In a telephone interview with EurActiv, Dii CEO Paul van Son admitted that the project’s initial export-focus represented “one-dimensional thinking”.
Although the industrial alliance was set up to develop renewable energy supplies in the Maghreb to feed up to 20% of European electricity demand by 2050, Dii now concedes that Europe can provide for most of its needs indigenously.
“If we talk about renewable energy from North Africa, only a small fraction will ultimately supply the European market,” said van Son, adding that the European market could supply up to 90% of its own power demand.
“Frankly, four years ago Desertec was all about bringing energy from North Africa. We abandoned that one-dimensional thinking. It’s now more about creating integrated markets in which renewable energy will bring its advantages … That’s the main objective,” he said.
Desertec ‘too expensive and utopian’
Critics of Desertec questioned the viability of a project to generate 100GW by 2050 at a cost of €400 billion, and doubts multiplied when founding shareholder Siemens pulled out of the venture in November last year. In the same month, Dii failed to get the support of the financially-strapped Spanish government for a 500MW CSP demonstration project in Ouarzazate, Morocco, though the project is still going ahead.
“[Desertec] is not viable in its original form because it is too expensive and utopian. It attracted very little funding. It has essentially collapsed into more or less a bilateral deal,” argues Peter Droege, president of Eurosolar, an industry association.
European electricity players question Dii’s initial business model, arguing that its export-focus was incompatible with current levels of grid interconnectivity between the Maghreb and Europe, and within Europe itself. They add that the market is already struggling to absorb additional renewable energy capacity.
“At a very basic level, we are still missing lines and capacities for export,” according to Susanne Nies, head of Energy Policy and Generation at Eurelectric, the European electricity industry association.
“Spain is already struggling with its own excess renewables production – additional imports from third countries would certainly compound the problem,” she added.
“It is difficult to argue that the EU needs the additional RES capacity,” she said, noting that the technical, economic and regulatory framework of the electricity system needs adjusting in order to cope.
Van Son, who wants Destertec to focus on market synergies, agrees that there is a long way to go before electricity market integration in Europe but argues that that there is a business case to be made.
“If we see the tremendous synergies in terms of real money saving then politicians should not be allowed not to take advantage of these energy synergies. Harming the citizens of Europe and the Middle East is not what politicians should want to do,” he said.
Unappealing market conditions
North African countries, the initial focal point of Dii’s activities, are concentrating on meeting their own domestic power demands, which are growing rapidly, and have anyway been hesitant to commit to what they see as unappealing European market conditions.
“We don’t know if the prices of electricity on the European market are going to give us a return on investments,” said Mustapha Mekideche, the vice-president of Algeria’s state-owned Conseil National Economique et Social (CNES), speaking at an Algiers energy conference in November 2012.
Algeria’s state utility group Sonelgaz signed a cooperation agreement with Dii in Brussels in December 2011, despite doubts from senior Algerian energy decision-makers over Dii’s future.
“The countries of northern Europe need to show their willingness to buy electricity produced from renewable energy,” said Sonelgaz president-director-general Noureddine Bouterfa in an Algerian press interview prior to signing the deal.
Despite Algeria’s ambitious target to produce 40% of its electricity from renewable energy sources by 2030 in a bid to free up more gas for export, progress in establishing projects on the ground has been slow, and a promised Dii-Algerian commitment on a CSP plant has not materialised.
RWE still interested
Dii still has its supporters, including German utility RWE, which is keen to expand into the renewable energy sector. In Morocco, the Maghrebi country that has been the most supportive of Desertec, RWE is currently in negotiations with partners to form a coalition, the first step in plans to construct 50MW PV and 50MW wind plants in the Kingdom.
“We are convinced that the Desertec project is a very good opportunity to build up a renewable energy supply for North Africa. Although some people criticise the project, we believe that it will be successful in the long run,” said RWE spokesman Martin Pack.
RWE confirmed that electricity produced from the Moroccan projects would be for the local market and not for export.