Tracking Profit in an Increasingly Competitive Market

Long-term electricity auctions in Mexico have seen a staggering drop in prices. While this is good news for the industry’s competitiveness and final users who will be receiving cheaper and cleaner energy, it places a burden on the value chain, warns Luis Garrido, Sales Country Manager Mexico of Braux Energy Group. “To become more competitive, companies must optimize their manufacturing processes while keeping them adaptable to the evolving market conditions worldwide, especially in Mexico where the market has become much more competitive in a short period,” he says.
Considering the competition in the long-term electricity auctions that have, according to Garrido, “punished the entire industry in terms of revenues,” he can foresee the creation of new financing schemes that will adapt to the new and evolving market conditions inherent to those auction results.
Braux Energy Group is a multinational founded in 2006 in Spain that over the years has entered into activities in 16 countries. It is involved in the entire solar PV value chain, from design and engineering of PV plant elements such as the manufacture of trackers to services for the solar industry such as EPC, O&M and even commercialization of energy. Aiming for other opportunities while the market consolidates, Garrido says Braux Energy Group has preferred to work in Mexico developing projects in more well-known and stable schemes, such as the ones provided by PPAs.
The company has already managed to enter into important contracts with major project developers, he continues. “Braux Energy Group is consolidating its presence in the country. We are developing a PV park of 180MW for ACCIONA and are close to sign another 54MW worth of projects,” he says. “Besides those opportunities, we hope to obtain another utility-scale and self-supply project soon, as we are already working on the project economic and technical proposals.”
Braux Energy Group is aiming to install 250MW to 300MW per year until the end of 2020. While this may be considered a small number, Garrido explains that Braux aims for quality rather than quantity, a strategy it hopes will build long-term client relationships. “One of our mandates as a company is to always comply with all of our clients’ requirements, therefore becoming a well-known company in the industry,” he says.
This strategy has led the company to establish links with some of the biggest players in the market. “We are having close conversations with companies such as ENGIE, Mitsui and Canadian Solar to show them the installations we have already finished,” he says. According to Garrido, these are promotional activities, since it will not be the developers who hire Braux directly, but the EPC companies that auction the actual installation of the projects. “Nevertheless, it is always helpful to have the approval of the main companies in the country to get more contracts,” he says.
As manufacturers start flooding the Mexican market and looking to provide the lowest prices in the industry and for developers to increase their revenue margins, Garrido warns of the importance of keeping standards high. “Up until now, the selection of PV components has been dictated by the companies’ preference and to their usual providers, instead of up to minimum quality standards,” he explains. “This is the same case for the entire system, until it reaches the interconnection point, where normativity is directed by CFE, as the owner and operator of the entire grid.”
While Garrido recognizes that it will take time for the consolidation of the projects that were awarded in the long-term electricity auctions, he warns that continuity is key to avoid an industry crash. “Populist measures should be avoided as they affect private players and could slow down investments in the country, ultimately hurting the Mexican people,” he says. “Mexico is a country where plenty of foreign investment has been deployed, and the new administration should recognize that and avoid restricting the country’s growth. Optimally, the new administration should not only recognize the existing momentum but also foster the entrance of more capital into the country.”