The Sun Shines at Night: Solar Thermal Power with Storage

Summary.  The Solana Generating Station, a solar thermal electric generating facility in Arizona, has begun operation in October, 2013.  Solar thermal plants capture energy from the sun as heat, which is then used to form steam that drives a turbine generator.  Solana additionally features a thermal storage capability, based on heating a molten “salt”, to buffer extra heat energy for use when the sun does not shine.  The buffer provides up to six hours of thermal operation.  Solana’s electricity is contracted to Arizona Public Service, an electric utility company.

Solana is one of several commercial-scale solar energy facilities in the U. S. currently under construction or newly operating.  Its financing included major support from the U. S. Department of Energy Loan Guarantee Program.  This program supports many projects that commercialize new or unconventional technologies that provide energy for the U. S. economy.  Only 6% of its guarantee funds were granted to projects that have been “discontinued”.  This indicates its funds have a highly creditable success rate of 94%.  The program  fulfills an important governmental function, that of supporting projects that would have difficulty attracting private investment.

Introduction.  Incoming solar radiation generates electricity on a commercial scale using two different technologies.  First, solar photovoltaic power uses semiconductor light-sensitive panels directly to generate electric current.  These include the familiar solar panels used on rooftops for local generation.  Photovoltaic power is not considered here.

The second technology is solar thermal power generation.  The heat contained in sunlight is captured in a circulating fluid that heats water to steam.  The steam is then used in a conventional turbine to generate electricity.  An industrial scale solar thermal facility with the added feature of storing heat has just become operational in Arizona; it is described here.

The Solana Generating Station has begun operation near Phoenix, AZ.    This station a) focuses the sun’s energy using mirrors to heat an oil fluid flowing through the black horizontal pipes in the photo below.

Thousands of curved mirrors focus sunlight onto black pipes to heat the oil circulating in them.

Source: http://www.nytimes.com/2013/10/18/business/energy-environment/arizona-utility-tries-storing-solar-energy-for-use-in-the-dark.html

 

The heat stored in the oil is used either to b) heat water to make steam, which then drives turbines to generate electricity, or c) heat a high temperature molten “salt” (not table salt) which stores the transferred heat in a hot salt tank.  This is shown in the image below for daytime operation of the station.

 

At night the station d) transfers the heat stored in the molten salt back to the oil, which is then used to heat water to steam, driving the electric turbines.  This is shown in the image below.



 

Enough heat is stored in the molten salt during the day for about six hours of generating service after dark.

 

Other solar energy installations have tried storing excess energy in electric batteries.  But these are expensive, and so not suitable for large installations.

 

Industrial scale electricity generation.  The Solana Generating Station operates two generating turbines to provide a peak power (power is the rate of generating electrical energy) of 280 megawatts (MW; millions of watts; a watt is a unit of power).  The parabolic mirror-circulating oil facility includes thousands of individual mirrors covering about three square miles of land.  The station was built by the Spanish electricity company Abengoa using primarily materials sourced in the U. S. 

 

The electricity provided by Solana is being sold under a long term contract to Arizona Public Service (APS), providing electricity sufficient for 70,000 customers.  In addition to the Solana station, APS will have a total installed solar power capacity of 750 MW by the end of 2013, enough to serve 185,000 customers.

 

The Solana Generating Station represents a capital investment of about US$2 billion.  The U. S. Department of Energy (DOE) Loan Guarantee Program supported US$1.45 billion of this amount.  The utility customer base and long service lifetime of the station provide reasonable assurance that the loan guarantee will have been a successful venture.

 

During construction, the project provided 1,500 jobs in the local community.  Abengoa will require a small number of local permanent positions for maintenance and service of the station.

 

Discussion

 

The Solana Generating Station is but one of several industrial-scale renewable energy generating facilities being developed in the U. S.  A previous post summarizes some of the solar projects included in this category.  These too have reached fruition or are about to begin operation.

 

General descriptions of solar energy, be it photovoltaic or solar thermal, have been concerned with intermittency of service since the sun’s energy is available only during daylight hours.  The Solana Generating Station overcomes this criticism by use of its heat storage system based on molten salt heat reservoirs.  Although inevitable engineering losses arise during heat transfer into and out from the reservoirs, the station’s design permits using the sun’s energy, in the form of the heat stored in the reservoirs, to generate electricity during dark hours of the daily cycle, and/or if clouds excessively obscure sunlight.  Additionally the stored heat complements portions of the daily light cycle when other renewable energy sources, such as solar photovoltaic generators or wind turbines, are poorly effective.

 

The DOE Loan Guarantee Program (LGP) provided valuable financial support for this project.  The objectives of the program are summarized as “guarantee[ing] loans that support early commercial use of advanced technologies, if there is reasonable prospect of repayment by the borrower.” DOE loan guarantees are intended to promote commercial use of innovative technologies, but not to support energy research, development, and demonstration programs.

 

The LGP has provided loans totaling US$24.2 billion to 29 renewable energy and advanced technology commercial projects other than loans supporting nuclear energy.  They are summarized as having saved jobs or provided construction jobs totaling about 50,000 (although 33,000 of these are ascribed to jobs saved by loans to Ford Motor Co.).  Most of the loans are listed as “closed”.  Only a few, totaling US$1.5 billion, are listed as “discontinued”, including a loan to Solyndra Inc. which gained unfavorable political attention two years ago. 

 

In other words, only 6% of the funds guaranteed under the LGP have performed unsatisfactorily.  This is a highly positive outcome for a program intended to encourage novel or unproven technologies.  Thus the LGP has been remarkably successful in supporting the commercialization of new or unconventional technologies that promote expansion of the energy mix, and greater efficiency in transportation, for the U. S.  It is concluded that the LGP fulfills an important governmental function, that of supporting projects that would have difficulty attracting private investment.

 

  

© 2013 Henry Auer

One-Year Extension of Tax Credits for Renewable Energy in the U. S.

Summary.  The American Taxpayer Relief Act of 2012 included a one-year extension of tax credits favoring renewable energy growth in the U. S.  It liberalizes the credits, expanding their applicability to include projects whose construction will have begun during the present year, 2013.  A primary component within renewable energy that benefits from these tax credits is generation of power by wind.  It is projected that wind energy could provide 20% of U. S. energy by 2030.

Tax credits in the U. S. for renewable energy have a history of being allowed to expire, then being reinstated later, each active period enduring for only one or a few years.  This is highly disruptive for the industry, as it makes long-term planning with certainty largely impossible.  The U. S. needs to implement long term policies governing development of renewable energy in order to provide such certainty.

 

Introduction. Renewable energy is playing an increasingly significant role in the U. S. and around the world.  Wind energy provides a large fraction of this growth, as well as much of the total installed capacity, among the various renewable sources. In addition to wind, these include solar energy, hydroelectric power, biofuels, geothermal energy and ocean or tidal energy.

In the U. S., renewable energy has received subsidies in the form of an investment tax credit (a credit favoring investment in new facilities to promote construction) or a production tax credit (PTC; a credit based on the amount of energy delivered once a facility is operating).  Wind energy has received tax credits, much in the form of PTCs.  In the recent decade the U. S. Congress allowed credits to lapse, and then reinstated them, in an arresting pattern of fits and starts.  This is shown for wind energy in the following graphic:

 

 

History of ITCs and PTCs for wind energy in the U. S. The blue bars show annual wind generating capacity added each year, using the scale for gigawatts added shown on the left vertical axis.  The light blue section of the bar for 2012 shows planned capacity additions at the time this report was prepared late in 2012, presumably in anticipation of the expiration of the PTC at the end of 2012.  The green line shows the total wind capacity installed in the U. S., using the values on the right-hand vertical axis.  The 1603 Grant was a provision of the American Recovery and Reinvestment Act of 2009 (the “stimulus” combating the recession) that made a fractional direct cash payment for renewable energy projects.

Source: U. S. Energy Information Agency; http://www.eia.gov/todayinenergy/images/2012.11.21/windcaplarge.png.

 

It is quite clear from this graphic that periodic expiration of tax credits (see the years following expirations in 1999, 2001, 2003, and 2009) had drastic negative impacts on installation of new generating capacity during the following year.  In addition, as noted in the legend to the graphic, during 2012 wind industry planners were factoring in a scheduled termination of the PTC effective at the end of the year by accelerating new construction.

 

Extension of Renewable Energy Tax Credits.  The so-called “fiscal cliff” in the U. S. raised the possibility of sharply higher taxes and reduced spending as of Jan. 1, 2013.  At literally the last minute, in an effort to avoid this fiscal crisis, the U. S. Congress passed the American Taxpayer Relief Act of 2012 (the “Act”) on Jan. 1, 2013, and President Obama signed it into law on Jan. 3. 

 

In addition to provisions averting many facets of the looming fiscal disaster, the Act included provisions extending tax credits for renewable energy.

 

Renewable Energy Provisions of the Act.  The Act provides extensions of tax credits with slightly more favorable terms than in previous years.  Most of the provisions are summarized here.

 

a)     A production tax credit or an investment tax credit for wind energy is extended for one year ending Dec. 31, 2013, but the terms are liberalized by requiring only that construction must have begun by that date rather than, in earlier versions, been completed by then.  A total of $12 billion may benefit the wind industry over the next 10 years;

b)     a credit for energy efficiency in existing or new homes;

c)     a credit for vehicle refueling facilities providing alternative fuels;

d)     a credit for biodiesel and renewable diesel fuel mixtures, applied to fuels sold after Dec. 31, 2011 and by Dec. 31, 2013;

e)     for the four tax credits described above, the deadline is extended to Dec. 31, 2013, but the subject of the credit must have become available for use after Dec. 31, 2011.  Thus they are retroactive for about one year, and expire after one year;

f)      a credit for producing cellulosic biofuels after Dec. 31, 2008 and before Jan. 1, 2014, applicable to a wide range of newer cellulosic sources and to cultivated algae; thus this provision is retroactive for four years and remains effective for one year.  There is also a special allowance for facilities that produce the newer cellulosic or algal biofuels, placed in service after Dec. 31, 2012 and effective for one year; and

g)     a credit for geothermal facilities whose construction begins before Jan. 1, 2014.

 

The New York Times reports that electricity produced from other forms of renewable energy sources, including tides and ocean waves, landfill methane and hydroelectric facilities were also included in the tax credits.

 

Analysis

Extension of Tax Credits. The American Taxpayer Relief Act of 2012 included several provisions extending PTCs or ITCs for the relatively short period of 1 year, as itemized in this post.  This 1-year extension contributes, albeit only briefly, to helping wind energy and other renewable energy technologies to provide an increased share of America’s energy demand.  In a report issued in July 2008, The Office of Energy Efficiency and Renewable Energy of the U. S. Department of Energy modeled a scenario (EERE) in which wind energy would supply 20% of U. S. demand by 2030.  To achieve this objective, generating capacity would have to expand from about 46 gigawatts (GW) in 2011 (see graphic above) to 305 GW in 2030 (EERE).

 

The legislative wrangling over whether, and how, the fiscal cliff could be averted was itself a cliffhanger.  It was not until the last days before the fiscal cliff deadline of Jan. 1, 2013 that the outlines of the law were assembled, and final passage required a late night session of the lower chamber, the House of Representatives, on New Year’s Eve extending into the early hours of the new year.  Most of the renewable energy credits were extended for only one year.  Thus the Act guarantees yet another period of uncertainty promising yet another contentious legislative struggle over further extensions in one year’s time.  Nevertheless the Act liberalized the credits by extending them to projects whose construction will have begun before the expiration date, replacing the earlier requirement that projects must have been completed by the deadline date.

 

Policymaking by fits and starts is highly disruptive.  Governing in this way, by awarding and withdrawing tax benefits literally at the last minute on a schedule of once a year to once every few years, is extremely disruptive for business activity (see the graphic above).  Corporations and entrepreneurs seeking to develop renewable energy need multi-year periods for planning, funding, and installing renewable energy facilities.  Depending on the particular technology and location, this can include factors such as gaining zoning and siting approval, undergoing environmental impact analysis, assembling financing, garnering purchase contracts for the energy ultimately produced by the renewable source, and construction.  For example, according to the American Wind Energy Association, developing a new wind farm requires 18-24 months.  Many of these factors are interdependent.  Singly or in conjunction with one another, settling these arrangements requires extended periods of time.  It is highly counterproductive for developers to have to contend with short-term provision and expiration of tax credits.  Effective energy policy must create long-term stability in order to enable the justified expansion of renewable energy technologies.

 

It would be far more reasonable and effective to develop policies on subsidizing the development of renewable energy on a long-term schedule. In this way corporations and entrepreneurs could plan the development and implementation of projects secure that subsidy policies were intact, available as scheduled, and could be used as appropriate throughout the lifetime of the project.

This view conforms with the history of the use of subsidies in the

U. S. for newly emerging energy technologies throughout this country’s history, beginning in the nineteenth century. Federal and/or state subsidies were consistently applied, and have been found to be most effective when a new technology was in the  early years of its development.  Unfortunately, at least in the case of crude oil, subsidies continue to be granted even now, more than 100 years after the birth of the industry. Clearly, subsidies are no longer warranted for this industry, given the enormous revenues and profits among the major crude oil producers.  Those expenditures could more justifiably be applied to the current group of nascent technologies encompassed within renewable energy.

 

Advantages of renewable energy.  Construction and development of renewable energy projects have many positive policy features. The new facilities will operate within the U. S., rather than abroad.  In contrast, much new petroleum exploration and development  occurs in more and more remote locations and environments.  Commonly these require deep drilling and frequently involve deep sea operations including development in the extreme conditions of Arctic oceans.  These conditions are fraught with environmental hazards that can come to fruition with disastrous consequences. Furthermore, as drilling operations take place under increasingly challenging technical conditions, their costs increase correspondingly.  In contrast, the costs for renewable energy are well-understood and easily budgeted.

 

Developing renewable energy preserves and/or creates jobs.  The American Wind Energy Association states that currently 75,000 workers are engaged in wind energy.  It expects that the policies in the Act could save as many as 37,000 of those jobs and create many more in later years.  There are almost 500 manufacturing facilities in the U. S. related to wind energy, located in all 50 states.  A thorough summary of job economics related to renewable energy is presented in this post.

 

Renewable energy sources have the very important feature of not emitting greenhouse gases into the atmosphere.  Global warming due to manmade greenhouse gases is already a very serious problem and is destined to get worse as humanity's demand for more energy grows. New fossil fuel-based energy- facilities put into service now, such as oil and gas pipelines, electric generating plants, oil refineries, and the like, will continue operating for a useful lifetime of, say, 40-50 years.  These new facilities will continue spewing greenhouse gases into the atmosphere throughout their service lifetime, adding to those already accumulated and worsening global warming.  In contrast, renewable energy facilities, once placed in service, have close to zero lifetime emissions of greenhouse gases, yet have the potential capacity to provide a significant portion of America’s energy demand.

The American Taxpayer Relief Act of 2012 laudably includes a one-year extension of tax credits for wind energy and other forms of renewable energy.  It is lamented that the extension is for only one year.  This prevents entrepreneurs and businesses from making plans for further development of renewable energy with the certainty of having a long-term policy in place.  The expanding renewable energy industry provides jobs for American workers, contributes to freedom from reliance on foreign sources of energy, and relieves the burden of accumulating greenhouse gas emissions in proportion to its installed generating capacity.  All efforts should be undertaken to implement a long-term energy policy in the U. S. that includes appropriate support for the expansion of renewable energy.



 

© 2012 Henry Auer