Due to its advantageous geographic location and
relatively low labour costs, Morocco has built close ties with Europe, its main
trading partner.
Since 1993, a privatisation policy has been implemented
in certain sectors, including electricity. Morocco began to privatise
state-owned firms before most other Arab and African states. In critical
sectors, such as electricity, the government’s strategy has been to enforce
public-private partnerships. Economic policies pursued since 2003 have brought
macroeconomic stability with generally low inflation, improved financial
performance, and steady progress in developing the service and industrial
sectors. Yet poverty and unemployment rates remain relatively high.
The robust growth in electricity demand has underlined
the need for a significant expansion in future power generation, and
transmission capacity, in Morocco. This is creating considerable investment
opportunities for private sector participation. Surging demand, and a strong
need to reduce dependence on expensive coal and oil imports, have also
motivated the recent development of the renewable energy sector.
Unlike some of its neighbours such as Egypt and Libya,
the Arab Spring protests did not have a major impact on Moroccan economy.
However, a sluggish economic growth in Europe brought some challenges in 2011,
which could continue in 2012. But, while pursuing ambitious structural reforms,
the country has succeeded in weathering a difficult global economic
environment, with GDP growth expected to reach 4.5-5.0 per cent in 2011 and
2012.
Overview of the Moroccan Electricity Industry
Morocco’s electricity sector has traditionally been
controlled by the state-owned and vertically-integrated Office National de
l’Electricité (ONE), which the government reorganised in 1995 in order to
regain profitability. A single buyer model is still being applied with the ONE
buying all power produced in the country through Power Purchase Agreements
(PPAs). The power utility also assumes a regulatory and supervisory role.
Due to the growing population and economic development,
Morocco’s electricity demand is increasing rapidly. Electricity demand reached
26,531 GWh in 2010, meeting the needs of a population of about 32 million
inhabitants. During the 1990s, power shortages and a desire to control public
spending led the Moroccan Government to make more use of the private sector
resources in order to meet the country’s power needs. Today, there is a clear
trend towards increased involvement of the private sector, namely, in power
generation and distribution, but also in regulation and supervision.
Consequently, restructuring and progressive liberalisation is slowly taking
place. Also, there is an urgent need for setting up an independent regulatory
body in order to raise transparency and avoid conflicts of interest with the
ONE.
Electricity in Morocco is mainly generated from fossil
fuels and, more particularly, from oil and coal. Due to a shortage of domestic
resources, Morocco imports about 96 per cent of its energy feedstock
requirements, exposing the country to volatile (and currently very expensive)
oil prices. This constitutes a heavy burden on the state’s budget as the
government is subsidising fuel prices.
A successful rural electrification programme was
implemented between 1996 and 2008. The degree of electrification in rural areas
reached 96.8 per cent in 2010, ahead of expectations. However, Morocco remains
characterised by low electricity consumption per capita (744 kWh in 2010)
compared to neighbouring countries, which means that its electricity sector remains
in a rapid growth development phase.
Substantial investments are planned over the next ten
years, in order to follow steady demand growth and eventually meet the export
potential of green power to Europe. However, this objective will not materialise
in the short-term as it still needs to overcome political, technical, and
financial obstacles.
While the government’s plans are ambitious, it has
struggled to meet targets in the past. For instance, the reserve margin
decreased to worrying levels in 2007 and 2008, due to significant delays in
completing new generation facilities. Nevertheless, the commissioning of new
facilities in 2009 and 2010, combined with an expansion of the transit capacity
between Morocco and Spain (inducing an increase of electricity imports from
Spain), has helped resolve the situation. Indeed, the National Plan of Priority
Actions launched in 2008, encompassing the building of new generation capacity
and the implementation of energy efficiency measures, created balance between electricity
demand and supply from 2009 onwards.
Private Sector Participation
Since 1994, power plants can be built and operated by
private companies, subject to open tendering and upon satisfaction of
production requirements from the ONE. Besides power generation, the private
sector is also involved in power distribution (three private concessions).
Independent Power Producers (IPPs), from a total of
three, provided a significant share (54.1 per cent) of total Moroccan
electricity production in 2010, a trend that will further increase in the next
ten years in order to fill the gap between electricity demand and supply. Yet,
the degree of involvement will be tributary to a well-defined and favourable
legislative framework combined with acceptable financial incentives.
This is the reason why the upcoming law on the
restructuring of the sector (separating generation, transmission and
distribution activities, and establishing an independent regulatory body), and
the progressive sector’s liberalisation, should enhance transparency and
promote further private sector participation.
The largest electricity generation facility in Morocco is
currently owned by an IPP, namely, Jorf Lasfar Energy Company. It consists of a
1,320 MW coal-fired power plant, currently being expanded by another 700 MW
(expected commissioning in 2013).
Renewable Energy Potential
In an attempt to develop all energy resources available
in the country, and to reduce its dependence on expensive imported fossil
fuels, the Moroccan Government has decided to launch an ambitious wind and
solar power programme. This renewable energy programme aims to build 4,000 MW
of additional generation capacity by 2020 (2,000 MW of wind and 2,000 MW of
solar) thanks to public-private partnerships. As a result, renewable energy
(wind, solar, and hydro) should account for 18% of the installed capacity by
2012 and 42% by 2020.
Potential for large-scale renewable energy generation
facilities is significant, but will depend on interest from private investors,
the ability to raise funding, and the strength of the legislative framework.
Between 2009 and 2011, new legislation has been enacted to promote renewable
energy and energy efficiency (laws n° 13-09 and 47-09). Law n° 13-09 allows
power producers using renewable sources to sell their electricity directly to
customers connected to the EHV-HV-MV grid, progressively bringing an end to the
ONE’s single buyer model. Production of renewable energy is consequently open
to competition and producers get access to the national electricity grid. The
law also allows the export of power from renewable sources, which is a stepping
stone for the implementation of projects like Desertec.
Total estimated cost of the Solar Power Plan is $9
billion, with commissioning of solar power plants taking place between 2015 and
2019. The first project (500 MW) will be located in Ouarzazate and will also
make part of the Desertec initiative. The first pre-qualification bids have
been submitted for phase I including a 160 MW concentrated solar power plant. A
club of development banks will provide debt financing (World Bank, EIB, AfDB,
AFD, and KfW). The location of the other four projects is in Ain Beni Mathar,
Tarfaya, Laayoune, and Boujdour. The only project implemented to date is the
472 MW Integrated Solar Combined Cycle power plant in Ain Beni Mathar, with a
solar component of 20 MW.
Total estimated cost of the Wind Power Plan is $3.75
billion. To date, 280 MW of wind capacity has already been installed and
represented 2.9 per cent of 2010 total production. The plan includes other
projects to be located in Tarfaya, Laayoune, and Tetouan, and it also includes
the 1,000 MW Initiative with wind farms to be located in Taza, Essaouira,
Midelt, Tangier, Laayoune, and Boujdour. Taza (150 MW) falls under phase I
(currently in final selection stage) whereas the other wind farms (850 MW) fall
under phase II for which the pre-qualification bid tendering process closed in
April 2012. The same turbine supplier shall supply the turbines for phase II
(850 MW), which constitutes a major capital investment opportunity.
Two dedicated agencies have been created, with an aim of
fostering the development of renewable energies and energy efficiency measures,
namely, the Agency for Development of Renewable Energy and Energy Efficiency
(ADEREE) and the Moroccan Agency for Solar Energy (MASEN). MASEN will also be
responsible for directly concluding and managing PPAs with solar project
companies. Morocco’s desire is also to create a local renewable energy
industry, develop research, and at the same time create new job opportunities
in this field.
Despite the ambitious plan to develop renewable energy,
coal is expected to remain the main energy source in 2020 (27 per cent of the
energy mix). Nuclear power, currently undergoing a feasibility study, might be
part of the energy mix by 2022-2025.
Forecasts and Trends
The Moroccan electricity industry has been growing
steadily at nearly 6-8 per cent annually in the last ten years, following
vigorous economic development and the implementation of a very successful rural
electrification programme. This trend is expected to continue at about 5-7 per
cent for the next ten years, following GDP growth forecasts of about 5.5 per
cent.
The country has embarked on a very ambitious electricity
generation capacity-build programme, in order to raise installed capacity from
6,350 MW in 2010 to 14,500 MW by 2020, as electricity consumption is expected
to almost double in the corresponding period. Many energy efficiency measures
are also being implemented in order to rationalise demand.
Revenues from electricity sales amounted to $2.2 billion
(MAD 18.4 billion) in 2010. These revenues are expected to more than double by
2020 to about $4.9 billion (MAD 41.3 billion). On the other hand, investments
will reach an estimated $16.4 billion (MAD 138 billion) in new generation
infrastructure (2012-2020) and $2.5 billion (MAD 21.3 billion) in network
expansion (2011-2015).
Regional integration with neighbouring countries (Spain
and the Maghreb via Algeria) will also further secure the country’s power
supply, and at the same time fulfilling Morocco’s aspiration to become the
power crossroad between Africa and Europe. However, it will depend on financing
and political will from Northern African governments to align and harmonise
their legislation between themselves, and also with Europe.
Conclusions
Various initiatives, like the Mediterranean Solar Plan,
Desertec, and Transgreen (Medgrid), are being evaluated to boost the production
of green power in the MENA region to meet a growing local demand, and also to
export green power to Europe. Yet financing costs and political risks still
remain an issue. Morocco aims to play a key role in supplying green power to
Europe, facilitated by its existing 400 kV double circuit transmission line
with Spain (a third line could be built to expand power transmission capacity).
The first solar project, also part of the Desertec initiative, is expected to
be commissioned by 2015 in Ouarzazate. Renewable energy developments also meet
the strong need for Morocco to reduce its too high dependency on expensive
fossil fuel imports.
The private sector is expected to play a major role in
new capacity expansion, but a favourable legislative framework will need to be
put into place in order to ensure transparency and efficiency. The fact that
the Moroccan electricity industry still does not have an independent regulator
is a major impediment. Yet the government is making progress, as reflected with
the promulgation of the recent renewable energy law.
Also, regional integration within the Maghreb could take
a new turn with the set-up of new democratic governments following the Arab
Spring protests. Increased economic integration and hence power exchanges could
reinforce the region and position Northern African countries advantageously
towards Europe. But this process of change might take some time before bearing
any fruit.
Frost & Sullivan