Dubbed "the door of the desert", the picturesque Moroccan city of Ouarzazate is making a name for itself as something much more than a staple of backpackers' bucket-lists. It is the site of the world's largest concentrated solar power plant.
Named after the Arabic word for light, the Noor 1 solar power plant, with a maximum capacity of 160 megawatts, started producing electricity in February. Once completed in 2019, the entire Noor-Ouarzazate project will cover up to 18 per cent of Morocco's annual electricity generation. It will save the country one million tonnes of oil equivalent and prevent the emission of 3.7 million tonnes of CO2.
The Noor plant is part of Morocco's ambitious Solar Energy Programme, which will see five solar power projects spread over 10,000 hectares built by 2020 at a cost of $9 billion. According to the Global Trends in Renewable Energy Investment 2016, released by the UN Environment Programme (UNEP) last month, Morocco invested more than $2 billion dollars in renewable energy in 2015.
In May this year, countries will meet in Nairobi for UNEA 2 - the world's de facto "Parliament for the Environment" - to discuss ways of fighting climate change by delivering clean, affordable energy for everyone. Finding means of financing the developing countries' renewable energy ambitions will be crucial to achieving the promise of the Paris Agreement – to keep the global warming to well below 1.5°C.
Morocco's solar project is underwritten by a number of financial institutions, including the World Bank, the African Development Bank, the European Investment Bank, the German KfW Development Bank and the French Development Agency. Additional support is provided by the Climate Investment Funds.
This international finance has been a critical factor in reducing the project's risk and enhancing its financial viability by reducing the cost of investment and, as a consequence, the cost of electricity. Morocco, which will be hosting the next global climate conference, COP 22, is aiming to become a leading renewable energy producer in the region and is exploring the possibilities of exporting its clean electricity to Europe.
Between them, Morocco's planned solar and wind projects could produce up to 42 per cent of the country's electricity by 2020. Reaching this goal would be a game-changer for the Kingdom, which currently imports 96 per cent of its energy, making it the largest importer in North Africa.
Across the border, Tunisia is also looking to the abundant sunlight as a source of energy, eyeing a 30 per cent clean power generation target by 2030. One of the routes the country is pursuing to harness this resource is the use of rooftop solar water heaters.
As in many parts of the world, however, the purchase price for a solar water heater can be many times the total monthly earnings of most households. This high upfront cost presented a significant financial barrier for many families, even though a solar water heater can pay for itself in as little as four years.
Despite this short payback time, loans were often difficult to obtain because the banks were reluctant to lend for what they saw as an unfamiliar energy technology. Households also tended to favour the heavily subsidized gas-fired units.
To address this barrier, UNEP initiated the Mediterranean Investment Facility for renewable energy and energy efficiency technologies in Tunisia, Montenegro, Morocco and Egypt. The facility helps local governments and financial institutions offer two key incentives – a reduced rate reduction and a guarantee for commercial loans.
The mechanism offers five-year loans for residential solar water heaters with repayments made through a customer's monthly electricity bill. It also includes a 20 per cent subsidy of the initial cost, which makes solar water heaters competitive with natural gas.
Through the facility, the initial $2.2 million funding from the Italian Ministry for Environment, Land and Sea has leveraged a total investment of more than $200 million. Inspired by the success of the project, other Mediterranean countries – Montenegro and Egypt – have replicated it at home.
Whether building the world's largest solar power plant or investing in a household water heater, financing will be key to achieving the ambitious goals set by the Paris Agreement. When countries meet at UNEA-2 next month to find ways of mobilizing the billions of dollars needed for investments in sustainable development and climate action, Morocco's and Tunisia's experiences will stand as shining examples of the kind of returns that these investments can produce.