Spain's Solar Power Market Meets Morocco

Today, I want to expand on Spain's role in the global renewable energy boom.

You'll remember that last week I detailed the role of Spanish investors and companies in Peru's clean power expansion. As it turns out, Spain is fast becoming the hub of not only a trans-Atlantic but also a trans-Mediterranean green energy economy.

Spain's investment in South America is nothing to sneeze at, and neither are its results. Latin Business Chronicle reports that Spanish lender BBVA (NYSE: BBV) is banking on expansion of its Western Hemisphere operations to keep it growing. The bank upped its income from countries like Colombia, Chile, and even Venezuela, helping to offset weakness back in Spain where the recession has hit construction and other industries hard.

While at home the going is still tough for Spain's #2 bank (and really any bank that isn't boosting earnings by cannibalizing its own recommendations), BBVA's overseas outposts provide a glimmer of hope about future earnings for execs and investors.

For the Spanish renewable energy industry, there's a market much closer to home that we expect to provide megawatts worth of opportunities in the next few years.

I'm talking about Morocco.

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More Energy for the Land of the Moors

Morocco lies just across the Strait of Gibraltar from Spain, but it's a world away economically. Spain's economy is over 19 times the size of Morocco's, and because the industrial base is so much stronger on the Iberian Peninsula (also including Portugal), Spain consumes 10 times the amount of power that Morocco does.

The only reason Spain doesn't eat up the same proportion of power as its GDP would suggest is that Morocco's energy intensity (usage per unit of GDP) is highly inefficient.

Despite the current disparities between the two countries — or maybe because of them — in 2010, we will see Morocco take the baton from Spain in solar power generation plans against a backdrop of previous Spanish strength in the sector.

Over the past several years, the Spanish government in Madrid stimulated the global market for solar power modules and components with attractive subsidies. The goal with such incentives is to guarantee residential and commercial solar power customers that they won't hemorrhage money from high-cost installation and panel prices. Instead, feed-in tariff (FIT) plans for solar PV in Spain and Germany, and for wind energy in Denmark, effectively bring clean power technology down to coal or natgas prices.

In 2008, Spain saw solar power capacity jump by 380% over 2007 as the national subsidy quintupled, but at the end of that year Madrid hit the brakes. Spain dialed down its solar subsidy, put a limit on the amount of sun power it would subsidize (500 MW per year), and effectively gave whiplash to worldwide suppliers and module makers like Germany's Q-Cells and China's Yingli Green Energy (NYSE: YGE), who had expected a hungry Spanish solar market for years to come.

So many assumptions came crashing down in late '08, as the credit crisis shocked companies into deep job cuts, investors ran from the market's falling knife, and politicians looked for any tourniquet they could find.

Over a year after the you-know-what hit the solar panel, Morocco, which imports 95% of the energy it uses, is launching a bidding round to start building 500 MW in concentrating solar power (CSP).

Moroccan Energy Minister Amina Benkhadra announced that the first bidding round to build and supply the solar plant at Ourzazate will be held in late February, just over a month from now.

That auction could put Spain in the driver's seat as a primary producer rather than a primary consumer of solar power products.

Empty Land, Full of Promise

One downside of large-scale solar power that its detractors like to point out is just how much land a major array takes up. Yet the desert Southwest of the U.S., Spain's southern desert regions just across from Morocco, and Morocco itself possess vast, virtually uninhabitable areas where solar power plants make sense.

Though Morocco won't get to 500 MW overnight, the country's goal of drawing 38% of its power from five local solar projects will in turn draw money and technology from around the world. Japan — one place where they don't have much land to play with, let alone sun-soaked deserts — is putting up $7.4 million for photovoltaic plant in Morocco. That announcement came along with commitments to up Japanese involvement in water access and rural electrification in Morocco.

Greentech Media reports that Spanish companies Cuantum Solar, Siliken, and Fotowatio are moving into the U.S. market to offset domestic weakness, and we're sure those firms are willing to hop the ferry over to Morocco for new business, too.

Let's not forget that even though Morocco gets lumped in with the Middle East, North Africa is a distinct region with history and potential. At this week's World Economic Forum in Davos, Switzerland, Francis Beddington of emerging market investment house Insparo Capital told Reuters, "Not investing in Africa is like missing out on Japan and Germany in the 1950s, Southeast Asia in the 1980s and emerging markets in the 1990s."

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Morocco's primary industry is textiles. It won't get anywhere beyond being the European Union's poorest southern neighbor without energy. Spain has the practical and political expertise to get Morocco off the ground and even make it part of the EU's Desertec plan to draw 15% of continental electricity from North Africa by 2050. The grid linkup technology is there (high voltage direct current HVDC), and so is the resource.

You can take a peek at the future in this Desertec map from the Club of Rome:

From Brazil to Japan to Israel, Spain, and Morocco... it's time to tie all these international experiences in together for comprehensive energy development action.

Regards,

Sam Hopkins
International Editor

P.S. From February 3-5, Nick Hodge and I will be at ReTech, the premier technology conference and exhibition in Washington, D.C. There, I'll be focused on the "International Markets and Competition" track, one of six different "courses" over 5,000 attendees will follow to get updates on the state of the global industry.

I'm looking forward to catching up with old company contacts and meeting new ones, as well as getting a clear picture of how different regions and companies are adjusting to tough financial conditions to keep their clean energy progress rolling. You read my report from the ACORE Phase II Renewable Energy Policy Forum direct from Capitol Hill this fall, and I expect the info from ReTech to be just as vital for investors. There are still spots open if you want to attend ReTech. Find out more here.