Power policy

Heavily dependent on fossil-fuel imports for its energy needs, Morocco has ambitious targets of 42% of its generating capacity to be renewable by 2020, and 52% by 2030. At the time these targets were announced in 2009, Morocco had only 280 megawatts of wind capacity. By the end of 2020, renewable capacity had grown to 1,430 megawatts of wind and 1,059 megawatts of solar, falling short of the 2 gigawatts each needed to reach the target. There is enough capacity in the pipeline for Morocco to meet its target if all of these projects are commissioned in the coming years. Seen as key to securing energy independence, while reducing expensive fuel imports, the renewable sector has received strong state support.

Power prices and costs

Power prices in Morocco are subsidized by the state utility, the Office Nationale de l’Electricité et de l’Eau potable (ONEE), which does not pass on the full cost of generation to consumers and therefore operates at a loss. Government support of the energy sector is a strain on public finances but has been rationalized within a developmental context. Servicing the 5% growth rate in electrical demand and the acute evening peak remains a primary concern in securing new generating capacity. Much of this slack has been met with expensive diesel generators. The difficulty and expense in meeting evening peak demand has necessitated storage requirements for Moroccan solar tenders and electricity tariffs that are 40% higher during the evening for commercial and industrial clients. The high cost of meeting evening peak justified a PPA for the Noor I solar thermal project of $189/kWh 2013, which includes five hours of storage. Since 2013, a maturing domestic industry, technological advances and hybrid-plant design with solar have driven down costs. In 2018, the tender for the latest solar thermal (hybrid) project was won at only $70/MWh. However, the future of this project remains uncertain, as ONEE have not signed the required PPA. Lower demand growth due to the pandemic, and a legal investigation of the Masen CEO, mean that this situation may not be resolved in the short term. In 2016, the PPA for 850 megawatts of wind projects awarded to the Enel, Siemens, and Nareva consortium set a world record price of $30/MWh on average.

Power market

Coal is the largest sector in Morocco’s power mix, accounting for 38% of capacity and more than 68% of generation as of 2019. The coal sector has added more than 2.4 gigawatts of capacity since 2011 with 1.3 gigawatts added in 2018. In the context of total capacity growth of 35%, renewables capacity has remained constant at around 34% for the last five years. Wind and solar capacity has more than tripled from 5% to 18% since 2011, and additions of a further 2 gigawatts of renewable capacity in the coming years will push this to the 2020 target of 42%. Recent years have been poor for hydroelectric generation, and total renewables generation has been flat at around 16% but grew to 20% in 2019. This has hidden an underlying growth in solar and wind generation from only 3% in 2010 to 16% in 2019. The Moroccan state utility, ONEE, still holds a monopoly over the transmission network and is involved in all sales of electricity in Morocco. ONEE also accounts for around a third of total generation, and more than half of the distribution and retail sectors of the power market.

Morocco’s electricity demand has grown at an average rate of 5.1% since 2010, slightly outpacing average economic growth of 3.5%. Of particular importance to the energy sector, peak electrical demand has also grown at a similar rate to total demand. Morocco has had great success in the electrification of rural areas, with the ONEE connecting more than 99% of the Moroccan rural population to the grid by 2014. The law that provides the framework for renewables projects, law 13-09, only permits the sale of electricity over the medium- and high-voltage networks. In 2015, the publication of act 58-15 opened up the possibility of access to the low-voltage networks, seen as key to the growth of the small-scale PV sector. However, as of 2020, this act is not yet implemented and therefore any sale of electricity back to the grid by small enterprises or private individuals is not yet possible. This obstacle is intended to be removed in the short to medium term. Estimates of total wind-resource potential for Morocco are as high as 25 gigawatts.

Doing business and barriers

Morocco’s political stability and business-friendly legal frameworks have combined with its excellent solar and wind resources to fuel consistent speculation on its renewables ambitions. The local content requirement of the 850-megawatt wind tender awarded in 2016 was met, while also setting a world record low tariff. Completed in 2017, the Siemens-Gamesa blade factory in Morocco is the only facility of its kind in Africa. Located in free-export zone of the port-city of Tangier, it is envisioned that this factory will enable further cost reductions for local projects in Morocco, while opening up export markets in Africa. The Moroccan renewable energy agency, Masen, has been instrumental in reducing both barriers and risk in Moroccan renewables investment. Masen has borne forex risk, performed environmental studies and land preparation, issued green bonds, acted as an offtaker, and blended concessional finance to consolidate loans with debt profiles suited to both developers and Masen. All of these functions have contributed to the success of the projects to date and have helped streamline renewables investment in the country.

However, a highly critical report of Masen by the kingdom’s Economic, Social and Environmental Council published in 2020 has undermined confidence in Masen and resulted in a legal investigation of its CEO. The report makes a strong case that Masen could have acquired cheaper energy investing in PV and foregoing the more expensive solar thermal technology chosen for the Noor Ouarzazate projects. While likely to signal a pivot toward PV projects in the near future, the fallout from this report is not yet complete, with continued uncertainty around the future of the Noor-Midelt projects (solar thermal, battery, and PV hybrids). Looking forward, PV additions will contribute cheap daytime generation but will not help the grid meet its large evening demand peak. Highlighting this challenge is that form 2009-2019 growth in Moroccan coal generation has outpaced that of renewables by a factor of 2.5 to 1. In the absence of further investment in technologies that can generate in the evening (such as solar thermal), the boom in Morocco’s coal generation will continue.

EV market

Morocco’s electric vehicle (EV) market remains at an early stage, with hybrid vehicles currently less than 1% of new vehicle sales.

EV policy

Morocco has lowered import tax and removed some circulation taxes for EVs.

Buildings market

Morocco has little heating requirements outside of its mountainous regions, and air-conditioner use and hot water heating dominate energy use in buildings.

Buildings policy

Morocco passed a decree in 2015 making the implementation of a thermal regulation code mandatory for all new building construction.