Why Desertec Could Succeed
There is no doubt that the development of Desertec will be a challenge for its architects, promoters and supporters. Technical difficulties will add to financing and regulatory issues never anticipated before, further magnified by cultural differences that exist between countries involved in this giant project. But despite all the difficulties of the world, the project must succeed and there is plenty of evidence and good reasons why I think it will.
First, let’s start with the bad news. Money will not be easy to gather. At the cost of 400 billion euros on the low end of the range, those trusted to gather the money will have a real hard time making their case, at least in the foreseeable future. The difficulty in finding financing will come from various sources. First, it is a big project and so it requires big brains to engineer the proper financing deals. As it turned out, the financial community is itself bracing for massive regulatory changes, potentially affecting those mega projects. The Dubai debt debacle means that Arab money will have to be somewhat limited. Appetite for investing in these types of projects has dropped, as many sovereign wealth fund managers will consider them risky bets.
More recently, we are seeing Greece and other European countries dampening the short term prospect for stronger growth of the European economy. In this case, there is a temptation to wait for Europe to heal its wounds first. Will the richer nations of Europe be forced to wage the bail-out battle and forget about big projects like Desertec? Tempting! Read the rest of this analysis →