Desertec loses major German partners

The Desertec project’s grand vision of supplying large-scale solar energy to Europe by 2050 is looking increasingly murkier following the exit of a number of high-profile German companies from the Desertec Industrial Initiative (Dii), the venture’s industrial consortium.

German utility giant Eon, construction and engineering group Bilfinger and banking group HSH Nordbank have announced they are withdrawing from Desertec in what is widely seen as a major blow to the project.

Eon announced it would leave Dii after its current contract expires at the end of 2014. "Eon aims to focus exclusively on its own projects while keeping an eye on renewables markets in Africa and the Middle East," the company said in a statement Friday.

A Bilfinger spokesman confirmed to Reuters a report by German daily Handelsblatt that the company would not extend its contract when it expired at the end of the year.

The companies follow other German companies that have left Desertec, including electronics and engineering firms Siemens and Bosch, both of which also exited the solar sector altogether.

Dii CEO Paul van Son declined to comment on the withdrawal of the companies but pointed out that recent events in the Ukraine could lead to renewed interest and greater political support in the initiative.

Speaking to German daily Süddeusche Zeitung, van Son said changes in Dii’s nework of companies had always occurred and that was something that would continue in the future. He added that Europe was again focusing on energy security following the crisis in Ukraine, adding that renewable energy and cooperation with North Africa and the Middle East could play a larger role in the EU’s long-term strategy.

Desertec launched in 2009 with the aim of generating and transmitting solar and wind energy from North Africa and the Middle East to Europe as of 2020 and providing up to 15 percent of Europe’s power by 2050, at a cost of some €400 billion ($553 billion). Yet political instability in the region and conflicting goals among initial Desertec partners have hampered the initiative’s development.

The non-profit Desertec Foundation, which had strong backing from the German government, parted ways from the Dii consortium of multinational companies last year, citing "irresolvable differences" between the two organizations over strategy, communication and management style.

Despite the high-profile exits, a number of German players continue to support Dii, including power supplier and Eon rival RWE as well as corporate shareholders Deutsche Bank and Munich RE.

While Desertec developers have said the project could end up transmitting up to 600 terawatt hours annually from desert regions to Europe — more than the whole of Germany consumes per year — critics have countered that the technology needed to transmit the power would be far too expensive to be viable.

In addition, with the economies of African countries growing rapidly, power demand in the region could soon soar, vastly limiting the amount of energy for Europe by the time the project eventually begins operation.