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"Solar Market Outlook" with Maria Chea, Solar Analyst, Americas at IHS Markit

Mexico had a record year for PV installations in 2018. What will it take to continue this installation pace? 

Mexico installed 2.8 GW in 2018, the main driver for the volume of installations was due to the project completion deadlines of past tenders. IHS Markit expects the country to install between 2 to 2.5 GW every year up until 2021, which is when we will begin to see a decrease in installation volumes because of the lack of contracted projects caused by the cancellation of the fourth long-term energy auction. For Mexico to continue installing high volumes of PV beyond 2021, the private PPA and wholesale market will need to fill this void. 

 

What are some of the most promising programs or policies that will support the future of solar development in Mexico?How do you think the government’s current approach will impact the market and how might this change?  

The government of Mexico created the Clean Energy Certificate (CEL) scheme to support renewable energy adoption. “Suministradores,” energy providers in the regulated and unregulated markets, and large consumers are required to obtain CELs. By the end of this year, 5.8% of their electricity will need to come from clean energy sources and the requirement will continue to increase every year until 2022. Net metering and self-generation policies have helped drive the adoption of PV systems in the distributed generation segment of the market. As of February 2019, distributed generation installations reached over 560 MW. 

   

What are your personal predictions for the future of the Mexican solar market over the next 12 months? 

Mexico will have stable growth up until 2021, IHS Markit forecasts that the country will install nearly 3 GW by the end of 2019. The utility-scale segment will constitute about 86% of total installations while residential and C&I segments will make up the remainder. The residential segment will continue to see an increase in PV installations as electricity prices continue to be high, particularly for users with intensive consumption profiles. 

 

What steps will need to be taken to achieve Mexico’s 35% renewables energy goal by 2024? 

The cancellation of the fourth auction will affect the Clean Energy Certificate (CEL) market and could cause a delay in Mexico achieving its clean energy goal. In 2018, there were a total of 6.6 million CELs awarded. IHS Markit expects that the number of CELs awarded in 2019 and 2020 will continue at a similar level, but ultimately lower in size beyond 2021 due to the cancellation of the fourth auction. To meet its clean energy goal, the government will need to find a way to maintain similar renewables installation volumes to reach its 35% goal and its 13.9% CEL requirement by 2022. 

 

What technology trends are shaping the global solar supply chain? How will this affect domestic deployments? 

Bifacial modules are starting to become more popular for utility-scale installations. In Mexico’s Tlaxcala state, a 232 MW plant being developed by Enel Green Power already started construction and is installing bifacial modules. This technology offers lower installation costs on a per watt basis which could be beneficial for Mexican projects, particularly in areas with high irradiation levels or in desert regions.  

Solar tracking systems will continue to gain traction in Latin America, as we are seeing more projects adopting these mounting systems to boost energy production. Starting in 2017, string inverters gained higher installation rates in utility-scale projects globally, particularly small-scale projects. Energy storage will become an interesting system component for the Mexican market particularly in the utility segment; however, proper regulations are yet to be set in place. 

 

As Mexico is prone to seismic activity, what can solar and storage technologies offer over carbon-based competitors when it comes to grid resilience? 

Although this falls beyond IHS Markit’s scope of research, at a high level PV may offer lower reconstruction costs and ease of replacing components compared to other carbon-based technologies, i.e. replacing a central or string inverter, or even a module array. Moreover, whereas a coal or natural gas power plant may need to shut down after a seismic activity due to potential hazards, PV systems do not pose the same safety risks as other carbon-based competitors.