German firms lead massive North African solar project

There are multiple hurdles that can be foreseen in this project:

1. Technology Risk - CSP as a technology has not been implemented on a very large commercial scale across the world. There have been a few projects in Spain and US based on CSP technology, but CSP remains a technology that has not been completely proven on a large commercial scale.
2. Financial Risk - It is uncertain given the state of the credit markets, if a project of this scale and size can be executed within a decade. Even with implicit sovereign backing, firms may find it hard to raise project finance in time to complete the power plant construction.
3. Economic Risk - Investing massive sums of money in building infrastructure, which would quickly become a "sunk cost", could be a risky proposition.
4. Business Model Risk - So far renewable energy, especially Solar has been modeled as a distributed source. Given the high cost of Solar relative to grid electricity, Solar has been mainly preferred for off-grid applications where no incentives are available and for grid applications where strong incentives like feed-in tariff are present. In that sense creating a centralised system like CSP for Solar, implies a new business model and hence business model risk.
5. Political Risk & Sovereign Risk - Most of the North African countries suffer from political and economic instability. While land costs may be cheap, country risk becomes a significant element, given the project size and life. While this country risk can be hedged to an extent, by options like purchasing insurance, an intelligent trade balance etc, full protection may not be possible.
   

However, inspite of all the risks mentioned above, the signal that players of significant muscle are serious about renewable energy is evident.

http://www.guardian.co.uk/environment/2009/jun/16/solar-power-europe-africa

Deutsche Bank, E.ON, RWE, Siemens to finance €400 billion CSP plan that would power Europe with clean electricity from Africa. Solar power originating in the deserts of North Africa could power Europe with clean electricity, if a consortium of 20 German companies has its way.

The businesses, which include major names in European energy, finance and manufacturing, are expected to assemble next month, according to Guardian News and Media. The ambitious and costly €400 billion ($553.44 billion) plan, called Desertec, sets out to power 15 percent of Europe’s electricity by solar energy from Africa within a decade.

The players—including Siemens, Deutsche Bank, and energy companies RWE andE.ON—are expected to meet July 13 in Munich to form the agreement. The companies haven’t provided details about their involvement in the project. According to Guardian News, other attendees will include German government ministries, global think tank The Club of Rome, and a Zurich-based non-government organization of leading scientists, managers and politicians who support sustainable development.

The expensive project is planned to move forward despite the economic crisis, and is aimed at keeping Germany as a leader in solar energy. Germany fell behind Spain in the global market for solar with 1.5 gigawatts installed in 2008, compared to Spain’s 2.51 GW (see Spain leads 2008 solar market).

The Desertec project would build concentrating solar power plants in several North African locations. Morocco, Libya and Algeria have been cited as potential spots that are politically stable and where land is also inexpensive. The energy would be sent via high-voltage direct current transmission lines to Europe, which has been deemed technically possible, but expensive.