Morocco sets bold targets to boost renewable energy generation capacity

To reduce dependency on international markets as well as emissions from energy production, Morocco has established a plan to make renewable sources a central part of its energy mix. By 2020, just under half of the country’s power is expected to be generated from renewable energy. There is a strong focus on developing wind and solar, which are predicted to have an installed capacity of 2000 MW each within five years. Morocco’s growing infrastructure for hydroelectric generation will also contribute.

Strategy

Many of the policies now being implemented were outlined in the 2009 National Energy Strategy, which emphasised foreign direct investment, efficiency in consumption and regionally integrated grids. Under the strategy targets, each renewable energy source – wind, solar and hydro – will contribute 14 percentage points to the goal of having 42% of power originate from renewable sources.

Reducing dependency on imports will have a hugely positive impact on Morocco, which, according to the International Energy Agency, imports 91% of its energy. By the end of 2015 the country is expected to have 36% of installed capacity coming from renewable sources. This will be broken down into 1800 MW from hydroelectric energy, around 800 MW from wind and 160 MW from solar capacity, according to Mohamed Berdai, an energy consultant.

To achieve 2000 MW of installed capacity from solar energy sources, five plants are set to be built in the coming years. The total cost of the country’s solar programme is estimated at €7.7bn by the Moroccan Agency for Solar Energy (MASEN), which is charged with bringing the plan into fruition.

One of the largest solar projects is the Ouarzazate Solar Complex, which aims to establish a plant with an installed capacity of 500 MW, making it the biggest solar farm in Africa. The first phase is a concentrated unit with a total production capacity of 160 MW, and is currently being built by Saudi contractors ACWA Power International, which won the tender for the €852m project. The contract entails the building and operation of the plant, as well the supply of electricity at a set price of Dh1.62 (€0.18) per KWh, which was lower than the price offered by the other competing consortiums. The first section of the Ouarzazate project, Noor I, is set to be operational by October 2015. The same contractor was part of the winning consortium in the tender to build the second phase of the Noor II scheme in Ouarzazate. The €1.7bn project was won by ACWA Power and Spain’s Sener in January 2015, and will include two solar power stations with a combined 350 MW of capacity. The project also supports the expansion of Morocco’s solar manufacturing industry. Mohammad Abunayyan, chairman of ACWA Power, told OBG, “30% of the goods and services of the Noor I solar plant have been procured locally, and for Noor II and Noor III, this rate will be increased to 35%.”

The contract for Noor II is a build-and-operate agreement, with established sale prices of Dh1.42 (€0.15) per KWh for the 100-MW power plant, and Dh1.36 (€0.15) for the second plant. Another solar energy production unit at the plant with a capacity of 50 MW is being considered by MASEN. Total production capacity at Ouarzazate should be 500 MW by 2018. When complete, the project will also be equipped with thermal storage capacity of three to five hours, which will help secure energy for increased demand in the evening, according to the OCP Policy Centre, a Morocco-based think tank.

Financing

Investment for the Ouarzazate solar units has come from various sources. Overall, a total of €1.4bn has been secured by Morocco from different international lending partners. “Morocco’s strategy for renewable energy, combined with its stability and focus of vision makes the country very attractive for international companies acting in the energy sector,” Anas Kabbaj, Commercial Manager for North West Africa at General Electric, told OBG. “This is not only beneficial to Morocco in terms of energy infrastructure and competitiveness, but also is leading to increased knowledge transfer and technology leadership for Morocco in the region – something that we have seen in recent years,” he added.

In October 2014, Rabat received approval for a €442m loan from the World Bank for the second phase of the Ouarzazate project. German state-owned bank, KfW, is also participating, financing €678m. Some €100m has been pledged by the European Investment Bank, and the African Development Bank (AfDB) is loaning €213m.

Solar power is a natural option for Morocco. The location of the Ouarzazate complex, for example, in the central desert region, has a direct normal irradiation level of 2635 KWh per sq metre per year, according to the AfDB, making it one of the world’s most favourable areas for solar power generation.

Wind

Harnessing another natural resource to create clean energy, the kingdom is also investing heavily in the development of wind farms. The end of 2014 saw the start of operations at the Tarfaya wind farm, on the Atlantic coast. The 300-MW capacity project includes 131 turbines, and was built through a joint venture between Nareva Holding, a renewable energy company owned by Morocco’s Société Nationale d’Investissement, and French energy group GDF Suez. The consortium responsible for building and operating the €450m farm has also signed a 20-year purchase agreement with Moroccan public utilities company Office National de l’Electricité et de l’Eau Potable (ONEE) for the energy.

Capacity is also being added to the Al Koudia Al Baida wind farm, which has been operating since 2000. In late 2012, Theolia, which owns the farm, launched a tender in conjunction with ONEE to renew equipment at the site, as well as add 200 MW in a second phase, which will see the project expand in the surrounding area. Scheduled to start operations in 2016 is the Taza wind farm, a 150-MW unit near the city of Fez. The project is currently being built by a consortium made up of EDF Energies Nouvelles, Mitsui and Alstom. Under the state’s Integrated Wind Programme, two other wind farm projects are being developed in the Laayoune and Boujdour areas, which will amount to 300 MW and 100 MW of capacity, respectively.

Hydroelectricity

Renewable energy will also get a substantial boost from hydroelectric production, with two major projects set to become operational in the coming years. One is the Dh1.5bn (€163m) M’dez dam at Sefrou, near Fez. Construction began in early 2015 and work is set to be completed by 2018, at which point the dam will have a 170-MW production capacity. The second is the 350-MW capacity STEP Abdelmoumen Dam, to be ready by 2019 in the region of Agadir.

Export Markets

Part of the government’s aim is also to establish the necessary capacity to export clean energy. Existing infrastructure which interconnects the grid with both Algeria and Spain would allow this. However, Morocco would face some tough competition from Spanish wind energy, which is produced more cheaply, and the EU’s current renewable energy legislation is at best vague regarding clean energy imports between member states, as well as imports from non-EU countries.

The strategy to increase the contribution of renewable energy sources has many advantages. Although the drop in oil prices seen in 2014 and 2015 has improved Morocco’s short term financial position, past volatility has shown that there is a good chance that the trend will be reversed soon. “To lessen our dependency on energy producing countries that are also wrapped in instability is a good thing. Furthermore, they are clean energies,” Mehdi Lahlou, an economist at the National Institute of Statistics and Applied Economics, told OBG.

The authorities also expect that the vast investments going into renewable energy generation will create new employment options. MASEN, for example, expects the solar facilities at Ouarzazate to have a local industrial integration of 30%. Also relevant will be the environmental impacts that renewable energy sources will have on the country’s carbon footprint. According the AfDB, the solar plan will correspond to a 3.7m tonne reduction in carbon dioxide emissions per year, 1m tonnes of which will result from the Ouarzazate project alone. The Tarfaya wind farm, on the other hand, will reduce emissions by 900,000 tonnes annually.

By putting an emphasis on wind and solar projects to produce energy, Morocco is reducing both its dependence on external energy markets and the prevalence of fossil fuels in its primary energy production. Doing so by harnessing its natural strengths will also help to develop new industries and create jobs, but the country’s renewable energy plans may face challenges. Some international investors are somewhat reluctant to invest in renewable energy projects in the southern regions due to the ongoing dispute regarding the territory’s status.

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