Munich Re may insure Desertec solar energy project
Sept 7, 2009 - George Frey - The Associated Press
MUNICH - German reinsurer Munich Re AG said its main role in the proposed Desertec solar energy project is currently as a catalyst and advisor, but could become a bigger investor and possible insurer for the project in future - if and when it gets built.
Desertec, still on the drawing board, aims to produce solar-generated electricity for much of Europe, Africa and the Middle East in coming years through a vast network of generating facilities and transmission grids across North Africa and the Middle East.
Speaking in a recent interview with The Associated Press, Munich Re's chief financial officer Joerg Schneider said the reinsurer is for now a leader in the consortium of companies involved, but that Munich Re would "be happy to support it further" either as an investor or by eventually insuring it.
"We very willingly take the role for the interim phase of being the driver of the cooperation in order to make it move," Schneider said.
"That is our task at the moment, to set everything up so that it is then self-running. Then there will be an intensive project phase."
The three-year project phase will focus on creating the regulatory framework and developing a detailed rollout plan to allow stakeholders, including governments, to evaluate their possible involvement and investment. The next step in Desertec will be to legally incorporate, he said, which is planned for Oct. 31.
"We'll try to do our best to speed it up," Schneider said, adding that "political realization is the main question mark here. Is it possible to really find and create enough solid ground for such enormous investments?"
Over the summer, a consortium of 12 European companies announced plans to build the project in North Africa and the Middle East which they said could satisfy 15 percent of Europe's energy needs by 2050.
The Desertec consortium also includes Deutsche Bank AG, German industrial conglomerate Siemens AG, and the German power companies RWE AG and E.ON AG.
The project would be based largely on solar power plants, which use mirrors to focus the sun's energy to heat liquid and power turbines. Such plants are already running in the U.S., Spain and elsewhere.
"Within six hours, deserts receive more energy from the sun than humankind consumes within a year," according to the Desertec Foundation's Web site.
The project is probably still far from being realized though, given the enormous cost and funding necessary to build the project alone - while generation and transmission will also come at no small cost.
Still, other risks remain, like potential political instability or even terrorism threats in the region, while some environmentalists say Europe would be better served sticking to smaller-scale solar facilities at home.
The German Aerospace Center estimates the new electricity transport network alone will cost some euro45 billion ($63 billion), while the group forecast the entire project could approach some euro400 billion.
"Desertec has the unique chance not only to do something for Europe's power provisions, but to also do a lot for these countries," Schneider said.
"That, I think, is very important; to bring wealth to these countries. It is therefore a unique chance to bridge the cultural gap between Europe and Africa somewhat," he said, calling it "a huge vision."
The Desertec consortium said it had already started discussing the project with governments in Europe and Africa, though wasn't specific as to which ones. Morocco, for example, has already expressed interest.
The company said it was still too early to say how equity investors might join the project, if it gets built.
Shares of Munich Re were down about a third of a percent at euro104.20 ($149.00) in Frankfurt afternoon trading.
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