CS Energy quits Solar Flagships project

The Queensland state-owned generator CS Energy has quit the Solar Dawn consortium that is proposing to build a 250MW solar thermal power station as part of the federal government’s Solar Flagships project.

The departure was quietly announced by CS Energy in late December, when it revealed that it would not take up the O&M contract (operations and maintenance) of the $1.2 billion project. CS Energy was to have taken an equity stake in the consortium, but will no longer do so.

The decision by CS Energy creates further uncertainty about the future of the project, which – along with the other Solar Flagships winner, the 150MW Moree solar PV project – failed to arrange finance by the mid-December deadline.

The future of the projects now appear to be in the hands of the federal government, which is considering whether to grant a firm extension, or take other action such as return the pool of funds (it was to invest $465 million), or hand the grant to another applicant. That review is continuing. The Queensland government has pledged $70 million to the project.

A spokesperson for CS Energy said the energy company had decided to concentrate on existing projects. Ironically, these include another project with Areva using the same Compact Linear Fresnel Reflector technology. This project, a 44MW “solar boost” to the 750MW Kogan Creek coal fired generator in south west Queensland, has begun construction and is due to be complete by 2013. The spokesperson said CS Energy still saw synergy between these two projects. Solar Dawn, which has got most of its development approvals, is to be sited next to Kogan Creek.

The Solar Dawn project proposes two 125MW modules of solar arrays, supported by a gas “booster” plant. There has been some speculation that the size of the project may have to be reduced due to costs.

The departure of CS Energy from the consortium leaves Areva and its development partner Wind Prospect CWP as the sole shareholders. Areva, the French nuclear giant, has deep enough pockets to fund the project, but it is understood to want to spread the risk. It bought the CLFR technology from Ausra, a company co-founded by Australian solar researcher Dr David Mills.

The flagships program has been criticized by many in the industry because of the grandiose nature of the projects, when it might have been wiser to fund a broader range of smaller projects using different technologies, and so spread the risk. (See Matthew Wright’s piece on why grants should be ditched in favour of feed-in-tariffs).

Both flagships winners have been unable to strike critical power purchase agreements with utilities, a critical step if they are to get bank finance. They have been hampered by the poor environment for PPAs, the novel nature of the technology, and the fact that the contracts need to reflect the value of the energy being provided during daytime peaks.

There are several scenarios being discussed in the solar industry as to what may happen if the financing deadlines are not extended. Several are pushing hard for the losing bidders – which include two ventures between First Solar and TRUenergy and AGL, an Infigen/Suntech venture, and in the solar thermal space, the Solar Flare project including Siemens, Parsons Brinckerhoff and John Holland – to be given an opportunity. It may be that the ambition and scale of the projects is pushed back and some grant monies returned to the Australian Renewable Energy Agency, which ostensibly has carriage of $3.2 billion of grant funding.

The Solar Dawn project is also fighting against a global trend that has seen solar thermal projects dumped in favour of solar PV, which are further down the cost curve. And Solar Dawn does not include a storage option, which could have given it more flexibility to seal a PPA. It had been negotiating such an agreement with Queensland utility Ergon Energy, but failed to cut a deal.

A spokesman for Areva was not immediately available for comment.