North Africa Concentrating Solar Power Program

In December 2009, the Clean Technology Fund (CTF), under the leadership of the World Bank, approved a $750 million Investment Plan for Concentrating Solar Power (CSP) in the Middle East and North Africa (MENA) region. The plan aims to invest in CSP projects in Algeria, Egypt, Morocco, Tunisia and Jordan and to mobilize an additional $4.85 billion from other sources bringing the total cost of the program to $5.6 billion.

The Ouarzazate Concentrating Solar Power plant in Morocco is the first of its kind to be developed under this Concentrated Solar Power Investment Plan and currently constitutes the largest proposed CSP plant in the world. Similar pilot projects have been implemented in the MENA region including Ain Beni Mathar and El-Kureimat projects in Morocco and Egypt respectively. They differ from Ouarzazate in the fact that they are hybrid projects generating energy from gas and solar resources whereas Ouarzazate depends solely on solar energy.

The 500 MW plant is part of the $9 billion Morocco Solar Energy Plan launched in November 2009, the country’s climate change mitigation strategy which calls for the commissioning of five Concentrating Solar Power plants between 2015 and 2020 for a total capacity of 2000 MW.

Morocco imports almost all of its energy needs and its energy mix is composed mainly of oil and coal. The Ouarzazate solar thermal plant constitutes an important step in Morocco’s path towards energy security and renewable energy and it will allow the country to increase its revenues from the energy sector. Ouarzazate is located in southern-central Morocco and is characterized by an abundance of solar resources as well as the availability of water, two important features for the development of Concentrating Solar Power.

Who stands to benefit from this project? According to the Project Information Document (PID) prepared by the World Bank, “Morocco is ideally positioned to serve European markets and to use this positioning to take a technology and market lead.” This raises a question concerning the allocation of the generated power between export to European markets and local consumption. While many argue that Europe can pay a higher premium for the Concentrating Solar Power until there are adequate economies of scale to make it more affordable for Moroccan consumption, we then have to ask ourselves who is actually benefitting from this project.

Another concern is related to the measurement of household energy access. Generally, lighting is used as an indicator of the availability of power in a given area. One of the implications of using this limited measuring tool is to argue that a country like Morocco has 100% access and can therefore afford to export energy to Europe. We question whether this is a sufficient measurement for calculating access and whether it would be more accurate and informed to also consider the reliability of electricity and whether the electricity is sufficient to power all essential services such as heating, cooking and other household purposes. Financing is also an issue when considering the scale and cost of this project.

The World Bank has committed $200 million out of a total project cost of $665 million. In addition, the CTF and the African Development Bank (AfDB) constitute potential funders according to the PID. However, even if the CTF and AfDB both committed their proposed funds, the combined amount would still not cover the total cost of the project. So, the availability of financing remains a concern for the Ouarzazate CSP project. Having said that, the World Bank has proven itself to be a strong and convincing business partner given that it has already raised more financing for the overall CSP program than observers were anticipating even a few months ago.

Whether or not Ouarzazate is deemed a successful project ought to depend on the development outcomes it generates, and not simply on the fact that it is a renewable energy project which is not emitting carbon. While it is not yet clear, it seems that a fair amount of the power generated from this CSP plant will be headed for Europe. If this is to be the case, the premiums that the Europeans pay for the power should go towards subsidizing energy for Moroccan consumers in a cross-subsidization scheme or towards the development of other renewable energy projects in Morocco to ensure affordable universal access for Moroccans.

The project should also create employment opportunities in CSP-related industries. The World Bank is currently assessing the local capacity in the MENA region for the manufacturing of inputs for CSP plants, and if local procurement is guaranteed, this would be a positive move towards the achievement of development outcomes.

In order to stay faithful to the World Bank’s mission of poverty reduction, clear development outcomes need to be the raison d’etre of each Bank-supported project. As more CSP projects get implemented in the region, it is essential that local experts and affected communities are consulted at every stage of the process to ensure that it is the poor communities of the Southern Mediterranean who are the beneficiaries of these projects. As the Bank drafts its global energy strategy, that raison d’etre needs to remain a central theme.