In the 1930s, in the Great Depression, international oil companies were drawn to the newly-formed state of Saudi Arabia, where oil had been discovered. At first, companies were reluctant to go to a faraway desert kingdom, with little infrastructure, no modern institutions, and few people with technical education. But the resource looked rich, so importing equipment and engineers, the companies took the plunge. The rest, as they say, is history. Saudi Arabia, and much of the Middle East and North Africa (MENA), became the preeminent global supplier of oil.
Nowadays, nobody thinks of MENA as faraway, the region is developed with infrastructure networks; replete with qualified engineers. Institutions have deep roots, and post-Arab Spring opening is underway. The region is pulsating with possibility. And another huge resource is attracting growing attention: the world’s best sunshine.
There is a solar revolution happening in a corner of MENA – in Morocco’s Ouarzazate. Long a prime destination for international moviemakers – known fondly as “Ouallywood” – for films needing desert locations and glaring sunshine. Now a different Ouarzazate script is unfolding – the world’s largest solar power plant, using that same desert sun.
Everyone is watching as Morocco turns its solar potential into economic opportunity for its citizens. Other countries could move fast with solar energy if Morocco succeeds. The bidding process for the 500 megawatt solar power plant at Ouarzazate is well-advanced, a public-private partnership is being finalized, and financing from multiple donors has been secured. The Clean Technology Fund (CTF) is leading the way with a $197 million concessional loan, and the World Bank Group, African Development Bank, and European development agencies are participating.
The technology is concentrated solar power (CSP). It transforms the heat of the sun into steam to drive an ordinary turbine, using mirrors mounted on steel frames. A technology in commercial operation since the 1980s. A technology – unlike that for oil – which is highly transferable, has almost no intellectual property rights attached, and can create much-needed employment.
But CSP still has some way to travel down its cost curve. Costs are still high because demand is low, and demand is low because costs are high. Transitional subsidies can generate the economies of scale in equipment manufacturing and the continuous innovation that will bring costs down. Most intriguingly, a cost reduction in heat storage would allow CSP to become a 24/7/365 non-carbon electricity supply without fossil fuel back-up – until now the preserve of nuclear energy, geothermal and hydropower, with well-known limitations. That would be revolutionary for energy security and for climate change.
So where can those subsidies come from? Some of MENA’s oil exporters – such as Saudi Arabia – are designing such subsidies to free up oil currently burnt in the power sector or for desalination. Some oil importers – such as Morocco – want to reduce dependence on volatile oil markets. But there are limits to what MENA can (and should) afford in subsidies for a global public good.
There is also concessional climate financing – with the multilateral CTF and bilateral Fast Start Financing paving the way to the eventual Green Climate Fund. This is crucial to jump-start the process, and is indeed essential to getting Ouarzazate CSP moving. But there are limits to what it can do for replication and scale-up to exploit MENA’s massive solar potential.
There is another huge source of transitional subsidies – Europe. Right now, Europe subsidizes solar energy produced in Europe, even in not very sunny places. It could open its green energy markets to solar imports on a level playing field, and those subsidies would buy much more solar energy. The EU legislative basis exists, but is still being translated into national political decisions and legislation.
Europe has also launched its Mediterranean Solar Plan, and European companies have the Desertec Industry Initiative, to help create the political and commercial framework for solar imports. Likewise, the Deauville Partnership, set up by the G8 in 2011 to help democratizing MENA countries, has pledged support for the scale-up of CSP. But these plans need to move from Powerpoint to power plant, from communiqués to commissioning.
Meanwhile, Morocco has done the concrete, and taken leadership in solar energy integration and climate change mitigation. It is ready to scale-up solar energy, and pave the way for the rest of MENA, but needs European markets to open, for scale-up to be financeable.
All eyes are on this daring experiment in bringing green growth and green jobs in the wake of the Arab Spring, and integration across the narrow Mediterranean. So Moroccans and their neighbors wait for Europe’s response. A real European Neighborhood Policy, aid through trade, and a real vision for climate change mitigation. Let the sunshine in.
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