Trust underscores every successful partnership. Without it, we cannot plan for the future, let alone imagine a better one. The more partners involved, the more trust becomes an absolute necessity. Our only chance of addressing climate change is to build up more of it.
The Euro-Med region is a key battleground for climate. Mediterranean countries possesses tremendous potential to produce solar and other renewable energies. These can replace fossil fuels at home and catalyze the further growth of renewables in Europe. Creating trust among states and for potential consumers in Europe has been slow, but this is changing.
Last month, the Association of Mediterranean Energy Regulators (MEDREG) brought together representatives from 22 countries in Brussels to move forward on building an integrated Euro-Mediterranean energy market. Launched in 2007 with backing from the European Union, MEDREG has already realized successes through “promoting a transparent, stable and compatible regulatory framework” that encourage renewable energy investments. Last December, it supported Algeria’s first renewable energy auction, a 150-MW solar tender.
The Euro-Med has had fairly obvious synergy in energy for nearly a century. Yet this was in the traditional consumer-supplier mold and centered on North Africa. Today, electricity is the center of gravity of global energy demand – building up regional connectivity based around the Mediterranean will be essential. There are obvious differences between northern and southern Mediterranean countries and then among southern Mediterranean countries themselves. Striking the right balance, then, between tailoring country-specific solutions and building trust and expediency through uniformity will not be easy, but one clearly worth working towards.
Maghreb model
North Africa has long been a major energy conduit for Europe. Algeria and Libya were central to European oil-supply security since the 1950s and have been vital to gas-supply security this century.
In solar, however, Morocco reins supreme. The country has made incredible leaps, becoming a net exporter of electricity to Europe for the first time in 2018. Morocco sent 20,588 gigawatt hours (GWh) to Spain and only imported 10,442 GWh through the two 700-MW interconnectors. Morocco’s capacity to produce renewable energy from both solar and thermal now stands at 3.5 GW. This strength prompted Morocco and Spain to sign a memorandum of understanding in March 2019 for a third, 700-MW line that would be operational by 2026.
These trends are infectious. In April 2019, Italy and Tunisia also reached an agreement for a 600-MW interconnector that would transit clean solar power to Europe. This can encourage electricity trade between Algeria and Tunisia, even if Algeria also may be eyeing the Morocco-Spanish highway, as its solar tender was focused on projects in the southwestern part of the country.
Political risk
MEDREG’s vision undoubtedly bolsters hopes for greater regional interconnectivity, but these plans remain relatively stillborn, particularly between Mediterranean countries. A 2016 Oxford Institute for Energy Studies study illustrates that the EU’s approach to building interconnectors relies of incentive regulation, something which has failed thus far to unite the Euro-Med. “The fact that intra-regional interconnections are barely used signals that interconnection investment in the southern region is driven by security of supply rather than the market.”
We cannot ignore political instability and fragmentation as real handicaps that stifle investment and raise capital costs. Yet electricity markets are not the same as oil and gas. Countries may not trust each other in terms of the later, since oil and gas underscore military and economic power. Trading renewable energy as electricity, on the other hand, is about powering and empowering people. It is also vastly cheaper than fossil fuels.
According to its President Ms. Gülefşan Demirbaş, “MEDREG will further pursue its personalized support towards Southern countries, focusing on the development of the design of electricity markets, the unbundling of vertical integrated companies, the role of off-grid consumers and the coming age of electricity storage.” This dovetails with what the Oxford study advocates: “a hybrid business model in which the main benefits of a merchant model are maintained within a regulated structure.”
Looking east
Regulatory convergence, moreover, is a sensible and viable strategy to bolster interconnections between countries further east, such as Jordan, Lebanon, Libya, and Palestine, all of whom rely on purchasing power from others. Egypt, as a growing producer can become the nucleus for these countries. As of 2010, it had 1,027 MW of transfer capacity with these countries. Many projects have moved towards realization since, the most exciting of which is a 3,000-MW interconnector with Saudi Arabia.
Momentum towards a common set of electricity regulations in the Euro-Med is essential to fostering the further development of renewable energies on all sides of the sea. Countries do not need to be close allies to trade power; they simply need to trust the terms of the deal.
