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Amy.Offord_111 Aug 15

PLANNING FOR A SURGE IN DEMAND

PLANNING FOR A SURGE IN DEMAND image

Renewables, gas, nuclear and coal are all part of the energy policies of countries across North Africa.

North African governments are bolstering plans to increase investment in power, with the demand for electricity likely to skyrocket in the coming years. Renewables feature heavily, while nuclear is under consideration in Egypt and new coal capacity has made an appearance in Morocco. Morocco’s enthusiasm for renewables is largely driven by security concerns – Rabat first began promoting low-carbon technologies a decade ago in an effort to reduce its reliance on hydrocarbon imports; it is the only country in North Africa without significant oil and gas production. In 2018, hydrocarbons comprised 93% of Morocco’s overall energy (rather than generation) mix, but this was still lower than the 98% recorded in 2008. The country spent AED69bn ($7.09bn) on oil and gas imports in 2017, creating a huge drain on its foreign currency reserves.

However, falling costs and greater investor interest have also played their part in the renewables revolution, as access to financing for such projects has become easier, including donor support and preferential loans from some institutions. Paddy Padmanathan, Chief Executive of Saudi-based ACWA Power, said his company’s latest Moroccan project – the Khalladi windfarm – is “the first transaction in the Kingdom of Morocco which is eligible for RECS [renewable energy certificate system] green credits and has also secured the Gold Standard certification”. However, it’s not all about renewables in Morocco. The kingdom’s concern over energy security, as much as climate change, was reflected by the completion of the 1.4GW Safi coal-fired plant in December 2018.

EFFICIENCY DRIVE NEEDED

A report on energy efficiency published in April by the Moroccan Centre for Economic Conditions concluded that rising energy demand would challenge the country’s ability to sustain power supplies and achieve its renewable energy targets. Said Mouline, Director-General of the National Agency for the Development of Renewable Energy and Energy Efficiency, said that the state should encourage people to reduce their  energy consumption because it was already close to the levels of countries that are more industrial and have a far higher GDP per capita. The traditional way of reducing energy consumption – and by far the most obvious – is to increase prices, but Rabat is reluctant to raise regulated power, gas and fuel prices.

It has been successful in attracting private-sector investment in renewable energy projects, with the Moroccan Agency for Sustainable Energy overseeing agreements struck with independent power producers. It has already introduced low tax rates on residential and business solar energy equipment. This includes agriculture – 28,000 farms now use solar water pumps. In October 2018, the German government agreed to back a €80m project to improve energy efficiency in Morocco, including in public buildings, transport and street lighting.

Research published in January by energy consultancy Wood Mackenzie calculated that electricity in Morocco is cheaper from solar photovoltaic (PV) power projects than combined-cycle, gas-fired plants, even when four hours of costly lithium-ion battery storage for the solar power is factored in.

“Five years ago, you would have been called crazy to say this was on the cards for 2019,” said Wood Mackenzie Analyst Rory McCarthy. The picture is different in Egypt, where gas remains more economical, largely due to the availability of cheaper local gas feedstock than Morocco, which has to import its supplies. The cost of gas feedstock in Egypt is $3/m Btu, in comparison with $6.90-9.00/m Btu in Morocco.

Battery storage currently increases the cost of solar power in Morocco by a massive 126%, although Wood Mackenzie forecasts that this will fall to 85% by 2023. However, it also forecasts that solar PV storage may struggle to compete with solar concentrated solar power (CSP) for long-term storage. While the former usually aims at four hours’ storage, analysts can often factor in CSP storage of up to 15 hours.

EGYPT PRIMED FOR NUCLEAR

Cairo’s decision to back nuclear power is a key component of Egyptian power policy. Several African governments, including Nigeria, have sought to follow South Africa in developing nuclear power plants, although little progress has been made to date. How-ever, Egypt could buck that trend.

In March, the Egyptian Nuclear Regulation and Radiological Authority gave the Nuclear Power Plants Authority (NPPA) permission to develop a nuclear power plant on the El Dabaa site on the coast, 170km west of Alexandria, after considering its application for 18 months. The application included an environmental impact assessment, design concept, site data and security analysis. The International Atomic Energy Agency also provided input.

The NPPA will now seek a construction permit for the project, which will be developed by the Russian State Atomic Energy Corporation using its VVER-1200 pressurised water reactors. The four planned reactors will give a total 4.8GW of baseload generating capacity. The current schedule is for the reactors to come on stream between 2026 and 2028, but nuclear energy projects are often subject to long delays. It has been reported within Egypt that Russia will pro-vide a $21.25bn loan to help finance the scheme, with the Egyptian government providing the remaining $3.75bn development costs. The loan is to be repaid over 22 years at a reported annual interest rate of 3%.

TUNISIA BEEFS UP RENEWABLES

Tunis finally seems to be following Morocco’s lead by promoting renewables to reduce both its fuel import bill and trade deficit. In May 2018, the Ministry of Energy and Mines launched a tender for contracts to develop 500MW of wind and 500MW of solar capacity, but this January announced a more ambitious combined target of 1.9GW by 2022. Four small wind power projects with a combined capacity of 120MW received their licenses in January, with all output sold to state utility STEG.

The country is also seeking to upgrade the grid to increase its capacity and prepare it for the more variable production of solar and wind power projects. In December, the Islamic Development Bank agreed to provide a €121m loan to help finance the construction of 210km of high voltage transmission line and upgrade 30 substations. However, either the government or STEG will have to secure more funding to finance the improvements.

This article is an extract from the Africa Energy Yearbook 2019, a partnership between African Business and EnergyNet.