The Sun Heats-up Morocco’s Economy
By Radia Lahlou
Morocco’s economic fortunes have long been tied to the sky’s bounty: sunshine and rain. Indeed, the agricultural sector represents about 15%[i] of the country’s GDP, almost four times the global average[ii]. Now Morocco’s sun also provides another form of wealth: solar energy.
The construction of solar plants has boosted the local economy by providing jobs and creating demand for components made in Morocco, with many recent projects exceeding the minimum 30% local content requirement. In addition, solar energy is contributing to Morocco’s prosperity by allowing savings on energy imports and reducing the balance of payments’ sensitivity to fossil fuel prices.
Reducing dependency on energy imports
Morocco is a net energy importer, sourcing about 95 % of its primary energy needs from abroad. Its balance of payments is therefore highly sensitive to oil prices, as displayed in figure 1.
Figure 1: Morocco’s Current Account and Energy Trade Deficits – Sensitivity to Oil Prices (Source: Moody’s, 2016)
Fossil fuels still dominate Morocco’s power generation mix, despite a significant share of hydroelectricity, as illustrated in figure 2. In 2009, the government set national targets to increase the share of renewable energy to 42% of installed capacity by 2020, which in 2016, was increased to 52 % by 2030. Alongside fossil energy subsidy reform, launched in 2012, increasing the share of renewables in the energy mix will further mitigate the country’s balance of payments’ sensitivity to fossil fuel prices.
Figure 2: Energy mix in Morocco – Installed capacity by 2015 (Source: Export.gov, 2017)
According to a 2016 study by rating agency Moody’s[iii], the CSP part of Noor Ouarzazate complex (510 MW CSP, 72 MW PV) alone can contribute to annual energy import savings of up to 0.3 % to 0.5 % of GDP. In this study, Moody’s used the price of a barrel of oil to simplify the conversion of Tons of Oil Equivalent (TOE) savings into US dollars. The complex’s 510 MW CSP plants with storage will eventually save 1 million tons of oil equivalent (TOE) annually. At $ 96 per oil barrel, this would yield annual savings of around 0.5% of Morocco’s GDP. Such high oil prices were last seen in 2014 and are expected to return in the near future[iv].
On track for the target of 2000 MW of solar by 2020, the Moroccan Agency for Sustainable Energy (Masen) announced that the Noor Ouarzazate complex is expected to be fully operational by end of June 2018. At the same time, Masen is reviewing tenders for the first phase of the Noor Midelt complex, comprising two hybrid CSP/PV plants of 400 MW each, to be awarded by end of 2018. Extrapolating these numbers to the total 2000 MW solar installed capacity planned for 2020, the corresponding savings on fuel imports would reach 1.86 % of the GDP in 2021.
Net energy importers across the region, including Tunisia, Jordan and, to a certain extent, gas-producing Egypt could also reap similar benefits by installing CSP and PV. It remains to be seen whether fuels savings, in addition to the rapid drop in solar prices, will be enough to trigger a rush of new solar projects across the region.
[i] The Global Economy http://www.theglobaleconomy.com/Morocco/Share_of_agriculture/ (Last accessed Feb 23, 2018)
[ii] The World Bank Data https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS (Last accessed Feb 23, 2018)
[iii] Moody’s investor service [Paywall], Government of Morocco- World Largest Solar Power Complex reduces Dependence on Energy Imports– 11 February 2016 (Last accessed Feb 23, 2018)
[iv] IEA 2018 annual energy outlook https://www.eia.gov/outlooks/aeo/data/browser/#/?id=12-AEO2018&cases=ref2018&sourcekey=0 (Last accessed Feb 23, 2018)