The most significant step toward creating an ambitious, $500 billion solar project in the North African desert occurred on July 13.
Executives representing one Algerian and 11 European companies gathered in Munich that day to formally launch the Desertec Industrial Initiative, a new alliance for developing solar-thermal energy. In mundane business terms, the 12 companies signed a memorandum of understanding to create a new company by October 31.
The new company, named Desertec Industrial Initiative (DII), will tackle the creation of a complete network of electricity generation plants from renewable energy sources — mostly solar heat — and transmission lines around and under the Mediterranean with the aim of satisfying approximately 15 percent of Western European electricity demand by 2050.
News of the project quickly drew comments from supporters and critics alike, many asking if such a venture was at all serious.
A few years ago, discussion of solar energy was but a nice mind game, something for incorrigible idealists, aspiring but naïve scientists, academics tormented by fears of climate doom and influence-free politicians — the backbenchers who never get invited to the power lunches of the big companies.
But now the situation has changed. Like the economic climate and energy prices that have contributed to demand for energy efficient vehicles, the idea of solar power has gained traction in the real world, and is able to elicit professions of idealism from corporate executives who have billion-dollar signatory powers.
What makes the announcement of Desertec a milestone in the history of energy generation is convergence: specifically, price-cost ratios and technical capabilities have come together in a way that was not plausible five or six years ago.
The project presents the possibility of new future partnerships for the Mediterranean rim countries, making the region a new global player that can see eye to eye with other economic growth centers.
The sales pitch for solar power
The first selling point of Desertec is that it is possible. The technical basis of Desertec, are Concentrating Solar Thermal Power plants, which use sunlight in the generation of electricity via steam turbines. It is a tested and proven method that has been applied in commercial operations, which have been in business for more than a decade.
The other decisive technical component in the concept is power transmission. Here, the protractors of a Mediterranean grid say that the latest high-voltage direct current (HVDC) transmission lines are economical up to a distance of 3,000 kilometers with a attrition rate of no more than 3 percent per 1,000 km.
The second selling point is profitability. Cost of producing a kilowatt of electricity from Desertec’s renewable sources is projected to come down to levels that are comparable to, or lower than, costs of generating electricity from the burning of fossil fuels. The cost argument involves variables and assumptions but it is strongly supported by the trend of the past 10 years that has shown the cost of renewable energy drop at better-than-expected rates, including the cost of the other solar electricity generation method, photovoltaic, which is approaching the break-even point in Europe.
The third selling point is sustainability: the energy created by Desertec can replace dwindling fossil reserves, there are no CO2 emissions and it creates a new energy balance where production and consumption are distributed more equitably than in the oil-era scenarios of Middle Eastern energy exporters and consumers.
The Desertec plan for the Mediterranean rim
The draft of the Desertec power network is much more than a simple link from some Saharan solar farm or power tower to electricity grids in Europe. The roadmap for renewable energy circling the Mediterranean also entails wind, hydro and other renewable power generation plants. On the African and Western Asian side, more than 30 solar thermal plants would be augmented by a string of wind farms along the Atlantic coast and occasional hydro power and biomass installations.
This grid of MENA power production would reach over to Europe via several routes, mostly crossing under the Mediterranean. Power lines in the draft plan follow both the short, western routes into Spain, but also island hop through Cyprus, Crete, Malta/Sicily and Sardinia/Corsica. And, of specific importance for the Levant region, about 35 percent of the solar power plants on the Desertec roadmap are located on the Arabian Peninsula, with transmission lines sketched to traverse Syria and link into Turkey’s Anatolia.
The draft concept on the Desertec site also mentions several pilot projects that would deliver electricity and water to MENA’s most oppressed — the people of Gaza.
“A solar power plant and drinking water plant on Egyptian territory for the benefit of the Gaza Strip would be useful as a pilot project,” the paper says, “for humanitarian reasons.”
This goodwill is sure to be confronted with challenges, just as the entire plan will probably see more changes than implementation of original draft components if the project eventually becomes a reality.
Source: Regional Press Network
The naysayers
When held against these pro-Desertec arguments, opponents of Desertec seem to be largely captivated by mono-cultural thinking and monopolistic fears. Some want the project to be stillborn because it could create power for big business and might threaten the growth of small-scale solutions for renewable power in Europe that could sustain an alternative cottage energy industry.
Other detractors north of the Mediterranean painted a dark image of political risks that would allow the power producing and power transmitting countries in MENA to use the network as a political pressure point. Others criticized the MENA countries as being vaguely “unstable.”
Such issues confront the energy industry aplenty, as political challenges are a major facet of dealing in the global energy supply infrastructure of today.
However, what is of much greater interest from the vantage point of the MENA side, is the question of how many opportunities for economic growth, sustainable investment and skills development would arise from Desertec and how much this project would do for peace by way of integration.
No one can reliably foretell how much energy will be consumed by the MENA countries by the middle of the century. Chances are that development of production capacities in the high-population growth countries of the region will trigger new opportunities for manufacturing and consumption.
But some have criticized the project for being dominated by European companies with only one minor MENA investor.
Independent experts with a favorable view of the Desertec concept have argued that it would be logical and desirable for the countries on the producing side of the solar rim to be the first to benefit from this energy source for their own domestic needs and general industrial development. But Desertec, representing a new energy infrastructure between Europe and the MENA, could become a catalyst for many positive changes in the social and economic disparities between the two sides of the Mediterranean.
Crucially, MENA private sector businesses will be able to exploit this opportunity if they succeed in accelerating their growth in governance and competence.
Desertec Industrial Initiative — the venture and the players
The 12 companies taking part in the Desertec Industrial Initiative (DII) partnership are from the energy, finance, technology and manufacturing sectors. The six DII participants that are household names and publicly traded on European markets have a combined market capitalization of approximately $200 billion. German firms represent nine of the 12 companies that put their signatures on the collaboration.
In terms of geographic reach of member companies, the partnership is firmly integrated in European business and energy operations and sweetened by the addition of an Algerian company, Cevital, whose core business is in producing margarine and edible oils.
Also on the list is ABB, the technology group headquartered in Switzerland and the privately held Spanish group, Abengoa. The former is not only a leader in products such as power plant turbines but also has a strong history of working with Arab clients. Recently the company received orders for power transmission projects in Bahrain and Saudi Arabia.
One of the main drivers of the DII partnership and one of three financial firms in the venture is Munich Re, the reinsurance company. Munich Re hosted the launch event, and board member Torsten Jeworrek explained the company’s interest in the initiative. He said the project was important given the increased number of climate-related catastrophes and the importance of clean energy in avoiding future escalation of costly catastrophes that will affect the insurance and reinsurance sector.
“We are pursuing a visionary plan,” he said. “If it is successful, we will make a major contribution to combating climate change. The ecological and economic potential is huge.”
Munich Re’s signature on the Desertec initiative was joined by two German lenders: national banking leader Deutsche Bank and HSH Nordbank, a financial institution specialized in corporate lending and business finance that is majority-owned by two northern German states.
EON and RWE are the energy companies that make the venture dynamic with their very strong positions in running infrastructure networks and utilities. In the list of German engineering providers, Siemens, the ubiquitous engineering multinational, is joined by two specialist firms, Schott Solar and MAN Solar Millennium.
Going another step into the analytics of the DII team, there is a 13th warrior as one participating company is itself a joint venture. MAN Solar Millennium was formed by German solar plant builder Solar Millennium and by MAN Ferrostaal, a Dutch-German group that delivers industrial solutions and constructs plants in, among other areas, the chemical and petrochemical fields.
Note: the majority owner of MAN Ferrostaal, with a 70% stake, is Abu Dhabi’s outbound energy investment unit, International Petroleum Investment Company. The state-owned IPIC completed the acquisition of the controlling interest in March of this year under an agreement that valued the stake at $697 million.
