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TranscriptScott Bilby: We're continuing on with our solar thermal power theme. That's the technology that’s right here, it’s right now. It’s large scale and it solar that keeps producing electricity long after the sun has gone down.
This morning we’re going to be speaking with Kevin Smith, Chief Executive Officer of Solar Reserve, and he’s going to tell us more about this technology. Solar Reserve is a California-based developer and owner of large scale concentrated solar power (CSP) projects using central tower, molten salt storage technology. Previous to this Mr. Smith was Senior Vice President of Development at Invenergy, President of Insight Energy, Chief Operating Officer of Rolls-Royce Power Ventures, and General Manager & Vice President of Indeck Energy.
So, he knows what he’s doing. In the last twenty years he’s actively managed and developed the acquisition of financing and construction jobs all over the world with capital costs getting close to about five billion dollars; so he really knows what he’s doing.
So, Kevin, you’re joining us from California. How are you going?
Kevin I am. Good morning.
Scott It’s morning for us, afternoon for you.
Kevin: It is. It is.
Scott: Now, can you tell us a little bit about, you’ve got a long history in energy and latterly with renewable energy. Can you tell us a little about your history, because you’ve got wind power history as well?
Kevin: Right. Background-wise I have a Mechanical Engineering degree from Purdue University here in the U.S. and a Masters in Finance from University of Chicago. And pretty much I’ve been in the electricity generation field for my whole career. Starting out, did a bit of nuclear in the early 80s with large engineering firms in the U.S. and then gradually moved over onto the private power side, developing a number of what we would call co-generation, probably in Australia maybe (known) more as CHP, Combined Heat and Power kind of facilities, natural gas.
As the renewable energy space became more interesting here in the U.S. I moved over into the renewable energy side around 2003, 2004 started looking heavily into renewable energy. Before I joined Solar Reserve I was with a group in Chicago called Invenergy and we developed about 2,000MW of wind energy facilities in the U.S. and some in Europe and then in January 2008 Solar Reserve was a start-up group that was working with United Technology Corporation on a new technology for large scale solar and they enticed me to join them in early 2008 to head up the development side and then ultimately I took over as CEO earlier this year of Solar Reserve.
Matthew Wright: Now, were you aware of what solar thermal power towers and what the technology was about before you joined, or did you hear the story and…?
Kevin: Yes, I was. Yes, I mean I’ve been in the power industry for my whole career so conventional power, natural gas, nuclear, wind, solar, photovoltaic, etc. had done, when I was looking at joining Solar Reserve I had looked carefully at the solar markets, I had done a lot of wind energy and I thought that the next move to try and meet the kind of ever changing requirements for electricity demand that solar was a better fit than wind. While wind’s going to take a big slice of power requirements, the difficulty with wind is the intermittency issues and it’s largely an off peak supply, at least in the US. Kind of the windy times are more in the evenings and the winters as opposed to the heat of the day which is really when solar power has its best production. And Solar Reserve’s technology, which we’ll get into a little bit with utilising molten salt as the heat collection fluid, has storage capabilities which really can provide, if necessary, 24 hour a day power.
So, I looked at some of the solar thermal technologies and really felt that Solar Reserve’s combination of large scale with integrated energy storage, plus the technology supply from United Technology Corporation, which is a large, fifty billion dollar U.S. diversified technology company, was a great step for my skillset which is developing large scale electricity generating facilities.
Scott: Now Kevin, can you just tell us a little about the history of Solar Reserve, ie: the Solar One and Solar Two plants that were built by the Department of Energy, and one question in particular I’d like to ask too, was that Solar One plant, was that the first time that tower technology was ever used?
Kevin: I think it was the first time it was used, well certainly the first time in the US. There was a tower project that was done in the south of France a number of years ago and I’m not quite sure whether that one was done before or after the projects in the US, but certainly they were the first tower projects in the US.
The Department of Energy decided that they wanted, this was in the late 80s initially, early 90s, that they wanted to investigate large scale solar; so they put together a consortium of players, including the Utilities in California, and they built the Solar One facility which was a tower facility surrounded by a field of mirrors, and that field of mirrors basically shines up at a, we’ll call it a receiver, a receiver of heat that sits at top of the tower and that tower is essentially a boiler which has metal tubes with liquid running through it. And Solar One was based on, that fluid that was water that would be converted to steam by the heat that was concentrated at the top of the tower, so you’d run water up the tower, it would go through this heat exchanger at the top and it would generate steam, the steam would come down the tower and then you’d put the steam through a conventional steam turbine to generate electricity. And Solar One operated for a number of years, but the difficulty with Solar One is the intermittency problem; even though you’re concentrating the power of solar energy into steam, if you don’t have quite enough sun then that steam flashes back into water and then that can cause problems with trying to generate electricity with water as opposed to steam.
So, in the mid 90’s the Department of Energy was working with Rocketdyne who at the time was looking at a number of issues with molten salts in other technologies and other applications and the Department of Energy and Rocketdyne got together and said, ‘you know, what can we do to try to stop this intermittency issue? How can we store energy?’ You really can’t store it with steam because you’d have to have a massive tank in order to store steam for energy generation.
So, the Department of Energy and Rockydyne got together in the mid 90’s and they converted the Solar One project to Solar Two and basically it was the same structure, tower with the receiver at the top, surrounded by a field of mirrors that would focus on this receiver at the top of the tower, but instead of having water running through the pipes, up and down the tower and in the receiver at the top, they utilised, essentially, molten salt. Which salt at high temperatures has similar characteristics as water, but the big differentiator that it has is that at high temperatures it doesn’t flash into steam. It stays in a liquid state at temperatures exceeding about 400 or 500 degrees Fahrenheit which is about 240 degrees Centigrade, it still is in a liquid state at very high temperatures. So, the salt would get heated by the sun, and that’s the technology we’re using now, gets heated by the sun in excess of 500 degrees Centigrade and at 500 degrees Centigrade it’s still a liquid.
So, we can store it in a large tank at the base of the tower and then we can generate electricity as needed. So, when it comes time to utilise the energy, whether it’s because of utility demand or peak requirements, we then take the molten salt, put it through a heat exchanger, generate steam which then goes through a conventional steam turbine. So, the value of the molten salt is really that it stays in a liquid form at high temperature so it can be stored in an integrated solution in the project. And that’s the technology that we’re utilising at Solar Reserve.
Matthew: Now, in order to get that heat up to the top of the tower, I’m just looking at a diagram here from your web site, you’ve basically got a 2.6 kilometre diameter field and over 17,000 mirrors. Can you sort of describe that field and how it works?
Kevin: Yes, the size of the project, I mean these are large scale facilities, so a typical facility for us is in the 100 to 200MW which would essentially power about 50,000 homes from one facility. The tower is a single tower, approximately 200m tall that sits in the middle of a field of about 600 hectares, you know about 1600 acres in the US, and that field, based on the size of the mirrors that we’re utilising, has about 17,000 mirrors that would surround the tower and focus on that receiver that sits on top of the tower. At the base of the tower you would have what we call cold tank for salt storage, but it’s still really at an elevated temperature, and then you have your hot tank which has fully heated salt ready to generate electricity and that would it at the base of the tower. You’d pump the colder liquid, that’s still in a liquid format, up the tower, it would go through a pretty complicated receiver system and that would absorb the energy as that salt is spinning around those tubes at the top of the tower. Once it finishes going through the receiver system, and now it’s at elevated temperature, it goes into the storage tank ready to generate electricity; or it could be stored for use later in the day.
Matthew: Now, we’ve read a report from National Renewable Energy Laboratories and Sargent and Lundy suggesting that after a few thousand mega watts of these plants the price could considerably drop. Do you consider that conclusion to be something that your company is driving towards and going to be able to market with?
Kevin: Yes, I think there’s really kind of two factors that will help drive down prices. One is the initial projects are all kind of custom designed, so you got initial engineering costs that are having to be absorbed in the initial projects; follow-on projects can take advantage of the previous costs spent in engineering. Plus your orders of magnitude on building 17,000 heliostats is a whole lot different to ordering 100,000 heliostats, which are the mirrors that surround the field. So, once we get into replicated production activities...
Similarly with the receiver, the first one will be the first one of this size built and that will be built by UTC, United Technology Corporation, a subsidiary of Pratt and Whitney Rocketdyne, Rocketdyne being the same company that did Solar Two. So, that the first receiver that’s going to be built is a custom design, one-of-a-kind facility. The additional facilities would replicate that exactly and so that would drive down manufacturing costs.
In addition, the efficiency issues, improvements in heliostat design, improvements in really the calculations on what the generation profile will be from your facility, will improve as we have better information and so we can price the electricity that’s generated tighter and more effectively. And so really, its order magnitude on manufacturing facilities and replicating manufacturing facilities that can be done cheaper and cheaper as you build more and more of them as well as really fine-tuning the design to make it a more efficient application.
Matthew: Now Kevin, we have coal plants here in Australia and they run at what we say capacity factors, on an annual basis, of about eighty five per cent and also solar plants in Australia are often, are on sun, so the sun’s out and operating them say 25% of the year. Just wondering what’s the capacity factor with the salt storage and being able to dispatch that solar power after dark, what’s the capacity factor of your Solar Reserve plants?
Kevin: Well, it depends on how the utility wants to, with the storage capabilities we can kind of custom design the run profile. We’ve got some projects in Spain where the government structure is looking at smaller projects, more in the 50MW size range, but we’re designing facilities at 50MW that would run close to 24 hours a day. So, we’re probably looking at capacity factors in the 70-75% range. In the US we’re building larger facilities from an output standpoint but running them only during the peak periods that the utility wants them, so maybe the capacity factors are more in the 40% range, but when we actually look at what the utilities asking for which is, ‘how much can you provide during that peak period when we really want the power?’, we’re providing guarantees in the 80-85, even upwards to 90% guarantees of delivering capacity when the utility wants it, which is really the critical part. It isn’t necessarily the year round capacity, it’s when can you deliver energy when the utility needs it the most, and because of the storage capabilities we can make sure that if we’ve got any kind of solar availability to us, or storage in our tanks, that we can deliver that during the periods that the utility is looking for that power. So, we’re in that kind of 90% range on peak delivery of power.
Matthew: So, basically for the immediate needs of electricity utilities you can match their demand, their peak power, when it’s most valuable, but in the longer term you’ve also got the case for being able to provide sort of around the clock or matching a whole electricity supply’s demand.
Kevin: Correct. And some utilities say, ‘Well, we understand that the sun shines from 6am to 6pm or 5pm, but really our peak requirement is one o’clock in the afternoon until eight o’clock at night, people come home from work and put on a bit of tea and we really need to cover that peak period which possibly the sun’s down by then or very low in the sky’.
So, if their peak is one o’clock in the afternoon to eight o’clock at night, perfect for us. We collect energy all day but we don’t start generation until one o’clock in the afternoon and then we run straight to their peak requirements. So, that’s the key.
A lot of the solar facilities that exist now, and probably the ones you mentioned in Australia, are photovoltaic which are going to have a big role in the future for energy supply but the difficulty with photovoltaic is that it generates only when the sun shine and a little bit of cloud comes over and it’s down and it’s back up again, so you get intermittency problems with photovoltaic but it still can provide energy during peak periods, it just doesn’t have the reliability that the utility wants from large scale solar generation.
Scott: We’re speaking with Kevin Smith, and he’s the CEO of Solar Reserve. And interestingly in Australia we talk about baseload power all the time and how the coal guys and only nuclear power can provide this, but the big thing now, I guess, with the molten salt storage on the solar thermal plants is that they can provide baseload if they want to, but as you’ve just explained and Matthew has just reiterated, disbatchable power is more valuable. And I think that’s the message we need to get out there, that solar can do both, and it will be doing both in the future, and it’s doing something that our baseload power guys just can’t match.
Now, I’d like to ask you about your financing, because I know the coal plants are having trouble in the US now. There’s litigation against them, people are causing all sorts of trouble and it’s making it hard for them to get up and going, and I guess there’s also that cost per tonne of carbon emission, the uncertainty around that is also going to make it very difficult for people to have certainty about financing these coal plants. So, can you just tell us what the scene is for the solar plants in the U.S? I assume that inherently there’s greater certainty and it makes it easier for people to finance these projects?
Kevin: Well, the financing markets world wide are difficult right now with financial problems with the lenders, but the markets are coming around and certainly there’s a big push for renewable energy. So, for investors and lenders that want to participate in the energy markets their focus is on the renewable energy market for the most part, which is wind and solar; and wind and solar projects largely are financed on the basis of long term power contracts in the US. So, you sign a 20 year power contract to sell your product, your electricity, to the utility. In Europe it’s largely tariff-based, so what they call feed in tariffs, so the government guarantees a long term price for your electricity.
So, you’ve got certainty of your revenue stream based on long-term, and because you have no fuel costs there’s no really escalation risk, the way you would with a natural gas project or a coal project. That is, what’s the price of natural gas going to be in twenty years? Hard to tell. Whereas, once we build our facility the fuel costs are essentially free. We’ve got a little bit of an O and M, operating and maintenance, cost but aside from that we know what it’s going to cost us to generate power for 25 years.
And so that helps with the financing structures. In the US, the US government has provided kind of some tax subsidises, called investment tax credits, which help wind and solar. It’s Production Tax Credits on the wind side and Investment Tax Credits on the solar side. Those essentially are some government subsidies that help make the renewable energy a bit more competitive to some of the other sources. Because a lot of times people largely look at a natural gas, or a coal plant, and they say, ‘what’s the cost today to generate electricity, and how does it compare with renewable energy?’ and really the key is what’s the cost going to be over the next 25 years as some of the non renewable forms of energy prices continue to rise.
So, the financing markets are tough right now, but we’re getting very good traction. We’ve got a good investor base into Solar Reserve; six or seven well funded, some private equity, and major investors into Solar Reserve, and we’re working hard to get those first projects ready to go in to construction, and we’re talking to lenders now and we’ve got a good reception on the technology.
Matthew: Now, let’s go back to the molten salt. Can you tell us a bit about the salt cycle, how it goes up the tank, what happens at night time, so I understand that it freezes at under 200 degress Celcius so it’s always kept hot, even when it’s in the cold tank. Can you tell us what happens at night? Because obviously you pump the salt up the tower during the day to receive the heat, so during the night how do you maintain the stability of the salt?
Kevin: Salt freezes at below 240 dgrees Celcius. Our operating range is between 290 degrees Celcius in the cold tank, and 570 degrees Celcius in the hot tank. Typically we’d like to have our tanks fairly full on the hot side but assume at the beginning of the day we’re starting out in the cold tank at about 290, heats up to about 570 over the course of the day and fills the hot tank. Both tanks are heavily insulated tanks so we lose maybe 1% of the heat on a daily basis; so we’ve got a fairly nice margin on the energy storage capabilities. So, even if for some reason we had substantial equipment problems or we were cut off from the electricity grid because the utility had transmission problems, we can last for two months or so without the salt reducing in temperatures enough to freeze. So, there’s plenty of margins in there, and like I said the insulated tanks.
In addition, the tanks have electric heaters in them so if, for some reason, we needed a lengthy stay with no sale of electricity and we’re just storing the energy, if we have a problem with reduction in temperatures we can heat them back up electrically. In Solar 2 which ran in the late 90’s for 3 years, that DoE demonstration project, I think they almost never utilized their electric heaters because the storage capabilities of the tank can last, literally, for weeks and weeks without dipping down into the danger areas where it would freeze. And if you do get some freezing the system has electric heat tracing throughout so so that you can thaw things out.
Matthew: Now, in future generations of the technology, you’re looking at salts that freeze at lower temperatures, are you?
Kevin: Yes, Rocketdyne is largely the technology provider for us, which is a UTC company. Solar Reserve is doing some engineering activities along with Rocketdyne on at looking at different materials that we can utilise for future generations of the technology and there are some materials out there that have wider range in order to store energy. Right now we believe that the salt is really the best technology out there now, and it’s a very safe and benign material, so it’s publicly acceptable...
Matthew: It’s just fertilizer right?
Kevin: Yes, exactly. I mean it’s not harmful, and at the end of the life of the Solar Two project after the DoE program was done, it was really just a three year contracted program that The Department of Energy put on. They basically put a shower at the top of the tower and sprayed it onto the ground and they came by and picked it up with a back hoe to take it off and then it got used as fertilizer. So, it’s a pretty safe substance.
Matthew: That sounds fantastic. Now with the mirror field, how big are the mirrors?
Kevin: Our mirrors, there’s a bunch of different philosophies on mirror design, and we’ve chosen kind of a mid-sized mirror in the, I’ll say 60 or 70 m2 is our design, which is large but the Solar Two facility had heliostats in excess of 100m2 and there are some other technologies that are looking at using much larger mirrors in the 120-140 m2 size. And then there are others that are looking at 1m2 kind of heliostats.
We’ve settled kind of in the middle and it’s really based on an analysis of what we thought, you know a combination of cost issues obviously, you’ve got bigger heliostats but less of them, which means less foundations, hopefully less steel. But at very large sizes you’re into shipping issues and transportation of the pieces and components, you’ve also got accuracy of the mirror, because we’re focussing the mirror on a receiver that could be a kilometre away and so we need some tight accuracy. So, if you’ve got real big pieces then you’ll get some sagging in the equipment and maybe the accuracy is not as good as it needs to be. So, we’ve got a mid sized mirrors as far as the industry goes, and that’s the design that we’ve done based on our cost analysis of what makes the most sense for us.
Scott: Now Kevin, can you just tell us quickly, because we have to end very soon, what your upcoming projections are, and do you have any plans for Australia?
Kevin: Well, our two primary markets are southern Europe and South West U.S. and we’ve got a number of projects in late stage permitting in both Southern Europe and here in the U.S. In the U.S. it’s largely California, Nevada, Arizona, New Mexico, some activities in Colorado, and those are the prime markets for us. We’ve got thirty or forty projects in various stages of development across those markets.
We are looking at some additional international markets including the Middle East, were looking at some things in South Africa, and we have done some studies and have been working with some groups in Australia looking at the market over there, including the potential for solar energy at some of the remote mining activities which typically are burning fuel oil which they truck 200 or 300 kilometres which gets extremely expensive, so if we can put solar energy, but it needs integrative storage ‘cause they have facilities that need to run around the clock. So, we are doing some preliminary activities in Australia; we’re watching very closely what’s happening with the regulatory structures and the promotion for renewable energy in Australia. Power prices are pretty low in Australia from an international view, so it’s hard to make the economics work on solar unless the government really wants to make a move to push towards clean energy.
Scott: Well Kevin, thank you very much for joining us this morning. Unfortunately, we’ve just run out of time. You’ve been very informative and we’re very impressed with the success you’re having and good luck with all the future successes.
Kevin: Thank you very much. I appreciate the time.
Scott: We’ve just been speaking with Kevin Smith, he’s the Chief Executive Officer of Solar Reserve and they’re a California-based developer and owner of large scale concentrated solar power projects using central tower, molten salt storage technology. If you want to learn more about Solar Reserve you can visit www.solar-reserve.com
Transcript by Graziella Cristiano
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