EU commits billions to North African renewables as fossil fuel bill surges

When Dan Jørgensen stood before journalists in June and declared that the European Union's fossil fuel import bill had swollen by more than €47 billion in just over three months, without delivering a single additional molecule of energy, he was not merely describing a price shock. He was framing the political rationale for a wager that Brussels has been quietly building for years: that Europe's energy security now runs through the Sahara.

The European Commission's T-MED initiative, announced the same month, commits almost $5.8 billion in public money to renewable energy projects across the Middle East and North Africa. The goal is to deploy solar arrays in the desert and wind farms along the Mediterranean's southern and eastern shores, then ship the electricity north via high-voltage subsea cables. If it works, the corridor could supply a meaningful slice of European demand while cutting the continent's exposure to volatile hydrocarbon markets.

The arithmetic of desert power

The numbers the Commission cites are arresting. The MENA region holds roughly 2,300 GW of technical renewable potential, more than twice the EU's entire installed capacity today. Solar and wind generation costs there run 30 to 40 percent below European levels, a gap driven by higher irradiance, stronger and more consistent winds, and cheaper land. On paper, the economics are compelling: every euro of capital deployed in Morocco or Egypt yields more kilowatt-hours than the same euro spent in Germany or Poland.

But the full ledger includes transmission. Moving gigawatts across the Mediterranean demands high-voltage direct current (HVDC) cables that cost millions per kilometre, plus converter stations at each end. The Commission hopes its $5.8 billion will catalyse up to $29 billion of private capital by 2035. Even that sum falls short of the $115 billion the EC estimates the region needs to realise its full potential. The gap between political ambition and financial reality remains wide.

Germany's Atlantic gamble

The most concrete expression of the strategy is Sila Atlantik, a German-Moroccan venture backed by roughly $30 billion in planned investment. Two subsea cables stretching some 4,800 kilometres would carry up to 15 GW of Moroccan solar and wind power to Germany, enough to meet about 5 percent of the country's annual electricity demand. The project was born from the wreckage of Xlinks, a similar Morocco-UK proposal that collapsed in 2025 after failing to secure UK government support and viable offtake agreements.

Reuters reported in June that Sila Atlantik has stalled over disagreements about project structure and financial guarantees. The details matter: who bears the risk if Moroccan output underperforms? Who pays if European demand shifts? How are revenues split when the cables cross multiple exclusive economic zones? These are not abstract questions. They determine whether institutional investors, pension funds, insurers, sovereign wealth funds, will commit the billions required.

A history of false starts

Europe has been here before. The Desertec initiative, launched with great fanfare in 2009, envisioned a vast network of Saharan solar plants feeding Europe. By 2014, most industrial partners had withdrawn, citing political instability after the Arab Spring, regulatory opacity, and the falling cost of domestic European renewables. The EU and the European Investment Bank did invest €106.5 million in Morocco's Noor Ouarzazate complex, a 580 MW concentrated solar plant that began operating in 2016. It cuts emissions by an estimated 760,000 tonnes a year, a real achievement, but a fraction of the gigawatt-scale vision.

More recently, the EU agreed a $794 million package for Egypt in June: a $690 million loan from EIB Global, the European Investment Bank's development arm, plus up to $104 million in Commission grants to upgrade and expand the Egyptian grid. That project is pragmatic rather than transformative, strengthening a national network that can eventually absorb and export renewable power. It also reflects a shift in EU strategy: smaller, bankable interventions rather than a single grand design.

Regulatory friction in partner countries

The Commission's own documents acknowledge that money alone will not unlock MENA's potential. Permitting procedures in several North African states remain opaque and slow. Grid access rules are often designed around state-owned utilities with little experience of independent power producers. Land rights for vast solar arrays can be contested. Currency convertibility and repatriation of profits are not guaranteed. The EC says it will "encourage countries across MENA to simplify permitting procedures, improve grid access, and strengthen regulatory frameworks", diplomatic language for reforms that have resisted external pressure for decades.

Morocco has made more progress than most. Its renewable energy law, updated in 2015 and again in 2020, allows private developers to sell directly to the grid and export. The Moroccan Agency for Sustainable Energy (MASEN) acts as a one-stop shop for project development. But even there, the Sila Atlantik delays suggest that cross-border infrastructure introduces a new layer of complexity, treaty-level agreements, maritime boundary delineation, and the harmonisation of grid codes across three or more jurisdictions.

Energy security versus industrial policy

Jørgensen's framing, energy security through electrification and connectivity, resonates in a Europe still reeling from the 2022 gas crisis. Yet there is a tension. Every billion euros spent on North African generation and transmission is a billion not spent on European wind farms, solar parks, storage, or grid reinforcement at home. The Commission argues the two are complementary: cheap imports reduce the system cost of the transition, while domestic capacity provides resilience. Critics in several member states worry that reliance on imported electricity merely substitutes one dependency for another, albeit one with a different geopolitical profile.

There is also an industrial dimension. European turbine and solar manufacturers face fierce competition from China. If the bulk of MENA deployment uses Chinese equipment, as many recent projects have, the EU's public money may subsidise foreign supply chains. The Commission has not attached strict local-content requirements to T-MED funding, though the Net-Zero Industry Act, now in force, aims to ensure that 40 percent of the EU's annual deployment needs are met by domestic manufacturing by 2030. How that target interacts with extra-EU projects remains undefined.

The private capital test

The ultimate test of T-MED is whether private investors follow public money. The $29 billion leverage target implies a ratio of five private dollars for every public one, aggressive by infrastructure finance standards. Development banks typically achieve ratios of two to three. The difference hinges on risk perception. If Morocco, Egypt, Tunisia and others can demonstrate bankable power purchase agreements, stable regulatory regimes, and currency regimes that allow dollar or euro revenue streams, the capital may come. If not, the Commission's billions risk becoming a sunk cost in a series of pilot projects that never reach scale.