Rabat targets independent energy

19 October 2009

Morocco is exploring the use of its oil shale and renewable energy sources to meet rising demand for electricity as its reliance on imports leaves it vulnerable to price fluctuations

Morocco’s recent call for expressions of interest in developing an oil shale-fired power plant is another important step forward in the country’s efforts to exploit its domestic energy resources and diversify its electricity generation. With no oil or gas reserves of its own, the country is almost completely dependent on imports of fossil fuels and electricity to meet its power requirements.

In 2008, electricity consumption totalled 24,000GWh. About 47 per cent of this was produced using coal, 17 per cent using fuel oil, 12 per cent using natural gas, while renewable energy contributed 7 per cent. Almost 18 per cent of Morocco’s electricity demand in 2008 was met through imports from Spain.

This reliance on imported sources of either fuel or electricity for more than 90 per cent of its power makes Morocco vulnerable to fluctuations in energy prices.

The country’s main power provider, Office National de l’Electricite (One), says the costs of its fuel and electricity purchases in 2007 totalled $1.4bn. One’s 2008 financial results have yet to be made public but, given the spike in oil prices last year, to $147 a barrel in July, the figure is likely to be higher.

Coal imports

As a result, Morocco aims to develop its own independent energy resources to improve security of supply, shield itself from price rises, and meet rapidly growing demand for electricity.

Over the past decade, the country has gradually shifted away from using fuel oil in its power plants and increasing the contribution of coal to its energy mix in reaction to rising oil prices. In 1993, coal-generated power met just 14 per cent of the country’s primary energy demand.

Coal, imported from the US, South Africa, Colombia and Poland, remains at the heart of a national energy strategy announced by the Moroccan Energy, Mines, Water & Environment Ministry in March. But the strategy also commits to developing the country’s renewable-energy portfolio, as well as examining the potential for using oil shale for the production of hydrocarbons and electricity.

Under a pilot project, a 100MW oil shale-fired plant will be located in Tarfaya in the southwest of the country. Rabat called for expressions of interest in the project in August. It will be built as an independent power project (IPP) and the successful bidder will develop, finance, construct, commission, operate and maintain the plant. One will buy the electricity produced by the facility under a 30-year power-purchase agreement. The project company will also mine for oil shale.

Morocco has explored two main oil shale deposits in Tarfaya and Timahdit in the north of the country. Other potential sites have been identified and known deposits are estimated to contain 50 billion barrels of oil. Power consumption in Morocco has been rising by 7.5 per cent a year since 2003, boosted by the country’s economic growth, and demand is expected to continue increasing at this rate until at least 2015.

A rural electrification programme launched in 1995 has also contributed significantly to this growth, with coverage in the target areas rising from 18 per cent in 1995 to about 95 per cent at the end of 2008. According to the World Bank, peak power demand is forecast to rise to 8,000MW in 2015. In 2007, peak power demand was 3,980MW.

A lack of investment in new capacity over the past decade has eroded the country’s reserve margin and left Morocco dependent on Spain to bridge its electricity generation gap during peak times.

Added capacity

The total installed capacity is about 5,300MW, but a large proportion of the country’s 1,700MW hydropower production facilities are understood to be ineffective, due either to water shortages or to silted-up reservoirs.

To meet demand for electricity, One says it will need to add 500-600MW of new capacity each year for the next 10 years.

In its July representation to the Energy, Mines, Water & Environment Ministry, the utility said it would invest $5bn over the five years to 2013 in power generation, transmission and distribution projects. This figure excludes the cost of its planned IPPs.

In total, One says, 5,800MW of generation capacity is due to come on stream by 2015, with the largest increments in capacity coming from the 660MW extension of the 1,350MW coal-fired Jorf Lasfar IPP and the construction of a new coal-fired facility at Safi on the Atlantic coast, which will add 2,640MW over four stages. In line with the national energy strategy, One aims to meet 20 per cent of the country’s electricity needs through renewable energy by 2012.

Part of this target is intended to be met through the 200-300MW Tarfaya wind farm project, which is slated to begin operating in 2011. Studies have shown that wind power offers the greatest potential for renewable energy in Morocco. Nonetheless, the country is also pursuing opportunities for solar power and the 450MW gas-fired, combined-cycle power plant currently under construction at Ain Beni Mathar will have 20MW of solar capacity.

The Ain Beni Mathar plant will consume the remaining gas available to Morocco from Algeria’s Maghreb-Europe pipeline, which passes through the country on its way to Spain. But a project by Societe Anonyme Marocaine de l’Industrie de Raffinage to build a liquefied natural gas receiving terminal is in the early planning phase. In time, this will enable Morocco to access gas from other markets.

Tendering delays

Despite One’s plans, there are concerns in the industry that delays getting new projects off the ground will cause the supply-demand gap to worsen in the near term.

“There have been some political machinations over the Safi site, which have held up that tender, and there seem to be bureaucratic delays in pushing through the Tafaya project,” says one power industry executive. “They don’t seem to have a structure that lends itself to timely decision-making and progress.”

The bid deadline for the Safi plant was delayed until the end of October following changes to the scope of the project and One’s decision to move the site of the proposed plant by 7 kilometres, after failing to get approval for the first site selected.

Under the original plans, the utility was to be responsible for providing the coal feedstock and building the coal-handling terminal at Safi Port. But it has since decided to make the winning developer responsible for the construction of a coal jetty and the long-term coal supply.

The Tarfaya wind project has been on the table for about two years. In August 2007, 16 companies were prequalified for the scheme, but a request for proposals was not issued until February 2008. Two bid teams responded, but commercial bids have yet to be opened.

One is also putting its faith in private entities to contribute 850MW of wind capacity to meet its 2012 renewable-energy target under its self-generation programme, Energipro.

To facilitate this contribution, legislation was amended in June 2008, raising the private power production limits from 10MW to 50MW. A new renewable-energy law that is expected to further liberalise the sector is currently passing through parliament.

Rabat hopes that industrial users will follow the example of France’s Lafarge Cement, which in 2005 opened a 10MW wind farm in Tetouan, northern Morocco, satisfying 40 per cent of its factory’s power requirements. The firm intends to add another 22MW of wind capacity in the coming years. 

“Electricity demand in Morocco is too close to the supply limits for comfort,” says the executive. “If you lose any of the machines on the system, they either have to import large quantities from Spain or, if that is not an option, shut people off. So there are occasional demand-induced blackouts at the moment. And they have still got a few years of problems ahead of them.”

Morocco was one of the first countries in the Middle East to adopt the IPP model. Today, more than 56 per cent of the country’s total installed capacity is operated under a concession, but over the past five or six years, investments in new capacity have failed to keep pace with demand growth.

Talk of exploring the potential for innovative energy sources such as biomass and algae, in addition to wind and solar, is well-intentioned but will not bring the significant new generation capacity that Morocco needs. The same can be said of initiatives to investigate the potential for domestic reserves of oil shale, coal and phosphate-derived uranium for a possible nuclear programme.

Plans to install a third power link to Spain to facilitate greater exchanges of energy through buying in power is a costly way to meet demand and one that Morocco can ill-afford. What Morocco needs above all is to bring significant new and reliable generation capacity on stream as soon as possible, and to strengthen its transmission and distribution networks.

For that to happen, the various authorities in charge of the energy sector need to pull together and remove the obstacles that are preventing projects from moving ahead.

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