1. MOROCCO NARS/ICARDA CRP2 WORKSHOP, RABAT MAY 22, 2015 IS SOLAR ENERGY A VIABLE OPTION TO REPLACE LIQUEFIED PETROLEUM GAS? A CASE OF IRRIGATED AREAS USING GROUNDWATER IN MOROCCO Serghini H., Roberto T, Ampaitepin S., Laamari A. and Aden A. 2. CONTENT 1. Challenge with LPG use; 2. Domestic price and subsidy energy policy; 3. Survey sample, study sides and results; 4. Scenarios simulating spreading out of LPG use in Morocco; 5. Solar energy investment costs, comparison with LPG costs, Net Present Value; 6. Valuation of CO2 Emissions; 7. Conclusions and recommendations. 3. CHALLENGE Subsidy to LPG LPG subsidy introduced long ago purpose provide poor households, with affordable source of energy to incentive to switch away from wood and charcoal. Yet, unexpected application farmers started to use LPG for irrigation purposes; In 2014 International price of a 12-litre bottle of LPG was $14 (about 100 DH). Moroccans pay just 40% of that amount as the government fixed a retail price of $5.60 (40 DH) per bottle; Almost 100% percent of LPG consumed in Morocco is imported, and hence it is highly exposed to international price fluctuations; No official estimation of LPG use for pumping irrigation water. Field observation and survey (87%) suggest that LPG used as primary energy source is spreading out; Meeting of the Moroccan Parliament (Rabat - December, 2012) the use of solar panels as an alternative to LPG: (i) Shrinking government subsidy resources; (ii) Farmers needs to secure energy for irrigation purposes; and (iii) Concerns for environmental aspects. 4. CHALLENGE: SUBSIDY TO PETROLEUM PRODUCTS OVERTIME HAS INCREASED!!! * Preliminary data. Source: Cour des comptes, Rapport sur Le systme de compensation au Maroc Diagnostic et propositions de rforme, janvier 2014. 48.3 Billion DH (6,350 million US$) 1.5 Billion DH (197 million US$) 36 Billion DH (4,737 million US$) 5. SUBSIDY LEVEL BY SOURCE OF ENERGY Source: Ministre de lEconomie et des Finances, 2014. LPG Diesel Gasoline DH/Kg % of the price DH/L % of the price DH/L % of the price 2008 5.2 157 1.6 22 1.0 9 2009 3.0 91 0.4 6 0.1 1 2010 5.4 161 2.0 28 1.2 12 2011 7.0 210 3.9 55 2.7 27 2012 7.5 224 4.0 49 2.3 19 2013 6.7 201 3.1 38 1.2 10 Subsidy to LPG remains relatively constant, while subsidy to diesel and gasoline tend to decrease. 6. SURVEY Two Moroccan regions (112 households surveyed): 1) Sidi Laidi (Settat Province of the Chaouia-Ouardigha region) 43 farmers randomly selected 2) Ouled Zaydouh (region in Fqih Ben Saleh province) 69 farmers randomly selected Survey streamlined 14 discussion questions around six areas: 1) Farm characteristics; 2) Irrigation facilities; 3) Water storage; 4) Cost of pumping; 5) Energy used by the household; and 6) Potential use of solar energy for irrigation. and 7. SURVEY RESULTS NUMBER AND SIZE OF FARMS IN SIDI LAIDI AND FQUIH BEN SALEH Source: Own elaboration based on solar panel survey, 2014. Region Indicator < 5 ha 5 and < 10 ha 10 and < 20 ha 20 ha All sizes Sidi Laidi Average area (ha) 2.8 6.3 12.5 30.6 11.4 St. Deviation 13.1 Number of farms 14 9 12 8 43 Number of farms (%) 32.6 20.9 27.9 18.6 100 Maximum size (ha) 4 8 18.5 80 80 Minimum size (ha) 1.5 5 10 20 1.5 Fquih Ben Saleh Average area (ha) 2.9 6.1 13.5 30 9.6 St. Deviation 8.7 Number of farms 17 30 14 8 69 Number of farms (%) 24.6 43.5 20.3 11.6 100 Maximum size (ha) 4.7 9 19 40 40 Minimum size (ha) 1.2 5 10 22 1.2 8. Region One Two Three Four Five Six Total Average Number of farmers Sidi Laidi 62.8 25.6 2.3 4.7 2.3 2.3 100 1.7 Fquih Ben Saleh 73.9 21.7 1.4 1.4 0 1.4 100 1.4 1 AVERAGE SIZE OF FARMS ACCORDING TO LAND OWNERSHIP Source: Own elaboration based on solar panel survey, 2014. Region Private Collective Rented Average farm size Sidi Laidi Ha 6.0 2.4 3.0 11.4 % 52.0 21.8 26.2 100.0 Fquih Ben Saleh Ha 6.2 0.5 2.9 9.6 % 65.7 4.7 29.6 100.0 1 Source: Own elaboration based on solar panel survey, 2014. Number of wells owned by farmers (percentage) 9. AVERAGE AGE OF WELLS Source: Own elaboration based on solar panel survey, Source: Own elaboration based on solar panel survey, 2014. Average depth of the wells Range Sidi Laidi Fquih Ben Saleh % Average age of wells % Average age of wells < 10 years 38.1 4.0 12.4 7.4 10 and < 20 years 31.7 14.7 47.2 14.5 20 and < 30 years 22.2 22.4 22.5 23.5 30 years 7.9 36.4 18.0 35.9 All ages 100 14.1 100 19.5 1 Well depth in meters Sidi Laidi Fquih Ben Saleh Number of wells (%) Average depth Number of wells (%) Average depth < 40 m 19.7 31.4 11 19 40 and < 50 m 19.7 42.2 11 43 50 and < 60 m 15.5 52 38.5 77.1 60 m 45.1 62.8 39.6 140.2 Total 100 50.9 100 91.9 10. PUMPS LIFETIME DURATION, AVERAGE PRICE AND DEPRECIATION Source: Own elaboration based on solar panel survey, 2014. Region Age < 10 years 10 and < 20 years 20 and < 30 years 30 years All Sidi Laidi Number of pumps in % 1.3 68.4 29.1 1.3 100.0 Pump average price (DH)* 25,000 19,709 21,522 30,000 20,434 Average pumps' lifetime in years 8.0 10.5 20.4 30.0 13.6 Depreciation DH/year 3,125 1,870 1,055 1,000 1,500 Fquih Ben Saleh Number of pumps in % 3.3 55.6 27.8 13.3 100.0 Pump average price (DH)* 15,667 22,630 28,588 28,667 24,858 Average pumps' lifetime in years 5.3 11.5 21.0 32.6 16.7 Depreciation DH/year 2,938 1,971 1,361 880 1,486 11. ENERGY COST OF PUMPING GROUNDWATER (PERCENTAGE OF TOTAL WELLS) Source: Own elaboration based on solar panel survey, 2014. Cost levels Sid Laidi Fquih Ben Saleh LPG LPG Diesel Less than 0.20 DH/m3 8.8 10.3 - 0.20 and < 0.30 DH/m3 44.1 39.7 - 0.30 and < 0.40 DH/m3 38.2 27.9 - 0.40 and < 0.50 DH/m3 2.9 10.3 9.5 0.50 and < 0.60 DH/m3 2.9 5.9 33.3 0.60 DH/m3 or more 2.9 5.9 57.1 Total quantity of wells (%) 100 100 100 Average cost (DH/m3 ) 0.30 0.33 0.67 12. SCENARIOS SIMULATING SPREADING OUT OF LPG USE IN MOROCCO Source: Own elaboration based on solar panel survey, 2014. Scenario 1: 30% of private irrigation uses LPG; Scenario 2: 50% of private irrigation uses LPG; Scenario 3: 75% of private irrigation uses LPG; Scenario 4: 100% of private irrigation uses LPG. Range Sidi Laidi Fquih Ben Saleh Less than 100 m3 /cylinder 14,0 21,8 100 and < 150 m3 /cylinder 51,2 36,4 150 and < 200 m3 /cylinder 27,9 29,1 200 m3 /cylinder or more 7,0 12,7 Total 100 100 Average abstraction (m3 /bottle of LPG) 140 124 1 Groundwater abstraction per region and farmer (percentage) 13. Scenario: Percentage of private irrigation using LPG) Amount of groundwater pumped using LPG (billion m3 ) LPG subsidy (billion DH) Percentage increase of 2013 LPG subsidy Scenario 1: 30% 1.2 0.7 4.9 Scenario 2: 50% 2 1.2 8.1 Scenario 3: 75% 3 1.9 12.2 Scenario 4: 100% 4 2.5 16.3 1 ENERGY COST OF PUMPING GROUNDWATER (PERCENTAGE OF TOTAL WELLS) Source: Own elaboration based on solar panel survey, 2014. Impact of shifting from diesel to LPG Region For the needs of Yes No No response Total Sidi Laidi Households 7.0 90.7 2.3 100 Pumping 0.0 90.7 9.3 100 Fquih Ben Saleh Households 6.9 87.5 5.6 100 Pumping 0.0 91.7 8.3 100 1 Source: Own elaboration based on solar panel survey, 2014. Solar energy current use 14. SOLAR ENERGY INVESTMENT, AND COMPARISON BETWEEN LPG AND SOLAR SYSTEM COSTS Source: Own elaboration based on interview to solar panel provided in Rabat-Morocco, September 2014. Solar energy installation system cost Case Well depth (m) Groundwater abstraction (m3 /day) Total cost of the investment (DH) Annual depreciation of the whole investment (DH) 1 30 22 25,068 2,062 2 200 140 567,312 34,492 3 49 340 293,040 18,622 4 56 65 89,296 5,982 5 80 100 188,802 12,952 6 30 50 49,760 3,790 7 90 30 89,296 5,982 8 120 153 358,017 23,199 9 46 192 330,000 18,600 Average 78 121 221,177 13,965 1 15. Source: Own elaboration based on interview to solar panel provided in Rabat-Morocco, September 2014. Cost of pumping water by case Case Well depth (m) Annual quantity of groundwater pumped (m3 /year) Annual quantity of water pumped by m of depth Annual cost (DH) Average cost of one m3 (DH) Cost of one m3 out of one meter of depth (DH) 1 30 10,039 301,170 2,062 0.21 0.0068 2 200 63,887 12,777,400 34,492 0.54 0.0027 3 49 155,153 7,602,497 18,622 0.12 0.0024 4 56 29,662 1,661,072 5,982 0.20 0.0036 5 80 45,633 3,650,640 12,952 0.28 0.0035 6 30 22,817 684,510 3,790 0.17 0.0055 7 90 13,690 1,232,100 5,982 0.44 0.0049 8 120 69,819 8,378,280 23,199 0.33 0.0028 9 46 87,616 4,030,336 18,600 0.21 0.0046 16. Source: Own elaboration based on interview to solar panel provided in Rabat-Morocco, September 2014. Cost of one cubic meter per one meter depth (DH) 0.0000 0.0010 0.0020 0.0030 0.0040 0.0050 0.0060 0.0070 0.0080 0 50 100 150 200 250 Costofonem3outofonemeter depth(DH) Well depness (m) Higher costs Lower costs 17. Source: Own elaboration based on solar panel survey, 2014. Cost of pumping one cubic meter of groundwater Liquefied gas (DH) Solar energy (DH) Difference (%) Sidi Laidi 0.30 0.20 33.3 Fquih Ben Saleh 0.33 0.13 60.6 1 Subsidy to solar systems (simulation scenario) Source: Own elaboration based on solar panel survey, 2014. Estimated quantity of groundwater currently pumped (billion m3 ) Number of needed solar panels Cost of acquiring solar panels (million DH) Budget for 50% Subsidy (million DH) Allocation of 50% of the gain from switching to solar energy (million DH) Number of years to cover all pumped water by solar energy 4 31,950 6.6 3.3 371 9 18. Income and cost structure of representative farmer Crop Income (DH) Cost (DH) Net revenue (DH) Production area (ha) Alfalfa 4,125 1,276 2,849 1.25 Corn 54,089 12,402 41,687 4.00 Olive tree 52,500 2,501 49,999 2.50 Potato 525 2,485 - 1,960 0.25 Onion 1,300 1,125 175 0.50 Sesame 3,125 1,088 2,038 0.50 Pepper 2,875 8,392 - 5,517 0.50 Citrus 1,200 1,500 - 300 1.50 Total agriculture 119,739 30,769 88,970 11.00 Source: Own elaboration based on Benchmark survey data (ICARDA, 2010). Net Present Value (NPV) analysis 1 - (1+r)-t r x - ICNPV = 19. Indicator NPV1 NPV2 NPV3 NPV4 NPV5 Income reduction (%) 10 20 30 40 50 New income (DH) 107,765 95,791 83,817 71,843 59,869 New net revenue (DH) 76,996 65,023 53,049 41,075 29,101 New NPV (DH) 108,261 57,030 5,798 45,434- 96,665- Change in r (%) 30 35 40 45 50 New NPV (DH) 73,830 32,395 983 23,582- 43,290- Sensitivity analysis, reductions in income and increases in discount rate Source: Own elaboration based on Benchmark survey data (ICARDA, 2010). Estimated NPV investment on solar energy DH 159,493 (about US$ 20,985) investment would be profitable Discount rate (%): r = 0.23 Time period (years): t = 20 Initial investment (DH): I = 221,177 Net income (DH): C = 88,970 Net Present Value (DH): NPV = 159,493 20. VALUATION OF CO2 EMISSIONS : ENVIRONMENTAL FRIENDLY AND ENERGY SAVING FROM APPLYING SOLAR ENERGY IN PUMPING GROUNDWATER: A CASE STUDY IN MOROCCO CO2 analysis: Emissions Source: Own elaboration based on solar panel survey, 2014. Parameters LPG Diesel Sidi Laidi Fquih Ben Saleh Sidi Laidi Fquih Ben Saleh Annual Consumption (kg or lt /year) No. of farmers 51,040 39 165,290 56 7,400 2 72,797 16 CO2 emission per area (kg-CO2/ha/year) Equivalent to emission amount of passenger cars /year 425 19 477 61 1,397 4 972 44 Estimation at national level Parameters LPG Diesel CO2 emission per Total Area Equipped for Irrigation (million kg-CO2/year) Equivalent to CO2 passenger car emissions (number) Share of all passenger cars in Morocco (%) 676.4 153,006 7.13 1,457.9 329,773 15.37 21. VALUATION OF CO2 EMISSIONS : ENVIRONMENTAL FRIENDLY AND ENERGY SAVING FROM APPLYING SOLAR ENERGY IN PUMPING GROUNDWATER: A CASE STUDY IN MOROCCO ( CONT.) CO2 analysis: Emissions MJ/ha/year= Megajoules per hectare per year. TJ/year = terajoules/year Source: Own elaboration based on solar panel survey, 2014. Parameter LPG Diesel Sidi Laidi Fquih Ben Saleh Sidi Laidi Fquih Ben Saleh Net Heating Value (NHV) per Area (MJ/ha/year) Equivalent to 60-watt electric bulb (bulbs/year) 6,531 8 18,976 24 7,332 9 13,206 17 Estimation at national level Parameter LPG Diesel NHV per Total Area Equipped for Irrigation, (TJ/year) Equivalent to 60-watt electric bulb (million bulbs/year) 10,389 13 19,810 25 22. Valuing Carbon & Carbon Trading Do you know Carbon Emission can be traded in the market? How Agriculture can involve in the carbon trading? 23. CONCLUSIONS AND RECOMMENDATIONS The results of the survey implemented in Sidi Laidi and Fquih Ben Saleh suggests there is a trend to widespread the use of LPG (cost is much less than diesel). This is encourage by the fact subsidy to diesel is shrinking, while keeping changeless subsidy to LPG. If LPG use to pump groundwater widespread to 30% of private lands, impact on government subsidy would be 0.7 billion DH (about 92 million dollars). If it is used in 100% of irrigated lands subsidy would grow by 2.5 billion DH (about 329 million dollars); We estimated that in average solar energy is between 33.3% and 60.6% cheaper than LPG; NPV estimations suggest investing in solar energy is profitable. However, sensitivity analysis indicates the uncertainty and risk associated to solar energy. Government might need to consider providing important subsidies to purchase solar systems; If farmers eventually adopt solar energy, the government should not expect that LPG system is completely abandoned. 24. CONCLUSIONS AND RECOMMENDATIONS (CONT) Environmental evaluation of CO2 emissions from LPG and diesel suggests that diesel contaminates more than LPG; The level of LPG CO2 emission emerging from pumping groundwater is equivalent to the emissions that 7.13% of all passenger cars in Morocco generate in one year. In the case of diesel, CO2 emissions out of pumping groundwater would be equivalent to those generated by 15.37% of all passenger cars in Morocco; Switching from LPG or diesel to solar energy would mean saving the equivalent amount of energy spent by13 to 25 million 60-watt electric bulbs (depending on the type of fuel - LPG or diesel- that is replaced). 25. CONCLUSIONS AND RECOMMENDATIONS Once the solar energy is installed, the cost of pumping water is almost zero. Farmers may be tempted to overuse irrigation water and to extend their irrigated surface As a consequence, the depletion of groundwater may be accelerated; The size of the solar energy installed should correspond to the capacity of wells and the needs of plants; The government should, as requirement, implement groundwater meters to control the amount of groundwater pumped, and to apply costing to groundwater to make it sustainable in the long term. This measure is very challenging to implement but it is the only way to save the groundwater; More research on solar energy and irrigation in the frame of 26. THANK YOU MOROCCO NARS/ICARDA PARTNESHIP COORDINATION MEETING