Alexander Mohanty: It is too early to get into details to these questions.

 

The Desertec Industrial Initiative (DII) aims at accelerated implementation of the Desertec concept in the EUMENA region. This work of the DII will entail a thorough analysis and the establishment of a framework for investments to supply the MENA region and Europe with power produced using solar and wind energy sources. Thus, the goal of the DII is to “pave the road” for these investments and thus for the implementation of the Desertec concept.

 

 

Alexander Mohanty: The financing of power plants and of the grid under the umbrella of the DII requires the implementation of an appropriate regulatory framework that provides an adequate risk-return profile for these projects. If this is achieved, a whole range of financing sources will be open, such as traditional project finance and/or capital markets funds, Sharia-compliant instruments, private equity, bond issuance, debt certificates. A mix of equity and debt will be used according to the risk characteristics of the individual projects.

 

 

Alexander Mohanty: The DII’s implementation plan will not assume financing of a single project. The Desertec concept rather stands for a multitude of projects in different MENA countries which together form a new renewable energy interconnection.

 

The individual projects are envisaged to be financed by different public and private sector investors and sponsors.

 

Within an established regulatory framework, also government and EU grants/guarantees will have to be considered as well as Economic Commission for Africa coverage and support from multilateral institutions such as the European Investment Bank, World Bank/International Finance Corporation, African Development Bank.

 

Media reports often refer to Desertec as a €400bn project. This figure represents a rough estimate by a German Research Centre DLR (www.dlr.de) for the financing costs of a number of projects envisaged to be realized up to 2050 to cover up to 15% of Europe’s energy consumption from renewable energy resources. Since the timeline is 40 years, this puts the figure of €400bn into a new perspective, as this means an average of €10bn would be needed over a period of 40 years.

 

 

How can a titanic project like Desertec be insured at all in the face of a gigantic spectrum of unforeseeable risks – from permit delays to material damages during transportation and assembly, from desert storms to terrorist attacks – to name but a few?

 

Michael Able: In general, the Desertec concept aims at having the MENA region benefit from Desertec by providing a large share of the projected energy growth and also by providing fresh water capacities. This will mitigate the risk.

 

The vulnerability of one single cable is also limited due to the diversification of Desertec over the whole MENA region – we explicitly do not strive to purchase clean power from the deserts only from a few locations.

 

 

Michael Able: The technological risks can be insured with conventional coverage. The political risks are more challenging to handle: In detailed consultations with members of the individual parliament, concepts have to be worked out that allow the investor to take the risk of an investment. At a glance, public-private partnership concepts are feasible tools.

 

 

Michael Able: There is no comparable project that exists already, at least regarding the huge complexity of the complete value chain. Anyway, each element of the Desertec value chain has been proven in reality – from renewable energy generation over HVDC transmission to the distribution via existing grids.

 

 

 

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