Untapping Tamaulipas’ Full Wind PotentialWed, 02/19/2014 - 11:26
Oaxaca was once the alpha and the omega for Mexican wind energy generation. However, American Shoreline, banking on past successes based on exploring new areas, had the ability to see other geographical options that would help the company. Aware that wind resources are not limited by international borders, American Shoreline made the most out of its consulting contracts with Mexican companies and decided to seize a virtually unexplored opportunity at the time: Tamaulipas.
Manti Cummins, American Shoreline’s Director of Wind Energy, explains: “Tamaulipas is well linked with South Texas in cultural, economic, and business terms. People commute across the border on a daily basis. Because of the strong maquiladora presence, locals are quite used to dealing with transnational companies, making them valuable actors in the economy”. Tamaulipas provides a simple cultural landscape for foreign companies, which facilitates a transnational business climate. This is an advantage over Oaxaca, where international power companies might have to struggle with one of many ethno-linguistic groups that are not necessarily integrated in international commerce flow.
In 2007, American Shoreline prepared the necessary legal requirements and documents to set up in Mexico, where projects may seem like an easy task once they are completed, but a project is likely to be suspended or terminated before completion because of cultural and environmental issues, according to the American Shoreline representative. The company began developing projects in Mexico before the 2008 Energy Reform, which has worked in the company’s favor. American Shoreline’s team found itself lucky enough to come across 13,000 hectares belonging to a single owner. “Single land owners are simpler to deal with; multiple owners do not see eye-to- eye all the time and neither do their multiple attorneys,” Cummins points out. “During the development stage, land owners receive a significant amount of money to ensure mutual cooperation. Once the project becomes operational, land owners receive a bonus payment and participatory royalties on a percentage basis, making them active stakeholders.”
American Shoreline has been responsible for installing 2GW in Texas over a four-year period and 11GW since 1999. The company’s plans in Mexico include the El Porvenir project in Reynosa’s south-east region. “Starts off at the coast and goes 70km inland. I bet you can get 10GW there,” says Cummins to emphasize the attractiveness of Tamaulipas’ wind resources. Maybe the best spots in Oaxaca are already taken, but American Shoreline sees no limits to Tamaulipas’ potential. “There are currents going from Tampico to Nuevo Laredo and the wind quality in Tamaulipas provides significant advantages. For example, the absence of turbulent flows allows for more affordable turbines to be installed.” American Shoreline’s Tamaulipas project is expected to be operational in 2014 and will consist of two sites amounting to 800MW in total, with 150MW installed in the first phase. El Porvenir has received great support from the state authorities who are also putting their best efforts in ensuring that the projects have a smooth development.
The wind industry offers a positive outlook for the Texas-based company. Its home state operates as an independent grid, separate from the rest of the US. “There are approximately 65GW in the Texan grid, which has 70GW of stock capacity,” Cummins states. “The situation in Mexico is similar when you include self-suppliers and CFE’s energy generation.” The main difference and challenge is transmission infrastructure. In Texas, the capital costs of transmission are not borne by the project but by the overall rate payers, who are not greatly affected by slight increases in the bills that end up paying for new zones. On the other hand, projects in Mexico, such as Open Season, typically require US$200-400 million in investments. Furthermore, there are regions in Tamaulipas with great wind conditions but no transmission infrastructure. In order to address these obstacles, Cummins advocates for stronger collaboration efforts between public and private players in the energy sector. “An enhanced CFE would be of great help because of the organization’s political weight. CFE is facing a notorious challenge, making itself a viable stand-alone entity without significant support from the government,” declares Cummins when talking about the Mexican market and competitiveness. “It is not viable to put all the eggs in one basket. CFE needs to increase its portfolio of power purchase arrangements. If we want to see how wind power will play in the market, let it compete with natural gas,” Cummins adds.
“Standing out in the challenging Mexican wind market requires significant expertise and tenacity, traits of world- class players. American Shoreline possesses these qualities that are destined to ensure our success in the country. The lesson learned here is to never give up,” says Cummins.