Kai Schluetter
Managing Partner
Internovum Solar
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Insight

It Is Time for State Governments to Bet on Solar

Wed, 02/24/2016 - 12:45

Time and time again have Mexico’s geography and its world class solar resources been lauded by energy players across the globe. Unfortunately, investment in the sector has been limited and it has lagged behind that of wind and other technologies. These several barriers that continue to hold back the sector have not tarnished the extraordinary opportunities for investment that some states across Mexico offer. For Kai Schluetter, Managing Partner at Internovum Solar, the federal government has paved new roads for private investment and it is now time for state authorities to strengthen this new option and make renewable energies a reality. “The main advantage of developing photovoltaic projects is that you can develop and install them in almost every region of Mexico, which helps increase the awareness of solar technology throughout the country,” Schluetter expresses.

In Schluetter eyes, there is a lack of knowledge surrounding PV technology and this has driven Internovum Solar to bridge this gap and promote solar across Mexico. “We are developing ten projects in various states of Mexico, mostly in the central and northern states. Most of them started over two years ago and are currently being developed under the previous legal scheme.” The quality and quantity of northern Mexico’s solar resources are superb. The best solar thermal resources are in the states of Baja California, Sonora, and Chihuahua. For instance, Baja California has a solar thermal capacity of 5GW, with the potential to generate 11.6GWh of solar electricity per year

One of the most common stumbling blocks that companies encounter when entering the local authorities’ panorama is the government’s lack of familiarity with the technology. “To circumvent this, there is an early consultation with the government at the very beginning of a project in order to gauge the viability of developing it, and the licenses and permissions needed to build roads and other important assets.” An example would be the construction license or the land-use permit, where normally certain fees are involved. Schluetter explains the process, “When you are constructing a building, a predetermined area is taken into consideration to estimate the taxes payable. With PV fields it is different since you want to avoid calculations based on the area covered by the modules, as this will exponentially increase the taxes to be paid.” In these instances the company has to explain to the authorities the basis of the construction location and in Schluetter’s experience most of the officials are straightforward, open, and enthusiastic about renewable energies and solar technology. “They are willing to reconsider the way they calculate the property taxes and adapt them to the needs we have in order for the project to be bankable.”

Struggles arise when developing projects on community lands or common lands and according to Schluetter, since there are more people involved in the negotiation process, the company is expected to meet conflicting interests. However, Internovum Solar does not back away from a challenge, “The negotiation is actually the most interesting part of the project development in Mexico, and you can see the differences between community and private lands,” he expands. Schluetter emphasizes the importance of building trust during the negotiation process with the communities, “because they will be living there their entire lives and you will have to interact with them, whether it is pleasant or not.” At the end of the day, despite the barriers companies must overcome, Schuletter is convinced that the construction of renewable energy projects will not only bring price stability for the off-taker in the long term but economic prosperity to those states that decide to bet on solar.

Solar will play an important role in Mexico’s power matrix in the future, but for now, it will be overshadowed by other technologies. Mexico certainly has its objectives and needs; the first to cover the energy demand, and the second to generate cheap energy for all consumers. “The construction of gas pipelines and imports will have an impact on the reduction of electricity in the short term, but in the medium term the effects will be minimal.” Schluetter indicates that the impact will be limited due to the decrease in oil prices and the possibility of a similar trend in natural gas. “This means Mexico should lower its dependency on gas and diversify its energy sources.” Renewables such as solar provide this much needed certainty and advantage in the medium and long term.