FCBI Energy

Desertec: slow death or healthy evolution?

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Courtesy of Courtesy of FCBI Energy

After five years the Desertec Industrial Initiative will cease to exist in its current form. The question for the industry is whether this is a natural progression or a cause for concern.

It has been a bumpy few weeks even by the turbulent standards of the Desertec Industrial Initiative’s short history.

After a dwindling number of backers earlier this year decided to maintain the Dii as a going concern, the Initiative’s latest meeting, on October 13, saw members leaving in droves.

Only three of Dii’s 19 shareholders decided to stand by the Initiative, which was set up in 2009 as an industry partnership to help push through the ambitious Desertec Foundation vision of creating renewable energy plants in the desert, with the potential to export power abroad.

A stripped-down version of the organisation will now serve as a consultancy and services agency to its three remaining shareholders, which are ACWA Power of Saudi Arabia, the China State Grid and RWE, Germany’s second-largest electricity company.

As part of the move, it looks like Dii will shutter its Munich headquarters and redeploy staff to field operations in Middle East and North Africa (MENA) markets, although it is understood that the exact details of how the organisation will function in future are still being sketched out.

Klaus Schmidtke, Dii’s head of communications, confirms that the final breakup was fundamentally a matter of money. “We had a group of 19 shareholders all paying €100,000 a year,” he says.

“We said we needed a budget of €2 million a year and they were not ready to pay that sum.”

Beyond simple finances, though, the episode once again calls into question the wisdom of the whole Desertec idea. There is no doubt that both Dii and the Desertec Foundation have struggled to stay true to their founding principles.

Solar power

While Desertec was at first widely linked to the idea of producing solar (and wind) power in MENA for export to Europe, the Foundation’s web site now explicitly denies this was the intention.

“The Desertec idea has never been about delivering electricity from Africa to Europe,” it says, “but to supply companies in desert regions with energy from the sun instead of oil and gas.”

This is odd, to say the least, since Desertec severed links with Dii last year after the latter essentially said the same thing. The flip-flopping over what Desertec really stands for makes it hard to gauge whether the concept can be considered a success or a failure.

On one hand, although Desertec is now aiming to replicate its vision in other desert regions, most notably in Latin America, a lack of clearly identifiable progress to date could be seen as confirming that it simply will not work.

On the other, it is also fair to say that many desert areas, including MENA, are now waking up to the potential for renewable energy generation sources such as CSP. “We see 3GW, and next year 4GW, in the region,” says Schmidtke. “When we started it was 73MW.”

It is tempting to say much if not all of this development could easily have taken place even if Desertec had never existed.

But while there is not a single plant out there that can be unequivocally credited to Desertec or Dii, it is likely that the behind-the-scenes efforts of both organisations may have contributed to creating a sense among MENA policymakers that renewable energy might be worth pushing for.

Energy exports

And it is notable that even if Dii will not longer be pushing for MENA energy exports to Europe, one of its former members, at least, has not given up.

Within a week of the Dii bombshell, London-based Tunisian CSP developer Nur Energie announced it was tabling a proposal to sell electricity to the UK under a similar contract for difference scheme to that being used to fund offshore wind and new nuclear plants in Britain.

“It’s an independent project that has been in development since 2009 in collaboration with a group of Tunisian investors and Low Carbon, one of the largest renewable investors in the UK,” says Daniel Rich, Nur Energie’s chief operating officer.

“It’s a 2.25GW CSP plant along with a submarine cable to a landing point in Italy. Our main market is the UK because we saw that we could deliver electricity from the Sahara to the UK at prices below offshore wind.”

With recent news reports suggesting the scheme will not meet contract for difference requirements, Rich is keen to point out that the UK is not the only potential market for North African CSP; countries such as Germany and Switzerland could also be in the frame.

Meanwhile, within Dii, ACWA Power has recently announced it is looking for around USD$7.5 billion in investment for MENA renewable energy projects. In light of this, rather than assuming Desertec has failed it might be more reasonable to say the concept is no longer needed.

Europe and MENA policymakers are now well aware of the solar potential south of the Mediterranean. Now it is simply a matter for the markets.

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