POWER TO THE PEOPLE - RURAL ELECTRIFICATION

UNCLAS RABAT 000250

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ENRG ECON SOCI MO
SUBJECT: POWER TO THE PEOPLE - RURAL ELECTRIFICATION


1. Summary. The Government of Morocco's (GOM) ambitious program to
expand rural electrification throughout the country is nearing
completion - two years ahead of schedule. By the end of 2008, the
Programme d'Electrification Rurale Global (PERG) will reportedly
bring electricity to every village in the country. At a cost of $3
billion, the program has not been cost effective in energy terms,
but its goal is to help reduce the disparity in living standards
faced by Morocco's 12 million rural inhabitants (40 percent of the
population) and offer them greater economic and educational
opportunities. Morocco plans to export its expertise in rural
electrification to other countries in Africa and has already won a
contract in Senegal over competition from Electricite de France.
End Summary.

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LET THERE BE LIGHT
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2. In 1995, the GOM announced PERG with an ambitious goal of
increasing Morocco's then 18 percent rural electrification rate to
100 percent by 2010. The program was launched in 1996 and through
2004 it added approximately 44,000 miles of medium and low voltage
power lines in Morocco (latest data available). According to
Mohammed Hajroun, Director of Electrical Equipment and Rural
Electrification at the Ministry of Energy, the rate of rural
electrification reached 93 percent by the end of 2007 and the Office
National d'Electricite (ONE) now expects to reach its goal of 100
percent in 2008. Like many developing countries, Morocco has been
somewhat remiss in the timely implementation of other development
projects, so for PERG to be two years ahead of schedule is a major
accomplishment.


3. The object of the program is to provide electricity to essential
public services such as schools and medical clinics, small
enterprises to help boost local economies, and to households. Upon
completion, PERG should bring electricity to more than 35,000
villages, 1.9 million households and 12 million people who
previously did not have access to it. Approximately 93 percent of
the villages will receive electricity through connection to the
existing electrical grid and the remaining seven percent of
villages, the most remote, will use photovoltaic cells to produce
electricity.

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SHARING THE COST
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4. Part of PERG's success is due to cost rationalization - it
targeted villages with the lowest average cost of electrification
per household and gradually moved to villages with higher average
costs. The program's ability to bring electricity to large numbers
of people early in the process encouraged the GOM to accelerate the
pace of the program and be on target to finish two years ahead of
schedule. From 1996 to 2001 PERG spent an average of less than
10,000 dirham ($1,300) per household to bring electricity to rural
villages. From 2006 to 2007, this price had increased to almost
27,000 dirham ($3,600) per household. Electricity produced from
photovoltaic cells is the most expensive part of the program and
costs more than $3,600 per household.


5. The high cost of rural electrification is shared by three main
partners. Local authorities contribute either a one-time payment of
2,080 dirham ($277) per household, or 500 dirham ($67) per household
per year for five years. In addition, individual households pay
either 2,500 dirham ($335) in advance, or 40 dirham ($5) per month
for seven years. The final partner is ONE, which covers all
additional costs. In total, ONE has contributed approximately 55
percent of the total cost of the program. The European Investment
Bank has underwritten 780 million euros ($1.17 billion) in
electrical projects in Morocco since 1984, including many for PERG.


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NEXT STEPS
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6. ONE is seeking to capitalize on the success of PERG by marketing
its expertise in rural electrification to other African countries.
It has already beaten out Electricite de France for a $16.3 million
rural electrification contract in Senegal where it will manage a
25-year contract to electrify 550 villages. In addition, ONE has
installed a generator in Mauritania, and is upgrading one power
station and building another in Sierra Leone. The continent of
Africa has a rate of electrification of a mere 24 percent and it
therefore represents a market with great potential for ONE's
services.


7. As the completion of PERG draws near, the GOM has started a new
program, Valorisation de l'Electrification Rurale (VER),to help
increase the economic benefits of PERG. Thus far, PERG has created
14,000 jobs and the goal of VER is to use the advent of
electrification to increase economic, human and social development
on a broader scale. Through VER, representatives from ONE will
consult with villagers, local associations and regional authorities
to identify small projects that can use electrical power to
stimulate economic activity. VER has already supplied machinery to
assist local industries and motors to pump water, and envisions
numerous small modernization projects to benefit rural Moroccans.
VER will work in conjunction with the palace's National Initiative
for Human Development (INDH) to promote social development and will
be paid for predominately by ONE and local beneficiaries.

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COMMENT
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8. Comment: Since 2002, growth in demand for electricity in
Morocco has grown at an annual rate of 8 percent and PERG has
contributed to this rise. Although it is poor in terms of energy
resources, Morocco's ability to export its expertise in rural
electrification highlights its technical savvy in the field. The
project has certainly been expensive and ambitious, but should do
more to ease the rural/urban divide and offer rural inhabitants new
economic opportunities.
RILEY