Ability to Persist Through Crisis Gives Strength to Bounce Back
STORY INLINE POST
Q: How did the company adapt its operations in the last year?
A: Last year was indeed tumultuous, despite our ability to adapt to different circumstances. 2020 was a year of many changes but it also brought new opportunities. We were able to apply a variety of strategies during the pandemic that benefited us. An example is our focus on investment into projects that use to be turnkey oriented. This has become a main business line for ForeFront in Mexico. Distributed generation in general has become a much wider market for the company here.
Q: How have the pandemic and regulatory uncertainty accelerated the sector’s move toward distributed generation?
A: While it may not have increased demand per se, these factors impacted the flow of money that companies were contemplating to invest in renewable projects or other external updates to improve their efficiency and reliability. Instead, companies are now realigning these budgets towards their own energy production, which has opened up the opportunity for external investors to provide the entire solution, including investment, construction, and O&M over the long term.
Q: How does the company approach these projects and what would be the main benefits for the end user?
A: In general, our business has two types of projects: on-site and off-site. We develop both types from the greenfield stage until they are operational. As a third party, we operate and maintain the projects.
One important benefit is that our clients do not have to invest in the solution themselves; instead, they just sign a power purchasing agreement (PPA) with ForeFront. Second, the regulated energy prices available to users are very high, and will remain that way for some time. We know that energy generation in Mexico is more focused on sources such as fuel oil and other fossil fuels. This does not allow reduction in energy prices so customers could find more competitive opportunities with our solar solutions. Since adaptability is a strength of ForeFront, we can offer tailored solutions, addressing our clients’ needs and finding a solution that works best for both parties.
Q: Are local energy users shifting toward sustainability?
A: In all honesty, we have noticed that Mexican companies are more interested in energy savings, which is normal for a developing economy. I do see that international companies, especially large corporations, have a higher interest in environmentally friendly solutions, even though they are also looking to save costs rather than just cut down on emissions.
Whether this trend affects Mexican companies more deeply will depend on changes in regulation. If there is not a clear regulation that demands companies to decrease CO2 emissions and become greener or that provides incentives for these actions, I do not think it will be a priority for companies, especially right now, in an economy hit by the pandemic and marked by lower sales. Companies will prefer to decrease costs and focus on their own economics rather than the environment. Hopefully, there will be room for both.
Q: How do you assess a project’s potential below the utility-scale threshold but bigger than DG?
A: Such projects can be of value because they are not big enough to cause problems for the grid and can be better positioned in specific areas. Smaller and on-site projects are the future of renewable energy. Unfortunately, updating and improving electrical infrastructure is not a priority in many countries, including Mexico. Smaller projects that are closer to customers and boosted by storage is the future for power generation. While we do not have regulation regarding storage yet, we hope this will be discussed in the near future.
Q: How do you assess the viability of adding battery storage in Mexico’s energy sector?
A: While there are few situations in which you could add storage to a project, there are still opportunities, in my view. There is no additional support for companies to motivate them to add storage into the mix. However, I think that storage can no longer be ignored by the market. Many companies operating outside of the grid are supported by diesel generators, which is too expensive and could be replaced by batteries. In some areas of the country that are outside the reach of the national grid, it is already a possibility.
Q: What are the main challenges the company faces when developing projects?
A: Everyone is facing similar challenges. Mexico is dealing with an economic situation that has never been seen before. The country will need to experience greater economic stability before companies feel confident to move ahead with projects regarding their energy use and supply. At the moment, companies are looking to reduce costs and switching their energy supply might not be on the top of their list. In addition, market uncertainty is an issue in the energy sector. Since we do not know what will happen next, any reported rumor causes a great deal of turbulence and uncertainty. This incites potential clients to hold off any business decisions they might have wanted to take. Economic stability will hopefully return around the end of 2021, when the pandemic wanes. But I do not know when uncertainty in the energy sector will go away.
Q: What are ForeFront’s objectives for the year?
A: Any crisis also opens up opportunities. If you are able to persist during the crisis, you can come back and rise again because your company will be at the forefront of a new opportunity. In my opinion, players that stay in the market until this crisis is over will be better positioned. We simply have to move past these challenges, there is no other way around it. Despite potential obstacles, renewables are the future. We will keep fighting for this and look for opportunities wherever they may be. Eventually, the market will stabilize and open up. We should all believe in its potential.
ForeFront Power provides renewable energy solutions in the US and Mexico. The company is gearing up to be a frontrunner in distributed generation and on-site projects in Mexico. ForeFront Power is part of Mitsui.