Will Desertec ever move from Power Point to Power Plant?

Is Desertec in crisis? At its annual conference in November in Berlin, the Desertec Industrial Initiative (DII) had hoped to announce the signing of a ground-breaking agreement between Germany, Morocco, France, Italy and Spain that would open the way for a first "Reference Project" in Morocco. But at the last moment Spain baulked. And there has been more bad news, as Bosch and Siemens, two of DII's biggest-name supporters, pulled out of the project. Yet many other private and public backers remain supportive. Moreover, countries in the Middle East and North Africa (MENA) are increasingly enthusiastic about renewable energy. Indeed, Desertec's biggest hurdle may well be Europe's fragmented energy policies. "What worries me is not the political situation in MENA", said one shareholder, "but rather that in Europe." And there's the success of the Energiewende in Desertec's "home country" Germany, which makes people wonder whether power from the desert is necessary at all.

Desertec eclipsed? (c) iStockphoto.com/Hans-Walter Untch
In January 2009, when the Desertec Foundation was established, it was hailed by just about everyone. From top-of-the-line investment banks to Greenpeace there was a consensus that Desertec could be more than a fairytale. It was envisioned as a way to supply abundant affordable energy for Europe – in particular, to feed power (primarily concentrated solar power) generated in the Sahara Desert through high-voltage direct current (HVDC) transmission cables across the Mediterranean and over the Alps and the Pyrenees.

But the idea behind Desertec was and is also to help modernize and provide economic development and energy to countries in the Middle East and North Africa (MENA) where the power is generated. In concrete terms, Desertec would provide for as much as two-thirds of those regions' energy needs and supply up to 15 percent of Europe's demand by 2050.

In October 2009, the Desertec Industrial Initiative (Dii) was founded, which was to give hands and feet to the futuristic vision of the Desertec Foundation. In terms of industrial backers, the heavy hitters that signed on as shareholders resembled an all-star team that couldn't seem to lose: RWE, Eon, Siemens, Deutsche Bank, and two dozen others. (Several dozen more are "partners," which is an associate status below stakeholder.)

The last three years have seen the mammoth project inch slowly forward. Country-specific assessments, draft regulatory frameworks, and concrete reference projects are all underway. Despite the loss of Bosch and Siemens just about everyone else – including new players – are on board. "It's gone from a dream to a vision, and now we're working on making this vision an option," one of Desertec's German founders, physicist Gerhard Knies of the Desertec Foundation in Munich, told EER. The non-profit foundation, unlike the shareholder company Dii, is a global civil society initiative aimed at promoting Desertec. "We know it's not impossible now," says Knies, "Now it's all about how to do it and what is needed. The ground has been prepared."

Cutting edge

But this is where things inevitably get difficult. The current cutting edge of Desertec's metamorphosis from idea to reality is a plan to build a 600 million-euro solar plant in Morocco. The agreement, once concluded, would allow DII to move forward with a 150-Megawatt plant in the Moroccan hinterland in Ouarzazate that will be built by private sector actors together with the Moroccan Agency for Solar Energy. The project will be supported by Germany's investment bank KfW, the European Commission, the World Bank or the French development bank AFD, and Germany's environment ministry. Once built, it could send electricity through existing transmission lines that link Morocco and Spain beneath the Straight of Gibraltar by 2016. In addition, a 100 MW project of PV and wind power initiated by the German utility RWE could be ready as early as 2014.

But at the 3rd Dii Desert Energy Conference in Berlin, 7-9 November, Spain had still not signed. Dii representatives say that Madrid offered no official reasons for its wavering, and they expect Spain to sign the memorandum in coming weeks. But according to one insider, Spain doesn't want to – or simply given the economic crisis can't – pay for expanded and enhanced grid connections intended for its stretch of the all-Europe network.

As for Bosch and Siemens, the two German companies have said they are not withdrawing because of a lack of faith in Desertec, but because of changes in their company strategies. Siemens has announced that it will divest all of its investments in solar energy. Dii said it regretted the loss of the two German heavyweights but noted other corporations had climbed aboard and the project as a whole was not affected.

What crisis?

But there are other challenges in getting Desertec from "power point to power plant," as Santiago Seage, CEO of the Spanish company Abengo Solar put it at the conference in Berlin.

It's a crisis in a positive sense. It's not a threatening crisis
Critics say the project is too costly and is hobbled by political uncertainties, not least the upshot of the Arab Spring rebellions. Desertec has also struggled to attract investors and the overall mood is distinctly more sober than three years ago. "Of course the initial euphoria has blown over," said Paul Van Son, managing director of Dii, in Die Zeit. "But that's normal. There's no doubt anymore that a huge energy market is emerging in North Africa and the Middle East."

In an interview with EER, Van Son, responding to charges of Desertec being in a crisis, said: "It's a crisis in a positive sense. It's not a threatening crisis. Companies come and go. It's a pity that Bosch and Siemens are going, but others have signed up. We had just 11 shareholders and partners in 2009, now we have a total of 57." Just this summer, for example, the Spanish company Elecnor and Germany's Leoni, both involved in renewable energy technology, became shareholders.

"We're convinced of the compelling value of this proposition," said Paddy Padmanathan, president of Acwa Power, a Riyadh-based developer, owner and operator of independent water and power projects, at the conference. "We will one day be exporting power to Europe because it will be cheaper. We want to accelerate the project by creating a bigger market and driving the price down."

"We're not walking away," echoed Seage of Abengoa Solar, reinforcing comments from other shareholders. "It'll take time to get to the power plants. What worries me", he added, "is not the political situation in MENA but rather that in Europe."

The fact that China has expressed keen interest to become involved in Desertec also lifted some spirits.

How can we sell energy to Europe with such a fragmented European market?
Van Son confirmed that talks with the Chinese state-owned power company SGC had begun, but were "not far advanced". SGC boasts experience building long-distance grid connecting facilities. If the Chinese want to chip in on grid connections (estimated to cost €100 billion), says Desertec's Knies, "this, in principle, would be welcome." But whether this is a good thing or not, he says, depends on the details of the agreement.

Disparate subsidies

Europe's commitment to Desertec – or lack of it – was a recurring theme at the conference. The private sector actors in particular wanted to see more centralization and greater efforts at harmonizing energy market regulation, renewables goals, climate protection policies, grid construction, and EU authority on energy matters. "How can we sell energy to Europe with such a fragmented European market?" asked Mike Winkel, CEO of Eon's Climate & Renewables unit. "Europe needs to support the Desertec vision in Europe," said Winkel, who was not alone criticizing the patchwork landscape of Europe's energy market.

The disparate subsidies and incentives for renewables across the continent make planning difficult. Some speakers called for an elimination of all energy subsidies (for fossil fuels, nuclear, as well as renewables) while others, including Dii's Van Son, argued that supports of different kinds would be necessary despite the strides renewables have made toward market parity over the years. CSP in particular is an aspect of the Desertec vision that will need external financing before it becomes competitive on the open market, said Van Son, who added that Desertec would welcome the EU stepping forward to co-fund site and technical studies.

Van Son wouldn't be pinned down about exactly what kind of subsidies he envisioned aiding Desertec. Nevertheless, he sees future incentives based on best practices in Europe. "Incentives schemes can bring capital to the market," he said, but added that it is unhelpful when "there are different supports in every country and every region or state has its own hobby horse." But van Son also addressed the business world, urging it to step up as well: "Industry has to stick out its head a little further, too, if Desertec is to be successful.".

Long stretches

Another matter still up in the air is what to prioritize once the Morocco-Gibraltar-Spain pilot is up and running.

"Democracy isn't the best model for sustainability"
There's still no consensus on what has to happen first in order to sow the Sahara with high-power solar plants. Desertec envisions a grid network that crisscrosses the Mediterranean and links Ireland to Egypt and Finland to Tunisia. The EU, for example, is currently financing a 64-kilometer HVDC cable that tunnels beneath the Pyrenees to France, which will finally link Spain's and France's grids.

Yet long stretches of the envisioned "supergrid" are currently found only in blueprints. Matteo Codazzi, CEO at Milan-based energy consultancy CESI made a strong case for laying the requisite transmission cables first. "You've got to build the highways before the cars," said Codazzi. "This means reinforcing the existing grid where it needs it, and building new connections, both in Europe, in MENA, and between the continents. Meanwhile there will be time to get the infrastructure in place in North Africa."

Other participants however felt that the construction of power plants and a range of other headline tasks could be fulfilled at the same time as the grid was being enhanced and expanded.

If the transmission issue is still very much up in the air, several other things are becoming clear. For one, in Desertec's early phase Morocco is now the country of choice. Since the monarchy in Rabat was not upended by the democratic revolutions of 2011, it paradoxically offers the most stable conditions for Desertec at the moment. In some other countries, the Arab Spring threw a spanner into Desertec's works. "You need state leaders who think in the long term and Morocco's King [Mohammed VI] does this," says Knies. "Democracy isn't the best model for sustainability. The ground has to be prepared – in industry, technology, training programs, higher education. Morocco is doing a coherent job of this."

Energiewende

What is also becoming clear is that concentrated solar power (CSP), the technology of choice when Desertec got started, is increasingly supplemented by standard photovoltaic power and wind power.

Germans may see Desertec as a welcome helping hand, they do not view it as a crucial part of their Energiewende
The original idea was that CSP plants would use heat storage tanks to enable them to supply electricity on demand day and night. This, so the argument went, made them an ideal complement to fluctuating energy sources such as mainland Europe's wind and photovoltaic power. But CSP technology is costly compared to today's PV units and requires substantial financing, which has not been forthcoming.

Finally, although it was only mentioned on the margins of the conference, something else in Europe has changed since 2009, with enormous implications for the original Desertec vision: Germany's Energiewende. The Energiewende has made giant strides since 2009, which, on the one hand, boosts the Desertec idea: it shows that clean energy principally from wind and solar can provide energy reliably for a country as big and industrially endowed as Germany.

But the success of the Energiewende has also led some of Desertec's original supporters, like Greenpeace Germany and the German Greens, to conclude that Germany doesn't need Desertec. Even Germany's environment minister Peter Altmaier said recently that "Desertec has become much less important since Germany's renewables boom." Germans may see Desertec as a welcome helping hand, they do not view it as a crucial part of their Energiewende.