News Article

The Role of Solar and Wind in Mexico’s Energy Mix

Wed, 02/24/2016 - 13:18

Óscar Bernal, Director General of EOSOL Energy de México
Adrián Escofet, President of AMDEE
Mannti Cummins, Director General of Energía Veleta
Héctor Olea, President and CEO of Gauss Energía and President of Asolmex
Alejandro Díaz de León, CEO of BANCOMEXT

Bernal opened by mentioning the continuous and steady investments in the wind sector; conversely, he pointed out how solar energy has patiently waited for a moment that has not yet arrived. He mentioned that even though the solar sector has flagship projects like Aura Solar I, TAI Durango, and an upcoming 50 MW project, this industry has not received enough support, so he started the discussion by asking the panelists what is needed to make solar energy an adequate competitor of the wind sector.

Escofet pointed out that renewables are a relatively new industry in Mexico, dating roughly eight years back, as the country’s prominent oil industry did not foster the development of other energy sources. He said the wind factors found in the country make projects viable without the need for incentives. “In fact, there are no incentives in Mexico for renewables,” Escofet emphasized, but he did recall mechanisms found in the older framework, such as green wheeling and the energy bank.

“Money does not like uncertainty,” were the opening words of Mannti Cummins to echo on Escofet’s statement about the lack of incentives, which deterred financing institutions from investing in renewable energy projects previous to the reform. “Developers were expected to demonstrate interconnection capacity while offering guaranties when approaching a bank, and that was difficult to the point that the industry became stagnant.” He joked that renewable energy projects become viable when they are supported with someone else’s money.

The solar industry’s voice was heard in Olea’s words, who noted that there are several megawatts of solar power being submitted, and even though the financial and regulatory elements are in place, the projects lack a commercial outlet. “The projects are referred to as ready-to-build for a reason, but they are not realized because they do not have a PPA.” He identified the commercial outlet as the reason why wind power is booming while solar is not. This, in his view, is where the Energy Reform comes into play, as it will provide the necessary elements so that the commercial outlets, such as tenders, can flow. “I do not think CFE has understood its role in the new model. The tender intends to allocate 6,300 GWh in PPAs. With the numbers CFE is offering, I do not think this will be achieved. However, I am confident that the model will be continuously improved, so we have to look out for the second tender.”

Bernal said that the fact that renewables might not be able to participate in the first tender is concerning, and proceeded to ask Díaz de León what the sector looks like from a financing perspective. The head of Bancomext told how project planning was previously carried out in an almost improvised way, so the tenders will bring a certain order to the planning of the sector. “The ecosystem is complicated enough as it is, and the changing costs of technology and development make planning difficult,” he expressed. “The banking sector’s task is to liaise with the market players who know the technology, its costs, and applications, and understand their needs. The key is for projects to be bankable. If they are, the risks can definitely be mitigated.”