Technology leadership currently held by Europeans for STE is to defend not only for the benefit of Europeans but also understood as the firm European contribution to achieve a more sustainable development for all countries for the world. This implies already today a strong collaboration with many other countries endeavouring together to blend their respective assets for a common goal.

• In this context, one of the five priorities of the European Commission was defined in May 2014 by J. C. Juncker:

“We need to strengthen the share of renewable energies on our continent. This is not only a matter of a responsible climate change policy. It is, at the same time, an industrial policy imperative if we still want to have affordable energy at our disposal in the medium term. I therefore want Europe’s Energy Union to become the world number one in renewable energies.”

• The same was later included among the key actions of the commission elected in November 2014:

“An ambitious climate policy is integral to creating the Energy Union. Actions include the EU Emissions Trading System (EU ETS), strong but fair national targets for sectors outside the ETS to cut greenhouse gas emissions, a roadmap towards low-emission mobility and an energy policy which makes the EU world leader in renewables”.

Technology leadership depends on early market penetration, clear strategy and better resources than those of competitors.

Being a (market) leader implies meeting at least one of the following conditions:

• having an earlier penetration on the relevant market, i.e. having been the first to enter the market;
• having been the first to adopt a strategy for market penetration (where, when, preparedness for a triggering event, etc.);
• having more financial, technological and commercial resources than competitors, even it was not the first to enter the market.

Technology leading companies must constantly monitor their environment so to defend their leadership (unless they happen to act in a legal monopoly position, which is not likely to be the case any longer). To do this, companies can opt for 2 strategies:

• have patents or trade secrets that duly protect a product or product design against imitation, especially based on sustainable international legal framework on competition.
• increasing primary demand: either seeking for new consumers (strategy of market expansion or geographical extension or segment) or proposing new uses for products or making more consumers consume the product. This means also defending market shares. In order to stay at the forefront of innovation, companies must improve their margins by acting on the quality / price ratio or be able to adopt an adapted “political” packaging.

No single STE power plant has been built so far worldwide without using European technology…

[…]

STE is the only one or among the few technology sectors where European companies hold technology leadership due to a STE deployment program launched in Spain back in 2004.

This deployment initiative taken by the Spanish government led to the construction of some 50 STE power plants in Spain – a wise political decision that indeed fulfilled at that time the conditions for achieving leadership in a new renewable energy technology.

Spain and the other countries such as Germany, Italy, Denmark, France, etc. that participated in this wise STE deployment program since 2007 as developers and suppliers have built up not just excellency in solar research, but also an entire STE industry representing the whole value chain.

Today, the STE sector differs fundamentally from solar PV especially in the sense that there is no STE power plant built today in the world that does not use technologies developed by Europeans or where European entities are encouraging innovation.

Amid the global competition for technologies and markets, this is not a minor aspect, and Europe should indeed be interested in defending this position.

Defending EU technology leadership in STE without a home market (STE plants built again in Europe) is an illusion.

[…]

The STE must expand (first in a EU “home market” and also on world markets) before the new entrants overrun European industries.

How quick and how large energy markets develop in EU (or in any other market of the world) depends on:

• Coherent energy policy programmes and smart support instruments
• Energy cooperation across borders and continents
• Fair sharing the investment risks for 1st-movers
• Optimized efficient financing instruments

The idea that European STE technology can be defended without giving to the technology immediate local applications is much of an illusion: R&D (should) follow market needs /technology leadership cannot be engineered in labs without corresponding markets. This is especially true for STE taking into consideration the crucial objective of cost reduction, for which incremental innovations will be easier to introduce to STE markets without further negative impact on costs.

Finally, the STE success story that started for Europe in Spain (due to the optimal solar resources of the country and the shared vision of both right (2004) and left (2007) wing political parties) was put at threat by retroactive changes of the legal framework about renewables from 2012 on.

The key feature is manageability of STE generation together with a huge cost reduction potential that will make a further increase of variable RES into the power system possible and sustainable.

[…]

Solar Thermal Electricity (STE), also known as Concentrating/Concentrated Solar Power (CSP), is a technology that produces heat by using mirrors to concentrate sunlight into a linear or central receiver, which brings the solar energy to a heat transfer fluid. This heat can be stored for hours or used right away to generate electricity – usually with a steam turbine – or as process heat for industrial application.

Solar thermal electricity generated from plants with thermal storage system deliver firm electricity on demand without additional cost – even after sunset.

STE is grid-friendly not only due to thermal energy storage, but also due to the mechanical inertia provided to the grid by conventional turbines, since solar thermal power plants produce solar thermal electricity in a similar way to conventional power stations – based on absolutely reliable technology.

Five main elements are required: a concentrator, a receiver, a heat transfer fluid, a storage system, and power conversion block. Many different types of systems are possible, including combinations with other renewable and non-renewable technologies. So far, plants with both solar output and some gas or biomass co-firing have been favoured in the US, North Africa and Spain. Hybrid plants help produce a reliable peak-load supply, even on less sunny days.

The reason was a political decision in the aftermath of the financial crisis 2008 motivated by an apparent cost gap between STE and variable RES in times where no investor had to care for system adequacy.

[…]

While substantial STE investments occur on world markets using EU technology and combining advantages of all RES technologies case-by-case in response to local needs, EU stopped investing in STE.

• Due to regrettable political decisions, market failure for accessing attractive risk finance and adverse general conditions (including policy and regulatory uncertainty in the aftermath of the 2008 financial crisis in Europe), no new plants have been built in Europe since 2013, whereas more than 20 have been built or approved in third countries – still with participation of EU companies and in all cases using European technology.
• More concretely, policy-makers were discarding CSP because of the apparent cost difference generated by the mass deployment of PV especially in Germany, the overcapacities in the power markets in many European countries and the substantial restrictions in Italy for constructing large plants.
• Meanwhile, international competitors are dramatically stepping up technology and deployment efforts in their respective home markets. Deprived from a home market, EU companies will no longer be able to offer references on technology advances when competing for contracts.
• The business cases of European companies, which invested in Spain, have been dramatically damaged by the retroactive measures on their plants. The changes in the regulation even prevent the owners to introduce innovations on the operating plants.
• European and international investors’ confidence has been severely damaged by European policies from 2012 on and;
• innovative cooperation mechanisms made available in the 2009 RES Directive left so far unused by Member States.

This led to a situation where – just as for any other energy technology – the STE sector in Europe is today depending on a political commitment by some countries to create the necessary boundary conditions (i.e. legislative and financing instruments) for achieving the agreed targets. This will also provide again sufficient confidence to investors for taking higher entrepreneurial risks in Europe.

The retroactive measures fully destabilized the revenue stream of operators and investors, knowing that the total investment in Spain of 14Bn€ was held only to 65% by Spanish entities and 35% by foreign investors.

[…]

The measures were in detail:

• RDL 1614/2010 (Dec) All the plants were obliged to choose the fixed tariff option on the first operation year. This was worth 120 million €.
• RDL 2/2012 (March) Tax reform reducing the discount of financial costs on the
  profits before taxes. The impact was 50 basic points on the profits after taxes.

Followed in 2012 and 2013 by

• Law 15/2012 (Dec). 7% new tax and abolition of premium for the electricity produced from natural gas. A share of 15% of electricity out of gas was previously officially established by R.D. 661/2007.
• RDL 2/2013 (Feb). Abolition of the choice “pool price + premium”. This represented around 13% income reduction. Change of the updating index. This has an impact of 2% income reduction.

The impact of these retrospective measures on the Cash Flow and Debt Service of the projects was from last December to February 2013 already a 37% income reduction that was simply impossible to be covered by the projects.

• The average Debt Service Ratio of the “Project Financing” contracts was usually over 1.30. The cash flow of the Solar Thermal power plants has been dramatically affected by the above commented measures. The current DSR of most plants are below 1.0.
• There were difficult negotiations between the owners of the plants and the banks in order to find specific solutions for each case.
• New repayment schedules with longer tenors were usually not enough. Increasing the equity was requested, but shareholders were not prepared to provide additional funds for a non-profitable business any longer.

Main financial figures of the STE sector in Spain

• There are today 2300 MW connected to the grid corresponding to 50 plants
• Most of the plants (95%) are parabolic trough type 50 MW each. 40%
   are provided with large storage capacity (7.5 hours)
• Roughly speaking the total investment of the global STE deployment in Spain
   amounted to 14000 million €.
• Regarding Equity, 65% is Spanish while 35% is worldwide owned (Europe, USA,
  Japan, Arab Emirates, etc.)   
• The average leverage of the first 40 plants was 80% while most of the latest ones have been built without the typical project finance scheme.

The reality behind the Spanish Electric Deficit

• Renewable energy sources (RES) are often blamed as responsible for the electrical deficit in Spain which is absolutely false. This has been the focus of an aggressive campaign by the utilities to protect themselves from the big mistake of building close to 30,000 MW of subsidized Combine Cycles in the last years.
• The deficit until 2008 was the difference between the total costs and income of the electrical system. Since 2008 is the difference between the regulated costs and the corresponding income as the generation costs are entirely transferred to the bill. In 2008 the deficit amounted to around 15,000 million € when the deployment of RES was not significant.
• the premiums to RES represented at that time 1/3 of the total regulated costs, but they have been subject to the largest reductions with the last retrospective legal measures.
• The reason for the deficit is the hesitation of the Spanish Governments since 2004 – to establishing the necessary tariff to cover the total costs of the whole electrical system.
• The fiction of delaying the payments for the incurred costs implies currently an amount over 2 Bn€ per year as financing costs. As this has been caused by the political decision of “no tariff increase” it should be taken by the public budget rather than by the electricity consumers. The accumulated impact of this political decision is a significant part of the current 23,Bn  € deficit.
• There are some items in the regulated costs that shouldn’t be charged to the consumers of electricity:
  • The compensation in the extra-peninsula territories for having the same electricity cost than in the main land. That amounts to 1800 million € per year.
  • The “interruption costs” received by some big electricity consumers for accepting to be disconnected in case of power deficits. This was reasonable until 2005 –although it was seldom the case – but it currently became a kind of subsidy to these companies, due to a large surplus of capacity. Such lower electricity prices allowed them to remain in Spain. This amounts to 750 M€ per year.
• Although RES received between 5 to 6 Bn € per year during the last years, they contributed to reduce the pool price of the kWh. Their accumulated effect since the beginning of the Special Regime system was a net saving of around 9 Bn € for electricity consumers.
• Premiums received by STE plants represented around 3% of the total premiums received by all the technologies of the Special Regime (cogeneration, renewable, and others) until now. STE ranked 4 in the premiums after PV, Wind, and Cogeneration (CHP). However, STE plants have been dramatically and discriminatory affected by the last regulations.
• Transport and specially distribution are the main part of the regulated costs amounting to around 40%. The EBITDA of the distribution business of the utilities has been very high during the last 10 years when the electrical deficit has been generated. There is more room in this item than in RES to reduce the deficit.
• Payments at pool price of Nuclear and Hydro generation has resulted in enormous windfall profits during the last 10 years. Establishing a tariff with a reasonable profit for these technologies could provide savings of around 1,5 Bn € per year.

The Spanish government loses first ICSID arbitration claim over retroactive measures against Solar Thermal Electricity (STE) plants.

[…]

The retroactive measures taken against STE plants by the Spanish government in 2012 – 2013 and consolidated in 2014 resulting in a massive change of the remuneration scheme for RES power plants have now been unanimously condemned by ICSID, the International Center for the Settlement of Investment Disputes. Among the 26 arbitration claims against these changes filed at the ICSID by several RES industries, the case of the STE industry (20 claims) stands out since these measures brought the deployment of STE to a stop in Europe and still negatively impact the business development of European companies holding worldwide technology leadership in STE technology.

Well known is that right after the STE plants were built, the revenue streams of plant operators were suddenly cut by a third(!).

Less known is that ahead of these cuts, the solar thermal sector had reached an official agreement with the Spanish government so as to keep a stable remuneration for previously constructed or awarded plants. By this agreement, the STE sector accepted delaying both the operation start of the plants and the remuneration regime “pool + premium” by one year compared to the initially authorized schedule. This resulted in savings for the Spanish system of around 1.4 billion € already between 2011 and 2013. While the STE sector scrupulously fulfilled its commitments (and effectively refrained from a 1.4 billion € income), the Spanish government did not comply with its obligations.

The main argument used by the Spanish government to defend the changes was that “entrepreneurs should have known that laws can be changed”.  Indeed, all entrepreneurs knew and still know it, but the ICSID now arbitrated that such massive sudden changes of agreed rules may not occur in whatever way. The Spanish Ministry recently said in a press release regarding the arbitration award of ICSID that each arbitration is “different”. No doubt about that. However, the common denominator of further arbitration awards about the solar thermal sector (with still some 20 pending cases) will lie now in two undisputable facts: a) the abrupt retroactivity of the measures taken and b) the obvious breach by the Spanish government of an agreement with an industry sector. In addition, the assessment of the damages performed in this first ICSID sentence shows that the current remuneration scheme that was set to provide a “reasonable profitability” on investments of 7.4% is a fiction that even the experts presented by the Ministry recognized.  

The Spanish government might now take this arbitration award as a good opportunity to consider whether it makes sense to wait for an expected “string” of negative awards due to the fact that most of the still-pending cases are from the STE sector or to be proactive and negotiate with both international investors and the STE industry an acceptable settlement solution.

Recent reports in major Spanish media mention that the Spanish Ministry is now likely to lobby the EU institutions for avoiding the payment of the ICSID sentence (128 M€) via a) declaring its own RE support schemes as a breach to EU State-Aid rules and b) stating that the Energy Treaty Chart would not apply within EU Member States. Furthermore, ESTELA also observes obvious hesitations from the Spanish Ministry of Energy to support and even spearhead a “STE initiative for Europe” worked out with the SET-Plan framework aiming at defending the STE technology leadership position held by companies in about 10 EU Member States – amid fears that non-European competitors might easily take advantage of a longer STE investment stop in Europe.

The main risk is that there will be no more business case for any renewable technology once a given penetration threshold of 30-40% of variable RES is achieved and the energy transition kicks back into fossil sources.

[…]

In Europe, the combined effects of:

• “modest” 27% RES targets for 2030 without binding national targets
• energy efficiency policies
• a structural growth/demand stagnation
• the generation overcapacities and existing de facto stranded investments
• The resistance to decommissioning old coal and nuclear plants in many countries
• the conventional industry lobbying (shale, “gas to power”, etc.)

Last, but not least, the unbalanced ratio between manageable and intermittent resources will trigger alarming effects.

The main reason is that a deployment of variable generation sources up to a level beyond approximatively 30 % already tables the issue of sustainability of the energy transition itself. Variable generation sources will inject into the grid energy at the same time without a corresponding market demand. This results in:

• Less or no more business cases for any RES investment because investing in cheap variable generation without value for the system wuill stop and with it the need for the higher value of manageable generation that can well be replaced by conventional capacities;
• Severe drop on employment in the “green economy”
• Abrupt energy price peaks for manageable energy whenever demand rebounds, since there will be not enough capacities for balancing the system
• Jeopardizing the decarbonisation objective for 2050
• Aggressive take-over actions on European technology holders (“PV syndrom”!)
• Citizens will suffer a still carbonized environment and ultimately pay for a wrong strategy

Market forces can only increase efficiency of actors towards a political goal, but will not deliver without solid regulation system value – and even less added value for society at large.

[…]

Prior to assessing the “business as usual” vectors of any energy policy discussion in Europe, namely:

• evaluating the current potential deployment of STE in the European internal electricity market at various time horizons (5/10/15… years);
• supporting innovation in the sector;
• assessing whether the recently launched Clean Energy Package proposals of the EC services will support or rather inhibit such a deployment;
• pointing at flawed comparisons between technologies that do not provide the same product.

It is urgent to assess the implications of further delayed or withheld action for the sector in terms of:

• industry policy incl. fair competition conditions inside and outside Europe, and its impacts on employment
• technology leadership including excellence in research and innovation,
• attractiveness for investors and IFIs (that will dramatically impact the costs of the technology)
• sustainability of the energy transition in Europe as a whole.

Policy makers are the only mandated forces in charge of energy policy choices taking into account all their implications.

Policy-makers should embrace in their strategy the 3 dimensions of the energy transition:

• business (cost/return ratio) which underpins concepts such as “affordability”, “LCOE”, “competitiveness” that should be relevant essentially to banks – but much less to political leaders in charge of energy strategy,
• macro-economic (GDP metrics, up into “social welfare” understood as the well-being of the entire society, including the increase of GDP, jobs, quality of life, quality of the environment (air, soil, water), availability of essential social services, even religious and spiritual aspects of life. This should be essential to any government policy.
• political: if the a.m. macro-economic dimensions are properly reflected against a pure cost approach, the issue of energy transition becomes an efficient instrument to policy makers for binding voters especially in urban areas or environmentally and/or economically stressed regions of Europe.

Soon will overcapacities in Europe decrease and call for replacing old power plants. This situation and the investments needed ahead of this put also decision-makers in front of their responsibilities to prepare the most important step towards energy transition.

[…]

Let’s take an example:

• In Portugal, the useful lifetime of 2 coal power plants comes in 4 or 5 years at the most to an end; 30% of all electricity produced will, in theory, go away with their demise; with what will they be replaced? coal again? natural gas?
• This is a typical situation bringing a clear opportunity to perform a major leap towards energy transition embracing all complementary renewable resources, bridging decentralized and centralized production; in such a case STE with storage has a very important role to play – not only for the benefit of Portugal!
  • Companies from all over Europe would be called upon to contribute;
  • Such a decision in a country coming closer to 100% generation capacity in RES (Portugal already has more than 50% capacities in hydro and wind that would be able to further increase backed by STE and in this scenario) could become a milestone and also a demonstration for other European countries about how to achieve the 100% carbon-free power system.
  • While competing for investments decisions in new plants (new conventional plants substituting for old ones), the STE plants with storage become much more competitive since the current old conventional plants produce electricity only at fuel cost, since their respective investment costs are “considered” as already amortized …
  • In fact this situation – described here as for Portugal and coal plants – is valid when taking into account the existing or still needed interconnections between countries considering for Europe as a whole with its old nuclear plants: these produce at “apparent” cheap costs (the costs for various environmental damages, dismantling, waste processing and disposal are not included in LCOEs figures), but new nuclear plants require very high investments against which STE can already compete!

There are at least 9 Member States with companies holding references in STE technology and well positioned to compete on STE world markets.

[…]

It is indeed a matter of urgency to debunk the erroneous perception in many national authorities, ministries, regulators, European institutions’ services that the potential benefits of a relaunch of this sector would be limited to those European countries where STE power plants were already built and/or having very good solar resources (Portugal, Spain, Italy, Greece).

The reality is very different: as true it is that the main European STE promoters in Europe as of 2016 are based in Spain (such as ACS Cobra, Acciona, Abengoa, Sener, TSK, Elecnor, etc.), this is just the most obvious outcome of the STE deployment program launched in Spain in 2007-2013. But the industry texture of the STE sector is sub-stantially wider.

There are at least 9 Member States with companies holding references in STE technology:

The current developers of STE plants do best efforts on all active markets to aggregate companies from other European countries via joint ventures, alliances and EPC contracts. Even if the following list of companies is not exhaustive, entities such as in Denmark (Aalborg), in the Netherlands (NEM), in Belgium (CMI, Enseval-Moret), in Italy (Ansaldo, Archimede, ENEL Green Power, Turboden, CCI-Orton), in Germany (Siemens, MAN, BASF, Schlaich Bergermann, Flaveg), in the Czech Republic (DOOSAN Sköda Power), in France (GE(former Alstom), ENGIE, Saint-Gobain, CNIM, etc.), in Portugal (EDP Inovacao) can be mentioned.

Besides supplies and services that are normally provided at least cost by local companies of the country where a plant is built (civil works, assembling on site, non-specific auxiliary services) there is a widespread distribution of STE competences and business potential for companies across at least 9 EU member States.

These companies hold references in STE technology, based for a substantial part on own R&D and are able to successfully compete on global STE markets – if politically supported by fair competition conditions and based in an own home (means in this case: European) market.

STE/CSP Power Plants Around the World

A key point for the deployment of renewables in Morocco was the quality of policy and institutional framework about two targets – also recognized by all international financial institutions.

[…]

A key point for the deployment of renewables in Morocco was the quality of policy and institutional framework about two targets – also recognized by all international financial institutions.

The most striking element that makes Morocco stand out among all STE deploying countries is the quality of the policy and institutional framework elaborated there to achieve 2 targets:

• the country’s independence from fossil energy imports and most importantly
• setting up a new industrial hub for solar technologies for the rest of Africa

A decisive move was the creation of MASEN (Morocco)

• Masen is a multi-stakeholder in the NOOR projects.  It is the procurer of the IPPs, the off-taker of the electricity, the senior lender and, through its subsidiary, Masen Capital, a 25% shareholder in each project company and in each O&M company.  Masen also provides the site and associated infrastructure and services.  
• The reason for the many roles of Masen is not just to achieve best value for money for the Moroccan public, but also to ensure that Morocco benefits in the long term from the knowledge and skills developed through the construction and operation of the NOOR projects, protecting and advancing Moroccan interest in the projects and in the solar energy industry in general.
• With 20 shortlisted bidders for NOOR PV I, three CSP projects with an aggregate capacity of over 400 MW under construction, and procurement for the next solar complex – NOOR Midelt – underway, Morocco, and Masen, can rightfully be considered a leading player in the solar energy business.  The interesting question is whether other countries in the MENA region can replicate this success.

The NOOR STE projects have achieved very competitive tariffs, among others due to the project structure adopted by Masen. 

• For these projects, Masen has taken on the role of lender, raising the debt financing itself, from a group of International Finance Institutions (IFIs), including AfDB, the Clean Technology Fund, EIB, IBRD, and KfW.  The IFIs benefit from a guarantee granted by the Kingdom of Morocco.  Masen acts as sole-lender to the project companies, packaging this debt and on-lending it on preferential terms.  As a government-owned entity, Masen is able to achieve far better pricing than a special purpose project company.  The cost of debt is therefore significantly lower than would otherwise be the case, and is estimated by Masen to result in a reduction of approximately 30% of the price per kWh 

All this produced within few years impressive results, with last but not least much better financing conditions offered by a very wide range of major international financial institutions for the implementation of Moroccan Solar Plan that the ones any EU country would be granted!

The first of the NOOR Ouarzazate STE projects and the first stage of Morocco’s Solar Plan, NOOR I (150 MW parabolic trough project with 3 hours of energy storage), is connected to the grid since end 2015.  

The second phase of the Solar Plan comprised two CSP projects procured concurrently:

• NOOR II (a 200 MW parabolic trough project with 7 hours of energy storage); and
• NOOR III (a 150 MW tower project with 7 hours of energy storage). 
• These reached financial close in May 2015 and are currently under construction.  First operation is expected in 2017.

And a further 250 MW will be added to Moroccan’s energy system next year. Most important feature of the decision-making process in Morocco is the fact that the solar generation shall be balanced up to a considerable amount of STE recognizing by that the complementarity between both solar technologies.

The Middle East is ramping up its plans for STE based projects and is about building up capacities well in line with the IEA target figures for 2050 where STE should be the dominant technology in the MENA countries.

[…]

The Middle East is ramping up its plans for STE based projects and is about building up capacities well in line with the IEA target figures for 2050 where STE should be the dominant technology in the MENA countries.

[…]

China awarded a first batch of 20 STE projects in September 2016, including nine solar towers, seven parabolic trough plants and four Linear Fresnel plants. The projects must be completed by the end of 2018 to be eligible for the Feed-in-Tariff (FiT) of 1.15 yuan/kWh ($0.17/kWh).

[…]

Recently, a new actor entered STE markets – China with a very active involvement of stated-owned/supported Chinese companies in the sector in various regions of the world with good solar resources.

In China, developers must overcome limited build experience and China’s severe weather challenges to meet tight construction deadlines set out in the country’s first large-scale deployment program.

China awarded a first batch of 20 STE projects in September 2016, including nine solar towers, seven parabolic trough plants and four Linear Fresnel plants. The projects must be completed by the end of 2018 to be eligible for the Feed-in-Tariff (FiT) of 1.15 yuan/kWh ($0.17/kWh). This gave developers just over two years to secure financing, select an engineering, procurement and construction (EPC) contractor, and construct the plant.

A two-year timeframe may be sufficient in more mature STE markets, but not in markets such as China, especially as wintertime in northwest of China brings extremely low temperatures which can prevent civil work for several months. such as the Western regions of Qinghai and Yunnan that can be hit by sandstorms and temperatures which can swing from -40°C to 20°C in one day,

China currently has a successful track record in developing and nuclear, fossil fuel, hydropower, PV and wind power plants, but there is little experience in large-scale CSP construction.

The main challenge is the lack of experience in system design and integration. China has many demonstration loops and systems, but now the minimal capacity [in the pilot program] is 50 MW. Going from 1 MW to 50 MW and 100 MW will not be easy.

China’s operational STE plants are in Feb 2017:

EU policy should be aware that in order to shorten the learning curve and reduce project risks, local developers are now contracting experienced international STE consultants, such as:

• German engineering consultancy SolEngCo was selected by a Chinese electric power design institute to offer basic and general engineering services for a Chinese CSP plant
• Swedish-Spanish firm AF Aries Energia is also supporting CGN Power Group’s 50 MW Delingha project as owner’s engineer, guiding them in the tender process to select an EPC contractor and the main equipment.
• Advisian, the global advisory business of WorleyParsons, is acting as owner engineer for a 50 MW solar tower being supplied by EPC contractor North China Power Engineering (NCPE).

Another major advantage for developers in China is the country’s comprehensive supply chain, requiring minimal imports. Major components such as parabolic trough receiver tubes (heat collecting elements), reflectors, raw glass, molten salt and thermal oil, can all be supplied and installed already at relatively low cost. SunCan is currently developing a 100 MW solar tower in Dunhuang, in the Gansu province and a technology supplier for two 100-MW solar tower projects in Jinta and Yunmen, Gansu province. The company is also the EPC contractor for a 50 MW parabolic trough project in Delingha, Qinghai province.

There is a risk for Europe that the market entrance of China into STE develops similarly like the PV panel dispute – linked to Chinas economy model (WTO case about “market economy”).

[…]

The industrial threat on Europe of the market entrance of China into the STE market is likely to follow a similar development like the PV panel dispute linked to Chinas economy model (WTO case about “market economy”).

The scenario is well known: it consists first in copying technology, then reproducing at lower costs, building up some project references via limited joint ventures with European companies and finally push European market actors out of their home and the world market via companies take-overs, mergers, etc.

The solar PV panel dispute has been by far the biggest trade controversy between the EU and China. Under the Climate and Energy Package 2020, the EU became the largest market for solar panel products, reflecting growing demand for renewable energy consumption.

China, meanwhile, has surpassed the EU as the largest solar panel manufacturer in the world. The lower prices of Chinese solar panels have encouraged installation of the solar system in EU Member States. A group of European manufacturers who felt marginalised by the pricing of Chinese exporters, however, lodged a petition to the European Commission against alleged unfair competition.

After an investigation, the EU imposed tariffs on solar panels imported from China, prompting the latter to immediately launch an anti-dumping probe on European wine. Since the EU is China’s biggest trading partner and China is the EU’s second partner, both parties decided to settle the dispute through negotiations instead of starting a trade war. In July 2013, the EU and China settled the solar panel dispute.

The main dispute was pricing. Chinese exports of solar panels enjoyed lower prices in the EU market, which, according to the EU solar industry, resulted from cheap loans and government subsidies. Following the introduction of the Five-Year Solar Plan by the Chinese government, the price of a Chinese solar module fell dramatically from 3€ per Watt peak (Wp) in 2008 to as low as 0.40€ per Wp in 2011.

Elsewhere, production costs of solar energy, a novel field, were also experiencing a market decline in production costs. Meanwhile, the manufacturing capacity of China’s solar-panel industry grew tenfold, and the surge in exports contributed to a 75% drop in world prices.

The agreement between EU and China consisted of a minimum price of EUR 0.56 per Wp for panels until the end of 2015 and of a limitation of the export volume. This did not change much to the takeover of the PV production by China.

[…]

In July 2013, a settlement was reached between the EU and China. The agreement consisted of a minimum price of EUR 0.56 per Wp for panels until the end of 2015 and of a limitation of the export volume. Chinese companies were also allowed to export to the EU up to 7 gigawatts per year of solar products without paying duties. About 90 per cent of Chinese solar manufacturers signed up to the minimum price. According to Karel De Gucht, the EU trade commissioner, the price undertaking would “stabilise the European solar panel market and remove the injury that the dumping practices have caused to the European industry”. The EU PV makers, however, felt that the settlement was “not a solution but a capitulation”, and that the “EU commission decided to sell the European solar industry to China “under pressure”.

Since the trade relationship between the EU and China is admittedly too big to fail, settling the solar panel dispute can be considered successful for having avoided a trade war. It is crucial for both the EU and China to maintain good trade relations based on mutual benefit. However, differing trade interests with China of Member States have divided the EU in the negotiations. In facing the increasing bargaining power of China, a joint effort among the EU Member States is advisable.

For the PV solar manufacturing industry, global competition has resulted in reduced prices. The lower solar panel prices bring benefit to the customers, as well as the Member States that are promoting the adoption of renewable energy consumption by subsiding the installation of solar panels.

This current price level for PV panel points also – taking of course the off-taker needs – at the possibility of new hybrid plants STE/PV that would combine the key assets of both technologies (example in Chile)

Unfortunately, not much… EU and China have indeed an interest in joining their efforts in international rule making and global standard setting bodies. EU will actively pursue global supervisory and regulatory solutions, promoting open markets and regulatory convergence, and build on co-operation with China.

[…]

Dialogue comes always first: The EU has a clear preference for resolving trade irritants with China through dialogue and negotiation. The existing EU-China trade related dialogues should be strengthened at all levels, their focus should be sharpened on facilitating trade and improving market access and their scope extended.

EU and China also have an interest in joining their efforts in international rule making and global standard setting bodies. The EU will actively pursue global supervisory and regulatory solutions, promoting open markets and regulatory convergence, and build on co-operation with China through EU-China regulatory dialogues. This will also help to ensure compliance of Chinese imports with EU standards for food and non-food products.

But where efforts fail, the Commission will use the WTO dispute settlement system to ensure compliance with multilaterally agreed rules and obligations.

Trade defence measures will remain an instrument to ensure fair conditions of trade. The EU is actively working with China with a view to creating the conditions which would permit early granting of market economy status (MES). Recent progress has been made on some of the conditions. The Commission will continue to work with the Chinese authorities through the mechanisms we have established and will be ready to act quickly once all the conditions are met.

Build a stronger relationship. A key objective of the negotiations for a new Partnership and Cooperation Agreement, which will also update the 1985 Trade and Co-operation Agreement, will be better access to the Chinese market for European exporters and investors, going beyond WTO commitments, better protection of intellectual property and mutual recognition of geographical indications.

On 12 May 2016, with an 83% overwhelming majority, the European Parliament passed a Resolution against dumping and the granting of MES to China. The Resolution is an important signal that the EU will not grant MES so long as China fails to meet its WTO obligations.

In December 2016, WTO will re-examine China’s terms of membership and decide whether or not to grant market economy status (MES)

Under Section 15 of the Chinese WTO Accession Protocol, China can be treated as a non-market economy (NME) in anti-dumping proceedings. The definition of China as a NME allows importing countries to use alternative methodologies for the determination of normal values, often leading to higher anti-dumping duties.

The correct interpretation of Section 15(d) of the Chinese WTO Accession Protocol has come under debate, as well as whether the latter section stipulates the automatic granting of Market Economy Status to China after December 2016. This analysis looks at the debate regarding the interpretation of Section 15(d) and the current policy of selected WTO members with respect to China’s Market Economy Status.

Efforts for setting up improved European R&D infrastructures in the sector should be seen today as crucial – because the EU wants indeed the European industry to maintain its global leadership in the sector. Otherwise know-how and knowledge bearers will be acquired at low cost by non-EU competitors.

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In case of a prolonged stagnation of the STE deployment in Europe, the competitiveness and the recognized excellence of European research centres involved in STE research will be negatively impacted.

As of 2017, the distribution of STE dedicated R&D facilities is as follows:

Laboratories working for STE research are distributed as follows:

In spite of having these R&D infrastructures managed under different national governance and funding schemes, they all are structurally depending on direct relations with the STE industry. Furthermore, the European Commission supports financially R&D projects under H2020 including the improvement of cooperation across these centres up to the potential setup of common research infrastructures for the sector.

Maintaining Europe without an own STE deployment program will question the need for and the further use of non-industry R&D facilities.

This will result in an attractive opportunity for non-European competitors to acquire knowledge bearers at low cost on labour markets.

Technology will also be acquired at the lowest costs in case of company takeovers.

It is just a matter of time until the absence of a European STE market severely impacts the mere existence of these knowledge and innovation centres.

Furthermore, the short-term priorities of R&D centres (all working under essentially national R&D plans and governance models) are sometimes far away of what industry considers as most promising technology. The STE industry calls for a better coordinated governance for the use of European R&D resources regarding existing and new R&D infrastructures as presented in the EU-Solaris project (2012-2016) and STAGE-STE project (2015-2018) acting as a bridge between research institutions and STE industry and gathering hundreds of high-level scientists and experts contributed to define several action lines along the entire value chain of the sector (material, performance optimization of components, etc.).

In the STAGE-STE project, STE research entities and industry have jointly delivered substantial input to the “Initiative for Global Leadership in Concentrated Solar Power (CSP) / Solar Thermal Electricity (STE)” that was recently approved by the SET-Plan. The practical implementation of this Initiative will soon bind in a coherent process across Member States several important research projects anticipated by STAGE-STE and already evaluated by the industry as most likely to bring a competitive / innovative advantage with the realisation of a First-of-A-Kind (FOAK) commercial project in STE in Europe.

As a closing conference, STAGE-STE will present the main projects results in the wider perspective of the current situation of the CSP/STE sector in Europe and the expected developments. This event will be organised on the 23rd January 2018 at the European Economic and Social Committee (EESC) in Brussels. The event will address:

• The link between the activities of European R&D centres active in the sector and the need for a home CSP/STE market in Europe;
• Why, amid of extremely rapid cost reductions for CSP/STE for plants built outside Europe and the resulting threat of losing CSP/STE technology leadership to non-Europeans, EU member states are called to provide a better framework in terms of research support, financing conditions and market design
• Why CSP/STE technology is today available as the most competitive CO2-free solution to deliver bulk amounts of flexible power system.

To view programme and register to the event, please visit here: http://stage-ste.eu/workshop/