Learning from Morocco: Why Invest in Concentrated Solar Power?

November 8, 2016

Noor Plant, Morocco

The Falling Cost of Concentrated Solar Power

New technologies are often caught in a bind. 

Their true value only emerges once people begin to use them, but until they have a proven track record few are willing to try. Breaking out of that bind and establishing a track record requires someone with vision – who can both recognize the potential inherent in a new technology and willing to take the risk to unlock it.

That was the case with Concentrated Solar Power (CSP) in the Middle East and North Africa (MENA) region, until Morocco launched its bold program to invest in the technology.  With the first phase of the 500 MW NOOR project coming on line earlier this year, the 160 MW NOOR I plant, Morocco is providing an example to the region of the value of CSP.

Learning from NOOR

It was to study the example of NOOR that government officials and energy and finance experts gathered in Casablanca, Morocco earlier this year. The aim was to share knowledge and build networks to catalyze the development of CSP in a region ideally suited to the technology due to its abundant sunshine.  The conference was co-hosted by the Moroccan Agency for Solar Energy (MASEN) - in charge of leading the country’s shift to renewable energy - the Climate Investment Funds (CIF) and the World Bank Group (WBG). The CIF and the WBG have partnered around the goal of supporting the installation of 1 GW of CSP generation capacity in the region through the US$750 million Clean Technology Fund (CTF) MENA CSP Investment Plan.

One of the first lessons, delivered by the president of MASEN, Mustapha Bakkoury in his opening remarks to the conference, was that Morocco was not committed to a particular technology. Morocco was committed to breaking its dependence on imported fossil fuels and to taking action on climate change. To meet this goal, a target was set of meeting 42% of its power generating capacity needs through renewables by 2020– a figure that was raised to 52% by 2030 at last year’s climate talks in Paris, France. It was in figuring out how to meet the country’s current and future energy needs within this national plan that CSP was identified as a solution.

In response to the market research that MASEN conducted, the national power utility made clear that its greatest need was in the early evening once the sun had gone down. That was when demand for electricity reached a peak. CSP, with its thermal storage, could be depended upon to meet that demand. While photovoltaic has far lower capital costs, it can only generate electricity when the sun is shining. In recognition of the true value of CSP, Morocco was ready to invest.

Another lesson was the importance of concessional financing, in the short and medium term, in meeting the greater capital costs of CSP. The CIF provided $435 million in concessional financing, which was used to leverage more than $3 billion from the World Bank Group, the African Development Bank and other European financing institutions. For the international financial institutions it was an opportunity to support the development of a new technology that could play a critical role in the global shift to renewable energy – a global public good. The investment in the technology, particularly in MENA, will make a big contribution to bringing down the cost of CSP globally. Morocco’s sunny climate and temperature will stretch subsidy dollars much further than investments in other regions. Along with contributing to the global goal of shifting away from fossil fuels through the development of renewable energy technology, for Morocco it is a way of harnessing their natural resources to meet the national goal of building their energy independence with a clean and dependable source of power.


The Falling Cost of Concentrated Solar Power

Looking beyond price to value

With each new CSP project comes new technological advances and further drops in costs. NOOR I can store three hours’ worth of energy, while NOOR II and III will store seven hours’ worth. Examples from around the world include the Redstone CSP plant South Africa announced in 2015, which will have 12 hours of energy storage. NOOR II, III and Redstone all use a system of ‘dry cooling’, minimizing their use of another precious natural resource: water.

Concessional financing will still be needed, but bringing in the private sector is critical for scaling up investments in CSP technology and attracting other sources of financing. Head of Acwa Power, Paddy Padmanathan, who was in Casablanca, was part of consortiums that had winning bids for both the NOOR and Redstone projects. He said that electricity generated by NOOR I cost US$ 0.245 per kilowatt-hour (kWh), and US$ 0.18/kWh if you factor in concessional financing. That has dropped to US$ 0.19/kWh for NOOR II, and to US$ 0.175/kWh for Redstone.

With a pipeline of projects, the price of CSP will continue to drop added Padmanathan. However, price continues to be a major obstacle, with many opting for photovoltaic and wind for which capital costs have dropped further and faster, to half that of CSP. For Luis Crespo, the president of ESTELA, this is short-sighted. It misses the essential value of CSP, which is the ability to deliver electricity on demand, day or night. This makes CSP the equivalent of a fossil fuel fired power plant, but without the harmful emissions or the expensive fuels.  According to Crespo, CSP delivers a healthy return for every concessional dollar due to its multiple other impacts.

CSP plants are often developed in remote areas, bringing development and jobs to poorer communities. MASEN’s president, Mustapha Bakkoury talked about the effect on the local economy, that the NOOR project has provided an incentive for higher value added manufacturing for the supply of parts. The NOOR I project sourced 30% of its components locally. The goal for NOOR II is to raise that figure to 35%.

A by-product of the CSP process, steam, also has potential for a number of industrial applications. It is currently being used for the extraction of hard to reach oil deposits, but could be used for other processes that address the region’s needs, such as water desalination.  Padmanathan spoke of an agricultural production company in Western Australia that pumped the steam from their CSP plant into their greenhouses, to ripen their tomatoes. Rather than a ‘power purchasing agreement’ which governs the cost of construction for most power plants, that project was underpinned by a ‘tomato purchasing agreement.’

The ultimate lesson of the conference was that for the region, it no longer made sense to wait on the side-lines. Morocco has taken the first, risky step and proven the value of the technology. In the four years since the announcement of the NOOR project, the cost of the technology has been on a downward slope, while the technology has steadily improved. The CIF, the World Bank and other institutions are ready to support countries with concessional finance and technical advice, to help them see beyond price and invest in renewable energy that is as dependable as the fossil fuels they will replace.

If these are not reasons enough to move forward with CSP, there is always the promise of plump and juicy tomatoes.