A restructured Moroccan electricity market and its interaction with the Iberian power market

Market deregulation represents a prospective evolution for the Moroccan electricity industry, potentially leading to the establishment of a wholesale electricity market. This deregulation could pave the way for coupling the Moroccan and Iberian markets as they are already interconnected. Our paper anticipates this possible development and investigates the effects of the interconnection between the Iberian and a hypothetical Moroccan wholesale power market under market coupling. We specifically investigate prices and their dynamics, cross-border exchange and its flow, congestion and its rents, emissions, and social welfare. Different scenarios of interconnection capacity are simulated for the years 2019, 2021, and 2030. The years 2019 and 2021 are simulated both as counterfactuals, and as a historical benchmark, allowing for a comparative assessment of future developments projected for 2030. Our results indicate substantial welfare and environmental benefits from the existing interconnection, with further potential benefits attainable by expanding its capacity, which are especially massive in the 2030 horizon. Our findings likewise confirm that complementarity between interconnected markets enhances welfare and reduces price volatility, and that welfare benefits from interconnections are largely explained by autarky cross-border price differentials. Emission reductions are driven by the larger production and exports of renewable energy by the Iberian market.