Four Phases for Mexico’s Largest Solar ProjectWed, 02/19/2014 - 12:18
So far, operational solar projects in Mexico have mostly been residential PV systems but the reality of big solar farms might be just around the corner. Since 2009, Consorcio Integrador Sonora 80M (Sonora 80M) has been working on creating the biggest solar park in Latin America, which will have a capacity of 80MW, upon completion of its four phases.
Sonora 80M is a consortium formed by four Mexican and two Spanish companies. After analyzing the renewable energy market for some time and waiting to see if subsidies would be introduced, they banded together. After due consideration and research, a partner specializing in land regulations noted that Sonora had the economic and political climate Sonora 80M was looking for, in addition to an excellent solar resource, setting the company’s first project in motion.
César Martín Rodríguez, CEO of Sonora 80M, believes that being a bi-national company gives the group a strong advantage. “We started working in Mexico with the intention of contributing and making the most out of the local knowhow. I have been working in Latin America for ten years now and my experience has been that projects are successful when you work with local people. This is where many large companies fail: they have money and knowledge, so they feel entitled to doing things their way. An invasion is not the way to do business.”
Sonora 80M has had to overcome many hurdles in order to sell the idea of an 80MW photovoltaic park in a market still at such an early stage of development. The first challenge the company faced was coming up with the capital for a project of such magnitude. Martín Rodríguez underlines the difficulties that rose from this task in a non-consolidated market. “People thought we were insane and considered our project impossible,” he recalls. The company had to reach a point of balance and decided that even though 20MW would require a large investment, it was more viable. This is when the decision was made to split the megaproject into four segments. The second challenge was finding adequate tariffs. The project came down to numbers with the company’s financial model, warranties, and IRR coming under thorough scrutiny. The third challenge was the permitting process and paperwork regarding the company’s PPP as well as negotiating with authorities. “We have had to convince municipal authorities that a street lighting project using PV energy would reduce costs. You have to sell this idea from both a technical and legal point of view, while convincing the entire town council. Afterwards, we had to deal with the political parties, who will reject a proposal just to spite their opponents. It has been exhausting and our biggest challenge by far,” Martín Rodríguez says. The fourth challenge was finding an off-taker who was interested in only keeping the production surplus. Sonora 80M had to overpower its park by 20%, so it needed a partner interested in keeping the excess production. Ford Motor Company turned out to be just that off-taker. According to Martín Rodríguez, it was fairly easy selling the idea to the automotive company. “Ford asked who the investors were and what we wanted from them. We told them to jump aboard as it would not cost them anything, they would reduce their energy costs, and get positive publicity. Since Ford is a socially responsible company with a plant in Hermosillo, everything fit together perfectly,” he recalls.
After four years of work, the biggest solar park in Latin America is still not a reality. Martín Rodríguez explains that the company lagged on Phase 1 because of the time it took to acquire the necessary resources. However, Phase 2 is already progressing at a good pace. As soon as Phase 1 begins construction, the company expects Phase 3 and 4 to be quite dynamic. “Three more states have approached us to develop a project that delivers economic benefits and could employ up to 1,500 people. This creates prosperity in the state where these projects are being developed.” However, Sonora 80M has not jumped to other states because its efforts are still focused in Sonora. Martín Rodríguez considers that the time is right to invest in certain market niches but warns that one of Mexico’s major problems is the procedures required to make a project happen. “Whatever project you want to take on, you are going to spend at least six months dealing with paperwork. Administrative procedures need to be more agile for the market to properly emerge, although CRE has been doing a great job. Knock down the procedure barriers and the market will boom,” he adds.