Page 3 of 4The big question mark
Even if all these problems are overcome, gas market prices need to be high enough to compensate for the expense of tight or shale gas exploration and production. However, present indications are that they could be relatively low for some time, given the participation in the market as major players, now or in the future, of Qatar, Australia, the US, Nigeria and others. Official Algerian comment about future pricing and demand has been quite optimistic, but the reality, says Ciszuk, is, “We don't know; it's impossible to say."
It is also hard to say whether the market value of solar power will be worth the price of providing it. Non-Algerian renewable energy companies will presumably be encouraged to share their technologies. However, there may be little financial incentive for them to do so and the companies will probably have little influence over how their technologies are employed or monetised. At the very least, recent pronouncements indicate that the Algerian government would like a strong local component in manufacturing and research. Significant lack of project control could deter foreign partners from getting involved (or persuade them to focus on more business-friendly countries like Morocco), adding to long-term costs.
But even if Algeria were an open, attractive investment environment for solar energy development, is solar at the moment a profitable business?
Africa to Europe?
To start with, there is the problem of the distance from the heart of the Sahara desert up to the Algerian coast. As Ciszuk says, “We might be talking about power transmission over well over 1500 kilometres depending on where they start building these facilities. Maybe they'll try to build them a bit closer of course but you still have transport losses of electricity.” It’s true, he adds, that new technologies can create and move renewable power much more efficiently than before, making the idea of potentially exporting power from Africa to Europe at least conceivable, but it is by no means a proven system. In any case, Algeria is a long way from making that happen. “They've struggled so far to be a good investment destination for other companies than upstream; they've even struggled with upstream companies,” says Ciszuk. “So to be a new Silicone Valley for the renewable industries is very ambitious.”
But even if the price the market is willing to pay per unit of solar energy can justify the effort, don’t forget too that these calculations need also to make room for domestic power supply, which is likely to be a drain on export earnings for solar as well as gas.