Development and Investment

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The low cost of Desert Energy

Desert Energy has two different price labels: Investment cost and operating cost. 

For Desert Energy to be useable we have to build two structures: a power plant in the desert and a transmission line to Europe. If the energy is used locally or the facility produces hydrogen, the cost of the investment drops significantly as the transmission line is not necessary in these cases. 

The most expensive aspect of the investment is in fact the transmission line with roughly 25 billion euros needed. Other expensive components of the power plant like a water-pipeline or the electric substation are base costs as well, they are not really dependent on the output of the plant. In order to maximize the cost efficiency, these components should be used to their maximum utility. 

If the energy is distributed locally, the investment for the infrastructure can vary from a few million (for example installing grid lines) up to several hundred million euros (for example for hydrogen production). For further calculations, a worst-case of an additional billion in costs is assumed. 

A power plant in the range of 3 GW is ideal for this purpose and costs around 5 billion euros for a total bill of 30 billion. A nuclear power plant with a similar power output would be Hinkley Point in the United Kingdom. It already costs over 25 billion and is not even finished yet. 

From that perspective, desert energy seems to be at a disadvantage with the high investment cost. Of course, the cost of operation is the selling feature of desert energy: No fuels required and the sun doesn’t charge anyone for shining. 

The maintenance cost of such a power plant is comparable to that of the slightly more complex gas or coal plants. Nuclear plants have a far higher maintenance cost, due to higher security  requirements. 

At this point fossil fuels already offer no advantage over desert energy and their position is getting worse: Even without the climate crisis, renewables are inevitable. The world is running out of fossil fuels!

And when some commodity gets ever rarer, while demand increases… the price goes up. 

Even before China´s entry into the global fight for oil, gas and coal the energy market was already tight. And the consumption of Europe or the USA is not about to drop, even with more efficient technologies. Soon there will be India with another billion people going for the western level of living and Africa is booming, both in terms of economy and in terms of population. 

Whoever thinks that 10 billion people with the living style of a westerner fighting over limited amounts of fossil fuels will not increase the price, has not understood the concept of demand and supply. 

Yet another additional cost for fossil fuels and nuclear power is the aspect of long term damage. The oil industry has a massive negative impact on fishing, for coal hectares of fertile land are dug up and the price tag for storing nuclear waste isn’t even determined yet. 

The immense damage done by extreme weather (drought, storm etc.) can only be estimated at this point but is surely in the range of several trillion euros summed over the next years. 

The following chart sums up the different costs of the most common energy sources and desert energy: 

 

Source: 

Investment cost

Operational Cost

Long term costs

Coal

1 billion/GW

5-8 Cent/KWh

Degraded land through mining, Climate expanses

Natural Gas

1 billion/GW

7-9 Cent/KWh

Climate expanses

Nuclear Power

7-8 billion/GW

8-15 Cent/KWh

Degraded land through mining, Storing nuclear waste

Desert Energy
(without transmission to Europe) 

2 billion/GW

7-11 Cent/KWh

Desert Energy
(with transmission to Europe)

10 billion/GW

7-11 Cent/KWh

Opportunities for Development

At the moment deserts are a negative geographic feature. There are almost useless in terms of agricultural production and food imports are a major contributing factor to the poverty of countries in Africa or the Middle East. 

Desert Energy would be a chance to let the deserts bloom! Not only the local energy demand could be met, but exporting the energy would give vital hard currency supplies. These are needed to get medical products, agricultural machinery and other investment goods for the development of the own infrastructure, security and development of public services and economy. At this point, countries throw off their import/export balance to get access to these goods and accumulate debt in the process. 

These exports and hard currency supplies offer developing countries the chance to take their development into their own hands. 

Additionally, desert energy can provide desalination of seawater to increase agricultural output, hygiene standards and combat desertification in places that would normally be lost due to the climate crisis. 

Energy transition for Industrial Nations

The three biggest problems of a full energy transition to renewables would be solved by desert energy: 

  1. Transmission: With desert energy, only a few power plants in the desert have to be connected to a few electric substations in Europe. This so-called point-to-point-grid is far easier than connecting thousands of small suppliers like wind farms to a super grid. 
  2. Baseline supply: With solar and wind, a lot of additional money and effort has to go into batteries or other storages. Despite Power-to-Gas now getting viable, it is still cheaper to just install a reliable baseline supply. Blackouts were a mostly fictitious argument from the beginning, but with desert energy, the problem is solved once and for all. 
  3. Cost: At the moment wind and solar plants are installed whose potential will never be reached and the sun doesn’t shine all the time and wind is not a given. There has to be more wind and solar than the current demand because in case of good weather both the supply must be satisfied as well as demand from storage facilities who ensure supply at a later point. This huge overkill of installed power costs a lot of money. 

It is much more economical to invest in machinery that runs 24/7. Thanks to thermal storage, solar thermal energy can be supplied during the night. 

At this point, we will look at a basic calculation for Germany, Europe´s biggest consumer of energy. 

The peak power needed in Germany is 80 Gigawatts, with 40 Gigawatts constituting baseline supply. Already 40% of that is supplied by renewables. If we want to install another 50 GW of baseline power with desert energy to reach over 80 GW of green products that would cost 500 billion euros. Germany spends 100 billion euros per year (!) on coal, oil, gas and uranium, half of that money is spent on imports. Compared to the annual public spending of 1,4 trillion (government + social security) that isn’t a lot for a one-time expenditure. After only 5 years the investment paid off in macroeconomic terms as Germany would save money by not importing so many fossil fuels. 

Opportunities for Investment

The energy sector is never going to decline. Energy will always be needed. There is no market shift or economic trend that is going to change that. 

Desert energy has already been tested on a commercial scale. Al-Noor and many other projects proofed that. The biggest bottleneck is the lack of presence of this idea in the minds of investors. At the moment investors are craving for investment opportunities: 

  • Most big companies have enough turnover to cover their investments and therefore require no loans.
  • The housing market is already at a record high
  • Live insurances and retirement schemes struggle to fulfil their promised profit

Admittedly desert energy is not as flexible as company shares that can be sold at each point in time at an existing market, but for long term investment, the option is very attractive as profit and stability are guaranteed. 

Even within companies, desert energy is an attractive option. Energy-intensive processes could be outsourced to these plants and thereby lower costs. 

Another option is hydrogen production. Hydrogen is needed in large quantities in the chemical industry or it could be shipped to airports or seaports as fuel.