China: Concentrated Solar Power to tackle the energy challenge

China: Concentrated Solar Power to tackle the energy challenge

China’s innovation policy sets an ambitious goal: It shall be an innovative country by 2020 and global innovation leader by 2050, transforming from a factor-driven economy to an innovation-driven one. Indeed, according to the Global Competitiveness Index 2016–2017, China has already succeeded in rising to the 28th position, well ahead of other BRICS countries, and is ranked together with Spain, Iceland and other developed countries. Similarly, according to the Global Innovation Index 2016 China joins the ranks of the world’s 25 most-innovative economies, aiming to be among the top 15 most innovative countries by 2020 .

For innovation to flourish, though, the country has to face up to one of its biggest challenges: environmental pollution, particular water and air pollution. Coal is responsible for about 40% of the deadly fine particulate matter known as PM 2.5 found in China’s atmosphere . More than 80% of the water in rural areas is inappropriate for drinking or bathing because of contamination from industry and farming.

An even bigger challenge is how to balance these growing environmental concerns with the demand for further economic development. This balance could be reached by the transition from a coal-based to a low carbon economy. However, this would imply that it is necessary for China to increase its innovation capacity. According to Chinese innovation strategy, it is going to prioritize “secure, clean and efficient energy technologies” and support renewable energy sources with a recently announced $360 billion to be invested by 2020, thus becoming a world leader in renewable energy investment.

For the renewable energy sector, one of the biggest landmarks of 2016 was the incentive given to Concentrated Solar Power (CSP) technology in China. The government has introduced a target of 5 GW by 2020 and support policies, as Feed-in Tariffs (FIT) of RMB 1.15/KWh ($0.22/KWh). In 2016, around 20 projects were announced, mainly owned by private companies and to enjoy these FIT they would need to be completed by 2018.

What is Concentrated Solar Power?

Concentrated Solar Power (CSP) plants generate solar thermal electricity using mirrors to concentrate the sun’s rays, and produce heat for electricity generation via a conventional thermodynamic cycle.  The key distinction of CSP compared with other renewables is the heat storage system, which enables it to generate electricity even with cloudy skies or after the sun has set. That means that it is one of the few renewable energy technologies that can provide a constant energy flow.

The benefits of CSP are numerous, as it not only has less impact on the grid, but can also generate the heated steam necessary for several industrial processes, and be used in a hybrid system together with any other resources, thus decreasing the capital costs. Obviously, just like any technology, it has an impact on the environment, using water, a large area of land, etc. Yet the areas that would be suitable for the operation of CSP (i.e. those with high direct irradiation) are precisely those where socioeconomic conditions are below the national average, and where this technology could help to promote regional development.

While CSP is not a new technology, it has recently re-emerged. But it has not yet spread well, which is reflected in its capital cost – the main barrier for its further deployment. Compared with other renewable energy sources, CSP technology is still expensive. While photovoltaic (PV) plants receive around RMB 0.5-0.8/KWh of FIT, CSP would benefit from the RMB 1.15/KWh price, although many experts are claiming that this is still quite low. Hope rests on the Chinese ability to drop the costs of technology, as has happened with PV panels. The growth in cumulative installed capacity of solar PV from 1 GW in 2000 to 180 GW in 2014 provoked the decline of the PV module cost due to the increase in the volume of production. The similar growth and cost drop could happen with CSP technology, as the total capacity of 50-100 GW is expected to be achieved by 2030.

Challenges

Apart from the technical challenges regarding CSP development, there are those of a political and economic nature:

– While a majority of the equipment needed for a CSP plant can be produced locally, the Chinese CSP sector still depends on foreign technology. Although the recently announced policy may help to overcome this situation, as many international companies have already announced their interest in entering the Chinese market, that dependency could still be one of the biggest challenges to cost reduction.

– As with any new technology, CSP is regarded as a high risk investment by investors and banks. The economic feasibility of any projects hinges on the availability of affordable project financing, which itself depends on risk perceptions by private investors. Shinko and Komendantova shows that de-risking CSP investments leads to a 39% reduction in the main cost, thus specific measures has to be taken to reduce the perception of the new technology risks by banks and investors.

– Contrary to other countries, which mostly prioritized the development of renewable energy itself, China supported the renewable energy manufacturing industry, exporting a large number of its products. That has put China in first place as the leading PV panels’ producer, and increased value-added exports. Yet, while the government put a great efforts to catch up with other countries in terms of innovation capacity, private sector usually succeeds in decreasing costs through large scale production, but still lacks an independent innovation capability. Companies invest to R&D less than 1% of their total income and it’s just a half from what spend their competitors in developed economies. If more companies would invest in CSP technologies development, more players would be in the market and increased competition would lead to the cost reduction.

This list is not exhaustive and could be continued further, but it can give a first view of the challenges faced by CSP technology and innovation in general in China.

 

Alina Gilmanova is currently a PhD candidate at UNICAMP University (Brazil) and Tsinghua University (China) at China-Brazil Center for Climate Change and Energy Technology Innovation. She focuses her research on solar energy policy analyses in Brazil and China, in particular what are the drivers and challenges for Photovoltaic and Concentrated Solar Power technologies deployment in these countries.

http://chinadevelopmentagenda.com

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