Rome—13-14 October—The Desertec Industial Initiative (Dii) held the 5th Dii Desert Energy Conference on October 13-14 in Rome, Italy. The conference brought together governments, industry and civil society to discuss how to realise an integrated Mediterranean electricity system in which renewable energy plays a leading role. 

Richard Bridle from the IISD Global Subsidies Initiative (GSI) attended the conference to highlight the impact of energy subsidies on sustainable electricity systems.   
 
Energy subsidies are a central issue in any discussion of electricity systems in North Africa. The IMF estimates that pre-tax energy subsidies cost $237 billion in 2011 equivalent to 8.6 percent of regional GDP and a staggering 22 percent of government revenue. Of this total around $52 billion were spent on subsidising the electricity sector, mainly by providing low cost fossil fuels to generators, covering electricity sector losses and providing tax breaks to electricity companies. 
 
To place these two figures in context, the cost of subsidies to fossil fuels may be compared to the cost of implementing regional plans to promote renewable energy. 

The Dii estimates that the total regional target – the sum of published national targets - for renewable energy deployment up to 2020 is 50 GW. Some have expressed scepticism that these targets can or will be met, often citing high costs as a barrier. Yet the cost of meeting this target using mature renewable energy technologies, according to cost estimates of current renewable energy projects from IRENA, would likely be in the range of $ 50-200 billion.

This means the cost of meeting the entire renewable deployment target up to 2020 would likely be less than the cost of a single year of fossil fuel subsidies. 
 
This fact highlights the massive cost of fossil-fuel subsidies in comparison to proposed spending on renewable energy. But fossil fuel subsidies are not only expensive. The money spent on fossil-fuel subsidies actually creates a barrier to renewable energy by reducing the cost of the output of fossil fuel power stations, thereby reducing wholesale electricity prices and making it harder for renewable generators to sell their output at a viable price. In addition, subsidies generally benefit incumbent electricity sector actors, preventing new entrants, such as renewable energy generators, from gaining a foothold in the market. 

Despite the significant political challenges to be overcome, reform therefore remains a priority for both financial, environmental and energy security reasons.