30 September 2015



Mexico’s electricity reforms still on track to boost solar

Author: Mike Stone, Solarplaza

Concerns over the potential of the Mexican solar market appear to have been overstated, according to insiders.

Enrique Nieto Ituarte, director of sustainable projects for Nafinsa Mexico, said: “The energy reform is on track with the timing the government is targeting.”

Worries about Mexico’s market reform emerged after the Mexican government had set about launching legislation to break up state-run monopolies and, it said, make it easier for outside energy companies to compete in the country.

Although the focus was very much on the chopping up of big oil firms, the creation of new market rules was of big interest to the renewables sector. These new regulations should allow non-discriminatory access to the grid for all comers.

In addition, the government said it would be promoting renewables, with the goal of reaching 35% clean energy by 2024… and an amazing 60% by 2050.

At the time, many were impressed. “Mexico’s energy reform is a real revolution,” enthused Ignacio Sánchez Galán, chief executive of Spanish energy group Iberdrola. But a few months later, grumbling could be heard. Despite Mexico’s leading role in Latin America's solar markets, investing and developing PV projects remained difficult - the main obstacles being how the regulator, the Comisión Federal de Electricidad, would handle who could get access to the market.

However, several insiders in the Mexican renewables industry gave a more optimistic view of the situation. ANES (the National Association for Solar Energy) acknowledged that last year “the number of solar companies operating in Mexico has leapt to around 600 – a 1,200% increase from 46 in 2010,” and solar investment stood at a record-breaking USD$2.5bn.

Nieto said: “The rules for the new electricity market have been published recently and for renewable energy there will be auctions published in a few weeks time. This will present the opportunity for developers to bid for projects on electricity, capacity and clean energy certificates.” A public consultation about the new rules had already yielded results such as an extension of power-purchase agreements from a decade to 15 years.

Hector Olea, CEO of Gauss Energia (which developed Mexico’s largest solar power plant) and president of the Mexican solar photovoltaic energy association (Asolmex) said the extension was a positive step.

Regarding the perceived sluggishness of reforms, he made the point that such “game-changing” shifts would take time to get right, and rushing the process was in no one's interest. Like Nieto, he noted that requests for proposals will be issued for renewables in the next few weeks, ensuring October will be an “exciting time” for solar in Mexico.

Also Ernst & Young seems to share the same positive feeling about the country, which this month gained 3 positions in the “Renewable energy country attractiveness index”, becoming the world’s 13th most interesting market for solar PV (was 16th only the last June 2015).

“Now that the bidding guidelines for Mexico’s first ever energy auction will reportedly be announced in October (with winning bids expected in March 2016),” states EY’s report, “further momentum [is to be given] to Mexico’s already burgeoning renewables market, with major international players such as SunPower Corp. and AES announcing joint ventures to develop large-scale wind and solar projects.”

So perhaps observers should wait and see the outcome of this next phase of Mexico’s ambitious reforms, which Nobel Prize-winning economist Joseph Stiglitz described as “very impressive,” before making negative judgment calls.

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