Auctions Drive Newcomers to Solar

Q: What was behind SgurrEnergy’s decision to open a local office in Mexico?

A: Over the last two years we identified an increasing number of clients that have been involved or have a presence in Mexico, a trend encouraged by the enactment and implementation of the Energy Reform. The country’s ambitious clean energy targets and abundant natural resources, combined with the market potential, have made it an attractive location for renewable energy investment. So our decision to move here was a reaction to market trends and an ability to identify a burgeoning market with real potential for development. Mexico is one of the most attractive emerging markets in the world and we wanted an on-the-ground presence to truly understand the country’s local market and the challenges it faces.

Q: How did the results of the first power auction affect the company’s perspective of the market?

A: We were pleasantly surprised by the results in the first tender carried out under the new regulatory scheme. The immediate impact of solar energy and the low prices for tendered contracts are positive for the renewable energy industry and in line with the goals of the Energy Reform. We were not expecting solar to surpass wind energy in the number of megawatt-hours awarded so quickly, particularly at the tendered prices, although dropping renewable energy prices is a trend the industry has been observing in different regions, such as Peru or the southern US. This is a result of improvements in efficiency, a decrease in manufacturing costs and the use of innovative financing mechanisms. But we remain somewhat cautious about the potential reaction of investors and project developers to record-low energy prices, because the ability of a diverse range of developers to compete at the rates tendered in the first auctions will be somewhat limited. If Mexico wants to build a diversified market it will have to push prices up so a wider range of developers and suppliers can also be involved in the process.

The expansion of the grid and growth in energy demand will be crucial for defining the feasibility and economic potential of energy projects in Mexico. Yucatan is becoming a renewables hub after being awarded a large portion of the tendered projects. However, uncertainty remains as to whether or not the Peninsula’s power network can support more renewable projects. SgurrEnergy is working to identify areas of the country that have potential resources and which could benefit from the development of renewable energy projects. Like in other regions, our strategy to capitalize on the country’s resources is primarily dictated by the needs and expectations of our clients, helping them with technological aspects or the optimization of certain stages of the project, all according to local constraints.

Q: How has R&D impacted the development of renewables and prices?

A: R&D has been crucial for the development and expansion of renewable energy in recent years. For instance, the advances made in wind measurement technologies have allowed developers to gather more accurate data, which is used to design more efficient wind farms that yield higher power outputs. One of the industry’s goals is to develop a product capable of measuring wind speeds across an entire region in an efficient and cost-effective way, which would help reduce uncertainty, time to market and improve overall project development processes. Innovations in measuring technologies allow developers to optimize the performance of the individual wind turbines as well as the work of the wind farm as a whole.

Q: What are SgurrEnergy’s expectations for its first years in Mexico?

A: We expect a greater number of projects to be developed in Mexico in the coming years and we expect to become a trusted partner to these developers. There is a considerable difference between winning a tender or a PPA contract and successfully developing a wind farm or a solar park, so we want to focus on helping companies close the gap and make their projects a reality.