Summary :

1. Renewable Energies (RES) have become an identity sign of EU’s energy policy. The promotion of RES is one of the energy policy responses to climate change, and the emphasis made by the European Commission and some Member States on its deployment has helped to place the EU as a world leader in the sector. However, the contribution of renewable energies has remained marginal in the southern Mediterranean energy mix. The Union for the Mediterranean (UfM) has launched the Mediterranean Solar Plan (MSP) to support RES deployment in the region, and Morocco has shown its interest in participating in the initiative, which would enable the country to exploit their important solar and wind potential, increase energy supply, reduce energy dependency and diversify its energy mix.2. Morocco is probably the best positioned country to implement the Mediterranean Solar Plan. It has a relatively significant solar and wind energy installed capacity, and given its proximity to Spain (14 km) it has the only functioning electricity interconnection with the EU in the region. With the granting of an ENP Advanced Status to the country, the European Commission and Morocco signed a joint political declaration regarding energy cooperation in 2007. Morocco was then included in the Intelligent Energy Europe initiative through which the Union seeks to promote institutional and regulatory change and pursues sectoral integration below the threshold of membership. In the wake of the Arab Spring, the Commission proposed to extend the Energy Community Treaty to Mediterranean Partner Countries (MPCs) among the measures intended to deepen EU-MPCs economic integration and promote economic development.3. The MSP would help Morocco to supply its internal electricity markets with RES and exporting the surplus to the EU benefiting from the new green energy trade scheme provided by new Directive 2009/28 article 9. The purpose of this FEMISE research is to reflect on whether the MSP has the potential to become a driver for Moroccan development or can instead be better considered as a EU-centric project aimed at achieving its own environmental objectives together with the promotion of European industries and engineering firms4. The MSP has two main objectives: to deploy 20 Gigawatts of installed renewable energy capacity in the Mediterranean region by 2020 along with the necessary transmission capacities and cross-border interconnections; and to promote energy efficiency in MPCs. However, to date, the efforts have concentrated on deployment, assessing the maturity of existing RES projects in MPCs, the economic viability of planned projects, and the main technical and financial obstacles concerning their implementation.5. The MSP is closely linked to Directive 2009/28 on renewable energies, which sets the national objectives for the 2020 RES contribution to the gross total energy consumption fixed by the EU. These targets are challenging for several EU countries, requiring cross-border RES flows (physical or virtual) among the EU, but probably also from third countries, a possibility that is explicitly contemplated by the Directive’s article 9. RES-generated electricity exchanges are important within the EU, but are scarce with third countries. Besides the exchanges of wind energy in Northern Europe, only Spain exports so-called green electricity to Morocco. Directive 2009/28 offers an institutional framework to foster the development of Euro-mediterranean cross-border RES flows.6. The flexibility measures contemplated by the Directive include statistical transfers, joint projects, and joint support mechanisms. Statistical transfers refer to the exchange of green certificates, which can be done within a joint project and can benefit from a commonly agreed joint support mechanism. For green electricity imported from third countries, the conditions are not so flexible: they do not allow statistical transfers, only physical electricity transfers; and to ensure additionality[1], only new installations starting operations after the entry into force of the Directive can be considered in the fulfilment of RES national objectives. Member States can implement joint projects with third countries, including in its national objectives the green electricity imported.7. These restrictions can however be relaxed. First, in the absence of existing (but projected) operative interconnections, the Member State can include in its national objectives the green electricity that has been agreed until the infrastructures are in place. More importantly, even if statistical transfers with third countries are excluded by the Directive, de facto it offers the opportunity to such countries of include it by joining the Energy Community Treaty, whose contracting parties can benefit from the same flexibility measures than EU Member States, if it was so decided. This is an open possibility for Morocco to benefit from statistical transfers, widening the opportunities for RES deployment in the country.8. Directive 2009/28 provides the framework for the integration of RES in the Euro-mediterranean region and the functioning of the MSP. However, the MSP should also reach the UfM’s objectives inherited from the Barcelona Process of achieving a shared space of peace and prosperity, reassessed by the recent Joint Communication from the Commission and the High Representative, ?Un partenariat pour la démocratie et une prospérité partagée avec le sud de la Méditerranée? (March 8, COM (2011) 200 final), which includes the deployment of RES as a channel for euro-mediterranean cooperation.9. In this regard, the MSP should also be conceived as a driver for economic development for MPCs in at least five key aspects:

• To provide part of the energy required by MPCs’ economic growth
• To contribute to the supply of the modern energy services required by economic development
• Contributing to eradicate energy poverty
• To use solar and wind energy resources to generate new economic activities, new jobs and new incomes
• To provide technical cooperation, training and technology transfers in order for MPCs to be able to reap the benefits of RES deployment

10. To date, all the studies on the MSP have adopted a technical-economic approach. There are no comprehensive studies on the eventual socio-economic impact of the MSP under different scenarios. It is important to highlight that a comprehensive programme that considers all of these elements will constitute the first occasion in which energy is conceived as an instrument of economic development in the Mediterranean. This FEMISE project tries to set the first steps in such a research agenda.11. Concerning Morocco, there are several factors that have contributed to the design of a new energy strategy. They can be summarised in supply and demand factors. From the demand side there are demographic pressures and development requirements, including increasing rates of urbanization, rising transport and industry needs, rural energy modernization, etc?. Energy consumption is also to increase due to new plans launched by the Moroccan government, all of them implying new energy needs: Plan Vert, Plan Emergence, developing a world hub for phosphates, and expanding transport infrastructures. Energy demand is projected to experience a three-fold increase to 2030, especially electricity demand, which would increase from 24.000 GWH in 2008 to 95.000 GWH in 2030. Other, more energy intense scenarios, point to an increase in electricity demand up 133.000 GWH in 2030.12. From the supply side, Morocco suffers from acute energy dependency ratios, due to scarce conventional energy resources, especially in oil and coal, which constitute almost 90% of Moroccan energy consumption. The energy bill has been rapidly rising during the last decades in two dimensions: the cost of imports represents a significant part of Moroccan trade deficit (oil imports only represent almost 20% of total imports and 50% of the trade deficit); and energy subsidies represent a relevant part of budget expenditures (up to 25%). Morocco wants to develop a diversified basket of RES technologies in order to respond to such supply challenges.13. As a response to these challenges, the Moroccan government designed a new energy strategy in 2009 mostly aligned with the EU’s energy trinity of energy security, competitiveness and environmental sustainability. It also adds country-specific preferences such as the promotion of local expertise and know-how and the explotation of the country’s abundant renewable energies potential. The objective is to reach a 42% contribution of RES to the Moroccan electricity mix in 2020 (including hydro). For that year solar and wind energy would reach 4.000 MW of installed capacity.14. Since 2000, Morocco has significantly expanded wind energy installed capacity. Current installed capacity is about 200 MW and 1,720 MW are being developed. Wind energy is thought to be a potential engine of growth for the Moroccan economy, allowing for the exploitation of today idle natural resources, attracting foreign investment, creating a new industrial fabric and fostering technological spillovers and human capital formation. Wind energy will increase its contribution to the electricity mix from the current 2% to 14% in 2020.15. Solar energy deployment, photovoltaic, thermal and concentrated, is intended to be accelerated due to the Moroccan Solar Plan launched by the government. The plan wants to develop the country’s huge solar resources, reaching 2,000 MW by 2020, and covering 10% of Moroccan electricity demand for that date. Thermal energy for heating domestic water can make a significant contribution, insofar the current park of heaters represent almost 6% of Moroccan electricity generation. Photovoltaic solar energy is especially well adapted to de-centralised rural electrification. As today, 50,000 photovoltaic systems are functioning, and the rural electrification program provides electricity to 200,000 Moroccan rural households. These projects are also institutionally supported by the creation of new national agencies such as the Moroccan Agency For Solar Energy.16. Within this regional and national context, the main objective of this project is to analyze the economic effects of building Concentrated Solar Plants (CSP), Photovoltaic (PV) and Wind farms (WP) installation in Morocco during the next 30 years. The focus of the study lies on the impact on value added and employment, in order to assess the effect of RES deployment on Moroccan economic growth and development. We analyze several alternatives for future renewable electricity generation mixes in Morocco, comparing its economic effects under the electricity demand forecasted by different agencies and research projects. In doing so, we also address the role of RES in assuring energy development, in the sense of contributing to provide the country’s electricity needs.17. The project generates dynamic simulations in a long term perspective and evaluates different scenarios, applying an econometrical methodology based in a dynamic Input Output Model (I-O model). In order to create this dynamic effect, we incorporate some technical variants in the simulation process to deal with the fundamental changes in the country’s economic structure over the long term. Our results shed light on the economic consequences in terms of GDP, value added and employment in Morocco for several plausible scenarios concerning investment in solar and wind energy.18. In order to determine the investment needed to carry out simulations considering the different technological alternatives, the project identifies three basic inputs: expected electricity demand, investment and operation and maintenance costs, and the learning curve or cost-reduction trend for the different technologies. From these three groups of variables, we can determine the so-called ?Business Plan? for each scenario in the simulations performed. The next step consists on distributing the impact of investments among economic sectors through IO tables. The import content of such investments becomes then a key factor in defining the different simulation scenarios by 2040. A detailed methodological chapter discusses these issues more in deep.19. Given the investment included in the global ?Business Plan?, the project discusses seven scenarios of simulation according to two important drivers:

• Exports:

• No exports are considered: Business as usual (BAU) and Smart scenarios
• Additional RES generation is installed to allocate 20% of Moroccan RES generation for green electricity exports: Export, Smart Export, Export-CSP, Export-PV and Export-Wind scenarios.

• Ratio of investment filtered to equipment imports:
  • There is no reduction in the import content of RES investments, simulating that the Moroccan RES industry is not able to go down the learning curve, and no technological nor training catch up happens to increase the local content of RES components: BAU and Export, Export-CSP, Export-PV and Export-Wind
  • Morocco is able to catch up with technological transfers, cluster development, specialized training and technological cooperation. As a result the import content of RES investments becomes gradually half of the BAU scenario over the whole period: Smart and Export Smart scenarios.

20. The BAU scenario is a baseline in which there is no exports and no catching up. The Export scenario reflects a situation on which an additional 20% of Moroccan RES-generated electricity is exported after supplying domestic demand with the mix of RES technologies set by the government. The Export-CSP, Export-PV and Export-Wind scenarios simulate attaining such additional generation capacity (this 20%) exclusively with each of the technologies: CSP, PV or wind. The Smart Export scenario seems to be the more attractive in combining both technological and industrial catching up to attain the benefits of exporting Moroccan RES-generated electricity surplus.21. The total investment is distributed by decenniums, in order to accomplish the objectives of installed capacity for each technology source. Taking into account the current state of the investments in Morocco and the MASEN plans, probably the economic impact will be very concentrated in the last years of the current decennium (2011-2020). For the rest of forecasting periods, we can’t assume if the investment is going to be concentrated in two or three years or it is going to be disseminated around the ten years. So, in order to realize comparisons, we summarize the total impact over the final year GDP[2].22. The results of the simulations for each scenario can be summarized as follows:

• In the BAU scenario the value added global average annual effect on the Moroccan economy resulting from the installation of renewable energy starts at about 0.18% of GDP in 2010 and reaches 1.17% in 2040. The corresponding impact on employment would be about 36,000 new jobs in 2010 and around 265,000 at the end of the forecasting period [3].
• In the Export scenario (20% of additional RES electricity installed capacity to export) For scenario III, the effect of exports is relatively small: at the end of the period, the whole value added impact is about 1.41% on GDP (compared with 1.17% in the baseline) and the number of jobs created would be around 319,000.
• In the ?Smart Scenario? (just reducing the dependence on imported components), increases the value added impact up to 1.6%  at the end of the period (an additional impact of around 0.4% compared with the baseline) and increases by up to 401,000 the creation of employment (around 140,000 more than in the baseline).
• In the ?Smart Exports Scenario? (the optimum scenario) the combined impact of RES, reducing dependence on imports and exporting a 20% surplus is equal to 1.9% (in terms of value added) and 482,000 employees.
• The remaining scenarios (concentrating the exports in just one technology) allow us to make a ceteris paribus comparison on the differential economic impact due to the selection of each one of the three RES technology alternatives.
• The results of scenarios for ?export with CSP? and ?exports with PV? indicate that both have similar consequences in terms of economic effect on the Moroccan economy, only slightly higher in the case of CSP: the impact on GDP would be about 0.05% higher with CSP than in the photovoltaic.
• In contrast, the ?wind farm exports? scenario makes a clear difference:  the impact would represent 1.8% of GDP in 2040 compared to 1.25% average of the two alternative sources and, regarding employment, the use of this alternative would lead to about 415,000 jobs in the economy (140,000 jobs more than the BAU scenario).

Comparative Summary of Basic Results for the Different Scenarios of Simulation(Impact on Value Added in % of GDP and Employment at the End of the Simulating Period)

PROGRESSIVE REDUCTION OF IMPORTED COMPONENTS

NO

YES

EXPORTING

NO

?B.A.U.?

+1.17% GDP

+265,730 Empl

?SMART?

+1.59% GDP

+401,671 Empl.

20% OF RENEWABLE ENERGY

?EXPORTS?

+1.41% GDP

+318,876 Empl.

?SMART EXPORTS?

+1.91% GDP

+482,005 Empl.

INCREASING THE INSTALLED CAPACITY IN RENEWABLES TO EXPORT WITH?

?CSP PLANTS

+1.27% GDP

+289,369 Mill.

–

?PV PLANTS

+1.24% GDP

+282,631 Empl.

–

?WIND FARMS

+1.6% GDP

+415,032 Empl.

–

New Employment by Scenario (Full-Time Equivalent Workers)
Scenario

2010

2020

2030

2040

BAU

35,989

67,609

162,931

265,730

SMART

35,989

79,561

223,519

401,671

EXPORTS

35,989

81,130

195,517

318,876

SMART EXPORTS

35,989

95,474

268,223

482,005

V (CSP)

35,989

81,418

178,633

289,369

VI (PV)

35,989

78,304

162,220

282,631

VII (WIND)

35,989

96,671

238,113

415,032

Detailed Figures of Added Value Impact by Scenario (,000 ?)
Scenario

2010

2020

2030

2040

BAU

137,936

295,070

828,276

1,555,418

SMART

137,936

330,489

1,043,678

2,104,220

EXPORTS

137,936

354,084

993,931

1,866,502

SMART EXPORTS

137,936

396,586

1,252,414

2,525,064

V (CSP)

137,936

334,664

888,130

1,679,047

VI (PV)

137,936

327,647

833,800

1,645,104

VII (WIND)

137,936

443,991

1,274,363

2,467,939

23. Taking into account some additional issues computed through the General Equilibrium Model of the ?Haut Commisariat du Plan de Maroc?: Real GDP growth could be higher by 0.4% in the first years and 0.1% in the end. This potential growth will increase with the increase in energy capacity. Increase of labor income which will be higher by 1.71%. Government savings which will increase by 3.8% and total government revenue will be higher by 0.64%24. The general conclusion is that RES deployment entails significant economic opportunities for Morocco in terms of GDP and employment. In the proposed scenarios, the figures for economic impact on GDP vary from 1.17% to 1.9% at the end of the period (2040), with employment figures for full-time equivalent direct and indirect effects on the economy between 267 and 482 thousand jobs. Our results conclude that the alternative that produces more benefits in terms of GDP and employment growth is the installation of wind, whatever the framework of exports and imports is contemplated. Obviously, this conclusion is related with the current Moroccan capacity to build and to install windmills. The mature Moroccan industry in this technology allows the country to be an important exporter of these engines already.25. However, our results also show that policy decisions regarding exports and improving local capacities are crucial in profiting the most from the opportunities RES deployment offers to Morocco. The best economic performance is attained in the Smart Export scenario. But even in the absence of catching up, significant employment and GDP figures result from the Export-Wind scenario, which represents a less ambitious approach.[1] Additionality, like in the Clean Development Mechanism, is introduced to foster the deployment of new generation capacities, instead of profiting from already existing plants.[2] In order to realize these relative measures over the GDP, a 4% of annual increase of the Moroccan GDP has been supposed for all the simulation period. [3] In 2010, around 6,900 jobs are directly created by the installation works. The rest is a consequence of indirect and demand induced effects.