Opportunities Emerge Despite Slow Regulatory Environment

Q: What are the main lessons Sowitec has learned throughout its years in the Mexican market?

A: When we arrived in Mexico in 2008, everything was simpler because there was not much competition. There are now many companies in the market, which are not only developers but also construct and operate the projects. These are large transnational companies that have already integrated the entire value chain within their organization. This has been a significant challenge, but it has not been an insurmountable obstacle because there are still companies that trust our work. Large companies continue to seek us out, and we have several projects under development with them.

We were not prepared for the pandemic. During that time, we focused on optimizing the projects we had in our portfolio. We also learned that we must always be prepared for any change that the government may introduce. This six-year term has been challenging for all companies.

Q: What were the main challenges Sowitec has faced during the AMLO administration?

A: Many processes initiated before the pandemic were not processed by the government, which gave no reason for the delays. Some field processes, such as land registries, were halted by presidential or federal mandate. We were told that, by federal mandate, nothing related to renewable energies could be processed. Renewable energy projects do not seem to align with the current administration. 

CENACE used to publish how many projects were under evaluation and other indicators, but it stopped updating this information. This update now has a three-month delay so we do not know where we stand and cannot advance some projects. After the pandemic, relationships with the authorities improved and we received some responses from the National Institute of Anthropology. On the other hand, SEMARNAT and SENER have not provided responses to some requests.

The incoming administration may bring change. Given Claudia Sheinbaum’s background and contributions to the environment, she might positively influence the development of clean energies. She is surrounding herself with qualified people like Marcelo Ebrad, who has supported renewable energy.

Q: How has the company adapted to changes in client preferences? 

A: We have simply been adapting to the industry and our clients. In the past, our clients always thought on a large scale, with projects between 200MW and 250MW. We adapted to that scheme, which was very profitable for a development company. Clients are now looking for smaller projects, between 70MW to 100MW, and we have again adapted, but it is not a substantial shift, as both types of projects require the same activities. The only difference is that the economic benefits are smaller.

We have made changes in how we work as a company. The pandemic and the current Mexican energy market have caused us to reduce our team. That is why it is imperative to keep the teams trained and not compromise our work's quality.

Q: How have your operations changed regarding utility-scale renewable projects, distributed generation, and PPAs?

A: We have not made much progress with distributed generation, as we still focus on conventional and large-scale projects. We have also been considering agrisolar projects, which involve placing panels on agricultural fields. We are also including storage systems in our projects because they are necessary. CENACE has resolved to require batteries for interconnection studies. 

Mexico has fallen behind on regulation, which limits the types of projects being developed. For example, we considered floating photovoltaic projects but the authorities did not know how to evaluate them. This is also the case for green hydrogen, as legislation is still not fully in place. Other countries have clear regulations, which is better for the industry. 

The energy transition is focusing on mobility but the country does not have the appropriate infrastructure. Mexico could be a powerhouse in energy, but we lack the infrastructure to make it happen. 

Q: What type of projects is Sowitec prioritizing in Mexico and what new technologies is it exploring? 

A: We are focusing primarily on conventional solar, as it is the most requested and feasible option at the moment. Mexico is located in a geographically advantageous area with high solar irradiance. We still keep an eye on continuing our wind projects, which were the foundation of the company in the country. We want to continue developing wind projects, but this is complex since the regions with resources, such as Oaxaca and Coahuila, are already saturated with wind farms. 

We are also exploring new strategies and lines of action, in the green hydrogen sector for example, which needs renewable energy for its production. Our business development team, based in Argentina, is looking for synergies for this type of project. 

Q: What are Sowitec’s objectives for 2024 and 2025, and what emerging trends do you identify in the sector? 

A: Our objectives are to sell the projects we already have in our portfolio, which include selling about 100MW next year, and about 400MW in the following years, provided the government allows us to move forward with the permits. We are focusing on projects that contribute to a broader vision. We would like to be part of the green hydrogen production chain, where we not only generate and sell energy to meet industrial demand but also contribute to more integrated projects. For example, to produce hydrogen, we need water and renewable energy. This green hydrogen can be used as fuel for airplanes and other industries. We would also like to assist in the decarbonization of various industries, such as cement and steel factories, which rely on fossil fuels.

Many companies are committed to decarbonization and seek to use clean energy not only for environmental reasons but also for fiscal benefits. Generating energy from clean sources provides them with tax incentives, which is more advantageous than using conventional energy.

Sowitec is among the world’s largest developers of renewable energy projects. In 2008, it started operations in Mexico, where it has developed and sold 630MW in renewable energy projects.