CITIC SEC released a research report stating that concentrated solar power (CSP) combines the dual functions of grid flexibility and long-duration energy storage, serving as a reliable resource to enhance renewable energy integration. Supported by recent policies, CSP has rapidly developed as a complementary regulating power source for new energy bases. Technological advancements, localization, and economies of scale have driven down CSP's levelized cost of electricity (LCOE). While still higher than conventional power sources, its competitiveness is expected to improve through further cost reductions and increased regulatory value, fostering sustainable industry growth.
The report highlights that power systems will continue facing capacity and flexibility shortages, boosting demand for ancillary services like peak regulation. CSP's superior flexibility allows it to play a critical role in power systems, benefiting from policy support, technological progress, and economies of scale to reduce costs and secure favorable tariffs. Manufacturers deeply embedded in the CSP supply chain stand to gain significantly, while early-mover operators may secure technological and experiential advantages.
Recently, China's National Development and Reform Commission (NDRC) and National Energy Administration (NEA) issued guidelines to promote CSP's large-scale development, outlining its strategic positioning, growth targets, and policy mechanisms. Key takeaways include:
1. **Dual Role in Grid Stability & Storage**: China primarily adopts molten salt tower CSP technology, converting solar energy into electricity via heat absorption, storage, and steam turbines. With thermal storage enabling 8–15 hours of dispatchability and peak-shaving capabilities of up to 80%, CSP effectively supports renewable integration. Mature projects globally demonstrate potential as baseload power under specific conditions.
2. **Expansion in Renewable Bases**: Despite slow early growth due to high costs, CSP is accelerating as a key regulator for desert-based renewable hubs. The 14th Five-Year Plan targets 3 GW annual CSP deployment, with 3.3 GW under construction and 4.8 GW planned by 2024—mostly paired with solar farms. The guidelines aim for 15 GW by 2030, implying 2.2–2.5 GW annual additions in the 15th Five-Year Plan period.
3. **Cost Reduction & Market Competitiveness**: Localization and scaling have cut CSP's standalone LCOE to ~¥0.53/kWh. Though still less economical than alternatives without cost-sharing (e.g., as PV adjuncts), policy incentives—such as Qinghai’s ¥0.55/kWh tariff for demo projects until 2028—will bolster viability. Larger projects (300–600 MW) will further reduce costs via economies of scale. Future revenue from ancillary services and capacity markets may reduce reliance on subsidies.
**Risks**: Weak power demand; steep tariff declines; slower-than-expected CSP cost reductions; inadequate policy support; delays in power market reforms.
