The first auction price bids are due in March, and prequalification for the second renewable auction in Mexico is expected to take place in as early as May or June.

Monumental Market Conditions Revealed as First Mexican Clean Energy Capacity Auction Prequalification Bid Window Closes

Annie Silvester for | ArcStar Energy

 

The qualifying window for the first public renewable energy auction in Mexico closed on Friday, February 12, 2016. The auction will be among the world’s largest bid procurements for renewable energy. Mexico’s Secretary of Energy (SENER) is expecting to award Power Purchase Agreements (PPAs) for 2.5GW of energy with a term of 15 years.

A reported 103 bidders applied for qualification. A total of 468 technical offers were submitted, including plans for several large-scale solar and wind farms.

In January, the country’s state utility, Comision Federal de Electricidad (CFE), published regulations for this first auction. This included setting a price ceiling for clean energy at approximately USD $70 per megawatt-hour, one of the lowest energy sector caps set to date.

For ArcStar Energy, LLC, a New York-based energy investment transaction and development management firm active in the Mexico energy market since 2012, Friday’s submission deadline marked the first clear view of precedent-setting market mechanisms and conditions. Working with its in-country partners, ArcStar successfully submitted 760MW AC of large utility-scale photovoltaic projects involving seven qualifying bidders.

ArcStar partner and country manager, Brent O’Connor, commented, “The timing of the first qualification window closing coincides with the ongoing uncertainty in the oil and gas markets, coupled with a high in the U.S. Dollar, to which the long-term Power Purchase Agreements payments will be tied. These factors, combined with some of the most optimal solar and wind resources in the world, make the results of this auction monumental. The auction is expected to result in some of the lowest net bids for renewable energy generated by large-scale clean energy projects worldwide.” O’Connor continues, “This, of course, has significant long-term consequences, as the current low-cost of dirty fossil fuels has made it increasingly difficult for governments to retain the political will to shift to clean renewable sources. Therefore, the results of this auction present the potential to be a win-win for our sector, the Mexican rate payers and, of course, our planet from an environmental and climate change perspective.”

As part of the National Electricity System Development Program, Mexico is seeking to add 20GW of clean energy in the next 15 years, receiving as much as USD $62.5 billion in private investment in the energy sector by 2018, and USD $160 billion through to 2029.

O’Connor adds that despite the tremendous effort put forth in preparation for this initial submission, it is not time for industry players to rest quite yet. The first auction price bids are due in March, and prequalification for the second renewable auction in Mexico is expected to take place in as early as May or June. ArcStar has an additional 1GW of solar projects targeted for this second window, so much work remains to be done.

ArcStar is also pairing established investors with PV solar projects of similar scope and quality in countries including Brazil, Turkey, Kazakhstan, Pakistan, Colombia, Chile, Panama the United States and Canada.

 
 

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