Another week, another set of depressing headlines about the cost of nuclear power. The AP1000 plants being built in the US states of Georgia and South Carolina now look as though they will cost 30% more than earlier estimates. Late last month the owners of the Georgia facility had also announced further construction delays.
The search for reliable baseload carbon-free electricity continues in the face of nuclear’s mounting problems. Despite its high capital cost, attention is increasingly directed towards ‘Concentrating Solar Power’ (CSP), a technology that uses focused light to heat a liquid that turns to steam and drives generators. The huge advantage of this approach is that energy can be stored in the form of very hot fluids and turned to electricity in the night hours.
People have been dreaming of putting CSP in the Sahara for decades. The ideas have come to nothing. But now interest from commercial and experienced investors is rising. This week I spoke to the backers of a large potential CSP plant in the Tunisian desert.(1) TuNur intends to collect energy from thousands of reflective heliostats around a central tower, the approach pioneered in Spain but now deployed in several places around the world, including the 390 MW project at Ivanpah on the California/Nevade border. What do the finances of ventures like this look like? What are the obstacles to deployment?
The full plan for the Tunisian project envisages a maximum of 2.5 GW of electricity generation. This scheme will occupy around 10,000 hectares (10 by 10 kilometres) and produce approximately 10 TWh a year (about 3% of UK annual consumption). This scheme sees a high voltage DC undersea line running from Tunisia to the Italian coast north of Rome. The final customers could be as far away as the UK provided that grid capacity is available across Europe, something that is far from guaranteed.
Stage 1 will be two 125 MW CSP fields. This pilot will be different to the main scheme because it will send its electricity to Malta, and then on to Italy via an existing transmission line. The projected cost of this initial scheme is about €1bn for the solar fields and €500m for the cable, under the ground in Tunisia and then across the Mediterranean. The total cost is therefore somewhere around £1.1bn at today’s £/€ exchange rate, or around £4.30 a watt.
Because they can store heat, the capacity factors of CSP plants are high, reaching over 40%. The total output of the pilot will be about 1 TWh a year, worth around £50m at today’s unsubsidised UK wholesale prices. A return of little more than 3% on the investment, before even considering the cost of maintaining the plant or paying fees for electricity conveyance is clearly insufficient. So the scheme’s backers are looking for UK Contracts for Difference (CfDs) similar to those available for other newish technologies such as offshore wind. For the first years of the new electricity market in the UK, offshore wind will obtain support of £155 per MWh.
The backers of the TuNur project point to the relative reliability of their power source – the Saharan sun – compared to North Sea winds as a clear justification for CfD support at this level. As nuclear’s prospects in the UK fade, DECC appears to be increasingly sympathetic to allowing imported electricity to participate in the UK subsidy regime. But, as yet, no final decision has been made that would allow the Tunisian project to receive the high prices guaranteed by the UK regime.
As a point of comparison, rumours suggest that DECC will eventually offer the Swansea tidal lagoon around £160 a MWh, and the TuNur people comment that they would be very happy with the same treatment as the lagoon. In fact their prospectus sees the possibility of support levels below €100/MWh for the last 1GW of their scheme. At today’s exchange rates, this would be £75/MWh, far less than the price being offered to the beleaguered Hinkley Point nuclear project. Nuclear support also extends for 35 years, far longer than the 15 guaranteed under CfDs.
Apart from the price, what are the main obstacles to this hugely important desert scheme? The first is that Tunisian law has not yet fully accommodated itself to the export of electricity from this project although the backers say that the final approval is highly likely to be forthcoming soon. Second, bank finance needs to be raised to accompany the shareholder’s money. This type of project, which will allow diversification of energy sources along the whole of the North African coast, is ripe for support from multinational development banks and fund-raising is likely to succeed if a guaranteed market for the electricity, such as the UK, can be found.
The third requirement is a commitment from interconnectors from the UK to the continent to provide long-term routes for 250 MW of power (less the inevitable losses on the cable to Malta) to get here. I think this may be more of a problem that the project’s backers believe. The current interconnectors from France and the Netherlands are currently fully loaded most of the day. Wholesale power prices in the UK are generally higher than in Europe so British utilities already buy as much from the continent as they can.
There are plans for more cables across the Channel and North Sea, including an interconnector that would use the Channel Tunnel but these links have yet to be built. In addition, capacity would have to be reserved on a long-term contract, before the Tunisian power can gain entirely reliable access to the UK market at a pre-determined price for conveyance across the Channel.
A fourth concern is the long-term stability of Tunisian politics. The country is the single obvious success story of the Arab spring, but many investors will worry about the large amounts of capital that need to be invested and the relatively long payback period.
‘Old-fashioned’ CSP plants that use parabolic mirrors in straight lines need relatively large amounts of water to cool the generating plant. Solar towers such as will be employed in Tunisia need very little water because they can be air cooled. Some water is needed for cleaning the heliostats after dust storms but the project intends to get this in recycled form from a local agricultural venture. The recycled water would otherwise not be used because of its high mineral content.
Lastly, the performance of the flagship Californian Ivanpah project, built with very similar technology, will concern funders. At the last report in November of last year, Ivanpah was generating about half the electricity that was projected when construction started. The reasons are unclear but it looks like cloud cover, induced particularly by contrails of airplanes flying into Los Angeles airport, is much higher than predicted. The Tunisian project has three years of sunshine data and the numbers are now independently verified. So if the Ivanpah problem arises because of lower sunshine than estimated the effect shouldn’t be replicated in Tunisia.
As time passes, the eventual victory of solar power as the primary world energy source in a decarbonised world is looking increasingly secure. And as more projects are completed, and costs come down, CSP seems to be possible contender as a principal provider of baseload power. The UK’s entire electricity needs could be provided by 30 solar farms of TuNur’s eventual full extent, occupying a total desert area of about 100 km by 30 km, a pinprick in the Sahara. The arguments in favour of allowing the Tunisian project into the UK’s CfD subsidy scheme are overwhelming.
(1) Thank you very much to Kevin Sara and Daniel RIch of Nur Energie for speaking so openly about this exciting project. (I have no commercial interest in the scheme).