What we are seeing is that the Mexican government and its regulatory and policymaking bodies are listening to the stakeholders in Mexicos renewable energy space and they have been tweaking and updating the reforms accordingly.
Renewable Energy in Mexico - MIREC WEEK
Jamie Dowswell | MIREC WEEK
Can you provide a quick breakdown of Mexico's energy reform and what impact it has had on the development of renewable energy in the country?
Mexico’s power sector has recently undergone broad reforms to unbundle the state owned utility, CFE, in an effort to promote competition in the sector, reduce energy prices, and attract investment for clean energy projects.
The government has set an ambitious goal of 35% of clean energy supply by 2024, and this led to the first ever clean energy auctions which were held in 2016, and which are expected to take place on an annual basis. As a result, solar and wind project development looks set to explode to meet the need for clean energy supply across the country.
Why is renewable energy becoming such an important issue for Mexico's commercial and industrial sectors (e.g. manufacturing, retail, hospitality)?
The country’s energy reform will have wide ranging implications for Mexico’s energy hungry commercial and industrial (C&I) sectors. Large manufacturers and commercial businesses will have to begin sourcing an increasing percentage of their energy from clean energy sources like solar and wind farms.
There will also be a Clean Energy Certificates scheme which is expected to come into force in 2018, beginning with a requirement of 5 percent and gradually increasing year on year.
Is the Mexican government committed to the energy reform movement? How do they help or hinder the process?
The government has been a key driver of the energy reform in Mexico. Without them it is unlikely we would have seen so much activity in renewable energy in such a short space of time. As with any reform, there will always be teething issues, but what we are seeing is the implementation of an entirely new energy system over a course of 3-5 years that has taken up to 20 years in other more mature renewable energy markets like the United States.
What we are seeing is that the Mexican government and its regulatory and policymaking bodies are listening to the stakeholders in Mexico’s renewable energy space and they have been tweaking and updating the reforms accordingly.
We are seeing major global organisations like Google and Facebook moving to 100% renewable energy goals, are large Mexican companies following a similar trend?
Slowly but surely, and the reasons for this are twofold. Firstly, government led directives which compel high energy users to participate in a Clean Energy Certificates (CELs) scheme from 1 January 2018 have sparked a number of companies into action. In a space of 1-2 years we have seen sectors which are renowned for high energy use shift their position from being heavily critical of the energy reform to embracing it wholeheartedly. In recognition of the low pricing we saw in the latest energy auctions, many Mexican organisations are in the process of pursuing partnerships with wind and solar developers across the country to procure cheaper and cleaner energy.
Secondly, while some of the Mexican based operations of large international organisations are following suit in their commitment to 100% of renewable energy, we are also seeing Mexican companies adopting renewables as part of a dedicated CSR strategy to promote sustainable practices. Some large players, like Walmart and General Motors, have already set out on a clean energy pathway and have developed projects for self-supply, while the market for distributed generation continues to grow.
Are we seeing large scale development of renewable energy in Mexico, or is there more of a shift to distributed generation schemes like rooftop solar?
Both, although at the moment large scale development has been more prevalent, whereas the rooftop solar market looks set to pick up pace over the next 12 months or so.
Utility scale solar was limited until last year’s energy auctions saw an explosion of interest in their development. Many of the solar projects which won in the 2016 auctions have already, or are expected to break ground this year. That said, there are still some lingering doubts about the viability of some of the projects, which has led to some delays in the beginning of construction. The market is keen to understand what penalties, if any, will be applied to those developers who do not fulfil their commitments within the government’s allocated project time frame.
Earlier this year, the Mexican government also introduced new guidelines to reduce the red tape related to the installation of rooftop solar systems less than 500kW. As energy prices have gradually increased, some of Mexico’s highest energy users from the domestic sector (the DAC Market) and the commercial sector have sought to take advantage of the cheap energy afforded by solar power. Previously, bottlenecks were encountered during the interconnection process where the former state utility (CFE) was responsible for reviewing these permits. This responsibility has now been passed over to the grid operator (CENACE) with the hope that this will speed up the approval process.
Accordingly, distributed solar energy looks set to double this year alone, and the government is lending its support to the sector and has set a target of ensuring that 5% of all homes in Mexico have domestic rooftop solar systems connected to the grid.
How do you think the next 5 years will evolve as far as the transition to renewable energy in Mexico and what is needed to accelerate the process?
Enel’s head of renewable energies for Central America recently stated that they view as one of the hottest renewable energy markets in the world, and it looks set to remain so for at least the next 3-7 years. The government has lent its full support to the Energy Reform and the work being done by the policymakers and regulatory bodies should be commended for achieving so much in such a short space of time.
I think that once we begin to see tangible economic results from the owners of the auction winning projects of 2016 and 2017, growing confidence in the market will help to develop the industry further and will provide investors and financiers who have held back with the confidence to fully commit to Mexico.
Here at Green Power Global, we are very bullish about the market and we are seeing strong annual growth year on year at MIREC WEEK, the renewable energy congress which we organise in May each year. We recently held our 6th edition and have never had more attendees, sponsors, exhibitors and speakers. We look forward to working in the market for many more years to come. More information can be found via our website – www.mirecweek.com.
Jamie performs market research and analysis for Green Power Global’s Latin American portfolio of renewable energy congresses. Green Power Global produces events across the globe dedicated entirely to the renewable energy sector.
Jamie is responsible for the development of Green Power Global’s flagship 5 day congress, MIREC WEEK (Mexico International Renewable Energy congress) and has also worked in other emerging Latin American renewable energy markets including Colombia, Chile and Central America.
The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag
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