CSP COSTCSP Cost Roadmap ROADMAP We finally made it !

N. Benz, ESTELA General Assembly July 15, 2010

27 companies organized in ESTELA awarded A.T.Kearney for a Cost Roadmap Study

Industry roadmap report summary

Concentrated Solar Power (CSP) comprises four technologies with different characteristics
CSP technologies overview
Parabolic Trough
Comparably high1) / large scale systems in place

Solar Tower

Dish Stirling

Linear Fresnel
Comparably low1) / large scale deployment not yet proven

Level of technological maturity

Usage of parabolic shaped mirrors to concentrate solar radiation on linear tube receiver Commercially proven technology with heat storage capacity

Concentration of solar radiation on a point receiver at the top of a tower Enables operation at high temperature level and provides heat storage capabilities

Usage of parabolic dish and stirling engine which simplifies overall system concept (modularity) High net solar to electrical efficiency Suitable for both small stand-alone, decentralized off-grid power systems as well as large grid connected power systems

Usage of flat mirror design, which is easier to produce Efficiently enables other industrial uses like steam processing Provides heat storage capabilities

1) Compared between the different CSP technologies Source: ESTELA project team; A.T. Kearney analysis

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Industry roadmap report summary

Each technology has its own value proposition and therefore different deployment optima
Technology comparison
Parabolic Trough Solar Tower Dish Stirling Linear Fresnel

Commercially proven
and bankable technology

Commercially proven
and bankable technology

Value proposition

Maturity level and

operational experience

Efficiency High operating

temperatures

Modularity Efficiency Low water

consumption

Cost effective for

steam generation

High land-toelectricity ratio

Usability of space
below support structure due to linear design

Modularity Large number of EPC

providers

Centralized grid access locations

Centralized grid access locations Locations with hybridization possibilities

Decentralized off-grid power systems Locations with water scarcity Centralized grid access locations

Centralized grid access locations Locations with hybridization possibilities Industrial location with steam processing needs

Application/ Locations with hybridization deployment possibilities focus

Source: ESTELA project team; A.T. Kearney analysis

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Industry roadmap report summary

CSP industry possesses the advantage of putting bets on several serious and forward moving technologies
Project/commercialization roadmap (projected start of commercial/large scale operation)
Technology 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Synthetic aromatic fluid Molten Salt Superheated steam2) Saturated steam1) Superheated steam Molten Salt New technologies Pressurized air, solar fuels, 2)

Parabolic Trough

Solar Tower

Dish Stirling

Stirling engine

Linear Fresnel
Technology in commercial operation today further projects planned

Saturated steam

Superheated steam

In commercial operation today technology expected to be substituted, no further projects planned1)

1) Technology not considered in cost modeling as it is expected to be substituted 2) Technology not considered in cost modeling as viability needs to proven and commercial data not yet sufficiently available Source: ESTELA project team; A.T. Kearney analysis

Technology in advanced stage of development but not yet in commercial operation, viability needs to be proven commercial projects planned

Technology in early state of development, viability needs to be proven commercial projects yet to be planned

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Industry roadmap report summary

With the increasing commercialization of technologies, CSP industry is expected to face a steep capacity ramp-up
CSP capacity forecast (projected, installed capacity in GW, global)
80

CSP industry will significantly build up capacity until 2015 with 12GW validated with currently project pipeline
60

60

Base case scenario is expected to reach 30GW in 2020 and 60GW in 2025 Parabolic Trough as proven technology will remain the dominant technology with a share of 50% in 2025 Solar Tower is expected to catch up and gain a share of 30% Dish Stirling and Linear Fresnel are expected to have a cumulative share between 10-20%

+15%

40 +21%

30
20 +65% 12 1 0
2010 2015 2020 2025

xx% CAGR = compound annual growth rate of base case scenario Source: ESTELA project team; A.T. Kearney analysis

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Industry roadmap report summary

Current installed capacity and projects mainly located in the US and Spain capacity in MENA will increase strongly
CSP capacity installed capacity and project pipeline (in GW, until 2015)
8.0

0.4

Current capacities and planned projects mainly located in US and Spain1)

2.5 0.3 Inst. Pipecap. line 0.0 0.8

Inst. Pipecap. line

MENA expected to ramp up in mid term DNI levels 2,000 are prerequisite for the deployment of CSP

US
Tropic of Cancer

Spain
Equator

Inst. Pipecap. line

MENA

Tropic of Capricorn 0.1 0.5 0.0 0.5

Inst. Pipecap. line

Inst. Pipecap. line

RoW
Focus countries with (high) CSP potential Source: Interviews with industry experts; A.T. Kearney analysis; NREL

Australia

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Industry roadmap report summary

First major cost reductions are expected in 2013 tariffs1) are expected to decrease by 40-55%-points until 2025
Expected tariff1) development 2012 2025 (in % compared to reference plants 2012, excl. impact of DNI)
Economies of scale Economies of scale Implementation of major technological improvements Cost & efficiency improvements

100% 90% 80% 70% 60% 50% 40%

2012

-5-30% 70-95% -35-50% -40-55%

50-65% 45-60%

CSP cost reduction Main drivers for reduction Deployment of new technologies Economies of scale Efficiency improvements Cost reductions Effects vary across the different technologies and between dispatchable and non-dispatchable plants
Main drivers for tariff reduction

2015

2020 (Conservative) outlook

2025

Validated/ proven improvement measures

1) Tariff = minimum required tariff Source: ESTELA project team; A.T. Kearney analysis

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Industry roadmap report summary

Tariff1) reduction will be driven by cost and efficiency improvements as well as economies of scale
Projected tariff1) development by measure / over time (tariff1), in %)
100%
18-22%points 10-15%points 21-33% -points

-40-55%points

Plant scaling currently not applicable in Spain with current regulation

Cost and efficiency improvement cannot be strictly separated as both are interdependent in most cases cost improvements refer to component, plant engineering and O&M cost reductions Economies of scale and cost & efficiency partially overlap

28-37%points

45-60%

1st large scale plants2)

Cost

Efficiency

Economies of scale

LCOE 2025

Cost & efficiency improvements

1) Tariff = minimum required tariff; 2) Referring to 2010-2013 according to planned commercialization date of each technology (reference plants) Source: A.T. Kearney analysis

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Industry roadmap report summary

Highest potentials of technological improvements are expected in the thermal generation and storage system
Overview on main technological/efficiency improvement measures
Functionalities

Technology

Solar collection system

Mirror size and accuracy Optimized support structure design Field configuration and heliostat size optimization Optimized tracking system costs Optimized support structure design Optimized mirror sizes for various solar resources Automatic mirror assembly Optimized mirrors

Thermal generation system

Receiver characteristics Alternative working fluid Higher operating temperature Alternative working fluid Higher operating temperature Improved cycle technology

Storage system
Alternative storage reservoir designs and storage medium compositions Alternative storage reservoir designs and storage medium compositions

Electrical generation system

Parabolic Trough

Turbine efficiency

Solar Tower

Turbine efficiency

Dish Stirling Linear Fresnel

Storage development

Engine efficiency and capacity

Receiver characteristics Higher operating temperature

Storage development

Turbine efficiency

Initiative improvement potential: High Medium Low Source: ESTELA project team; CENER; A.T. Kearney analysis

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Industry roadmap report summary

Major reduction potential is seen in engineering and planning cost, thermal generation and storage system cost
Overview on main cost reduction measures1) (excluding economies of scale, reduction until 2025 in %)
Project CAPEX Functionalities Engineering / Technology

planning 32-36% 41-45% 27-31% 35-39%

Solar collection system 14-18% 13-17% 25-29% 21-25%

Thermal generation system 26-30% 18-22% n.a. 23-27%

Storage system 25-29% 20-24% not yet applicable not yet applicable

Electrical generation system 8-12% 5-9% 37-41%2) 3-7%

O&M cost

Parabolic Trough Solar Tower

18-22% 15-19% 15-19% 15-19%

Dish Stirling
Linear Fresnel

27-45%

13-29%

18-30%

20-29%

3-12%2)

15-22%

1) No major cost reductions for project development cost expected, construction cost are expected to increase with increasing labor cost 2) Dish Stirling excluded from cross technology overview as Stirling engine is not comparable to turbine technology and cooling systems differ significantly Source: ESTELA project team; A.T. Kearney analysis
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Industry roadmap report summary

Engineering and planning, power block and project development cost are expected to drive economies of scale
Economies of scale (reduction of CAPEX/GWh annual output in %)1)
100%
6-17%

8-23%

9-26%

9-22%2)

21-24%2)

Main levers for economies of scale

Engineering/ planning cost Power block Project development cost

x1

x2

x3

x4

x5

x10

Multiple of reference plant output

1) Plant scaling refers to plant sizes from 50-500MW; 15MW Linear Fresnel plant has been excluded from overview 2) Solar Tower only scaled up from 50-200MW, Linear Fresnel from 15-250MW 1) Source: ESTELA project team; A.T. Kearney analysis

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Industry roadmap report summary

Electricity cost of CSP decrease significantly with increasing irradiation level (-4.5% per 100kWh/ma)
Tariff/LCOE development over DNI level (in % compared to reference plant location Spain)
110 105 100 95 90 85 80 75 70 65 60

-4.5% per 100 kWh/ma

-18-19% -24-25%
Reference plant location DNI 2,084 kWh/ma (100%)

Tariff decrease about -4.5%-points with an increase of DNI by 100kWh/ma due to increasing plant output At DNI of 2,500 kWh/ma tariff range between 8183% compared to reference plant location in Spain (DNI 2,084 kWh/ma), e.g. in Saudi Arabia At DNI of 2,700 kWh/ma tariff ranges between 7475% compared to reference plant location, e.g. in Algeria

-33-35%

2,000 2,100 2,200 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000 DNI in Italy Spain Portugal Tunisia Morocco kWh/ma
Greece Southern Turkey United Arab Emirates Nevada/US Australia California/US Chile Arizona/US Algeria Saudi Arabia South Africa

Source: A.T. Kearney analysis

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Industry roadmap report summary

Transmission cost from MENA countries with higher DNI levels to EU countries do not outweigh LCOE advantages
HVDC transmission cost1) (in /MWh)
6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.6-0.7 0.3-0.4 500 1,000 2,000 3,000 4,000
Cost 0.53.5 advantage of CSP production 1.14.1 in MENA 1.74.7 countries due to 2.35-3 higher DNI 2.65.6 levels

r=3,000km

r=2,000km

2.4-2.5
r=1,000km

1.8-1.9 1.2-1.3
HVDC transmission cost
r= 500km

0.5
0.0

Tropic of cancer

Distance in km 500 km Distance MENACentral Europe 3,000-3,500 km

e.g. Algeria e.g. Southern Spain Algeria Spain e.g. Morocco e.g. Egypt Spain Spain

1) Includes cost of transmission losses Note: transmission cost for HVAC not considered; cost efficient HVDC connection considered as prerequisite for large scale deployment CSP in MENA region; Source: A.T. Kearney analysis; Industry analysis
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Industry roadmap report summary

Dispatchable CSP technologies will compete against conventional energy sources (CCGT and hard coal)
Cost comparison of dispatchable CSP against conventional (Spain, LCOE, in c/kWh)
30

25

Includes cost and efficiency improvements and economies of scale

20

15

12-14 Gas price 22/MWh

12-15

13-16

10

>40/MWh

>55/MWh

>60/MWh

Dispatchable CSP technologies are expected to compete against CCGT and hard coal as peak to mid load provider On the long run, CSP can substitute CCGT as peak to mid load provider Further hybridization can support cost competitive dispatchability Introduction of additional CO2-penalties would further drive competiveness of CSP Assumptions: Constant CO2-emissions cost of 38/t from 2015 onwards

0 2010

2012

2015

2020

2025

Hard coal CCGT

CSP dispatchable

Assumptions: DNI 2,084 kWh/ma; inflation included (CPI -0.5%); storage 5-20hrs Plant sizes increase according to projected ramp-up; CCGT 25 years, Hard coal 40 years plant runtime Source: ESTELA project team; A.T. Kearney analysis; EPIA

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Industry roadmap report summary

Within RES portfolio, CSP technologies compete against non-dispatchable wind and PV as peak load provider
Cost comparison of non-dispatchable RES (medium irradiation) (Spain, LCOE, in c/kWh)
30

25

Includes cost and efficiency improvements and economies of scale

20

15

14-17 10-14

10

Non-dispatchable CSP technologies (w/o storage) will compete against nondispatchable RES as peak load provider PV is expected to be the favorite non-dispatchable RES to serve peak demand in regions of medium irradiation, e.g. Spain, due to cost advantages CSP is not expected to be competitive against wind
7-11

0 2010

Wind offshore

Wind onshore

2012

2015

2020

2025

CSP non-dispatchable PV industrial system

Assumptions: DNI 2,084 kWh/ma; inflation included (CPI -0.5%); Plant sizes increase according to projected ramp-up; PV cost development based on Paradigm Shift scenario; wind 20 years, PV 25 years plant runtime Source: ESTELA project team; A.T. Kearney analysis; EPIA

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Industry roadmap report summary

In areas of high irradiation CSP is expected to be competitive as non-dispatchable RES against PV

PV and CSP LCOE development over DNI level (LCOE in % compared to reference plant location Spain)
110 105 100 95 90 85 80 75 70 65
Increasing degradation limits efficiency of PV
2015 2010

High outside temperature levels limit the efficient deployment of PV in areas of high irradiation due to degradation and efficiency CSP efficiency increases with higher DNI levels

60 2,000 2,100 2,200 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000
Italy Spain Portugal Tunisia Morocco Greece United Arab Nevada/US Southern Emirates Australia California/US Chile Turkey Arizona/US Algeria Saudi Arabia South Africa
PV in % compared to CSP 2010 CSP Source: ESTELA project team; A.T. Kearney analysis PV in % compared to CSP in 2015

CSP systems access more solar radiation than PV in higher DNI markets, as they track the sun on either a single or dual axis
CSP is expected to be the more cost efficient deployment alternative, also for non-dispatchable solar power, in areas of high irradiation with high temperatures, e.g. US Southwest, North Africa
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DNI in kWh/ma

17

Industry roadmap report summary

LCOE for wind including storage are expected to range at a comparative cost level as dispatchable CSP technologies
LCOE wind including storage cost1) (in c/kWh)
Wind offshore
30 30

Wind onshore

14-29 12-27
25

12-23
10-20 10-16

25

11-22
20

20

9-18

15

15

8-15

10

10

Includes cost and efficiency improvements and economies of scale

5 5

Includes cost and efficiency improvements and economies of scale

0 2010

2012

2015

2020

2025

0 2010

2012

2015

2020

2025

CSP dispatchable Wind offshore incl. storage CSP dispatchable Wind onshore incl. storage 1) Storage cost (pump, pressurized air, hydrogen) range between c5-20/kWh in 2010 and are expected to range between c3-10/kWh in 2025 Source: EPIA Set for 2020; VDE; A.T. Kearney analysis

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Industry roadmap report summary

As storage cost for PV are considerably higher, CSP will not compete but complement solar power portfolio
LCOE PV including battery storage cost (Spain, in c/kWh)
80 70 60

High storage cost drive LCOE for dispatchable PV electricity Dispatchable PV systems are not expected to be competitive against more cost efficient dispatchable CSP plants
25-55 20-40 15-30

40-70
50 40 30 20 10 0 2010

PV and CSP will not compete but rather complement each other in the RES portfolio of areas with high irradiation levels (US, MENA) to serve peak and mid load demand PV will serve daytime peak demands

Includes cost and efficiency improvements and economies of scale 2012 2015 2020 2025

CSP dispatchable PV- industrial system, incl. storage Assumptions: Comparable battery storage capacity, 5-20hrs Source: EPIA Set for 2020; VDE; A.T. Kearney analysis

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Summary
With the ATK-cost road map we have a well founded study, based on experience in developing and constructing CSP plants and cost development of components.

Main competitor for CSP within Renewable Energies is PV

CSP has to significantly reduce cost in all functionalities: Planning, Engineering, solar field components, construction. There is no single big lever. This process has to gain more speed. Cooperation between various players has to be established and fostered The key value propostion of CSP is storage. Non dispatchable CSP is barely able to compete with PV and Wind. The main competitors within CSP are Parabolic Trough and Solar Tower. Even though the technologies are complementary in some cases, the race will be thrilling!

Thanks to all the participants of the study for their contributions and for their patience and thanks to A.T.Kearney for their great job.

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