The Desertec Industrial Initiative (Dii) has abandoned its strategy to export solar power generated from the Sahara to Europe, killing hopes of boosting the continent’s share of renewable electricity with cheap external supplies.
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.
Susanne Nies, Head of Unit for Energy Policy and Generation at industry association Eurelectric, said:
“In terms of power consumption, the world is currently divided in two. On the one hand, emerging economies - Turkey, Brazil, China, India, etc. - are experiencing steep power consumption growth of impressive 8-10% a year. North Africa and Africa at large are indeed part of this trend. On the other hand, the OECD world, including the EU, are seeing negative power consumption trends till 2020. This is due to the continued recession, demographic changes, improved energy efficiency - and despite the fact that electrification is set to increase.
Destertec’s initial business model was set to work on the basis of exports. This would have allowed it to cover its power generation costs. However, this initial ‘export’ approach might need to be reconsidered, for two main reasons:
Firstly, at a very basic level, we are still missing lines and capacities for export. Building these is technically difficult because of the deep waters in the Mediterranean. Moreover, it is not just the link between North Africa and Europe that is the problem. Rather, the question arises what happens with the extra capacity once it reaches the Iberian Peninsula. Spain is already struggling with its own excess renewables (RES) production - additional imports from third countries would certainly compound that problem. Spanish lines would need to be strengthened, with a view to moving excess electricity to France. But the interconnection at the Spanish-French border is also congested. Having said that, it is true that progress has been made in strengthening the Mediterranean ring of transmission lines, but this needs to be further pursued as a matter of urgency in the common interest of all countries concerned.
Secondly, it is difficult to argue that the EU needs the additional RES capacity. Europe is currently witnessing a situation in which RES capacity is competing to replace existing conventional plants. This shift requires solving plenty of system issues, including the resynchronisation of the system consecutive to the development of RES, in particular variable wind and photovoltaic. Although variability is not a problem in itself, it obliges the system to change its way of functioning, which also means giving time to the technical, economic, and regulatory framework to adjust. Adding even more RES from Desertec in the meantime would probably not support this move.
One final reason for being perhaps a bit more sceptical about the export dimension than initially expected: concerns about Africa’s own consumption. It would be a big mistake for Africa to neglect its own, indigenous power generation and risk its own security of supply for the sake of satisfying the demand of Europe. Demand in Africa already exceeds supply. At the same time, carbon lock-in has to be avoided. A convincing business case is needed for this to happen. The move away from very expensive CSP to onshore wind, which is closer to the market, but also to large photovoltaic plants is certainly the right one.”
The EU is hoping to reach its long-term goal of de-carbonising its economy by topping up domestic renewable energy production with solar electricity imports from North Africa.
One of the flagship projects in this regard is the Desertec Industrial Initiative, which was launched in July 2009 by 12 companies who agreed to establish financing plans to develop solar projects in the Sahara Desert.
The €400-billion Desertec project aims to eventually provide 15% of Europe's electricity needs with solar power imported via a high-voltage cable.
But this strategy was put into question in November last year when two major investors, Siemens and Bosch, pulled out of the project.