ISSUE 02 MAY 2013 IMPACT this issue Assessment of the Local Manufacturing Potential for CSP Projects KEY ACHIEVEMENTS Informed US$ 297 million ESMAP Study Highlights Concentrated Solar in World Bank funding for construction of Power Potential in Morocco Ouarzazate 1 On a bare desert plateau near Ouar- CSP is of particular interest to utilities be- Helped mobilize private zazate in southern Morocco sits what will cause of the significant potential for cost re- sector support for CSP soon be one of the largest Concentrated duction from economies of scale, design im- development in Morocco Solar Power (CSP) installations in the provements and diverse supply chains, as world. well as its thermal storage capability that in- Identified CSP compo- creases capacity factors, reduces generation nents that can be pro- The development of the 500 MW Ouarzazate cost and contributes to grid reliability. duced by Moroccan I plant is a cornerstone of the Moroccan Solar companies Plan, an ambitious strategy by which the With its abundant sunshine, adequate water, country aims to generate 2,000 MW of CSP existing technical capacity and proximity to by the year 2020. Europe, Morocco possessed all the attributes required for CSP production. But relatively CSP systems use mirrors and lenses to con- high-up front costs, an untested export mar- centrate sunlight onto a small area. The con- ket and uncertainty about job creation, tech- centrated light then acts as a heat source that nology transfer, and benefits to local busi- can generate electricity at a conventional nesses had impeded the establishment of a power plant. CSP has been identified as one large-scale CSP industry. of the key technologies at the heart of the energy technology revolution because of its “Everyone could see that Morocco possessed potential to reduce greenhouse gas emis- this incredible solar resource, but turning it sions. Moderate estimates project CSP could into something economic and usable was meet 3.8 percent of the world's power needs challenging to everybody,” said Jonathan in 2030 and 9.5 percent in 2050. “Everyone could see that Morocco possessed this incredible solar resource, but turning it into something eco- nomic and usable was chal- lenging to everybody.” “Politically, it was Jonathan Walters Director of Regional Programs and important for us to Partnerships with the World Bank’s optimize CSP’s MENA Region economic impact starting with the Walters, Director of Regional Programs and Partnerships with the World Bank’s Middle East and North very first project. Africa (MENA) Region. That’s why the ES- MAP study was so Mustapha Bakkoury, President of the Moroccan Agency for Solar Energy (MASEN), said that while the government was strongly committed to developing CSP, it nonetheless required solid documentation of important to us.” the benefits a solar energy industry could bring to the country. Mustapha Bakkoury, President of the Moroccan “Even though we had the conviction about CSP, we needed to mobilize public and private sector sup- Agency for Solar Energy port by showing that the potential for local manufacturing and long-term job creation was actually (MASEN) there,” Mr. Bakkoury said. To that end, ESMAP support was mobilized by the World Bank to prepare a report evaluating the op- portunities and challenges in developing local solar industries in Morocco and other MENA countries. The report’s subsequent findings were to play a catalytic role in informing the development and prepa- ration of a World Bank loan for the Ouarzazate I plant, which was approved by the World Bank’s Board of Executive Directors in November 2011. The World Bank’s US$ 297 million in funding for Ouarzazate I—US$ 200 million through the Interna- tional Bank for Reconstruction and Development and another US$97 million through the Clean Tech- nology Fund (CTF) in partnership with the African Development Bank—in turn helped leverage a further US$ 1.4 billion in project financing from a group of seven international lenders. Carried out by Ernst & Young (France) and the Fraunhofer Institute (Germany), the ESMAP-funded Assessment of the Local Manufacturing Potential for Concentrated Solar Power Projects evaluated the manufacturing and other value-added impacts CSP could bring to Morocco and other MENA countries. The ESMAP study also assessed the potential for local job creation, a thematic focus Mr. Walters said stemmed from a simple fact. “Every single time you discussed CSP with governments, non-governmental organizations or business- es in North Africa, within 5 or 10 minutes the discussion always turned to the expected employment, manufacturing and skill development impacts beyond the power plant,” Mr. Walters said. “ESMAP went about answering these important questions in a systematic, detailed fashion.” IMAGES The ESMAP study was presented in mid-2012 at a series of workshops in Morocco and Egypt attended by representatives from national renewable agencies, the private sector, and the donor community. © The World Bank The study found that Morocco and other North African countries Mr. Walters said the ESMAP study’s focus on the bottom line reso- could generate substantial income and employment from CSP nated clearly with its intended audience. deployment at scale, and that sufficient capacity existed to bring immediate gains to local manufacturers tasked with supplying spe- “The study goes country by country, manufacturing component by cialized components and services to a CSP industry. manufacturing component, and our audience of mainly engineers loved it, because engineers want to be convinced by the facts,” Mr. In addition to economic benefits from construction and civil works, Walters said. the report found that most CSP components could potentially be manufactured in MENA countries: mounting structures in the short The study also outlined how innovative concessional financing— term, followed by non-CSP-specific elements like piping, mirrors, including support from the CTF—could bring down the high up- and float glass in the medium term, and eventually more complex front investment costs of CSP, thus making the scheme more at- components, such as receivers. tractive to local and international investors. It also reassured poten- tial donors that CSP would have comprehensive impacts beyond The ESMAP study also projected that MENA countries could reap clean energy benefits and that locally produced content would not large economic benefits in the future by creating export opportuni- raise overall project costs. ties for CSP components. For this to be possible, a regional free trade arrangement for trading renewable energy components or When MASEN began a search for an operational partner to design, primary/intermediate products for renewable energy components finance, construct, operate, and maintain the Ouarzazate I plant, could contribute significantly to better market integration, acceler- Mr. Bakkoury said the ESMAP study proved instrumental in deter- ate the development of a stable and sizable CSP market, and en- mining a local manufacturing benchmark to be indicated to bidders. large the regional content in future CSP projects. In September 2012, the Saudi Arabian company ACWA Power The ESMAP study included the following findings specific to the International was awarded the contract and formed a Public Private development of a CSP industry in Morocco: Partnership (PPP) with MASEN—one of only three PPPs created in North Africa in the aftermath of the ‘Arab Spring’.  That by 2015 Moroccan firms could be producing 30 percent of the components required to generate the country’s CSP, a The development of Ouarzazate I through a PPP demonstrated the figure that could rise to 50 percent by 2020 and to 60 percent government’s clear commitment to involve the private sector in the by 2025. solar program. According to the PAD, “a successful completion of  That the production of 2,000 MW of CSP by 2020 could add a the transactions envisaged under the proposed project will estab- cumulated US$ 4.6 billion to Morocco’s economy. lish MASEN as a solid partner to private developers interested in CSP/Solar development. This transformation is essential as the  That more than 11,000 new CSP jobs—ranging from low- program requires funds well beyond the public sector financing skilled positions in construction to high-tech positions in engi- capability.” neering and management—could be created by 2020. The first 160 MW from Ouarzazate I is expected to come online in late 2014 and will help Morocco avoid 240,000 tons of CO2 a year—the same as removing 80,000 cars from the road annually. Mr. Bakkoury said the tariff from the Ouarzazate I plant is projected to be US$ 0.19 per kilowatt/hour (kWh)—one of the lowest CSP costs in the world and significantly less than the US$ 0.26 kWh originally envisioned. Morocco is currently seeking to award a contract for construction of a second plant at Ouarzazate, which when completed is expected to generate 300 MW of CSP and 40 MW of photovoltaics. The Ouarzazate II project includes a pilot export component, and ESMAP talks are underway between Morocco, France, Germany, and Spain about an agreement MISSI ON to provide subsidies so that Moroccan solar energy can compete on a level playing field with domestically produced solar energy in Europe. The Energy Sector Manage- ment Assistance Program Mr. Bakkoury said the ESMAP study had provided the necessary rationale to rally sup- (ESMAP) is a global port for the large-scale rollout of CSP in Morocco. knowledge and technical as- sistance program adminis- “Politically, it was important for us to optimize CSP’s economic impact starting with the tered by the World Bank. It very first project,” Mr. Bakkoury said. “That’s why the ESMAP study was so important to provides analytical and advi- us.” sory services to low- and middle-income countries to increase their know-how and institutional capacity to achieve environmentally sus- tainable energy solutions for poverty reduction and eco- nomic growth. ESMAP is funded by Australia, Austria, Denmark, Finland, France, Germany, Iceland, Lithuania, the Netherlands, Norway, Sweden, and the United King- dom, as well as the World Bank. IMPACT Issue 02 May 2013 The World Bank 1818 H Street, NW Washington, DC, 20433 USA www.esmpa.org esmap@worldbank.org