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Analysis

A Sunny Future in Mexico

Wed, 02/21/2018 - 10:27

Solar energy in Mexico is growing at exponential rates. Its participation has become even more important thanks to the long-term electricity auctions. Although much attention has focused on the auctions, the short implementation times and low costs are making solar the preferred technology for distributed generation.

There is little doubt that solar is on the way up the power generation ladder in Mexico. In the first half of 2017, the amount of solar capacity installed increased 70 percent compared to the year-earlier period, to 460MW from 270MW. Jochim Goldbeck, President of Solarnet, says the country is attracting solar projects due to its “growing industrialized market, lots of energy consumption, 120 million inhabitants, rising demand and exceptional irradiation levels, among other factors.”

The Mexican territory receives over 2,190 hours of sun per year. In some regions, such as in the northeast and Baja California, energy production levels can reach up to 8.5kWh per square meter per day. The International Energy Agency, in its Mexico Energy Outlook 2017, states that the lowest average solar resources in the country compare favorably to the highest averages in Germany and Japan, the world’s second and third-largest solar markets, as can be seen in the graph on the right. The spike in solar technology installations in Mexico follows a global trend. PRODESEN 2017-31 states that over 66 percent of the world’s solar technology capacity was installed during the last four years.

But there is one glaring drawback that continues to hinder the technology’s development: intermittency. The sun is not available 24 hours a day, every day, and clouds are one of the major enemies of solar panels. To solve this issue, companies are diversifying and changing their business models to include storage services that will be able to offer energy security to clients. Francisco García, Country Manager of Gransolar, highlights the company’s interest in providing this kind of service by developing its own technology. “In partnership with PV Hardware, we are developing our own battery system that would differentiate us among industrial users. We hope to provide support and stability in locations that lack a reliable network.” 

With a short history in the country, it is understandable that another of the challenges solar is facing is cultural. A market that is not used to developing a certain kind of project will naturally have some resistance to its implementation. As technological innovations, such as trackers, are implemented around the world in the solar segment, Mexican companies find themselves playing catchup. Luis Garrido, Sales Country Manager Mexico of Braux Energy Group, explains that “even though Spanish companies have a significant presence in this particular sector (trackers), the Mexican counterpart is often unfamiliar with the key information required by a tracker manufacturer to produce a quote perfectly adapted to the particular conditions of the location where the solar park will be built.”

Just as with wind, solar is getting the unprepared Mexican transmission grid in trouble. For wind, the main problem is that the most attractive locations for projects tend to be located far away from transmission lines, but for solar, the issue is whether the grid can handle the increase in produced energy. This was to be expected, says Oscar Bernal, Director General Mexico of Eosol Energy. “Usually, infrastructure is unable to follow the boom in this industry once triggered, especially considering the growth in demand that electricity will experience in the coming years.”

Evolution of Photovoltaic Energy in Mexico

Average Solar Irradiation Levels Reached in Selected Countries (MWh/m2 per year)

But technology is not the only burden hindering the interconnection of more solar projects. Although CRE required CFE to allow for a hurdle-free interconnection process, reality hit as the company faced a lack of administration capacity to handle all the interconnections being requested. While media coverage often portrayed CFE as a company looking to remain as the key player by rejecting interconnection permits, some in the industry saw a different picture. José Zambrano, Director General of Galt Energy and member of ASOLMEX, says, “when CFE acquired legal protection against the interconnection rules published by CRE many newspapers published wrong or even false information. ASOLMEX sat with CFE to understand the reasons behind the agency’s action and how it could be worked out. Instead of burning bridges we looked for a way to fix the problem. CFE was not able to handle so many interconnections in such a short time as no company can deal with a major change in core activities in just a couple of days. After those talks, both CFE and us — the companies involved in distributed generation — were ready to keep working together. We recognized that the legal protection for CFE was necessary and interconnections started to be handled much more quickly.”

A BRIGHT FUTURE

Beyond cultural and technological challenges, both national and international companies see in the Mexican market a great business opportunity. García mentions his company’s high expectations for the local market and sees medium to long-term sustainable growth as feasible for the industry. Similarly, Gonzalo Rodríguez, Sales Manager México, Caribbean Islands and Central America of JA Solar, profiles Mexico as the most promising country in the region “with the Chilean market declining and a complicated scenario both in Brazil and Argentina. The rest of the region, including Central America and the Caribbean, has taken important steps as well but has still not reached the GW capacities Mexico is targeting.” PRODESEN 2017-31 expects that, for the given time period, a total of 7.68GW will be installed, requiring an investment of MX$216 billion.

Javier Romero, Executive Director of AMFEF, points to the importance of taking advantage of Mexico’s booming market to create a local value chain able to handle the country’s production requirements. “Mexico must take advantage of this opportunity to reach a position where it can create its own solar industry, capable of competing with the quality and competitive prices of the rest of the world.” If Mexico fails to do so, the country could face complications such as Europe and Canada faced “because they lack local manufacturing production.”

Fortunately, some players in the industry are already working toward the creation of a stronger solar value chain in Mexico. Among them is María José Icaza, Director General of SOLARSOL, which is a Mexican manufacturer of photovoltaic panels, and although the company buys the cells from a provider in Taiwan, the remaining raw materials are Mexican and the panel assembly is carried out in Mexico. She emphasizes how, although for now the cells have to be imported, the company is working to make the production more local. “We want to make a difference in the Mexican market by placing a special emphasis on producing a top-quality product based on local innovation and prove that Mexican products can comply with the highest quality standards.”

Mexico’s potential for the installation of solar projects, as well as for the creation of a value chain able not only to cover national but also international requirements, is clear. The long-term electricity auctions and distributed generation projects are creating a highly attractive market in Mexico for PV solar in the short, medium and long terms. As Hongbin Fang, Director of Product Marketing for LONGi Green Energy Technology, says: “We are convinced that Mexico’s PV market has bright days ahead of it.”