to achieve direct steam generation within the absorber tubes
are under way in order to reduce the costs further.

Linear Fresnel Collectors

Another option under investigation is the approximation of the
parabolic troughs by segmented mirrors according to the principle
of Fresnel. Although this will reduce efﬁ ciency, it shows a consid-
erable potential for cost reduction. The close arrangement of the
mirrors requires less land and provides a partially shaded, useful
space below.

Solar Tower Systems

Concentrating the sunlight by up to 600 times, solar towers are
capable of heating a heat transfer ﬂ uid up to 1,200 °C and higher.
Today, molten salt, air or water is used to absorb the heat in the
receiver. The heat may be used for steam generation or—making
use of the full potential of this high-temperature technology in the
future—to drive gas turbines. The PS10 project in Sanlucar, Spain,
being the ﬁ rst commercial solar tower project currently under con-
struction aims to build a steam cycle pilot plant with 11 MW of
power. For gas turbine operation, the air to be heated must pass
through a pressurized solar receiver with a solar window. Com-
bined cycle power plants using this method will require 30 percent
less collector area than equivalent steam cycles.

Parabolic Dish

Parabolic dish concentrators are typically relatively small units that
have a motor-generator in the focal point of the reﬂ ector. The mo-
tor-generator unit may be based on a Stirling engine or a small
gas turbine. Their size typically ranges from 5 to 15 m of diameter
or 5 to 25 kW of power. Like all concentrating systems, they can
additionally be powered by fossil fuel or biomass, providing ﬁ rm
capacity at any time. Because of their size, they are particularly
well-suited for decentralized power supply and remote, stand-alone
power systems. Dishes up to 400 m

have been built, with this size

being used for direct steam generation.

N N E X

CSP T

E C H N O L O G Y

P T I O N S

101

NNEX

HARACTERIZATION

THE

GEF

OUR

-C

OUNTRY

ORTFOLIO

ESCRIPTION

EACH

THE

FOUR

PROJECTS

ACCORDING

SET

CRITERIA

)

Country/Location Egypt/Kuraymat

Type of technology

Conventional combined-cycle plant with solar thermal power collector (not trough-speciﬁ ed)

Technical parameters (installed MW, etc.)

Located about 90 km south of Cairo. The project site is characterized by an uninhabited ﬂ at desert

landscape, high intensity direct solar radiation that reaches 2,400 kWh/m

/annum, an extended

uniﬁ ed power grid, and extended natural gas pipeline, and is near a source of water.

The conceptual design of the project is as follows:

Power Block

Typical combined-cycle power plant consists of:

Two gas turbines of about 41.5 MWe, each ﬁ ring natural gas as fuel to generate electricity, in

addition to the capability of using fuel oil distillate No.2 as an alternate fuel for emergency;

Two heat recovery steam generators – (HRSG) will use the exhaust gases from the gas turbine

to produce superheated steam;

One steam turbine of about 68 MW;

Cooling system in which the steam turbine exhaust will be condensed in the condenser and

pumped to the HRSG.

Solar ﬁ eld

The solar ﬁ eld comprises parallel rows of solar collector arrays (SCAs), sets of typical

mirrors—which are curved in only one dimension—forming parabolic troughs. The trough

focuses the sun’s energy on an absorber pipe located along its focal line (Heat Collection

Element

“HCE”).

The total area of the solar collectors is about 220,000 m

, connected in series and parallel

to produce the required heat energy by tracking the sun from east to west while rotating on

a north-south axis.

The heat transfer ﬂ uid (HTF), (typically synthetic oil) is circulated through the receiver heated

to a temperature up to 4000C. The ﬂ uid is pumped to a heat exchanger to generate steam that

can be superheated in the HRSGs and integrated with the steam generated from the combined

cycle (CC) before introducing it to the steam turbine (ST) to generate electricity.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

102

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Summary of Technical Parameters of Baseline Design

Capacity of Solar portion (MWe)

Capacity of gas turbine (MWe)

2 X 41.5

Capacity of steam turbine (MWe)

Net electricity generated (GWh

/annum) 985

Exegetic solar generation (GWh

/annum) 65

Solar share

6.6 percent

Fuel saving due to solar portion (toe/annum)

14,000

reduction (Tonnes/annum)

38,000

Source: Information provided by NREA.

Business model (EPC, separate EPC for

The Government of Egypt put in place regulations that are not attractive to the BOOT approach concept, which resulted in the adoption of the EPC with O&M project by

solar and fossil, IPP)

NREA.

The current structure of the Egyptian electricity sector is vertically integrated where the generation, transmission, and distribution companies form part of the Egyptian

Electricity Holding Company. The holding company is obliged to purchase electricity from the generation companies. This potentially simpliﬁ es the purchasing of electricity

from any new generation facility, including that from any ISCCS plant.

Business models that will be applied will depend to a large extent on future investment policies as presented by the government.

Furthermore, international investment organizations such as the World Bank, JBIC, and KfW should also facilitate investments in the Egyptian manufacturing industry.

Egypt derives much of its foreign exchange through exporting crude oil and natural gas.

Solar thermal, as well as other renewable energy technologies, has the potential to save Egyptian natural gas, which could then be exported at a premium price, with a

small margin (proﬁ t), possibly Piasters 2/kWh, going into a renewable energy fund.

Liability provisions (in particular

NREA will be the owner of the project and the recipient of the GEF grant. The private sector can participate in the O&M through contracts of limited time frame that will not

for hybrid) exceed ﬁ ve years.

Two separate contracts are planned for the combined cycle (CC) island and the solar thermal island. This arrangement is at the request of JBIC. No major problems are

foreseen by NREA with this two-island arrangement. Bidding documents will be designed to be very speciﬁ c as to how to manage this two island approach.

Status of project

At bidding stage (see below)

Country/Location Egypt/Kuraymat

103

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Expected project time schedule

Solar Island

C.C. Island

Conceptual Design Report

March 11, 2003

Prequaliﬁ cation Document issued for Solar & CC

August 30, 2005

December 26, 2005

WB non-objection of evaluation of PQD

March 14, 2006

June 28, 2006

Financing secured (letter of intent from JBIC)

Issue Bid Documents (two packages)

May 30, 2006

July 17, 2006

Bidding (ﬁ rst stage)

August 5, 2006

Evaluation by Consultant

August 28, 2006

Clariﬁ cation with bidders (solar + CC)

September 25-28, 2006

Bidding (second stage)

November 30, 2006

November 15, 2006

Evaluation by Consultant

December 21, 2006

December 25, 2006

Review by NREA

15 days end October 2006

WB/JBIC non-objection

January 10, 2007

Negotiation & Draft Contract

January 15, 2007

January 22, 2007

WB/JBIC Approval

January 30, 2007

Egyptian Authorities Approval

February 15, 2007

Contract Sign

February 20, 2007

Completion of Construction

July 2009

WB/NREA sign grant agreement

End April 2007

WB non-objection on draft contract

2 weeks mid-May 2007

Egyptian Authority approval & ratiﬁ cation

mid-April 2007

(including

ﬁ

nancing)

Consulting contract for project

End May 2007

management in place

Contract signature

End May 2007

Contract effectiveness

Mid-June 2007

Completion of EPC works

30 months mid-December 2009

Financing structure

JBIC to ﬁ nance the CC island with the GEF grant to cover the incremental cost of the solar power plant. NREA to participate in both the solar part and the CC.

The total project cost is estimated at $199.3 million, including taxes and duties and contingencies, but excluding interest during construction. The total project cost includes

the 5-year O&M estimated at $13.93 million for the solar and combined cycle islands. The total project cost of $199.3 million will be ﬁ nanced as follows: $49.9 million

from the GEF as a grant; $92.3 million from the Japanese International Bank of Japan (JBIC); and the remaining $57.1 million equivalent from NREA. The discount rate is

assumed to be 6 percent.

Final owner of plant

NREA

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

104

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Institutional frame in host country

The Egyptian energy policy depends on three main pillars, namely (1) diversifying energy resources; (2) improving energy efﬁ ciency and enhancing energy conservation

for electricity generation

programs; and (3) maximizing the share of renewable energy (RE) in the energy mix.

Fossil fuels (oil, natural gas, limited deposits of coal) contribute 85.3 percent to the energy mix. Hydro (Nile River), contributes 13.7 percent to the energy mix. Renewable

energy (RE), mainly from wind, contributes nearly 1 percent to the energy mix.

Currently, the growing demand rate for electric energy to satisfy Egypt’s socioeconomic plans ranges from 6.5 to 7.5 percent annually during this decade. The target is to

increase installed capacity from 18,600 MW in 2004 to about 27,000 MW by 2010. Consequently, Egypt is required to add about 2,000 MW/year, as an average, to

secure the needed energy supplies. Such expansion provides room for a considerable share of electricity generation from renewable sources.

Securing energy demand on a continuous basis is a vital element for sustained development plans, in view of the nation’s limited fossil fuel reserves. Egypt has given due

consideration to the promotion of its indigenous renewable energy resources, mainly solar, wind, and biomass.

The evolution and expected increase in generation capacity can be seen in the following graph:

Source: Information provided by NREA.

Institutional framework in host country

In 1982, a renewable energy strategy was formulated as an integral part of national energy planning in Egypt. Currently, the strategy aims to cover 3 percent of Egypt’s

for renewable energy

electric energy demand with renewable energy resources, mainly from solar, wind, and biomass applications by the year 2010, with additional contributions from other

renewable energy applications.

The growing demand of electric energy to satisfy economic and social development plans reaches about 6 percent annually up to 2010. Such expansion plans provide

room for a considerable share of electricity generation from renewable energy resources.

The strategy calls for the development of renewable energy resources, particularly solar, wind, and biomass, through speciﬁ c measures for development activities, including:

Renewable energy resource assessment and planning;

Research, development, demonstration, and testing of the different technologies;

Country/Location Egypt/Kuraymat

5,000

10,000

15,000

20,000

25,000

30,000

year

2003

2007

2004

2005

2006

2008

2009

2010

Evolution of electricity installed capacity in Egypt

105

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Transfer of technology, development of local industry, and application of mature technologies;

Establishment of testing and certiﬁ cation facilities and development of local standards and codes; and

Education, training, and information dissemination programs.

Renewable energy’s environmental beneﬁ ts allow for ﬁ nancial support through various mechanisms such as the Clean Development Mechanism (CDM), ﬁ nancing RE

incremental costs, soft loans, and mixed credits.

Key governmental institutions and

Ministry of Electricity & Energy

their interests

New and Renewable Energy Authority (NREA)

The national power utility, the Egyptian Electricity Holding Company (EEHC).

Tariff structure in country

The average cost of electricity at generation for Egypt is Piasters 15/kWh (approximately 2.63 cents/kWh as of April 2005).

It has been calculated that for the ISCCS the cost of generation will be 4.9 cents/kWh.

It should be noted that Egypt’s installed generation capacity at 2003/2004 was 18,119 MW. With the planned ISCCS capacity of 150 MW, the size of the project is small

in comparison to Egypt’s total generation capacity and the initial high generation costs can easily be absorbed by the total generation capacity.

Expected LEC (c/kWh)

The LEC for kWh price of the ISCCS plant is still uncompetitive compared to other schemes of power generation. (See previous note).

Overall energy situation of Egypt

Energy policies

Egypt’s energy policies are formulated basically in the two main energy sectors; the oil and gas sector, and the electricity sector.

The oil and gas sector has the following objectives:

To achieve national self-sufﬁ ciency of petroleum products and natural gas;

To increase Egypt’s hydrocarbon reserves. The oil reserves had slightly increased from 3.46 billion barrels (1990/91) to 3.68 billion barrels (2000/01). Gas reserves

have increased nearly six times in the same period to reach about 57 trillion cubic feet (TCF);

To maintain oil export revenues as one of the major sources of foreign exchange needed for development;

To undertake oil and gas operations using environmentally sound practices to protect human health and the environment; and

To promote energy utilization efﬁ ciency in all consuming sectors.

The electricity sector aims to achieve the following objectives:

To maximize the exploitation of all feasible hydro resources, including mini-hydro;

To maximize the use of natural gas for existing and new generating facilities;

To develop and promote the use of renewable energy resources, especially wind, solar, and biomass;

To improve energy efﬁ ciency in both sides of supply and demand; and

To develop regional electricity interconnection with the neighboring countries.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

106

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Primary Energy Resources

Egypt’s main energy resources are oil, natural gas, hydropower, and coal, in addition to good potential for renewable energy resources. Oil and gas accounts for 93.5 per

cent of total commercial energy consumption.

Current oil reserves total 3.68 billion barrels, mostly located in the Gulf of Suez. The present annual production level of oil is nearly 32.3 million tons (MT), of which

23.4 MT are consumed domestically (representing 73 percent of that production). The balance is exported.

Current reserves of natural gas are about 57 TCF. Most of the gas resources are located in the north coast, Nile Delta, and western desert. The development of proven

natural gas reserves is a result of the country’s intensive efforts to attract foreign investment in gas exploration and production. The Government of Egypt has allowed

for sharing gas production and more ﬂ exibility in gas pricing; these incentives have attracted more foreign investment in oil and gas exploration. With an annual production

level of 796.4 TCF in 2000/01, natural gas could play an important role in the country’s future energy scene. A gas substitution policy has been adopted and is being

implemented to promote the use of natural gas in electricity generation, industry, transport, and residential and commercial utilizations.

Hydropower is the third major energy resource in Egypt. Most of the Nile’s hydro potential has already been exploited to generate about 13.7 TWh of electricity annually.

Some assessment studies revealed the feasibility of using mini-hydro-generating facilities to make use of some small hydro potential along the river’s main streams.

Currently it is planned to develop four small hydropower stations with total installed capacity of nearly 60 MW. Pumped storage potential has also been assessed in

“Algalala” and “Ataka” sites to be used as peak load pump storage stations.

In addition to oil, natural gas, and hydro, Egypt has limited coal reserves estimated at about 27 MT. The only commercial mining is in Maghara, Sinai, producing about

600,000 tons per year. However, the current production is 58,000 tons per year. About 1.8 million tons of coal are being imported now as feedstock for the steel industry.

Near-term strategy for CSP for the Egypt

NREA expects a successful pilot project in Egypt that leads the CSP technology and may create new industries related to solar ﬁ elds. In the near term, the project schedule as

presented earlier will be followed to implement the pilot project. Additionally, the transfer of know-how and learning into Egypt is expected to take place. As part of the

overall project, additional activities will include:

Training of NREA/EEHC and regulatory staff in solar thermal power plant operations, with particular respect to dispatching and integration into the power system;

Monitoring/evaluation and dissemination of performance results from the project, both domestically and internationally. The purpose of this activity is to support future

replication;

and

Consulting services for project management and support to NREA’s PIU.

NREA also is planning to survey local equipment suppliers/contractors to establish what components may be provided locally and to inform such suppliers and contractors of

the opportunity for future projects.

Mid-term strategy for the country with

NREA developed an ambitious program for large-scale electricity generation using an integrated solar combined cycle ower plant. In this ﬁ eld, NREA has completed a study

possible future options (maybe 10 years)

on “Technical Development of Solar Thermal Electric Power Generation and its Potential Utilization both in Egypt and Mediterranean Countries,” including evaluation of the

application status of the solar thermal generation technologies and systems developed worldwide along with a study specifying predictions of the construction and operation

development

capacities.

The long vision for STEG targets the installation of 750 MW by 2017 producing 7 TWh/year of electricity for local consumption and export through the interconnected

electricity grid to Europe. Such a plan envisages a fuel saving of 64,000 TOE at 2017. In addition, it will create valuable chances for technology transfer and job creation

opportunities in Egypt and the region

Country/Location Egypt/Kuraymat

107

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Annual

Energy

Generation at the

Power

Total

5 year

end of the period

No. of

Capacity

Cumulative

Accessible

development

plans

GWh/year

plants

(MW)

Capacity

Potentials

1997–2002

2002–2007

0.95

150

2007–2012

3.98

300

450

2012–2017

300

750

Source: Information provided by NREA.

Accessible potentials and installation plants for solar thermal electricity generation

1. Accessible potential: Total capacity that can be installed on 50 percent of the lands that are sunny and available at less than 5 km from electric and gas networks.

2. The ﬁ rst plant is anticipated to be ISCCS.

Suggested approach to improve

NREA has gained signiﬁ cant experience in designing and implementing wind energy projects with international loan and grant ﬁ nancing. Important lessons drawn from that

chances of CSP success in Egypt

experience include the importance of a transparent and well-managed competitive bidding process. Another important lesson from the development of the wind projects is

that they have attracted major international suppliers of wind technology, demonstrating the interest and comfort of major suppliers with business transactions in Egypt.

Furthermore, through the development of these projects, NREA has operated under PPAs with the national utility and has gained signiﬁ cant experience in structuring and

negotiating such agreements. This experience will be very useful in the competitive bidding approach adopted for the solar thermal project, in which a power purchase agree

ment will need to be put in place as well as a gas purchase agreement

Egypt has a large oil and gas sector and provides valuable foreign exchange. However, one of the objectives of the oil and gas sector is to promote energy efﬁ ciency in this

sector. A barrel saved is a barrel produced, and considering Egypt’s energy situation, which is characterized by a growing energy requirement and depleting energy

resources, energy conservation becomes of paramount importance. The upward adjustment of oil prices is driving the need for energy conservation. How pressing such a

need may be may differ from one country to another, depending on the impact of imported energy prices on the economy and the balance of payments. Energy-producing

countries, which were lucky enough to attain self-sufﬁ ciency, are least hit by the energy shocks and tended to deal complacently with it.

Egypt was one of the countries that experienced these mixed-blessing events. Egypt has concluded a large number of oil exploration agreements with many international

companies, and consequently, oil production has steadily been on the rise since the mid-1970s. Starting in 1976, Egypt has been able not only to meet its own needs of

energy, but also to export some oil. Consequently, the urge for energy conservation was given a lower proﬁ le in the Egyptian energy policy. The growing production of oil

and gas since 1975 has stimulated a period of fast economic growth. With little or negligible effort at energy conservation, domestic energy consumption went hand in

hand with domestic oil and gas production since the mid-1970s. The availability of domestic oil and gas, which were priced at historically very low prices, encouraged

unrestrained uses of energy. This distorted pricing system was justiﬁ ed, at the time, on the basis of prevailing social and political reasons, but this does not change the fact

that a great deal of precious resources have been wasted over a long period of time. Now, with increased awareness of the limitation of oil and gas reserves, and a valid

expectation of higher future prices of imported energy, the call for energy conservation should take a more serious dimension.

The process of energy conservation usually begins with efforts to change certain behavioral attitudes and practices acquired under a period of low energy costs. At a second

stage, emphasis should shift to investment in retroﬁ tting activities whose energy savings would be quick and attractive. Finally, in the longer run, the process would aim at

replacing obsolete technologies with new and more efﬁ cient ones. Therefore, energy conservation should not be considered as a one-time process, but rather as an ongoing

process that extends over the short, medium, and long terms. Moreover, the overall target should not be limited to the enhancement of energy efﬁ ciency, as represented by

reduced energy intensity, but it should also aim at attaining a higher level of GNP and a faster rate of economic growth. Generally, energy saved as a result of energy

Installed plant rate

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

108

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

conservation could be redirected either to feed larger and more efﬁ cient domestic production, or exported to generate foreign receipts that support investment plans and the

balance of payments.

A policy recommendation to delay Egypt from becoming a net importer of energy is to retain all or most of the limited oil and gas reserves to meet future domestic energy

requirement.

NREA has indicated that the solar thermal project, as well as other renewable energy projects, can save Egyptian natural gas, which could be exported at a premium price,

with a small margin (proﬁ t), possibly Piasters 2/kWh, going into a renewable energy fund

Such a renewable energy fund can make a major contribution toward the establishment of a solar thermal industry. If an integrated and holistic approach is adopted to

the use of such a fund, it can be argued that such a fund can ﬁ nd strategic application in the development of Egyptian know-how and intellectual capacity. Locally based

knowledge enables wider choices to be made and increases the probability of new technologies being accepted by all stakeholders. Furthermore, locally based knowledge

is sensitive to local issues. One such issue may be poverty alleviation, which would beneﬁ t from an expansion of the manufacturing sector—manufacturing sector that

could be expanded to support an Egyptian solar thermal industry. As indicated by NREA, one of the ﬁ rst sets of activities to be undertaken in this regard is to:

Survey local suppliers/contractors to establish what components can be sourced locally’

Train NREA/EEHC and regulatory staff in solar thermal plant operations, in particular in dispatching and integration into the power system; and

Monitor, evaluate and disseminate performance results both locally and internationally with a view to support future replicability.

Critical success factors for Egypt in the ﬁ eld of solar thermal energy

Implement Egypt’s energy policy, taking into account that Egypt’s oil and gas reserves have a limited life;

Implement energy efﬁ ciency policy to encourage retention of oil & gas reserves for local consumption;

Within the context of the energy efﬁ ciency policy, encourage the exploitation of Egypt’s renewable energy resources;

Develop the renewable energy fund, ﬁ nanced through a levy on exported oil and gas;

Develop local expertise, know-how, and intellectual capital; and

Develop local manufacturing enterprises to take advantage of solar thermal projects.

Country/Location Egypt/Kuraymat

109

N N E X

–

H A R A C T E R I Z A T I O N

O F

T H E

GEF F

O U R

-C

O U N T R Y

O R T F O L I O

DDITIONAL

NFORMATION

FOR

GYPT

An overview of the Egyptian energy situation is outlined by Gelil (2002). The following table provides a description and an overview
of the characteristics of Egypt’s electricity sector:

Description

2003/2004 2002/2003 Variance

(%)

Peak

Load

14,735 14,401 2.3

Total power generated

GWh

94,913

88,951

6.7

Hydro

GWh 13,019 12,859 1.2

Thermal

GWh 67,948 68,204 (0.4)

Power purchased from wind

GWh

368

204

80.4

Power purchased from (IPPs)*

GWh

77.4

76.7

0.9

Power gen. from private sector (BOOT)

GWh

13,501

7,607

77.5

Net exported power

GWh

918

827

Sent energy from connected power plants

GWh

78,029

78,065

(0.5)

Generated energy from isolated plants

GWh

269.7

239

12.8

Total fuel consumption

ktoe

15,261

15,267

–

H.F.O

ktoe 1,213 1,642 (26.1)

N.G

ktoe

14,006 13,579 3.1

L.F.O

ktoe 42 46 (8.7)

Fuel consumption (private sector BOOT)

ktoe

2,735

1,400

95.4

Fuel consumption rate

gm/kWh gen.

224.6

223.5

(0.5)

Fuel consumption rate

kcal/kWh

2,201

2,190

(0.5)

Thermal

efﬁ

ciency

% 39.1 39.2 (0.3)

N.G ratio to total fuel

89.2

3.1

N.G ratio from power plants connected to gas grids

98.1

97.1

Installed

capacity MW

18,119

17,671

2.5

Hydro

2,745 2,745 –

Thermal

13,186.5

13,498

2.3

Wind

140

122.2

Private

sector

2,047.5

1,365

Transmission

lines km

2,263 2,263 –

400

kV 33 33 –

220

13,711 13,711 –

132

2,466 2,466 –

15,731 14,855 5.9

33kV

2,749 2,526 8.8

Transforme Capacities

MVA

500

10,155 10,155 –

220

29,208 24,605 18.7

132

3,641 3,591 1.4

29,362 27,917 5.2

1,851

1,801

Source: Authors based on information provided by NREA.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

110

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

The following ﬁ gure describes the evolution of the Egyptian electric-
ity sector 1971–2003.

Source: Autors based on ENERDATA Database.

Below is the daily load curve for Saturday, June 19, 2004. This
provides a perspective on the daily load curve in the middle of
the Egyptian summer. Prominent is the maximum demand at about
10:00 pm in the evening.

Source: Information provided by NREA.

Below is the daily load curve for Wednesday, December 31,
2003. This provides a perspective of the daily load curve in the
middle of the Egyptian winter. Prominent is the maximum demand at
about 7:00 pm in the evening, as expected for winter, the demand
is higher than for summer.

Source: Information provided by NREA.

The diagram below presents the daily load curve for two days, June
19, 2004, and September 30, 2004. Peak demand is similar,
but with differing times of occurrences.

Source: Information provided by NREA.

2,000

4,000

6,000

8,000

10,000

12,000

14,000

GMh

year

Daily Load Curve (Maximum Discharge) on Saturday
19/6/2004 (Discharge: 235 Million m

)

Grid

Hydro

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

30/9/2004 (14401)

19/6/2004 (14735

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2003/2004

2002/2004

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

GMh

year

Evolution of electricity installed capacity in Egypt

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Electricity production from gas
Electricity production from oil

Wind electricity production

Hydro-electricity production

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

year

Daily Load Curve (Minimum Discharge) on Wednesday
31/12/2003 (Discharge: 75 Million m

)

Grid

Hydro

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

111

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Country/Location India/Mathania

Type of technology

Parabolic trough integrated with a combined cycle plant

Technical parameters (based on Sep

Capacity of the plant is 155 MW

, of which 30 MW are solar (original was 35 MW using 220,000±3 percent m

parabolic trough ﬁ eld). Expected annual net production

2004 RREC spreadsheet)

from the ISCCS of 916 GWh per year. The solar output is estimated at 63 GWh

(depending on the level of thermal storage included) representing 6.9 percent of the

annual production. Solar radiation for the region has been quoted as around 2240 kWh/m

/yr (DNI).

The inclusion of thermal storage has been encouraged, with the 2002 RfP document stating that 5 percent of the bid assessment weighting criteria would be devoted to

storage (bids with no storage would receive a score of 0 for this parameter).

The site is relatively ﬂ at, with access to water and transmission. The source of fossil fuel for the gas turbine has proved problematic. Supply of cost-effective fuel to the

project has been one of the critical issues to be resolved. There is a letter from GAIL stating gas price of INR 270.47/MMBTU, with possibility of cheaper gas from a new,

nearby oil/gas ﬁ eld.

Business model (based on 2002 RfP)

Pre-qualiﬁ ed bidders submit a proposal for an EPC with O&M contract to build the plant on a turnkey basis and operate it for a period of ﬁ ve years. The plant will be owned

by the Rajasthan Renewable Energy Corporation (merger of REDA and RSPSL). The EPC part of the contract is a ﬁ xed lump sum. The power purchase agreement is intended

to be with Rajasthan Rajya Vidyut Prasaran Nigam Limited (RVPN).

Liability provisions (based on 2002RfP)

Bids with less than 50 GWh

of solar production will not be accepted. For the purpose of tests on completion, rejection criteria (i.e. plant not accepted) apply to net electric

power (if 5 percent below performance model), net heat rate (if 2 percent above performance model), and the solar ﬁ eld (if 5 percent below performance model). Penal

ties for performance deﬁ ciencies apply to a number of parameters. In relation to the solar ﬁ eld, a penalty of 100,000 INRs is payable per kW

of deﬁ ciency (2002 RfP).

A second acceptance test applies at the end of the ﬁ ve-year O&M period whereby penalties amounting to 80 percent of the ﬁ rst acceptance test penalties apply. An agreed

level of degradation is permitted.

Status of project

The project could not be implemented in a timely fashion because it had serious ﬂ aws in design due to the proposed technology and aggravated by inappropriate location.

The capital cost of the project was about $200 million, and the resulting subsidies were in the range of $112 million to $136 million. After many extensions, an ICB failed

in September 2003 due to lack of bidders. Subsequently, the Bank requested a commitment from the Government of India for additional measures to improve the project’s

economics, including additional subsidies. Finally, the Ministry of Finance sent a letter stating that the Ministry of Environment and Forest had decided to close the project.

Expected project time schedule

The project has been dropped and is no longer part of the WB/GEF pipeline. The Government of India and other donors (such as KfW) might consider other opportunities

for taking the project forward.

Project developer/Prequaliﬁ ed developers

Prequaliﬁ cation was completed in February 2002. Initially three consortia were involved; however, one pulled out, leaving two consortia, both from India, using the same

solar ﬁ eld supplier.

Financing structure

The present funding arrangement (according to RREC) is:

Loan from KfW (revised)

€

92.16 million (this ﬁ gure is from the RREC 2004 ﬁ nancial spreadsheet, however KfW advise their loan at present is

€

125.7 million).

Grant from GEF

$45 million

Grant from GoI

$10.86 million

Grant from GoR

$10.86 million

Total

INR 8,226 million

Capital cost breakdown (including IDC) is solar block (INR 3,557.2) and CC block (INR 4,669.6).

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

112

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Owner of plant

RREC

Institutional framework in host country

Generation and distribution throughout the country is controlled by state-owned bodies, apart from several private sector licensees catering to such cities as Mumbai,

for electricity generation

Ahmedabad, Surat, and Calcutta, and in the state of Orissa where distribution of power has been privatized.

India requires signiﬁ cant power generation installation over the coming years. Its tremendous growth rates make it a power-starved nation, even after 50 years of planning

and the experience of putting up a 90,000 MW generating capacity with associated transmission and distribution systems. Power shortages have resulted from insufﬁ cient

capital investment in the sector and from a need for improved efﬁ ciency in delivery (the country has high T&D losses and low plant utilization). The national average energy

shortage in FY99 was 5.9 percent, and the peak deﬁ cit was as high as 14 percent. In Rajasthan, the shortages were a little less than average. According to estimates of

Central Electricity Authority (CEA), India needs an additional 100,000 MW at an estimated investment of nearly $100 billion to meet its power requirements in the next

15 years. Participation of private/foreign capital would appear inevitable.

Installed Power Generation Capacity (MW) as on 02/28/2005

Thermal

Sl.

No. Region Hydro Coal Gas DSL Total Wind

Nuclear Total

Northern 10,596.6 16,914.5 3,213.2

15.0 20,142.7

178.5 1,180.0 32,097.8

Western

5,702.1 20,791.5 5,035.7

17.5 25,844.7

632.5

760.0 32,939.3

Southern 10,437.8 13,892.5 2,720.4

939.3 17,552.2 1,671.7

780.0 30,441.7

Eastern

2459.5 15737.4

190

17.2 15944.6

5.2

0.0 18409.3

Eastern 1,133.9 330.0 750.5 142.7

1,223.2 0.3 0.0

2,357.5

6 Island

5.3 0.0 0.0 70.0 70.0 0.0 0.0 75.3

All

India 30,335.2 67,665.9 11,909.8 1,201.8 80,777.5 2,488.1 2,720.0 116,320.8

Source: CEA National Electricity Plan, Appendix 4.3.

Year

Electricity Consumption (GWh)

Annual compounded growth rate (%)

1950

4,157

–

1960–61

13,841 11.6

1970–71

43,724 12.2

1980–81

82,367 6.5

1990–91

190,357 8.7

2000–01

316,600 5.2

Source: General Review, CEA.

Country/Location India/Mathania

113

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Summary of All-India long-term forecast

Year

Energy Requirement (GWh)

Peal Load (MW)

2006–07

719,097 115,705

2011–12

975,222 157,107

2016–17

1,318.644

212,725

Source: 16th EPS Report.

11th Plan Capacity Addition (Tentative) – Sector Wise

Sector

Hydro

Thermal

Nuclear

Total

Central

15,828

4,328

2,264

22,420

State

11,740

12,523

9,273

33,536

Private

4,940

Total

32,508

16,851

11,537

60,896

Source: 16th EPS Report

Institutional frame in host country

India is keen to promote and develop its renewable energy resources. There is apparently a goal (administered by the MNES) to have 10 percent of new power come from

for renewables

renewables by 2012. The technologies pursued are mainly solar PVs, solar thermal, wind, many forms of biomass, and also associated new and emerging technologies.

The Ministry of Non-Conventional Energy Sources (MNES) provides ﬁ nancial incentives, such as interest subsidy and capital subsidy. In addition, soft loans are provided

through the Indian Renewable Energy Development Agency (IREDA), a public sector company of the ministry and also through some of the nationalized banks and other

ﬁ nancial Institutions for identiﬁ ed technologies/systems.

The government also provides various types of ﬁ scal incentives for the renewable energy sector, which include direct taxes (100 percent depreciation in the ﬁ rst year of the

installation of the project), exemption/reduction in excise duty, exemption from central sales tax, and customs duty concessions on the import of material, components,

and equipment used in renewable energy projects.

The ministry has also suggested that states should announce general policies for purchase, wheeling, and banking of electrical energy generated from all renewable energy

sources. Fourteen states have so far announced such policies in respect of various renewable energy sources.1 We heard of a 10 percent target for renewables, but can’t

conﬁ rm its status at this time.

Key governmental institutions

The key institutions for renewables in India are the Government of India itself, the Ministry of Non-Conventional Energy Sources (MNES), the Renewable Energy Develop

and their interests

Agency (IREDA). In the state of Rajasthan, the state government formed a new company—Rajasthan Renewable Energy Corporation (RREC)—on

August 9, 2002 by merging the activities of REDA and RSPCL. RREC is the state nodal agency for promotion of renewable energy programs in the state.

Main Activities of RREC are:

Extending electricity in remote rural areas through solar photovoltaic (SPV) lighting systems;

Execution of 140 MW integrated solar combined cycle power project at Mathania;

Development of wind energy power projects;

Development of biomass power projects;

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

114

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Development of mini-hydropower projects; and

Designated agency under Energy Conservation Act.

The state government announced a wind policy in April 2003, which is valid up to 2009 for additional capacity creation. The following incentives apply to this Wind Policy

Sale of power to RVPN for 2003–04 Rs. 3.3/unit;

Annual escalation at 2 percent;

Wheeling charges ﬁ xed at 10 percent;

Provision for third party sale/captive consumption;

Exemption of electricity duty for ﬁ ve years; and

Allotment of sites at concessional rate.

200 MW commissioned/application for 500–600 MW registered with RREC.

Electricity data for the State of Rajasthan

PARAMETER

JODHPUR

DISCOM

RAJASTHAN

GENERAL

Population

15,317,007 53,523,388

Area

(km

) 182,509

242,239

Population

Density(Persons/km

) 84

156

District.

Employees

9,249

40,223

ELECTRICAL

Total connected load (MW)

2,614

9,902

33KV lines (kms)

10,000

25,718

33/11KV S/S (Nos./Capacity in MVA)

581/2,140 MVA

1,650/6,490 MVA

Domestic Connected Load (MW)

725

2,181

Agriculture Connected Load

793

3,110

Ind.Connected Load (MW)

714

3,382

Domestic Electriﬁ cation

47 percent

42 percent

Villages/Towns Electriﬁ ed

83 percent

92 percent

T&D Losses (percent)

39 percent

38 percent

Revenue from sale of electricity (Rs.Crores)

785

2948

Energy Sold (MU)

3,463

12,716

Average Tariff (Rs./unit)

2.11

2.18

Country/Location India/Mathania

115

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

CONSUMER

Total

Consumers

1,520,871 5,082,743

Domestic

Consumers

1,174,897 3,703,259

Agricultural

Consumers

104,813

577,443

Industrial

Consumers

35,172

134,084

Consumers

600

2,505

Domestic Consumers as percent of total consumers

77 percent

73 percent

Source:

http://www.rajenergy.com/JodDiscom.htm#

Near-term strategy for CSP in India

India, being the ﬁ rst ISCCS and ﬁ rst GEF project, suffered from a lack of competitive interest. While India has become mired, other projects have beneﬁ ted from the early

difﬁ culties identiﬁ ed as a result of the Mathania process. India could now stand to beneﬁ t from the renewed interest shown in CSP and ISCCS. Thus it would probably be

premature to drop the Indian project from GEF funding until the near future for Morocco and Egypt in particular are established. There does not appear to be, however, a

stated plan for CSP at the government level beyond the existing project. The Central Electricity Authority’s draft National Electricity Plan [http://www.cea.nic.in/nep/nep.

htm] considers a wide range of energy technologies and potential, but essentially expects most of the contribution over the next 15 years to come from fossil fuel, hydro,

and nuclear. Certainly India is well aware of the technical potential for the technology, and the solar resource is available. It is noted in the draft plan that just 1 percent of

the Raj desert could provide up to 6,000 MW of solar power. In addition, there is interest from Indian private industry to advance CSP technology, whether troughs, Fresnel,

towers, or dishes. The summer demand and supply curve for Delhi shown below indicates a signiﬁ cant power shortage during solar hours in the summer months. This gap

would be well-matched by a solar technology such as CSP, especially as thermal storage could also help supply the demand into the evening.

Source:

http://www.ndplonline.com/index.jsp

India also has a strong R&D base, which could help to provide a good scientiﬁ c resource, not only for technical development of the components but also for performance

monitoring and thermodynamic cycle improvements. The strong knowledge and familiarity that Indian power engineers have with thermal technologies (based on fossil fuel)

provides a good foundation for integration of solar thermal, which essentially uses the same power cycles and power blocks.

500

1,000

1,500

2,000

2,500

3,000

HOUR

Reqt

Demand Met

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Own Generation

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

116

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

View of the country on a mid-term

India has huge power capacity additions planned over the next decade. At the end of 2002 (end of the 9th Plan), the country had a peaking shortage of 12.7 percent and

strategy for CSP with possible future

energy shortage of 7.5 percent. The 10th Plan (2002–07) recommended an additional 46,000 MW to be installed by 2007, and the 11th Plan is likely to suggest a fur

options (5–10 years)

ther 60,896 MW required by 2012. The modeled break-up by fuel type is shown below. For the longer term, a further 69,500 MW is expected to be required during the

12th Plan (2012–17). The 12th Plan continues with the same expected trend of hydro, thermal, and nuclear.

The plans also consider various scenarios. In particular, gas is a limited resource in the country, and it is likely that gas will have to be sourced outside of India. Hydro also

is a resource that can produce signiﬁ cant seasonal variability, particularly if climate change becomes more pronounced. Solar thermal ﬁ ts well with other fossil fuels, as it is

based on the same thermodynamic cycles and power generation equipment. Thus it could be a strategic move to incorporate solar thermal into the mix to help offset any

unplanned shortfalls in gas resources. With hydro expecting to contribute approximately ??? of the installed capacity by 2017, solar is likely to be a strategic hedge here

also because, if there is a reduction in water ﬂ ows due to drought, there is a good chance that levels of solar insolation will be high. It has possibly already been carried

out, but with climate models improving it would be interesting to consider the complementarity of solar and hydro under various climate change scenarios.

Suggested approach to improve chances

There seems to have been a differing view over time as to the capacity of the solar portion. Figures up to 35 to 40 MW of solar have been circulated. The latest cost

of CSP success in India

spreadsheet (June 2004) has been based on 30 MW. This seems a sensible choice, in fact, if the reluctance of the GoI to sign off is due to the cost. It makes the technical

integration easier, with less manipulation of an otherwise optimized combined cycle required. It also improves the overall GHG performance of the ISCCS as off-design

operation is less removed from ideal (the steam turbine is less-oversized, thus duct-ﬁ ring or the level of part load operation is reduced). The arguments by RREC appear to

make this capacity quite competitive in terms of LEC versus imported price of electricity. However we would recommend consideration that the next RfP include additional

assessment criteria with a signiﬁ cant weighting that considers the size of the ﬁ eld (or solar GWh

) offered. There should still be a minimum required ﬁ eld size (in the

original RfP this cut-off was 50 GWh

, below which the bid would not be considered). However, this should now be a lower ﬁ gure, to be determined through consultation

This would mean that bids could be differentiated on the basis of the solar ﬁ eld size, prompting competition on both the quality and quantity of solar offered.

Paradoxically perhaps, the ultimate outcome for GEF is likely to be improved if the solar expectation is reduced. The solar ﬁ eld, being modular, will generate as much experi

ence and know-how as a larger one. And though the solar capacity would be less, the number of solar MW is to some extent arbitrary. In the broad scheme of things, which

is ultimately what OP 7 is concerned with, the technology and the industry would be better served by a successful project. There is more chance of a successful industry

being spawned by a successful 25 MW than by a risky 30 MW, or even by a proposed 35 MW that never proceeds because it is too expensive. By 2015, no one will be

concerned that the very ﬁ rst project was a few MW less than originally intended.

In addition for the India case, we would recommend that the speciﬁ ed CSP technology be broadened to enable alternative collector technologies to be offered. There is

already a study under way for a 5 MW linear Fresnel plant in India, and strong interest in a dish-based solar steam plant.

Country/Location India/Mathania

117

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Country/Location

Mexico/Sonora State, Aqua Prieta

Type of technology

Parabolic trough integrated with a combined cycle plant

Technical parameters

For the former site Cerro Prieto near Mexicali in Baja California Norte (source: SMA study, June 2000): 285 MWe plant with a 39.6 MW

parabolic trough solar ﬁ eld,

14 percent of plant capacity is solar corresponding to 4 percent of annual electricity yield (site has an average DNI of 2,600kWh/(m

a)).

Plant site was changed to Sonora state in November 2004, irradiation data there even seems to have slightly higher values. Latest inquiry from CFE to the WB: increase the

ISCCS total plant size from 250 MW to 500 MW. The solar ﬁ eld capacity is not yet determined (in between 25 MW

and 40 MW

A new study by Sargent and Lundy (May 2006) determined that the increase in capacity of the thermal component in fact increases the conversion efﬁ ciency of the solar

energy

collected.

Business model

“Obra Pública Financiada OPF” corresponds to a Finance Build Transfer scheme, similar to an EPC contract (Engineering, Procurement & Construction = Turnkey contract ).

The operation will be performed by CFE (by law). Flexibility about maintenance.

Previously IPP was pursued and a tender was already published in March 2002. But due to the fact that WB/GEF could/would not commit to its funding before the win

ning bidder was chosen, the bidding process had to be stopped. After a visit of Mr. Laris Alanís (one of the 5 CFE directors) at the World Bank in Spring 2003, the business

concept was changed to an EPC contract with CFE getting the WB fund. The former hen-egg-problem (CFE could not put out a conditional bid while the WB could not grant

the funding previous to knowing who would receive it) is resolved now.

Liability provisions

The EPC contractor will be responsible for the construction ﬁ nancing, engineering, procurement, and construction, selling the turnkey hybrid plant to CFE. CFE will operate it,

maybe maintenance contractor.

Status of plant

June 2005: presentation to the Treasury Ministry.

November/December 2005: Approval by the Treasury Ministry.

The hybrid plant has been included in the PEF (Programa de Egresos de la Federación) and approved by Congress. The site for the 500 MW facility has been selected at

Agua Prieta, State of Sonora.

After a technical economic assessment by Sargent and Lundy (May 2006) and a consultancy by Spencer Management, the World Bank task team has concluded that “the

500 MW 2x2x1 CCGT arrangement enhances the contribution and efﬁ ciency of the solar component”. In addition, the larger size of the thermal component does not affect

the contribution of the project to reduce either the long term cost of the technology or the amount of GHG emissions. In fact, the installation of the solar ﬁ eld in Mexico will

build local technical capacity with the potential to trigger replication in the country with either gas or coal based power facilities. The chances for this are particularly high for

Mexico, given the culture of entrepreneurship exhibited by CFE engineers with other technologies such as geothermal.

Expected project time schedule

June 2006: invitation for tenders (published).

September 2006–January 2007: start construction.

April 2009: Grid connection.

Project developer/Prequaliﬁ ed developers

In the IPP bidding procedure in 2002, several companies were submitting bids. However, there was very little interest for offering the solar ﬁ eld because the solar-ﬁ eld-only

was an option for the CC plant. The bidding was stopped by CFE when it became clear that the above-mentioned hen-egg-problem could not be resolved. According to

current planning, the next bidding will occur in 2006. According to Mexican law, no prequaliﬁ cation of bidders occurs.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

118

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Financing structure

CFE is paying for the combined cycle, for the land (CC+SF), and for O&M. WB is paying for the solar ﬁ eld investment and the excess power block investment.

(CFE ﬁ nancing procedure: CFE is applying for the investment ﬁ nancing within its annual investment plan at the Mexican Treasury, which has to approve the investment

in agreement with the Congress.)

The investment for the thermal portion of the Solar Thermal Hybrid Plant Agua Prieta II has been approved by Treasury and Congress.

Final owner of plant

Comisión Federal de Electricidad (CFE)

Institutional frame in host country

The main electricity company in Mexico is CFE, a state-owned utility. CFE is responsible for the whole country, except for the central area of Mexico City, which is served by

for the electricity market

a CFE-owned daughter (Luz y Fuerza del Centro – LFC). CFE has a similar structure and spirit as EDF in France who contributed to set up CFE.

The revenue of CFE is part of the federal budget (same as the oil company Pemex). Subsidies and proﬁ ts must balance (requirement from Ministry of Treasure) but

currently subsidies to CFE are higher (source: Gabriela Elizondo, Feb05). It seems difﬁ cult to compensate this with the tariffs (subsidized tariffs for the residential and

agricultural sector, the subsidies are planned to be reduced (POISE – Programa de Obras e Inversiones del Sector Eléctrico 2004–13).

CFE has a legally ﬁ xed least-cost expansion plan (law: LSPEE); investments have to be justiﬁ ed in compliance with the objective to provide the least-cost electricity.

The Mexican power sector is open to competition in a limited way. There are three types of projects:

Build-lease-transfer (CAT): the acceptor of the bid provides the ﬁ nancing, the detailed engineering, and the construction. These projects are operated by CFE and use

ﬁ nancial means belonging to a trusteeship until the investment is covered by CFE, when CFE acquires plant ownership.

Financed-built-transfer projects (OPF): same as CAT with the only difference that the ﬁ nancing is provided by CFE.

Independent Power Producers (PIE): the acceptor of the bid provides the ﬁ nancing, builds the plant, operates it, and owns it.

Institutional frame in host country

Currently no green tariffs exist in Mexico, but a new law on renewables is in preparation looking at these issues. It is not yet clear how or if this law will justify excess

for renewables

costs related to current status of CSP technology, especially against the background of the least-cost-obligation. In the past, CFE has been more reluctant to invest in

renewables plants. Mexico has a capacity payment for generation capacities (subsidy for availability); hydroelectric power is considered as intermittent and does not

receive this subsidy.

The current CFE plant portfolio contains the following renewable energy sources:

Hydroelectric power plants

These are considered cost-competitive during the demand peak.

Geothermal power plants

These are cost-effective.

Wind energy

According to CFE calculations, wind energy (LEC 4-7c/kWh) cannot compete with CC technology, however it can compete with coal-ﬁ red power stations. Furthermore,

wind energy is considered useful to help diversiﬁ cation (fuel) and is considered environmentally friendly. (It has not become clear how strictly the least-cost-obligation

is being applied against other criteria (as e.g. fuel diversiﬁ cation). Apparently, wind energy does not fully meet the least-cost requirement. However, approximately

400 MW of wind turbines will be installed over the next 10 years.)

Country/Location

Mexico/Sonora State, Aqua Prieta

119

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Photovoltaics

In Mexico, 5 percent of the 103 million inhabitants are not connected to the grid. During the last nine years, 42,000 small solar modules have been installed to

serve the same amount of houses. This will be a widely applied technology in the future for populations pending electriﬁ cation in rural areas.

Key governmental institutions and

CFE: Mexico’s main electricity company

their interests

Mexico’s Ministry or Energy (SENER)

Mexico’s Treasury Ministry, to approve the ﬁ nancing of new plants

Structure of the Mexican energy sector:

Source: Information provided by CFE.

Energy Policy Objectives (SENER):

Increase the quality of life of the Mexican people;

Promote a rational use of resources in the context of sustainable development and intergenerational equity;

Promote investment in productive and feasible projects for Mexico;

Generate an elastic supply of hydrocarbons;

Increase productivity in the sector; and

Achieve a competitive pricing policy.

Ministry of

Energy

CRE

Energy Regulatory

Commission

CNSNS

National Nuclear

Safety

Commission

CONAE

National

Commission for
Energy Savings

PEMEX

Mexican Petroleum

Company

CFE

Federal Electricity

Commission

LyIFC

Light and Power

Company for

the Center

ININ

National Nuclear

Research Institute

IMP

Mexican Petroleum

Institute

IIE

Electric Research

Institute

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

120

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Tariff structure in country

The large-scale industry (high and medium voltage customers), companies and high-level consuming households (low level voltage customers) are paying a price calculated

from the fuel price development and a price component depending on the indices of the producing branches: machinery and equipment, basic metallurgy, and other

manufacturers. The residential and agricultural sectors pay subsidized tariffs.

Description of the electric power system

Concerning gas and oil reserves, Mexico ranks (worldwide):

9th in crude oil proven reserves;

21st in natural gas proven reserves;

7th in crude oil production; and

8th in natural gas production.

Despite these promising numbers, Mexico is a net importer of natural gas; about 30 to 40 percent of total gas consumption is imported.

The country has 45 GW installed capacity (gross capacity in 2003). The power generation system of CFE by produced amount of energy is given in the following graph

(only grid-connected plants).

Source: Information provided by CFE.

Accordingly, the use of fossil energy sources accounts for 82 percent of annual energy production.
Self-producing (autonomous) units account for 9.4 percent of national electricity production. The past and future (forecasted) electricity consumption are given in the

following

graph:

Country/Location

Mexico/Sonora State, Aqua Prieta

Combined Cycle,

27.0%

Turbogas, 3.4%

Internal combustion

engine, 0.4%

Dual-firing,6.8%

Coal-fired power

stations, 8.2%

Geothermal and wind,

3.1%

Nuclear power,

5.2%

Hydroelectric power,

9.7%

Conventional Rankine,

36.2%

121

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Source: Information provided by CFE.

For the years 2004–13 (being the reporting period of the latest CFE electriﬁ cation plan POISE), CFE predominantly plans to build combined cycle plants, with a total

capacity of 13.0 GW. The arguments are high efﬁ ciency, and thereby air cleanliness for critical zones. According to POISE, combined cycles offer the ﬂ exibility to use

alternative (future) fuels like gasiﬁ cation of other energy sources (e.g. from PEMEX reﬁ neries, gasiﬁ ed coal, or waste).

The electricity production from heavy fuel oil becomes less attractive because its production in Mexico is decreasing. Nuclear energy is not considered to be practicable

(Mexico already has one nuclear power plant). The utilization of coal is limited due to necessary infrastructure (e.g. port), environmental aspects, and importation of

this

fuel.

In the face of possibly future high natural gas prices or possible future limitations of gas procurement by PEMEX (Petróleos Mexicanos) or limitations from US-American

importations, CFE has taken action such as gas drilling (Altamira and another drilling in the Paciﬁ c Ocean). For the future, CFE permanently studies other generation

technologies like renewable energies or combined cycles with gasiﬁ cation of coal and waste. Beyond the planned 13.0 GW of CC plants, 3.2 GW hydroelectric, 0.7 GW

coal-ﬁ red Rankine, 1.0 GW gas turbine, 0.1 GW internal combustion (e.g. Diesel), and 0.4 GW wind and 6.7 GW of not yet deﬁ ned plant types are being planned.

CFE has many old plants with low efﬁ ciencies and high costs that are only used for peaking power generation. In the forecasted period (2004–13) 4.2 GW of these plants

will be taken off the grid to improve the competitiveness of CFE’s power plant assembly.

In 2003, Mexico exported 765 GWh

to California and 188 GWh

to Belize; the cumulative imports amounted to 71 GWh

Near-term strategy for CSP in the country

Besides one 25 MW

solar ﬁ eld (to be integrated into the CC plant “Baja California III”) no other solar thermal power projects are mentioned in Mexico’s electriﬁ cation

plan for the years 2004–13.

View of the country on a mid-term strategy

Once successful experiences have been completed with a ﬁ rst solar thermal power plant (i.e. the ISCCS plant), a further expansion of CSP technology is likely, esp. in the

for CSP with possible future options

face of rising fossil fuel prices and favorable solar conditions in Mexico (personal communication of Juan Granados, CFE). This has happened with wind energy: After 10

(5–10 years)

years of successful operation of a ﬁ rst wind turbine, several wind parks with a total capacity of several 100 MW are now being projected.

100

150

200

250

300

TWh

350

Autoabastecimiento
Ventas sector público

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Histórico

177.0

160.4

Pronóstico

Consumo total

305.8

279.3

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

122

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Country/Location

Morocco/Ain Beni Mathar

Type of technology

Parabolic Trough integrated with a combined cycle plant

Technical parameters

200–250 MW

, of which 20–30 MW solar, 220,000 m

parabolic trough ﬁ eld. Expected annual net production of 1,590 GWh per year. The solar output is estimated at

3.5 percent of the annual production representing 55 GWh per year.

Link to the gas pipeline Maghreb-Europe (Algeria to Spain) (12 km connection). Morocco is entitled to about 10 percent from the gas transited through this pipeline. So

far, it has not used all its entitlement.

Business model

EPC (Engineering, Procurement & Construction = Turnkey contract) with O&M. Following an unsatisfactory response to an original competitive bidding of an IPP, Morocco’s

public power utility ONE has decided to ﬁ nance the solar thermal plant itself. Contract common for the solar and the fossil part. 5-year O&M contract. This contract can be

renewed for another 5-year period. The O&M contract will ensure appropriate incentives for the operation of the plant, including to the full capacity utilization of the solar

ﬁ

eld..

Liability provisions

(in particular for hybrid)

Status of plant

The bid document has been completed by Fichtner Solar and reviewed with the client (Ofﬁ ce National d’Électricité). Beginning March 2005, the bid document has been

submitted to the World Bank for “Non-Objection.” The two-stage bid documents were issued to the prequaliﬁ ed bidders in July 2005. The technical and ﬁ nancial proposals

were opened May 2006.

Expected project time schedule

Allowing for normal time span for bid evaluation, and contract negotiations, it is expected that the EPC with O&M contract for the project can be signed by the end of

2006, and at the latest in January 2007; expected start of operation of the plant is mid-2009 (construction time 30 months).

Project developer/Prequaliﬁ ed developers

The prequaliﬁ cation of potential contractors had been completed in 2004. There were applications from seven international consortia, out of which four have been

prequaliﬁ

ed.

Financing structure

Total cost of plant is expected be around $243 million. This includes transmission lines and substations, connection to gas pipeline, land acquisition, boreholes, access road

and engineering and supervision.

GEF grant (20 percent): $50 million (incremental cost due to solar thermal component).

O.N.E. will bear about 16 percent of the total cost of the project.

Remaining from African Development Bank as a loan (The Board of the ADB has already approved the co-ﬁ nancing for this project in March 2005): about $156 million.

Final owner of plant

Ofﬁ ce National de l’Electricité ONE

Institutional frame in host country for the

The Moroccan electricity market is being structured into a competitive part of the market (for industrial consumers) and a regulated single-buyer market (for residential

electricity market

consumers). Both parts are expected to converge towards a fully open whole sale market for electricity. Morocco is interconnected with Spain and Algeria. ONE will

continue to be solely responsible for transmission .

The program by ONE for the development of its transmission network (3 billion Dirham,

€

270 million) has the objective to enforce the reliability and the security of its

functioning, as well as the exchange with the neighbours in view of the opening of the national electricity market to competition and its integration into a vaster European-

Maghreb market. This programme foresees notably: (1) the doubling of the interconnection with Spain, already done in December 2005 ; (2) the reinforcement of the

interconnection with Algeria; (3) the development of the 400 kV grid towards the centre (Mediouna) and the East (Oujda) with the construction of 3 400 kV/225 kV

stations; (4) The extension of the 225 kV grid; and (5) the modernisation of the national dispatching.

123

NNEX

–

HARACTERIZATION

THE

GEF F

OUR

-C

OUNTRY

ORTFOLIO

Institutional frame in host country for

Objective to increase the share of (new) renewables from 0.24 percent in 2003 to 10 percent in 2011 and close to 20 percent in 2020.

renewables

Since June 2004, Morocco has a national plan for the development of renewables and for the improvement of energy efﬁ ciency (EE). This is an indication of the political

will to integrate renewables into the national energy landscape with quantiﬁ ed objectives. The plan shall contribute to the national objectives of supply security at the lowest

cost, general access to energy, the preservation of the environment, and more generally to sustainable development. It foresees the production of electric power of

600 MW from wind parks and thermo-solar hybrid plants; the exploitation of biomass and cogeneration; and a program for the creation of 1,000 micro enterprises for

energy services close to the user, and decentralized electriﬁ cation of about 150,000 rural households under the rural electriﬁ cation program.

Key governmental institutions and

ONE: Morocco has a strong need for new capacity: peak power in July was 3,190 MW, which is only 12 percent above the available capacity (available capacity is less

their interests

than installed capacity).

Government of Morocco/Ministry of Energy: enabling Morocco to embark on a path of sustainable development in accordance with its commitments under the 2002 Johan

nesburg World Summit for Sustainable Development and the 1997 Kyoto Protocol to the Climate Change Convention.

Centre de Développement des Energies Renouvelables (CDER)

Tariff structure in country

Electricity tariffs to consumers are high in Morocco due to the taxes: 7–8c/kWh. This is pressure to lower the costs, especially to industry (tariffs have been lowered by 36

percent)

Description of the electric power system

As of September 2004, the power plants owned by ONE are 26 hydropower plants (total installed power 1,265 MW), 5 thermal power plants based on steam generation

(2,574 MW), 7 power plants based on gas turbines and several diesel plants (784 MW), wind turbines (54 MW), or in total an installed power of 4,508 MW). 40

percent of the capacity is working less than 5 hours a day.

The vast majority of Morocco’s electricity is generated in thermal power plants that burn oil and coal. All of the oil is imported, and most of the coal comes from South Africa

(the United States and Columbia are also key suppliers). The country’s two largest electricity power station are located at Mohammedia and Jorf Lasfar. Sixty percent of the

hydropower is concentrated in the ﬁ ve largest hydro plants: Bine el Ouidane in Azilal (capacity 1.38 billion m

), Idriss 1er on the Oued Sebou (1.186 billion m

), Al

Massira at Settat (2.76 billion m

), al Wahda (3.8 billion m

) and Ahmed el Hansali in Zaouiyat Echeikh (0.74 billion m

The year 2004 registered a strong increase in electricity demand of 7 percent and this for the second year in a row; demand has now reached 17,946 GWh. Some

56.4 percent of demand was met by IPPs, 35 percent by the power plants exploited directly by ONE, and 8.6 percent by imports through the interconnection with Spain.

Hydroelectricity production reached 1,591 GWh (a 10.4 percent increase compared to 2003) and represents 8.9 percent of electricity demand.

Near-term strategy for CSP in the country

Power projects near ﬁ nalization:

First gas-ﬁ red combined cycle plant of Tahaddart: Power 385 MW, Owner: E.E.T (Energie Electrique de Tahaddart, created for this purpose. 48 percent of the capital is

owned by ONE, 32 percent by Endesa Europa and 20 percent by Siemens Project Ventures), Operator: Siemens O&M, Cost

€

285 million, Start: April 2005. 20 years

Power Purchasing Agreement E.E.T – ONE. Financing: 25 percent of the investment is ﬁ nanced by the provision of capital, the remainder by two loans raised on the

Moroccan market at the Banque Centrale Populaire BCP and a consortium constituted by the BCP, the BMCE Bank and the CA.

Hydro pumping station of Afourer, Power 463 MW, Owner and operator ONE, Cost 1,700 million Dirham (about

€

155 million), Financing: European Investment Bank

and Arab Fund for Economic and Social Development. Start: 2005.

Wind park of Essaouira, Power 60 MW, mean annual production 210 GWh, Owner and operator ONE, Cost 650 million Dirham (about

€

60 million), Financing: Loan

€

50 million from KfW. Start of operation: end of 2006.

Wind park of Tanger, Power 140 MW, mean annual production 510 GWh, Owner and operator ONE, Cost 1,800 million Dirham (about

€

165 million), Financing:

Loan

€

80 million from the European Investment Bank,

€

50 million from KfW, Agence Française de Développement, ONE. Start of operation: beginning 2007.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

124

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

Hydropower plant Tanafnit-El Borj, Power 2 x 9 MW MW, mean annual production 100 GWh, Owner and operator ONE, Cost

€

61 million, Financing: Loan

€

million from KfW. Start of operation: second half of 2007.

Installed Power

Short term projects

Start

Combined cycle plant Tahaddart

385

2005

Pumping station Afourer

463

2005

Transfer of 3 gas turbines from Tan Tan to Laâyoune

100

2005

Wind Park Essaouira

2006

Wind Park Tanger

140

2007

Solar thermal plant Ain Beni Mathar

200–250 MW

2009

Hydroelectric complex Tanafnit El Borj

2x9 MW et 2x13 MW

2007

Performance boost for the thermal power plant of Mohammedia

600

2007

Source: Authors based on internet data from ONE.

Rural electriﬁ cation: The PERG global program for rural electriﬁ cation was approved in the Government Council in August 1995 and put into practice starting 1996. ONE,

which is responsible for carrying out the program of rural electriﬁ cation, has accelerated the pace since 2002 to generalize the access to electricity by 2007 rather than

2010 as originally foreseen. At the end of 2007, the PERG will have contributed to electrify 34,400 villages, of which more than 28,000 are linked to the national grid,

thus providing access to electricity for 12 million people for a global budget of around 20 billion Dirham (close to

€

2 billion). This objective will be realized to 91 percent

by linking the consumers to the grid and by 7 percent through decentralized electricity generation with PV installations. At the end of 2003, a budget of about 12.3 billion

Dirham (more than

€

1 billion) was engaged by ONE to electrify 13,235 villages (989,946 homes, 6,434,000 rural inhabitants). The rural electriﬁ cation level, which

was 18 percent in 1995, reached 62 percent at the end of 2003, and 72 percent at the end of 2004 with the connection of 187,000 homes to the electric grid. ONE

projects to connect 4,000 villages in 2005, with 200,000 homes. The investment will reach

€

420 million, of which part is used for solar energy equipment for

22,000

houses.

Conclusion: The hybrid solar thermal plant of Ain Beni Mathar is a ﬁ rm part of the short to medium strategy for the expansion plans of

the electric sector in Morocco. Together with the recent commitment of the African Development Bank to engage ﬁ nancing, the chances

for the project taking up operation by 2009 appear high.

View of the country on a mid-term strategy

The new 5-years plan (2005–2010) of ONE foresees investments of the order of 30 billion Dirham (

€

2.7 billion).

for CSP with possible future options

Longer-term power projects:

(5–10 years)

Second gas-ﬁ red combined cycle plant of Tahaddart: Power 400 MW. Start of operation: 2008–2009

Combined cycle plant de Al Wahda (Province de Sidi Kacem): 800 MW. Start of operation: 2008–2009. Invitation for the expression of interest launched

March 2005 in view of the prequaliﬁ cation of companies.

Conclusion: New solar thermal plants are so far not part of the mid-term strategy for the expansion of the electricity sector in Morocco

(time horizon 2005–2010). However, ONE plans to consider solar thermal option further in an early stage of realization of the ﬁ rst plan

at Ain Beni Mathar.

Country/Location

Morocco/Ain Beni Mathar

125

N N E X

–

H A R A C T E R I Z A T I O N

O F

T H E

GEF F

O U R

-C

O U N T R Y

O R T F O L I O

Additional information for Morocco:

IGURE

24: D

AILY

LOAD

CURVE

THE

OROCCAN

ELECTRICITY

SYSTEM

(

OVER

THE

YEAR

AND

OVER

THE

WEEK

)

May
June
July
Aug

Sept

Oct

Nov

Dec
Jan 2005
Feb

April

Feb 2004
March

1,000

1,500

2,000

2,500

3,000

3,500

Hour

8 10 12 14 16 18 20 22 24

Winter Summer

Charge curve Morocco Feb 2004–Feb 2005
(first Tuesday in each month)

Thu 6
Fri 7
Sat 8
Sun 9

Wed 5

Mon 3
Tue 4

1,000

1,500

2,000

2,500

3,000

3,500

Hour

10 12

18 20

Charge curve Morocco week 3–9 January 2005

Source: Authors, based on ONE.

IGURE

25: G

ROWTH

ELECTRICITY

DEMAND

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

GWh

1990

1992

1994

1996

1998

2000

2002

2004

Growth in final electricity demand in Morocco 1990–2002

Source: Authors based on ENERDATA Database.

ABLE

12: O

VERVIEW

POWER

PLANTS

OWNED

ONE

OROCCO

(2004)

Installed Power in MW

26 hydropower stations

1,265

Pumping station and turbines of Afourer

233

5 thermal power stations (steam)

2,385

Coal-ﬁ red

1,665

Oil-ﬁ red

720

6 gas turbines

615

Diesel

Total thermal plants

3,069

Wind (of which 50 MW from the CED*)

Total ONE

4,621

Source: Authors based on internet data from ONE.

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

126

SSESSMENT

THE

ORLD

ANK

/GEF S

TRATEGY

FOR

THE

ARKET

EVELOPMENT

ONCENTRATING

OLAR

HERMAL

OWER

ABLE

13: E

LECTRICITY

PRODUCED

TYPE

POWER

PLANT

OROCCO

(2004)

(GWh)

Part

(%)

Thermal ONE

4,648

25.9

Hydro 1,600

8.9

Wind 13

0.1

Concession

10,122

56.4

JLEC: Jorf Lasfar Energy Compagny JLEC

9,936

55.4

Compagnie Eolienne de Détroit CED (Wind)

186

1.0

Contributions from third

0.4

Balance of exchange

1,535

8.6

Morocco – Spain

1,554

8.7

Morocco – Algeria

–19

–0.1

Auxiliary consumption and compensators

–33

–0.2

STEP (Energy absorbed by the pumping)

–10

–0.1

Total electricity called

17,945

100

Source: Authors based on internet data from ONE.

ABLE

14: T

HERMAL

POWER

PRODUCTION

OROCCO

(2004)

Fuel

Net production in GWh

Part (%) *

Coal 12,520

85.8

Jorf Lasfar

9,936

68.1

Mohammedia

1,571

10.8

Jérada

1,012

6.9

Fuel oil

2,061

14.1

Mohammedia

1,113

7.6

Kénitra

768

5.3

Gas turbines

126

0.9

Laâyoune + Dakhla

0.4

Gas oil

0.0

Total thermal

14,584

100

* in relation to the total thermal production

Source: Authors based on internet data from ONE.

ABLE

15: H

YDROPOWER

PRODUCTION

OROCCO

(2004)

Installed Power *

Net production

GWh

Part (%)

Bine El Ouidane

135

130,302

8.1

Afourer 94

304,594

19.0

Step Afourer

233

10,329

0.6

Hassan 1er

55,414

3.5

Moulay Youssef

43,351

2.7

Al Massira

128

66,784

4.2

Imfout 31

17,735

1.1

Lalla Takerkoust

14,544

0.9

M. Eddahbi

13,194

0.8

El Kansera

17,044

1.1

Oued El Makhazine

67,992

4.2

Lau 14

33,155

2.1

Idriss 1er

110,417

6.9

Allal El Fassi

240

162,432

10.1

Al Wahda

240

319,948

20.0

Mohammed El Khamis

46,477

2.9

Ahmed El Hansali

136,661

8.5

Ait Messouad

23,338

1.5

Other 58

26,619

1.7

Total hydro

1,498

1,600,330

100.0

* At the maximum slope of the dams

Source: Authors based on internet data from ONE.

127

N N E X

I S T

O F

I N T E R V I E W E D

P E R S O N S

African Development Bank: Nono J.S. Matondo-Fundani

Ajmer Vidyut Vitran Nigam Limited: Rajeev Agarwal

BMU – German Ministry of Environment: Joachim Nick-Leptin,

Ralf Christmann

Comisión Federal de Electricidad CFE (Mexico): Ing. Juan

Granados, Ing. Alberto Ramos

DLR (German Aerospace Center): Robert Pitz-Paal, Jürgen
Dersch, Franz Trieb

Fichtner Solar GmbH: Georg Brakmann

FlagSol GmbH: Paul Nava, Michael Geyer

Global Environment Facility GEF: Christine Woerlen

Imperial College Centre for Energy Policy and Technology:

Dennis Anderson

International Energy Agency SolarPACES: Thomas Mancini,

Michael Geyer

Kearney & Associates: David Kearney

KfW (Kreditanstalt für Wiederaufbau): Klaus-Peter Pischke

New & Renewable Energy Authority NREA (Solar Thermal

Department): Eng. Salah El Desouky, Eng. Ayman M Fayek,
Eng. Khaled M Fekry

National Renewable Energy Laboratory NREL: Henry Price,

Mark Mehos, Tom Wil-liams

Ofﬁ ce National de l’Electricité: Omar Benlamlih, Abdallah

Mdarhri, AbdelazizMr. Houachmi, Azzedine Khatami

Rajasthan Renewable Energy Corporation RREC: Shri Rakesh

Verma (Chairman and Managing Director) and S.L. Surana

Rajasthanstahan Vidyut Vitran Nigam: Shri Salauddin

Ahmed

Sandia National Laboratories: Thomas Mancini

Schott-Rohrglas GmbH: Nikolaus Benz

Siemens Financial Services: Jürgen Ratzinger

Siemens Power Generation: Thomas Engelmann

Solargenix: Gilbert Cohen

Solel, Inc.: David Saul

US Department of Energy DoE: Thomas Rueckert

VDI/VDE (Verein Deutscher Ingenieure/Verband der Elektro-
technik Elektronik Informationstechnik e.V.): Ludger Lorych

World Bank: Gabriela Azuela, Anne Bjerde, Chandrasekar
Govindarajalu, Charles Feinstein, Rohit Khanna, Todd Johnson,
Rene Mendonca, Pedro Sanchez