Leopoldo Rodríguez Olivé
Former President
AMDEE
/
Insight

Time For Continuous and Sustainable Wind Industry Development

Wed, 02/19/2014 - 10:42

AMDEE, the Mexican Wind Energy Association, has helped the government to set the target of reaching 12GW installed wind power capacity by 2020. Some optimists believe that this target is moderate, given how quickly the wind industry in Oaxaca developed in recent years, while new technology is enabling capacity factors of 35- 40% in places where installing wind turbines was unheard of. However, Leopoldo Rodríguez Olivé, AMDEE’s former President from 2011 to 2013, remains sanguine. He says that transmission will be a major bottleneck, which is why the association is seeking for the government to commit to a  long-term plan for the expansion of transmission capacity. The Open Season scheme has provided a solution in regions where transmission deficiency has been an issue, but Rodríguez Olivé says the Open Season scheme has certain elements that are not ideal, such as private parties needing to pay for planned capacity three to four years in advance. Today, over 60% of installed wind power capacity comes from private projects and off-takers. “Many of these projects are profitable and sustainable,” says Rodriguez Olivé. “However, with the natural gas price hovering at around US$3 per million Btu, it is hard to justify investing in wind energy or other renewables. But should the natural gas price rise to a range of US$4-6 per million Btu, then wind energy would become competitive.”

Incentives include an energy bank that serves as a virtual energy storage for self-supply projects, and transmission at a fixed rate regardless of where the energy is generated and consumed, are already producing results in the absence of feed-in tariffs and subsidies. “The combination of these incentives and Mexico’s available wind resources eliminate all questions about the financial viability of wind energy projects,” Rodriguez Olivé adds.

In Mexico, most wind projects have been financed by development institutions, such as IFC, NAFINSA, Banobras, the North American Development Bank, and the Inter- American Development Bank, as well as commercial banks. However, a growing track record has seen more commercial banks interested in investing in wind projects, says Rodríguez Olivé. He adds that this has translated into manufacturers and service providers developing strong human and technical capabilities in Mexico and acquiring expertise in the market. Domestic abilities for engineering projects and the construction of towers and turbines are thus increasing.

To take the next step, Rodríguez Olivé recommends that Mexico strengthens its services and supply industries,ranging from operation and maintenance to consulting, construction, and financing. In the short term, advanced components will be imported, especially given that European manufacturers are looking for new export markets due to overcapacity in their home countries. “With much of the equipment and machinery still coming from abroad, there is a strong potential for Mexican manufacturers to move up,” explains Rodríguez Olivé. “A lot of electronic and mechanical components could be manufactured domestically since Mexico has already shown its potential for manufacturing joint ventures in the automotive and aerospace industries. Small and medium size companies as well as large turbine manufacturers are already looking for suppliers in Mexico.”

“The Mexican wind industry has the chance to grow in a continuous and sustainable way,” he concludes. “There is potential to fully deploy this industry across the value chain and beyond power generation projects. To do so, every strategy must be based upon long-term objectives and take into consideration the expansion of the grid.”