Mexico’s solar energy sector has demonstrated remarkable growth over the last five years, but several factors could potentially limit further development in the short term, said ASOLMEX Managing Director, Nelson Delgado.
The installed capacity for solar energy generation in Mexico has experienced a truly unique streak of exponential growth during the past five years, according to ASOLMEX’s figures. In 2017, installed solar capacity accounted for 171MW, which represented only 4 percent of the installed wind capacity at the time, as well as a minuscule percentage of all installed capacity in the country. While 2021 figures are not yet final, Delgado said that it can be reliably asserted that the year’s installed solar capacity amounted to approximately 7,416MW. “Today, solar PV generation represents 8.2 percent of the country's installed capacity,” said Delgado.
However, this growth has not been matched in infrastructure development as Mexico’s transmission infrastructure has grown at a much slower pace. This lack of balance is behind 86 percent of the alerts regarding operating status are explained by the lack of transmission infrastructure, according to Delgado.
Despite this growth in the solar sector, Mexico’s energy generation matrix remains fossil fuel-driven at 71.4 percent against 28.6 of renewable energy generation in 2021, which fails to meet the government’s previously established target of 30 percent renewable energy generation by 2021. Within this renewable energy percentage, photovoltaic solar-based electricity generation represents 5.3 percent, compared to 6.5 percent of wind energy and 10.7 of hydroelectric energy. Most growth has been concentrated in large, utility-scale solar PV projects developed between 2017 and 2021. Back in 2017, most of solar’s installed capacity was focused on distributed generation (DG).
Much of the current capacity is geographically dispersed along the most sun-drenched regions of Mexico, concentrated mainly in the northern plateau states. Sonora is at the top of this list, with 1,257MW of utility scale solar capacity installed. The state will see much more to come as the 1GW Puerto Peñasco project goes through its initial phases in 2022. The state-owned project has the ambition to become the largest solar generation project in Latin America. Nevertheless, Delgado considers these state-by-state numbers to be low overall. “We are very far away from exhausting the potential of Mexico for this kind of generation.” In terms of DG, Delgado’s data shows that there are clear examples of states that have more effectively deployed their resources to incentivize these kinds of developments and projects. As a result, states like Nuevo Leon and Jalisco show up clearly on the map when compared to neighboring states.
Despite the results in the solar segment, the legal and regulatory uncertainty in which the sector finds itself will not allow the growth for solar PV generation projected for 2024, says Delgado. Furthermore, he emphasized that even if SENER’s targets were met, the country would still fall short of its clean energy goals. Legal uncertainty could reduce the pace of new investment, which is necessary for growth to continue as projected.
The approval of López Obrador’s energy reform adds to the uncertainty plaguing the sector. According to Delgado, CFE would be once again vertically and horizontally integrated as an autonomous governmental agency responsible for organizing and directing the electricity sector. This eliminates independent regulators and independent grid operator CENACE. The initiative also proposes the immediate cancellation of all private Power Purchase Agreements (PPAs).
Despite the challenges, private sector leaders are still hoping for a successful resolution to the current discussions surrounding electricity generation. “This is not a war, but a discussion that must be depolarized. The future of the country and of the electrical system must remain central, as well as the sustainable future of upcoming generations,” said Delgado, highlighting DG’s growth through information and technology distribution, in parallel with new government incentives. “Companies must understand that solar power is aligned with their energy cost structures. They should become more aware about their energy needs and how this energy reaches them, so that they can begin to understand why solar energy must be part of their strategies and budgets,” concluded Delgado.