Arab Spring a short-term problem for solar-Medgrid

Thu Nov 24, 2011 7:40am EST

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BRUSSELS, Nov 24 (Reuters) - Unrest in North Africa has set back in the short term ambitious plans to develop solar energy for use locally and in Europe, but for the longer term the region's abundant sunshine offers huge investment potential, the head of France's Medgrid said on Thursday.

The grid alliance's chairman Andre Merlin was speaking after signing a memorandum of understanding on future cooperation with solar project group Desertec, backed by the European Commission, which is keen to increase its supplies of renewable and reliable energy.

"In the short term, it (the Arab Spring) is very unfavourable, but for the longer term, these countries have to develop and energy is a key element of development. I am confident for the medium term and long term perspective," Merlin said.

Medgrid, with founders including power and grid firms Alstom , Areva, EDF and RTE was set up in Paris in 2010, with plans to develop grid infrastructure across North Africa and into Europe.

In all it is seeking to build five interconnections at a cost of around 5 billion euros ($6.7 billion), including between Tunisia and Italy.

The Commission has taken the view that Medgrid is a natural complement to Germany's 400 billion euro Desertec Industrial Initiative, which will use mirrors to harness the sun's rays to produce steam and drive turbines for electricity generation in the Sahara region within the next decade.

Its goal is to analyse how to develop clean energy in the deserts of North Africa that could supply up to 15 percent of Europe's power demand by 2050.

"By joining efforts and coordinating their approaches, the two initiatives take a truly European dimension," EU Energy Commissioner Guenther Oettinger said in a statement.

"There is now a concrete perspective of solar and wind energy being produced for the joint benefit of European and Northern African and Middle Eastern citizens, as well as for the benefit of both markets."

($1 = 0.7490 euros) (Reporting by Barbara Lewis; editing by Rex Merrifield)

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