- Morocco’s non-hydroelectric renewables capacity will grow by 4.4GW over the next decade, supported by the government’s power mix diversification efforts and favourable wind and solar conditions.
- Morocco is a regional outperformer on our Renewables RRI, which highlights the market’s attractiveness to investors because of its relatively lower risks and high rewards.
- Progress in the sector will be driven further by factors such as hydrogen adoption, international financing and the development of interconnections with the EU.
Morocco’s non-hydropower renewables capacity will grow by 4.4 gigawatts (GW) over the next decade, supported by the government’s commitment to diversifying the country’s power mix. Over the coming decade we forecast 1.6GW of wind and 2.5GW of solar capacity to be added, with the latter falling in line with the government’s plan to develop 2GW of each by 2030. We forecast the share of non-hydropower renewables to increase from 15.8% of total power output in 2019 to 35.2% by 2029.
Morocco’s latest renewable energy targets are highly ambitious, with the government announcing at the COP21 global climate that it now aims to have 52% of its total power generation to come from renewables (including hydropower) by 2030, up from the previous target of 42%. To achieve this aim, the government created a set of legislative frameworks which include market liberalisation, energy efficiency measures, power production regulation and the establishing of new institutions to direct efforts, mainly the Moroccan Agency for Solar Energy (MASEN). Furthermore, there have been key policies that have had a positive impact on growth in new renewable capacity. These policies include increasing of the industrial self-production cap from 10MW to 50MW and a net metering scheme for renewables, encouraging the sale of excess electricity back to the national grid.
High Resource Potential Creating An Upside Risk
Morocco’s high level of resource quality is reflected in its utilisation rates, with its solar and wind power capacity achieving 35% and 33% respectively over 2019. Compared to Germany’s solar and wind rates of 12% and 22% for the same period this indicates the market’s strong natural potential. This is further reflected by a report from the World Bank in H2 2020, outlining Morocco’s vast offshore wind power potential at 10GW, while floating wind technology is estimated at a potential of up to 135GW.
While not currently pursuing the offshore segment, the government is looking to increasingly develop its wind potential. This is evident with the latest attempts to push through a 900MW coastal onshore wind project developed by computing firm Soluna in the disputed southern region of Western Sahara near the town of Dakhla. The USD2.5bn project aims to provide low-cost energy for advanced blockchain computing facilities, further demonstrating the market’s emerging role in Africa as a technology and renewable energy hub. Despite being scheduled to enter the construction phase, ongoing issues related with the Western Saharan border disputes have hindered developments.
Within our Renewables Risk/Rewards Index (RRI), Morocco has emerged as a regional outperformer with a strong balance of low risks and high rewards. Morocco is currently ranked second-highest on the Renewable RRI in the Middle East and North Africa (MENA) region. The market also ranks well above all others in the African continent with its scores bolstered by continued growth in its renewable power generating capacity. Furthermore, Morocco has relatively low industry risks with an open and competitive landscape, lower barriers to financing and strong legal frameworks in the context of its peers.
However, the impact of Covid-19 on the market’s economy poses key downside risks, which led to our Country Risk team revising down our 2020 real GDP growth forecast for Morocco to -4.5%. We believe Covid-19-induced disruptions to economic activity combined with a second consecutive poor harvest season will contribute to rising unemployment in Morocco in the months ahead. This, in turn, will undermine social stability and exacerbate pre-existing domestic tensions. While the risk of demonstrations is contained over the short term through restrictions of movement during the pandemic, medium-term risks to social stability will remain a factor.
We therefore expect that renewables capacity growth over 2020 will slow down to 10% y-o-y, down from 16% in 2019. Ongoing disruptions to construction activity in Morocco still present a potential risk to derailing projects. Furthermore, strained global supply chains and equipment procurement in the solar sector also present roadblocks for project realisation.
We highlight three key power technology and Infrastructure developments in Morocco that will continue to drive progress in the sector.
- Solar Advancements & Foreign Financing: A key solar development, the Noor Midelt Solar Power Complex, has entered pre-construction. The 2GW project tender was launched by the newly formed MASEN and will be spread over several phases. The development consortium will be led by French energy company, EDF, and Emirati solar developer, Masdar. Noor Midelt phase 1, due for completion in 2022, will comprise a 420MW PV system during daytime hours and after sundown a 380MW salt based thermal storage system powered by daytime CSP will deliver constant power for approximately 10 hours. This first phase, costing USD785mn, has been funded by the German Development Bank, the European Investment Bank, the French Development Agency, the European Commission, the World Bank and the African Development Bank. This indicates strong foreign financial support for new developments in Morocco’s renewable power sector.
- Hydrogen Adoption: The Moroccan government has ambitions to become a global leader in supplying low cost green hydrogen. The government signed a cooperative and development agreement with the German government in June 2020, with the aim to develop large scale renewable energy and green hydrogen production systems. The first projects were announced over Q3 of 2020, with one known as the ‘Power-to-X scheme’ which will develop a 100MW green hydrogen facility. The other project will develop an associated technology research hub for renewable-based hydrogen.
- European Integration: We expect new interconnections with Spain to increase trade between Morocco and the EU, allowing the market to become a significant electricity trading partner for the Iberian Peninsula with two existing interconnections totalling 1360MW capacity. A new 700MW connection is due to be commissioned by 2026 at a cost of EUR150mn, aiming to integrate the rapidly increasing volumes of cheaper Moroccan solar power. According to Spanish transmission operators Red Eléctrica de España, the net result of the planned connection will be a reduced marginal price of electricity. Furthermore, increasing interconnections will add flexibility and support in the market as intermittent power sources rise.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. The original article can be accessed by clicking here