The rise in international energy prices over the past two years has been hard for Morocco. In 2011, the country imported 95 per cent of its energy needs at a total cost of MD89.84bn ($10.1bn), and an increase of 31.2 per cent over 2010, according to state oil and gas company Office National des Hydrocarbures et des Mines (ONHYM).

To make life bearable for the country’s poorest people, Rabat has long subsidised energy, but with oil above $100 a barrel for much of 2011, these subsidies came to account for 20 per cent of total government spending and 6 per cent of gross domestic product. In late 2011, the Moroccan Energy Ministry forecast that sustained high oil prices could dent state coffers by $5bn in 2012, an unsustainable price for a government struggling to cope with mounting debt and falling foreign currency reserves.

Increasing energy demand in Morocco

As is often the case, Morocco’s fuel subsidies benefit the wealthiest Moroccans far more than the poorest. In June, the country’s new coalition government led by Abdelilah Benkirane opted to cut the subsidy. The price of unleaded petrol went up by MD2 a litre, about 20 per cent – the biggest increase in the better part of a decade.

The fuel subsidy is not Morocco’s only energy problem. Electricity demand grew at 6-8 per cent a year during the 2000s, while about 86,000 households are simply not connected to the national grid, meaning they depend on oil- or gas-fuelled generators for electricity, or cope using traditional forms of energy, such as wood-burning stoves for cooking and oil lanterns for lighting. The energy and mines ministry expects demand for energy to double by 2020 and to triple by 2030.

[Morocco] is one of the most promising places in north Africa [for renewable energy], if not the world

Jan Pieter Cools-Wildiers, Siemens

The Benkirane administration is hoping a series of investments, including hydropower, wind and solar energy projects, and oil and gas shale developments, will prove successful in the coming years. Top of the government’s list of priorities are several renewable energy projects that promise to yield results quickly and relatively cheaply. State utility Office National de l’Electricite (ONE) hopes to build new wind farms capable of generating 1,720MW of electricity by 2020, bringing total wind power capacity up to 2,000MW.

ONE also wants to build 2,000MW of solar plants by 2020 and to bring total hydropower capacity up to 2,000MW in the same period. The aim is that renewables capacity will total 6,000MW by the end of the decade.

If all the renewable energy projects, including private-sector initiatives, currently being planned go ahead, the final capacity could be in excess of this figure. Combined, the projects involved may cost up to $15bn.

Morocco developming energy autonomy

Morocco could go from being a net importer of fossil fuels to an exporter of clean, renewable energy, says Dan Storey of Germany’s Desertec Foundation. The company is involved in the solar aspect of a plan to build a huge regional network of renewable energy schemes in North Africa to provide energy to Europe.

“The country has recognised that the transition to renewables will bring major advantages for its energy independence and economic development,” Storey says. “Its energy strategy identifies the integration of Morocco into regional energy markets as one of its aims. With transmission links to Spain and Algeria already in place, Morocco will play a leading role.”

Germany’s Siemens is working on wind power projects in the country. “The potential for renewables is the biggest in Africa,” says Jan Pieter Cools-Wildiers, renewables business development manager for Morocco at the firm.

“[Morocco] is one of the most promising places in North Africa [for renewable energy], if not the world. For the vast majority of its energy resources, Morocco relies on imports of fossil resources and imports of electricity in certain peak periods from Spain, so it has tremendous interest in developing its energy autonomy.”

The wind and hydro elements of ONE’s plans are the most advanced and look like being the first to bear fruit. In early 2012, the country had an estimated 284MW of installed wind power capacity and 1,205MW of hydroelectric power plants, compared with total installed solar capacity of about 20MW.

The advantage of wind schemes in Morocco, says Cools-Wilders, is the energy they produce is cheap, with wind speeds along the Atlantic coast averaging about 8.5 metres a second. “Due to the quality of the wind sites, Morocco doesn’t have to subsidise its renewables, as in the rest of the world. ONE sells the wind energy at the same tariff as it buys energy here from combined-cycle power plants,” he says.

Firms such as Siemens, which is working on a private 100MW wind power scheme at Haouma and Foum el-Oued, and a 300MW project for ONE at Tarfaya, are also attracted by the regulatory regime in Morocco – the most advanced in the region.

Developers in the country can produce energy and choose to sell it on to clients at privately agreed prices. ONE is also developing most of its wind and solar schemes under a public-private partnership model, using build-own-operate contracts on most schemes. It is also helping to arrange finance for many projects through state funding and international institutions, such as the African Development Bank, which has pledged almost $500m for renewables schemes in Morocco.

Morocco’s renewables exports

Despite this kind of help, solar projects and plans to export energy are taking a little longer to get off the ground. 

“The ambitions for growing a solar industry are somehow taking more time to materialise,” says Cools-Wilders. “ONE has said that by 2020 it wants 14 per cent of its energy needs to come from wind, hydro and solar. With wind, this is highly likely, hydro is already there, but solar is the biggest challenge. [ONE] must realise that the capital expenditure of putting a megawatt of solar in is at least 3-5 times higher on average than putting wind capacity in.”

Desertec Industrial Initiative (Dii) is a Munich-headquartered consortium of private-sector firms set up to work on major renewables projects as part of the Desertec Foundation. It plans to export renewable energy from Africa to Europe. In May, the consortium signed a memorandum of understanding (MoU) with state-run Moroccan Agency for Solar Energy (Masen) to build 500MW of solar power plants at a cost of $2.5bn.

The first project is meant to be a 150MW concentrated solar power (CSP)plant in the north of the country. The partners behind Dii have committed about $250m towards the scheme, which is projected to cost $750m. Masen is understood to have offered a similar level of equity. Despite its prohibitive cost, financing the scheme is not a problem, the issue is getting European clients to buy the electricity it produces. Dii and ONE plan to export electricity from the scheme to Europe, but there renewable energy is subsidised. Paul Von Son, Dii’s chief executive officer, says the firm has yet to find a European government willing to import costly renewable energy.

“We always knew it would not be easy these days to get government support for the projects,” he says. “CSP and solar thermal is the most expensive because it is the newest technology. But the starting point is very costly and so we need government support. And it is not easy to get government money for renewables projects these days.”

Energy industry officials say European countries are not keen to subsidise renewable energy produced overseas, especially given the current state of their own finances and economies. Dii is likely to look at other schemes that offer a better return on investment, including wind. “The 150MW is for re-export to Europe. But we are not limited to that – we are focused on wind and photovoltaic, where technology is relatively low cost,” says Von Son.

In the meantime, Masen is forging ahead with its own schemes. Firms bidding on a deal to finance, build and operate a 160MW solar plant as an independent power project (IPP) at Ouarzazate expect Masen to award the contract before the end of 2012. Although the deal will be an IPP, Masen is already committed to providing 100 per cent of the debt required to finance the scheme, with help from international financial institutions such as the World Bank.

“Ouarzazate will be the real test case for the industry,” says an engineering executive based in Morocco. “All the Desertec stuff will take a lot longer, but this has full state and international backing and is for the local market.”

Morocco’s fuel potential

Rabat is not just focused on renewable energy, it still holds high hopes for the country’s potential as a producer of fossil fuels. By December 2011, it had issued 54 onshore and 61 offshore oil and gas exploration licences across 447,448 square kilometres. Industry executives say they do not hold much hope for the prospect of a major discovery, however.

Meanwhile, in 2011 ONHYM helped push through new legislation and a new regulatory framework to help support the production of shale oil and gas. It has signed a MoU with Estonia’s Eesti Energia to explore the potential of shale oil production in Tangier, Ouarzazate, Errachida, Agadir and Agbala. The state energy firm is working on another MoU, with ONE, to set up a pilot oil shale power plant in Tarfaya. Last year, it signed an agreement with state phosphates miner Office Cherifien Phosphate (OCP) to explore for oil shale in three areas where it is already working.

OCP could also be key to another plan – to build a nuclear power plant in Morocco by the end of the decade. Along with phosphates, Morocco is rich in uranium, which is often associated with phosphates. In 2007, OCP signed a deal with France’s Areva to produce uranium from phosphates in Morocco.

Some of the uranium could fuel a new nuclear power plant at Sidi Boulbra. The site was approved as safe for a reactor by the International Atomic Energy Association in 2005. As recently as 2010, Rabat said it planned to build a 1,000MW nuclear facility by 2022-24. However, discussions of the plans have since been muted, although nuclear energy is due to make up as much as a quarter of all energy supply by 2020.

Given the disaster in Japan last year and the rising cost of installing new nuclear capacity, officials in Rabat believe the scheme is unlikely to move forward in the near future. For the time being, Morocco’s attempts to ease its reliance on fuel imports will rely heavily on the winds of the Atlantic.