How can CSP reduce its cost per kWh and compete with other renewables?

1 The cost drivers of CSP

The cost of CSP depends on several factors, such as the type of technology, the size and location of the plant, the level of solar radiation, the storage capacity, and the financing conditions. According to the International Renewable Energy Agency (IRENA), the global weighted average levelized cost of electricity (LCOE) for CSP was 0.185 USD/kWh in 2019, which is higher than most other renewables. The main cost drivers of CSP are the capital expenditure (CAPEX), which accounts for 70-80% of the LCOE, and the operation and maintenance (O&M) costs, which account for 10-20%.

2 The potential of cost reduction

Despite the high costs of CSP, there is a significant potential for cost reduction in the future. IRENA projects that the global weighted average LCOE of CSP could drop to 0.086 USD/kWh by 2030 and 0.056 USD/kWh by 2050, assuming a 10% weighted average cost of capital (WACC). The main factors that could drive down the costs are the economies of scale, the learning effects, the innovation and optimization of the technologies, and the reduction of the financing risks.

3 The role of economies of scale

One of the ways to reduce the cost of CSP is to increase the size and capacity of the plants, which can lower the specific costs per unit of output and benefit from the synergies and efficiencies of larger systems. For example, a 100 MW plant can have a lower LCOE than a 50 MW plant, due to the lower fixed costs per MW and the higher capacity factor. Moreover, larger plants can have more storage options and flexibility, which can increase their value and competitiveness in the electricity market.

4 The impact of learning effects

Another way to reduce the cost of CSP is to leverage the learning effects, which are the improvements in the performance and efficiency of the technologies as a result of accumulated experience and knowledge. Learning effects can be measured by the learning rate, which is the percentage of cost reduction for every doubling of the cumulative installed capacity. According to IRENA, the global average learning rate for CSP was 18% between 2010 and 2019, which means that the cost of CSP decreased by 18% for every doubling of the global installed capacity.

5 The importance of innovation and optimization

A third way to reduce the cost of CSP is to foster innovation and optimization of the technologies, which can enhance the reliability, durability, and quality of the components and systems. Innovation and optimization can involve different aspects, such as the design and materials of the mirrors or lenses, the receiver and heat transfer fluids, the power block and turbines, the storage and hybridization solutions, and the control and monitoring systems. For example, some innovations that could lower the cost of CSP are the use of molten salt or air as heat transfer fluids, the integration of thermal energy storage or hybrid power plants, and the development of advanced algorithms and sensors.

6 The reduction of financing risks

A fourth way to reduce the cost of CSP is to lower the financing risks, which are the uncertainties and barriers that affect the availability and affordability of capital for CSP projects. Financing risks can depend on several factors, such as the regulatory and policy frameworks, the market and grid conditions, the project development and procurement processes, and the stakeholder engagement and awareness. For example, some measures that could reduce the financing risks are the provision of stable and long-term incentives and contracts, the improvement of grid access and integration, the standardization and simplification of the project design and bidding, and the promotion of public-private partnerships and knowledge sharing.