German climate finance / Implementation of climate finance

Climate finance case study: desert power generation as a driver of sustainable development in Morocco

The Noor 1 solar thermal complex at the foot of the Atlas Mountains in Morocco. Source: Boris Schinke

German climate finance is usually analyzed only in terms of the amounts Germany pledges to developing countries. Yet the question of which projects are funded and whether they contribute to moving the world toward a low-emission, sustainable path of economic development is equally important. Over the past years, Germanwatch has monitored a project that is being partly funded by Germany: the Nooro (the subscript “o” stands for the location) solar power station in Ouarzazate, Morocco.

The solar complex on the outskirts of the Moroccan Sahara shows how a transition to a future of sustainable energy can be realized: the largest solar power station in the world is taking shape on 3,000 hectares of land in Ouarzazate, 200 km south-east of Marrakesh. The 580 megawatt (MW) Noor – which means “light” in Arabic – project was established in 2009 by King Mohammed VI.

The parabolic troughs of the first 160 MW section (Noor 1) stretches across the arid Atlas highlands like a vast hall of mirrors. ACWA Power, the Saudi Arabian project developer, says that the complex will be up and running in a few months. If all goes to plan, three further sections of the solar complex will be operational by 2019. The plant is equipped with a molten-salt storage facility, enabling it to store energy – in form of heat – for up to seven hours. This will ensure continued power generation in the evening hours when the sun has set and the country’s power requirements are at their peak. More than one million households will thus be supplied with clean electricity while saving millions of tons in CO2 emissions.

Morocco’s plan to expand renewable energies

Four additional solar complexes modeled after Noor are set to be built in other sunny regions of Morocco in the coming years, ensuring that by 2020, 42% and by 2030, more than half of Morocco’s installed power generation capacity will use renewable energy sources (see chart). This represents a key strategy for modern, climate-friendly development in the kingdom, which has no significant oil, gas or coal deposits and currently has to import around 95 percent of its energy.

Installed capacity and power generation in Morocco in 2014 and 2020 (author’s calculations based on ONEE, 2015).

Globally, Morocco’s energy policy is considered exemplary, and so Germany and other international partners backed the solar showpiece and numerous other green energy projects in the country. Germany’s stake in the Noor project’s total cost of around €2.2 billion amounts to €834 million. The financing is being provided as a low-interest KfW loan within the framework of the International Climate Initiative (ICI) and the German Climate Technology Initiative (DKTI) on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) and the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB).

While generation costs of solar thermal power stations have fallen by more than 30 percent in recent years and the increased quantities and associated experience related to the system components make a further drop in price likely, a kilowatt hour generated in Ouarzazate still costs significantly more than electricity from a conventional power station. The responsible Moroccan Agency for Solar Energy (MASEN) has created an appropriate framework to ensure that the investment in Ouarzazate nevertheless remains worthwhile for Morocco. The agency’s goal is to leverage the expansion of renewable energy as part of an economic development program on the way to a low-carbon future.

A broader development framework

Flanked by measures to promote development, Ouarzazate is a testing ground for creating benefits for the overall economy through the convergence of climate protection and sustainable development within the context of major solar thermal complexes. By realizing the power plant complex, Morocco not only intends to decrease its strong dependence on foreign energy imports and thus reduce its trade deficit, it is above all placing development aspects in the focus of its energy policy aspirations. Key elements of Morocco’s energy strategy include:

  • Jobs and local value creation: during the construction of the first section in Ouarzazate alone, around 2,000 jobs – primarily in the region and nearly 90 percent originating in Morocco – were created over the course of two and a half years. In addition, about 30 percent of the components installed in the power plant were made in Morocco.
  • Education and vocational training measures: while a significantly smaller workforce is required for the operation of the power plant, maintenance work is to be handled mainly by domestic companies. The experience and expertise thus acquired will be applied to the construction of further solar projects in Morocco. Various measures have been launched in the vicinity of the Ouarzazate project and in other parts of the country to train the needed specialists and develop competitive value chains.
  • Compensation for restricted land use rights: Despite the considerable space requirements of the power plant, resettlements could be avoided. It was, however, necessary to restrict the economic use of the land – for example, firewood or medicinal herbs may not be collected there, nor may the land be used for livestock. To compensate for this, the affected communities were provided with money to improve local welfare, educational, and healthcare facilities.

Notwithstanding the efforts of the Moroccan government to develop a business model for large solar thermal projects that also pursues development policy objectives, it will be crucial to see further investments in a low carbon future increasingly as a societal responsibility with the Moroccan people as stakeholders. Given the ambitious expansion targets that will make numerous other major projects necessary, the successful implementation of Morocco’s transition to renewable energy will not only hinge on its impact on development, but also on the kingdom’s success in creating a suitable framework for civil society participation in planning and decision-making processes. This is an area – one that is also challenging for European countries – in which Morocco still has scope for improvement in future. As the biggest current recipient country of international climate finance, Morocco can thus continue to serve as a model for other countries of the global South and set standards for the sustainable development of international climate finance projects.

Boris Schinke / Germanwatch

Further reading:

Pioneers of Change: 21 good practices for low carbon development in developing countries (case study)

Social CSP – Energy and development: exploring the local livelihood dimension of the Noor I CSP project in Southern Morocco

Good neighbours: A development policy perspective on community acceptance and procedural justice in the context of utility-scale renewable energy