Mexico Businesses Want and Need Renewables, What Are We Doing?By María José Treviño | Thu, 09/17/2020 - 14:28
Data mining can help identify important tendencies in areas like politics, human behavior, economics, science, energy and culture. For years, data mining has been used to extract usable data by analyzing data patterns in large batches to increase effectiveness and provide superior solutions. The interesting fact about the data mining process and how they get to results, is that the information it provides is real, not theoretical, which is what businesses and consumers are really interested in, when formulating major strategies that drive socio-economic interests and government rules that impact market practices. It has also provided business and political leaders with an indication of real trends, such as the increase and value of renewable energy.
Renewable energy is a popular topic online and for so many positive reasons. Google Trends shows how this concept is growing worldwide and in Mexico, the phrase is hitting this search engine about 50,000 times per day with a calculated steep increase projected to double in less than six months. As we see in the graph below, this is an increasing trend as more and more people are interested in learning about how renewables impact the environment, support climate change, its impact on costs and how they can access them (solar, wind, hydro, etc.).
Google calculates that each search consumes 0.0003 kWh of energy, which is equivalent to about 0.2g of carbon dioxide which TIME Magazine said in 2011 was the equivalent of having a lightbulb turned on for 17 seconds. According to SEO Tribunal, experts in search engine optimization said Google supported 63,000 searches per second or 5.6 billion searches a day worldwide. As an energy-intensive user, the company joined the R100 group, together with over 250 companies that have set their renewable energy target at 100% by a particular date in the future. This group began in 2014 with only about 15 members and has grown exponentially in six years. These corporations, through their global leadership have demonstrated a real intent to lower their carbon footprint, take advantage of cost-efficiency solutions, and gain visibility, loyalty and interest from younger generations and investors that consider sustainability efforts crucial to the environment, people and the bottom line.
These companies represent an emerging force when it comes to increasing renewable energy targets, because they realize employees, communities and elected officials want to do business with companies that use best practices. In Mexico, we are observing the increasing trend of corporate sustainability compliance, some due to supply chain commitments, where their largest clients are performing audits on Environmental, Social and Corporate Governance (ESG) performance. According to the International Renewable Energy Agency (IRENA), in 2018, over 100 companies had reached an 85-100% renewable energy mix worldwide. In fact, in one of their recent studies, they interviewed over 2,000 companies, 86 of which were located in Latin America and the Caribbean and of those, 36% had sustainability goals.
IRENA states that a third of the world´s energy comes from renewable sources, mainly hydro, wind and solar. The “Global Trends in Renewable Energy Investment 2020” report elaborated by the UN Environment Program and BloombergNEF mentions that there are already 87 governments around the world that have set renewable energy targets by 2030 in order to comply with international agreements. If we add government goals to corporate targets, these commitments will entail adding about 826GW of new capacity which would translate to about $1 trillion dollars of global investment during the next decade. As this document states, and in line with the latest UN Environment Program Emission Gap report, more governments and corporations must incorporate these types of commitments to their business practices because the previously mentioned projection only accounts for a fraction of what is needed to limit temperature increases below 2 degrees Celsius as is defined in the Paris Agreement, of which Mexico is a part of.
The report states that although Mexico has had a 17% growth from 2018 to 2019 in renewable energy project development, Brazil increased 74% and Chile 302% within the same time period. In addition, Mexico still needs 9.6 GW to achieve its 2030 target set by the government. To put this in perspective, Mexico currently has around 10 GW of solar and wind generation represented in over 120 projects around the country. Although regulatory risk has decreased a bit recently, we need to focus not on what the government is not doing but rather on what it is. To meet these goals, the Mexican government must set clear rules between the public and private sectors in order to drive investment and transmit confidence locally and abroad.
Mexico has an increasing 3% historical yearly electricity demand and a growing interest for renewable energy consumption. The demand is available and even easier to obtain, as consumers are becoming more educated and sophisticated around the terms and conditions that private energy procurement contracts include. The CONCAMIN recently stated that according to CRE documentation, the government has not approved 285 generation permits in the past year, which puts Mexico´s consumers at risk of not being able to meet demand needs in the future. As we know, these projects take years to develop and complete.
Acclaim Energy recognizes two main areas of focus for large C&I consumers: sustainability and cost reduction, the latter with greater importance at this time. The interesting aspect is that by meeting sustainability goals, consumers can save money as well. When companies do it right, they can achieve both goals by structuring contracts that include competitive economic terms and conditions, through a product structure that is in line with their consumption and risk profiles. The fact is that technology costs have decreased dramatically in the last decade with the cost of wind declining by almost 50% and solar technology by over 80%. The International Energy Agency (IEA) predicts costs to decrease an additional 15-35% by 2024.
The world is rapidly evolving, incorporating energy storage technology, microgrids and AI into societies, so that consumers can achieve greater benefits. Market deregulation, auctions, and these types of practices drive competition and not only help large C&I energy consumers but also permit energy access to remote areas in developing countries and communities. The collaboration between the government and the private sector to achieve sustainability commitments has proven to be positive but not fast enough or sufficient to meet the growing demand and needs.
Mexico, are we preparing to join the growing global tendency or are we staying on the sidelines to watch investments and multinationals look for new countries to invest in?