US Experience in Efficient Generation Mix

Q: Why should the commercial and industrial sectors turn to RER Energy Group when shifting to solar power?

A: RER Energy Group provides an integral solution, specialized in commercial, industrial and on-site systems. The industrial sector in particular is ideal for on-site solutions because the facilities in this sector already have the required space and infrastructure. These companies also have high electricity consumption but not high enough to be candidates for other supply options like PPAs with remote PV parks. With CFE’s price volatility, final users can obtain immediate benefits in the range of a 20-40 percent price reduction without having to invest more money. These investments are similar to realestate investments and generate IRR’s of 20-35 percent, but with lower risks. Our on-site solutions are intended to help commercial and industrial businesses maximize their savings in energy, knowing that we will provide excellent quality and a product that will last for several decades.
Q: How is RER Energy Group providing solutions and services to heavy industrial energy users?

A: We provide them with an efficient mix. Usually, when industries consume a lot of energy, relying solely on a PV on-site solution tends to fall short, since it will require a great deal of space to generate enough energy. There are many combinations that could work, such as PV and combined cycle or CHP. Analyzing their options from a mere solar perspective, companies have three choices. They can either participate through net metering, wholesale or net billing. Solar energy has the particularity that its production curve is similar to the curve of the highest local marginal nodal prices. We designed a market strategy where companies sell the energy at the point where it is the most expensive and buy over the course of the day. This way, it can compensate the consumption curve by buying at the lowest points and selling when the price is the highest.
Q: What is your assessment of the growth of merchant projects and private PPAs?

A: The problem that merchant contracts faced was the lack of certainty in the market regarding electricity rates. Between 2015 and early 2018, the market experienced huge volatility with no clear trend. In 2018, CFE announced that it was going to launch a pilot market where it would change the methodology used to calculate its tariffs. The methodology was launched but the changes remained uncertain so CFE announced a provisional methodology. For those that want long-term PPAs, it has been very difficult to convince clients to enter into a beneficial agreement for both the client and the developers. However, we are seeing the market stabilizing to somewhat more rational prices. Comparing Mexico with international prices and considering installed capacity, I think that we will start to see many more bilateral PPAs, especially since we are experiencing a lowerprice auction trend and PPA prices are going up.

Q: What is RER Energy Group’s flagship project in the country?

A: We have a pipeline of around 90MW of distributed generation. We are working on building around 1-3MW per month. We calculate that by 4Q18 we will have our first project ready, with an installed capacity of 500kW, and larger ones will be completed in 2019. Our pipeline of projects is for companies in different sectors, including steel manufacturing companies, agribusinesses, processing industries and metal-mechanics companies. We are focusing our efforts in the Bajio and northern regions, as well as the Yucatan peninsula.
Q: How do you choose the best components based on a project’s specificities?

A: The most important factor is obtaining bankable projects, especially if a fund is going to participate and is looking for long-term returns. Quality is critical, which is why we have only been allowed to use components from Tier 1 companies. Given the supply and demand issues and time constraints, we incorporated several brands. This turned out to be a good move since it helped us develop a solid relationship with several brands showcasing healthy growth.