July 13, 2009 / 2:20 PM / in 8 years

Desertec to develop investment plans by 2012: DII

MUNICH (Reuters) - The Desertec Industrial Initiative, the world’s most ambitious solar power project, will map out investment plans by 2012 to develop carbon-free energy that could supply up to 15 percent of Europe’s needs by 2050.

Twelve companies, including Siemens, Munich Re, E.ON, RWE and Deutsche Bank Monday signed a Memorandum of Understanding to establish DII by October 31, with spending plans to be released within the next three years.

However, doubts remain about how the project -- which envisages the development of solar thermal power plants in Northern Africa -- will be funded and to what extent political instability in the region might put a damper on efforts.

“After three years we want to present a detailed investment plan which is feasible,” Munich Re board member Torsten Jeworrek told a news conference in Munich, adding he expects investment to be less than 1,000 euros per European inhabitant.

Initial funding for the project would include 1 billion euros ($1.4 billion) from the European Union, Germany’s deputy foreign minister Guenter Gloser told reporters on the sidelines.

A further 4 billion euros of funding are currently being sought, an industry source told Reuters. Other firms taking part include Swiss ABB and Algeria’s Cevital, as well as Germany’s HSH Nordbank, M+W Zander and Schott Solar.

DII’s broader aim is to analyze how to develop clean energy in the deserts of North Africa, but very few hard facts were released -- such as the total financial volume of the project or the countries where those plans would be realized.

Gerhard Knies, chairman of the Desertec Foundation’s supervisory board, said the project would be dependent on state funding, as is the case in the photovoltaic industry.

NOTHING MORE THAN LOBBYING?

”So far, this is nothing more than political lobbying in my view,“ said one equities analyst who declined to be named. ”In the short- to mid-term, this will have no impact on the photovoltaic sector.

But in the long-term, this could be a major breakthrough for the industry. Solar thermal plants have the necessary size for bigger utilities to join so it sounds plausible,” the analyst added, pointing to potential political risks in northern Africa.

Munich Re’s Jeworrek said he was optimistic those and other problems could be eventually be overcome.

“I have heard many times over the past days that there are concerns about political issues in connection with Desertec in Northern Africa, but we have a lot of geographical leeway regarding the location of the project,” Jeworrek said.

Growing global efforts to slow climate change by reducing greenhouse gas emissions along with a projected increase in energy demand in the Middle East and Northern Africa make the projects all the more attractive, its proponents say.

The DII is a product of the Desertec Foundation, a global network of government agencies, companies and think-tanks that are exploring how solar power generated in deserts can become an effective global energy contributor.

The Desertec Foundation has noted that in six hours the world’s deserts receive more energy than mankind consumes in a year.

The projects would use concentrated solar power (CSP) -- a technology that uses mirrors to harness the sun’s rays to produce steam and drive turbines to produce electricity -- from the Sahara and deliver to markets locally and in Europe.

In June, news about Monday’s meeting left analysts scrambling for details of the plans, which include a possible 100 gigawatt solar thermal power plant in northern Africa and the Middle East, worth a staggering 400 billion euros.

A report by Germany’s Wuppertal Institute for Climate for Greenpeace and the Club of Rome said that the project could also create 240,000 German jobs, as well as 2 trillion euros-worth of power by the middle of the century.

(Reporting by Christoph Steitz and Jens Hack; Editing by Rupert Winchester and Jon Loades-Carter)

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