Infrastructure Experience for Better Renewable Energy ProjectsMon, 02/25/2019 - 09:28
Q: What specific added value does Buenavista Renewables offer to the energy industry in Mexico?
A: Buenavista started activities in 2013 as a Chinese-US-Mexican company. Many of the founders come from the banking sector with a focus on financing infrastructure projects for transportation, water, sanitation, solid waste and energy, among others. Our backgrounds give the company a specialized knowledge of how projects are carried out and financed, as well as their associated risks and mitigation factors. The business opportunity for Buenavista in Mexico began when we recognized that intensive energy consumers suffered when structuring energy projects that needed to incorporate clean energy sources. They did not fully understand all the elements related to regulation and banking. Given our experience developing financial schemes for infrastructure projects, we knew we could add value to Mexico’s energy market conditions.
Q: What key factors do off-takers consider when choosing an energy provider for PPAs?
A: It is true that off-takers are trying to consume more renewable energy sources to lower their carbon footprint but the most important factor to consider when buying electricity is the economic benefits. This means that they need to have monetary savings through time and stable energy prices. Fortunately, some off-takers enjoy a higher added value by consuming clean energies because their clients reward them for that. As an example, we developed the solar park Los Santos Solar I in Chihuahua, one of the first solar parks in Mexico, to deliver electricity to a German company that wanted to reduce its environmental impact. According to our client, its opportunities to get new customers would increase significantly not only because its products and service prices would decrease or be stable through time, thanks to more efficient energy consumption but also because its clients wanted to have more environmentally-responsible suppliers.
Q: What factors make intensive energy consumers hesitate on signing PPAs?
A: Entering into a PPA is not easy. Sometimes it is hard to explain the specifics of the contracts to potential clients. The first obstacle comes at the moment of asking them to sign a long-term contract where they will not receive energy right away, but up to a year or more. Clients would much rather sign a contract to buy energy now and for a short-term period that they could extend if needed. But for a PPA we need a committed purchaser of energy and a signed contract to be able to finance the development of the project.
The low prices for electricity reached in the long-term electricity auctions represent another challenge. Potential clients have asked us why we do not offer the same low prices as those perceived in the long-term electricity auctions. In those cases, we have to explain as clearly as possible how the wholesale and retail electricity markets work, as well as how the projects are financed and developed in different ways.
Costs associated with conventional sources to generate electricity are an important factor to consider in the long-term stability of prices. That being said, renewable energy sources then become an important tool for intensive energy consumers to ensure their costs associated with energy consumption are more stable in the long run and with that argument in mind it becomes easier for potential customers to understand the benefits of our solutions.
Q: What main challenges have you encountered when developing renewable energy projects?
A: Mexico has set a transparent and healthy regulatory framework through its Energy Reform but we must admit that it has also presented a challenge for companies like us since this framework is still evolving and we must adapt to it. This has caused delays and unexpected changes in our projects. We hope this evolution continues to move in the right direction, toward its final purpose of making the participation of industry players smoother and clearer.