At the annual SolarPACES Conference (held virtually for the second year) Cerro Dominador’s CEO Fernando Gonzalez answered questions from the international network of concentrated solar power (CSP) researchers and developers attending about exactly what happened in the recent Chilean energy auctions with the record-low bid for CSP at under $34/MWh.
How Cerro Dominador bid a record low price
“There are multiple factors there; we have amazing solar resources in Chile, so we have a high capacity factor in our plants, and we designed the CSP to have the lower LCOE,” Gonzales explained.
“We also ran a competitive process to select our EPC contractor. We haven’t selected which one yet – but we received quotes that were very competitive, that we baked into our offer. And all the proposals we received were more or less in the same range, which gives us comfort that this will be achieved”.
Gonzalez revealed that the Likana site will be three CSP towers of 200 MW each for 600 MW – up from the 450 MW original three tower CSP design from SolarReserve, and have 12 hours of thermal energy storage, so that would be providing 7,200 MWh of 100% solar energy nightly.
They have a separate site nearby, Pampa Union, where they can build 600 MW of PV as well, to generate low cost PV during the daytime.
“This combination of CSP plus PV enables us to provide a very competitive solar energy profile to supply electricity 24 hours a day,” he explained.
“But we will likely build the project in phases. The two projects, the CSP and the PV, will be built when we have the contracts. For this auction we were planning the first tower of about 200 MW of CSP plus 200 MW of PV.”
This solar combination would follow the design of their existing 210 MW Cerro Dominador solar project now in operation in the Atacama desert, which also combines CSP and PV solar fields adjacent to each other (110 MW and 100 MW respectively). It also includes a small amount of battery storage for additional flexibility, while generating lower cost longer duration night power from 17.5 hours of thermal energy storage as part of the CSP plant.
Auction design failure
Chile has a target to meet, ending the use of fossil fuels, and this bid in the 24 hour tranche would provide firm and dispatchable 100% renewable all-solar generation both day and night – at record-low cost.
But due to the way Chilean auctions are designed, this innovative plan did not win, because auction design there assigns no value to flexibility or storage from renewable energy.
“The way the market works in Chile is different than other parts of the world,” Gonzalez explained.“Auctions only require a commitment to deliver on an annual basis, not on all the hours you are bidding. And even if you don’t have energy, you can buy it in the market to serve your contract.”
Because of this, PV developers could actually win a 24 hour contract to supply power at night, despite providing no actual generation to cover night time, by just buying power after dark. Or they could claim their bid would include battery storage, but specify the capacity only in megawatts, not in megawatt hours, concealing the reality that this might only provide as little as an hour or so of discharge.
So the auction failed to integrate reliable, proven, long duration CSP storage, even at this record-breaking price, despite many researchers showing it is the key to fully decarbonize Chilean electricity. With no over-night renewable energy storage, the Chilean energy system will continue to depend on more expensive gas or diesel for base load stability.