In the solar sector, the 160 MW Nour 1 concentrated solar power (CSP) plant in Quarzazate is a prime example of the type of project that will attract investment.

The development and planned expansion of Morocco’s flagship utility-scale Concentrated Solar Power (CSP) project underscore our view that the country has the potential to become a renewables hub in North Africa. Development bank financing will underpin foreign investment in this emerging solar segment as the government attempts to lessen Morocco’s reliance on imported fuels and keep pace with growing demand for electricity.

Morocco has the potential to transform itself into a North African renewables hub and the Concentrated Solar Power (CSP) segment in particular is a major investment bright spot. We made a substantial upward revision to our forecasts for installed solar capacity in early September to reflect this view, and funding has continued to flow into projects over the second half of 2014. Favourable climactic conditions, government efforts to reduce reliance on expensive imported fuels, a robust project pipeline and ambitious, solar capacity targets will drive growth.

Our optimistic view is bolstered by the both foreign direct investment (FDI) and development bank funding that are flowing into the power and renewables sectors. This investment will be necessary if Morocco is to keep pace with strong demand for electricity and support its strengthening manufacturing sector as the economy rebounds in 2015 ( see ‘Returning To Firmer Growth’, November 4). Investors will increasingly view Morocco as an export-oriented manufacturing hub that can supply the European market, which should bode well for underlying economic growth and drive demand for new power capacity.


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Project Development Creates Upside
Morocco – Solar Capacity Forecasts (MW)

In the solar sector, the 160 MW Nour 1 concentrated solar power (CSP) plant in Quarzazate is a prime example of the type of project that will attract investment ( see ‘Solar Heating Up’, September 10). It is backed largely by development bank financing, which has helped to stimulate private sector investment from foreign firms. In particular, we have witnessed greater economic cooperation between Morocco and the Gulf Cooperation Council (GCC) since 2011 – something that is evident with the Nour project.

The following developments support our views on Moroccan solar.

The USD1bn Nour 1 plant is being built by Saudi Arabia’s ACWA Power International. The World Bank, the African Development Bank (AfD) and European Investment Bank (EIB) are providing funding – with the first 160MW stage of the plant due to come online in 2015.

Crucially, momentum appears to be building behind plans to expand the plant by 350MW. In late September, the World Bank announced it would approve a total of USD519mn to support the expansion of the facility. Similarly, on December 4, the AfD also stated it would grant two loans worth USD217mn to support the second stage of the project. Construction of stage two is due to start in 2015.

On November 17, it emerged that consortia led by ACWA Power International and Spain’s  Acciona had submitted the lowest bids for contracts to expand the project site. A team led by ACWA has proposed building and operating the 200MW Nour II plant, selling its output at USD0.16 per kilowatt hour (kWh), while the Acciona-led consortium has proposed selling power from the 100MW Nour III plant at USD0.17/kWh.

The development and subsequent expansion plans for this project align with the government’s target of having at least 2 gigawatts (GW) of solar capacity by 2020 (part of a wider target to have 6GW of renewables capacity by the same date). Asian companies are also getting involved in the sector, with China’s state-owned Shanghai Electric reported to be set to invest more USD2bn in five solar projects (with combined capacity of 3.5GW) over the next five years.

Taking these developments into account, we reiterate that Morocco will establish itself as a relatively robust regional market for investment in new domestic solar and there is certainly upside to our forecasts for the solar sector (see chart above). While coal will play the biggest role in the energy mix to the end of our forecast period and is also receiving significant funding ( see ‘Coal To Bolster Manufacturing Drive’, September 23), we forecast renewables will account for around 15% of all generation by 2023. We emphasise, however, that government targets are much more ambitious and there is upside to this forecast.

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