Power policy

Heavily dependent on fossil-fuel imports for its energy needs, Morocco set ambitious targets for 42% of its generating capacity to be renewable by 2020, and 52% by 2030. At the time these goals were announced in 2009, Morocco had only 280 megawatts (MW) of wind capacity. By the end of 2021, the country’s renewable capacity had grown to 1,460MW of wind and 966MW of solar, falling short of the 2 gigawatts (GW) each needed to reach the target.

Still, there is enough capacity in the pipeline for Morocco to meet its ambition if all these projects are commissioned in the coming years. Seen as key to securing energy independence and reducing expensive fuel imports, the renewables 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’Electricite 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 country’s 5% growth rate in electricity 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 the evening peak justified a PPA for the Noor I solar thermal project of $18 per kilowatt-hour in 2013, which includes five hours of storage.

Since 2013, a maturing domestic industry, technological advances and hybrid-plant design with PV have driven down costs. In 2018, the tender for the latest solar thermal hybrid project was won at only $70 per megawatt-hour (MWh). However, the future of this project remains uncertain as ONEE has still not signed the required PPA. Lower demand growth due to the pandemic and a legal investigation of the head of the country’s renewable energy agency, known as Masen, mean this situation may not be resolved in the short term. In 2016, the PPA for 850MW of wind projects awarded to a consortium comprising Enel, Siemens and Nareva set a world record price of $30/MWh on average.

Power market

Coal is the largest sector in Morocco’s power mix, with the latest published figures indicating is accounted for 38% of capacity and more than 68% of generation as of 2019. The coal sector has added more than 2.4GW of capacity since 2011, with 1.3GW added in 2018 alone.

In the context of total capacity growth of 35%, renewables capacity has remained constant at around 34% of the power system for the last five years. The share of wind and solar capacity has more than tripled from 5% to 18% since 2011, and additions of a further 2GW of renewable capacity in the coming years will push this to the 2020 target of 42%. Estimates of the country’s total wind-resource potential are as high as 25GW.

Recent years have been poor for hydroelectric generation. Total renewables generation has been flat at around 16% of the total, although grew to 20% in 2019. This has hidden underlying growth in solar and wind generation from only 3% in 2010 to 16% in 2019.

Moroccan state utility ONEE still holds a monopoly over the country’s transmission network and is involved in all sales of electricity. ONEE also accounts for around a third of total generation, and more than half of the distribution and retail sectors of the power market.

The law that provides the framework for renewables projects only permits the sale of electricity over the medium- and high-voltage networks. In 2015, the publication of Law 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, this act has not yet been implemented and therefore any sale of electricity back to the grid by small enterprises or private individuals is not possible. This obstacle is intended to be removed in the short to medium term.

Morocco’s electricity demand has grown at an average rate of 3.9% since 2010, slightly outpacing average economic growth of 2.9%. 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 ONEE connecting more than 99% of the rural population to the grid by 2014.

Doing business and barriers

Morocco’s political stability and business-friendly legal frameworks, combined with its excellent solar and wind resources, have made for an attractive outlook for renewables development. Indeed, Siemens Gamesa opened Africa’s first wind turbine blade factory in Morocco in 2017. Located in a 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 also opening up export markets in Africa.

The Moroccan renewable energy agency, Masen, has been instrumental in reducing both barriers and risk in renewables investment in the country. Masen has borne foreign exchange 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 country’s Economic, Social and Environmental Council published in 2020 has undermined confidence in the renewable energy agency and resulted in a legal investigation of its chief executive officer. The report makes a strong case that Masen could have acquired cheaper energy by investing in PV and foregoing the more expensive solar thermal technology chosen for the Noor Ouarzazate projects. While likely to signal a pivot towards PV projects in 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 the fact that growth in Moroccan coal generation outpaced that of renewables by a factor of 2.5 to 1 from 2009-2019. 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

While Morocco has lowered import tax and removed some circulation taxes for electric vehicles, the government has yet to implement any substantive policy support in this sector. The country’s EV market remains at an early stage, with hybrid vehicles currently accounting for less than 1% of new vehicle sales. In 2021, Morocco installed the first Tesla supercharger in Africa.

EV policy

The government has yet to implement any substantive policy support in this sector.

Buildings market

Morocco passed a decree in 2015 making the implementation of a thermal regulation code mandatory for all new building construction. However, the country does not have an energy efficiency plan. There is little need for heating outside of Morocco’s mountainous regions, and air-conditioner use and hot water heating dominate energy-use in buildings.

Buildings policy

The government has yet to implement any substantive policy support in this sector.