Is Siemens' solar spending spree paying off?

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1 Is Siemens' solar spending spree paying off? Posted by [1] on Mar 26, 2010 In 2009, Siemens AG positioned itself at the forefront of the CSP sector via strategic acquisitions that included the buy-out of Solel Solar Systems and a stake in Archimede Solar Energy. CSP Today speaks to René Umlauft, CEO of Siemens renewable energy division, to find out how the solar business is shaping up. By Rikki Stancich in Paris Siemens AG saw clear potential in concentrating solar power early on and its timing, to date, could not have been better. The German industrial giant s move into the CSP space last year was impeccably timed with 56 CSP projects (representing a combined 2,339 MW) being given the go-ahead in Spain under the Spanish Royal Decree 6/2009, as well as government backing for CSP projects in India and the USA. Its 100% buy-out of Solel Solar Systems, which developed the UVAC 2010 state-of-the-art receiver, coupled with a 28% stake in Archimedes Solar Energy, a first mover in molten salt receiver technology, has placed Siemens in a duopoly position with the only other major receiver manufacturer, Schott AG. Meanwhile, as far as CSP project development is concerned, the combination of Solel and Siemens is nothing short of a formidable formula. Solel s extensive experience in developing and manufacturing solar field equipment and planning and construction of solar fields is well matched with Siemens long standing history in power generation as well as the the management and execution of largescale projects. As a founding member of the Desertec Industrial Initiative (DII), which aims to establish the investment framework and infrastructure to service both the MENA region s energy requirements and up to 15% of Europe s energy demand from solar and wind energy sources, Siemens has covered its bases to ensure that it will play a pivotal role in shaping the new energy landscape. CSP Today s Rikki Stancich talks to René Umlauft about the integration of its latest solar acquisitions, Siemens future CSP strategy and the CSP sector could do more to drive down costs toward wholesale parity. CSP Today: How successful has the integration of Solel been to date? René Umlauft: We have had a very high level of success of integrating Solel into Siemens Concentrated Solar Power, right from closure of the deal.

2 We have fully integrated Solel, from the sales team through to the IT team and the former Solel employees are highly visible and recognized within Siemens. There is a strong degree of harmonization between the teams and we are now going together to the market. CSP Today: What is the level of demand like at present and in terms of Siemens CSP products and services, where is demand greatest? René Umlauft: Overall with CSP there are a lot of projects at different stages of development. Some developers are ready for ordering parts and some are in discussions with us. In Spain there are a number of projects about to take off, owing to the Royal Decree and India and the US are also strong growth markets. There is a mix of demand some customers are only demanding the UVAC receiver; some want to take the whole solar field a lot of architect designers in the US are demanding this. Then we have customers demanding the entire EPC package. Our strategy is to offer what we are asked for, be it the turbine, receiver, or part systems (the solar field, power block, turn key jobs) - we offer the complete portfolio. Demand differs from market to market in Spain, developers are looking for part solutions; in the US, the demand is more for solar field part solutions; whereas the Middle East is largely a market for EPC contractor services. CSP Today: What is Siemens' forward strategy regarding CSP - are there any new CSP projects in the pipeline, or any planned partnerships or potential acquisitions? René Umlauft: What we have now in our portfolio is technical leadership. The UVAC 2010 really is state-of-the-art when it comes to receivers. We are the only company that can provide the complete solar field as well as the power block. And with Archimede, we can provide molten salt receivers too. Currently, we view trough technology as being the most advanced and the most bankable; the majority of projects being designed today are designed to use a trough solution. CSP Today: Is Seimens likely to acquire any other CSP technology firms that are developing alternatives to trough technology?

3 René Umlauft: We have no plans for acquisitions but of course we will be looking closely at tower projects to see what is going on from the technology point-of-view. CSP Today: The CSP industry seems to be undergoing a consolidation phase. Can you comment on this? What are the benefits and drawbacks of industry consolidation? René Umlauft: I would say it is more a case of industrialization, rather than consolidation. The CSP is industrializing insofar as we are not few players; it is simply that larger players are now stepping in and industrializing the business, which will enable markets reaching wholesale parity. This should be the common goal to reach wholesale parity in the medium-term. Larger players deliver knowledge, processes and scale effect all of which drive down cost. CSP Today: The Archimede receiver production facility is under construction. Are we likely to see commercial deployment of these receivers any time soon and if so, where? René Umlauft: Archimede is at the offering stage for projects around the globe, in Italy, China, Chile to mention a few. The technology could really drive down cost and increase efficiencies. Our new receiver plant in Italy will start in early CSP Today: What is the anticipated demand for receivers that handle molten salt as the heat transfer fluid? René Umlauft: We anticipate a lot of demand. There is a lot of confidence in the product because of the upsides in efficiency, lower cost and the heat storage properties offered by molten salt. CSP Today: Are rising salt prices likely to have a negative impact on uptake of molten salt technology? René Umlauft: It depends on the size of the plant and the tonnage requirement. If you are talking about a molten salt storage unit with a 5-hour storage capacity, then salt prices could have an impact. CSP Today: On a more general note, where can efficiency gains be achieved in the CSP sector? René Umlauft: We see a way for larger power plants upward of 50MW (in the realm of 80, 130,

4 150MW) to drive down costs via economies of scale. In both receivers and trough technology there are opportunities for increasing efficiency through industrializing processes and by manufacturing parts in the field. Greater efficiency can be achieved not only by optimizing single components, but also by optimizing the whole system. Think about the diameter of a receiver: Why do we use the diameter that we use today? Because it is the same diameter that we used 30 years ago; it is the historical standard. If you increase the diameter of a receiver to receive more fluid, you could reduce the size of the overall solar field. By introducing new specifications for components, you could achieve greater overall operational efficiency. CSP Today: Bloomberg New Energy Finance s CEO Michael Liebreich recently said: I can almost guarantee that Desertec as it s currently described will not happen. We ll not be sitting in this hotel in 25 years time and using electricity from North Africa. What is your response to his statement? René Umlauft: Why shouldn t we develop CO2-free power generation across continents in the 21st century, just like we developed intercontinental telecommunications in the 19th century. This unites sustainability, technological competence and visionary entrepreneurship. But there will always be skeptics. I fully support the Desertec initiative. CSP in Northern Europe is infeasible it needs to be used where the resource lies, which is in the Sun Belt, near to the coast line with a relatively close connection to Europe. Desertec presents a win-win situation for everybody it stimulates local industry, provides energy security as well as additional revenues for the North African energy exporting countries. A lot of people are showing interest and support for the concept. In addition to the original 13 founding members, more than one hundred companies have expressed their interest in getting involved. Four new shareholders from Spain, Italy, France and Morocco just joined the DII. There are considerable challenges that have yet to be overcome, such as gaining support from politicians and planning transmission. The technical aspect is not an issue; the factor underlying the success or failure of the Desertec initiative will most likely be political will. To respond to this article, please write to the editor: Rikki Stancich: rstancich@gmail.com

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