Concentrated solar power (CSP) is a promising technology for low-carbon power generation. Thanks to abundant solar resources in the world’s sun belt and its ability to provide flexible and reliable power supply when combined with thermal storage, CSP could play an important role in maintaining a steady power supply in future low-carbon energy systems with high penetrations of fluctuating renewable power from solar photovoltaic and wind.

The barrier preventing further CSP deployment is cost. Currently, due to a lack of deployment it is a higher risk, higher cost investment than available alternatives. However, our analysis shows that if international finance institutions (IFIs) and committed national governments were to join forces to deploy 5-15GW of CSP, it could reduce its electricity production costs by around 14-44% and make CSP competitive in countries like Morocco and South Africa, providing increased energy security and affordable power to drive their growing economies and positioning them as market leaders in a technology of international promise.

National policymakers choosing to support the deployment of CSP can ensure they achieve their policy objectives more effectively and at lower cost by taking the following lessons learned through our analysis of the international CSP market and case studies in key countries into account:

  • Provide sufficient financial support to drive deployment
  • Ensure that support can be sustained over time to avoid boom and bust
  • Design policy to ensure that the cost of support falls to reflect decreasing technology costs over time
  • Align public and private actors’ financial interests to reduce the perception of policy risk and the cost of renewable energy support
  • Make reliable on-site solar irradiation data available
  • Consider low-cost and/or long-term debt as one of the cheapest ways for national governments to support renewable energy deployment
  • Move away from flat power tariffs to remunerate the flexible power supply provided by CSP to more accurately reflect its benefit to the energy system
  • Longer-term more private and local debt is needed to secure long-term financing and reduce currency risks

CSP needs international financial resources that can be concentrated on specific technologies to implement first plants. This international public finance is best used:

  • In countries committed to harnessing their solar resources that are unable to bear the full cost due to weak capital markets and no CSP experience
  • For early stage CSP technologies with high investment risks but great potential for cost reductions or energy system benefits to mitigate those risks the private sector is unwilling to bear
  • To provide knowledge on policy tools and technology to local policymakers

IFIs can improve the effectiveness of this support in the following ways:

  • Consider adjusting loan requirements according to the technology maturity
  • Harmonize loan and regulatory requirements when groups of institutions lend to large CSP projects
  • Reduce foreign exchange hedging costs of IFI loans for developers, by either taking on the risks or convincing host countries to partially denominate tariffs in foreign currency

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