Mexico’s energy market has undergone a massive change, causing leading solar developers and financiers to wonder what the future holds for the Mexican PV market. Impressively, the forecast for the Mexican PV market is very bright, and as solar expert Mr. Hector Olea, President of ASOLMEX and CEO of Gauss Energia explains, “With this energy reform, the government wants to become more mainstream, similar to what we have seen in other countries where energy markets are standardized. For us, this market revolution is a game changer. We have to re-educate ourselves after 20 years of developing projects in one way, and we have to change the culture in Mexico to understand the implications.”
Mexico is already one of the most curious markets to observe, with the highest potential for a solar boom when compared to the rest of the countries in Latin America. However, it was frozen in 2014 due to the changes in regulation and the modification of the main routes of energy policy leaving investors wondering what to expect going forward.
“We expect the market will be huge in Mexico starting in 2015 because there are fundamentally three main reasons for the success of solar there. The first is that energy is scarce and the population is large and growing rapidly. They need more energy resources to meet the demand. The second is that Mexico is one of the countries with the highest solar irradiance and very few days of rain, so it has higher production of energy. The third reason is the price of electricity is quite high during the peak hours, mainly in the big cities, which makes solar quite competitive with the conventional sources of energy,” states Arturo Herrero, Chief Strategy Officer and Head of Emerging Markets at JinkoSolar.
While the projects coming down the pipeline in Mexico are plentiful, Mr. Hector Olea encourages developers and investors to be patient in order to get the most out of the up and coming Mexican PV market. “This energy reform cannot happen overnight, so we have to be vigilant and take responsibility for managing the expectations of those changes. The key for us is having a solid implementation of the market rules. The next year will be a favorable time to look into actual development, with 2017-18 bringing remarkable growth.”
Importantly, CENACE recently announced their criteria for power generation projects to receive approval to connect to the grid. Mr. Olea emphasizes that this development shows that the restructuring of the Mexican energy market is a long term commitment from the government and regulations are already being issued. “It is a permanent change, and we know what to expect as we have seen similar changes being implemented in other countries. While we need to be patient, that does not mean that we are currently sitting and waiting. In fact, we are discussing with local players, like Gauss Energia, who could join forces with other large international players to take advantage of these opportunities.”
Mr. Arturo Herrero encourages discussions between local and international players by also emphasizing that there has become a need to modify the solar end product to be much more durable and resistant to conditions and environments that are extremely harsh (notably for Latin American and South African clientele). “ The technology of the product has improved a lot in this area. For example, panels have since come into existence that are meant to withstand lower degradation that does not impact power performance, such as the aforementioned rising panel temperatures around 60°C, or over 90% humidity, as can often be the case in various parts of Latin America during harsh temperatures and conditions in the summer months.”
Due to these technological improvements, countries within Latin America such as Mexico or Chile that are considered to be two of today’s biggest emerging markets, can look to expand more rapidly due to recent solar innovations that can last in the long-term despite extreme weather conditions.
With over 2 GW at least expected in Mexico by 2020, Mr. Olea adds, “I foresee that in the next two years, PV will literally explode because we have the resources necessary to make that happen. Additionally, the need for solar PV greatly exists, so we have elements from the supply and the demand side to make solar take off. Policy makers need to understand that the price of PV is down so dramatically that the competitive nature of PV technology already exists.”
Latin America is a hotbed for solar activity at present, with countries such as Chile, Brazil and Honduras seeing an infiltration of new solar plants and projects coming down the pipeline. While these countries are also prime locations for solar PV expansion, Mexico is particularly of interest. Shares Mr. Olea, “The size of the Mexican economy, the large PV potential, the amount of great resources, and the new regulations in development, make Mexico stand out among competing markets. As an investor you can really rely on Mexico to deliver. It is a completely new market on top, which is unique.”