David Martínez López
Director of SPV's México
Envision Energy

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Are We Closer to a 100% Made-in-Mexico Wind Turbine Generator?

By David Martínez López | Thu, 06/16/2022 - 11:00

The constant threat of global warming has influenced many countries to migrate their energy consumption increasingly toward renewable energy sources in a desperate attempt to reduce energy consumption through fossil sources, considered the main culprits of environmental pollution.

Renewable energy projects not only offer a reduction in the cost of electricity against current electricity rates but also represent important competition against other options from fossil sources.

Mexico has an unquestionable potential in terms of wind power. The clear proof is the more than 7GW of installed capacity coming from wind, located mainly in ​​Tamaulipas and the Isthmus of Tehuantepec in Oaxaca, a site known for being the mecca of wind projects in Mexico since the first wind farm came online around 1994.

The panorama of the energy sector in Mexico is very different in 2022, where we have come all the way from not having a development plan for the industry prior to the Energy Reform of 2014 to having a plan toward a 35 percent renewable energy penetration in 2024 considering an “open market” and the current situation in which again it seems we don’t have a feasible plan and, therefore, we as an “industry” must come up with another development plan for the years to come.

I often use the phrase “there´s nothing as certain as death itself.” This is the only thing that is certain in our lives. Well, the urgent need for additional installed capacity in Mexico, I must say is as certain as death itself. It’s a fact.

During the years in which the 2014 Energy Reform was implemented, we reached the peak of the renewable energy sector as an industry. With awarded contracts for future installed capacity coming from the energy auctions in the form of more than 7GW, considering all three power auctions, while also securing a few of the most competitive prices for both wind and solar energy around the world during those years (2015-2018). Foreign investments of around US$10 billion was directed at the energy auctions while they lasted proof that something was happening within the sector. And it was positive while it lasted.

If we talk specifically about wind turbine manufacturing OEMs (Original Equipment Manufacturers), around 85 percent of the market share is divided between three players. These three manufacturers continue to produce the main components for their turbines in “overseas” factories, primarily in India, China, Brazil, and some European countries, depending on the component in question. It is important to add that Mexico already has facilities and capabilities to manufacture several components for a wind turbine generator (WTG), primarily in the form of bearings for the blades and the nacelles, steel and concrete towers (and hybrid in some cases), blades and other smaller components and electrical equipment. But what happens with the rest of the main components (such as hubs, generators and gearboxes) and why are those not being manufactured entirely locally? It is estimated that Mexico has a wind potential of more than 50GW (versus the 7GW currently installed) with plant or load factors greater than 20 percent. For me, it is definitely a very attractive market. Before trying to answer such questions, let’s go back to the basics of energy availability and its relation to economic growth through history.

I often like to go back to the basics of the relevance of the energy demand versus economic growth ratio ever since the dawn of the industrial revolution. This is very simple: as economies grow, the energy demand associated with such growth will increase on an almost perfect 1 to 1 ratio. Similarly, if energy is constrained, economic growth will be pulled back in the same way. We can take this approach even further and escalate it not only in relation to economies as we know them on Earth but rather on an interstellar level, taking the Kardashev Scale as an example, which is the method of measuring the technological empowerment of any given civilization, considering the amount of energy such civilization has access to and is able to use. This example portraits perfectly the relevance of energy demand versus its availability on a larger and broader cosmic scale.  

In other words, if an energy supply were to be unlimited on Earth, then humans would finally be able to step into the next chapter of evolution and perhaps would be able to finally travel our galaxy and the universe itself. All this based on the theory of unlimited energy supply and yes, I am a fan and admirer of interstellar travel and space. 

I think it is pretty evident that we as humans need additional sources of energy to evolve, the same way as Mexico needs more energy as its population increases at a whopping 1.4 percent annual rate, considering the already 135 million inhabitants living among us. So, do we have to say more to the relevancy of the need for additional installed capacity in our country? I think not.

Going back to the original topic, it is now clear that there is an actual need for electricity to be able to get economic growth in return. It is also clear that given Mexico’s wind energy potential, it is definitely a very attractive market to invest in, betting on its energy industry development via renewable energy projects. So, what has gone wrong? Where are the main areas of opportunity? Are we getting closer to finally being able to fully manufacture and integrate a WTG locally? Carry on with me:

1. Ever since the Electricity Industry Law (LIE) came into operation in 2014, there have been ups and downs within the electric industry in terms of development of projects and investments capitalized and planned. The recent policies as instructed by the federal government, such as the “Política de Confiabilidad para el Sistema Eléctrico” (Reliability Policy for the Electrical System), published by SENER in May 2020 amid the decrease in electricity demand derived from the COVID-19 pandemic, and the more recently proposed “Contrareforma eléctrica” (electrical counter-reform), published by the Mexican federal executive in September 2021, are definitely sending the wrong message to both potential local and foreign investors and players around WTGs and the wind industry itself, whereas a number of those were previously finding ways to manufacture and integrate their components within our country. This vision needs to be remediated as soon as possible, before we experience a massive leakage of capital out of our country, to never come back.

2. Going back to the LIE as it was published in 2014, there was a roadmap to a competent and feasible planning of the National Electric System (SEN) together with the electric energy transmission and distribution public service, which to date seems to be one of the major challenges for the integration of newly added capacity coming from renewable sources. Not only that, but global agreements were entered into by Mexico in the form of reaching 35 percent of energy generation from CO2-free sources by 2024 (translated into 9.5GW of additional installed capacity). Unluckily, we will be around 8GW short, according to CFE. Therefore, without planning, it is difficult for WTG OEMs and the supply chain linked to the manufacturing of components for wind energy generators to make a safe bet in our country at the current political and economic point in time in which we are trapped.

3. Federal incentives for supply chain development linked to the production of WTG components is essential. Take the aerospace industry as a reference. Ever since around 2004, it has experienced exponential growth because it had the right incentives, the right strategy, and the right collaboration between federal and local authorities together with the private sector to make the final step of implementing a success case. It’s no wonder that the first 100 percent made-in-Mexico airplane was announced just recently. It took the industry less than 20 years to accomplish such an important milestone. Collaboration between government and the private sector is the key to achieving great things. This is proof of that. 

To elaborate on a final response to our initial question, I have to say that unfortunately we are not any closer to reaching the milestone of manufacturing a 100 percent made-in-Mexico WTG. It was during 2017 when we stood the best chance of attracting even more interest from the renewable energy industry, including all the parties involved within the WTG supply chain, once the energy auctions proved to be successful from an investment point of view. After the third and last energy auction of 2017, all the momentum achieved thus far just faded away into thin air.

Fortunately, not everything is a mere combination of bad news and bad timing. The three statements above are proof of that. We know the current situation; we know what needs to be done and we know how it needs to be done. Alignment and implementation will be key elements to overcome such challenges. Let’s always remember: there cannot be economic growth without energy demand, without economic growth there cannot be a true form of wellness for people.

Electric energy needs to be sustainable, reliable, affordable, and available to the entire Mexican population. This is the only way to reach the desired state of wellness.