Frenell white paper v1 0 may 2016 a4

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SOLAR POWER ON DEMAND Least Cost Opportunity for Sun-rich Countries

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Table of Contents 1. Executive Summary

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2. DMS® – How it works 1 - The Linear Fresnel Collector 2 - The Thermal Energy Storage 3 - The Heat Exchanger

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3. DMS® Applications 1 - Solar Power Demand 2 - Seawater Desalination 3 - Enhanced Oil Recovery 4 - Energy Storage

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4. Economical Sensitvity of DMS® Applications 1 - Plant Scale 2 - Capacity Factor 3 - Project Internal Rate Return 4 - Solar Radiation 5 - Desalinated Water Price

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5. Competitiveness 1 - DMS® Compared with Conventional On-demand Power Plants 2 - DMS® Multi-Tank as Grid-level Energy Storage 3 - DMS® compared with Photovoltaic and Battery Storage 4 - DMS® compared with Diesel Generator Power for Remote Supply 5 - DMS® compared with Gas fired Steam Generation for EOR

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6. Country Opportunities for DMS® Applications 1 - China 2 - Oman 3 - Jordan 4 - Egypt 5 - Morocco 6 - Chile 7 - United States

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7. Summary and Outlook

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Abbreviations Units Appendix References

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1. Executive Summary

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1. Executive Summary

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1. Executive Summary FRENELL is a German technology company specializing in the manufacture and turnkey delivery of concentrated solar power (CSP) plants with integrated energy storage systems. The firm works with global energy investors and advisors to design and deliver cost-competitive solar solutions enabling power utilities to transition from fossil fuel to solar energy in providing base load and peak power to consumers all day every day.

This White Paper presents FRENELL’s new Direct Molten Salt (DMS®) technology as a key enabler for this transition. It provides a broad overview of DMS®, its range of technical and situational applications, and the related commercial economics.

The Paper is written against a background of industry concerns that dismiss CSP as way too costly to supply demand-matching electricity compared with conventional power plants. These concerns have resulted in continuing reliance on cheap but volatile renewable energy sources such as photovoltaic and wind power with conventional fossil-fuel based power plants to cover the remaining supply gaps. Yet fossil fuels are not without their problems.

New exploitation technologies in oil and gas have stranded a number of large-scale energy investments. Short-term hydrocarbon supply and price volatilities have likewise raised the investment risk on future multi-

billion-dollar energy infrastructure projects disrupting national energy plans and budgets alike.

•

Is there a solution to such problems? Can we ease or end our reliance on volatile fossil fuels as the primary source of base-load and peak-demand electricity? And, if we can, how? What technology must we use?

•

FRENELL’s engineers have been asking themselves these very questions. They developed DMS® in response. It is a new technology using CSP to collect and store the sun’s energy to provide an affordable, stable, ondemand supply of electricity.

This White Paper explains this together with the advantages of DMS® such as: •

•

•

DMS® plants can deliver demand-driven electricity for as little as 5 - 12 US¢/ kWh, already break-even with the price of coal-fired power and economically competitive with gas-fired power DMS® CSP plants reach the lowest levelized electricity costs when designed for base-load power delivering their nominal power capacity 24 hours a day from spring to autumn.

All-up production costs drop by 80% once DMS® power plants are fully depreciated, typically after 20 years with a further 20 years remaining in the plant life cycle

•

DMS® offers the potential for governments to end electricity subsidies and remove the associated cost pressures from their budgets DMS® plants provide the opportunity for sun-rich countries to transition from fossil fuels to solar energy and thereby, for those countries with gas and oil reserves of their own, to export these or redirect them to export higher-value industrial production Built primarily using coil steel and glass, more than 70% of DMS® construction inputs can usually be sourced within each user country thereby building local industry and supporting the country’s balance of payments

This White Paper will explain these and other advantages of the FRENELL DMS® in detail.

In doing so, it attempts to take the middle ground by providing sufficient detail to satisfy industry professionals while limiting that detail to make it as easy as possible for those with a more general interest to appreciate the technological advance DMS® represents.

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2. DMS® – How it works

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2. DMS® – How it works

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2. DMS® – How it works 2.1 The Linear Fresnel Collector The FRENELL DMS® technology is at heart very simple. It collects, converts and stores the sun’s energy as high-temperature heat to be converted to steam when needed. The DMS® system essentially consists of three main systems: This is the first stage. Sunlight is concentrated through FRENELL’s proprietary Linear Fresnel collector where parallel rows of flatglass mirrors reflect direct solar radiation onto a fixed-position receiver unit. Similar to parabolic-trough systems, FRENELL´s

Absorber tube

Reflected sun rays

Primary reflector Figure 1: FRENELL collector

receiver uses vacuum absorber tubes. In contrast to parabolic-trough collectors, molten salt heated to 550°C is pumped through FRENELL´s receiver.

The molten salt collector system has been thoroughly developed and tested over the last two years. The primary reflector technology has been successfully applied in various commercial CSP projects since 2009.

Critical operational aspects of DMS® such as draining the molten salt from the receiver for

repair works have been successfully tested [1]. Particular attention has been paid to the unlikely but possible event of salt freezing inside the absorber tube if the circulation of molten salt was interrupted for more than five hours and operators forgot to drain the molten salt from the receiver. It has been demonstrated in more than 20 field tests that the frozen salt can be re-liquefied in the absorber in less than ten hours without damaging any component.

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2.2 The Thermal Energy Storage In the second stage, the molten salts collecting the daytime energy yield are stored within a proprietary Thermal Energy Storage (TES) system.

Compared with a costly field-manufactured two-tank storage system, FRENELL´s MultiTank system consists of an array of preengineered and shop-manufactured tanks.

The Multi-Tank storage is an innovative evolution of the state-of-art two-tank molten salt storage technology. The global installed capacity of molten salt energy storage exceeds 11 GWhel with an additional 5 GWhel under construction and 2 GWhel under development [2].

The main advantage of the Multi-Tank is its modularity allowing a tailored thermal energy system simply by determining the amount of tanks needed to cover the requirements. This minimises the need for expensive, time consuming engineering work.

Figure 2: Comparison of 2 Tank with FRENELL´s Multi-Tank storage

It also increases the system availability since repair works at one of the units will not require a shutdown of the entire CSP plant as in the case of a two-tank system.

2. DMS® – How it works

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2.3 The Heat Exchanger In this third stage, the molten salt drives a Salt/Water Heat Exchanger to convert the collected heat into steam. The total amount of stored energy can be dispatched on a day-ahead basis to match the customers’ steam demand curve.

Those three primary components form FRENELL´s modular and scalable DMS® system. Here’s what it looks like visually.

The conversion of heat from the molten salt to steam through a single interface eases significantly the integration of DMS® in various applications.

The steam parameters of up to 550°C (1,022°F) and pressure levels of up to 200bar (2,900 Psi) cover the whole range of steam applications.

Figure 3: FRENELL’s DMS® (Direct Molten Salt) technology 1.

2.

3.

4.

5.

Solar Field Thermal Energy Storage Salt/Water Heat Exchanger Cold Salt Pump Hot Salt Pump

FRENELL delivers DMS® systems tailored to the customer’s turnkey needs including the complete tracking and power-control system. Fully-automated cleaning devices for the primary reflectors and receiver system, requiring very little water allow a daily cleaning of the optical components maintaining an average cleanliness of more than 98% even in very dusty desert environments.

No single technical component of the FRENELL´s DMS® system is new. All have been well tested and proven over time.

•

FRENELL´s primary reflector technology has been successfully applied in commercial projects since 2009 with a total thermal capacity of more than 150 MW.

•

•

•

Molten salt is a state-of-the-art energy storage medium already applied in GWh scale.

Molten salt as a heat transfer fluid has been used in various reactors in the chemical industry for more than 30 years.

Vacuum tube absorbers are the most proven receiver systems in the CSP industry having been in use for more than 25 years.

DMS® reconfigures these proven components in creating the most flexible, lowest cost, lowest technical risk system covering the whole range of steam applications.

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3. DMS速 Applications

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3. DMS® Applications

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3. DMS® Applications 3.1 Solar Power on Demand As a scalable source of low-cost, demandmatching solar technology, DMS® opens the door to multiple applications in countries and regions across the world’s Sunbelt. It has a number of applications. These are the main ones.

In case new power plants are required, the DMS® technology can be combined with a state of the art, high efficiency steam turbine power block. Because the solar field uses available land very efficiently, DMS® can be installed adjacent to existing fossil fired power stations to reduce or completely

replace their fossil fuel consumption.

Figure 4 shows the main components of a DMS® CSP plant.

The heat exchanger is designed to deliver the nominal steam mass flow to meet turbine needs while the solar field and the Multi Tank can be tailored to the most cost efficient configuration. This configuration is achieved by over sizing the solar field to provide 2-5 times more thermal energy at peak times than the nominal capacity of the steam turbine. The surplus daytime solar energy is then stored in the integrated

Figure 4: FRENELL’s DMS® technology with Power Generation application 1.

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Solar Field Thermal Energy Storage Salt/Water Heat Exchanger Cold Salt Pump Hot Salt Pump

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Steam Turbine Air Cooled Condenser Feedwater Pump Deaerator Public Electricity Grid

Multi-Tank thermal energy storage system.

As the solar irradiance declines in the late afternoon, the turbine can continue to run at nominal load for up to 20 hours by dispatching the required thermal energy from the storage system.

Figure 5 illustrates the load curve of solar thermal energy collected during daytime continuously increasing the level of heated salt mass in the storage system. While maintaining nominal turbine power load overnight, the level of heated salt decreases to its overnight minimum at sunrise.

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PV (photovoltaic) and wind power have increasingly shown their capacity to challenge fossil fuels as a primary energy source. However, neither have the capability to store the energy source nor the electricity they produce, it becomes more and more challenging to cover the remaining supply gaps.

This is especially true for countries in North and South Africa where PV and wind cannot match the daily power demand peaks in the evening and at night.

In such cases, Figure 6 shows how DMS® CSP plants can perfectly replace fossil backup power by throttling the turbine load to a minimum during daytime hours before

ramping to maximum load during evening and night time demand peak.

This enables DMS® CSP plants to be the first choice for base-load power generation while also serving beside wind and PV as a complementary renewable energy technology paving the way for a 100 % renewable electricity supply.

BASELOAD

Figure 5: FRENELL DMS® baseload power supply

0 am

6 am

12 am

DMS® power supply

6 pm

Solar irradiance

12 pm

Storage level

DISPATCHABLE

Figure 6: FRENELL DMS® power on demand supply curve

0 am

6 am

DMS® power supply

12 am PV power supply

6 pm Typical demand of developing country

12 pm

3. DMS® Applications

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3.2 Seawater Desalination Many sun-drenched regions are also water scarce. This drives many countries towards seawater desalination. The base load electricity demand of reverse osmosis plants, representing the highest market share in the seawater desalination market, can be covered by DMS® CSP power.

Multi-effect Distillation (MED) requires thermal energy at a temperature level below 120°C. This can be delivered either directly from a DMS® system or from the exhaust steam of a DMS® power plant’s turbine.

applications aiming for a lowest possible complexity.

For mid to large scale MED desalination, the cogeneration of electricity and desalinated water is likely to provide better economics.

A stand-alone solar MED plant might be the better choice in case of small-scale

Figure 7: FRENELL’s DMS® with MED application 1.

2.

3.

4.

5.

Solar Field Thermal Energy Storage Salt/Water Heat Exchanger Cold Salt Pump Hot Salt Pump

6. Steam Transformer 7. Condensate Pump 8. Thermo Vapor Compressor 9. Effect #1 10. Effect #2

11. Effect #3 12. Effect #n 13. Final Condenser

7. Condensate Pump 8. Feedwater Pump 9. Deaerator 10. Public Electrcity Grid 11. Steam Transformer 12. Thermo Vapor Compressor

13. Effect #1 14. Effect #2 15. Effect #3 16. Effect #n 17. Final Condenser

Figure 8: FRENELL’s DMS® with CoGeneration application 1.

2.

3.

4.

5.

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Solar Field Thermal Energy Storage Salt/Water Heat Exchanger Cold Salt Pump Hot Salt Pump Steam Turbine

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3.3 Enhanced Oil Recovery Thermal Enhanced Oil Recovery (EOR) is widely used to increase crude oil extraction from matured oil fields. Major sun-belt regions like Oman, Kuwait, Egypt and California have long used the technology as part of their extraction approach.

Currently, natural gas is used to produce steam that is injected into a well to heat the heavy oil thereby enabling it to flow more easily to the pump well by reducing its viscosity and surface tension.

The process is energy intensive. It consumes about 20% of the energy contained in the total quantity of all the oil extracted to generate the required steam for EOR alone.

FRENELL’s DMS® system can be applied here to replace up to 100% of the gas consumed for EOR thereby lowering the carbon foot print of today’s oil production. The existing gas boilers can be maintained in idle mode as a backup capacity for periods with insufficient solar radiation to cover the steam demand.

Figure 9: FRENELL’s DMS® with EOR application 1.

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3.

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6.

Solar Field Thermal Energy Storage Salt/Water Heat Exchanger Cold Salt Pump Hot Salt Pump Oil-Water Seperator

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10.

Water Treatment Station Feedwater Pump Injection Well Production Well

The main advantage of FRENELL’s DMS® over other CSP applications in the EOR sector is its ability to deliver of solar generated steam from storage on demand around the clock as per the oil field operator requirements.

In addition due to its higher temperature of up to 550°C DMS® CSP in contrast to 300°C state of the art solar EOR technologies can be further used for power generation once oil fields are fully depleted, thus mitigating the risk of stranded investments.

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3.4 Energy Storage FRENELL’s DMS® Multi-Tank energy storage can serve as a grid-level energy storage technology. When used for this, a multi-tank system can be placed next to an existing

thermal power station to run excess grid power into high temperature thermal energy using electrical heaters. Stored in the MultiTank system, this thermal energy is then

Figure 10: FRENELL’s DMS® Thermal energy storage for renewables 1.

2.

3.

4.

5.

6.

Wind farm/PV plant Electrical Heating System Thermal Energy Storage Cold Salt Pump Hot Salt Pump Salt/Water Heat Exchanger

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8.

9.

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11.

Steam Turbine Air Cooled Condenser Deaerator Feedwater Pump Public Electricity Grid

converted back into electrical power by generating steam to drive the existing steam turbine when needed.

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4. Economical Sensitivity of DMS速 Applications

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4. Economical Sensitivity of DMS® Applications

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4. Economical Sensitivity of DMS® Applications 4.1 Plant Scale

Many factors influence the Levelized Cost of Electricity (LCoE1) of DMS® CSP plants.

To understand their relevance, FRENELL has carried out a series of sensitivity assessments varying only one factor at a time while keeping all others constant using the following base-case conditions: • • • •

Plant location Aswan, Egypt; solar radiation 2,917 kWh/m²a DNI Plant size 50 MW 8% unleveraged project IRR; real, net of inflation Total investment as per FRENELL turnkey EPC price calculation on today‘s DMS cost and efficiency Basis including development cost

•

O&M costs as per internal FRENELL calculation

Solar field and storage hours is designed for lowest LCoE at base case conditions.

The accepted commercial wisdom in electricity generation is that the larger the size of your generating plant the greater the economies of scale. This is true for conventional power plants mainly because specific turbine costs decrease and thermal to electric conversion efficiency increases by scaling up the plant size.

The same principle applies for the power block of DMS® CSP plants. However, due

LCoE and plant specific costs for various plant rated power 14 12

LCoE (US¢/kWh)

10 8 6 4 2 0 0

50

100

150

200

250

Plant rated power (MW)

Figure 11: LCoE as a function of plant rated power

1

LCOE calculation method is shown in Appendix

300

350

400

to the modular nature of DMS® technology, the cost of solar field and thermal energy storage is close to linear, watering down the overall economy of scale effects of DMS® CSP plants.

As a result, the LCoE ranges from 13 US¢/kWh at a scale of 5 MW down to 6,5 US¢/kWh at a scale of 100 MW. At a plant scale larger than 100 MW, the cost increase of the solar field header pipe work starts to balance further power block economies of scale. This explains why there is no further LCoE reduction beyond 100 MW DMS® CSP plant capacity.

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4.2 Capacity Factor The capacity factor reflects the annual energy production relative to a plant that would run at nominal power 24 hours a day for all 365 days of the year.

Following Figure 12 shows the influence of storage size on LCoE for plants with different capacity factors. Higher capacity factors require the integration of more storage hours, not a simple increase in the solar field, which would have to defocus if not supported by the required storage capacity. This explains the rapid increase in the respective LCoE curves at specific storage hours beyond their minimal turning.

The lowest LCoE can be reached with 1218 hours energy storage delivering capacity factors of 60-80%. DMS® CSP plants with such layouts would deliver nominal power rates 24 hours a day from spring to autumn, when power demand is highest in sunbelt countries.

Importantly, the graph reveals the sweet spot of DMS® CSP as the preferred base-load power application.

25

Storage size: 0h

LCoE (US¢/kWh)

20

2h 15 6h 10

12 h

5

18 h

0

24 h 0

20

40

60

80

100

Capacity factor (%)

Figure 12: LCoE as a function of capacity factor. Each line reflects a given storage capacity at different solar field sizes, as necessary to achieve a specific capacity factor

4. Economical Sensitivity of DMS® Applications

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4.3 Project Internal Rate of Return This section of the White Paper assesses the influence of project return expectations or the cost of capital on LCoE. Profit return targets on equity investment and also bank interest rates are driven by current market opportunities reflecting also the perception of related technology and country risks of a specific investment.

The underlying base case assumption of 8% unleveraged project IRR should be attracting to private investors given the current all-time low of interest rates. Figure 13 shows that

LCoE would reduce more than 20% assuming a moderate 4% unleveraged project IRR that are likely to attract investments especially by state-owned utilities mandated to minimize electricity prices rather than maximize investment returns.

In well-selected cases, DMS® CSP plants could deliver even higher project IRRs than 8% when power purchase prices are aligned more closely with the prices of more costly competing power generation technologies such as diesel gensets.

FRENELL contributes to reducing the cost of investor financing through the low-risk nature of its proprietary technology. All components of FRENELL‘s solar field and energy storage technologies are based on standard components, which are fully proven. A large-scale system is simply „more of the same“. FRENELL’s DMS® CSP technology also removes the classic dependencies on volatile fossil fuels, even on water for cooling. This makes DMS® CSP running costs very predictable.

40% 30%

Relative LCoE value

20% 10% 0% -10% -20% -30% -40%

2

4

6

8

10

Unleveraged project IRR [%/year]

12

14

Figure 13: LCoE as a function of project unleveraged IRR / financing cost (base case is 8%)

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4.4 Solar Radiation Since direct solar radiation is what fuels CSP plants, the amount any country or region receives is a key driver for the resulting cost of DMS® CSP power generation.

The measure used to determine this for FRENELL‘s concentrating solar technology

is Direct Normal Irradiance (DNI). Figure 14 shows the DNI geographical distribution.

Energy yield and LCoE are directly linked with a region’s DNI. The following Figure 15 shows their almost linear relationship. The DNI low-end for commercially feasible solar

power generation is most likely at 1700 kWh/m²a. While the value of FRENELL’s DMS® CSP plants may decline below this, the related DMS® multi-tank energy storage system continues to grow in value to regions with a lower DNI.

Figure 14: World map of Direct Normal Irradiance (DNI) [3]

14 12

LCoE [US¢/kWh]

10 8 6 4 2

Figure 15: LCoE variations with various weather data files that are representative for suitable CSP sites

0 1.500

2.000

2.500

3.000

Annual DNI [kWh/(m²a)] Simulated results

Trend line

3.500

4. Economical Sensitivity of DMS® Applications

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4.5 Desalinated Water Price Seawater desalination is particularly important for coastal regions in Sunbelt zones where water shortages are a constant and ever increasing threat. FRENELL’s DMS® plants offer a key solution for desalinizing sea and brackish water. Coupled with a MultiEffect Desalination facility using thermal exhaust from steam turbines to supply the distillation process, DMS® plants can become significant cogeneration facilities producing both water and electricity.

Since the total amount of desalinated water and electricity per year is a given, the annual revenues necessary to deliver the 8% project IRR depend on the sales prices (costs) per unit of water and electricity. The higher the unit price of water, the lower need be the price of electricity and vice versa.

In countries like Egypt, cost of desalinated seawater is in the range of 0.9 – 1.2 US$/m³ depending on the currency exchange rate

Levelised cost of Water [US$/m³]

2 1,8 1,6 1,4

1.2 US$/m³

1,2

Water market price range

1 0,8

0.9 US$/m³

0,6 0,4 0,2 0 5

7,5

10

12,5

Electricity price [US¢/kWh]

Figure 16: LCoE as a function of price for water (LCOW)

15

17,5

and the region of the desalination facility [4]. This means a DMS®-based cogeneration plant would generate electricity at a price of 8 – 10 US¢/kWh, assuming an unleveraged project IRR of 8%. The price of water and electricity would need to increase for higher returns on the investment. Alternatively, markets allowing an increase in one may provide room to offset prices in the other.

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5. Competitiveness

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5. Competitiveness

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5. Competitiveness

5.1 DMS® Compared with Conventional On-demand Power Plants Since volatile PV and wind technologies are not reliably matching the given power demand curve in sunbelt countries, there is a requirement for further power plant capacity capable of producing power to cover the remaining supply gaps. This is only possible for power plant technologies with a fuel stock such as fossil fuelled power plants and CSP plants with integrated thermal energy storage.

Figure 17 provides a detailed comparison of levelized costs of electricity (LCoE) across such dispatchable power generation plants.

Coal fired power stations are well known for delivering the lowest cost electricity while having the highest carbon footprint. They are followed by gas-fired Combined Cycle power stations. The levelized cost of DMS® CSP power plants ranges between 5 and 12 US¢/kWh and is therefore seriously cost competitive with fossil power stations. The cause of the LCoE bandwidth of DMS® CSP plants is explained in more details in further sections of this White Paper.

Some further aspects of DMS® CSP plants are worthy of mention: •

•

the LCoE calculations for DMS® CSP plants shown above take into account the use of air cooled condensers (ACC) to avoid consuming water to condense the turbine’s exhaust steam. ACC is far more expensive than water cooled condensers and also decreases turbine cycle efficiency. However, the significant cost savings of FRENELL´s solar field and thermal storage solution compensate for this while still leaving DMS® CSP plants one of the lowest cost on-demand power solutions.

DMS® CSP plants at a scale of only 100 MW are fully competitive with fossil power stations that reach their cost minimum at a scale of 500 MW or even greater. DMS® CSP plants thereby enable a more distributed power system where the generating capacities are spread over a region rather than concentrated in a single place. This helps to reduce the power system spare capacity in cover shut downs of a single power station either due to overhaul or sabotage events. It also reduces the investment cost of electricity transmission grids.

•

Since DMS® CSP plants are running 100% on solar energy there is no added fuel cost in the equation. About 90% of the levelized costs are caused by the depreciation of the initial investment costs. Plant operation and maintenance including frequent replacement of spares and wear components account for 10 % of the total. As a consequence, once the initial investment is fully depreciated, typically after 20 years, the cost of DMS® CSP electricity will drop below 1 US¢/ kWh for the remaining 20 years of the plants technical life time.

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14

Levelized cost of electricity ($ct/kWhel)

12

10

8

6

4

2

0

Oil-fired Power Plant [1]

Gas-fired Power Plant [2]

Coal-fired Power Plant [3]

[1],[2],[3] FRENELL internal LCOE calculations based on the following external source: Fraunhofer ISE - STROMGESTEHUNGSKOSTEN ERNEUERBARE ENERGIEN STUDIE NOVEMBER 2013 [1] Assumed Brent oil price 30 to 70 $/barrel

[2] Assumed gas price 6 to 12 $/MMBTU

[3] Assumed coal price 50 to 100 $/t

Figure 17: Price competitiveness of FRENELL DMS® plants versus conventional dispatchable power generation

[4] [4] FRENELL LCOE: medium scenario: site DNI 2300 kWh/(m²a), 12% Project IRRreal / 25 a, 100 MWel , included: EPC, O&M, PD, land good scenario: site DNI 3000 kWh/(m²a), 4% Project IRRreal / 25 a, 100 MWel, included: EPC, O&M, PD, land

5. Competitiveness

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5.2 DMS® Multi-Tank as Grid-level Energy Storage Expansion of energy storage has been considered as one of the key measures to facilitate the grid-integration of high amounts of volatile renewable energy generation in a power supply system. Hydro pump power stations are generally the cheapest energy storage system on a grid level. These, however, are not an option for sun-rich countries where water is scarce and its application is constrained by availability of land and environmental impact. To date electro-chemical batteries are discussed as a potential key storage technology in the future. Battery technologies have been improving driven in large measure by a fast-growing industry developing battery systems for electric cars. This has raised hopes for an automotive-driven reduction in the cost of electro-chemical batteries that may also be economically viable for the electricity supply and distribution sector.

In November 2015, Lazard published the most recent study of current and future costs for energy storage on transmission grid level [5]. Three key parameters determine the cost of electricity discharged from energy storage to transmission grid level: the investment cost per kWh electricity; the cycle efficiency

describing the ratio between the amount of discharged electricity and electricity moved into the storage; and the lifetime of the storage system.

are still expected to account for around 56 % of future generation costs followed by AC/DC converters as the next major cost.

The table below compares Lazard´s view on these key drivers for today´s and future figures of electro-chemical battery storage systems with FRENELL´s Multi-Tank storage when combined with an existing thermal power station.

FRENELL’s thermal storage system costs 24 – 32 US$/kWh. This includes the cost for integration into an existing power station.

Taking into account the conversion losses of steam turbines, the comparable investment cost of discharged electricity from DMS® increases to 55 – 91 US$/kWh.

The cycle efficiency of a lithium-ion battery storage system ranges from 75-85% taking into account the losses of AC/DC, reverse conversion and battery storage losses.

Add its much longer life span to the equation and the far lower cost of FRENELL´s MultiTank system well and truly overtrumps lithium-ion battery systems by far.

With the DMS® Multi-Tank, close to 100% of the charging electricity is converted to high temperature heat. The heat losses of a MultiTank system are about 1 Kelvin per day or only 1%. The steam turbine efficiency of an existing power station typically ranges from 35% to 45%, dominating the overall cycle efficiency.

While the cost of battery storage systems today ranges from 500 – 750 US$/kWh, further improvements are expected to see this fall to 300 US$/kWh. Regardless, lithium-ion batteries

Which brings us to the levelized cost of electricity discharged from the two systems.

The comparison charted below assumes one charge / discharge cycle per day at a cost of 2 US¢/kWh for the electricity charged in the respective storage systems.

BATTERY TODAY

BATTERY NEXT GEN.

FRENELL MULTI-TANK

Storage efficiency [%]

75-85

75

35-45

Storage costs [US$/kWh]

500-750

300

55-91

Lifetime [years]

5-15

5-15

25-30

It clearly shows that as a stand-alone product, FRENELL´s Multi-Tank energy storage system discharges electricity at a cost of 8-10 US¢/kWh, about 5 times cheaper than today’s lithium-

Table 1: Comparison of today’s and future battery storage system and FRENELL’s multitank storage regarding efficiency, costs and lifetime [5]

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ion systems and 2-3 times cheaper than potential future cost of batteries.

What this all adds up to is that FRENELL’s Multi-Tank energy storage system is particularly suited to markets like those in the United States, United Kingdom, Australia and Chile that have one or more of the following characteristics:

•

•

high shares of intermittent renewable energies requiring back-up power sources like energy storage and/or peaker plants to secure grid-reliability at all times the failure of peak supply energy from renewable sources to match peak demand resulting in an offer/demand imbalance leading to high electricity price variability

•

significant coal-fired generation capacity expected to retire soon due to economic pressure from competition with renewable energies and compliance with greenhouse-gas reduction goals

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LCoE [US¢/kWh] (a)

50

40

30

20

10

0

Battery (b)

Figure 18: LCoE comparison of Batteries and FRENELL’s thermal energy storage (a) 60% debt financing at 8%/a and 12%/a equity interest rate. 20 US$/ MWhel electricity price for charging for all systems

Battery next gen. (c)

(b) based on data from Lazard’s levelized cost of energy analysis v8.0. 75% to 85% charge-to-discharge efficiency, 500 to 750 US$/kWhel installed specific storage cost, 25 to 27.5 US$/kWh installed specific storage O&M costs, 15 year lifetime.

(d)

(c) based on data from Lazard’s levelized cost of energy analysis v8.0.

75% charge-to-discharge efficiency, 295 to 305 US$/kWhel installed specific storage cost, 5 US$/kWhel installed specific storage O&M costs, 15 year lifetime.

(d) based on FRENELL storage system, 35% to 45% charge-to-discharge efficiency, 24 to 32 US$/kWhth (equivalent to 55 to 91 US$/kWhel) installed specific storage cost including extra cost for system integration, 0.7 to 1 US$/ kWhth installed specific storage O&M costs, 25 year lifetime.

5. Competitiveness

page 38

5.3 DMS® compared with Photovoltaic and Battery Storage The admirable cost reduction PV has achieved over recent years has also raised hopes that PV combined with battery systems might provide day and night solar power supply at competitive costs. It is an important point worthy of exploration.

To this end, we can compare the performance of a 50 MW PV plant with lithium ion battery storage located in Aswan, Egypt with that of a 50 MW DMS® CSP plant, both designed for a capacity factor of 80 %. To do this, we draw on a PV energy yield assessment using the public domain tool SAM from NREL, US Department of Energy; and make investment cost assumptions for PV+battery based on ‘LAZARD‘S levelized cost of energy analysis’ as shown in table 2 [6].

As the following pie charts show, the capital costs for these two technologies are markedly shaped by their respective energy storage systems. The DMS® CSP storage costs are less than 10% of the total investment whereas the battery costs for a PV system account for more than 50% of the total.

This provides the basis for further comparing the LCoE curves of DMS® CSP and PV+battery over capacity factors as shown in Figure 19.

The costs of PV are lowest around 6 US¢/kWh without any battery storage. The LCoE of combined PV rises as more battery storage

is added, tripling at capacity factors of more than 70%. This trend will not change even if battery costs fall. Comparisons with other power-on-demand technologies, as shown in Chapter 5.2, demonstrate PV+battery will not become a competitive base-load power option.

The opposite is the case with DMS® CSP plants. While DMS® CSP plants without storage start with a higher LCoE than PV without battery, the DMS® LCoE decreases continually to its minimum of 6.5 US¢/kWh at a capacity factor of 60% on today´s cost and 5.5 US¢/kWh at a capacity factor of 70% assuming further cost reductions by 2020.

25

20

] LCoE [ US¢/kWh LCoE [ US¢/kWh ]

25 15 PV + Battery (2016)

20

PV + Battery (2020 projection) 10

Frenell DMS (2016)

15

PV + Battery (2016)projection) Frenell DMS (2020 5 10

Lowest cost PV

Lowest cost CSP

design point

design point

PV + Battery (2020 projection) Frenell DMS (2016) Frenell DMS (2020 projection)

0 5 0%

20%cost PV Lowest

40%

60% Lowest cost CSP

80%

100%

design point design point Capacity factor Figure 19: LCoE as a function of capacity factor for the FRENELL DMS® system and PV+Battery with potential cost projections 2020 at 8% project iRR. 0 The projections are based on 25% PV module price reduction, 300 $/kWh battery costs – optimistic scenario 0% 20% 40% 60% 80% 100% Capacity factor

page 39

This means that when a DMS CSP, is designed for a capacity factor of 60% (15 hour storage), it can reach similar LCoEs today as PV without any storage. ®

Further reductions in the cost of battery technologies over time will not change this.

DMS® CSP will continue to improve as the preferred solar power-on-demand technology over PV+battery.

An Excursion: Why Dollar per MW is Not the Right Measure to Compare PV with DMS® CSP Dollar per MW installed PV capacity has become the high level indicator to compare various PV technologies. This might work within the PV sector but not as a point of comparison between PV and CSP with integrated energy storage.

Balance of System 18%

Inverter BoP 1% 3%

Power block 18%

PV modules 22% Balance of System 10%

Batteries 56%

Solar field 57%

Thermal Energy Storage 15%

Figure 20: Investment cost breakdown for 50 MW with 80% capacity factor for DMS plant(left) and PV Plant (right)

System cost

Value

PV module specific costs Battery storage specific costs

0.7 US$/W DC 500 US$/kWh (today) 300 US$/kWh (next generation)

Inverters specific costs

0.1 US$/W DC

Balance of plant specific cost

0.4 US$/W DC

Table 2: Cost assumptions for PV+battery plant according to Lazard’s study and SAM software

The diagram in Figure 21, demonstrates the difference between a 50 MW PV plant without battery and a 50 MW DMS® plant designed for a capacity factor of 80%. The 50 MW PV plant would generate an annual yield of only 118 GWh compared with 350 GWh per year for the 50 MW DMS® plant. Put in another way, DMS® plants of an equivalent capacity can supply three times more energy yield than PV without batteries; and they do so with only a 10% increase in LCoE, as seen in Figure 21.

The graph also shows that the DMS® plant can deliver 50 MW electricity 24/7 from March to October thereby matching 100% the most often occurring power demand peaks after sun set.

MONTHLY GENERATED ELECTRICITY [GWH]

35 30 25 20 15 10 5 0

50 MW DMS® CSP with thermal storage (80% capacity factor) 50 MW PV without battery storage (27% capacity factor)

Figure 21: Monthly Energy yields of FRENELL DMS®(80 % Capacity factor) and PV’s most economic configuration

5. Competitiveness

page 40

5.4 DMS® compared with Diesel Generator Power for Remote Power Supply Diesel power has been a favoured technology for small-scale, off-grid power supply, in some cases even for dispatchable grid power during periods of peak demand.

Many countries, including those with high solar resources, have in consequence come to rely on diesel generators to supply a major part of their base-load electricity. This dependency exposes them to significant LCoE risk directly connected to volatile fuel prices making it difficult for those countries

costs of only 22 US¢ per litre, the highly subsidized price of diesel in Egypt.

FRENELL’s DMS® offers a clean, reliable, cost-competitive alternative. It already compares favourably at plant sizes as low as 5 MW. From there up, the cost efficiencies grow along with the scale of the power plant size. FRENELL’s 20 MW DMS® plant can, for instance, generate electricity for a lower price than a diesel generator assuming fuel

To provide a benchmark: The unsubsidized price of diesel based on a crude oil price of 40 US$ per barrel would be approximately 30 US¢ per litre not taking account transport costs of diesel to remote sites.

10,5

DMS-FRENELL1 Diesel Generators 2

lacking their own oil resources to provide a price-stable power supply.

2,6

8,6

1,6 10,3

7,4 0,7 1,7

1,2 8,6 6,5

0,7 1,7

8,8 11,6

0,7 1,7 0

2

Capital Cost O&M Cost Fuel Cost

13,1

14,0 16,2

4

6

8

10

18,5 12

14

16

18

20

Levelized Cost [US¢/kWh] 1 DMS-FRENELL calcluated at location with DNI 2,900 kWh/m².yr; 25 yrs lifetime and 9%/yr unleveraged IRR 2 Diesel generators calculated acc. to assumptions from 2015 Lazard Levelized Costs of Energy Analysis 9.0 https://www.lazard.com/perspective/levelized-cost-of-energy-analysis-90/

Figure 22: Comparison of levelized cost of electricity between diesel generators and FRENELL small-scale application[7]

page 41

The next two charts show this more clearly than words alone can fully capture. The first shows the significant fall in costs as the size of a DMS® plant increases and, correspondingly, the sharp rise in the cost of diesel power generation as diesel prices rise.

The DMS® plants avoid the cost volatility of diesel power. Requiring no fuel other than the sun, their core cost is the initial capital.

Thereafter, their operating costs remain negligible and predictably stable. This places

DMS® ahead of diesel power in terms of cost thereby making investments in DMS® easier and less risky.

Now to the second chart. It follows below, listing the diesel prices of 25 sun-rich countries, many heavily reliant on diesel power, with the most expensive diesel at the top descending to the cheapest at the bottom.

Cyprus

Bear in mind here the direct relationship between the cost of diesel fuel and the cost of generating diesel power. This makes it easy to see where the cost of DMS® power sits in the scheme of things. As the list shows, DMS® has immediate commercial relevance as a preferred power provider in 22 of the 25 countries listed from Egypt up.

1,24

Mauritania

1,15

Mali

1

Madagascar

1

Chad

0,94

South Africa

0,84

Morocco

0,83

India

0,76

Namibia

0,64

Sudan

0,53

Jordan

0,51

Oman

0,43

UA Emirates

0,42

Kuwait

0,37

Egypt

0,21

Saudi Arabia

0,2

Algeria

0,18

Iran

0,1 0

0,2

0,4

0,6

0,8

1

1,2

1,4

Diesel cost [US$/liter]

Figure 23: Overview of diesel fuel prices in various sun rich countries with the point of FRENELL competitiveness highlighted [8]

5. Competitiveness

page 42

5.5 DMS® compared with Gas fired Steam Generation for EOR With oil production of matured oil fields requiring an increasing quantity of steam for EOR operations, solar steam generation is worthy of consideration as a cheaper option than the current use of gas.

Costs for solar generated steam can be directly converted into equivalent fuel costs for natural gas. For this a standard gas boiler efficiency of 85% has been assumed.

The energy amount of the generated steam gives a direct relation to the energy unit MMBTU which is commonly used for natural gas prices.

When using DMS® technology for EOR costs ranging between 13-24 US$/ton of steam can be achieved, depending on project IRR and solar radiation. Considering the before mentioned translation method this would correspond to equivalent fuel costs of gas between 3-8 US$/MMBTU. Comparing this with historical gas prices as shown in Figure 24, this strongly indicates that using DMS® CSP instead of gas is the preferring investment option in most oil fields using thermal EOR. The balance will likely tip further in favour of solar EOR when markets penalize fossil fuels with carbon credits and

other environmental burdens to reduce CO2 emissions.

Solar EOR also offers the further advantage of diversifying industry in oil producing countries and, last but not least, creates DMS® CSP assets that will remain in place for further electricity generation as the oil fields are fully depleted.

18 Cost equivalent of solar generated steam by using FRENELL DMS® technology for EOR

16 14

[US$/MMBTU]

12

Japan cif (LNG)

10

Germany (AGIP)

8 6

UK (Heren NBP Index)

4 US Henry Hub

2 0

1996

1998

2000

2002

2004

2006

2008

2010

Figure 24: Historical natural gas prices compared to cost equivalent of solar generated steam

2012

2014

Canada (Alberta)

page 43

6. Country Opportunities for DMS速 Applications

page 45

6. Country Opportunities for DMS® Applications

page 46

6.1 China China has been a global leader in economic growth for many years. Gross domestic product and the energy sector are closely linked. Total produced electricity is 5,500 TWh generated by an estimated installed capacity of 1,260 GW, the largest installed generation capacity in any single country. Despite the strong growth in electricity demand, production exceeds consumption and is likely to continue delivering China a positive net balance for its electricity market [9] with capacity expected to nearly double by 2040 [10].

creates long distances between power producers and consumers. A more widely distributed range of small- to medium- power plants such as the FRENELL DMS® would further help.

Various state-owned corporations and private companies emerging from the State Power Corporation manage the generation, distribution and consumption of Chinese electricity. To increase the efficiency of power generation nationwide, the central government plans to interconnect the regional grids with ultra-highvoltage transmission lines to create a single national grid [11]. This should help address the challenge of China’s geographical size that

In 2014, China was already leading the world in the money it was investing and the total capacity it was building in renewable power. As a result, the country has increased its non-fossil energy output from 9.4% of primary energy consumed in 2010 to 12% in 2015 [12]. The ambitious minimum target for 2030 is set to 20% and reliable predications suggest China will easily achieve this target. In other words, the shift to renewable energy is well underway and the

China’s energy mix is currently dominated by coal power stations [11]. These gobble up almost half of all coal consumed in the world [10]. The resulting domestic power production in China increased more than 300% between 2000 and 2013.

progress is likely to increase in speed over time.

The 13th Five-year National Development Plan drafted by the National Energy Administration (NEA) for the National Development and Reform Commission (NDRC) sets a goal to support lowcarbon energy solutions and proposes installation of a CSP capacity of more than 10 GW by 2020.

The draft also proposes a feed-in-tariff (FiT) of 1 RMB (0.15 US¢) per kWhel [13] and suggests the regions of Qinghai, Shanxi, Gansu and Inner Mongolia as possible sites for locating the CSP plants. A first CSP project with a binding FiT of 1.2 RMB (0.18 US¢) per kWhel was approved by the NDRC in 2014 for the 50 MW Delingha CSP plant operated by SUPCON [14].

Many national research programs have been carried out to promote CSP supply growth.

The research includes the techno-economic analysis of various CSP technologies to define FiT adjustments, a proven approach in Chinese

16 Range of LCoE Combined Cycle

14

LCoE [US¢/kWh]

12 Range of LCoE Coal

10 8

LCoE FRENELL CSP DMS plant

6 Feed-in Tarif

4 2 0 5

6

7

8

9

Unleveraged Project IRR [%/yr]

10

11

12

Figure 25: LCoE as a function of project IRR for a FRENELL 100 MW reference CSP plant

page 47

FiT programs for other renewable energy sources such as wind and PV. To date, 14 CSP projects with a total capacity of 1,170 MW have been short listed [15] to build a capacity of 1 GW in the envisaged pilot phase.

The forecast budget for these is around RMB 30 billion (US$4.7 billion).

Among these, 400 MW are based on parabolic trough, 470 MW on power tower and 300 MW on Fresnel collector technology.

The outlook for investing in the Chinese CSP market is highly positive. The 13th Five-year National Development Plan provides for a total

Solar 0,2%

CSP capacity of 10 GW, more than double the current worldwide installed CSP capacity. The Plan supports investments in CSP plants through an assured FiT providing a solid foundation for the introduction of FRENELL’s DMS® system to the Chinese market. DMS® is perfectly suited to support Chinese legislators in reaching their ambitious goal in generating a clean, economic source of renewable energy.

A techno-economic analysis by FRENELL for a standard 100 MW DMS® CSP power plant with 14 hour storage and a capacity factor of 44% demonstrates its keen commercial competitiveness not only in China’s current

Nuclear 2,3% Natural gas, bio-mass 3,8%

Wind 2,6% Hydro 16,8%

Coal 74,3%

Figure 26: Electricity production in China by source (2013)

Technology

Capacity

Linear Fresnel

300 MW

Parabolic Trough

400 MW

Power Tower

470 MW

Total

1,170 MW

Table 3: China’s projected CSP plants for the pilot phase [15]

Figure 27: DNI map of China [3]

electricity market but also well into the future.

Figure 25 shows the levelized cost of electricity such a DMS® CSP plant can achieve at different project IRRs. At moderate IRR’s of 5%, FRENELL’s DMS® technology appears to be cost competitive with coal, providing China’s with a significant strategic option for its long-term energy planning.

The economics of scale are unmistakeable in China. It is a large and growing market with significant potential to further extend the renewable energy portfolio by using DMS® CSP to lower China’s carbon footprint and dependency on fossil fuel imports.

6. Country Opportunities for DMS® Applications

page 48

6.2 Oman Oman is blessed with plenty of gas and oil resources, also abundant solar radiation.

Oil production and exports play a major role in financing Oman´s national budget. The use of natural gas for thermal-enhanced oil recovery since 2007 has helped to turn around declining oil production.

The natural gas is produced domestically by an established exploration and extraction industry. Oman exports more than a third of the gas from its production as shown in Figure 29. The main sales are of liquefied natural gas (LNG) to Japan and South Korea as major trading partners. Figure 31 also shows increasing domestic consumption of Oman’s LNG. According to the government’s

Thousand barrels per day

1200 1000 800 Production

600

Consumption

400 200 0 1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Figure 28: Oman petroleum and other liquids production, consumption and net exports [16]

1200 1200

Gas Usage [BCF/yr]

Gas Usage [BCF/yr]

1000 1000 800800 600600 400400 200200 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Figure 29: Usage of explored gas in Oman in different fields

Others Others Industry Industry Electricity Electricity Oil sector Oil sector Exports Exports

ambitious aim of economic diversification, the country’s industrial sector has grown heavily during the past decade, consuming over the same period more LNG than new gas-field developments can provide. As a consequence, the quantity of LNG exports slightly decreased between 2010 and 2012.

page 49

Oman has successfully introduced its first solar projects to substitute gas for steam generation in the EOR sector in order to reduce domestic gas consumption and increase gas export volumes. The National Centre of Statistics and Information notes that Oman’s oilfields currently account for more than 20% of the country’s total gas consumption [17].

Since the currently applied CSP technologies do not have energy storage, their contribution to domestic gas consumption is limited to daytime operation. DMS® CSP offers the potential to triple the contribution.

Figure 31 illustrates the economic benefits of DMS® CSP in Oman´s EOR business.

Figure 30: DNI map of Oman [3]

Two scenarios have been calculated. While the “optimistic DMS® case” assumes a solar resource of 2,500 kWh/(m²a) and an unleveraged internal rate of return of 4% (IRR), the “conservative DMS case” relies on more conservative assumptions such as DNI of 2,000 kWh/(m²a) and 10% project IRR. The derived levelized costs of energy from the techno-economic evaluation of the two

6. Country Opportunities for DMS® Applications

page 50

18 16

15,6

Furthermore, cost assumptions for selling prices of natural gas have been made considering two scenarios with high and low prices for LNG sales revenues.

14

11,5

12

11,0

9,3 10

8,0

8,4

8 6,0

4 DMS CSP at 8% project IRR

2 0

DMS CSP at 4% project IRR 0

20

40

60

80

100

120

Nominal Capacity [MW]

Figure 31: Levelized costs of electricity (LCoE) for FRENELL power only application in Oman

16

39 High LNG price scenario

35 31

12 10

27

8

® 23 FRENELL DMS conservative scenario

6

19 15

14

FRENELL DMS® optimistic scenario

Low LNG Low LNG price scenario

4

11

2

7

0

Natural gas prices/ Cost equivalent of solar generated steam [US$/MMBTU]

DMS® CSP could be also extended from EOR to the power-generation sector to further reduce domestic gas consumption. The scenarios are based on conservative assumptions for a solar resource of 2,000 kW/(m²a) and vary in power block size (10, 20, 50 and 100 MW) with comparative internal rates of return (4% and 8% project IRR). The design of the solar field has been optimized with a thermal storage of 15 full load hours to fully cover Oman´s day and night power demand, especially in high summer. The results of the case study are summarized in the graph below Figure 31.

The small-scale application, including a power block size of 10 MW, provides levelized costs of electricity of around 12 US¢/kWh assuming 4% project IRR. Due to economies of scale, costs for a 100 MW power block can be halved to 6 US¢/kWh by implying similar rates of return.

12,7

6

Levelized Cost of Steam [US$/ton]

The resulting analysis shows that FRENELL´s DMS® technology already offers a costeffective solution for EOR applications in Oman. Given that more than 15% of the natural gas consumed is used for oil fields [18], the FRENELL DMS® offers significant potential for generating additional profits by increasing sales of natural gas to the LNG market.

LCoE [US¢/kWh]

scenarios can be transformed into fuel costs by the use of a conventional boiler characteristic.

Figure 32: Costs of steam for FRENELL EOR application compared to saved fuel costs of natural gas by LNG sales

page 51

6. Country Opportunities for DMS® Applications

page 52

6.3 Jordan Jordan is perfectly placed in the world’s Sunbelt to take full advantage of CSP solar technology to power its future. Sunlight showers the country as a daily resource with a DNI up to 2900 kWh/(m²a). This provides a tremendous opportunity to end Jordan’s almost complete reliance on costly fossil fuel imports by switching on the nation’s economic lights using CSP power plants.

This switch offers the opportunity to end the nation’s dependency on fuel imports.

The total energy consumed in Jordan has been dominated by a strong and continuous growth in energy consumption averaging 7% per year from 1998 to 2014. Jordan needs more electrical power. Installed generation capacity is expected to grow from 4.3 GW in 2015 to 6.8 GW by 2020. [20]

In 2014, imported diesel and Heavy Fuel Oil (HFO) provided 92% of Jordan’s power generation introducing vulnerabilities that include several disruptions from sabotage to gas supplies imported via the Egyptian Arab gas pipeline. High import costs and government subsidies impact adversely on the country’s balance of payments and seriously drag on the national budget.

Consequently, the Jordanian Government plans to invest US$15 billion in renewable and nuclear energy to boost domestic energy sources and begin stepping back from reliance on fuel imports. The national energy strategy includes plans to add CSP, PV and hybrid renewable systems of 300–600 MW to its supply mix by 2020 [21].

The Renewable Energy and Efficiency Law (REEL) of April 2012 secured the basis for investments in the renewable energy sector.

It has two powerful elements: 1. A “direct proposal regime” allowing private companies to negotiate renewable projects directly with the Ministry of Energy and Mineral Resources (MEMR) 2. A requirement for the National Electric Power Company (NEPCO) and regional distribution companies to purchase electricity generated by renewable energy projects and pay for their grid connection These create a highly supportive environment for operators to make significant investments in renewable generation projects of which FRENELL’s DMS® CSP systems are likely to be considered a standout contender.

Total Electrical Energy Consumption in Jordan [GWh] Average annual growth rate 1998-2014

16.000

14%

12.000

12%

10.000

10%

8.000

8%

6.000

6%

4.000

4%

2.000

2%

0

0% 2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Figure 33: DNI map of Jordan [3]

16%

14.000

Figure 34: Total consumption and annual growth rate of electricity in Jordan (1998-2014) [19]

Growth Rate [%]

Energy Consumption Jordan [GWh]

Growth Rate per year of Total Electrical Energy Consumption

page 53

Jordan’s State-owned NEPCO is responsible for purchasing all grid-connected power.

NEPCO’s average energy purchasing price was 137 JOD/MWh (193 US$/MWh) in 2014 at an average crude oil price of 90 US$/bbl [22], while its subsidized average power sales price was 127 US$/MWh. As a consequence, NEPCO had a deficit of US$1.7 billion in 2014.

This is 4.6% of Jordan’s GDP, a tremendous drain on the country’s economy.

FRENELL’s DMS® systems sail past these commercial benchmarks with ease. The DMS® base-load power plants are commercially competitive even on a small scale of only 10 MWel for classic IPP models. Costs come down further with larger DMS® plants offering even greater economies of scale. In all cases, the DMS® power purchase price that is below the

selling price of Jordan’s subsidized electricity tariffs can contribute to the nation’s public budget and economy by ending the need for any and all government subsidies.

While low oil prices since 2014 have eased cost pressures on Jordan, the pressures remain nonetheless. FRENELL’s DMS® CSP plants of 20 MWel or larger still compete with hydrocarbon power generation even assuming a “pessimistic” scenario for longterm oil prices of 30 US$/bbl over the next 25 years.

Jordan’s Energy Minister announced in mid 2014 that his Government expects to commission about 1,800 MW of solar and wind power capacity by 2018. This is far more than the renewable growth strategy laid out

in the National Energy Strategy and translates into a growth in generation capacity of 600 MW per year. It speaks to the growing peakcapacity demands increasingly placed on Jordan’s electricity grid.

Given these developments and FRENELL’s global leadership in CSP capture and storage, it is not unreasonable to assume the Jordanian Government could assign to FRENELL at least 10% of the renewable capacity it is committed to adding. This translates to 60 MWel per year of power plant capacity.

To facilitate market entry, FRENELL is already working with the Jordanian Government and a Jordanian project developer to develop a 10 MWel power plant.

250 67

Coal 48GWh Other Natural gas 67 GWh 1296 GWh

Average cost of grid power

LCoE [US¢/kWh]

200 150

NEPCO's average power selling price 2014 (subsidized)

100

12% project IRR 6% project IRR

50

3% project IRR

0 Heavy fuel oil 7690 GWh

Diesel 9168 GWh

Figure 35: Electrical energy production by type of fuel in Jordan (2014)

0

20

40 60 Nominal Capacity [MW]

80

100

Figure 36: FRENELL’s electricity costs over plant size for different DMS® CSP project IRRs in Jordan

page 54

6. Country Opportunities for DMS® Applications

6.4 Egypt Egypt’s energy mix is skewed toward hydrocarbons with 88% of total installed electricity capacity dependent on fossil fuels. The share of wind and solar power represents only 3% of the total capacity as of 2014, see Figure 38.

Egypt anticipates an electricity demand growth of 6% per year to cover population growth and economic development [23].

If production capacity is to keep pace with rising demand, it too will need to grow at 6% per year by 2022 and probably beyond.

Egypt’s primary energy source is natural

gas. It accounts for 46 % of the power generation based on the Egyptian Electrical Transmission Company (EETC) annual report. A lack of new gas field developments and increasing consumption of natural gas has led Egypt to switch from being a net exporter to become a net importer of natural gas. [24] In order to compensate the negative impact on Egypt´s foreign trade balance, the Government of Egypt (GoE) has therefore started initiatives to develop further gas fields and also adopted a Renewable Energy

Plan (RE Plan) setting a target for renewable energy to account for 20% of electricity generation by 2020. This also includes a feed in tariff for 2 GW of photovoltaic plants.

The Figure 40 plots Egypt´s power demand curve for a summer day when total power demand reaches its maximum. The power demand curve is steadily increasing from 7 am before showing a strong peak from 6 to 9 pm, afterwards decreasing towards the early morning low point.

An interpretation of the graph indicates that PV can help save the gas consumption of

Figure 37: DNI map of Egypt [3]

page 55

power stations during the day. This, however, does not reduce the need for additional power capacity to cover the steadily increasing peak power demand after sunset.

While wind velocities vary both day and night, the contribution of wind power for matching demand peak will remain stochastic.

This explains why Egypt´s current energy plan proposes Gigawatts of new power plants be built to supply electricity on demand. Such plants include gas-fired Combined Cycle plants and even coal fired power stations.

DMS® CSP plants also supply on demand power. But which of these would be the lowest cost option for Egypt?

Solar radiation levels in Egypt are very predictable. This provides a high level of certainty for electricity costs from DMS® CSP plants.

Assessing the electricity cost of natural-gas-fired Combined Cycle plants is not so easy as applicable gas prices in Egypt, accounting for about 80% of total costs of gas based power generation, vary from 3 US$/MMBTU for operational onshore gas fields to 4 - 6 US$/MMBTU for developing new gas fields. The prices reach into two-digit values for imported LNG. In order to deal with price variety, Figure 41 below shows the cost of electricity from gas Combined Cycle plants resulting for various gas prices.

Since new gas power stations can only be realized when new gas supplies become available, it appears reasonable to pick 6 US$/MMBTU for domestic gas over the next 25 years as a base case for gas CC power generation cost.

Since DMS® CSP would allow Egypt to reduce expensive LNG imports, a 10 US$/MMBTU could be seen as a reasonable gas price to determine the avoided cost of gas Combined Cycle power generation.

The resulting cost of electricity would then be 7 US¢/kWh for the base case and 10 US¢/kWh from an avoided cost viewpoint.

The grey band in Figure 42 below represents

Thermal (Oil & Gas) 88%

Figure 38: Egypt Energy Mix (2014)

Natural gas production and consumption [BCF/yr]

75

Wind Solar Hydro 2% 1% 9%

70 65 60 55 Consumption

50

Production

45 40 2013

2014e

2015f

2016f

2017f

Figure 39: Natural gas production and consumption for Egypt (in billion m³)

2018f

2019f

6. Country Opportunities for DMS® Applications

page 56

the cost of conventional gas-fired base-load power ranging between the gas base and high price. It also shows the LCoE curves for CSP DMS® plants at various sizes and project return targets.

The high end of the rendered DMS® CSP electricity cost is 12 US¢/kWh at a scale of 10 MW assuming a total return on investment of 12 % per year. DMS® CSP electricity costs can also get down to 4 US¢/kWh at a scale of 100 MW when targeting only a 6% return on investment per year.

25,000

Capacity MW

20,000

15,000

10,000

Base Load

Peak Load

5,000

0

0 am

Egypt Load 2010 PV

6 am

12 am

Egypt Load 2012 DMS® Base Load

6 pm

12 pm

Complementary firing Gas Turbine

Levelized Cost of Electricity [US¢/kWh]

13,5 12,5 11,5 10,5 9,5 8,5

Imported Fuel Prices

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

Local Fuel Prices

15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0

Figure 41: Local and imported gas prices and corresponding cost of electricity (considering all installed generation technologies)

Cost of Fuel [US$/MMBTU]

Figure 40: Egypt Load demand, Peak hours during night time

Matching the base case of gas Combined Cycle power plant costs would provide room for a 12 % unleveraged project return, more than high enough to attract independent power producers.

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However things progress, the following points make it clear that FRENELL’s DMS® CSP plants can add significant value to Egypt: •

Every Megawatt of installed DMS® CSP plant capacity will contribute to covering the continuously growing power demand peak making additional peak power obsolete.

Electricity costs for DMS® CSP baseload power are highly competitive with fossil power plants, dropping to ~1 US¢/kWh after full depreciation of the solar plant.

•

•

•

•

•

While using the abundant solar source of Egypt instead of gas, power generation costs will become more reliable.

The mitigated consumption of gas for power generation will improve Egypt´s foreign trade balance.

The use of air-cooled condensers will not further distress Egypt´s water supply constraints.

Since FRENELL will manufacture key components of solar field and thermal energy storage in Egypt, the market introduction of FRENELL would help to create new employments in an emerging and sustainable sector.

A DMS® CSP can also help Egypt utilize the benefits of the Red Sea coastline. This offers the world’s the highest direct solar radiation levels with abundant free space and water access. Constructed as a combined power and desalination plant beside the Red Sea a deliver 50 MW base-load power plant could also provide 50,000 cubic meters of desalinated water every day. Since Egypt currently depends on the Nile for nearly all its drinking and agricultural water, DMS® CSP MED plants offer an attractive second option to address Egypt´s water needs.

12 DMS CSP at 12% project IRR

LCoE [US¢/kWh]

10 8

DMS CSP at 10% project IRR

6

DMS CSP at 8% project IRR

4 DMS CSP at 6% project IRR 2 Gas Combined Cycle Power Plants

0 10

20

30

40

50

60

70

80

90

100

Nominal Capacity [MW]

Figure 42: FRENELL LCoE with different financing schemes – Current cost level of DMS® CSP has been assumed for the range of 10-50 MW / future DMS® CSP cost savings have been considered for 100 MW) (Unleveraged Project rate of returns) compared to gas combined power cycle costs. Reference site for DMS® CSP plant is Hurghada (2,950 kWh/ m²a DNI); Storage and solar field designed for LCoE minimum (>14 h storage / capacity factors approx. 70%)

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6. Country Opportunities for DMSÂŽ Applications

6.5 Morocco As a consequence of Morocco´s growing economy and population, the country has faced a continuous growth of electricity demand in the recent years, which is expected to continue on short and midterm.

The total installed power plant capacity is expected to more than double from 6,400 MW in 2011 to 14,000 MW in 2020.

Due to the lack of domestic fossil energy resources more than 80% of the consumed electricity has to be either imported or

generated using imported fossil fuels.

Figure 44 shows the accumulated power demand curve of the days with highest electricity consumption in the year 2013 and 2014. Demand is lowest from midnight to 8 am. It climbs higher from noon to 8 pm and peaks significantly from 8 pm to midnight.

In 2014, coal-fired power stations dominated Morocco’s total power supply followed by gas-fired combined-cycle plants and diesel generators. Wind and hydro had a share of about 11%.

In order to reduce carbon emissions and the strong dependency on fossil-fuel imports, Morocco has established a National Energy Strategy aiming to increase the share of renewable energy to 42% by 2020 and even to 52% by 2030 while at the same time reducing dependency on energy imports and bringing the annual subsidies in the electricity sector down to US$440 million.

Figure 43: DNI map of Morocco [3]

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To achieve these targets, Morocco has established a regulatory framework with the following elements:

•

• •

Electricity demand [GW]

•

Regulated tariffs for end customers are being progressively raised to reach production costs in order to reduce the annual electricity subsidies.

The Moroccan Solar Energy Plan (MSEP) implemented in 2010 is aiming for 2000 MW of concentrated solar power to be installed by 2020.

•

MSEP is coordinated by the Moroccan Agency for Solar Energy (MASEN) through big tender processes.

Liberalization of the electricity market has resulted in access to the national grid being opened to independent producers of High and Medium Voltage.

A new regulatory authority, National Authority for the Regulation of Electricity (ANRE), was created in 2015 to fix the rules and clarify the roles of public actors in the market.

6 5,5 5 4,5 4 3,5

27. Aug 14 09. Jul 13

3 2,5

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour of the day

Figure 44: Electricity demand profile Morocco (days with maximal power demand for 2013 and 2014)

These developments have set the framework for private investments in renewable energy systems such as wind, photovoltaic and CSP. Production facilities with a capacity of 400 MW are already installed or in construction on the Ouarzazate site.

The dominant share of coal, natural gas and diesel power generation in Morocco is reflected in the specific power generation costs of the respective plants.

6. Country Opportunities for DMS® Applications

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Coal is well known to be Morocco’s cheapest fossil power source with an average cost of 8 US¢/kWh [25] whereas Diesel power generation has the highest specific cost of more than 20 US¢/kWh. This results in the average cost of fossil-fuel-based power generation being around 12 US¢/kWh. How will the implementation of Morocco´s renewable energy target affect the overall cost of power generation?

The MASEN program so far has focused on Renewables 11%

tendering CSP projects including thermal energy storage to substitute for gas- and diesel-based mid- and peak-load power supply. The three tender rounds so far have resulted in power purchase prices of 14.3 18.7 US¢/kWh. Since these price levels remain above the average cost of power generation, the resulting cost gap is being closed with government subsidies. Power Purchase agreements (PPA) are formulated between the producer of electricity and MASEN

and MASEN formulates another PPA with ONEE and then electricity is sold to the end consumer by the regulated prices; which is subsidized at 2 levels, shown in Figure 48.

Meanwhile, the latest tender round for 850 MW of wind projects has achieved a new low for the cost of wind energy, securing average bids of just 30 US$/MWh. While wind is a fairly constant source of energy in Morocco, however, it remains a volatile source that cannot be relied upon to entirely match the demand profile.

Power importations 18%

11%

14% 28%

11%

Fuel + Gasoil 7%

2011 41% Natural Coal gas 17% Coal 47%

48%

Coal Other fossil fuels Renewables

Regulates the Market, Set Prices to Access National Grid (VHV HV MV) Regulates comercial relations between ONEE and Nationa Grid users

2020

2020

27%

27%

41%

Renewables

ANRE (2015) National Autority for the Regulation of the Electricity market

Figure 47: Moroccan Regulatory Environment

48% 2011

Other fossil fuels

Figure 45: Moroccan energy mix (2014)

14%

28%

31% Solar 31% Solar Coal Coal Other fossil fuels Other renewables Other fossil fuels Other renewables

Figure 46: Moroccan energy mix in 2011 and national energy strategy for 2020

MASEN (2010) Moroccan Agency for Solar Energy Coordinates the Moroccan Solar Energy Plan Responsible for the development of a National Solar Energy Business Expertise Chooses EPCs and supervises the work Will sell the produced power to ONE at a fixed price

ONEE

National National Office Office for for Electricity Electricity and and potable potable Water Water Electricity Electricity producer producer Purchases Purchases electricity electricity from from private private producers producers and and foreign foreign countries through countries through PPA PPA (Power (Power Purchase Purchase Agreements) Agreements) Ensures transmission and distribution Ensures transmission and distribution

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Photovoltaic is expected to arrive at a low cost level of around 5 US¢/kWh. However, photovoltaic without battery storage cannot contribute at all to meeting Morocco´s demand peak during evening and night hours.

As a result, the requirements for a dispatchable mid-load power supply will increase proportionally to the expanding wind and photovoltaic share.

FRENELL DMS® CSP plants are able to address Morocco´s need for an affordable and reliable renewable power supply. Even on a scale of 50 MW, a DMS® plant with 14-hour energy storage delivers electricity prices of 9.3 – 12.2 US¢/kWh, already below today´s average cost of fossil power generation. This would mitigate the need for subsidies to fund the cost-gap as applied at NOOR 1-3.

FRENELL’s large and adaptive energy storage systems would also reliably mitigate the use of expensive diesel generators covering the late-night demand peaks.

SUBSIDIES

PRODUCER

PPA 1

On a larger scale of 100 MW, DMS® plants will deliver electricity price levels of 6.4 – 8.5 US¢/kWh. Lower even than coal, this makes DMS® today´s lowest cost option for Morocco and the best of all replacements for the country’s conventional power supply.

FRENELL´s DMS® plant provides the technology required to advance Morocco´s progress toward its 2 GW CSP target by 2020 and to do so at price levels below the average cost of conventional power generation. The larger DMS® plants will

SUBSIDIES

PPA 2

MASEN

ONEE

REGULATED PRICE

CONSUMER

PPA1 > PPA2 > REGULATED PRICES

Figure 48: Power purchase agreement process in Morocco: Ouarzazate (500 MW) / Ain Ben Mathar (400 MW) / Boujdour (100 MW) / Tarfaya (500 MW) / Laayoune (500 MW)

OUAR ZAZATE

Size

Technology

Storage Capacity

MASEN PPA 1

TOTAL INVEST

Progress

NOOR 1

160 MW

Parabolic trough

3 hours

191 US$/M Whel

1,144 mio. US$

in production

NOOR 2

200 MW

Parabolic trough

7 hours

142 US$/M Whel

1,870 mio.

start up 2017

NOOR 3

150 MW

Power Tower

8 hours

152 US$/M Whel

Table 4: Key facts of CSP project NOOR, Ouarzazate, Morocco

start up 2017

6. Country Opportunities for DMS® Applications

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even deliver power purchase prices below the actual cost of coal-fired power stations.

Midterm, FRENELL’s DMS® energy storage systems likewise provide Morocco with a serious opportunity to take full advantage of low-cost investments in PV and wind power.

With these sources expected to over supply the non-base/non-peak Moroccan energy market in the midterm, storing excess PV and wind energy is likely to become a priority in the nottoo-distant future. The DMS® storage systems provide the perfect technology to do this in the

most cost-effective way currently available.

DMS® CSP plants are consequently positioned perfectly to support PV and wind energy as a complementary renewable base as well as a mid-load energy source.

They also pave the way for Morocco to make a 100% shift to renewable power supply at substantially lower costs than today´s conventional power generation.

The cost advantages of DMS® over coalfired power stations alone make it a sound investment for commercial operators. Local

firms and employment will likewise grow from manufacturing the DMS® solar field thermal energy storage components locally.

The government budget and foreign trade balance will also benefit as subsidies are reduced along with energy imports in a winwin outcome for everyone involved including end-consumers and the environment.

20 18

17,1

16 14,1

LcoE / Benchmark [US¢/kWh]

14

13,2

12,2

12 10,8 10

9,3

8,5

8

6,4

6 NOOR II power purchase price

4

cost of coal fired power generation DMS plant LCOE at 12% project IRR

2

DMS plant LCOE at 8% project IRR 0

10

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Nominal capacity [MW]

Figure 49: FRENELL DMS® performances for Morocco

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6. Country Opportunities for DMS® Applications

6.6 Chile Northern Chile is well placed to take advantage of FRENELL’s DMS® solar technology. It is a sun-blessed country with the World’s highest solar resource of up to over 3500 kWh/(m²a) (DNI).

Chile is leading Latin America in competitiveness, income per capita, globalization, economic freedom and low perceptions of corruption – all healthy signs for a prosperous economy with high attractiveness for international investments.

Six regional electricity grids (currently not interconnected) supply electricity to gridconnected customers. Chile’s North is covered by the SING and SIC grids. These account for over 99% of Chile’s capacity.

Chile‘s copper mining industry drives a constantly growing demand for base-load electricity. Chile has been installing 600 MW/a of power-plant capacity over the past 15 years rising to 1000 MW per year over the past five years. The strong capacity growth is expected to continue as new copper mines will require more energy per unit of exploited metal.

Chile has four major fuel sources for its electrical generation. Hydro is the largest, supplying a third of the total supply from

dams in the south although with increasing supply shortages due to longer periods of dry weather. Together with Hydro power, expensive imported fuels – liquefied natural gas (LNG), coal and diesel – make up the bulk of the remaining generation supply.

In view of the challenges presented by hydro’s increasing unreliability and the high costs and vulnerabilities associated with imported fuels, Chile has taken significant steps to expand its renewable portfolio beyond hydro. It has done this by setting a Renewable Portfolio Standard (RPS) for nonhydro renewables. Starting at 5% in 2010, the standard has been gradually raising. The 2025 standard is currently 20%, which could rise as awareness and the competiveness of wind and solar technologies grow. Giving teeth to its RPS standards, the government has introduced significant penalties for operators who fail to achieve the RPS targets – 30 US$/MWh for the first violation and 45 US$/MWh for the second.

Chile‘s liberalized power market has been regulated for the past three decades. Once a year, the National Energy Commission (CNE) tenders electric energy through longterm (20 years) supply agreements substructured in time-of-day energy blocks.

Figure 50: Map of Chile’s available solar energy (Direct Normal Irradiance) shows its peaks in Chile‘s North [3]

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Nominal power has to be delivered within each time block. As a consequence, weatherdependent power production from PV and wind plants needs to be „filled up“ through power trading.

In the last tender round (2015), 100% of the energy was contracted to producers of wind and solar power even though there was no specific prescription for renewable energies, a solid indication of the competitiveness of renewables. The threshold PPA electricity prices for the three time blocks were: Block A (23:00-7:59): 9.7 US¢/kWh (370 GWh)

Block B (8:00-17:59): 7.9 US¢/kWh (550 GWh) Block C (18:00-22:59): 9.7 US¢/kWh (280 GWh) Beyond the regulated tender for longterm PPAs, power can be traded bilaterally between IPPs and other market participants, such as electricity traders, utilities and offtakers.

Beyond such long-term power purchase contracts, a spot market organises the short notice power trade. Recent capacity additions of PV plants in Chile‘s sunny North has led to the phenomenon that spot market prices regularly drop to 0 US¢/kWh during

daytime hours when the grid’s capacity has reached its limits and, hence, cannot accept the entire available PV power. This has placed several planned and already realized PV investments in severe trouble.

At an annual direct normal irradiation of 3,350 kWh/m² - which is extremely high in the global context but only average for Chile‘s North - a 100 MWel FRENELL DMS® power plant produces electricity at a levelized cost as low as 5.2 US¢/kWh. With capacity factors of 82–85%, the FRENELL DMS® plants offer the cheapest source of base-load power to Northern Chile. They

Peak Demand SIC Grid (Central&Northern Chile) [MW] Peak Demand SING (Chile's Northern grid) [MW]

8.000

2.000

6.000

1.500

4.000

1.000

2.000

500

0

Wind Hydro 905 MW 6.452 MW

Annual Capacity Addition [MW/a]

Peak Demand [MW]

Annual Capacity Additions (SIC+SING) [MW/a]

Solar 545 MW

Natural gas 3.216 MW

2014

2013

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2006

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2003

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2000

0 1999

Coal 3.554 MW

Biomass 462 MW

Other fossil 942 MW

Diesel 3.461 MW

Peak Demand SIC Grid (Central&Northern Chile) [MW] Peak Demand SING (Chile's Northern grid) [MW] Annual Capacity Additions (SIC+SING) [MW/a]

Figure 51: Growth of Chile‘s peak demand and annual plant capacity additions [26]

2.000 Figure 52: Power generation capacity in Chile‘s main grids (SIC and SING) [26]

6.000

1.500

4.000

1.000

apacity Addition [MW/a]

eak Demand [MW]

8.000

6. Country Opportunities for DMS® Applications

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are particularly well suited to supply Chile’s mining industry.

Here is a simple comparison. Take a modestsized FRENELL DMS® generating 30 MWel with a capacity factor of 82%. This can generate electricity more cheaply than the latest PPA price (11 US¢/kWh) awarded to a much larger (640 MWel) Combined Cycle power plant fired with natural gas with a capacity factor of 68%. [27]

FRENELL’s multi-tank energy storage is also increasingly important to northern Chile, particularly so with copper mines demanding base-load power and day-time PV output falling out of favour.

With its cost-efficient DMS® solar and storage technologies, FRENELL can contribute to Chile‘s transition from fossil to renewable energies. DMS® provides power on demand at highly competitive prices that are cheaper than

• •

•

other CSP technologies both PV and wind alternatives because DMS® supplies power on demand thereby removing the PV and wind power trading risk LNG-powered Combined Cycle plants.

12

10

LCoE [US¢/kWhe]

8

6

4

2

0

30

40

50

60

70

Nominal electrical Power [MW] DMS CSP at IRR 12%/year DMS CSP at IRR 8%/year PPA electricity price of 640 MW Combined Cycle

Figure 53: Levelized cost of electricity of FRENELL DMS® plants in Northern Chile

80

90

100

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6. Country Opportunities for DMS® Applications

6.7 United States With a high annual Direct Normal Irradiance (DNI) of up to 3,000 kWh/m², the southwestern states of the United States – California, Arizona, Nevada and New Mexico – are well suited for Concentrated Solar Power.

Southwest US is a wholesale electricity market. Utilities typically own the generation, transmission and distribution systems that serve electricity consumers. Independent System Operators (ISOs) operate the grid transmission system independently of and foster competition for electricity generation among wholesale market participants.

Presently, PV generation is one of the fastest growing areas of renewable energy in the US with 20 GW annual addition of PV capacity projected by 2020 [28]. Especially for California, the growth of variable PVgeneration will produce a duck-shaped curve of net load (system load after subtracting wind and PV) [29]. This is anticipated to result in surplus power plant capacity in idle mode during peak PV output with the corresponding need for fast-ramping power generation as PV output drops in the evening. Estimates indicate a ramping capacity of 13 GW will be needed over three

hours to meet evening peak demand. This condition is most likely to occur on spring days with mild temperatures and high solar irradiation. Meanwhile, PV and wind are already causing over-generation and curtailment problems today that are likely to further increase over coming years [30].

FRENELL DMS® plants can play a vital role here. They offer the ideal complement to PV generation, as shown in Figure 55. During the day, a FRENELL DMS® plant can run at reduced or minimum load while charging its integrated storage system. When PV

Figure 54: DNI map of United States [3]

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generation diminishes in the evening, it can then ramp up power generation to full load to meet the evening peak thereby shifting output to periods that are also peak price. The rampup rate is constrained only by steam turbine capacity, not by the DMS® CSP system having the solar energy yield charged in the multi-tank system ready to be dispatched.

The US has a supportive regulatory environment for renewable energy. California in particular has a policy framework that supports the adoption of Concentrated Solar Power with integrated energy storage. Key elements of

California’s policy framework include: • Renewable Portfolio Standards to procure up to 50% of electricity from renewables by 2050 • A mandate to add 1.3 GW of energy storage by 2020 • A Federal Solar Investment Tax Credit of 30% till 2019 • the development of grid policies to assist the integration of a high share of renewables ultimately favouring CSP with storage to offset non-demanddriven growth of PV generation

Government policy aside, the straight commercial advantages of FRENELL’s DMS® are compelling by themselves. Compared with 2015 electricity cost estimates by the California Energy Commission (CEC) [31], the FRENELL DMS® is the cheapest dispatchable energy technology at sun-rich locations in southwestern US, as shown in Figure 56.

Even at a relatively small-scale, a FRENELL DMS® plant of 30 MWel capacity already delivers cheaper electricity than other CSP technologies at larger scale and is comfortably cost competitive with far larger Combined Cycle power plants fired by natural gas.

100%

80%

60%

40%

20%

0%

0 am

DNI

6 am

12 am

Duck Curve - Net Load in California

6 pm

12 pm

DMS® power supply

Figure 55: Typical load profile predicted for California with high share of PV generation for a spring day

6. Country Opportunities for DMS® Applications

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FRENELL also has a clear competitive advantage in another area of critical strategic importance to the US power industry – cost-effective energy storage.

By combining FRENELL´s thermal energy storage technology with an existing steam power cycle, excess power from the grid can be stored and dispatched flexibly and cheaply. The storage is charged during times of low or even negative electricity prices, i.e. when wind and PV are already being curtailed from power supply to the grid.

The Multi-Tank storage technology is particularly suited to the US market for the following reasons:

• Additional storage resource capacity will be needed for US grid reliability with a high share of renewable energy, which is why annual US storage capacity is projected to grow more than 1 GW each year by 2020.

• The US Energy Information Administration (EIA) expects 40 GW of coal-fired generating capacity will be retired by 2025 [32] due to low prices for natural gas, competition from renewables and compliance with emission standards. The steam power cycles of these plants can be retrofitted with FRENELL’s Multi-Tank storage and participate in the market as flexible backup power resources.

Therefore, FRENELL’s DMS® MultiTank storage technology is able to add significant value to the US electricity grid by providing cheap energy storage. At the most fundamental commercial level, it is significantly cheaper than the most ambitious cost goals optimistically set for future battery technologies.

capacity factor PPA Crescent Dunes Tower 110 MW [a]

58%

CEC: Parabolic trough 250 MW [b]

59%

CEC: Tower 100 MW [c]

57%

CEC: Natural Gas Combined Cycle 550 MW [d]

56%

30 MW [e]

43%

100 MW [e]

52% 0

Figure 56: Levelized cost of electricity for FRENELL DMS®, Combined Cycle and other CSP technologies in Southwest USA

13,5 12,7 11,4 11,6 10,7 8,3 2

4

6

8

10

12

14

16

LCoE [US¢/kWh]

[a] PPA of Crescent Dunes tower project in Tonopah, NV, 110 MW with 10 h storage; subsidized with Investment Tax Credit and Loanguarantee [b] 250 MW parabolic trough plant with 6 h storage; 7% WACC; cost assumptions from California Energy Comission (CEC) study [c] 100 MW tower plant with 11 h storage; 7% WACC; cost assumptions from CEC study [d] 550 MW CC plant with taxes; 6.2% WACC; $4.5/MMBTU fuel price and 4.1% annual fuel price escalation; cost assumptions from CEC study [e] FRENELL plants with 16 h storage; 7% WACC; costs for grid connection, project development, licensing and financing from CEC study

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7. Summary and Outlook

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7. Summary and Outlook

page 74

7. Summary and Outlook Solar power is coming of age. It has at last moved from being a peripheral add-on to any grid-level power investments to become a mainstream choice worthy of the most serious consideration. 2015 marked the first year when more money was invested in renewable energy than conventional fossil-fuelled electrical power, a transformative trend likely to continue and probably accelerate.

The early introduction of photovoltaic and wind power opened the door to and set the pace for the increasing adoption of and ultimate full transition to renewable power generation. PV and wind have become the cheapest sources of electricity while also paving the way to reduce the world’s carbon footprint of power generation.

Commercially, it has made good sense to start with the lowest cost options and stick with them until they reach the point of market saturation, which they are close to doing, in some regions such as the southwest of the United States. The commercial downside of such investments since it also leads to a significant increase in the cost of of dispatchable power required to cover the remaining supply gaps.

This in no way diminishes the importance of PV and wind power. They continue to be highly relevant. They also continue to demand a commercially competitive energy storage response to take full and best advantage of their contributions.

Developments in battery storage may yet

give them their day as a complete energy package. Just not yet. Battery costs still remain too high to be applied as energy storage on transmission grid level, although lithium-ion batteries could provide a return in retail markets where high electricity prices are charged to end-consumers.

In consequence, the search for cost-effective grid level energy storage has become and remains central to planning the future energy needs of the world. It is here that FRENELL’s DMS® CSP technology with energy storage comes to the fore. It offers the technological leap the industry has been looking and waiting for. DMS® solar power plants provide the lowest-cost option for base- to mid-load power that balances

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supply gaps between volatile renewable sources and the power demand curve. No one should underestimate the importance of this.

DMS® is a significant breakthrough as renewable energy can now deliver the entire spectrum of power requirements more cheaply than fossil fuels in regions where rich loads of solar energy soak the earth. In doing so, it provides the tool for leaping over fossil power generation to make a transition to 100% renewable power supply. What’s more, the DMS® energy storage technology even provides countries beyond the sunbelt with today´s lowest-cost option for gridlevel energy storage and re-transmission.

The FRENELL DMS® is adaptive to an investor’s commercial needs and priorities.

It is designed to meet the full requirements of any small to medium commercial power provider. It is dispersive so can be widely distributed to meet varying regional needs.

It is flexible as either a free-standing facility or combined with others as a co-generator.

Above all, it is highly cost competitive with conventional power generation.

These should be reasons enough for any investor to give FRENELL’s DMS® serious consideration when examining options for any new or extending any existing power facilities. Governments of sun rich emerging countries also have much to gain as DMS® provides escape from the heavy financial

burdens they carry in subsidising the high costs of conventional power generation.

FRENELL is a global pioneer in solar power engineering. It is committed to delivering renewable energy solutions giving the highest value to investors for the lowest cost. While the preferred energy mix in any region will depend on a multitude of factors, its DMS® makes solar the standout choice for investors looking to optimise their renewable energy investment portfolio.

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Abbreviations

page 78

Abbreviations ACC

Air cooled condenser

ANRE

National Authority for the Regulation of Electricity (Morocco)

BOO

Build-Own-Operate

Ownership of a project remains usually with the project com-pany, which gets the benefits of any residual value of the pro-ject.

BOT

Build-Operate-Transfer

Form of project financing, wherein a private entity receives a concession from the private or public sector to finance, de-sign, construct, and operate a facility stated in the concession contract

CC

Combined cycle

A CC power plant uses both a gas and a steam turbine together to produce up to 50 percent more electricity from the same fuel than a traditional simple-cycle plant. The waste heat from the gas turbine is routed to the nearby steam turbine, which gener-ates extra power.

CEC

California Energy Commission

CHP

Combined Heat and Power

Power station which generates electricity and process heat at the same time

CNE

Comisión Nacional de Energía

National Energy Commission of Chile

CO2

Carbon dioxide

Gaseous emission produced by burning fossil fuels

CoGen

Cogeneration of power and desalinated water

see CHP

CSP

Concentrated Solar Power

Generation of solar power by using mirrors or lenses to concen-trate a large area of sunlight onto a small area

DMS®

Direct Molten Salt.

Registered Trade Mark by FRENELL. Describing a CSP technolo-gy using molten salts as heat transfer fluid inside the solar field as well as storage medium.

DNI

Direct Normal Irradiance

The amount of solar radiation received per unit area by a sur-face that is always held perpendicular (or normal) to the rays that come in a straight line from the direction of the sun at its current position in the sky

DoE

Department of Energy, USA

EETC

Egyptian Electrical Transmission Company

EIA

U.S. Energy Information Admin-istration

EOR

Enhanced Oil Recovery

Thermal process for increasing the amount of crude oil that can be extracted from an oil field

EPC

Engineering, Procurement and Construction Services

Project development with the goal to deliver technical systems turnkey to a customer

EY

Ernst&Young

Multinational professional services firm headquartered in London, United Kingdom

FIT

Feed-In-Tariff

Policy mechanism designed to accelerate investment in renewable energy technologies

GDP

Gross Domestic Product

Monetary measure of the value of all final goods and services produced in a period (quarterly or yearly)

GoE

Government of Egypt

HFO

Heavy fuel oil

HV

High Voltage

IPP

Independent Power Producer

Entity, which is not a public utility, but which owns facilities to generate electric power for sale to utilities and end users

IRR

Internal Rate of Return

Method of calculating rate of return which makes the net pre-sent value of all cash flows (both positive and negative) from a particular investment equal to zero

LCoE

Levelized Cost of Electricity generation

Economic assessment of the average total cost to build and operate a powergenerating asset over its lifetime divided by the total energy output of the asset over that lifetime

Fraction obtained from petroleum distillation, either as a dis-tillate or a residue

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LCoS

Levelized Cost of Steam

Economic assessment of the average total cost to build and operate a steamgenerating asset over its lifetime divided by the total steam output of the asset over that lifetime

LCoT

Levelized Cost of Thermal ener-gy generation

Economic assessment of the average total cost to build and operate a thermal energy generating asset over its lifetime di-vided by the total thermal output of the asset over that lifetime

LCoW

Levelized Cost of desalinated Water generation

Economic assessment of the average total cost to build and operate a desalination plant over its lifetime divided by the total water output of the asset over that lifetime

LFR

Linear Fresnel

CSP collector technology which uses long segments of mirrors to focus sunlight onto a fixed absorber tube located at a com-mon focal line

LNG

Liquefied Natural Gas

MASEN

Moroccan Agency for Solar En-ergy

MED

Multiple-effect Distillation

MEMR

Ministry of Energy and Mineral Resources (Jordan)

MSEP

Moroccan Solar Energy Plan

MV

Middle voltage

NDRC

National Development and Re-form Commission (China)

NEA

National energy Administration (China)

NEPCO

National Electric Power Compa-ny (Jordan)

NOOR

Solar power plant in Ouarzazate, Morocco

NREA

New and Renewable Energy Authority (Egypt)

NREL

National Renewable Energy Laboratory (USA)

O&M

Operation and Maintenance

ONEE

National Office for Electricity and potable Water (Morocco)

PBT

Parabolic Trough

CSP collector technology which uses long segments of bended mirrors to focus sunlight onto a tracked absorber tube

PPA

Power Purchase Agreement

Contract for the purchase of electrical energy

PT

Power Tower

CSP technology which produces solar heat by focusing sun light with multiple heliostats at an absorber located at top of a cen-tral tower

PV

Photovoltaic

Technology of converting solar energy into direct current elec-tricity using semiconducting materials that exhibit the photovol-taic effect

RPS

Renewable Portfolio Standard

Regulation that requires the increased production of energy from renewable energy sources

SAM

System Advisor Model

Performance and financial model designed by NREL to facilitate decision making for people involved in the renewable energy industry

SF

Solar Field

SIC

Sistema Interconectado Central

Chile's central region's grid, which accounts for 68.5% of national generation and serves 93% of Chile's population

SING

Sistema Interconectado del Norte Grande

Northern grid of Chile, which accounts for about 19% of national generation

TES

Thermal Energy Storage

WACC

Weighted Average Cost of Capi-tal

Distillation process used for sea water desalination

Three-stage project with total power output 2.000 MW in 2020

the rate that a company is expected to pay on average to all its security holders to finance its assets

page 80

Units a

Year

bbl

Barrel

d

Day

GW

Gigawatt

1 Billion Watt (109 W)

GWh

Gigawatt-hour

1 Billion Watt hours (109Wh)

h

Hour

JOD

Jordan dinar

km

Kilometer

kWh

Kilowatt-hour

1 Thousand Watt hours (10³ Wh)

kWhel

Kilowatt-hour electric

1 Thousand Watt hours (10³ Wh) of electric energy

m²

Square meter

m³

Cubic meter

MMB-TU

Million British Thermal Units

1 MMBTU ≈ 293,071 kWh

MW

Megawatt

1 Million Watt (106 W)

MWel

Megawatt electric

1 Million Watt (106 W) of electric energy

MWhel

Megawatt-hour electric

1 Million Watt hours (106 Wh) of electric energy

MWth

Megawatt thermal

1 Million Watt (106 W) of thermal energy

RMB

Chinese Yuan

TWh

Terawatt-hour

USD

US Dollar

yr

Year

1 BBL (U.S.) = 0,158 987 3 m³

1 Trillion Watt hours (1012 Wh)

Appendix Levelized cost of electricity (LCoE) By definition, the levelized cost of electricity (LCoE) is the price of electricity (p) resulting in a NPV of 0, thus:

In the same way, by definition, the project internal rate of return (IRR) ist the value (d) resulting in a NPV of 0.

The net present value (NPV) is defined as the difference between the total life cycle revenues and the total life cycle cost of a project. For a power generation project with an initial investment I at year 0, annual constant O&M costs O, annual constant energy yield E and annual constant electricity selling price p all between year 1 and n the net present value is:

With: NPV the net present value in € E the energy yield in MWhel p the electricity selling price in €/MWhel 0 the annual O&M costs in €/a α the actualization factor The following assumptions have been made for calculating LCoE values presented in this White Paper: • Total investment in year 0 • Annual energy yield and O&M costs constant over the time period (similar to assuming no increase in O&M over time and no performance degradation) • Annual energy yield and O&M costs accounted from year 1 to n (similar to assuming a 1 year construction time)

page 81 Units/Appendix

page 82

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page 84

Whitepaper Version 1.0, Copyright FRENELL GmbH 2016; unless otherwise indicated, this publication may be used freely, shared or reprinted, as long as FRENELL is acknowledged as the source.

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