Location, Location, LocationWed, 02/22/2017 - 12:24
Q: How was ACCIONA Energía able to compete in the market given such low prices?
A: This phenomenon did not start in Mexico but in other international markets, for example Peru, where some companies implemented risky strategies to establish a presence. including lowering their prices to record low levels. In this aggressive competition for positioning, there were players, including ourselves, who could not reach these prices. We then realized we needed to rethink our approach and look at what these companies were doing. We were one of the few large names in the industry to read the signals and adjust its generation prices to be more competitive.
Suppliers and manufacturers in the industry have also stepped up their game to meet the demands of project developers. These prices were the result of efforts across the entire industry. It is important to note that the reduction in price also means less profitability, it has remained the same. We have fixed inefficiencies and optimized our costs without compromising quality. In 2010 the average price per megawatt of installed wind energy capacity was US$2 million. Now the cost is much cheaper because the installation and component costs are lower.
Q: What was the difference in strategy going into the first and second auctions?
A: Our strategy was all about location. In the first auction there were some advantages given to projects located in the Yucatan peninsula. We were then able to prepare a highly attractive proposal for a wind energy project there, offering a great number of equivalent full-load hours. For the auction process we used a differentiation strategy, presenting two offers for the same project, one for CELs and one for energy (annual megawatt-hours). We won by a tight margin but with a project that is profitable and able to provide CELs and energy at competitive prices. ACCIONA Energía really wanted to be a winner at this first auction because it was considered a strategical move for us.
In the second auction we decided to build a solar energy proposal because we wanted to enter the PV solar sector. ACCIONA Energía has been involved in the construction of all types of projects globally – wind, biomass, solar – but in Mexico we are mainly considered wind farm developers. We then wanted to broaden our presence in the Mexican renewable energy sector by entering the solar market with a profitable offer. Our solar project in Sonora will be offering 478MWh and a 29MW capacity per year as part of the agreement with CFE but we are also about to close a bilateral contract with a private off-taker to sell the surplus energy produced at this facility.
Q: What drove ACCIONA Energía to select Biofields as its partner for the solar project in Sonora?
A: ACCIONA Energía has enjoyed having Mexican partners since it arrived in Mexico 32 years ago. We consider ourselves a Mexican company after that many years in the market but few others see us that way. Having Mexican partners adds a lot of value at the national level. We have had extensive experience in the past working with companies like CEMEX. It was like having a big brother in the schoolyard, helping us to be more accepted. Working with Biofields is also going great. They have strong experience in agricultural management because they started as a biofuels company, making them the best partner for our PV solar project in Sonora.
Q: What other opportunities do you see for ACCIONA Energía besides the power auctions?
A: The auctions were the first incentive the market needed to start moving forward. The projects and the needs were there but nothing happened until CENACE organized the first auction in March. The Mexican government is making a strong push on this front that we as a renewable energy company are supporting by enhancing trust in the market. ACCIONA Energía is not just some random name selling energy, it has 32 years of experience in this market.