There are at least four lessons for developing countries from Morocco’s experience.

First, an incremental approach can be pursued in an environment where legacy entities can obstruct sudden, radical and ‘big-bang’ reforms. Morocco’s policy makers were selective in the aspects of the power sector market reforms they adopted. There was a clear sense of direction in the sector and capable institutional arrangements. Policy makers explicitly refused to fully privatize state agencies in the early 2000s. They, rather, opted for gradual liberalization through a series of laws that introduced IPPs in a process they could manage and control. They were also selective in their approach to privatizing electricity distribution, through concessions to AMENDIS, LYDEC and REDAL, that reinforced existing territorial monopolies, rather than full or partial divestiture of these municipal utilities. This gradualism also characterizes the development of renewable energy. Grid access was slowly granted to renewable energy producers to minimize disrupting the influence and market share of stakeholders like ONEE, certain ministries and the distribution companies. MASEN’s influence as a stakeholder could also be affected by further liberalization of renewables.

Second, institutional arrangements in Morocco are different from those prescribed by the 1990s power sector reform model, but nonetheless perform the necessary functions in practice. In introducing private participation in generation for instance, Morocco’s institutional arrangements provided credible commitments to investors through the instrument of PPAs and other risk guarantees. Similarly, in expanding electricity access, ONEE played a coordination role for domestic and international stakeholders for PERG. This aligns with recent research that the functions that institutions perform should be given more weight rather than the form they take.<sup>78</sup> Despite not conforming to the textbook model, Morocco’s power sector institutional arrangements performed the necessary commitment, coordination and cooperation functions to achieve energy sector objectives of attracting private investments to boost installed generation capacity and output.

Third, the ability to pursue socio-economic objectives in the power sector is contingent on having a strong and growing economy. Morocco’s power sector is characterized by significant cross-subsidies between electricity and water services at the municipal level, between urban and rural customers, and between different urban customer groups. This has been possible due to the country’s strong economic performance averaging 4.2 percent over the past two decades, and the existence of a relatively large population of electricity consumers with the ability to pay. Nevertheless, these socio-economic considerations have taken their chronic toll on the financial health of ONEE, which has nonetheless proved capable of balancing these conflicting considerations.

Finally, the implementation of the renewable energy strategy and diversification of energy supply within the prevailing institutional configuration has created parallel tracks in the sector. The first track is comprised of the legacy institutions operating a hybrid market model, with relatively little transparency and until recently without an autonomous regulator, but capable of delivering specific sector goals. The second track has developed to implement the country’s renewable energy strategy through private sector participation,

> 78 According to the World Bank’s World Development Report 2017, what drives policy effectiveness is not how institutions look or seem, but the functions they perform in terms of providing commitment, enabling coordination and facilitating cooperation (World Bank, 2017, p. 5).

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