Environmental Engineering Reference
In-Depth Information
necessary to conclude a PPA. Therefore, the an investor has a certain guarantee that
its product is going to be purchased.
4.4 Subsidies or Feed-Ins Are Necessary to Implement
the Desertec Concept
All figures illustrate that the project will not sustain itself at the beginning. The low
energy prices in all MENA countries highlight the importance of additional finan-
cial aid. There are doubts that the Moroccan people can easily pay twice the price
for energy than before. This also relates to the local industry. The effect of high
energy prices are increasing production costs, which makes the product itself more
expensive. In the case of Morocco, the country relies greatly on its textile industry
export. This branch has been under enormous pressure for several years because of
cheap Chinese products. An increase in energy prices could lead to a collapse of this
export branch. In other MENA countries, the change would be even worse, since
Morocco already has a very high energy price compared to its neighbors. Combined
with a PPA, there would be an obligation to purchase the energy. Hence, they would
“force” their customers to buy the new and more expensive energy.
Nevertheless, it is highly unlikely that prices are going to drop in the long term.
Especially in the case of solar thermal energy, there is going to be a break-even
point within the first few decades, making the energy cheaper. Some even claim that
the costs could decrease from 22 Euro cents per kWh to 5-6 Euro cents per kWh,
making it cheaper than today
s energy price in Morocco. However, based on the
average price of energy (22 Euro cents per kWh), the contract period should be
around 30-40 years before it pays off for the investor. This long lifespan is not
uncommon in international law. In international law, a contractual lifespan (also set
up as a PPP) can be up to 99 years. Yet, it depends on each country if the domestic
law has special requirements concerning the duration of contracts. In the case of
Morocco, the maximum lifespan is 25 years. It is unrealistic to expect that Morocco
will change its laws to allow longer projects. Even German law recognizes a
limitation of contract periods. Therefore, the PPP should include a renewal option
after the first 25 years. A renewal option is a common tool in PPPs. Moroccan law
also does not forbid such a renewal option. Nevertheless, there must be financial
support until this point is reached.
There are two main ways to achieve effective financial support, namely subsi-
dies and feed-in tariffs. The latter is complicated in the case of Morocco as national
law prohibits the utilization of feed-in tariffs. Subsidies might come from the host
state itself or from third parties, e.g. AU, EU or European states. The host state
might use some of the concession money to support the Desertec Concept at the
beginning, risking a zero-sum situation. Until the first plant is set and ready, it is
difficult to predict how much subsidization is necessary to successfully operate the
project. Besides the above-mentioned organizations or states, there are also projects
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