Patience, Key for the Future of Utility Scale Solar in MexicoBy María José Goytia | Thu, 05/19/2022 - 09:07
Q: What were the biggest challenges Reden Solar Mexico faced in 2021?
A: Our current portfolio in Mexico consists of three PV solar power plants located across the country. Following CENACE’s first long-term electricity auction, we have a plant in Yucatan, which has been operating since 2019. We also built the first PV solar plant in Zacatecas. Finally, we have Pollux, our plant in Nuevo Leon, which was also the first plant of its kind in the state.
2021 was a year full of challenges that brought a great deal of added value to the company and its asset portfolio. The first challenge we faced was to interconnect our Pollux plant to the national grid. Despite having trained ourselves throughout the pandemic to deal with unpredictable problems, we continued with high degrees of uncertainty in 2021. The added challenge was the technical and regulatory challenge of interconnecting a solar plant in Mexico. We are very pleased that we were able to meet this objective on time.
Another of our challenges was to sign a project financing contract for an asset that we already have in operation during an adverse time for the Mexican market. We were at an advanced stage with a development bank, which could not be finalized. Together with our colleagues from Reden Spain and Reden International, we moved quickly to close financing in New York.
Q: What impact did the sector’s regulatory uncertainty have on Reden's operation?
A: Regulatory turbulence is a harsh reality that is challenging energy companies. This uncertainty first affected our business planning, since the procedures at CRE and for its generation permits have slowed down, making it increasingly difficult to expand our portfolio. This outlook challenged Reden to stop focusing on the development of new projects for the time being and shift its focus to operating assets. The silver lining is that we now have more resources to focus on improving our asset management.
Q: What has been Reden's new strategy regarding asset management?
A: Asset management is hard work because a plant shutdown represents major financial losses. Asset management involves a longer-term vision, so companies try to implement medium and long-term strategies that help monitor the state of assets and improve the efficiency of existing processes.
In this context, Reden strengthened its team. We have capable people who have participated in the development and construction of our assets. Today, they are responsible for managing Reden's portfolio. The team does not only have on-site experience but is also trained to understand the regional differences to which operations must adapt.
The company has also selected highly efficient and reliable partners as well as suppliers. Because we own the assets, we are interested in solutions that offer not only speed in the resolution of problems but also consider long-term care to maximize the portfolio’s durability.
As of 2022, Reden exclusively manages assets within its own portfolio and does not provide this service to external parties. The goal of our asset management strategy is to gain independence within the international group, which would allow us to streamline decisions.
Q: How does Reden assess the possibility of expanding its Mexican operations?
A: The outlook for expanding operations with new development projects in the short term is not favorable. However, PV projects are envisioned in the medium and long term. Reden intends to continue expanding its portfolio in Mexico in the medium term. We simply must be patient and adapt to the different environments dictated by the market.
Q: In your view, what is the future of the solar industry in Mexico?
A: In the short term, Distributed Generation (DG) will be the branch within solar energy with the greatest growth. The generation capacity of these projects is also increasing. On the other hand, the utility scale market in which Reden participates is facing turbulence, which will continue in the near term. Therefore, we will be seeing more mergers and acquisitions between players that have less patience in the face of the current Mexican market trends. However, in the long term, due to Mexico's geographic distribution and energy demand, the market for utility-scale projects will persist. It will rise up again as soon as conditions change.
Q: What is the potential for Reden's agricultural greenhouse solution to be implemented in Mexico?
A: The potential is great. In France, Reden creates shared value between greenhouses and PV power plants. However, Mexico’s geographical and climatic conditions are different, so this exact solution would not be as beneficial. The design would have to be adapted to an open structure that would allow the development of agriculture together with solar power production on the same site. This type of solution requires teamwork between the industry and different levels of government. Reden does not focus on DG projects but the development of solutions similar to our photovoltaic greenhouses would be the exception, as we are interested in developing these solutions on a small scale and then scaling them up to utility-scale levels.
Reden Solar, formerly Fonroche Solaire, is a French, integrated solar power producer present in seven countries. It provides studies and project design, remote supervision and maintenance, network connection management, financial engineering, as well as PV panel manufacturing and solar plant construction.