Project Number: 43356 / TA 7402

Capacity Development Technical Assistance (CDTA)

January 2012

People’s Republic of China: Concentrating Solar Thermal Power Development (Financed by the Climate Change Fund)

Prepared by:

Team Leader: Jorge Servert; Co-Team Leader: Wang Zhifeng; International Technical Expert: Diego Martinez; International Financial Expert: Zhu Li; Coordinator: Hu Jicai; National Technical Experts: Ma Chongfan, Huan Dongfeng, Lu Zhenwu, Zhang Suhua, Lin Bao, lui Huaiquan, Chen Changzheng.

Technical Assistance Consultant’s Report

Revisions:

Revision Date Comment Signatures

Originated by

Checked by

Approved by

ABBREVIATIONS ADB – Asian Development Bank AEBIOM – European Biomass Association AEEG – Gas and Electric Energy Authority ARRA – American Recovery and Reinvestment Act CAPEX – Capital Expenditures CAS – Chinese academy of Sciences CHEC – China Huadian Engineering Company CO – Coordinator CNRS – Centre National de la Recherche Scientifique CRS – Power Towers or Central Receiver Systems CSIRO – Commonwealth Scientific and Industrial Research Organization CSP – Concentrating Solar Thermal CSP – Concentrating Solar Power CTL – Co-Team Leader DE – Dish/engine Systems DLR – Germany's national research center for aeronautics and space DNI – Direct Normal Irradiation DSG – Direct Steam Generation EA – Environmental Analyst EEC – Energy Economist EGEC – European Geothermal Energy Council EIRF – Environmental Impact Registration Form EIS – Environmental Impact Statement ENEA – Ente Nazionale per l’Energia, l’Ambiente e le Nuove Tecnologie EPC – Engineering, Procurement and Construction EPCM – Engineering, Procurement, Construction and Management EPIA – European Photovoltaic Industry Association EREC – European Renewable Energy Council EREF – European Renewable Energies Federation ESHA – European Small Hydropower Association ESTELA – European Solar Thermal Electricity Association ESTIF – European Solar Thermal Industry Federation EUBIA – European Biomass Industry Association EU-OEA – European Ocean Energy Association EUREC – Agency - European Association of Renewable Energy

Research Centers EWEA – European Wind Energy Association FA – Financial Analyst FIT – Feed In Tariff FLG – Federal Loan Guarantee GDP – Gross Domestic Product GHG – Greenhouse Gas GME – Gestore del Mercato Elettrico GW – Gigawatt ha – hectare HTF – Heat Transfer Fluid HVAC – High Voltage Alternating Current HVDC – High Voltage Direct Current IEA – International Energy Agency IRENA – International Renewable Energy Agency ISCCS – Integrated Solar Combined Cycle System ISES – International Solar Energy Society ISO – International Standard Organization

ITC – Investment Tax Credit ITE – International Technical Expert (ITE) ITL – International Team Leader JEDI – Job and Economic Development Impact kWe – electric kilowatt kWh – kilowatt-hour kW – thermal kilowatt LCOE – Leveraged cost of Electricity LF – Linear Fresnel reflector system MENA – Middle East and North Africa MGP – Mercato del Giorno Prima MITC – Manufacturing Investment Tax Credit MOST – Ministry of Science and Technology MTC – Manufacturing Tax Credit MW – Megawatt MWe – Electric Megawatt MWh – Megawatt per Hour MWt – Thermal Megawatt NDRC – National Development and Reform Commission NEA – National Energy Administration NREL – National Renewable Energy Laboratory NSI – Nevada Solar One NTE – National Technical Expert OECD – Organization for Economic Cooperation and Development OPEX – Operational expenditure O&M – Operation and Management costs PPA – Power Purchase Agreement PPP – Power Purchase Price PPPa – Public Private Partnership PRC – People's Republic of China PROTERMOSOLAR – Spanish association of thermo-electric industry PSA – Plataforma Solar de Almería PSI – Paul Scherrer Institute PT – Parabolic Troughs PTC – Parabolic-trough collector PV – Photovoltaic RE – Renewable Energy REC – Renewable Energy Certificate REN21 – Renewable Energy Policy network for 21st Century CNY – Renminbi R&D – Research and Development SDPC – State Development and Planning Commission SDS – Social Development Specialist SEGS – Solar Energy Generating System SEIA – Solar Energy Industries Association SERC – State Electricity Regulatory Commission S – State Economic and Trade Commission SNLA – Sandia National Laboratories Albuquerque SPC – State planning commission SPM – Suspended Particle Matter SRFU – Solar Research Facilities Unit SSPS – Small Solar Power Systems SWOT – Strength, Weakness, Opportunities, Threats TA – Technical Assistance TEIAR – Tabular environmental Impact Assessment Report

TES – Thermal energy storage TGP – Treasury Grant Programs WACC – Weighted Average Cost of Capital WREN – World Renewable Energy Congress

INDEX

1  EXECUTIVE SUMMARY (KEY FINDINGS) 10 

1.1  Outputs 10 1.2  Key findings 10 

2  PROJECT BACKGROUND AND CONTEXT 16 

2.1  Project Background & rationale 16 2.2  Scope of the Technical Assistance 17 

3  TASK 1: ROAD MAP FOR CSP DEVELOPMENT IN GANSU AND QINGHAI 20 

3.1  Key Findings 20 3.2  Road map rationale 20 3.3  Background and situation analysis 20 

3.3.1  The solar concentrating technologies 20 3.3.2  Worldwide current situation 24 3.3.3  People´s Republic of China (PRC) 25 

3.3.3.1  People´s Republic of China energy mix 25 3.3.3.2  Gansu and Qinghai energy mix 26 

3.4  Strategic analysis 26 

3.4.1  SWOT 27 3.4.2  Benchmarks 28 3.4.3  Risk, mitigation and contingency 29 

3.4.3.1  Risks associated to regulation 29 3.4.3.2  Risks associated to population and society 31 3.4.3.3  Risks associated to manufacturing industry 31 3.4.3.4  Risks associated to investors 33 3.4.3.5  Risks associated to weather: 35 3.4.3.6  Risks associated to plants needed supplies 36 3.4.3.7  Risks associated to grid 37 

3.4.4  Barriers 38 3.4.5  Potential barriers 38 

3.5  CSP deployment: electricity generation, cumulative installed capacity, value proposition & share on the national energy mix by 2040 39 

3.5.1  CSP developing scenario in PRC 39 3.5.2  Business-as-Usual scenario (BAU) 43 3.5.3  Intermediate Scenario 44 3.5.4  Proactive Scenario 45 3.5.5  Deployment 2012-2017 46 3.5.6  Deployment 2017-2022 47 3.5.7  Deployment 2022-2027 47 3.5.8  Deployment 2027-2032 48 

3.6  Toward competitiviness, grid parity, cost for society. 48 

3.6.1  Introduction 48 3.6.2  Investment reduction 49 3.6.3  Operation and maintenance costs 50 3.6.4  Financial hypothesis 50 3.6.5  Cost for society 51 

3.7  Key actions to promote and support CSP 54 3.8  Action plan 55 

3.8.1  Actions for National, regional and local government 55 3.8.2  Actions for Utilities and National State Grid 58 3.8.3  Actions for financial institutions 60 3.8.4  Actions for Universities and Research Centers 60 3.8.5  Technologies and R&D 60 

4  PILOT PROJECT 1 MWE DAHAN TOWER PLANT 63 

4.1  Background 63 4.2  Key Findings and lessons learned 64 4.3  Pilot MW-scale project review 64 

4.3.1  Background information 64 4.3.2  Project funding 64 4.3.3  Main research tasks 65 4.3.4  Stakeholders in the pilot project 65 4.3.5  Major barriers in implementation 66 

4.4  1MW Dahan tower plant review 66 

4.4.1  Location 66 4.4.2  System design 67 4.4.3  Equipment procurement 67 4.4.4  Stakeholders in the pilot project 67 4.4.5  Status of Dahan tower plant 68 

4.5  Economic and financial analysis on 1MWe Dahan tower plant 70 

4.5.1  Economic analysis 71 4.5.2  Levelized Cost of Electricity 71 4.5.3  Financial analysis 72 4.5.4  Return on Equity based on Cash Flow 72 4.5.5  Suggested power purchase price 72 

4.6  Measures to promote the CSP development 72 

4.6.1  Cost reduction 72 4.6.2  Political incentives 73 

5  SITE SELECTION & PREFEASIBILITY ASSESSMENT FOR 50 MW DEMO CSP PLANTS IN GANSU AND QINGHAI 74 

5.1  Background 74 5.2  Key Findings 74 

5.3  Rationale of a CSP project in Gansu and Qinghai 75 5.4  Project sites description (Site selection rationale description) 76 

5.4.1  Qualitative multi-criteria analysis 77 5.4.2  Technical Criteria 77 

5.5  Socio-Economic Criteria 77 

5.5.1  Environmental Criteria 78 5.5.2  Site Selection for Gansu 78 5.5.3  Site Selection for Qinghai 78 5.5.4  Gansu 79 5.5.5  Qinghai 79 

5.6  Prefeasibility assessment 80 

5.6.1  Technical 80 5.6.2  Economical and Financial Analysis 82 

5.6.2.1  Economic Assessment 82 5.6.2.2  Financial Assessment 83 

5.6.3  Social analysis 88 5.6.4  Possible social impacts 88 5.6.5  Land used 89 5.6.6  Demographic impact 89 5.6.7  Involuntary resettlement 89 5.6.8  Economic impact 89 5.6.9  Employment and income 89 5.6.10 Social acceptance issue 89 5.6.11 Environmental Impact 90 5.6.12 EIA requirements for the Project 90 5.6.13 Soil erosion 90 5.6.14 Biodiversity conservation and sustainable natural resources management 90 5.6.15 Pollution prevention and abatement 91 5.6.16 Management of hazardous materials and pesticide use 91 5.6.17 Greenhouse gas emissions 91 5.6.18 Health and safety 91 5.6.19 Induced and cumulative impacts 91 5.6.20 Physical cultural resources 92 5.6.21 Conclusions and recommendations 92 5.6.22 Risk analysis 92 

5.7  Suggestions on CSP incentive policies 94 

5.7.1  Tariff or electricity price set up 94 5.7.2  Supply information and promote training 94 5.7.3  Policy 94 5.7.4  New technologies 95 5.7.5  Value chain development 95 5.7.6  International cooperation 95 5.7.7  Promote the development of High Voltage Direct Current lines 95 

6  ASSESSMENT AND STRENGTHENING OF INSTITUTIONAL CAPACITY 97 

6.1  Background 97 6.2  Key Findings 97 

6.2.1  Catalogue of capacities needed for CSP 98 6.2.2  Institution capacities needed for CSP 99 6.2.3  Assessment of institutional capacities in PRC 100 

6.2.3.1  Overview of CSP development in PRC 100 6.2.3.2  Institution capacity existing in PRC 101 

6.2.4  Gap Identification 109 

6.3  Formulation and implementation of a capacity-strengthening program 110 

6.3.1  International programs on capacity strengthening 110 

6.3.1.1  Asian Development Bank: Asian Solar Energy Initiatives 110 6.3.1.2  International Energy Agency 111 6.3.1.3  The World Bank Group Program in Supporting CSP 112 6.3.1.4  DESERTEC Initiatives 113 6.3.1.5  European Commission, research and innovation program on CSP 113 6.3.1.6  National Renewable Energy Laboratory of the US Department of Energy

(USDOE) 114 

6.3.2  International networks related with CSP Development 116 6.3.3  Summary of national programs on capacity – strengthening 117 

6.3.3.1  National Alliance for Solar Thermal Energy 117 6.3.3.2  Gansu Provincial CSP Innovation Strategy Alliance 117 

6.4  Measures to enhance awareness of CSP power among stakeholders 118 

6.4.1  Information dissemination 118 6.4.2  Technical and commercial operation demonstration 118 6.4.3  Encourage participation and contribution to international networks 118 

7  DISSEMINATION OF KNOWLEDGE PRODUCTS TO RELEVANT PROVINCES ON LESSONS LEARNED AND CHALLENGES IN CSP POWER DEVELOPMENT 120 

7.1  Scope 120 7.2  Key findings: 120 7.3  Dissemination knowledge products 120 7.4  CSP knowledge dissemination website 122 7.5  CSP knowledge dissemination seminars 123 

8  CONCLUSIONS 129 9  LIST OF FIGURES 131 10  LIST OF TABLES 131 11  REFERENCES 132 

1 EXECUTIVE SUMMARY (KEY FINDINGS)

1.1 OUTPUTS

The present report is a summary of the Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development” funded by Asian Development Bank and being the executing agency China Huadian Engineering Company.

The key outputs of the TA are: Development of a road map for Concentrated Solar Power (CSP) demonstration and

deployment in Gansu and Qinghai Provinces.

Implementation of a pilot MW-scale CSP plant.

Identification of a priority demonstration project and prefeasibility assessment in Gansu and Qinghai Provinces.

Capacity assessment and strengthening of CSP demonstration.

Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP power development.

1.2 KEY FINDINGS CSP development is feasible in People`s Republic of China (PRC), specifically in Gansu and Qinghai and it would bring benefits not only to PRC but to the global economy. From the analysis carried out, grid parity could be achieved in 2030 if proactive actions are taken. In 2040, it is feasible that 15% of total electricity produced in PRC is supplied using CSP if appropriate actions are taken. CSP development can be a major driving force on local economy and energy production, reaching an installed capacity of 100 GW in 2030 and 400 GW in 2040 in P.R.C and 20 GW and 50 GW installed capacity in Gansu and Qinghai respectively in the proactive scenario. For Gansu, and Qinghai, taking into account their forecasted demand and wind energy deployment, it will be necessary to set up a high capacity transport grid to supply the demand located in the east as internal demand will not cover production. This also opens an opportunity for high energy demand companies to be established in Gansu and Qinghai. Gansu and Qinghai have a good solar resource but not the best in PRC Nevertheless, there is access to water supply, favorable topography, grid and transport and, hence, they are suitable areas for demo projects and future development. CSP is a stable predictable source of energy that can stabilize other renewable energy sources such as wind and solar PV. In Gansu and Qinghai, there are plans to set up wind and solar PV power plants on the order of GW. This is not feasible if no firm power is installed (such as CSP). PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Respectively, Gansu and Qinghai hold 5% and 14% of total PRC suitable land for CSP. Nowadays, electricity generation costs using CSP are higher than if using fossil fuels or other sources of renewable energy; nevertheless, it has some unique features:

Availability of primary resource, dispatchability and potential for cost reduction. CSP has been proven commercially in USA and Spain, creating a good track record. CSP development in PRC, due to its manufacturing and development capabilities, as shown in wind or solar photovoltaic (PV), should lead to a decrease on investment costs and hence on the cost of the energy produced. However, initial support is needed to achieve momentum, creating a virtuous circle: pipe-line of projects-industry development-cost reduction. ADB capacity building and financial support is a useful tool to reach this goal. PRC advantage in R&D capacity and new products time to the market combined with appropriate policy and planning support can speed up the introduction of new generations of more efficient CSP plants and hybrid power plants (coal, combined cycles or biomass) To supply all the electricity demand in PRC, Gansu or Qinghai in 2040: 150,000 km2, 2,400 km2 or 1000 km2 equivalent to 1,5%, 0.5% or 0,1% of their territory (using current technology) respectively, would be needed. Nevertheless, Gansu or Qinghai can develop a CSP industry to export energy to PRC In the present analysis, in 2040, to fulfill the proactive scenario of CSP energy production 65 TWeh and 174 TWeh would be produced in those provinces, respectively. The total land required should be 2% of suitable land, which means 0.2 % or 0.3% of total land in each province. This would generate a yearly income around CNY 30 billion and CNY 80 billion, respectively. There are some constrains and capacity gaps in PRC: lack of knowledge of the technology, specifically among design institutes and authorities; lack of water needed for cooling and cleaning; extreme winters and dust storms, grid capacity, specific regulation and lack of indigenous developed industry. The roadmap defines actions to eliminate or reduce constrains and gaps. A CSP power plant in Jinta, Gansu is feasible from a technical point of view, even though it faces the challenge of: low temperatures, high speed winds and lacks of indigenous developed industry; to achieve economical feasibility, a premium over fossil fuel generation price is needed. A 50 MW power plant based on parabolic trough using thermal oil as a working fluid without energy storage and with wet cooling is proposed as demo project. This choice has been made: Balancing risks, profits, local constraints and capabilities. The major gaps are: Lack of a development plan for CSP. Government of PRC has published the 12th five year plan, in which renewable energy technologies, such as wind (a goal of 100 GW for 2015), solar (a goal of 15GW for 2015) are key technologies. However, no specific development plan or roadmap on CSP has been defined. Lack of specific incentive policies targeted at CSP. PRC has issued wind power price policy, which is so called standardised power price policy for wind power project, concessional bidding process for grid connected solar PV projects and lately a feed-in-tariff for solar PV (CNY 1/kWh). There are no specific incentive policies for CSP.

Lack of experience on CSP design, construction and operation. There is no utility-scale commercial CSP project in PRC The Government of PRC has awarded a 50 MW CSP project in the Inner-Mongolia region to a Chinese company (Datang) through concession bidding. There are no established experiences on CSP design, construction and operation. Lack of standards etc. No national standards have been developed nor issued for key components of CSP in PRC Lack of investment confidence. For an emerging CSP industry, developers/investors are now reluctant and less confident to invest in CSP projects due to high capital cost, on the range of 1000 million CNY. Furthermore, local manufacturers for key components have not been established, and mainly rely on imported products, such as receivers. The scale of CSP projects investment is far too large for small and private enterprises in PRC to get involved.

Lack of awareness in financing institutions. PRC’s economy heavily depends on bank loans. Bank assets comprise 77% of all financial asset compared to 26% in the US. However, the banking system is still at the early business stage and lack of skills to identify the risky and profitable projects. PRC is now carrying out a banking system reform, which requires the banks to raise risk weighting for the loans in order to limit the bad debts, meanwhile, Chinese banks have very limited knowledge on the renewable energy and energy efficiency. This will increase the reluctances of capital investment to renewable energy and energy efficiency projects. Lack of awareness of CSP technology and development status in financial institutions is one of the main barriers for CSP development in PRC

The global value chain for CSP industry has been analyzed and, even though, there are companies or organizations to fulfill all the links, there is still a deficit in capacity and maturity in most of them.

Task 1: Road Map.

CSP has been proven commercially feasible in the U.S.A. and in Spain and there are relevant programs for further development in: Australia, PRC, India, Middle East and North Africa (MENA) region, South of Africa and America.

CSP technology has large room for reduction on: investment and operation and maintenance (O&M) costs as well as improvement in performance.

CSP technology is a clean, dispatchable and stable technology. CSP technology, nowadays, is not competitive with fossil fuels, hence, some kind of

support is needed to push forward its development. This support can be implemented using different mechanisms: Feed-in-tariff, power bidding tariff, grants, tax holidays or duty free tax, soft loans, public private partnership.

In PRC, there is a growing interest on CSP. Gansu, Inner Mongolia, Qinghai, Xizang and Xinjiang have a good solar resource for

CSP development but all of them are far from end power users and are relatively underdeveloped. Also, all of them have a good resource of wind energy which has to be combined with a firm source of electricity such as CSP.

Feed-in-tariff main lesson learned: Feed-in-tariff is a good mechanism to stimulate CSP development if combined with enough human capability but, if set too high, it can lead to an excess of expensive installed capacity with a high cost for society.

PRC has developed renewable energy related legislation (grid connection, promotion, obligation to buy energy) and environmental legislation creating a frame that has been good enough to attract investment in wind, solar PV and biomass, mainly, from local investors.

There is a capacity gap in some key technical and financial institutions in PRC as CSP is a new technology.

Three scenarios on the evolution of total installed CSP capacity have been, proposed. These scenarios are coherent with forecasts on PRC energy demand growth and regional and world CSP forecasts.

PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Gansu and Qinghai have suitable available land for CSP. 5% and 14% of total PRC suitable land are in Gansu and Qinghai respectively.

Task 2: Pilot project 1MWe , Dahan Tower Plant.

CSP technology started to attract great attentions from media, research institutes and industry in PRC since Ministry of Sciences and Technology founded the Institute of Electrical Engineering, Chinese Academy of Sciences (IEECAS) to build a R&D and demonstration 1MW solar power tower system. With the implementation of the project, the industry chain is forming gradually. At the beginning of 2011, National Development and Reforming Commission (NDRC) announced the grid-connecting price for the Inner Mongolia 50MW parabolic trough plant through a concession bidding procedure. The first commercial CSP plant in PRC It shows that the technology and project demonstration are relevant for a new technology to be recognized and be paid attention by the government and industry.

The project comprises two parts, one is R&D, and the other is demo system engineering. The R&D products are used in the demo project. There are several stakeholders in the whole project, and the funds from the Ministry of Science and Technology are allocated to each stakeholder directly, based on individual contracts. The organization leading the whole project is the Institute of Electrical Engineering, Chinese Academy of Sciences (which is also the owner of the demo plant) found it difficult to control the whole process of implementation. Because of an insufficient control of the funds, the delivery deadline for the R&D products is delayed beyond

the construction schedule. R&D needs collaborations and trust among different research institutes, universities and industries to reach optimal achievements.

Experience has shown that meeting deadlines and budget goals, and solving licensing complexity has been very difficult for the Institute. Time and effort has been consumed for the civil engineering work permission, which leads to delays on construction. Entrusting professional Engineering, Procurement and Construction (EPC) companies instead of being done by the Institute can be a good option.

Task 3: Site selection and prefeasibility assessment for 50 MW demo CSP plants in Gansu and Qinghai.

A study has been carried out and, in the opinion of the experts, the recommended technology for the first 50 MWe CSP plant in PRC is Parabolic Trough Collector with synthetic oil as heat transfer fluid (PTC) and, if possible, a natural gas back-up boiler.

Parabolic Trough is the only technology with enough commercial experience to ensure the success for this first CSP project in PRC minimizing risks. As a very clarifying data, 2300 MW out of 2339 MW planned to be built in Spain until year 2013, are PTC technology. This does not imply that future projects are not going to be developed using other technologies whose development is encouraged.

As a result of the financial assessment calculations, the minimum estimated electricity cost is 1 CNY/kWh, when considering national equipments, CDM benefits and an ADB loan.

Both social and environmental impact studies have been carried out for the two locations with positive results.

Four candidate sites had been proposed in Gansu by the Executing Agency, and another two sites in Qinghai. Though all proposed sites are basically acceptable, a site has been identified in Gansu and another one in Qinghai .

Task 4: Assessment and strengthening of institutional capacity.

The successful global commercial development of solar PV and wind has largely profited from the effectiveness of institutions and groups, including policy makers, investors, and project developers, manufactures, and utility.

This task assesses both the international and domestic institutional capacity required for CSP deployment in PRC, recommends measures to enhance awareness of CSP power and also provides assessment of CSP value chain in PRC.

Network is an effective way for industry to share information on technology development, market initiative, policy lobbying and actions, as well as to obtain information and public awareness building. In the past decade, networks on CSP, either technical networks or industrial associations have emerged and expanded. International networks play a vital role on promoting CSP industries. The following measures to enhance awareness of CSP power among stakeholders are recommended:

Information dissemination, through workshops, conferences, publications and study tours for main stakeholders and players in CSP value chain.

Establish technical and commercial operation demonstration to potential project developers and players in CSP value chain.

Encourage participation and contribution to international networks on CSP. PRC is now active in international networks on solar PV, with devoted efforts and support from industries and institutions. This has proven to have very positive effect on the solar PV industry, market and policy development,

Establish and enlarge scale of national networks. Although PRC has established national networks, it is still in an early stage, and government and industrial supports are needed to enlarge its scale and influence.

The CSP value chain in PRC has being integrated with participation of more players including project developers, materials producers, components manufacturers, Energy, Procurement and Construction (EPC) companies, operators, electricity distributors, investors and owners, research institutions and governments. As a result, CSP materials like steel, concrete and glass can be supplied locally by existing producers in PRC, as long as they can improve production processes to meet special requirements for CSP use. Key components like receivers and heliostats have been developed by a few domestic companies in PRC, and these products shall be industrially verified and improved. However experience on EPC and system integration is scarce in Chinese enterprises. Therefore the institutional capacity, in terms of manufacturing, R&D and financing as well as policy making, shall continue strengthening trough information dissemination, demonstration projects and formulation of specific CSP incentives and in particular international cooperation.

Task 5: Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP development.

When properly explained and understood the long term profits, the public and relevant stakeholders are interested on CSP technologies and projects.

Public dissemination can help to mitigate barriers which will emerge on the development of CSP projects.

Public dissemination can help to gain supports for CSP development from different stakeholders including local people, government authorities, R&D agencies, Non Governmental Organizations (NGOs), public media, commercial banks, investors, industries, education organizations, etc.

Public dissemination needs the participation and support from different stakeholders.

2 PROJECT BACKGROUND AND CONTEXT

2.1 PROJECT BACKGROUND & RATIONALE

During June 2009 the country programmed meetings in Beijing, a capacity development technical assistance (TA) for Concentrating Solar Thermal Power Development was discussed with the Government of the People's Republic of China (PRC), which led to its inclusion in the 2009 country assistance pipeline of the Asian Development Bank (ADB)1. During the TA fact finding mission in October 2009, ADB reached an understanding with the China Huadian Engineering Company (CHEC) and the government on the impact, outcome, methodology and key activities, scope, cost estimates, financing plan, consulting service´s inputs, outline terms of reference for consultants, and implementation arrangements of the TA2.

The TA has direct relevance to the country´s partnership strategy, which emphasizes environmentally sustainable development and inclusive growth (Asian Development Bank, 2008).

ADB's operational strategy also highlights inclusive economic growth in an efficient,

equitable, and sustainable manner. In its long-term strategic framework 2008–2020 (Strategy 2020), ADB has identified energy as a core operational sector and is achieving environmental sustainability as strategic priority (Asian Development Bank, 2008).

The TA

will address relatively weak solar power development in the PRC, which is an integral part of climate change mitigation strategies of the Intergovernmental Panel on Climate Change (IPCC)

and International Energy Agency (IEA).

The TA is ADB’s first solar power intervention in the PRC, and capacity strengthening, pilot project implementation, and prefeasibility assessment of an at-scale demonstration project in a poor western province may spur CSP power development throughout this area of PRC. It will build on lower-carbon emission interventions in PRC's energy sector, such as (i) renewable energy (wind and biomass), (ii) clean coal technologies (integrated gasification combined cycle and carbon capture and storage), and (iii) energy efficiency. The TA is fully aligned with the government's priority on saving energy and protecting the environment by seeking a more balanced, diversified energy mix with a stronger emphasis on renewable energy.

PRC forecasted economic growth, even through the efforts on reducing energy intensity on GDP through efficiency improvement and changing the economical model, will lead to an energy demand growth in the next years in absolute figures. This is a challenge both for PRC and the world due to the scarcity of fossil fuels resources and the impact on environment.

Worldwide there are projects and programs to develop CSP in Europe (Spain), USA, India, MENA region, Chile, Australia, South Africa, with major multilateral organizations involvement. Currently, more than 1 GW is in operation and announced projects are over 40 GW (CSP Today, 2010). This development offers the opportunity for capital and operation and maintenance (O&M) costs reduction and a market for Chinese companies.

1 The TA first appeared in the business opportunities section of ADB's website on 5 October 2009. 2 CHEC is a state-owned enterprise and is a group of company of China Huadian, one of the five large state-owned generating companies in PRC

A major challenge for renewable energy sources3 (wind and sun) is that the primary source of energy is not firm, nor predictable, hence, introducing instability into the electrical system. As electricity storage is expensive and not environmentally friendly, spinning reserve must be ready to cover lack of supply when using solar photovoltaic (PV) or wind power, this leads to a limitation in the maximum installed capacity of solar PV or wind. CSP plants are stable if heat storage is installed or CSP is hybridized with fossil fuels or biomass hence can it be used as base load or to follow demand (energy supply security).

CSP technology has been proven in commercial plants, being parabolic the dominant technology trough over 90% of power plants. But, it is still a non-mature technology in comparison with other clean energy sources. Economy of scale, risk reduction, new technologies with higher efficiencies, lower investment and lower water use shall emerge lowering the cost of the energy produced. If appropriate actions are taken and support is given, CSP will be competitive with solar PV and will reach grid parity being able to supply base and peak load for PRC demand in 2020 and grid parity in 2030.

Besides on-grid electricity, CSP can be used for industrial process heat, co-generation of heating, cooling and power, water desalination and small domestic or industrial applications.

Concentrating solar fuels (CSF, such as hydrogen and other energy carriers), in the future, could be used in transport or be transported using pipelines.

PRC has a large industrial and R&D base which can be used to develop an own industry which could supply components, system integration, financing and O&M both in PRC and abroad, similar to the one existing on wind turbines or solar PV. This opportunity could be of special interest for both Gansu and Qinghai provinces.

2.2 SCOPE OF THE TECHNICAL ASSISTANCE

This report summarizes the Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”. It outlines: the key findings, project rationale, CSP road map, support on the 1MWe Dahan Tower, CSP demo plants in Gansu and Qinghai feasibility analysis, dissemination activities and knowledge product created.

Task 1: Development of a roadmap for CSP power demonstration and deployment in Gansu an Qinghai provinces.

Task 2: Implementation of a pilot MW-scale CSP power plant. Task 3: Identification of a priority demonstration project and prefeasibility assessment

in Gansu and Qinghai provinces. Task 4: Capacity assessment and strengthening of CSP power demonstration. Task 5: Dissemination of knowledge products to relevant provinces on lessons

learned and challenges in CSP power development.

Within the frame of the Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”, the following activities have been carried out:

3 Hidropower is more predictable and in case of regulation dams it is firm and stable. Geothermal is stable. Nuclear energy is usually considered as clean energy in PRC, this source is also stable.

Task 1: Review and assess existing CSP development activities worldwide and complementary activities being carried out in the PRC.

Capture lessons learned from the international experience in formulating policies, regulations, programs and targeted initiatives to promote and support CSP power activities.

Undertake a comprehensive Strengths, Weakness, Opportunities and Threats (SWOT) analysis for CSP development, its demonstration and future application in Gansu and Qinghai.

Develop an initial outline of the CSP road map and seek stakeholder consultations. Prepare the CSP road map, and identify residual critical gaps—capacity, legal and

regulatory—that may delay or prevent CSP demonstration.

Task 2: Implementation of a pilot MW-scale CSP power plant.

Review the current ongoing pilot MW-scale project under the Eleventh Five-Year Plan (2006-2010).

Analyze ongoing activities in the pilot project and propose technology selection, and ascertain government and stakeholder commitment for its implementation.

Assess the financing need of the pilot project and type of funding needed to lower the cost barrier in its implementation.

Evaluate economics of the pilot project and its likely impacts such as social, environmental, financial, and electricity tariff.

Based on the pilot project planning, design, procurement, and implementation, undertake comprehensive risk assessment for CSP power, and identify measures to mitigate risks.

Task 3: Identification of a priority demonstration project and prefeasibility assessment in Gansu and Qinghai Province.

An assessment of the CSP technologies currently available and the proposal of one or several of them for the pilot project.

An economic and financial study to derive key financial indicators (e.g. Financial Internal Rate of Return, Net Present Value, etc.) and to determine the expected electricity generation costs and target tariff.

Environmental and social impact studies. Development of criteria to rank among several candidate sites for a 50MW project in

Jinta, Gansu.

Task 4: Capacity assessment and strengthening of CSP demonstration.

Identify institutional skills and resources needed to implement the CSP power road map. Review existing capacity and readiness of planners, research institutes, implementing agencies, and regulatory agencies to support CSP power demonstration and identify gaps.

Formulate, recommend, and implement a comprehensive national and international capacity-strengthening program for planners, researchers, implementing agencies, and regulators to bridge capacity gaps

Identify appropriate knowledge and experts’ networks needed to support CSP power activities and a structured mechanism to facilitate them

Identify measures to enhance awareness of CSP power among stakeholders, and organize appropriate national and international workshops and seminars

Task 5: Dissemination of knowledge products to relevant provinces on lessons learned and challenges in CSP power development.

Preparation of dissemination knowledge products. o TA knowledge products o CSP knowledge products o Brochure editing and publishing o Brochure dissemination

Establishment of knowledge products dissemination website CSP knowledge dissemination seminars

o CSP knowledge dissemination seminar at Gelmud of Qinghai province o CSP knowledge dissemination seminar at Jingta of Gansu province

International study trip o Aims and purpose o Participants & destinations choosing o Budget planning o Study trip planning and preparations o Trip & and visit o Study trip report preparation

Preparation of pilot project Preparation of solar data measurement Host the Large-Scale Solar Power Development Workshop in June, 2011

3 TASK 1: ROAD MAP FOR CSP DEVELOPMENT IN GANSU AND QINGHAI

3.1 KEY FINDINGS

As a result of the analysis, the following key findings are:

CSP has been proven commercially feasible in the U.S.A. and in Spain and relevant programs for further development have been launched in: Australia, PRC, India, Middle East and North Africa (MENA) region, South of Africa and America.

CSP technology has a large room for reduction in Investment and Operation and Maintenance (O&M) costs and performance improvement, as well.

CSP technology is a clean, dispatchable and stable technology. CSP technology, nowadays, is not competitive with fossil fuels hence governmental

and multilateral support is needed to push forward its development. This support can be implemented using different mechanisms: clear planning, R&D support, feed-in-tariff, power bidding tariff, grants, tax holidays or duty free tax, soft loans, promote public private partnership, etc. as described in the report.

In PRC, there is an active interest on CSP. Gansu, Inner Mongolia, Qinghai, Xizang and Xinjiang have a good solar resource for

CSP development but all of them are far from end power users and are relatively underdeveloped. Also, all of them have a good resource of wind energy which has to be combined with a firm source of electricity such as CSP.

The main lesson learned is that feed-in-tariff combined with enough human capability is a good mechanism to stimulate CSP development, but if set too high, it can lead to an excess of installed capacity and cost for society.

PRC has developed renewable energy related legislation (grid connection, promotion, obligation to buy energy) and environmental legislation creating a frame that has been good enough to attract investment in wind, solar PV and biomass, mainly, from local investors.

There is a capacity gap in some key technical institutions and financial institutions in PRC as CSP is a new technology.

Based on the analysis carried on PRC’s CSP development potential and on international references, a forecast on PRC’s CSP yearly installed capacity, has been made up to 2040. PRC has enough suitable land to supply more than 10 times the 2030 forecasted demand of electricity using CSP. Particularly, 5% and 14% of total PRC suitable land are in Gansu and Qinghai respectively.

3.2 ROAD MAP RATIONALE

Within the frame of Capacity Development Technical Assistance (CDTA), 7402-PRC, “People's Republic of China: Concentrating Solar Thermal Power Development”, the road map is a tool to define feasible goals and the appropriate strategies and actions to support their achievement.

Even though, as shown in this report, CSP can be a relevant source of clean energy for PRC, compared with other clean energy technologies such as solar PV, wind or biomass, there is a lack of presence in a tailor-made policies and government targets .

3.3 BACKGROUND AND SITUATION ANALYSIS

3.3.1 The solar concentrating technologies

The irradiance available for terrestrial use is only slightly higher than 1 kW.m-2, and consequently, it can only supply low temperatures to a thermal fluid due to heat losses.

It is, therefore, an essential requisite to make use of optical concentration devices that enable the thermal conversion to be carried out at high solar fluxes and with relatively low heat losses.

CSP systems can use the direct solar radiation, only. This is made up of the rays reaching the Earth’s surface directly from the Sun and not of those reflected by the environment (albedo, diffuse radiation…)

Figure 1 Components of solar radiation on Earth’s surface (courtesy NREL)

In order to reflect those rays onto the receiver, thus concentrating the solar radiation, it’s necessary to have the mirrors tracking the Sun as it moves on the sky along the day.

The position of the Sun with reference to a specific point on the Earth’s surface can be determined with a set of two angles: azimuth & altitude angles or hour angle & declination.

The systems which concentrate solar radiation onto a linear receiver (a tube) are called ‘linear focus’ or 2D systems. Such systems need to track the Sun only according to one of the above mentioned angles, depending on the orientation of the collector (W-E or N-S). These are the so-called ‘one-axis tracking’ systems. (for instance, a Linear Fresnel)

The systems which concentrate solar radiation onto a singular receiver are called ‘point focus’ or 3D systems. Such systems need to track the Sun according to both of the above mentioned angles. These are the so-called ‘two-axis tracking’ systems (for instance, a heliostat).

In the case of a solar thermal power plant, the solar energy is transferred to a thermal fluid at an outlet temperature high enough to feed a heat engine or a turbine that produces electricity.

Solar transients and irradiance fluctuations can be mitigated by using an oversized mirror field and using the excess energy to load a thermal or chemical storage system.

Hybrid plants using fossil backup burners connected in series or in parallel are also possible. Combination with coal or biomass fired or gas combined cycles is feasible.

Concentrating solar power today is represented at different degrees of commercial deployment by four technologies: parabolic trough systems (PT), linear Fresnel reflector systems (LF), power towers or central receiver systems (CRS), and dish/engine systems (DE).

Figure 2 Schematic diagrams of the four CSP systems scaled up to pilot

Regarding costs, it is generally agreed that with current investment costs all CSP technologies require a public support strategy for market deployment.

Concerning the path from theoretical design to commercial exploitation, the following phases are normally considered:

Figure 3 From design to commercial exploitation

Solar Receiver

Heliostats

Absorber Tube

Pipe with thermal fluid

Curved mirror

Receiver / Engine

Reflector

Central Receiver

Parabolic Trough

Dish/Engine

Linear Fresnel

Absorber tube andreconcentrator

Curvedmirror

Solar Receiver

Heliostats

Solar Receiver

Heliostats

Absorber Tube

Pipe with thermal fluid

Curved mirror

Receiver / Engine

Reflector

Receiver / Engine

Reflector

Central Receiver

Parabolic Trough

Dish/Engine

Linear Fresnel

Absorber tube andreconcentrator

Curvedmirror

Figure 4 High-level CSP industry roadmap

(Kearney, Solar Thermal Electricity 2025. Clean electricity on demand: attractive STE cost stabilize energy production, 2010)

If applied to the four CSP technologies:

PT would be in stage 7. Revision of technology for optimization CRS in phase 6. Construction of commercial plant LF and DE in phase 5. Construction of pilot project

Typical solar-to-electricity annual conversion efficiencies and other relevant factors for the four technologies, as compiled by a group of experts, are listed in the table below (IEA Roadmap, 2010).

Tech

nolo

gy

Ann

ual s

olar

-to-

elec

tric

ity

effic

ienc

y

Land

oc

cupa

ncy4

ha/M

We

Wat

er c

oolin

g (L

/MW

h)

Stor

age

poss

ible

Poss

ible

ba

ckup

/hyb

rid

mod

e

Sola

r fue

ls

Out

look

for

impr

ovem

ents

Parabolic trough 15%

Large

2.7 3000 or dry

Yes, but not yet for DSG5

Yes No Limited

4 Base on operating power plants data

5 DSG: Direct steam generation

Linear Fresnel

8%-10%

Medium

1 3000 or dry

Yes, but not yet for DSG

Yes No Significant

Tower 20%-35%6

Medium

1.6 2000 or dry

Depends on plant configu-ration

Yes Yes Very significant

Parabolic dish

25%-30% Small None

Depends on plant configu-ration

Yes, but in limited cases

Yes Through mass production

Table 1 Characteristics of Concentrating Solar Power Systems 7

The values for parabolic troughs, by far the most mature technology, have been demonstrated commercially. Those for linear Fresnel, dish and tower systems are, in general, projections based on component and large-scale pilot plant test data and the assumption of mature development of current technology. Major improvement can be achieved in the not so matured technologies.

3.3.2 Worldwide current situation

Generation of electricity and heat was by far the largest producer of CO2 emissions and it was responsible for 41% of the world CO2 emissions in 2008 (International Energy Agency, (2010)). By 2030, the World Energy Outlook (International Energy Agency) forecasts that the demand for electricity will be almost twice as high as current demand, driven by rapid growth of population and income in developing countries.

Nowadays, world energy matrix is mainly based on fossil fuels leading to sustainability, supply safety and geopolitical problems. Clean energy share increase is an effective way to address them.

Following intense activity in the early 80’s, the CSP technology suffered a “blackout” in the 90’s but nowadays it is rising again as a high-potential, technically and economically feasible clean energy source.

These new impetus are found especially in countries like Spain or the USA, but other emerging economies are also in their early stage toward a full deployment of CSP technology.

Concentrating Solar Thermal Power (CSP) can provide critical solutions to global energy problems within a relatively short time frame.

CSP has the potential to make major contributions to clean energy because: it is a relatively conventional technology and ease to scale-up; primary energy excess can be stored and hence, decuple offer and demand; it is commercially proven (SEGS trough plants in

6 Concepts to be proven with commercial power plants, this means plants in real operation, up to know the figures come from simulations, not from real plants operation.

7 IEA CSP Roadmap, 2010

operation for more than 25 years); it is suitable for Independent Power Producer (IPP) and it has a proven potential for further cost reduction, as it is in the initial learning curve stage8.

Current installed capacity (August 2011) is 1,3 GW, where 1,270 MW are Parabolic Trough, 38 MW Power Tower, 10 MW Fresnel and 3 MW Stirling Dish. In Spain there are 750.5 MW installed, 717 of them are parabolic trough, 1.4 Fresnel, 31 Power Tower and 1.09 Stirling Dish. USA has a total amount of 554.5MW installed. The distribution of the technology is 543 MW of Parabolic Trough, 5 MW of Fresnel, 5 MW of Power Tower and 1.5 MW of Stirling Dish.

Different analysis have been carried out by the World Bank, Ecostar DLR, A.T. Kearney and SolarPaces-Estela-GreenPeace to estimate the evolution of CSP installed capacity in the world.

3.3.3 People´s Republic of China (PRC)

3.3.3.1 People´s Republic of China energy mix

PRC has been experiencing rapid economy development in recent decades, while primary energy consumption has increased steadily to 3,250 million tons of coal equivalent (TCE) in 2010 (National Bureau of Statistics of China, 2011), at annual growth rate of 5.8% during the period of 1981 to 2010. Coal and oil always dominate the nation’s energy mix, accounting for around 88%.

Due to continuous economy development and the increasing in the Chinese standard of living, there is significant potential for further increase on energy demand. According to the forecast by Energy Research Institute of National Development and Reform Commission, primary energy demand will range from 3,853 to 4,772 million TCE by 2020, 4,604 to 5,852 million TCE by 2035 and 5,022 to 6,690 million by 2050.

PRC faces rising challenges on energy supply and environment including air pollution and the climate change. Therefore, renewable energy is one of strategic options of PRC´s energy development, to improve PRC’s clean energy supply and energy security, enhance the quality and competitiveness of its economy, reduce pressure on the environment, and mitigate the effects of climate change.

The 12th Five Year Plan describes how PRC will additionally adjust its energy mix by developing all sources of non-fossil fuel energy. A major target for the new plan is that non-fossil fuel energy will reach 11.6 percent in 2015, and 15 percent of the total energy consumption in 2020 (currently at about eight percent). Solar energy is expected to be the cornerstone industry of the newly developed energy industry.

According to estimates for three scenarios (i.e. proactive, intermediate and business-as-usual) by the (Chinese Academy of Engineering, 2011), renewable energy is projected to be 170-320 million TCE as an energy alternative, representing 4.3%-8.1% of total energy demand (12.7%–18.2% if hydropower included) by around 2020; and be 320-640 million TCE as one of main energies, representing 7.2%-14.3% of total energy demand (16.3% - 24.4% if hydropower included) by around 2030.

8 The expected cost reduction for this technology by 2025 is around 50% (A.T. & ESTELA, 2010), in the present roadmap a 10% learning ration has been used.

PRC has a high potential for CSP development between 51,000 TWeh/year and 71,000 TWeh/year energy production with a suitable area between 700,000 km 2 (7% of total PRC land) and 900,000 km2 (10% of total PRC land). Potential output exceeds present coal generation 16 times, and exceeds 2030 projections seven times (International Energy Administration, 2009). Similar figures emerge when CSP potential is compared to domestic coal reserves. PRC’s proved reserves could generate about 235 thousand TWeh – equivalent to five years of CSP output in the most pessimistic scenario (Ummel, 2010), nevertheless PRC has some unique difficulties related to extreme weather conditions, sand storms, lack of water and distance from production to the final users. (Ummel, 2010)

In 2040, all the electricity demand could be supplied using around 1.5 % of PRC territory (using current technology) or 150.000 km2.

3.3.3.2 Gansu and Qinghai energy mix

Gansu and Qinghai are two provinces in PRC with a good solar resource, according to (Ummel, 2010) analysis they account for 5.4% and 14% of total CSP potential respectively. Current Technical Assistance focuses on these two provinces. Nevertheless, Inner Mongolia, Xinjiang and Xizang, rich in solar resources can also profit from this analysis.

According to Qinghai statistical yearbook 2010 (Qinghai Provincial Statistics Bureau, 2010), the primary energy consumption in Qinghai Province was 23.48 million TCE in 2009, at annual average growth rate of 8.4% during the period of 1991 to 2009. And coal accounted for 41.5%, oil for 8.5%, natural gas for 13.9% and hydro power for 36.1%. While energy production was 29.68 million TCE, at rapid growth rate of 19.3 % during the period of 2004 to 2009, Qinghai province has become a net energy exporter to other provinces since 2005.

In Gansu province, the primary energy consumption was 54.82 million TCE in 2009 (Gansu Provincial Statistics Bureau, 2010), at annual average growth rate of 5% during the period of 1991-2009; and the coal accounted for 67.10%, oil 12.15%, natural gas 0.46%, hydro and wind power 20.29%. The energy production has speed up in the recent decade, at growth rate of 11.2% from 2000 to 2009, and reached 42.32 million TCE in 2009. But Gansu province still needs to import energy from other provinces.

Gansu and Qinghai potential electricity generation capacity is between 2,700 TWeh/year to 3,400 TWeh/year and 7,000 TWeh/year to 10,000 TWeh/year respectively covering a total land of 38.000 Km2 (8% of Gansu surface) to 48.000 Km2 (10% of Gansu surface) and 90.000 Km2 (12% of Qinghai surface) to 126.000 Km2 (18% of Qinghai surface) (Ummel, 2010). These quantities are much larger than current energy electricity production or demand.

3.4 STRATEGIC ANALYSIS

A strategic analysis covering SWOT, Benchmarks, Risks and Barriers is presented, the analysis is valid for PRC, particularly Gansu and Qinghai:

3.4.1 SWOT

Helpful to achieving the objective Harmful

to achieving the objective

Inte

rnal

Orig

in

Attr

ibut

es o

f the

pro

ject

STRENGTHS

Low Population Density. Good solar resource, land and water availability at Gansu and Qinghai. Government support central and local. Solar resource availability Minimum waste generation. Enough natural gas, water resource or other secondary fuels supply to feed the plant. CSP for electricity production can follow demand. Involvement of ADB on the project. CSP can combine heat and power production and can be hybridized with fossil or

biomass fuel. Significant effect in poverty reduction trough local jobs creation for erection and O&M. New business opportunity. New jobs creation. Improve standard of living of the western people. Possibility of alternative applications. Administrative process for renewable energies well known and master by the major

players.

WEAKNESSES

Leveraged Cost of Energy (LCOE) higher than conventional and

other renewable energy (e.g. wind and solar PV) sources. Distance from production to the final user. Lack of skilled workers, technicians, engineers and scientists on

this field. Complex population structure. Unfavorable weather conditions. High altitude. Transportation and communication are inconvenient for the

remote regions. Maturity of technology. Lack of other stakeholders (e.g. domestic commercial bank, both

federal and provincial governments .) experience, knowledge and confidence on CSP.

Exte

rnal

Orig

in

Attr

ibut

es o

f the

env

ironm

ent

OPPORTUNITIES

Worldwide concern about GHG emissions and the climate change. Existing international R&D and consulting resources. PRC central government is discussing the National Developing Planning, 2011-2015. Capacity of PRC to competitive mass production. Reduced time to the market capacity of Chinese industry. Global scarcity of fossil fuels resources. Increase of fossil fuels price and their volatility.

THREATS

Decrease of fossil fuels price and their volatility. Development of other renewable technologies. Lack of necessary funding for such a large project investments. Political and/or media pressure of coal & oil/nuclear lobby to

forget about solar technologies in case of initial solar project failures or difficulties.

Social pressure against the projects because of their (initial) extra cost in this critical moment for any country’s economy.

Without accurate and reliable DNI data. Lack of concrete financial frameworks to support the diffusion of

CSP.

Table 2 PRC SWOT Analysis

3.4.2 Benchmarks

The following bench-marks are fixed as a reference point. The roadmap proposed is coherent with them and proposes actions to make feasible reaching these targets:

Create a reliable weather database with data about solar radiation, wind, temperature, humidity and rainfall over all Chinese territory by 2020.

Create domestic manufacture and supply chains for CSP plants by 2020.

Create standard system on design, tests and certification on CSP plant and related equipment by 2020.

Grid parity is achieved in 2030.

Technology development leader in 2030.

Total target (or expected) CSP installed capacity by 2040: 400 GW.

Create the necessary framework for education of CSP-related technicians (plant O&M) and engineers (technology development to reach the targets listed in the former benchmarks).

Development of the necessary grid infrastructure to bring solar electricity from sunny regions to more populated regions following renewable energy depolyment.

Specific regulation to promote renewable energy and CSP such as: Grid connection priority and regulation, stable and clear retribution, firm power, dispatchability retribution and priority on dispatching energy

3.4.3 Risk, mitigation and contingency

3.4.3.1 Risks associated to regulation

Identified Risks Risk Mitigation Risk Contingency

Specific Renewable Energy regulation development takes longer than expected.

Take advantage of international experience and advice.

Hire foreign consultants specialized in regulations to shorten development time based on international experience. Create a focus group.

Stimulation mechanisms configuration selected is not optimal.

Take advantage of international experience and advice; make periodic checks of the regulation; introduce some safeguard clauses in the regulation to review it without introducing regulatory risk.

Set up a portfolio of stimulation mechanisms to have a more stable supporting system.

Prepare alternative regulation to replace the new regulation in case of malfunctioning.

It is possible that regulators try to adapt an existing document on Renewable Energy regulation without enough customization to take into account Chinese reality.

Require a new specific regulation for this issue.

Create a group of independent experts.

Create a surveillance team to follow the outcome when regulation is applied.

An alternative team who develops in parallel a regulation

The new regulation does not encourage CSP development or deployment speed.

Prepare alternatives which can reinforce the new regulation within the regulation to be trigged if necessary.

Introduce complementary stimulus to fine tune investment.

The new regulation is too generous so the framework results inefficient in short time and the process has to be slowed down.

Take advantage of international experience and advice.

Prepare alternatives which can slowdown the development within the regulation but without jeopardizing legal security.

Prepare contingency regulation which is applied in case of a rapid expansion of this kind of technology.

Identified Risks Risk Mitigation Risk Contingency

The Stimulation Mechanism selected can be inefficient to promote technology development or cost reduction.

Facilitate the knowledge transfer between research centers and manufacturers.

Develop a R&D program to boost this technology.

Introduce policies to promote Public Private Partnerships

Environmental Regulation can be too demanding or unrealistic, so the projects are not feasible or unnecessarily delayed.

Set arbitration between CSP development and environment

Develop a portfolio of projects in different areas.

Develop new technologies with less environmental impact.

If Environmental Regulation is inadequate, and the major hazards are not considered, the consequences of a potential accident can cause serious environmental damages.

Compare regulation with international benchmarks

Set clear and feasible to enforce penalties.

Promote public opinion awareness.

Develop technologies and procedures for the identified risks.

Table 3 Risks associated to regulation

3.4.3.2 Risks associated to population and society

Identified Risks Risk Mitigation Risk Contingency

Possible resettlements can generate social opposition.

Create campaigns about benefits of this kind of technology.

Improve life quality of resettled people.

Improve life quality of local communities

Portfolio of locations to chose the ones with lower impact on population

Long range urban planning defining Solar parks.

Create new urban centers destined to the resettled local habitants.

Lack of interest by existing teaching institutions on new training

Publicity on the future market for new education and work opportunities.

Governmental regulation on new titles.

Lack of interest by possible trainees on CSP

Lack of support by public authorities on training on CSP

Table 4 Risks associated to population and society

3.4.3.3 Risks associated to manufacturing industry

Identified Risks Risk Mitigation Risk Contingency

The role of local companies is eclipsed by international or some large Chinese companies.

Boost the creation of indigenous manufacturer companies by stimulation policies.

Promote joint ventures with technology providers combining international and national companies.

If few industrial players are in place, they could control the market creating an oligopoly situation which would keep prices up.

Make arbitration to avoid these situations.

Promote the creation of new companies

Promote the investment on R&D.

Apply the PRC regulations to promote free market.

Locations for CSP plants are far away from current manufacturing centers.

Promote special development areas nearby good solar resource areas.

Set transport mechanisms to supply the plants.

Identified Risks Risk Mitigation Risk Contingency

Fluctuations in prices of steel, glass for mirrors or gas can increase risk and hence financial costs.

Long term contract, on the range of three to five years.

Create Government funds to cover possible fluctuations of the price which make impossible the construction of plants.

No clear body to develop standards, which gather consensus from stakeholders: Industry, developers, utilities, government, financial institutions, .

PRC appropriate governmental body involvement in the process.

Use international standards

The standardization sets the references in manufacturing. The lack of standardization can lead to inefficient or non competitive products.

Make a public reference of quality standards.

Facilitate the knowledge transfer among manufacturers.

Creation of standardization Committees

Use international standards

Table 5 Risks associated to manufacturing industry

3.4.3.4 Risks associated to investors

Identified Risks Risk Mitigation Risk Contingency

Investors are not attracted by these projects and the predicted amount of MW installed is not reached.

Check periodically the results and forecast the future developments, if needed fine tune the regulation without increasing uncertainty.

Clear communication of Government interest on CSP development to the different stakeholders.

Trough communication and training reduce perceived risk.

Prepare alternative regulation which can replace the new regulation in case it is not efficient enough to attract investor interest.

Investors are too attracted by these projects due to their international experience and target is exceeded.

Check periodically the results and forecast the future developments, if needed fine tune the regulation without increasing uncertainty.

Prepare alternative regulation which can replace the new regulation if it is impossible to slow down development but without increasing uncertainty of jeopardizing existing projects.

Lack of reliable weather data.

Make publicly available reliable weather data.

Use of private databases.

Lack of interest by the major players due to a lack of projects pipe line to which supply in PRC or abroad.

Introduce stimulation mechanisms that promote stable pipeline project development (i.e. FIT).

Make visible the pipeline of projects.

Public development of projects.

Lack of wiliness by the domestic financial institutions and investors to implement the new technology.

Information campaign.

Training.

Financial or guarantee mechanisms from governmental agencies or multilateral institutions.

Public support of new technology projects.

Specific policy and allocation for new projects.

Table 6 Risks associated to investors

Risks associated to technology

Identified Risks Risk Mitigation Risk Contingency

Forecast in conventional technology cost reduction fails.

New technologies do not mature.

Long term contracts with suppliers based on partnership agreements.

Make the pipeline of projects visible to CSP value chain so economies of scale can develop.

Promote the participation in international bidding.

Promote R&D-Industry collaboration.

Create stimulation mechanism for R&D.

Create stimulation mechanism for components manufacturers.

Problems in technology and knowledge transfer to pilot and demo projects.

Enhance and boost relations between foreign and indigenous R&D centers and foreign and indigenous manufacture companies.

Make R&D agreements between foreign and indigenous R&D centers and foreign and indigenous manufacture companies.

New technologies for electricity storage reduce the cost of this alternative.

Boost R&D to reduce global CSP costs and particularly, thermal storage.

Avoid oligopoly situations in heat storage medium.

Transposition of international standards without taking into account Chinese specificities or lack of standardization.

Multidisciplinary team of experts in charge

Follow up committee

New standard development.

Table 7 Risks associated to technology

3.4.3.5 Risks associated to weather:

Identified Risks Risk Mitigation Risk Contingency

Locations can be inappropriate for this technology due to the weather conditions.

Create protection mechanism to avoid damages in the equipments.

Increase the requirements for materials and equipments.

Portfolio of projects to avoid areas with major risks.

Develop technology or reinforce the existing equipment.

Increase preventive and predictive maintenance.

Sandstorms or other adverse weather conditions can cause problems or damages in the solar field or unexpected cleaning costs.

Develop security mechanisms (automatic regulation of solar field) which protect equipments when inclement weather is detected.

Technology development.

Create physical barriers (i.e. trees) to reduce sandstorms effect.

Table 8 Risks associated to weather

3.4.3.6 Risks associated to plants needed supplies

Identified Risks Risk Mitigation Risk Contingency

Shortage of gas for hybrid power plants due to competitive uses or lack of supply.

Develop a stimulation mechanism to hybridize fossil fuels with clean energy.

Promote R&D and demonstration projects.

Promote hybrid coal-solar power plants.

Usually locations with good DNI have problems with water supply. Water shortages can stop plant operation.

Create Water reserves and specific canalizations to ensure the supply for these plants.

Promote R&D on dry cooling

Promote Combined Heat and Power projects, such as desalinization or industrial heat.

Change the wet cooling system of the power plant by dry cooling

Some CSP plants may need basic infrastructure development (roads and electric lines) before construction.

Enhance the existing infrastructures.

Create the necessary transport infrastructures.

The needs of qualified scientist, designers, operators, specialized EPC companies, financial institutions, . can complicate or delay the construction and operation of the plants.

Taking advantage of international experience, design training courses with international advice.

Create specific programs to train engineers, scientific and operators.

Scarcity of raw materials and components

Plan and communicate to the industry the plan to develop CSP plants.

Disseminate the pipe-line of projects

Lower import taxes for CSP use of components and materials.

Table 9 Risks associated to plants needed supplies

3.4.3.7 Risks associated to grid

Identified Risks Risk Mitigation Risk Contingency

CSP plant locations, grid capacity and distance to end user, can make the projects not feasible.

Take into account grid situation when defining plants location. Promote the creation of clean industry, energy intensive and population areas near the CSP plants and promote combined heat and power production

Create HVDC grid.

Lack of agreement between: central, regional, local government for HVDC development.

Preparatory meetings and agreements in advanced.

Lack of interest by the National State Grid as (HVDC) will compete with the current grid

Dissemination on HVDC profits, pilot projects.

Regulation and planning.

Lack of resources to finance this infrastructure.

Create a specific fund. Promote private-public partnership in such a way that risks are shared and overall diminished increasing investment and financing

Table 10 Risks associated to grid

3.4.4 Barriers

Technical barriers:

Extensive need of land. Extensive need of water for cooling and cleaning. Unfavorable weather conditions (extreme temperatures and sand storms) Lack of available solar resource data. Lack of indigenous industry. Lack experience of building CSP power plants and no experience of running

CSP power plants. Lack of accepted standards. Distance from production to demand, grid weakness. Technology risk for new developments. World market of several critical components is on the hands of a very few

suppliers. Access to water or natural gas networks.

Economical, policy barriers:

Lack of specific governmental plan for CSP development integrated in official planning.

Current higher LCOE than other sources for the electricity generated. Lack of experience on CSP investing in PRC(confidence and perceived risk of

investors) High Initial investment and difficulty to build economically sound pilot project

(feasible in solar PV and Wind). Lack of knowledge, experience and confidence of domestic commercial banks

on CSP projects. Social Barriers:

Resettlement Perceived risks due to lack of knowledge on the technology.

Environmental Barriers

Regulation on the use of thermal oil.

3.4.5 Potential barriers

Feed-in-tariff rigidity. Hybridization bounded. Slowing down of the R&D and pilot projects. Competition with other renewable energy sources (solar PV, wind, nuclear and

mining lobbies)

3.5 CSP DEPLOYMENT: ELECTRICITY GENERATION, CUMULATIVE INSTALLED CAPACITY, VALUE PROPOSITION & SHARE ON THE NATIONAL ENERGY MIX BY 2040

3.5.1 CSP developing scenario in PRC

Three possible scenarios have been considered for the developing of CSP in PRC, Gansu and Qinghai. These are: Business-as-Usual, Intermediate Scenario and Proactive Scenario.

These scenarios are:

Business-as-Usual (BAU) Scenario: No specific action is taken other than the general regulation for renewable energy in PRC CSP must compete with other renewable energies. In 2040, 2% of the electricity is produced using CSP.

Intermediate Scenario: Actions are taken by the government to promote the development of this technology, such as planning and setting up goals, multilateral soft-loans, projects concession biddings and R&D support. In 2040, 6% of the electricity is produced using CSP.

Proactive Scenario: Actions are taken by the government to boost the development of technology projects, pipe-line industry such as planning, multilateral soft loans, investment subsidies for new technologies, project concession bidding, feed-in-tariff and power bidding. In 2040, 15% of the electricity is produced using CSP.

These scenarios will be affected by exogenous factors such as: the development of CSP in other parts of the world, the evolution of fossil fuels and other energy sources, and storage costs and CO2 and other externalities perceived value, global and local evolution of economy and major natural or man-made disruptions.

Different scenarios will lead to different rates of reduction of the gap with competitive sources of energy. Support or leverage should finish once equilibrium is achieved. Measures proposed in this roadmap are oriented to narrowing the gap maximizing profit for society.

The three scenarios have been defined by the team of experts taking into account the restrictions (Energy demand, land availability, investment, grid, water, human resources, .) and international experience, both on installed capacity and energy mix.

To represent the installed capacity a logistic curve could have been used, but taking into account the early stages of development, a simple polynomial has been used.

Intermed. Proactive W year W A year year W0 (MW) 100 100

α 3 3 A (MW/year) 7 18.5 Where: W is total installed capacity, year0=2,012 for all scenario, W0 is year 2012 forecasted installed capacity and α is the growth exponent

Base scenario has been built from the information that was available and discussed on the period of the 12th Five-Year plan was prepared starting with 50 MW in 2012, growing to 400 MW in 2017 and 2,400 MW in 2022 and making the hypothesis that

installed capacity will double every five years after 2027, starting with 6,000 MW at that date.

In the following figure, the scenarios growth forecasted are shown and compared with SolarPaces-Estela-Green Peace forecasts:

Figure 5 Cumulate installed capacity scenarios

As no information is available at this moment, an objective criterion has been defined to fix the share for Gansu and Qinghai on total installed capacity: Proportionality with the suitable land for CSP in comparison with total land suitable in PRC, Hence, 5.3% of total in Gansu and 13.8% of total in Qinghai. (Ummel, 2010). Of course, this share could be easily modified with appropriate regional support or policies.

In next two figures, the energy mix evolution for different energies sources is presented for proactive scenario. The mix proposed has been created incorporating CSP contribution on top of the forecast made by Chinese Academy of Engineering, (Chinese Academy of Engineering, 2011) and evenly decresing other sources contribution9.

Chinese Academy of Engineering planning was prepared before Japan nuclear crisis 2011. The nuclear power safety is further stressed in PRC According to the requirement of the State Council of China in March of 2011, the approval on more than 20 new nuclear power projects were suspended till the formulation of nuclear power safety plan, which may led to slowdown of the development of nuclear power in P.R.C till 2020 or later, and leave more space for renewable power to meet the electricity demand in future. Therefore, it is significant to show the potentials of renewable power,

9 The Chinese Academy of Engineering did not even consider the contribution of CSP, which shows the interest of the current road map.

10

100

1,000

10,000

100,000

1,000,000

2000 2010 2020 2030 2040 2050

MW

Year

Installed Capacity Scenarios

Proactive

Intermediate

Base

SolarPaces‐Estela‐GreenPeace (Moderate Scenario for PRC)

SolarPaces‐Estela‐GreenPeace (Advanced Scenario for PRC)

in particular CSP with stable power supply, and attract more concern and investment on CSP projects.

Figure 6 Energy mix following Chinese Academy of Engineering10,

Figure 7 Electricity production mix for PRC including CSP, source: (Chinese Academy of Engineering, 2011) and own elaboration.

Energy Research Institute forecast for renewable energies by 2020 assigns 0.3% to solar energy lower than proactive CSP development scenario 1.2% of total energy.

Breakdown

installed capacity

(GW)

Electricity(TWh) mil.tce

hydro 350 1050 336 7,5% nuclear 80 520 166,4 3,7% wind power 150 300 96 2,1% solar energy 20 40 12,8 0,3% biomass 30 180 57,6 1,3%

Total 630 2090 14,9%

10 Note that CSP is not considered

0

2000

4000

6000

8000

10000

12000

14000

2010 2015 2020 2025 2030 2035 2040 2045

Others

PV

Biomass

Hydro

Wind

Gas

Nuclear

Oil

2,000

4,000

6,000

8,000

10,000

12,000

2010 2015 2020 2025 2030 2035 2040

TWh/year

CSP

Others

PV

Biomass

Hydro

Wind

Gas

Nuclear

Table 11 2020 target: 15% of non-fossil energy in Chinese energy mix, ERIAnalysis of land and investment constrains

Two basic constraints are the availability of useful land and financial resources.

In the following figure the proportion of the land needed to deploy CSP in P.R.C is shown:

suitable for CSP 9.5% of total PRC land needed to supply 100% of total electricity11

2% of total PRC land and

needed to fulfill the proactive scenario (15% of total energy) 0,25%

and it can be compared with PRC total surface.

Figure 8 Suitable land for CSP (PRC, Gansu and Qinghai) needed land to supply 100% and 15% (proactive scenario) of the electricity in 2040 in PRC

Needed investment could be a constrain for CSP development, as can be seen in next figure

11 Current land use for a typical P.T. power plant has been consider, this should decrease with the deployment of more efficient technologies and forecasted increase in capacity factor.

Land (103 km2) in 2040

total suitable for CSP

100% energy demand

proactive scenario

PRC 9,597 912 149 22

Gansu 454 48 2 1

Qinghai 721 126 1 2

Figure 9 Needed investment for different scenario (equity and loan)

Forecasted needed investment is on the order of CNY 10 billion till 2020, which means under CNY 10 per habitant. In 2030, when grip parity is to be reached, the investment would be on the order of CNY 100 billion, hence under CNY 100 per habitant. This investment seems feasible for Chinese economy considering the reward of 15% clean solar energy less costly than coal.

3.5.2 Business-as-Usual scenario (BAU)

This is the scenario where no special actions are taken. CSP path is guided by the general regulation for renewable energy in PRC and this technology must compete with other renewable energies.

For this scenario, the analysis done by World Bank (World Bank, 2006 ), Kevin Ummel (Ummel, 2010), A.T. Kearney (AT Kearney, 2010) and International Energy Agency (IEA CSP Roadmap , 2010) have been used as a reference, combined with expert analysis. As a result, in 2040 1,3% of total electricity is produced using CSP. The basic hypothesis is that PRC is a follower of the technology developed abroad, and it can also benefit from the development in other areas such as MENA or USA to develop its manufacturing industry.

Deployment starts with conventional Parabolic Trough (P.T.) with thermal oil as heat transfer fluid; in 2020, a new more efficient technology is introduced (Technology 1)12, followed by a new one (technology 2) in 203513. On parallel, hybrid power plants are set up. Most plants are built using P.T.

12. For performance calculation, Technology 1, has been identified with a central receiver (tower) using molten salt as a working fluid and for technology 2 central receiver using air as a working fluid. The model has been made using these two technologies as a reasonable hypothesis of future development; nevertheless, technology development may lead to other more beneficial possibilities.

13 A simple model has been defined for new technology introduction and technology share. From starting deployment date, the following stages are followed: 5 MW pilot Project; after, commercial deployment at a rate 1.5 times faster than the last new technology which was introduced. For hybrid plants 1/3 of total installed capacity has been considered with

0

1

10

100

1,000

2010 2020 2030 2040 2050Neede

d investmen

t (10

9CN

Y/year) 

Proactive

Intermediate

Base

Figure 10 Installed capacity for different technologies. Base Scenario

Figure 11 Yearly increase of installed CSP capacity. Base Scenario

In this scenario, PRC is a technology follower and, basically, develops its installed capacity with mature Parabolic Trough (PT), technology which is developed abroad, through; improvements are introduced in PRC with a delay. Technology 1 and Hybrid plants are able to compete with the pre-established technology (PT) from 2025 and Technology 2 beyond 2035.

Total installed capacity would reach 48 GW in 2042. The yearly growth rate for PT would steadily increase up to 3 GW per year (in 2042) while technology 1 will grow up to 1 GW per year (in 2042). In 2042, the CSP mix would be: 70% PT; 19% technology 1; 2% technology 2 and 9% hybrid plants

3.5.3 Intermediate Scenario

Intermediate Scenario: Actions are taken by the government to promote the development of this technology, such as planning and setting up goals, multilateral soft-loans, projects concession biddings and R&D support. In 2040, 6% of the electricity is produced using CSP. PRC is not a follower but a relevant actor in economies of scale, learning curve evolution, investment, O&M and risk reduction.

Deployment starts with conventional Parabolic Trough (P.T.) with thermal oil as heat transfer fluid; in 2020, a new more efficient technology is introduced followed by a new one in 2035. On parallel, hybrid power plants are set up. Most plants are built using P.T. but as new technologies are supported the share is larger than in base scenario.

a minimum of 50 MW. P.T. is calculated as the difference between total and other technologies.

0

10

20

30

40

50

60

2012 2017 2022 2027 2032 2037 2042

Total CSP

 Installed 

capa

city (G

W)

Hybrid

Technology 2

Technology 1

Parabolic Trough

0.00.51.01.52.02.53.03.5

2010 2020 2030 2040 2050

Yearly increase on CSP 

installed capa

city 

(GW/year) Parabolic Trough

Technology 1

Technology 2

Hybrid

Figure 12 Installed capacity for different technologies. Intermediate Scenario

Figure 13 Yearly increase of installed CSP capacity. Intermediate Scenario

As Technology 1 and Hybrid plants have been supported, these technologies will actively compete with parabolic trough, leading to a new industry where PRC can have a dominant position. Technology 2, will be starting commercial development at the end of the period.

Total installed capacity would reach 189 GW in 2042. The yearly growth rate for PT would steadily increase up to 7 GW per year (in 2035) and, from then on, it would keep almost constant while technology 1 would grow up to 5 GW per year (in 2042) with a tendency to replace PT as leading technology; hybrid plants would be relevant with a yearly growth rate of 3 GW per year in 2042. The CSP mix would be: 61% P.T.; 19% technology 1; below 1% for technology 2 and 19% hybrid plants.

3.5.4 Proactive Scenario

Proactive Scenario: Actions are taken by the government to boost the development of technology, projects pipe-line, industry, such as planning and setting up goals, multilateral soft loans, investment subsidies for new technologies, project concession bidding, feed-in-tariff, power bidding. In 2040, 15% of the electricity is produced using CSP.