IAI Working Papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI |Energy |Electricity between theAtlantic OceanandtheMediterranean Sea. systems byexploiting its strategic position at thecrossroads market into theregional andEuro-Mediterranean energy on existingpolicies aimedat integrating theMoroccan energy more thanhalf of thecountry’s primaryenergy. It also dwells which is responsible for the transformation or production of Moroccan energysystem with afocus on thepower sector, paper assessestheachievements andconstraints facing the with asustainable, competitive andsecureenergysector. This effective energytransition aimed at endowing thecountry Against this backdrop, Morocco is pursuing an ambitious, cost- local demandwhile keeping its import bill undercontrol. country isfacedwith thechallenging taskof meetingrising Morocco isthe largest energy importer in the region. The As theonly North African country with noown oil resources, Abstra by Tayeb Amegroud Achievements andPotential Morocco’s Power Sector Transition: Paper produced within theframework of the ct IAI-OCP Policy Center partnership keywords IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 2 C R entitled “Morocco’s seminar international at the * 1 kWh percapita isalmost threetimeshigher thantheworld average of 313kWh. than the1840kgoe world average, theMoroccan electricity consumption at 864 consumption percapita is540kilograms of oil equivalent (kgoe) or threetimesless per capita totheMoroccan consumption figures. While thecountry’s energy illustrated when comparing theworld average energyandelectricity consumption power sector. The importance of this sector in Morocco’s overall energy landscape is More thanhalf of thecountry’s primaryenergyistransformed or produced bythe its price-setting mechanismsareat thetop of thegovernment’s agenda. result, energyindependence,reform andcontinued liberalisation of thesector and prices have increased,putting particular pressureon thecountry’s finances. As a has proven tobeamajor problem asconsumption figures and global commodity task of meetingrisinglocal demandwhile keeping its import bill undercontrol. This largest energyimporter intheregion. Thecountry isfacedwith thechallenging As the only North African country with no natural oil resources, Morocco is the Introduction by Tayeb Amegroud* Achievements andPotential Morocco’s Power Sector Transition: Morocco’s Power Sector Transition: Achievements andPotential . September 2014. September reforms carried out over thelasttwo decades;(ii)summarisetheemerging trends a picture of theenergysector, describing theorganisation andtheimpact of opportunities and challenges ahead.More specifically thepaper will: (i)provide on thepower sector, inorder toidentify theachievements andthelong-term This review presents anoverview of theMoroccan energysystem,with afocus and investments in theelectricity sector. government developed anational energystrategy gearedtowards more reforms The role of thepower sector wasfurtheremphasised in2009when theMoroccan Paper produced within the framework of the IAI-O of the framework the within produced Paper Tayeb Amegroud is an energy consultant and O and consultant energy an is Tayeb Amegroud

ooperation” organised in R in organised ooperation” 2012 data from the International Energy Agency (IEA). Agency Energy International the from data 2012 abat on 26 September 2014. The first draft of the paper was written in written was paper the of draft first The 2014. September onabat 26 C ole in Fostering Euro-Mediterranean Energy Energy Euro-Mediterranean Fostering ole in P Policy C P Policy C P Policy C P Policy enter Fellow. enter partnership and presented presented and enter partnership 1

IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 3 C decades intheMoroccan energysupply. 1990. It isexpected that fossil fuels will remaindominant for at least thenextthree covering 60.7 percent of the country’s energy needs, compared to 76 percent in supply inMorocco, which reached17760ktoein2012(equivalent to206.55TWh). increase inenergydemandandhenceasustainedgrowth of primaryenergy R Morocco imports coal, usedfor power andindustry, andgasfor power from Algeria. 3 2 in 2012 of which 6.6 percent is directly related tothe cost of energy subsidies. finances and led toawidening of the Moroccan budget deficit toreach7.3percent high oil prices recorded in2011and2012wereparticularly damagingtopublic predominantly oil, puts aheavy burdenon government financesandbudgets. The and consumption of energy. Thecountry’s dependenceon imported fossil fuels, production, with theresult beinganacute imbalance betweendomestic production supply of oil, gasandcoal iseither negligible or suffers from high per-unit costs of Morocco dependson imports for mostof its energyneeds.Morocco’s domestic 1. Current energy context inMorocco considerations. effective energytransition, while taking into account security andenvironmental outline some potential areaswhere future developments will facilitate acost- efforts tomake themost of therecent transformations inthepower industry; (iv) (liberalisation, );(iii)identify some of themainchallenges facing Morocco’s Power Sector Transition: Achievements andPotential 5 4 electricite-one-support-project. http://documents.worldbank.org/curated/en/2008/05/9463432/morocco-office-national-de-l- produits pétroliers sur l’économie nationale sur pétroliers produits clés pour l’annéeclés 2012 gas. coal use mid-nineties and,more recently in2005,with theintroduction of natural Morocco hasdiversified its energymix over thelasttwenty years, firstbyincreasing 40 years, between1972and2012 (excluding electricity imports). It presents how Figure 2illustrates theincreaseof primaryenergysupply bytypeof fuel over seen inFigure 1. The shareof thevarious sources of thetotal primaryenergysupply in2012canbe on imports to satisfy its energy demand. Morocco isthelargestenergyimporter inNorth Africa andis96percent dependent

Idem. h apid economic growth prior to theglobal economic crisistriggered arapid World B Ministry of Energy, Mining, Water and Environment (MEMEE), S (MEMEE), Water Environment of and Energy, Mining, Ministry Haut- C leEnAnnuels.aspx. 5 Thechartclearly shows thecountry’s dependenceon fossil fuels with oil still C Simulation de l’impact de l’indexation des prix de certains de certains prix des Simulation de l’indexation de l’impact du Maroc, au Plan ommissariat Morocco. Office National de l’Electricite (ONE) Support Project Support (ONE) l’Electricite de National Office Morocco. ank, , November 2013, http://www.mem.gov.ma/SitePages/ 2013, November , , Septembre 2013, http://xfru.it/Jcje6i. 2013, , Septembre 3 In addition to oil and petroleum products, ecteur de l’énergie, Chiffres de Chiffres l’énergie, ecteur C , May 2008, p. 22, 22, p. 2008, , May hiffres C les1/ 4 2

IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 4 and studies indicated that therearevastonshore andoffshore sedimentary basins, could still beimportant undiscovered oil (andgas)reserves. R Morocco’s proven oil deposits aresmall, but thereisreasonable evidencethat there Source: International EnergyAgency (IEA). Figure 2|Total primaryenergysupply Morocco, 1972-2012 Source: Ministryof Energy, Mining,Water andEnvironment (MEMEE). Figure 1|Total primaryenergysupply, 2012 Morocco’s Power Sector Transition: Achievements andPotential ecent drilling activity IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 5 December 2013, http://www.strategicstudiesinstitute.army.mil/pubs/display.cfm?pubID=1186. 3000 hoursperyear or 5.3kWh/m²/day. meters elevation. The solarresource isabundant andtheannual sunshineaverages and southern regions, with theannual average wind speedexceeding 9m/sat 40 R (ADE 6 still largely unexplored, that are suitable for oil reserves. Morocco’s Power Sector Transition: Achievements andPotential 8 7 energy demand. which have thepotential tocover asignificant share of theincreasing domestic As for renewable energy, Morocco possesses extensive wind and solar resources, and investment incentives. application of liberal andinvestor-friendly regulations, including taxexemptions percent. Morocco has recently attracted many foreign companies through the cooperation with international partners where ONHYM’s share is capped at 25 Oil andgasexploration andsurveys arepartially carried out byONHYM in on thecentral-eastern zones of thecountry. with several private companies tostartashale gasexploration programme focused to extractcrudeoil from oil shale. More recently, ONHYM signed up partnerships end of seventies. In 1985,ademonstration unit plant wasconstructed andoperated Mines) hasbeenstudying oil shale andshale gaspotential inthecountry sincethe national oil andgascompany ONHYM (Office National des Hydrocarbures etdes Security Implications for the United and China States Security The total reserves areestimated tobearound 50billion barrels. R where it feeds into theEuropean gasgrid. the HassiR’melfield in Algeria via Morocco andtheStrait of Gibraltar with Spain of gasfrom Algeria toSpain andPortugal. TheMaghreb-Europe gaspipeline links natural gasreserves aresmall. Morocco plays animportant role inthetransportation Despite increased drilling activity and some recent discoveries, Morocco’s proven Panuke gasfield. first oil-producing reservoir, Cohasset-Panuke, andtherecently developed Deep potential isbasedon thesimilarity of theoff shore geology toeasternCanada’s Mines, géologie et énergie et Atlas)”, (Moyen géologie Mines, in Timahdit r

egarding shale oil, Morocco hastheseventh-largest proven reserves intheworld. Africa’s Booming Oil and Natural Gas Exploration and Production. National National and Production. Exploration and Booming Oil Natural Gas Africa’s Brown, E. David Source: Agence de développement des énergies renouvelables et de l’efficacité énergétique del’efficacité et énergétique renouvelables énergies des dedéveloppement Agence Source: . B ouchta, O. Zemmouri, “Etude géologique et réserves du gisement de schistes bitumineux de bitumineux deschistes du gisement réserves et géologique “Etude O. Zemmouri, ouchta, EE). 8 The wind energy potential is excellent invast parts in the northern , C , No. 50 (2nd semestre 1981), p. 55-69. p. 1981), (2nd semestre , No. 50 arlisle, US Strategic Studies Institute, Institute, Studies Strategic US arlisle, 6 High hopes for Morocco’s 7 TheMoroccan IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 6 and commercialisation of clean energy. of clean commercialisation and project. http://documents.worldbank.org/curated/en/1994/07/698185/morocco-repowering-power-plant- 9 hydro inpower generation andtodiversify fuel options with theincreaseof the this strategy. At thesametime,decision wasmadetoreduce theshareof oil and Productions) model intheelectricity generation sector hasbeenthespearhead of to allow private investment and theintroduction of theIPPs (Independent Power ambitious strategy toreform thesector. Anewamendment tothesector legislation government decidedtooverhaul theexistinglegal framework, introducing an delivering thenecessaryinvestments tomeetincreasingdemand,theMoroccan National del’Electricite) tomaintain afinancially sustainable power system while Faced with theserecurringproblems andtheinability of thestate andof ONE (Office recently commissioned Mohammedia coal-fired power plant. in hydropower resources, aprolonged drought, andthepoor performance of the problems facedbythecountry intheeighties. Thiswasmainly due toasharpfall shortages, which canbeseenasalegacy of thedifficult economic andfinancial Starting from 1990,theMoroccan power sector confronted serious power supply 2.1 1994-2014: twodecades of reform known as“gestionnaires délégués”. of neighbouring communes) aswell asfour private distribution utilities, also distribution of electricity andwater owned byamunicipality, commune, or group includes about seven local municipal utilities, also known as“R water andelectricity inlargeurbanareas.Morocco’s power distribution subsector overall performance of thepublic enterprises responsible for thedistribution of oversight over ONEE, and the Ministry of Interior (MI), which supervises the the Ministryof Energy, Mines,Water andEnvironment (MEMEE),which has R (Office National del’Electricité etdel’Eau Potable). The electricity sector inMorocco isdominated bythestate-owned operator ONEE 2. Background andevolution of Morocco’s electricity market Morocco’s Power Sector Transition: Achievements andPotential 11 10 (ONEP) and electric (ONE) utilities. electric (ONEP) and to private operators with purchase guarantees. important shareof thegeneration capacity; however, ONEE cangive concessions of Law 13/09,ONEE actsasthesingle buyer inthesector andowns andoperates an supplier. With theexception of renewable energyproduced undertheframework transmission network andmuch of thedistribution network andisthe mainretail

esponsibility for thesubsector isdivided at theGovernment level between ONEE is the state-owned company resulting from the recent merger between the country’s water country’s the between merger recent the from resulting company state-owned the is ONEE World B This law liberalises the renewable energy production and sets a legal framework for production for production framework alegal sets and production energy renewable the liberalises law This Morocco. Repowering of Project Power Plant Repowering Morocco. ank, 10 , GEF Project Document, July 1994, p. 1, 1, p. July 1994, Document, Project , GEF 9 ONEE owns thecomplete 11 égies” (utilities for IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 7 uni-koeln.de/fileadmin/user_upload/Publikationen/Working_Paper/EWI_WP_10-02_ Working Papers EWI in markets”, power conventional and supply on electricity Impact countries: Maghreb of the targets energy renewable “The Zingerle, B also See policies-effective-institutional-regulatory-financial-reform. documents.worldbank.org/curated/en/1993/01/440599/world-banks-role-electric-power-sector- Energy-Maghreb.pdf. R Institutional, of theprivate sector inpower generation. prompted thecountry toreplicate themodelandsignificantly increasetheshare was Morocco isearliest IPPandwasconsidered asuccessful experience, which units is1,356MW andtheproject costwas1.48bn dollars. TheJorf Lasfarproject a build-transfer-operation (BTO)arrangement. Thetotal capacity for all four of apower plant expansion bybuilding two similar specification generators under generation units undera30-year concession arrangement. Thesecond consisted two stages.Thefirstwastomanagetwo operating 348-MW coal-fired/steam-based concession agreement underacompetitive bidtender.Theproject consisted of Subsequently, in1996,ONE awarded CMSEnergyandABBa30-year generation facilities andoffer electricity toconsumers at competitive prices. liberalisation forms partof anattempt toimprove theperformance of power 13 12 percent in2004to3.5percent in2006andsubsequently to6.7percent in2012after of thenatural gas shareinMorocco’s primaryenergydemandfrom less than1 Siemens andEndesa,wascommissioned in2006andresulted intheincrease generation. Thefirstcombined cycle power plant, ajoint venture between ONE, Morocco with theopportunity tointroduce theuseof natural gasinpower The inauguration inDecember1996 of the Maghreb-Europe gaspipeline provided power projects. towards renewables andencouragedONE topursue development of more wind wind farmstartedproduction in2000,which resulted inamajor changeof attitude available intheextreme north of thecountry. Theprivately owned 50-MW Koudia to develop utility scale renewable projects andharnessthehuge windresources To diversify sources of energysupply, ONE launched anambitious programme purchase agreements with IPPs or privately owned power producers. a decreewhich allowed thenational power monopoly ONE toenter into power Encouraged by theWorld Bank,in1994 the government of Morocco adopted conservation measures. achieved with the introduction of new power generation technologies and energy concrete stepstoimprove its operational performances. Thisgoal wasalso tobe recovery of thepower state monopoly wasamajor partof thisstrategy andinvolved share of coal andtheintroduction of natural gas.Therestructuring andfinancial Morocco’s Power Sector Transition: Achievements andPotential 14 pdf_docs/PNAD and Options Issues

World B Ibid, p. 2. p. Ibid, Sustainable Power Sector Reform in Emerging Markets. Financial Financial Markets. in Emerging Reform Power Sector Sustainable Touche Tohmatsu, Deloitte ank, “The World B “The ank, egulatory, and Financial R Financial and egulatory, B 308.pdf. , Joint World B ank’s R ank’s 12 ank/USAID Policy Paper, July 2004, p. 35, http://pdf.usaid.gov/ 35, p. Paper, July 2004, Policy ank/USAID ole in the Electric Power Sector: Policies for Effective for Effective Policies Sector: Power Electric the ole in eform”, World in Papers Policy Bank 14 , No. 10/02 2010), http://www.ewi. (May rand and Jonas Jonas and Brand ernhard , January 1993, http:// 1993, , January 13 Thispartial R enewable- IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 8 78, http://www.casablanca-bourse.com/Documents/LYD/fr/Lydec_NI_obl_fr.pdf. combined-cycle-power-project. http://documents.worldbank.org/curated/en/2007/02/7517679/morocco-integrated-solar-32, documents/58. Studies Case GIM in roles of thepublic andprivate parties wereclearly stated: 16 15 • • of electricity, water andsewerage totheurbanareaof . and operation of thenecessaryinfrastructure todeliver thepublic services of supply the local authority assigns totheprivate sector thetaskof investment, construction distribution utility inCasablanca.Bysigning this30-year concession agreement, the French Lyonnaise desEaux (LYDEC) took control of themunicipality owned will take thelegal form of transferred management or ‘gestion déléguée’. In 1997, privatisation of electricity distribution utilities initiated inMorocco inthe1990s the reforms werequickly extendedtothepower distribution subsector. The To improve performance andquality of service at all levels of theelectricity sector, (ADER National Agency for theDevelopment of R Energy (MASEN), in chargeof implementing theMoroccan SolarPlanandthe create two dedicated governmental agencies: theMoroccan Agency for targetsfor 2020.To achieve theseobjectives, thegovernment decidedto high burdenon public finances,in2009 Morocco announcedambitious renewable Faced with therisksof theincreasingcost of fossil-fuel imports andthesubsequent suppliers. in which certain industrial customers areallowed tofreely choosetheirelectricity well asproduction, distribution andtrade; therebyopening anewmarket segment establishing a procedure for the authorisation of renewable energy installations as set out alegislative framework for thepromotion of renewable investments, to largeindustrial consumers. With the2010R operate plants with capacities notexceeding 50MW, andsell theirelectricity directly market toprivate investors. Private power producers wereallowed toown and In 2008,theMoroccan government decidedtofurtheropen thepower generation completion of thefirstintegrated solarcombined-cycle plant in Ain BeniMathar. Morocco’s Power Sector Transition: Achievements andPotential 18 17 org/files/ 2014, https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds. p. 6, January

c LYDE Tarek Hatem, “LYDE Hatem, Tarek World B must (i) achieve an efficient andfinancially sustainable management of the the private partnerhasadual obligation regardingresources andresults. It protects theinterest of consumers andtheenvironment; investment programme andperformance objectives for public services, and the public authority actsasadecision maker andaregulator. It setsthe Clean Technology Fund Investment Plan for Morocco. Update Note for Morocco. Plan Investment Fund Technology Clean Funds, Investment limate EE). C C , , Morocco. Integrated Solar Combined Cycle Power Project Cycle Combined Integrated Solar Morocco. ank, TF%20Morocco%20IP%20update_Jan%202014.pdf. Note d’information: Emission d’un obligataire emprunt Emission Note coté non et coté d’information: 16 , No. A027 (September 2007), p. 9, p. http://cases.growinginclusivemarkets.org/ 2007), , No. A027 (September C : Providing Electricity, Water & Sanitation to Water C &Sanitation Electricity, : Providing enewable EnergyandEfficiency enewable EnergyLaw, Morocco 18 asablanca’s Shanty Towns”, Shanty asablanca’s , February 2007, p. , February 17 Therespective , 25 June 2010, p. p. June 2010, , 25 , 15 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI 9 The electricity generation balance consists predominantly of thermal generation In 2000theper capita consumption was491kWh before reaching in2012864kWh. Figure 4presents therapid increaseof theelectric power consumption percapita. share of generation from privately owned power plants. fired units are due to becommissioned in2014, hencesubstantially increasingthe plants provide theremaining495MW (6percent). An additional 350MW of coal- of hydropower including 464MW of hydro pumped storage. Wind generation consists of 5,077MW (70percent) of thermal power stations, 1,770MW (24percent) As of 2013,Morocco’s total installed power generation capacity was7,342MW. This Source: ONEE. Figure 3|Peak power, energyproduction anddemandinMorocco, 2007-2012 percent from Spain. power plants for almost 70 percent of the total generated power while importing 18 to expandaccesselectricity. Onthesupply side,thecountry relied on thermal percent many timesduring thesameperiod, reflecting theimpact of recent efforts between 2003and2013toreach32,024GWh. Growth inpeakdemandexceeded 8 Electricity demandhasgrown fast,at anaverage annual rate of around 6.7percent, 2.2 Electricity demand and generation capacity Morocco’s Power Sector Transition: Achievements andPotential operational decisions. the technical expertiseandaccordingly make theappropriate investment and public service, (ii)adopt acommercially-minded approach, and(iii)provide 10 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI Figure 5|Balance of supply-demand, 2012 Source: ONEE. Figure 4|Per capita electricity consumption inMorocco, 2000-2012 percent). (see Figure 5),which comes from IPPs (42percent) andimports from Spain (16 Morocco’s Power Sector Transition: Achievements andPotential Source: ONEE andWorld Bank,Morocco: Clean and Efficient EnergyProject ...,cit., p.15. 11 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI Project accounts for approximately 26percent of thecountry’s total emissions. the future, driven largely byincreasesinelectricity generation, which currently per capita) isconsidered low byglobal standards,it isprojected torapidly grow in Although Morocco’s average rate of GHG emissions (2.8tonnes of CO2peryear 51,000 rural householdswereoffered photovoltaic systems. remote rural communities. Notably, more than3,600villages, including more than ONE introduced off-grid renewable energysystemstobringelectricity tosome the rural electrification rate to 98 percent. Driven byeconomic considerations, than two million rural householdswith accesstoelectricity andtherebypushing eighteen years, more than39,000villages wereconnected tothegridproviding more energising existinglimited initiatives toextendaccesselectricity. Over thelast d’Électrification Rurale Généralisé, startedin1996with theaimof replacingand Morocco’s rural electrification programme, also known asPER 2006. commissioned inAugust 1997;andanother400-kV linecommissioned inJune is through the Morocco-Spain network, which consists of two lines:a400-kV line and Morocco wereconstructed inthe1990sand2000s. Themaininterconnection exchanges arelimited. Transmission linestoconnect power among Algeria, Tunisia R kV transmission lines,11,625kmof 60-kV transmission linesand37substations. of 400-kV transmission lines, 8,389 km of 225-kV transmission lines, 147 km of 115- European andAlgerian power networks. Thetransmission gridconsists of 1,693km the transmission gridcovers theentire country and isinterconnected with the grid. Aside from asmall isolated network intheextremesouth of thecountry, ONEE isresponsible for operating andexpandingtheMoroccan power transmission 2.3 Thequest toexpand thegrid and accesstogreenerpower Morocco’s Power Sector Transition: Achievements andPotential 21 20 19 project structured as apublic-private partnership (PPP).Thisproject is being In 2010,MASENstartedthedevelopment of the500-MW Ouarzazate solar complex solar andwindresources. 2,000 MW of windcapacity totake advantage of thecountry’s excellent domestic developing 2,000MW of solar capacity, undertheMoroccan SolarPlan(MSP),and to meetthistargetbyincreasingtheinstalled hydro capacity toreach2,000MW, will increaseto42 percent of thetotal installed capacity by2020.Morocco plans this backdrop, it wasannouncedthat theshareof renewable energygeneration energy andconservation at thecentre of thenational energypolicy. Against 2009 Morocco adopted an ambitious new energy strategy which puts renewable

egional power interconnections aredeveloped rather well, but actual electricity

World B 2012 figures as shown in the annual ONEE’s activity reports. activity ONEE’s annual the in shown as figures 2012 ONEE- , May 2014, p. 6, https://www.climateinvestmentfunds.org/cif/node/15673. 6, p. 2014, , May B ank and African Development B Development African and ank Rapport d’activités 2012 d’activités Rapport Electricité, ranche ank (AD ank B Morocco: Noor 2&3 Solar ), Morocco: Concentrated Noor 2&3 , 2013. , 20 G or Programme 21 Hence, in 19 12 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI deployment of the rural electrification programme. Themainconsequences of burden of ONEE’s debtservice, theresult of anoften non economically viable rapid in investments inlargecost-effective generation facilities; and (iv) thegrowing expensive heavy fuel oil anddiesel inenergy production asaconsequence of delays debts from certain distributors and the public sector; (iii) the excessive use of operating costs;(ii)thelow collection (payments) rate anddifficulties torecover difficulties aremainly due to(i)atariffstructure that does not reflect thesector’s each andothersindecision-making anddevelopment of energypolicies. Financial stakeholders andtheabsenceof aclear framework definingtheresponsibilities of complex institutional environment, thanksinparttothemultiplication of agencies, investments. Thesestructural problems have beenamplified with anever more recurring severe financial challenges, while experiencing significant delays in key reduced theriskof acute power shortages, theelectricity sector continues toface twenty years have improved theconditions of accesstoenergyandconsiderably Despite thefactthat thereforms implemented bythegovernment during thelast 3.1 Major challenges ahead and theresulting resistancetochange. the inflexibility of the existing power system structure, its legacy business models, impediments tocontinuing thetransition relate nottotechnology or cost,but to the full socioeconomic potential of anefficient andsustainable energysystem.The are not sufficient to further economic development of the country and to unlock The current achievements of theenergytransition inMorocco, while important, forward 3. Electricity market restructuring: challenges and possible ways installed capacity from 830MW to2000MW by2020. The Moroccan Integrated Wind Energy Programme aims to increase thewind- capacity tomeettheevening peakdemand. dubbed Noor Power Plant, will also include three-tofive-hour thermal storage implements thetower receiver CSPtechnology. TheOuarzazate solarcomplex, under construction, will use parabolic trough developed intwo phasesbasedon two technological variants. Thefirstphase, Morocco’s Power Sector Transition: Achievements andPotential 22 capability. capacity by2020andsupport theemergenceof alocal windpower manufacturing to raisetheshareof windpower to14percent of thetotal generation installed is scheduled tostartin2016.Themaingoals of the windenergyprogramme are 1000 MW. Thetenderingprocess isunderway andtheconstruction of thefarms been selected for theconstruction of windfarmswith atotal nominal capacity of

Of which 550 MW is either under construction or commissioning. construction under either is MW 550 which Of CSP technology, while the next phase 22 Five newpotential sites have 13 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI initiatives arestruggling totake off. important as ONEE is facing a delicate financial situation and energy efficiency to thedevelopment of anopen andcompetitive energymarket. The combination of transparent pricing policy andartificially low electricity tariffsare major obstacles not allow for asustaineddeployment of clean energytechnologies. Thelackof a renewable energy production, theexistinglegal andinstitutional environment does and the goodwill expressed by the authorities to achieve ambitious targets for Despite theabundanceandquality of windandsolarresources inMorocco, 3.2.1 Transition toward low-carbon electricity production move beyond theprescriptive solutions of thepast. discuss three particular areas with opportunities for electricity market reform to above all asignificant reform of theregulatory framework. The following sections flexible andefficient powersystem, strengtheningregional interconnections, and information and communication technologies for thedeployment of amore share of renewable energy. Thiscanbeachieved thanks to asystematic useof objectives adopted inthe2009strategy, inparticular byfurtherincreasingthe The energy transition undertaken by Morocco can and must go beyond the 3.2 Transition toward asustainable power system sector andadopt acost-basedapproach tosetelectricity tariffs. should extendrecent efforts toreform petroleum products subsidies tothepower to distributors regardless of theirsize,region or typeof clients. The government low for alargespectrumof consumers (social tariffs),andensurefinancial targets department andisdesigned with thedual objective of keeping thecostof energy problem. Thecurrent electricity tariffstructure issetbyacentral governmental The practice of subsidised or cross-subsidisation of electricity isbecoming amajor in theoverall management of thesector. and network management. Lackof coordination results insubstantial inefficiencies areas of investment planningandload forecasting, standardisation of equipment planning, investment or operation. Coordination isparticularly essential inthe The current institutional settingof thesector hasnotbeenconductive torational interests. decisions because of thenumber of stakeholders andtheiroften non-convergent and revision of tariffs;and(ii)thedifficulties to implement a number ofurgent costs of production toconsumers and thelackof clear rules for theestablishment organisational problems are(i)theinability of thestate monopoly toconvey real Morocco’s Power Sector Transition: Achievements andPotential 23 en/2014/02/18909331/reforming-subsidies-morocco. World Economic Bank Premises

Paolo Verme, Khalid El-Massnaoui and Abdelkrim Araar, “ Araar, Abdelkrim and El-Massnaoui Verme,Paolo Khalid , No. 134 (February 2014), http://documents.worldbank.org/curated/ (February , No. 134 R eforming Subsidies in Morocco”, in in Subsidies eforming 23 Thisisall themore 14 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI power sector andfor theeconomy asawhole. will directly help thegovernment produce cheaper primaryenergysupply for the transit hub for customers intheregion, including offering awidevariety of services, regionally centred energysupply strategy, where Morocco will play therole of a of coal annually andmore than100million boeof oil andpetroleum products. A Mediterranean markets. By2020,Morocco will import around 10million tonnes are being transported by tankers and dry-bulk vessels via the Strait to Western and Growing volumes of fossil fuels from Africa, theMiddle EastandLatin America The Strait of Gibraltar isamajor transit point for seaborne-traded oil, LNG andcoal. reliable energypartner. interconnection with theEuropean power gridattest toMorocco’s reputation asa of projects such astheMaghreb-Europe natural gas pipeline andthepower and African energy exporting countries, and Europe. The successful completion role of an energy transit hub between the southern shore of the Mediterranean a relatively stable andsuccessful market economy. Morocco could also play the with many opportunities, which it hasbeenable totake advantage of todevelop a very largecoastlineon theAtlantic. Thisgeographical position provides Morocco but it hasaunique geographical position, having accesstotheMediterranean and Morocco does not have theenormous oil income of some countries intheregion, 3.2.2 Fostering amore ambitious regional integration agenda renewable energy. integrated energypolicy that placesgreat importance on energyconservation and and non-interdependent blocks of anenergystrategy, andshould put inplacean shift, but for that tohappen, policy makers must stop promoting non-coherent subsidised energycosts.Morocco cangarnerfully thebenefits of amajor global of inefficient legacy utilities and atthesametime compete with artificially lowand enough sincerenewable energyisrequiredtocompensate for any economic losses unlocking thehuge potential of distributed generation. However, thiswill notbe restrictions on accesstothemedium- andlow-voltage gridswith theobjective of below retails tariffs. Morocco has recently undertaken a policy for gradually lifting average costof newwindandsolarPVprojects hasdropped tolevels close toor growth of renewables inmarkets where gridparity isachieved. In Morocco, the Falling costs of anumber of clean generation technologies should boostthe complicate amore sustainable energytransition. public fundingleads tonon-well though-out investment decisions which further ONEE’s position asasole buyer andastate owned entity inreceipt of concessional Morocco’s Power Sector Transition: Achievements andPotential 24 Potential through Regional Integration. Challenges and Opportunities Challenges Integration. throughPotential Regional through-regional-integration-new-afdb-report-9591. 2012, p. 39, http://www.afdb.org/en/news-and-events/article/unlocking-north-africas-potential-

Emanuele Santi, Saoussen B Saoussen Santi, Emanuele en R en Unlocking North Africa Africa North Unlocking (eds.), Shaw William and omdhane 24 , African Development B ank, 15 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI consumers. This modelis increasingly deemed to benon-fit for a new world where very often anon-decreasing demand,while attempting tominimisecosts for the governments, with the sole purpose of ensuring the balance between supply and practices. Until recently, energypolicies weredesigned, at thelevel of central a reliable supply of power, andpressfor continuously adapted gridoperation energy, it iscrucially important todeploy newinfrastructure requiredtoprovide Given theurgency and thenew challenges raisedby the gridintegration of renewable 3.2.3 Technological innovation asadriver of change respective markets andincreasingregional energyexchanges. and easternMediterranean countries, inparticular, with aview toopening their EU should engageinintensified political andtradedialogue with North African is considered thegreatest obstacle toany serious regional energypolicy. The The limited cooperation betweenNorth African countries intheenergyfield deemed crucial toenergysecurity of Europe andthewhole region. leading role towards creating a Mediterranean energy hub in the south of Europe, and advanced relations with theEUasanopportunity toposition itself toplay a the European energy market. Morocco will need to view its geographic position energy cooperation andstated theultimate Moroccan objective of integration into Advanced Status signed betweenthetwo parties –theirinterest todeepenbilateral exchanges participating. Morocco and the EU recently expressed – in the 2008 competitive power market with numerous buyers, sellers, traders,andpower for energyexports. Theprogramme wasdesigned tocreate a single, integrated, The EU’s energyreform programme hasmadetheregion anattractive market optimally combines economic logic andtechnical constraints. smooth physical flow of power. Thefinal goal isto have amarket design that removing subsidies or any otherbarriers that canimpede competition andthe of national regulations andtechnical rules for operation of power systems,and global market standards, pursuingpolicies that promote theharmonisation regional market will requireimplementing necessaryreforms inorder tomeet component of such a regional integration strategy. However, a well-functioning Integration of theenergysystemsof North Africa isconsidered animportant better businessopportunities andhencemore financial incentives for renewables. From aneconomic point of view, interconnections offer accesstomarkets with without impairing thepower gridreliability or quality andcontinuity of service. a largerandstable power systemcanaccommodate alargeshareof renewables resources available inmany partsof theregion. From thetechnical point of view, interconnected power system would help to unlock the important renewable energy integration of power systems is mainly driven by the fact that a larger and further Mediterranean SolarPlan,, ,etc.).Therationale for furtherregional North Africa, andwasat thecentre of several unsuccessful regional initiatives (The the Mediterranean region benefits from significant political support in Europe and Strengthening power gridregional interconnections betweenthetwo shores of Morocco’s Power Sector Transition: Achievements andPotential 16 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI Worldwatch Institute, June 2014, p. 20-21, http://www.worldwatch.org/energy-transitions-ge-us. 20-21, p. June 2014, Worldwatch Institute, and the Way Challenges, Forward Perspectives, Transatlantic States. projects. Facility, and, more recently, the multilateral development banks, bilateral aidagencies, theGlobal Environment funded anumber of renewable projects andenergyefficiency initiatives from and householdequipment, thegrowth of several sectors of theeconomy and rapid a sustainedgrowing demand,caused bytherecent widespreadaccesstoelectricity probably witness important transformations inthenearfuture aswell. Faced with The power sector inMorocco is experiencing aphaseof rapid changesandwill Conclusion deployment anddiffusion indeveloping countries. an important role incatalysing renewable energy andnewenergytechnologies costs compared toexistingalternatives, international public financingcanplay While some of thesetechnologies arestill notwidely adopted or canpresent high already usedor plannedtobedeveloped byONEE andMASEN. electricity. Sizeable capacities of hydro pumped storage andthermal storage are renewable production inorder tobettermanagethesupply-demand balance for operators andindividual consumers tostore electrical energyor displaceexcess Energy storage systems,either decentralised or centralised, will enable grid to maintain gridstability while maximisingtheshareof clean energyproduction. renewable energygeneration. Short termweather forecasts or now castingareused key role inreducing theoperational challenges, often linked with intermittency, of more renewables. Accurate forecasting of windspeedandsolarradiations plays a system, fully optimise demand-side resources, while making it possible to add grid technologies canbeintroduced toreduce wasteandinefficiencies inthe power required for anefficient and optimal energytransition. Smartmeteringandsmart infrastructure andembracinginformation technologies. Avery similar attitude is Morocco wasat theforefront intheregion indeveloping amoderntelecommunication new network. intelligence requiredtosmoothly managechallenges arisingfrom operating this customers actingat thesametimeasconsumers andproducers, andfitted with the distribution will likely move towards amore decentralised interconnected gridwith unidirectional flows of energyfrom centralised generation totransmission and clean technologies, areconsidered tobevital. Thelegacy gridmodelbasedon technological developments, energy conservation and the large deployment of gas emissions, sustainable growth andpreservation of natural resources, future issues rangingfrom protection of theenvironment andreduction of greenhouse Morocco’s Power Sector Transition: Achievements andPotential 26 25

Alexander Ochs and C and Ochs Alexander Sustainable Power Sector Reform in Emerging Markets in Emerging Reform Power Sector Sustainable Touche Tohmatsu, Deloitte 25 Energy Transitions in Germany and the United in Germany Transitions Energy von Friedeburg, hristoph Clean Technology Fund for large solar and wind 26 In thepast,Morocco has , Strategy paper, Washington, paper, Washington, , Strategy , cit. , 17 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI Ministre3nov%202014.pdf. http://www.mem.gov.ma/SitePages/Discours/Discours%20Mle%20 5, p. 2014, 4 November sur le Photovoltaïque: du édition Salon International Première de la Photovoltaica l’inauguration de dele l’énergie développement photovoltaïque de solaire l’utilisation àl’occasion au Maroc feuille dévoile Amara sa de route Abdelkader pour (MEMEE), Mines and of Energy Ministry 27 of renewable energy. some minor issues related toconditions of accesstothegridfor private producers very unlikely that its role will beeffective inthenext years or go beyond supervising create aregulatory agencywith theassignment tooversee thesector reform, it is Although thegovernment of Morocco hasrecently announcedthedecision to but at thesame timeembodies thewidespreadreluctance tochange. the state power monopoly, encounters anumber of difficulties toperform itstasks in the power sector can impede implementation of much needed reforms. ONEE, decade hasshown that theprevailing institutional organisation andlegal framework generation capacity andcontinuously expandthepower grid.However, thelast urbanisation, thecountry will needtoinstall largeamounts of additional power Morocco’s Power Sector Transition: Achievements andPotential country. objectives andimmediate actions towards asuccessful energytransition for the everyone elseinvolved intheenergysector with theaimof setting the main innovation, permanent andtransparent dialogue betweenpolicy makers and creating anopen market that facilitates wider energy cooperation andpromotes towards amore flexible energysystem. Moroccan decision makers should aim at will requirethedeployment of appropriate energystrategies andagradual shift the ever-growing aspirations of societies for asustainable, inclusive growth, and A viable energytransition will needtotake into account economic objectives and to theMediterranean region. and reliable hub for energytransits from south tonorth andfrom the Atlantic basin but also apolitical commitment tocreate acommon energymarket andasecure between countries asmore thanphysically interconnecting national power grids, its geostrategic position andtake stepstowards considering energyintegration interests, Morocco must take advantage of intraregional complementarities and installed capacity. While regional integration must becompatible with its national is limited toregular largeenergyimports from Spain tocover theshortfall in In theabsenceof acommon regulatory framework, regional energyintegration ineffective. up anddeal with some establishedtaboos,otherwiseit will beincomplete and transition cannot do without a transformation of the current institutional set- mainly related toterritorial planninganddevelopment. TheMoroccan energy

See the Moroccan Minister’s recent speech on solar PV development in Morocco: Morocco Morocco: Morocco development in PV on solar speech recent Minister’s Moroccan the See 27 Thereform isfurthercomplicated bypolitical considerations Updated 6February 2015 , 18 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI worldwatch.org/energy-transitions-ge-us Strategy paper, Washington, Worldwatch Institute, June 2014,p.20-21, http://www. and theUnited States. Transatlantic Perspectives, Challenges, and the Way Forward, Alexander Ochs and Chiffresles1/C h clés pour l’année 2012,November 2013,http://www.mem.gov.ma/SitePages/ Morocco Ministry of Energy and Mines (MEMEE), Secteur de l’énergie, Chiffres Septembre 2013,http://xfru.it/Jcje6i l’indexation des prix de certains produits pétroliers sur l’économie nationale, Morocco. Haut-Commissariat au Plan du Maroc, Simulation de l’impact de obl_fr.pdf 25 June 2010,http://www.casablanca-bourse.com/Documents/LYD/fr/Lydec_NI_ LYDEC, growinginclusivemarkets.org/documents/58 Shanty Towns”, in Tarek Hatem, “LYDEC: Providing Electricity, Water &Sanitation toCasablanca’s http://pdf.usaid.gov/pdf_docs/PNAD Financial Issues and Options, Joint World Bank/USAID Policy Paper, July 2004, Deloitte Touche Tohmatsu, Sustainable Power Sector Reform in Emerging Markets. 2014.pdf climateinvestmentfunds.org/files/CTF%20Morocco%20IP%20update_Jan%20 Update Note, January 2014,https://www.climateinvestmentfunds.org/cif/sites/ Climate Investment Funds, pubs/display.cfm?pubID=1186 Studies Institute, December 2013,http://www.strategicstudiesinstitute.army.mil/ National Security Implications for theUnited States and China, Carlisle, USStrategic David E. Maghreb.pdf user_upload/Publikationen/Working_Paper/EWI_WP_10-02_R Working Papers, No. 10/02(May 2010),http://www.ewi.uni-koeln.de/fileadmin/ countries: Impact on electricity supply andconventional power markets”, inEWI Bernhard semestre 1981),p.55-69 bitumineux de Timahdit (Moyen Atlas)”, in Mines, géologie et énergie, No. 50 (2nd R. Bouchta, O. Zemmouri,“Etude géologique etréserves du gisement deschistes R Morocco’s Power Sector Transition: Achievements andPotential eferences Note d’information: Emission d’un emprunt obligataire cotéetnon coté, B rown, rand andJonas Zingerle, “Therenewable energytargetsof theMaghreb Africa’s Booming Oil and Natural Gas Exploration and Production. CleEnAnnuels.aspx GIM Case Studies , No. A027 (September 2007), http://cases. Christoph von Friedeburg, Clean Technology Fund Investment Plan for Morocco. B308.pdf Energy Transitions in Germany enewable-Energy- 19 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI node/15673 Solar Power Project, May 2014,https://www.climateinvestmentfunds.org/cif/ World BankandAfrican Development Bank(AD regulatory-financial-reform world-banks-role-electric-power-sector-policies-effective-institutional- January 1993,http://documents.worldbank.org/curated/en/1993/01/440599/ Institutional, R World Bank,“TheWorld Bank’s R repowering-power-plant-project July 1994,http://documents.worldbank.org/curated/en/1994/07/698185/morocco- World Bank,Morocco. Repowering of Power Plant Project, GEFProject Document, office-national-de-l-electricite-one-support-project 2008, http://documents.worldbank.org/curated/en/2008/05/9463432/morocco- World Bank,Morocco. Office National del’Electricite (ONE) Support Project , May integrated-solar-combined-cycle-power-project 2007, http://documents.worldbank.org/curated/en/2007/02/7517679/morocco- World Bank,Morocco. Integrated Solar Combined Cycle Power Project, February morocco documents.worldbank.org/curated/en/2014/02/18909331/reforming-subsidies- in Morocco”, inWorld Bank Economic Premises, No. 134(February 2014),http:// Paolo Verme, Khalid El-Massnaoui andAbdelkrim Araar, “R afdb-report-9591 article/unlocking-north-africas-potential-through-regional-integration-new- African Development Bank,2012,http://www.afdb.org/en/news-and-events/ North Africa Potential through Regional Integration. Challenges and Opportunities, Emanuele Santi, Saoussen ONEE- Morocco’s Power Sector Transition: Achievements andPotential B ranche Electricité, Rapport d’activités 2012,2013 egulatory, andFinancial R Ben ole intheElectric Power Sector: Policies for Effective R omdhane and William Shaw (eds.), eform”, inWorld Bank Policy Papers, B), Morocco: Noor 2&3Concentrated eforming Subsidies Unlocking 20 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI [email protected] www.ocppc.ma F +212522925072 T +212537270860 Morocco Floor –Mahaj Erryad-R R OCP Policy Center R shaping thefuture of Morocco. a program dedicated tounderstandingkey strategic regional andglobal evolutions economic andsocial development; commodity economics; and“Global Morocco”, contribution tofour thematic areas:agriculture, environment andfood security; emerging countries arefacing, OCPPolicyCenter aimstomake ameaningful major international debates andstrategic challenges that thedeveloping and By offering a “Southern perspective” from a middle-income African country, on leading research associates, inthespirit of anopen exchange anddebate platform. purpose, the Think Tank relies on independent research, a network of partners and development of Morocco, andmore broadly totheAfrican continent. For this international relations issues, considered asessential totheeconomic andsocial contribute toknowledge sharingandtoenrich reflection on key economic and OCP Policy Center is a Moroccan policy-oriented Think Tank whose mission is to About OCPPolicy Center Morocco’s Power Sector Transition: Achievements andPotential ead more about OCPPolicy Center: http://www.ocppc.ma/about-us/ocppc yad BusinessCenter –South, 4th abat, 21 IAI Working papers 15 | 05 - February 2015 ISSN 2280-4341 | ISBN 978-88-98650-29-3 © 2015 IAI Latest IAIW Morocco’s Power Sector Transition: Achievements andPotential www.iai.it [email protected] F +39 T +39 Via Angelo B and otherpapers’ series related toIAIresearch projects. (AffarInternazionali), two series of research papers (QuaderniIAIandR publishes anEnglish-language quarterly (TheInternational Spectator), anonline webzine and theMiddle East;defence economy andpolicy; andtransatlantic relations. TheIAI in the global economy and internationalisation processes in Italy; the Mediterranean research sectors are:European institutions andpolicies; Italian foreign policy; trends and abroad andisamemberof various international networks. More specifically, themain that end,it cooperates with otherresearch institutes, universities andfoundations inItaly and disseminate knowledge through research studies, conferences andpublications. To economy andinternational security. Anon-profit organisation, theIAIaimstofurther Founded byAltiero Spinelli in1965,does research inthefields of foreign policy, political Istituto Affari Internazionali (IAI) 14 |17 14 |18 14 |19 15 |01 15 |02 15 |03 15 |04 15 |05 14 |15 14 |16 06 3224360 06 3224363 Kosovo Supranational Divide in EUForeign Policy: Insights from Maria Giulia Amadio Viceré, Beyond theIntergovernmental- the Israeli-Palestinian Conflict: ACall for an EU Initiative Daniela Huber andLorenzo Kamel,TheMultilateralisation of Global Energy Trends:Old Wine in New Bottles? Marie-Claire Aoun,European Energy Security Challenges and Sphere Azzurra Meringolo, TheStruggle over theEgyptian Public Achievements and Potential Tayeb Amegroud, Morocco’s Power Sector Transition: Guillaume Lasconjarias, NATO’s Posture after theWales Summit for European Foreign Policy Along its Arc of Instability? Nathalie Tocci, TheNeighbourhood Policy isDead.What’s Next a Supply for theEU? Elif Burcu Günaydın, Can South-Eastern Mediterranean Gasbe Framework Governance Challenges of theEU’s 2030Energy and Climate Sirja-Leena Penttinen, Nicolò Sartori andKimTalus, and Grasping Opportunities Marco Sanfilippo, Chinese Investments in Italy: Facing Risks runetti, 9-I-00186 R o r ome, Italy king P aper s esearch Papers)