Adding Flexibility to PV Solar Energy

The residential market in Mexico has never looked as attractive as it does now for solar energy companies, with dropping generation costs boosting purchasing interest under different schemes, although new barriers have also emerged. With bigger companies looking to tap the sector’s potential, Mexican enterprises are also ready to reap the trickle-down benefits. A good example of this symbiotic possibility is the partnership between SolarCity and Mexican EPC business SYNERGY, says SYNERGY’s Director General Francisco Bonilla.

“We still consider that regulated tariffs do not reflect the real market conditions and make it difficult to have a level playing field for technologies such as solar rooftop systems,” Bonilla says. SYNERGY, experienced in working with solar rooftop installations for commercial users, partnered with SolarCity’s Mexico unit to facilitate the US company’s effort to bring affordable and renewable energy to small and medium-sized consumers, adding energy storage solutions to residential PV systems. The relationship will help reduce uncertainty about pricing and regulatory hurdles, Bonilla says.

“We were the first company to develop large-scale rooftop solar in Mexico in 2009, starting with two 250kW rooftop installations for Walmart in La Paz and Aguascalientes. Both projects were also the first solar rooftop installations to be privately financed in Mexico,” recalls Bonilla. “We met ILIOSS, now SolarCity Mexico, in 2013 and established a new contracting model in the country consisting of PPAs for solar rooftop systems. We were the pioneers in this area as all renewable PPAs before were used for utility-scale projects,” Bonilla says.

“It took great effort to structure this scheme as it was new in the country but we decided to invest in it believing it was the way to move solar energy forward in Mexico.” SYNERGY and ILIOSS experienced early success with this new business model but the situation changed two years later. “We experienced a setback when electricity tariffs decreased considerably in Mexico at the beginning of 2015,” Bonilla says. 

The latest challenge for the use of solar energy in small and medium applications is the murky landscape in the sector. The Mexican government has not yet defined the energy trading rules for DG systems, defined by law as those below 0.5MW. The DG industry also was shaken in 2016 by strong rumors about the introduction of netbilling in Mexico, a possibility that has been denied by CRE. The industry, however, is waiting to see the final rules before putting those fears to rest.

Under net-billing, users with DG systems connected to the grid would be charged for their consumption while being paid for the energy they give back to the grid according to the hourly prices in which energy is used and produced. This plan could be a drawback for PV solar systems because they produce energy in low-priced hours while users consume it at peak times, when it is more expensive. “Net-billing could impact negatively on small and medium-sized solar installations, particularly for residential customers. SolarCity experienced a similar situation in Nevada at the beginning of 2016, affecting the profitability of its residential solar business in the state,” Bonilla says.

Nevada’s Public Utility Commission threw a bucket of cold water over the solar industry there when it announced in December 2015 its decision to phase out net-metering and increase fixed monthly fees for solar users from US$12 to US$40 over a five-year period. The commission decided to grandfather existent solar users but new consumers were subjected to the new rules, forcing solar companies to rethink their presence in Nevada. SolarCity even said in January 2016 that it would cut 550 jobs in the state due to the changes in regulations.

SYNERGY is working on a new product to help users deal with this new market challenge. According to Bonilla, “the idea is to couple renewable energies with batteries so customers can produce energy at low-price periods and use it in peak hours. This product would also allow our customers to offer controllable demand to the market, which is now possible under the new rules.”