NATURAL GAS AND RENEWABLE ENERGY AT CENTER OF

UNCLAS RABAT 002205 SIPDIS SENSITIVE SIPDIS DEPT FOR NEA/MAG AND EB/ESC USDOC FOR ITA/MAC DAVID ROTH AND AARON BRICKMAN USDOE FOR GINA ERICKSON AND YOUNES MASIKY STATE PASS USAID FOR JENNIFER RAGLAND E.O. 12958: N/A TAGS: ENRG ECON SENV MO SUBJECT: NATURAL GAS AND RENEWABLE ENERGY AT CENTER OF MOROCCAN ENERGY POLICY REF: A. RABAT 732 ¶B. RABAT 151 ¶1. (SBU) Summary: Government and private industry came together last month for a one-day conference on Moroccan energy policy, stressing the need for Morocco to reinforce its energy sector and render it more competitive. Diversification of supply was the key message articulated by Prime Minister Jettou and other government participants. They outlined plans to expand the share of natural gas from 3 to 20 percent of energy production, while also expanding the share of renewable energy to 10 percent. Other priorities include assuring regularity of supply, generalizing access to energy, limiting consumption, and ensuring protection of the environment. Among the steps announced by the government was raising the limit firms are allowed to produce for themselves from 10 MW to 50 MW, with authorization for transport of any surplus to other sites on the transmission grid of the National Electricity Office (ONE). End Summary. ¶2. (SBU) The October 30 Conference at the Mohammed VI Conference Center on the coast in Skhirat brought wide participation by government and private sector participants, as well as international experts, including the head of the International Energy Agency. In his opening remarks, Prime Minister Jettou stressed the critical conjuncture in which the energy sector finds itself, given the negative impact rising prices have had on non-producers like Morocco, which depends on imports for 95 percent of its energy needs. The government's strategy, he said, is centered on assuring a regular energy supply, which he argued can best be achieved by diversifying sources of supply. Important but secondary goals include generalizing access to energy through continuation of the government's rural electrification program, limiting consumption, protecting the environment, and assuring the security of the nation's energy grid. ¶3. (SBU) Natural gas plays a central role in the plans outlined by the government. Currently only 3 percent of Morocco's energy needs are filled by natural gas. The government hopes to raise that level to 20 percent by 2012. To help dynamize the sector, the government envisages a large LNG terminal, with a capacity of three billion cubic meters of natural gas per year. The project, initated by the Moroccan Akwa group, could be launched in 2007. Mohammed El Hafidi, Director of Electricity and Renewable Energy at the Ministry of Energy, reminded us in a November 13 meeting, however, that feasibility studies are not yet complete, and that the project will proceed only if they are favorable. Current estimates are that the planned terminal would require an investment of 1.2 billion USD, and could be in operation by 2010 or 2011. Akwa has indicated that should plans proceed, it will seek foreign partners to help it develop the project. Not yet decided, however, is where the terminal will be located. Candidates include Tangiers, Mohammedia and Jorf Lasfar. At the conference, Akwa participants at the conference also stressed that the success of the project requires the "fiscal neutrality of the state." Morocco is also planning to open a 200 megawatt natural gas powered plant in 2009 that will use gas that Morocco receives from Algeria as a royalty for a pipeline that traverses Moroccan territory on its way to Spain). ¶4. (SBU) El Hafidi also noted that the Ministry is working to complete the law and accompanying decrees and regulations that will fully liberalize the electricity sector in coming years. Other departments are now commenting on the text, he said, and it should soon be presented to the government for its approval and transmittal to parliament. The goal, he said, is to "align Moroccan policy with that in Europe," so Moroccan manufacturers face a similar cost structure. Already, he noted Moroccan electricity markets are integrated with those elsewhere in the Maghreb and with Europe, given interconnections that allow transfer of up to 700 MW to both Spain and Algeria. ¶5. (SBU) In another liberalizing move, the amount of energy companies can produce has been raised from 10 to 50 MW, and they are able to move it along the transmission grid to other sites or sell it to ONE. When liberalization is complete, they will be free to dispose of it as they wish. (Note: This is a key shift, as with the earlier restriction, it was not profitable for companies to operate an independent generator. End Note.) ¶5. (SBU) Renewable energy plays a major role in the government's thinking, and the Ministry of Energy is preparing a separate law on the subject. Morocco's goal is to use renewable sources for 20 percent of its electricity-- or 10 percent of its total energy needs. In a November 15 meeting, Zohra Ettaik, Chief of Renewable Energies at the Ministry of Energies, told Emboff and visiting DOE PDAS for Energy Efficiency and Renewable Energy John Mizroch that the GOM also sees a bright future for renewable energy, given its wind energy resources on the Atlantic and Mediterrean coasts and in the Atlas mountain range. Currently, ONE has a 54 megawatt wind farm in Tetouan. In 2008, it plans to open two additional wind projects, a 60 megawatt plant in Essaouira and a 140 megawatt plant near Tangier, and in 2009 it hopes to complete a 30 megawatt plant in Oujda. In addition, two other plants (100 to 200 megawatts each) are also being planned for Taza in the Middle Atlas and Tan Tan in the southern coastal plain. By 2012, Morocco hopes to have 250 wind projects and produce 1,000 megawatts of electricity from windpower. ¶6. (SBU) Due to the high cost of producuing electricity from photovoltaic cells, Morocco only uses this technique for approximately 30,000 rural homes where it is cost prohibitive to connect them to the nation's electrical grid. However, Morocco also currently has 140,000 square meters of solar panels to produce hot water and plans to increase this by 40,000 square meters per year until it eventually reaches 400,000 square meters. Finally the Ministry of Interior has a small program to capture methane gas. Ettaik added that her office had recently signed an accord with eight other GOM ministries (Industry, Housing, Finance, Health, Interior, Education, Tourism, and Social Development) to increase energy efficiency in government buildings. The Ministry of Agriculture signed a separate agreement related to the pumping of water. ¶7. (SBU) Comment: Morocco's energy demand is growing by a steady 6-7 percent each year, and meeting that demand with affordable energy is a key government priority. Beyond its natural gas and renewable energy plans, Morocco is also moving forward with other options, including new generation coal-fired plants (a tender for two 660 MW plants was recently issued) and nuclear energy (ref B). Its success in ensuring the availability of affordable energy will play a key role in facilitating sustainable economic growth. End Comment. ****************************************** Visit Embassy Rabat's Classified Website; http://www.state.sgov.gov/p/nea/rabat ****************************************** Riley