Can the Mediterranean become Europe’s energy powerhouse?

Weekly Business Insights from Top Ten Business Magazines

Week 323 | Shaping Section | 1

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 323 | November 17-24 2023

Can the Mediterranean become Europe’s energy powerhouse?

The Economist | November 13, 2023

Extractive Summary of the Article | Listen

European governments hope to see emergence of a wider green-hydrogen economy in the Mediterranean basin, turning the region into a sun-fuelled counterpart to a wind-driven northern dynamo already taking shape around the North Sea. The prize is large. If plans for Europe’s southern powerhouse go well they will give the continent access to plenty of cheap renewable energy and allow it to clean up its carbon-spewing heavy industry.

In the age of renewable energy, countries on the Med boast some of the best conditions on Earth for harvesting natural forces.  Solar capacity shows vast potential. Spain basks in a daily average of 4.6 kilowatt-hours (kwh) of sunlight per square metre and Morocco in 5.6kwh, double what Germany can expect. Sparse populations mean that Spain and Portugal have ample land for such plants, as do the deserts of north Africa and the Middle East. In parts of Morocco and Mauritania both sun and wind are abundant, forming rare sweet spots where electrolysers can run virtually non-stop.

According to the International Renewable Energy Agency, the average cost of electricity from utility-scale solar plants declined from $0.45 per kwh in 2010 to $0.05 last year.  Transporting the energy north, to where it is needed, is now also more feasible. Desertec’s plan involved undersea cables, which have limited capacity. But now cheap and efficient electrolysers can convert electricity into hydrogen at source. This can then be transported as a gas or a derivative, such as liquid ammonia.

The Mediterranean’s position as Europe’s southern powerhouse is not, however, a given. Europe has to jump-start a market for a new source of energy and do so in a deregulated arena with many competing players.  Simultaneously ramping up demand and supply is a delicate balancing act. Companies are hesitant to commit themselves to signing long-term offtake agreements if they are unsure about the future availability and pricing of hydrogen. This, in turn, discourages producers from making crucial investment decisions. It does not help that political instability in north Africa increases risks and thus the cost of capital.  Yet the biggest problem is linking both sides of the market, which starts with establishing physical connections. 

Europe has no choice but to confront the myriad problems if it wants to meet its ambitious targets to reduce carbon emissions. Steps already taken include the European Commission’s launch of half a dozen initiatives from a “hydrogen accelerator” to spread the use of the gas to a “European hydrogen bank” to jump-start trade.

3 key takeaways from the article

1. European governments hope to see emergence of a wider green-hydrogen economy in the Mediterranean basin, turning the region into a sun-fuelled counterpart to a wind-driven northern dynamo already taking shape around the North Sea. The prize is large. If plans for Europe’s southern powerhouse go well they will give the continent access to plenty of cheap renewable energy and allow it to clean up its carbon-spewing heavy industry.
2. The Mediterranean’s position as Europe’s southern powerhouse is not, however, a given. Europe has to jump-start a market for a new source of energy and do so in a deregulated arena with many competing players.  Simultaneously ramping up demand and supply is a delicate balancing act. 
3. Europe has no choice but to confront the myriad problems if it wants to meet its ambitious targets to reduce carbon emissions.

Full Article

(Copyright lies with the publisher)

Topics:  Green Energy, Environment, European Union