A tale of two energy visions

November 29, 2012 | 00:00

A tale of two energy visions

What a luxury for me as an editor to be able to present two great articles to you. In fact, they might well be called two tales of Europe's energy future. One is about Gazprom's great new pipeline project South Stream. The other about the great Desertec project that is aimed at bringing solar power from North Africa to Europe.

South Stream is of course Moscow's prestige-ridden undertaking to retain its dominant position on the (Eastern) European gas market by bypassing the pipelines of Ukraine and squeezing out potential alternative supplies from Azerbaijan and elsewhere. After many years of technical preparations and extensive gas diplomacy, Gazprom has now made a positive final investment decision. Next week, on 7 December, South Stream will be officially launched at the Black Sea resort town of Anapa in Russia.

A (strategic) victory for Moscow? Yes, vis-a-vis Kiev and "Brussels" (in the battle for the "Southern Corridor"), it certainly is.

But does South Stream also make sense from a wider economic, gas market perspective? According to Matthew Hulbert, energy security expert and EER's lead analyst, the answer to that question is a resounding No! In a new article for EER, he argues that South Stream tells a tale of two Gazproms: Gazprom as a regional winner – and global loser.

In Matthew's view, South Stream is an attempt by Moscow to hold on to the "old" European market structure and long-term oil-indexed contracts. But an attempt that is bound to fail. Gazprom CEO Alexei Miller and Russian President Vladimir Putin, the two men to whom South Stream will be an enduring legacy, are blind to the way the global gas market is going, writes Matthew. The real action in the global gas market, he says, is in LNG, in unconventional gas and in Asia – all areas where Gazprom is conspicuously failing.

The tale of Desertec is a very different one indeed. The Desertec vision is no doubt well-known to our readers, although it should be stressed that Desertec is not only meant as a blueprint to provide Europe with renewable energy from North African deserts – as is often thought – but is also intended to help develop that region's indigenous renewable energy sources. Surely an appealing idea – but how realistic is it?

Well, interestingly, enthusiasm for renewable energy in the Middle East and North Africa (MENA) is growing. More than that: many MENA countries are wholeheartedly embracing the pursuit of solar (and wind) energy, including Morocco, Saudi Arabia and Algeria. Indeed, Algeria recently took out a fascinating full-page ad in the Financial Times (on 22 November) which proclaimed in a large headline that Algeria is "CREATING THE PATH BEYOND OIL" and presenting the country's "AMBITIOUS NEW RENEWABLE ENERGY PROGRAM".

Surely an upbeat message for Desertec. But rather surprisingly, as our Berlin correspondent Paul Hockenos reports, the big bottlenecks for Desertec and the accompanying Desertec Industrial Initiative (DII) now lie in Europe rather than in North Africa. Paul, who recently attended DII's annual conference in Berlin, notes that two important backers of Desertec (Bosch and Siemens) quit, Spain does not want to invest in reinforcing its electricity grids, and generally in the EU support for renewable energy is wavering. As one shareholder of DII said: "What worries me is not the political situation in MENA, but rather that in Europe."

No "final investment decision" yet for Desertec, then, but the project is still moving ahead.

Although South Stream and Desertec are two totally different schemes, they do have one thing in common. They are both grand visions to develop a major source of external energy supplies for Europe.

Whether those two visions are compatible or to what exent they compete with each other – that is a question for some other time.

 

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