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Given significant decreases in costs and the ability to provide flexible power, Concentrated Solar Power (CSP) is expected to play a key role as a local and renewable source of power to cope with increasing amounts of variable renewable energy (vRE) in power systems.
Increasing amounts of vRE are posing challenges to power systems. First, solar photovoltaic (PV) without storage cannot meet demand at night, so other forms of supply are needed for nighttime power. Second, power systems must have the ability to ramp up and down during the day to complement the ramp-up of solar PV in the morning and ramp-down of solar PV in the evening, which coincides with the evening demand peak. Third, power systems must have the ability to cope with frequent variations in outputs from solar PV and wind power plants.
CSP with thermal energy storage is well-placed to address the first two challenges and complement solar PV in the power system of the future, instead of combined-cycle gas turbines (CCGT) (or other more expensive thermal power plants) that currently play this role. CSP with thermal energy storage can provide renewable power at night and has the capability to ramp up and down during the day in the same order of magnitude as CCT.
Click to download the Flexibility of CSP-White Paper.
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Shannon Riley and Lisa Nations delivered a webinar on the topics of financing facilities and non-revenue water (NRW) performance-based contracts (PBCs). These could be two viable options to help utilities secure the resources they need to continue operations in response to the massive decrease in collections they are experiencing due to COVID-19. This webinar was hosted by RockBlue, an organization that partners with water and sanitation utilities in the developing world, empowering them to grow and optimize their operations.
You can watch the webinar and the Q&A session here. Below the two videos, you will also find a list of the questions and the time in the video at which they occur is listed.
1.1 Presentation
1.2 Q&A Session
- Question 1: “In Kenya, the problem with facilities is that the investment rules (ticket size, creditworthiness of borrowing entities, etc.) are misaligned with realities of the local market. Do the facilities proposed here address that in any way?” Answer: 1:01.
- Question 2: “Are there currently liquidity facilities operating in response to COVID-19?” Answer: 3:10.
- Question 3: “What about the option of bundling electricity and water liquidity facilities together? Target customers are likely to be the same and they are all critical services with similar tariff structures. Are there examples out there?” Answer: 4:23.
- Question 4: “One of the issues for NRW contracts is an accurate baseline. Many utilities/municipalities have a water balance that is not wholly accurate and it’s hard to get a handle on those estimates. How do you ensure in setting up an NRW-PBC that you can achieve an objective baseline that is transparent, that provides the incentives for both parties?” Answer: 6:28.
- Question 5: “One of the things we’re addressing is trying to respond to a pandemic which hopefully will come to an end and we’re facing cash constraints today. Are these mechanisms realistic answers to immediate cash concerns? Is it more appropriate looking at a 2-3 year, mid-term approach? Or are we talking about a long-term resilience mechanism for whatever the next crisis might be?” Answer: 9:43.
- Question 6: “Are utilities receptive to innovative financing? Do they have bandwidth to address this? Is there an uptake/willingness to spend time/energy/resources in structuring innovative contracts to address their short-term or medium-term financial constraints?” Answer: 13:18.
- Question 7: “Are NRW-PBCs appropriate/can they be used in utilities that are under-performing?” Answer: 18:07.
- Question 8: “A concern with liquidity facility model: you have assumed a v-shape recovery. Many utilities are taking severe long-term impacts in their performance so you’re going to see a u-shaped recovery. How long is the timetable of disbursements? What would be repayment periods? How would we address something with a longer trailing leg of recovery?” Answer: 22:00.
- Question 9: “The reforms that you envision in the liquidity model usually require some form of CAPEX investment to drive that performance improvement. Will most utilities that are not recovering costs currently going to be able to achieve substantial improvements on their own that would be necessary to receive additional disbursements? How are the utilities going to repay the financing unless it’s on a grant basis if these reforms don’t achieve recovery levels?” Answer: 24:37
- Question 10: “Your illustrative model demonstrates a potential 6-year payback period. There’s a concern where the lending markets aren’t willing to take on long-term risk. There’s a risk that even a 6-year payback period is out of line with the financial investors that are currently out there. Do you believe those are possible? In testing your model, have you looked at countries in that circumstance?” Answer: 28:39.
Castalia’s John Sachs shares his thoughts on recent developments in the sector.
Like many in the industry, we have spent the last few weeks trying to understand how the COVID-19 crisis will impact electric utilities and IPPs in emerging markets. Our early fears, raised in our late April blog “Assessing the impact of force majeure on emerging markets PPPs”, are starting to come true. The COVID-19 pandemic is putting many state-owned electric utilities in emerging markets under increasing financial stress and jeopardizing not only their IPP programs but also risking wider contagion in the economies. We are seeing this across the globe, IPPs receiving notices of payments being deferred, or threats of declaring force majeure, often with no details of for how long or if or when the IPPs will ever be made whole. The latest example of this financial stress, and the threat of declaring force majeure, was reported this week in Kenya.
This financial stress—resulting from a mix of reductions in demand, consumer tariff forgiveness and deferrals granted by the Governments for social reasons, and greater difficulty in accessing finance—is likely to last beyond the immediate period of emergency pandemic response. An additional source of stress may also be originating from the independent power producers (IPPs), who in some cases may be unable to fully satisfy their Operations and Maintenance responsibilities, import parts, or be faced with foreign exchange constraints due to the pandemic.
What we recommended in April remains even more true today, “Governments and authorities managing infrastructure concessions should get ahead of this through a rapid assessment of their PPP portfolios to identify and measure risk factors, including exposure under their force majeure clauses, develop action-oriented steps to manage the risks and, when appropriate, commence early engagement with private sector operators.” This early engagement to amicably work-out a solution with investors and their lenders could help avoid damage to their investment climates, cost of capital, and resulting cost of service from future PPP projects.
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