Long-term investment success in the Sahara will likely depend on the short-term success of today's more modest installations. And two things may spoil the show: the dwindling of Spain's CSP feed-in tariff and environmental resistance, similar to the kind that just killed the proposed BrightSource plant in California's Mojave desert.
In California's case, a 5,130-acre solar power farm was to be built on land once earmarked for conservation. BrightSource met powerful eco-opposition with its plans to canvas the idle acreage with solar mirrors. The company is now searching for an alternative site.
The problem is that CSP plans require giant land requests on unspoiled deserts, making them an environmental liability in certain parts. UBS calls this "a minor issue" in its analysis. Time will tell just how minor an obstacle it is.
In Spain, there are now 232 MW of installed CSP capacity, with an additional 4,300 MW said to be in various stages of construction. A generous feed-in-tariff made it all possible, and it might be vastly diminished. The Spanish government is pondering slapping a cap on the number of CSP facilities eligible for a government-financed premium.
But UBS isn't too concerned about the market effects of this either:
"It is likely that in autumn 2009 the feed-in tariffs for CSP will be lowered. However, the reduction might not turn out to be as the industry lobby for CSP ... is quite strong and the feed-in tariffs for CSP are at relatively reasonable levels."
Investors face a slew of other unknown risks: potential regulatory changes, withdrawal of global political support, emergence of competing and disruptive renewable technologies and technology component shortages, among other things.
But overall, CSP may be one the safest investment bets of the renewable energy bunch.
Most analysts agree that it is the solar alternative to utility-scale fossil-fuels. CSP installations can churn out far more megawatts than rooftop solar photovoltaics. That's in part because they have the coveted advantage of solar storage, meaning CSP systems can provide power at peak hours, even when the sun isn’t shining.
It's no wonder public money is flowing into the sector in major markets. Will investors follow?