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Analysis

Distributed Solar Energy Sees Growth, Uncertainty

Wed, 02/22/2017 - 16:40

Mexico has enjoyed a promising DG market since the country introduced the net-metering scheme back in 2007. The country’s new energy landscape has delivered more opportunities but regulatory uncertainty, as in other segments, is keeping solar players on edge.

According to the Wilson Center, PV solar energy technology has enjoyed the biggest growth under the netmetering plan, with CFE reporting it had 26.5MW of small and medium-scale solar systems under those contracts by December 2013.

The dramatic drop in PV solar energy costs — solar’s LCOE fell by 58 percent between 2010 and 2015, according to the International Renewable Energy Agency (IRENA) — has also contributed to the dissemination of DG because it has made PV systems economically attractive, particularly for residential users under the DAC scheme and commercial and small-scale industrial users under Tariff 2.

The introduction of the Energy Reform brought new advantages for this sector by allowing DG system operators to sell surplus energy in the MEM through a basic (CFE) or qualified supplier. In the past, distributed producers could only receive energy back from the grid as compensation for the surplus energy injected into the network, working as a “virtual storage” system.

There are now a wide range of possibilities on the horizon. The Electricity Industry Law considers DG, or “exempt generators,” as those systems under 500kW. DG systems do not require generation permits from CRE and are guaranteed open and non-discriminatory access to the Mexican grid according to the terms of the law.

Broadening the spectrum of energy trading options has opened the door for new business models to commercialize solar energy from DG systems. For instance, companies can now arrange PPAs with residential users, selling them energy from a PV system installed on the users’ rooftop. Companies could also aggregate several DG systems and sell energy, CELs or ancillary services through a registered supplier.

On the downside, the new landscape has also required solar energy producers to increase their levels of specialization because the market’s rules are now more complex. DG also faces uncertainty because of the lack of guidelines for this segment.

The draft for the “Interconnection Manual for Generation Plants Under 0.5MW Capacity” was published in September 2016 and raised concerns in the industry about a potential elimination of the net-metering scheme. That possibility, however, was later dismissed by CRE.

While the allure of the Mexican DG market continues unabated, solar companies will be on edge until the rules are clearly defined. The rooftop solar market alone is estimated to have a MX$30 billion value during the next five years, according to ANES. This represents around 100,000 residential and 300,000 commercial users, or 20 percent of the country’s electricity consumers, which is too big a cake to leave alone.