Thermal Solar Power Gets Hot

Technology that focuses the sun's rays to create heat—and generate electricity—is attracting growing investment by utilities

by Vaughan Scully From Standard & Poor's Equity Research

With the arrival of summer, children can sometimes be seen playing with magnifying glasses, delighting in their seemingly magical ability to light small piles of leaves on fire. This year, a utility-size version of the same idea—concentrating the sun's rays to create intense heat—is attracting growing interest and investment from electric utilities seeking to boost their capacity to generate power from renewable energy sources.

More states are requiring utilities to supply a portion of electricity from renewables—and in some cases, solar power specifically. As a result, electric utilities in the southwestern states (where the sun is strongest) of California, Arizona, Texas, Utah, Nevada, Colorado, and New Mexico are signing agreements to buy electricity from developers of solar power stations. These collect sunlight by lenses or mirrors and focused it to create heat that can be used to generate electricity.

On a large scale, and as a means of generating power, concentrated solar heat has several advantages over its chief solar rival, photovoltaic cells (which convert sunlight directly into electricity). Power from concentrating solar heat is less variable than from photovoltaic solar (or from wind), an important consideration for a full-scale utility. Solar thermal facilities can be designed to store energy for several hours after sundown, helping a utility meet evening spikes in demand. And since solar thermal plants use the same steam turbines to generate power that other generating stations use, the plants can be hybridized to burn natural gas or other fuels during nighttime hours, to keep output constant and maximize use of the turbines.

Mojave Model

Concentrated solar power is "the fastest-growing, utility-scale renewable energy alternative after wind power," says Emerging Energy Research, a Cambridge (Mass.) consulting firm, in a December 2007 report. The study describes the technique as "well-positioned to compete against other electricity generation technologies" and estimates that $20 billion will be spent on solar thermal power projects around the world from 2008 to 2013. More than 5,000 megawatts of concentrated solar capacity are already in development in the U.S. and Spain alone, the report says.

Florida-based FPL Group (FPL) operates the world's largest concentrated solar generation station—seven interconnected facilities in the Mojave Desert, with a combined capacity of 310Mw—that was built more than two decades ago. In March, FPL applied to build a $1 billion, 250Mw concentrated solar power facility north of Los Angeles that would be operational in 2011. FPL's "established position as one of the major wind-power producers in the U.S. has given it a competitive edge in the development of, and attractive growth potential projected for, solar power," says S&P equity analyst Justin McCann.

FPL's power stations use what's called the parabolic trough design, in which a curved reflective surface focuses light on a "receiving tube" carrying synthetic oil as a heat-transfer fluid. The fluid then boils water to produce steam, which turns a conventional turbine to generate electricity.

Spanish industrial group Acciona brought its $260 million Nevada One project online in June 2007, a 64Mw trough design that Acciona says is the world's third-largest.

Slew of Developers

Other new parabolic trough facilities are in development. Spanish industrial group Abengoa is developing a 280Mw parabolic trough station near Phoenix and several others in Spain. Martifer Renewables, 80% owned by Portugal's Martifer Group, is building a 107Mw parabolic trough facility near Fresno, Calif., which it says will begin operating in 2011.