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Escalating Costs Threaten Morocco-UK Green Power Project's $30 Billion Price Tag
In a recent update, Xlinks First, the investment company overseeing the ambitious Morocco-UK Power Project, revealed a substantial upward revision in the estimated construction cost for the colossal endeavor. Originally projected at £20 billion ($24 billion), the current estimates now range between £22-24 billion ($27-$30 billion), marking a staggering increase.
Furthermore, the estimated strike price for the project, intended to deliver green energy from Morocco's Southern Provinces to power homes in the United Kingdom, has also experienced a sharp rise. Originally calculated based on 2012 pricing, the strike price is now anticipated to fall within the range of £70-80/MWh.
James Humfrey, CEO of Xlinks First, attributed these adjustments to the inevitable influence of macroeconomic forces. "Our new guidance on the Morocco – UK Power Project strike price is broadly in line with what we are seeing in the wider market, and is caused by the impact of macroeconomic factors," he noted.
Approximately 60% of the cost increase can be attributed to global events affecting the supply chain, such as market-wide spikes in raw material and energy costs, coupled with a surge in global demand for renewables. The remaining 40% is directly tied to macroeconomic effects, with interest rates being the primary driver.
Despite these challenges, Xlinks First remains steadfast in its commitment to delivering the project, which aims to meet 8% of the UK's electricity demand with clean energy. "We continue to make good progress in raising the private capital needed to deliver the project, as well as constructive dialogue with key stakeholders, including the UK's Department for Energy Security and Net Zero," Humfrey emphasized.
The final determination of the strike price will fall under the purview of the UK's Department for Energy Security and Net Zero, and the company's guidance is subject to change as the project progresses.
The escalating costs pose a significant hurdle for the Morocco-UK Power Project, which was initially envisioned as a groundbreaking initiative to leverage Morocco's abundant renewable resources to support the UK's transition to a greener energy future. As Xlinks First navigates the complex interplay of macroeconomic forces, the project's future hangs in the balance, with the ultimate success hinging on the ability to overcome these formidable financial challenges.