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A Unique Value Proposition in Smaller Utility-Scale Projects

By Cas Biekmann | Fri, 08/14/2020 - 14:38

Q: What motivated the company to do business in Mexico and what have been the main challenges you have encountered?

A: ForeFront Power itself does not have a long history. It was founded three and a half years ago. Its origins stem from the acquisition of SunEdison, which was at one time the world’s largest solar company. Many of our employees worked there. In Mexico, ForeFront has been operating for a year and a half. We started looking for options in Mexico due to the country’s Energy Reform. Mexico has large solar resources, and the market is still in its early stages. Mitsui, of which we are a part, has been in Mexico for more than 100 years. It has faith in Mexico, and this added to our reasons to be here.

Interestingly, the company’s US business model is not applicable in Mexico. Therefore, one of the main challenges was to adapt and reinterpret it for the Mexican market. We focus on small to medium-sized utility-scale projects, ranging from 5MW to 10MW. We also develop onsite projects. When we own projects, the main differentiator is that we finance, build and operate the projects. Our plan is to have a long-term presence in Mexico.

 

Q: What does the company’s 900MW global portfolio look like?

A: Most of the company’s portfolio is located in the US, and consists of SunEdison’s C&I project portfolio. The other part was developed by ForeFront’s sizeable US team of almost 80 employees. This is close to 100MW, all consisting of smaller projects of around 100 – 5,000KW. Since our arrival to Mexico, the company has needed time to settle its physical presence and adapt our business model to the local market. Now, we have a portfolio of around 30MW in development, all smaller utility-scale projects. We are communicating with customers regarding onsite projects that are between 500KW and 2MW.

 

Q: What is the main client type that ForeFront is targeting in Mexico?

A: In the US, we target mainly commercial clients, as well as industrial. Other than that, the company does business with many municipalities and schools. Mexico, however, is a different market. Municipalities and other government entities cannot sign a PPA easily, as they have complicated payment terms. Payment guarantees are essential. Therefore, we focus mostly on industrial groups in Mexico, with some commercial projects.

 

Q: How is the company making use of Mitsui’s network to further enhance its products?

A: While I do have many contacts from my own experience in the energy sector, reputation is a big deal in Mexico. If we were to approach customers as ForeFront Power, they might not know who we are. Approaching them as Mitsui makes quite the difference in how we are received by potential customers. Therefore, we make use of Mitsui’s strong reputation and rich background. However, in the US, we do not promote our ties to Mitsui that much because we prefer to have a more independent image.

 

Q: Why should C&I players choose ForeFront Power to provide them with solutions?

A: The experience backing up the company is huge. Mitsui’s reputation gives us a great deal of credibility. Mitsui usually merely buys a participating share in companies. In this case, they are 100 percent owners. This shows their belief in targeting this type of renewable business.

Another added benefit is that ForeFront is not a company with a strong hierarchy. We have a more horizontal structure. Customers can approach all levels of the company in an easier way. But most importantly, we are a very flexible company. We adapted the business model from the US to Mexico and can tailor it even further to meet the customer’s demands.

 

Q: How have pandemic and other recent shifts in the energy sector impacted the company and where does it identify opportunities?

A: It has been a strange experience for the company. Before the pandemic, we were about to execute several PPAs. Some have fallen apart, mainly because the customers were big industrial automotive companies that faced uncertainty about remaining in Mexico. A long-term PPA is therefore not an option.

Another challenge lies with the current legislation since many opportunities have been put on hold, however this has resulted in higher electricity prices which represent an opportunity to offer a better price to our customers. Additionally, some companies wanted to invest in onsite solar projects before COVID-19 hit. Now, they no longer see it as a priority to invest in renewables. These companies are now looking to sign PPAs instead, and this has become another opportunity for ForeFront.

 

Q: How does the company expect to be affected by the shifting circumstances involving the public energy sector?

A: This has been widely discussed internally. ForeFront Power decided not to do so because we have a great relationship with CENACE. Filing an injunction could have damaged the relationship. We locate them in places where CFE cannot place projects on its own, which actually contributes to alleviating CFE’s pain point regarding grid stability.  Regarding CRE, we are experiencing major delays because it has let go many of its staff recently. Nonetheless, we see this period as a time of opportunity for the company.

 

Q: How does the company assess interconnection issues?

A: A major issue affecting Mexico’s energy sector is distribution and transmission infrastructure. If we do not do anything about this, we would be very dependable on a battery storage regulation that doesn´t actually exist. There will simply not be enough space to interconnect more projects. Storage will play a very important role.

For us, the goal is to interconnect to distribution lines, not to transmission lines. This is why we focus on smaller scale projects. This makes interconnection cheaper. We also build projects close to substations that have capacity available. There is still the chance that the Distributor will request something in exchange for interconnection but this approach decreases the possibility of receiving unreasonable demands.

 

Q: What are the company’s objectives for 2020-2021?

A: We want to be one of the first to develop small to medium-sized utility-scale projects. We did oversee some 20MW projects in the country, but they were usually in partnerships with the local government. Therefore, our goal is to be at the forefront of this market. We are offering shorter term PPAs as well. This is somewhat new in the solar market but flexibility is a goal for the company.

ForeFront Power provides renewable energy solutions in the US and Mexico. The company is gearing up to be a frontrunner in smaller utility-scale and on-site projects in Mexico. ForeFront Power is part of Mitsui.

Photo by:   ForeFront Power
Cas Biekmann Cas Biekmann Journalist and Industry Analyst