Investors in Mexican renewables growing wary

Wind and solar energy investments in Mexico are getting smaller, marking a downshift in interest the government could address with more clarity on investments.

“When there is continuity, investments keep growing rationally,” Ramón Fiestas, Latin America director of the Global Wind Energy Council (GWEC), told BNamericas. “But when there is a change of political order in a country, it takes more time for investors to react. Investors need to understand what is going to be the policy,” he said.  

“What happened in Mexico is that there still is not enough clarity in regard to the political will to satisfy energy demand in the future,” Fiestas said. “Pieces of ideas do not match together in a comprehensive way.” 

Since coming to office in December, President Andrés Manuel López Obrador has moved to reverse Mexico’s 2013/14 energy reforms and re-focus management of the country’s electricity grid toward the state utility, the CFE. Earlier this year, the government canceled a transmission line and a renewables auction for 7GW of wind and solar capacity.

Existing projects have carried on as before, but private firms have started fewer, and smaller, wind and solar projects in 2019.

VESTAS INVESTMENT

On September 26, Danish wind turbine maker Vestas secured an order for 42 wind turbines with V150 rotors at a wind farm in Mexico, which is expected to generate 168MW of electricity.

“This order showcases how Vestas’ technology can meet the increasing demand of private Mexican companies for clean, reliable and competitive energy,” Vestas México general manager Agustín Sánchez said in a press release.

The 73m blades that will be affixed to Vestas’s 150m rotors will be manufactured at the TPI Composites factory in Matamoros state. According to the press release, the Matamoros factory also builds blades for Vestas’ turbine model V136 and builds blades for Vestas projects in the entire region. 

One major snag that has prevented further expansion of wind and solar electricity are purchase agreements. But the Vestas press release said the deal included an output management agreement for the operation and maintenance of the wind park over the next five years.

4TH ELECTRICITY AUCTION

Speaking at an energy forum on September 18, energy minister Rocío Nahle said there would “probably” be a fourth electricity auction. “We’ll have one for 200MW, around Aguascalientes or in that area,” Nahle said, adding the government sought “a balance [of energy] in the country.” 

Mexico’s three previous electricity auctions were widely hailed as successes. "This scheme was working in a very efficient way,” the GWEC's Fiestas said. “If we look at pricing, in terms of tender calls from 2016-2018, prices became more effective and competitive.” 

Fiestas pointed out that a 2018 auction pushed prices down to US$17.8/MWh which remains the world’s lowest price awarded at a renewable energy auction. Since then, auctions in Brazil and Abu Dhabi have seen prices hover around US$20/MWh, but Mexico still holds the record. 

“It is not only the number of investments in wind farms,” in Mexico, Fiestas said, “but a completed industry established there, with a supply chain, and a long-term vision to stay for many, many years.”

On September 30, the Spanish renewables power company EDP Renováveis announced the signing of a 15-year purchase power agreement to sell electricity produced by a 100MW wind farm in Mexico, beginning in 2021.