Alejandro Cobos
General Manager
Notus Energía México
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View from the Top

Renewable Energy Growth Is Slower but Still Moving Forward

By María José Goytia | Fri, 06/24/2022 - 13:24

Q: How have regulatory uncertainty and the policy shift against renewable energy affected Notus' development of new projects?

A: The uncertainty in the market has not affected us as much as one would expect. Notus has been in the market for many years and we know that regulatory uncertainty is always present. When you know the industry, you know that you have to adapt to the changing policies of each new government, not only in Mexico but in any other country. When an energy reform as important as the change to the Electricity Industry Law (LIE) occurs, it is normal to face changes. Undoubtedly, the form was atypical, which increased uncertainty and therefore disinvestment. Yet, since before he became president, it was known that López Obrador was not inclined to promote renewable energy, so for us, his energy policy was not a complete surprise.

In our case, projects that were moving at a good pace slowed down. The slower pace of project development prompted us to focus on consolidating new lines of business that would bring more value to our customers, such as our development of 0.5MW distributed generation (DG) projects for Commercial and Industrial (C&I) use. The key is to adapt and adjust business models.

 

Q: What future does Notus foresee for renewable energy in Mexico?

A: Globally, renewable energy is a profitable business and is no longer beneath other power generation technologies. What is clear is that if you are competitive, you will be present in any market. Today, it is difficult to obtain permits in Mexico. However, there will come a point where it will be unsustainable to continue denying renewable power and depend on fossil fuels. The market is demanding more sustainable solutions.

Notus Energía develops wind and solar projects. The reality is that despite the pandemic and the uncertain regulatory environment, we did not stop developing projects. In a way, this period helped us to purge clients who were not committed or prepared to complete projects beyond the permitting process. Our projects changed in size, as we no longer do such large utility-scale projects. We continue to develop in all regions of Mexico, close to where industries demand this energy.

 

Q: How has Notus’ DG business line performed?

A: Our DG line is doing well, though we would like to have more projects. We are in a consolidation stage, experiencing favorable growth. In the past two years, the development of solar projects faced several challenges. The transportation of inputs, the lack of containers and the disruption of supply chains made the price of solar technology more volatile. When you have a large project, your position with suppliers is steadier. For small-scale projects, this is more difficult. We are developing 0.5MW projects, for which approximately 1,500 solar panels are required, focused on C&I use. For the projects to be profitable, we need to find the right balance between price and how we sell.

 

Q: Why has solar energy been developed more than wind energy in Mexico when there are favorable climatic conditions for both?

A: It is much easier to develop a solar project than a wind project. Obtaining financing for solar projects is a little easier, especially in Mexico, where excellent solar irradiation practically permeates the country. In contrast, a wind project requires more specific climatic conditions. The permitting process is relatively the same, however.

Grid accessibility is another issue that challenges wind generation more than solar. There is insufficient transmission and distribution infrastructure for the energy demand in and around large cities, which makes it difficult to send energy from places that have wind projects to where the energy demand peaks.

 

Q: What is Mexico's potential to develop offshore wind energy?

A: Offshore wind in Mexico has very little chance of happening in the next few years. Mexican seas have adverse characteristics for the installation of wind turbines. Most are in hurricane zones. In the Yucatan Peninsula, coral reef reserves are protected. Offshore wind generation becomes an option when you have already finished the land area for the installation of turbines but in Mexico, we still have a lot of land to explore. In addition, it is much cheaper to invest in the terrestrial electrical transmission network that allows the viability of larger traditional wind projects. Offshore wind projects require the installation of submarine transmission lines, too.

 

Q: How does Notus assess the potential of entering into energy storage solutions as a complementary line of business to the development of renewable projects?

A: We are constantly monitoring the advances in storage solutions that are coming to the market. However, it is not a project that we are undertaking at the moment. In Mexico, on the DG side, storage is not a great help because CFE acts as a battery: everything that is injected into the grid generates a balance in your favor and is used whenever you want. This is one of CFE’s main complaints against renewable energy. Until the regulation changes, DG storage is not that attractive. For utility-scale projects, it is more feasible to have hybrid projects where both solar and wind are generated. In Mexico, the generation curves of both renewable energy sources complement each other very well, which helps to generate a flatter tariff. In the future, storage will transform the energy sector but, first, we need a change in regulation and more accessible prices.

 

Notus Energía México is the Mexican arm of Notus Energy, founded in 2001 in Germany. The company is focused on the planning, development and management of wind and solar energy projects, including Distributed Generation projects.

María José Goytia María José Goytia Journalist and Industry Analyst