Desertec can be much more than a “Eurotunnel” for Europe’s energy

“It is great once you have it but a nightmare getting there,” was the response from Paul van Son, CEO of the Desertec Industrial Initiative, to this opening question during his presentation of the “Desertec” project at the German Marshall Fund’s latest roundtable discussion on the potential for the development of renewable energy in North Africa and linking it into Europe through five interconnectors.

The potential impact Desertec and other projects could have on the North African region and on Europe’s energy mix is significant. However, so are the costs: 400 billion Euro for Desertec, 25 million Euro for Helios, connecting renewable generation in Greece to  Germany, and 5 million Euro for Megrid, the French consortium led project on power transmission links.

Mr. van Son’s response was clear: Desertec will not be a second “Eurotunnel.” It is not a singular project but rather an opportunity to create energy markets in Europe’s wider neighborhood, specifically the Middle East and North African (MENA) region.

Technically, it is feasible, even the construction of large-scale concentrated solar power in the Sahara desert, although wind energy would account for more than half of the energy initially exported from the region to Europe.

But the challenges are bigger than just technical: operational, economic, financial, political, regulatory, environmental, and social feasibility of building renewable generation in the MENA region AND of connecting the output to Europe, are but some of them.

Having said this, renewable energy plants are moving forward in the MENA region: solar plants are cropping up in Jordan and Morocco; wind farms are being constructed in Egypt and Tunisia; a large solar thermal 140 MW plant is being built in Egypt, where solar PV will also power highway and streetlights. Interconnectors under the North Sea are operational between the UK and both France and the Netherlands. So, it can be done and maybe it is not just a “mirage”…

But what would it take to make it happen? The “conditio-sine-qua-non” or key pre-requisite would be to “create a political framework to formalize and regulate increased cooperation with the EU’s North African neighbors and to encourage the view to see them not as being on the border, but rather as an integral part of the European energy market” argued Michael Köhler, Head of Cabinet for EU Energy Commissioner Günter Oettinger.

And the Head of Cabinet came close to a promising announcement: the EU has been considering the establishment of an “Energy Charter” between the EU and the MENA countries, much in the same vein as the existing “EU Energy Charter Treaty (ECT),” an international agreement providing a multilateral framework for energy trade, transit, and investments.

At the end of the Cold War, the historic ECT laid the foundation for integrating the energy sectors of the Soviet Union and Eastern Europe into the broader European and world markets. The Energy Charter Treaty aimed to facilitate energy co-operation and the creation of a stable and reliable framework, very much the current objective of a new EU energy agreement with North Africa.

Unfortunately, such a Treaty might not be feasible in the post Arab Spring and European debt crisis circumstances. Mr. Köhler informed the GMF audience that the EU is in the midst of pursuing a slightly diluted Energy Charter Treaty, a so-called “Mediterranean Energy Community Agreement,” aiming to ensure a stable regulatory and investment framework that will encourage the development of new, North African energy sources for export to Europe. And if that does not work, the EU is even considering bi-lateral agreements with individual Maghreb countries.

The concept of establishing a Mediterranean Energy Community is exciting and promising! This is what is needed to turn a gigantic renewable energy generation opportunity in North Africa and connecting that capacity to Europe, into a reality.

Such a first step is vital because as long as the regulatory and political framework has not been established, funding Desertec and similar projects will not be feasible. The commercial and “governance” conditions need to be known; the regulatory framework governing investments will need to be clarified before such massive infrastructure projects come to fruition.

The realization of an EU led “Mediterranean Energy Community Agreement” would not just improve cooperation between the EU and the MENA region but also alleviate current conflicts amongst countries in this area. The EU Energy Commissioner’s Chief of Staff also outlined some elements that would need to be included in a proposed package for these countries, namely employment opportunities, vocational training, support in the regulatory process, and infrastructural development.

The elephant in the room remains where funding for these costly energy infrastructure projects will come from, in particular because of the distorted market conditions solar energy projects face in North Africa. Although they are up to 35 percent more efficient than equivalent projects in Europe they face higher interest rates on capital due to the risk premium imposed by political and structural challenges.

The answer may have to be the same as used for so many roads, rail, air, water, electrical, gas, and other infrastructure projects: these are long-term, strategic investments which cannot be justified only on the basis of a business case for commercial investors.

What these energy generation and transmission projects need are EU funding or EU guarantees, allowing to enhance economic growth in the MENA region, increasing trading relationships, leading, as history has often shown, to greater stability in the region, more jobs, greater prosperity, and more social justice.

Creating the equivalent of or extending the European Bank for Reconstruction and Development’s (EBRD) ability to fund renewable energy generation in North Africa and to connect it to Europe will need to go hand-in-hand with the EU’s agreement on a “Mediterranean Energy Community Accord.”

After all, if the EU signs a “Mediterranean Energy Community Agreement” and if the funding could be organized through the EU or its National Development Banks, Desertec and other projects will not be the Eurotunnel equivalent for energy. On the contrary, a “Mediterranean Energy Community Accord” would bring not only renewable electricity to both continents but create even more important co-benefits such as increased trade-relations, an increased likelihood of peace in the MENA region, wealth, and welfare and dignity in the Trans-Mediterranean region.

Miriam Maes is a Senior Fellow with the German Marshall Fund’s Energy Transition Forum