Renewable energy in Morocco

May 2012

Contacts

Key industry sectors

Executive summary

This briefing focuses on the outlook and challenges for renewable energy projects in Morocco. It gives an overview of Morocco’s domestic energy resources, planned projects and the factors driving Morocco’s energy strategy. It also examines the policy and regulatory environment for renewables projects and provides an overview of the requirements for developers of renewables projects in Morocco.

Context

Morocco is the only North African country with no natural oil resources and is the largest energy importer in the region with 96 per cent of its energy needs being sourced externally. The leading supplier of Morocco’s energy requirements is Saudi Arabia at 48 per cent. By 2009 Morocco’s energy bill had reached MAD62 billion (approximately US$7.3 billion) and electricity demand in the country is projected to quadruple by 2030.

Morocco is in a key geographical position that situates it as a regional hub and with an electricity network that is inter-connected with Spain and Algeria.

Morocco has small quantities of gas in the areas between Rabat and Menknes. Morocco also has large reserves of oil shale, and has signed partnership agreements with global energy companies to test these oil shales. However, in the absence of a proven specific industrial process that can produce oil and gas from this unconventional source, Morocco has turned to implementing a number of strategies for the promotion of renewable energy.

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Outlook

In 2008 Morocco launched the National Renewable Energy and Energy Efficiency Plan, which aims to develop alternative energy to meet 15 per cent of the country’s domestic energy needs and increase the use of energy-saving methods.

Morocco has the most ambitious renewable energy programme in the MENA region. It expects 42 per cent (equivalent to about 6,000MW) of its total energy mix to come from solar, wind and hydroelectric sources by 2020. It has more planned wind and solar projects than anywhere else in the region.

Morocco has a track record of implementing renewable energy schemes. However historically, inadequacy of regulatory framework, a lack of finance, and a piecemeal approach to renewables have all hindered the sector’s development.

As we will see later on in this briefing, in recent years the Moroccan Government has made significant efforts to strengthen the legal and regulatory framework in order to facilitate the development of the renewable energy sector in the country.

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Key drivers

Morocco has strong incentive to expand its renewable capacity rapidly, given that it is already spending over US$3 billion a year on fuel and electricity imports and is experiencing power demand growth of 6.5 per cent a year.

In 2010 Morocco’s energy mix was comprised of approximately 30 per cent of renewable energy (4 per cent wind and 26 per cent hydro) and 70 per cent of fossil fuels (17 per cent gas, 24 per cent oil and 28 per cent coal). According to the Moroccan Ministry of Energy and Mining, in 2011 the total installed capacity of renewable energy besides hydropower was approximately 300MW, of Concentrating Solar-Thermal Power (CSP), Photovoltaics, (PV) and wind.

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Moroccan Solar Plan

In 2009 the country launched the Moroccan Solar Plan, a national strategy to develop renewable energy. The Plan is one of the world’s largest solar energy projects and it is estimated that it will cost US$9 billion. The Plan aims to:

  • strengthen the security of supply of energy through the diversification of sources and resources
  • optimise the energy balance
  • build 2000MW of solar capacity by 2020
  • provide access to energy for the general population at an affordable and competitive price
  • achieve sustainable development through the promotion of renewable energy
  • promote productivity and competitiveness
  • protect the environment and the reduction of green house gas emissions
  • strengthen regional integration through the opening up to Euro-Mediterranean energy markets and harmonising energy legislation

MASEN, the Moroccan Agency for Solar Energy, is a public-private agency dedicated to implementing the Moroccan Solar Plan and the promotion of solar energy by:

  • developing solar power projects
  • contributing to the development of national expertise
  • proposing regional and national plans on solar energy

MASEN has invited expressions of interest in the design, construction, operation, maintenance and financing of the first of the five planned solar power stations. One is the 500MW plant in the southern town of Ouarzazate, further details of which are outlined below. Projects are also located at sites at Beni Mathar, Foum al Ouad, Boujdour and Sebkhat Tah.

Figure 12

Diagram

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Energy efficiency and The National Plan for the Development of Solar Thermal Energy

Energy efficiency in parallel with the development of renewable energy forms a major part of Morocco’s energy strategy, as provided for in its National Plan for Renewable Energy and Energy Efficiency Plan. Morocco’s energy strategy aims to save 12 per cent in 2020 and 15 per cent in 2030 of total energy consumption.

Morocco’s Renewable Energy Agency, the Agence Nationale pour le Développement des Energies Renouvelables et de l'Efficacité Energétique (ADEREE) has launched several energy efficiency programs in the construction, industrial and transport sectors. These energy efficiency programs will involve joint ventures with public authorities and international partners.

Morocco’s energy efficiency plan includes a solar water heater program (PROMASOL) which aims to:

  • increase supply to reduce equipment costs
  • improve the quality of solar-powered equipment and related services
  • ensure the large-scale adoption of solar water heaters through sectoral demonstration programs and mass media campaigns

PROMASOL is a United Nations funded initiative with the objective to double solar water heating capacity in three years to 40,000 m² per year. Since its inception in 2002, PROMASOL has cut carbon emissions by 1.3 million tons, and is expected to reduce around 920,000 tons of CO² a year until 2020. The programme has also increased the number of solar water heaters from about 35,000 m² of solar panels to approximately 240,000 m² in 2008.3

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Major projects

In this section we outline some of Morocco’s planned renewable energy projects.

DESERTEC

The DESERTEC concept involves the development of a trans-national super grid that integrates all types of renewable energies:

  • Concentrating Solar-Thermal Power (CSP) in desert regions
  • wind power in coastal areas
  • hydro power in mountainous regions
  • photovoltaics in sunny areas
  • biomass and geothermal power where geographic conditions are favourable

The DESERTEC concept aims to build CSP plants to supply renewable energy from MENA to European countries using high-voltage direct current (HVDC) transmission lines, and established the industrial initiative Dii (the latter being a consortium of 55 companies including E.ON, Siemens, Munich Re and Deutsche Bank), which amongst other things will work towards developing a framework for investments, in order to achieve this aim.

Last year MASEN and Dii signed a cooperation agreement to develop a large solar project in Morocco, which would amongst other things demonstrate the feasibility of the export of solar generated electricity to Europe.

Ouarzazate

The Ouarzazate project is a planned 500MW solar plant which will be among the largest CSP plants in the world. The project is receiving finance from, amongst others, the World Bank’s Clean Technology fund and the International Bank for Reconstruction and Development. It will be implemented in four phases. MASEN has invited commercial bids for Phase 1 a 160MW plant, and final bids to design, build, operate, maintain and finance the plant were recently submitted. Three groups submitted bids with the following levelised tariffs:

  • Acwa Power (Saudi Arabia), Aries Ingeniería y Sistemas (Spain) and TSK Electronica y Electricidad (Spain): MAD 1.597944 (18.87 $ cents) a kWh
  • Enel (Italy) and ACS Servicios Comunicaciones y Energia (Spain): MAD2.057201 a kWh
  • Abeinsa (Spain), Abengoa Solar (Spain), Mitsui (Japan) and Abu Dhabi National Energy Company (UAE): MAD 2.057503 a kWh

Ain Beni Mathar

Ain Beni Mathar is a 470MW hybrid solar-gas plant which will be located approximately 625 km east of the capital, Rabat. It will be the first plant to be constructed with cylinder parabolic mirror technology in Morocco. The African Development Bank is financing two-thirds of the cost of the plant, approximately €187.85 million.

The Moroccan Integrated Wind Energy Project

The Moroccan Integrated Wind Energy Project was launched in 2010, with an estimated investment of MAD31.5 billion (approximately US$3.7 billion) and aims to:

  • bring installed wind capacity from 280MW to 2000MW by 2020
  • increase the share of wind power in the national energy balance to 14 per cent by 2020
  • achieve a production capacity from wind power of 2MW and annual production capacity of 6,600 GWh
  • achieve savings of 1.5 million tonnes of fuel a year, corresponding to US$750 million dollars and prevent the emission of 5.6 million tonnes of CO² per year

The Hassan II Fund and the SIE are also responsible for creating financing schemes and business plans for each project included in Morocco’s wind power development program.

Morocco’s Office National de l’Electricité (ONE)

As part of Morocco’s Integrated Wind Energy Project, ONE has tendered for the construction of five wind farms with a total capacity of 850MW at the following locations: Tanger II 150MW; Midelt 100MW; Jbel Lahdid (Essaouira) 200MW; Tiskrad (Laayoune) 300MW; and Boujdour 100MW. The developer will design, finance, construct, operate and maintain the wind farms as IPPs. In addition, the developer and turbine supplier will also be required to extend the 50MW Koudia al-Baida Al II wind farm to a total capacity of 200MW.

ONE is also tendering a 150MW wind farm at Taza, northern Morocco, which will be constructed on a build-own-operate-transfer (BOOT) basis. Mitsui and ED Energies Nouvelle have been recently named as preferred bidder. ONE will agree a 20 year offtake agreement with the chosen developer.

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Policy and regulatory framework

The Moroccan Government has been praised for the substantial efforts that it has made in recent years to strengthen the legal and regulatory framework for developing renewables. Significant legal reforms include the following4:

  • Decree 1-06-15 of 2006 which obliges public institutions to employ competitive calls for tender in the award of projects. The law applies for example to municipalities that may wish to contract with wind farms or other sources of electricity from renewable energy
  • Law 16-08, voted in 2008, raised the ceiling for self-generation by industrial sites from 10MW to 50MW. The Law was conceived principally to support wind power, but applies equally to other technologies. This Law amends the 1963 Decree from which created ONE and attributes to ONE a monopoly of production above 10MW
  • Law 13-09 to promote renewable energy development and provide a framework for developers and investors in clean energy projects. The new law does not put a limit on the installed capacity per project or per type of energy, and provides a legal framework for clean energy export. (The main provisions of Law 13-09 are examined in further detail later on in this briefing)
  • Law 16-09 which provides for the establishment of ADEREE
  • Law 57-09, which provided for the establishment of MASEN
  • SIE (Société d'Investissements Energétiques), reference investor in the energy strategy of Morocco, was founded in February 2010 in accordance with the guidelines of the national energy strategy aimed at the diversification of resources, promotion of renewable energy and energy efficiency
  • The creation in 2009 of IRESEN, Research institute on Renewable Energy
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Electricity sector organisation in Morocco

Figure 25

Diagram

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Law no 13-09 with regards to renewable energies (the Renewable Energy Law)

The Renewable Energy Law aims to promote energy production from renewable sources, to market and export either by public or private entities. Previously, ONE (the state owned utility responsible for the provision of electricity as well as the operation of the transmission system) had the monopoly for the production of electricity. The Renewable Energy Law now permits electricity to be produced and exported by private entities. However, the supply of electricity must still be undertaken through the national electricity network.

The regime established by the Renewable Energy Law also provides for the following:

  • The principle that any power producer (public and private) from renewable energy sources has the right to be connected to the medium, high and very high voltage national electricity grid
  • A preliminary statement regime for new or upgraded installations that:
    • produce renewable energy of less than 2MW and more than 20kW and which are owned by the same operator on one or various sites

      OR
    • produce 8MW or more of thermal energy
  • An authorisation regime for renewable energy projects with a capacity of 2MW or more. Such projects can only be implemented if they are proposed by ADEREE.
  • No conditions will apply in the case of renewable energy which is provided by a unique promoter at less than 20kW.
  • The supply of electricity must still be undertaken through the national electricity network and interconnections. However, the law does give the possibility to any developer to build a direct electric distribution line, but such line may only be operated separately from the transmission network where:
    • the electricity produced is aimed to be exported
    • the operator has entered into a formal agreement with ONE
  • An obligation imposed on the administrative authority responsible for the development of renewable energy to allocate areas designed for the construction of wind and solar facilities of “high production capacity.” The designated areas will be proposed by ADEREE.

Figure 3: Overview of Law 13

Diagram

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Authorisation process

The applicant will initially obtain a temporary authorisation for the construction of the renewable facility and then a final authorisation for operation of the plant. Where the facility is not used within one year from grant of the final authorisation or if electricity production is suspended for more than two consecutive years then the final authorisation may be withdrawn.

Applicants under the authorisation regime are also required to meet certain technical and financial criteria.7

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Preliminary Statement process

The applicant will be required to submit an administrative file and will first be granted a temporary receipt and thereafter a final receipt. The producer will be required to renew the Preliminary Statement process where following grant of the final receipt:

  • operation of the plant has not started within three years

    OR
  • the electricity production is suspended for more than two consecutive years.

The law does not introduce fixed tariffs but states that all economic questions, as well as the technical conditions, have to be negotiated on a case by case basis between the grid operator and the power producer.

Although there is no feed-in tariff in place in Morocco, ONE operates a scheme, which in effect works as a feed-in tariff. This scheme is The EnergiPro project and is described in the next section.

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The EnergiPro Project

EnergiPro was launched by ONE and pursuant to which large industrial consumers are offered an incentive in the form of favourable tariffs to invest in renewables.

EnergiPro was launched in 2006 to promote independent production of electricity from renewable sources, and offers two key benefits:

  • transmission of electricity produced from renewable energy throughout the grid network at fixed rate
  • guaranteed repurchase by the ONE of any surplus electricity produced with a twenty per cent bonus on top of ONE peak, and off-peak day ahead tariffs

Several major firms have entered into “Energie Pro” agreements. Whilst, EnergiePro is not limited to wind energy, the program is primarily directed at this source.

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ADEREE

ADEREE was established pursuant to The Renewable Energy Law and replaced CEDR, the Renewable Energy Development Centre. ADEREE is in charge of implementing Morocco’s national plan for renewable energy and energy efficiency. ADEREE seeks to do this by:

  • proposing national and regional plans and incentive measures for the renewable energy and energy efficiency
  • the development of programs for renewable energy and energy efficiency within the framework of Morocco’s national energy strategy
  • the identification, evaluation, and realisation of the cartography of renewable energy resources and ideas for energy efficiency as well as proposing development zones for solar and wind energy
  • developing standards in the fields of renewable energy and energy efficiency as well as supporting research and development and training
  • the follow-up and co-ordination at national level of energy audits
  • ensuring participation at national and international level of technical and financial co-operation in the achievement of ADEREE’s objectives
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Société d’Investissements Énergétiques (SIE)

SIE is a Moroccan investment fund created for developing and promoting renewable energy and energy efficiency in Morocco. The fund was created in 2010 with MAD1 billion of capital from the Energy Development Fund (FDE).

FDE was created to support the national energy strategy and strengthen Morocco’s energy independence. The FDE (which also finances renewable energy and energy efficiency projects) was also the recipient of US$1 billion in grants provided by the Kingdom of Saudi Arabia, the United Arab Emirates and the Hassan II Fund for Economic and Social Development.

SIE’s investment policy is to take a minority shareholding interest in companies with “viable and concrete projects whose feasibility has been proven.” These stakes are managed within an agreed upon formal partnership agreement where areas of responsibility and cash flow are clearly outlined. Each entry into a company is tied to a clear exit strategy.

In applying its investment policy SIE seeks for the diversification of funds invested within each renewable sector and revenues from its investments will be channelled into new renewable energy projects.

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Conclusion

Morocco has far reaching ambitions for the renewable energy sector. With domestic demand for power rising steadily and power generation fuelled by imported fossil fuels, investment in developing energy from renewable sources is critical.

The Kingdom has achieved significant progress and has taken important steps to reforming the policy and regulatory framework, and boasts one of the most de-regulated electricity sectors in the MENA region. However, a number of barriers to the development of renewables remain to be addressed:

  • Grid issues - There are issues with integrating renewable power on to the transmission grid system. Such issues may be successfully addressed by investment to reinforce the transmission grid. However, as SIE has noted: “difficulties of maintaining a stable network over short periods of low voltage remain an obstacle.” An example of the latter is Safi IPP which entails the development of 800MW coal-fired power plant expansion. Another way to overcome the problem of the integration of renewable power to the transmission grid, is to support access to gas through the construction of an LNG  terminal to support the construction of combined cycle gas turbine (CCGT) plant, as in the case of the impending LNG project to be located near Jorf in Morocco.
  • Lack of feed-in tariffs - A feed-in tariff or a simplified tender process could be considered to accelerate power development in Morocco. The existing ONE IMs tender process is a long and costly process for bidders which sometimes end with no project.
  • Statutory framework and institutional infrastructure - historically weakness in both areas has impeded the development of renewable energy sources and the enhancement of energy efficiency. However, as can be seen from this briefing great strides have been made with, for example, the establishment of dedicated agencies such as MASEN and ADEREE and the passing of The Renewable Energy Law 13-09.

Furthermore, within the context of enhancing Morocco’s renewable energy framework and addressing these historical issues, The European Bank for Reconstruction and Development (the EBRD), as part of its Sustainable Development Initiative, is considering the development of market-based financing mechanisms for energy efficiency and renewable energy projects in Morocco. These may take the form of:

  • dedicated energy efficiency and renewable credit lines that provide funds to local financial institutions for on-lending for investments in energy efficiency and/or renewable energy projects
  • direct lending facility under which lending to medium sized projects can be facilitated
  • involvement of Energy Service Companies in energy efficiency projects
  • direct financing of energy efficiency and renewable energy projects in larger companies or as a standalone project8

Nevertheless, in comparison with other jurisdictions in the MENA region Morocco has achieved significant progress towards developing a viable framework for the development of renewables. This is further demonstrated by investors’ appetite for recent tenders launched by MASEN in the solar sector and ONE in the wind power sector. This is highlighted in a recent statement by Said Mouline Director of ADEREE who said that by “offering a more cohesive energy production effort in Maghreb, the area could have more say about funding, revenue sharing and sustainability. By developing green energy, Morocco is creating economic and social solutions for Europe in the future.”

Norton Rose Group, led by partners Anne Lapierre, Alain Malek and Simon Currie is currently assisting MASEN in connection with Phase I of the Ouarzazate program.

In October 2010 we issued a briefing titled “Moroccan plan for solar energy - MASEN 500MW Phase One Solar Power Complex at Ouarzazate”. The briefing highlighted selected issues arising out of the RFP process for the Ouarzazat programme and the issues which bidders and lenders may face in connection with the financing of these projects.


Footnotes
  1. (Platts/UDI 2010)
  2. ONE - Morocco’s Office National de l’Electricité
  3. Case Study PROMASOL: Democratizing Access to Solar-Water Heaters United Nations Development Program 2011
  4. Source: The European Neighbourhood and Partnership Instrument (ENPI): Paving the Way for the Mediterranean Solar Plan - Country Report Morocco
  5. Source: The European Neighbourhood and Partnership Instrument (ENPI): Paving the Way for the Mediterranean Solar Plan - Country Report Morocco
  6. VHV - Very High Voltage; HV - High Voltage; MV - Medium Voltage; and LV - Low Voltage
  7. In October 2010 Norton Rose produced the briefing: “Moroccan Solar Plan for Energy” which amongst other things, highlighted selected issues arising out of the RfP process for the Ouarzazate Programme and issues which bidders and lenders may face in connection with the financing of these projects.
  8. In November 2011 the EBRD appointed a consultant to prepare a Market Demand Study to assess the sustainable energy investment potential in Morocco and provide information to guide the EBRD through the design and launch of a successful financing mechanism for energy efficiency and renewable energy sources.
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