Mexico had a record year for PV installations in 2018. What will it take to continue this installation pace?
Given the new political view of the government, it is important to continue to have rules that can create an atmosphere of certainty that promotes private, national and international investment in the electricity sector. In particular, when it comes to solar photovoltaic (PV) generation, it is necessary for the industry to insist on Mexico meeting its Paris Agreement climate goals and mitigating the use of imported fossil fuels.
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?
In the medium term, it is expected that most investments in private renewable energy projects can be channeled through Mexico’s Wholesale Electricity Market (MEM). It is essential to strengthen the operation of the MEM in the short term with public policies that improve its transparency in the formation of efficient margin prices. We understand that the Energy Regulatory Commission (CRE) is working on new rules that point towards this goal. MEM’s permanence is fundamental for Mexican development of renewable energy. So far, we have no knowledge that the current government intends to dismantle this market.
How can the international investors approach the Mexican market? What value can the local companies offer to guarantee the success of their potential projects?
Due to its geographical location, Mexico is a highly attractive country for solar. 85% of its territory is optimal for generating solar through large-scale projects or distributed generation. At the same time, national electricity demand is growing at an annual average rate of 3.2%. This creates a positive development environment for solar projects in the country. My main recommendation for international investors who are interested in Mexico is to quickly develop a permanent presence in the country. To accelerate this process, it is ideal to establish joint ventures with local players to minimize the time-to-market for the development of real opportunities and profitable projects.
What are your personal predictions for the future of the Mexican solar market over the next 12 months?
The expected annual growth is approximately 2.5 GW of installed PV capacity in Mexico, for both large scale and distributed generation. With the arrival of the new administration, it is likely that this dynamic may slow down a bit, as they announce new public policies in the sector. However, we are confident that solar energy will maintain its growth trend in the long run, and the market will continue to strengthen as it has up to today.
What steps will need to be taken to achieve Mexico’s 35% renewables energy goal by 2024?
The competitiveness of renewable energy is the best way for Mexico to achieve these goals. As an example, in the third auction, a solar project reached a price of $18.93 US/MWh, which was a world record. The strengthening of the wholesale electricity market will trigger profitable projects at highly competitive prices, which will continue to contribute to the diversification of the power generation portfolio. At the same time, the commissioning of solar projects that are under construction –about 9 GW in total of installed capacity by 2021– will also contribute to fulfilling Mexico’s commitment to the Paris Agreement.
What technology trends are shaping the global solar supply chain? How will this affect domestic deployments?
In the medium term, large-scale storage technology will be essential in promoting the growth of solar energy deployments and optimizing the fragile transmission network of the national electricity system. The stability of this network will become more critical in the upcoming years, and storage solutions with large-scale batteries (BESS) will play a fundamental role in expanding renewable energy deployments nationwide.