Executive Summary
The future of Morocco’s energy supply and demand faces substantial hurdles. In particular, the country is perceiving a growth in energy consumption, which will increase the country’s dependence on fossil fuel imports and emissions of carbon dioxide. As a result of the challenges it encounters, Morocco has set itself high deployment targets on the issues of renewable energy sources for generating electricity (RES-E). Because of this, the Moroccan energy sector will experience an unparalleled transition that will need vast public and private investment. Private RES-E investment is hindered by various hazards, which may result in high financing costs and, therefore, a reduction in the number of capital-intensive RES-E projects. It is important to note that Morocco’s energy system is in jeopardy, notably in the power sector. Population expansion and the advancement of socio-economic development are putting enormous pressure on the Moroccan policymaking process since the energy demand is expected to rise at a pace double that of the North Mediterranean region (Akrofi, 2021). Based on the extrapolation of historical data, 115 TWh is predicted for 2050, whereas based on model-based estimates, 170 TWh is expected for 2050 (Aqachmar et al., 2019). As a result, the need for cooling power would rise due to human climate change, which might significantly influence the energy infrastructure. Morocco’s energy strategy must be rethought in light of these possible future changes.
The Transition of Energy in Morocco
The power industry has a lofty goal of increasing the use of renewable energy sources (RES-E). RES-E is expected to account for 42% of total generating capacity by 2020 and 52% by 2030 (Šimelytė, 2020). Morocco, one of the Climate Vulnerable Forum’s 40 members, has committed to using 100 percent renewable energy by 2050. By 2030, an additional 10 GW of RES-E capacity will be needed to meet these goals. Solar is expected to provide 4.6 GW, wind to 4.2 GW, and hydro to 1.1 GW of the total (Šimelytė, 2020). For Morocco to implement renewable energy sources (RES), the Moroccan Ministry of Energy estimates that more than USD 30 billion in investment is required. Investing this much money in the electrical industry until 2050 is projected at USD 1 trillion worldwide. RES-E transition will need more financial resources and a change away from old, high-carbon technologies to meet Morocco’s expected surge in electricity demand. The deployment of energy infrastructure in developing nations is hindered by a shortfall in GDP.
Throughout the globe, governments have to spend more resources on infrastructure, such as renewable energy. Over the last several decades, investors in high-risk technologies such as renewable energy sources (RES) have considerably raised their overall investments. Private, international, and multilateral development bank funding will be required to assist scale up the deployment of RES-E to the high targets established for it elsewhere, like in Morocco (MDBs). Concentrated solar power (CSP) plants need considerable private cash to be invested in large-scale installations. An estimated USD 1200 billion yearly must be invested in energy supply infrastructure by non-OECD nations, according to a new policy scenario by the International Energy Agency (IEA) (Aqachmar et al., 2019). Around $500 billion has been squandered on investments of USD 708 billion. The public sector cannot provide the funding needed to meet current development targets and associated expenditures. Several European nations have already started to merge private funds into public services that were previously strictly the province of the government. Diverse technological investments alter the overall risk profile due to production cost changes (Bouabid et al., 2019). Capital-intensive RES-E investments may be discouraged if some RES-E technologies (such as CSP) have relatively high producing costs.
Policy Mix Illustration
Most of the available research focuses on single technology evaluations regarding the impact of variances in risk of investment risks and costs of finance. In the case of the top-down approach, the core steps include defining time frame, strategic intent, vertical and horizontal scopes, policy strategies, instruments, and policy mix elements (Ossenbrink et al., 2018). The latter framework can be accessed in Table 1 of Annex 1. For the initial step, it should be noted that the value of power production technologies in terms of their capacity or system is, if not more, essential (Boulakhbar et al., 2020). Depending on the technology used, the location, and the time of day, this number may fluctuate. To ensure that these future scenarios are both technologically and economically realistic, it outlines how each technology may be employed in the future.
In the 1990s, a Moroccan energy plan was implemented to ensure rural residents had access to electricity. The government launched a gradual liberalization of its energy output with the first Power Purchase Agreements (PPAs) signing. In 1999, the energy demand was 13.265 TWh; in 2016, it was 35.405 TWh. More than ninety-nine percent of rural residents now have access to electricity, up from just eighty-nine percent in 1995. RES-E power plants are now being developed in Morocco to fulfill the increased demand for electricity and accomplish the energy transition outlined in the 2009 energy policy (Šimelytė, 2020). Listed below are the five main components of the top-down approach plan:
- Achieving a power sector fuel mix that is optimal
- Making use of sources of energy that are renewable to generate power will rise as a result.
- Promoting power sector private investment
- Encouraging energy efficiency and conservation in the commercial, industrial and residential sectors.
- Integrating electrical grids in different regions.
The government is working on an LNG (liquefied natural gas) effort to help offset the intermittent nature of power plants using solar and wind energy. Société d’investissements énergétiques (SIE) was created in 2010 by Morocco’s government to provide appropriate funding structures for RES deployment. By acquiring small shares in individual RES projects, the SIE serves as a public financial tool that supports and facilitates investments in RES. A total of $1 billion was invested in a fund called the “Fonds pour le développement énergétique” (FDA) in 2009 to implement the national energy strategy (El Iysaouy et al., 2019, p. 259). Approximately $1 billion in private sector Moroccan bank funding is dedicated to financing energy projects nationwide each year (Bouyghrissi, Berjaoui, and Khanniba, 2021). A Local Banks syndication tool brings together the Moroccan banks to pool their resources.
Critical Reflection
The key weakness of the topic is that various actual and perceived investment risks might cause a rise in the cost of funding infrastructure projects. Underdeveloped countries are reported to have costly financing needs for capital-intensive renewable energy projects (RES). This means that higher LCOE from RES-E and, as a result, lower scale investments in RES-E are discouraged due to high capital costs, which are frequently stated as high WACC (Bouyghrissi et al., 2021). Several objective financial hazards include operational, revenue, liquidity, and financing concerns. Internal or external events that might fail internal processes, people, and systems are considered operating risks (Basel II). An asset’s liquidity risk increases when there aren’t enough potential buyers or the market is inefficient. Inflation and foreign exchange rates are additional risk considerations for funding (Smouh et al., 2020). It is critical to consider that valuation, liquidity and, regulatory difficulties, foreign investment risk may be exacerbated by these factors.
The research that resulted in this paper relied heavily on the availability of an open-access tool for the construction of participatory power systems in underdeveloped countries. To facilitate stakeholder workshops, an open-source energy system modeling program known as repass!S was adapted for use on a smaller scale in spreadsheets. The whole model was simplified to a simpler spreadsheet model to speed up responses and results. It was less adaptable than the entire model regarding dispatchable technological merit order, but it contained the vast majority of its key features.
There are actual and subjective dangers to the project’s success linked to perceived obstacles. The stakeholder’s risk perception and the related effect of a bad event determine their risk perception. In addition, people’s willingness to tolerate risk and their choice to invest in a particular technology is directly linked to their risk perceptions. Risk aversion is a term used in economics to describe the desire of FDI investors to minimize their risk exposure. An increased level of risks can make a lucrative investment perceived as unappealing (Komendantova et al., 2021). In addition to the level of risk perception and the cost-parity of solar with fossil fuels, risk perception influences other factors.
The strength can be found in an optimized model of power supply for nations and regions. The energy produced by the predefined capacity of different power production systems covers an hourly resolved demand curve. An efficient solution approximating partial numerical equilibrium must be used to achieve a cheap mode of operation for all methods. Renewable energy sources like photovoltaics, solar, and wind power may be used when the weather is favorable (El lysaouy, L. et al., 2019, 263). The implementation of dispatching technology will be done in the sequence of decreasing marginal price. The model may simulate RES-E and dispatchable generation at high geographical and temporal resolutions. Many post-processing algorithms use model outputs, such as hourly production data for all of the predefined components of the simulated energy system, to calculate LCOE and corresponding carbon dioxide (CO2) emissions.
Compared with other neighboring countries, it becomes evident that financial and risk-sharing support is needed to stimulate private RES-E investments in addition to state ones. Reduce investment risks, such as unclear returns and potential financial losses, by enlisting MDBs’ assistance. The latter can enable a greater degree of risk perception reduction through competitive pricing (Smouh et al., 2022). Many believe MDBs may help transfer cutting-edge RES-E technology to underdeveloped countries, although there has been little research on the subject.
The lack of nuclear power production is a common element in all scenarios. However, this does not mean that nuclear power is not being explored as a viable future energy-generating option in Morocco; rather, it represents a unanimous decision by workshop participants. Insights into energy system planning and regulation may be gained even when a direct comparison of the scenarios is impossible. Electricity output levels are to be in the same ballpark. As a result, the 185 TWh, 184 TWh, and 189 TWh production capacity of the three scenarios (scenarios 1, 3, and 4) must be different depending on the producing technology mix (except for scenario 2). (205 terawatt-hours). Due to the high amount of intermittent output that cannot be stored or utilized year-round in the framework, this is the most wasteful option.
The technologies all have specific risk and finance profiles. Using the proposed financing rates, we found that a 100 percent renewable energy system with varied technology scenarios may be cost-competitive (El Iysaouy et al., 2019). Such carbon-intensive projects face increasing default risks and rising costs of financing traditional fossil fuel-based power production technologies; therefore, this comparison is acceptable today and may become more realistic shortly. The growth of energy consumption in developing African countries not only led to an increase in global energy consumption but significantly changed the international trade in energy resources. Developing countries have become increasingly active and often successfully compete in the consumption and production of energy resources. At the present stage, the problem of the effectiveness of energy partnership in the context of creating a unified system of energy security is particularly acute.
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Annex 1: Details of Top-Down Approach
Table 1. Details of Top-Down Approach