EME 812
Utility Solar Power and Concentration

8.2. Socio-economic aspects of CSP technology


8.2. Socio-economic aspects of CSP technology

CSP deployment has a number of positive collateral impacts on environment and social welfare, and those impacts are important to consider in the project feasibility analysis. Sometimes, when project evaluation is solely based on the energy prices, renewable energy technologies may not look competitive enough at the modern energy market. However, including externalities, such as greenhouse gas emission reduction effect, improved diversity, security of the energy supply, employment, etc., into the evaluation process can help to justify the value of a renewable energy project more fairly.

One of the prominent impacts of CSP in the socio-economic area is stimulation of the economy and creation of new jobs at the local level. This is largely due to relatively "low-tech" profile of this technology: the main components are mirrors, steel, concrete, and labor. These local impacts are realized through the increase in demand for goods and services and creation of jobs. These impacts can be classified as direct, indirect, and induced.

The direct effects imply the increased demand for good and services that are required to construct, operate, and maintain the CSP facility. The indirect effects involve the one the new investment has on new sales and material flows among other productive sectors of the economy. The induced effects are related to expansion of private expenditure (for example, from workers employed) in goods and services, such as food, health care, transportation, etc. [Lovegrove, Stein, 2012]. For proper accounting of all levels of external benefits, there should be a way to quantify them and to assign them a monetary value.

One of the analytical methods to quantify the externalities of energy projects is based on Input-Output (I-O) analysis. The I-O analysis is an economic theory that was developed by Wassily Leontieff, a Russian economist who received a Nobel Prize for it. This model describes the inter-industry relationships within an economy, connecting the outputs from one part of the economy to the inputs to another part of the economy. The data are typically expressed as monetary values and are organized as a matrix, with column entries representing inputs to an industrial sector, and rows representing outputs from that sector. [Input-Output Model from Wikipedia.org ]. Essentially, this approach recognizes that spent investment becomes income to other industries, and thus stimulates their development.

To understand how this method can be applied to CSP projects, we refer to the following publication, which analyzes the socio-economic impacts of parabolic-trough and solar-tower plants in Spain. The authors come up with impressive numbers for increase in demand and employment impacts, demonstrating the remarkable potential of CSP for benefiting local economy.

Reading assignment

Journal article: Caldes, N., Varela, M., Santamaria, M., and Saez, R., Economic impact of solar thermal electricity deployment in Spain, Energy Policy 37, 1628-1636 (2009).

This article is available online through the PSU library system. See copy of the article in Canvas Module 8. 

This article nicely demonstrates the quantified benefits from solar thermal energy projects, which are rarely taken into account in feasibility analysis. The type of analysis presented there is a convenient tool to determine whether the government subsidies provided to defray the cost of the renewable technology are justified in terms of social welfare.

Some main points in the above-mentioned study are included in the self-check questions below.

Check Your Understanding Questions 4-6 (Multiple Choice)