Organic Growth for an Evolving Market

It is not just big international companies that face challenges entering Mexico’s new energy sector. Smaller Mexican businesses have their own hurdles to jump as they fight their way to growth. Regulatory changes and financing are among the obstacles. Gustavo Bórquez, Market Development Director of Enilso, a Mexican company dedicated to solar energy and specialized in turnkey projects and EPC schemes, says starting small is the best option for these companies.

In a niche area, smaller companies can foster their technical abilities and, most critical, get to know the requirements and financing options, Borquez says. “Financing, far beyond any technical aspect, is the main challenge hindering renewable energy projects on any kind of scale. Enilso initially started as a project developer for the inclusion of renewables in the Mexican primary sector in Sonora. At first, developing financial power was a hard task because financing institutions were not ready for these kinds of projects, leading us to focus on governmental programs geared toward specific segments,” he says.

Once the niche has been extensively developed and the company has gained enough experience, it is time to grow. “By developing more projects in the niche sector, capital and experience accumulate, which can then be used in projects that expand the company’s reach. This strategy took us from the primary sector to now larger commercial and utility projects, always on an organic path,” says Bórquez. His company also provides products and services related to PV systems such as terrain and machinery rental and consulting.

The lack of financing in the energy sector is directly related to many factors, chief among them is the lack of information along the whole value chain, from final users to financing institutions, Bórquez says. To foster more financing options it is important to start from the base of the pyramid. “There are plenty of people who want to install renewables in their houses and businesses but they are absolutely disoriented because they have just left a monopolistic paradigm in which they were not able make decisions regarding their energy providers, or even think about ROI. The lack of information is a great barrier and not having the proper channels of communication is a big problem. We have to ensure communication between all parties interested in the sector, especially with final customers,” he says.

Ensuring that local authorities and associations are transmitting the right message is a crucial activity in which companies must take part. “Final customers should not have to reach out to companies to get informed. When they see companies focused on making money by selling new or unfamiliar products and services, they do not believe that their interests are aligned. That is why creating independent information channels they can trust is so important.”

As the base of the pyramid becomes informed about the benefits, it will start demanding beneficial renewable energy developments, therefore pressuring authorities and financing institutions to point their agendas toward the creation of vehicles that allow for that to happen. “An informed final customer will be interested in the project happening, because it is to his benefit, but he is not in the position to provide the required capital. Small companies are also not able to fully finance the development of so many projects. This will create an environment where financing institutions will see a possible market opportunity and will therefore fill the gap,” says Bórquez.

Despite the rough roll out of the new energy model, Bórquez is optimistic about its development. “The transition toward the new energy model was rough and left many problems to be solved along the way. The Energy Reform is undergoing a dynamic improvement process and as challenges are solved opportunities are created.”