Juan Ávila
CEO & Associate
Top Energy
/
Insight

Solar at Home on the Range

Wed, 02/22/2017 - 17:36

Identifying a niche market to cultivate can result in big business. Mexican EPC Top Energy uncovered a unique segment for its product when it entered the solar market: poultry farms. But the company warns potential entrants not to count their chickens before they hatch.

“It is a difficult market segment,” says Juan Ávila, the company’s CEO and Associate. “We have seen many solar energy companies enter this sector only to go bankrupt after one year.” Top Energy, which focuses on distributed generation, got its solar foot in the door with agricultural businesses in Aguascalientes, mainly medium to largesized chicken farms. One of the company’s flagship projects was a 700 PV panels installation at one of the state’s largest chicken producers, which sparked the interest of other farmers in solar solutions. “Opening the door to other chicken producers was a great hit for us. Each chicken coop consumes 35-60kW. There are plenty of opportunities for solar energy in rural applications because it is a competitive option even where other renewables can also be considered,” Ávila says.

The rural sector, however, is not an easy niche to capitalize on so diversity can provide a buffer, he adds. “We are redesigning our strategy so we can bring more SMEs aboard, factoring the new regulations into our business model. This special market niche is also known as distributed generation and according to some analysts this is one of the fastest growing markets for renewables, especially solar PV.”Even though the electricity consumption in SMEs is not as impressive as in large corporations, the scale of the market makes it an attractive segment. According to INEGI 99.8 percent of the over 4 million businesses in Mexico are SMEs, responsible for 52 percent of the country’s GDP. Investing in solar technologies might be an attractive option for companies in this segment using automated processes or with important electricity-related costs.

Financing is the major hurdle for SMEs to access solar solutions, a problem exacerbated by the lack of knowledge in local banks. “In Europe and the US it is easy to get financing for these projects because banks understand the mechanism behind it, including the savings that users obtain in their energy bills that should be considered in the refinancing assessment. Most Mexican banks do not see the business case in financing small and mediumscale renewables, even if they would also benefit from having more borrowers. European and American banks know that financing renewable energies is one of the safest investments because they become a productive asset. Mexican banks need to be aware of this so we can all benefit from the deployment of renewable energies in small and medium applications,” he says.

To overcome this challenge, Top Energy has made use of favorable credits and incentives provided by Mexican development banks NAFINSA and Financiera Nacional de Desarrollo (FND), as well as the energy-efficiency private trust FIDE. “We work a lot with NAFINSA, which has a program for buying fixed assets that SMEs can use to borrow money at a low preferential rate. NAFINSA offers credit up to MX$2.5 million over a five-year period and without any collateral,” says Hernández. “We also work with FIDE, which provides four-year loans and gives a 10 percent subsidy for residential high-consumption (DAC) projects. We also have the support of FND in the case of projects located in rural areas, whether they are farms or other customers located in rural municipalities. FND offers attractive loan schemes for rural habitants, which can go up to MX$240,000 at a 7 percent fixed rate for men and 6.5 percent for women.”

Top Energy is looking to adopt a more proactive approach for breaking the financing barrier by introducing a new business model. “We launched a new company focusing on distributed generation and commercialization of energy,” Hernández says. “We saw that financing continues to be a constraint for many potential customers so we take care of all the investment, giving customers the option to repay the project at lower payments than CFE’s rates. We have specific customers from other sectors we want to start working with, so we will focus on them as our next step.”