Reaching for the Hot Spots in the MarketWed, 02/24/2016 - 13:07
Q: What role and position do you hold in the Mexican solar sector?
A: Worldwide, SunEdison holds a coveted position by managing over 1,000 photovoltaic plants, generating 2.4GW, and a portfolio of 5.1GW. SunEdison arrived to Mexico in 2013 and its origins can be traced to the PV sector. We have three 30MW solar parks in Sonora, one 20MW park in Coahuila, and another in Chihuahua, which are all in different stages of development. Recently, we also acquired a wind project of 120MW in Durango. Since the acquisition of First Wind in 2015, the company has decided to look for new markets and business opportunities. We have chosen Ciudad Juarez as a platform for our production of PV modules, as well as opening a support center in Guadalajara for our operations in the US. It might be that many companies view local manufacturing as unnecessary, given that there is worldwide overproduction in the sector. Nevertheless, Mexico is an attractive manufacturing hub due to its proximity to the US and the growing local market. The production of PV modules will be carried out thanks to a JV with Flextronics. In Mexico we wish to position ourselves in the wind, solar, and hydropower sectors and we are looking to participate in the energy auctions in October 2015. With this in mind we must secure our position in this market.
Q: Mexico lags behind other countries in terms of large- scale solar parks. Now that a new legislative framework guides the industry, do you see Mexico betting on large- scale PV energy?
A: We definitely wish to be active in the development of utility-scale projects. Unfortunately, we had to postpone the construction of our solar parks because they were designed under the small power producer scheme, and due to the collapse of CFE’s marginal costs, we decided to halt the process. Under the new legislation there will be incentives to sell energy with the auctions planned by CFE. There will be equal opportunities for solar and wind because so far only the latter has obtained capacity recognition while the former does not, which has been a disadvantage. In order to consolidate our presence in this emerging energy landscape, we plan to grow organically through greenfield development, and we will be developing some projects on our own. SunEdison is a highly integrated company that started out manufacturing modules and then moved to developing projects and selling them once in operation. The recent creation of the US-listed Yield Co. allows us to change our business model. Now, we will no longer sell projects, as we became a utility that builds and operates the projects. Yield Co. gives us several advantages, one of which is obtaining cheap financing for our projects. The business model is positioning the company as a utility company and this is why Yield Co. was created.
Q: Could you describe the benefits of developing hybrid projects and having a diversified portfolio?
A: The market will tend to demand strong capacity, and by being an intermittent energy developer, we face a difficulty matching the profile required by CFE. I believe that by developing both solar and wind projects, we will have a better profile than other market participants. We will combine different technologies in order to have a unique load profile that will enable us to address production and demand in a better way. SunEdison is looking to acquire different projects across various technologies, including hydro. The projects we are looking for can be at different stages of development. Mexico is gearing up to be an incredibly competitive market, so we must look for projects that reflect this. We need projects with good resources, low interconnection costs, and built near competitive spots. In general, we look closely at the Leveled Costs of Electricity (LCOEs), which is the industry norm to compare the competitiveness of projects. We are carrying out in- depth research in order to know where the energy will be needed and where the emerging markets are found so that we can be there.
Q: What sort of advancement have you made in bringing electricity to distended communities in Mexico?
A: We have an initiative called Share, where we give grants to different communities across the world. In addition, SunEdison has developed a business model where it can supply electricity to remote areas and isolated communities. In Mexico we donated a large solar installation for a hospital in Chihuahua. All markets are interesting for SunEdison, so we wish to develop projects in the residential and commercial segments. In the residential segment, we plan on leasing the installations and guaranteeing a discount vis-a-vis the tariffs with little upfront payment. This business model has worked very well in the US and the UK, and we believe it will work here because there are some expensive tariffs.