Morocco-UK subsea power link project nears construction

From the newsletter

The project aiming to connect Morocco & the UK with a massive undersea power cable, is moving closer to reality. Dave Lewis, chairman of Xlinks, a UK-based renewable energy company, told Bloomberg that a final investment decision is expected in 2025. The project, which will cost around $30 billion, will go live in 2031.

• The project envisions the construction of 11.5 GW of solar and wind power and 22.5 GWh of battery storage in Morocco. This will be complemented by a 3.6 GW high-voltage direct current (HVDC) subsea cable to transmit the generated electricity to the United Kingdom.

• Once complete, the project will provide 8% of the UK's current electricity needs (3.6 GW), enough to power 7 million homes.

More details

• Over the last 10 years, Morocco has focused on renewable energy investments, more than doubling its renewable energy capacity from 2.1 GW to 5.4 GW. This places it behind only South Africa at 10.6 GW and Egypt at 6.7 GW. Its proximity to Europe is opening up more export opportunities that Morocco is eager to tap into. It plans to invest over $2.7 billion in the energy sector in the next five years.

• The country has been developing large-scale renewable energy projects such as the Noor Ouarzazate Complex, which houses the world's largest concentrated solar power (CSP) project, and its integrated wind programme. Morocco aims to achieve a 52% share of renewable energy in its total power generation by 2030, with a further goal of reaching 80% by 2050.

• The Morocco-UK interconnector will position Morocco as a green hub and enable it to unlock renewable energy export potential to create economic and social value. The wind and solar plants will be located in an area with twice the solar intensity of the UK and consistently strong winds. Morocco recognises the value of its wind and solar resources and has ambitious plans to export this renewable power to Europe.

• This project offers immense benefits to both Morocco and the UK. For Morocco, the project stands to generate income from site leases, export tax revenue, job creation, and industrial development through local procurement.

• For the UK, the project will help stabilise the grid, offer easily dispatchable power, and reduce wholesale electricity prices by 9.3% by displacing expensive, volatile gas. It will also reduce the UK's CO2 emissions by 9% in its first year of operation and contribute to the UK's target of an 81% carbon reduction by 2035, while helping to meet the anticipated 19% increase in demand from 2030 to 2035.

• Appointed financial advisors, J.P. Morgan and Societe Generale, are confident the project will secure the necessary financing. There is strong interest from banks, export credit agencies, development finance institutions, and institutional lenders.

• To date, the project has attracted $124 million in development funding from world-class investors like TAQA, TotalEnergies, Octopus, GE Vernova, and AF.

Our take

• Morocco has plenty of renewable energy potential, with solar irradiation being one of the highest in the world, and the potential for offshore wind could reach over 200 GW. This is more than enough to meet its local demand. The export electricity market is a big opportunity, particularly for the industrialised European markets that guarantee long-term demand. Yes, Morocco can export to other African countries through the regional power pools, but the European market is much more attractive.

• Attracting capital to such mega-projects can sometimes be a challenge. Commercial viability is key. The project seems to have cleared this obstacle based on the interested players wanting to invest. This is something lacking in many mega-projects in Africa due to political interests and interference. Morocco's leadership has steadied the ship in this regard.

• Bilateral energy trade deals are beneficial when there is minimal political interference, but they become risky when politics are involved. The UK and other European countries have suffered from gas supply cuts from Russia due to political differences. Energy security is crucial, and countries should approach such international energy trade deals cautiously to ensure they withstand the test of changing regimes.