Desertec potential revenue streams may account US$ 90bn for the Middle East and North Africa

A.T. Kearney says Desertec opportunity has the potential to generate revenues to compensate for drying oil fields

Dubai (19 July 2009) — A.T. Kearney, one of the world’s leading management consulting firms sees Desertec as a key opportunity for the Middle East to generate revenues by selling electricity in long-term fixed contracts to Europe. According to A.T. Kearney calculations, potential revenues for the Middle East and North Africa may reach US$ 90bn p.a.

Desertec, presently considered to be the largest ever green energy project, is a concept that outlines an approach for the sustainable supply of electricity for Europe, the Middle East and North Africa, using renewable energy sources up to the year 2050. It focuses on setting up a viable transition to an electricity supply that is inexpensive, environmentally friendly and based on secure resources.

A consortium including 15 of Germany’s largest companies and institutions plan to invest more than US$ 560bn in North Africa and Middle East in solar thermal power plants and transmission grids to cover 15 percent of the annual European electricity demand with green energy. Energy giants such as E.ON and RWE as well as Siemens, Deutsche Bank, Münchner Rückversicherung, Club of Rome and the German Government are in discussions and have founded a consortium on July 13th 2009.

“The challenge is to establish a future electricity supply that mixes available technologies and resources capable of satisfying not only the criterion of power on demand, but meets other criteria for sustainability as well,” explained Dr. Dirk Buchta, vice president and managing director, A.T. Kearney Middle East. “The necessary measures for this will take at least two decades to become effective, demanding, comprehensive policy and economic frameworks for its realization.”

“The success of the project will depend on close cooperation between Europe and the region to effectively introduce renewable energy via the interconnection of electricity grids by high-voltage direct-current transmission.” added Dr Buchta.

According to A.T. Kearney calculations, potential revenues for the Middle East and North Africa may reach for US$ 90bn pa. Considering the total investment of almost US$ 490bn only for the solar thermal power plants, this would lead to an investment/payback ratio, not considering the ramp-up, in the steady state of 1:5.

“Solar thermal power is one lever to reduce the expected supply demand imbalances in the Middle East,” said Christian von Tschirschky, principal at A.T. Kearney Middle East. “Depending on the country there are significant supply and demand imbalances especially during the summer months at peak times. Due to increasing demand this gap will further increase,” he added. A.T. Kearney estimates the total imbalance for the year 2020 will be around 4.5 GW in Abu Dhabi only.

Desertec investments will be scattered between different countries in the Middle East and North Africa. All countries in this region will compete for stakes in the overall Desertec project. “Our annual published A.T. Kearney Foreign Direct Investment-Index has shown that countries with a political and financial stable environment, a reliable regulatory and legal environment meet some of the key criteria required to attract foreign direct investment and hence a major share of the Desertec investment” added von Tschirschky.

A.T. Kearney believes that the Desertec project may act as an accelerator to close the supply gap with green energy. “Solar thermal power capacities may be ramped up in the Middle East to meet the own electricity demand in peak times and provide energy to the Desertec grid generating additional revenues in off-peak times,” concluded von Tschirschky.

About A.T. Kearney

A.T. Kearney is a global strategic management consulting firm known for helping clients gain lasting results through a unique combination of strategic insight and collaborative working style. The firm was established in 1926 to provide management advice concerning issues on the CEO’s agenda. Today, we serve the largest global clients in all major industries. A.T. Kearney’s offices are located in major business centers in 33 countries. During our 80 year history, we have provided management consulting services to most major corporations and governments around the world. From our fast growing Middle East offices in Abu Dhabi, Bahrain, Dubai and Riyadh, A.T. Kearney actively contributes to the operational excellence and profitable growth of industries and services in the region. For more information, visit www.atkearney.com.