Mexico wind energy investors 'in standby mode'

After years of rising investment, interest in Mexico's wind energy market is stalling after cancelled renewables and transmission line auctions. 

“We think the rollback of the auctions was negative, but we don't think current projects are at risk. We are in standby mode,” Gabriel Vigueras, director at energy consulting firm Mexico Energy Partners, told BNamericas.

“One of the biggest considerations for developers is nearby transmission and distribution infrastructure,” said Paola Moreno, director at the company.

“You can generate energy, but you must be able to connect it to the grid for the project to make sense.”

WIND GROWTH, STALLED

This is a stark reversal for a country that became a global focal point for wind energy after reforms to liberalize the energy sector were announced six years ago.

In 2016, Mexico held its first renewable energy auctions, drawing in two dozen global energy providers and kicking off dozens of projects, including Enel Green Power's 103MW Salitrillos wind park in Tamaulipas state. 

Those investments began materializing over the last year, and private companies began contracting with renewables providers as corporate appetites grew for cutting long-term emissions.    

In May, candy bar maker Mars signed a 15-year purchase power agreement with Vive Energía and Envision Energy for energy produced on wind farms in the Yucatán peninsula. 

Meanwhile, developers have taken to creating small industrial parks, dubbed “pocket parks,” where a variety of businesses can co-locate in a 30-40ha space serviced by renewables such as solar and wind energy. The first of these, Pocket Park Oriente, is expected to open in 4Q19 in Nuevo León state, with a handful of others planned to open in Coahuila and Guanajuato states in 2020.

Antonio Jarquin Laguna, professor of offshore renewables at TU Delft in the Netherlands, told BNamericas, “There are many places and regions with sufficient resources that haven't been considered and that have a lot of potential.”

He said that while more technical studies of wind energy potential were needed in Mexico: “The map corresponds to states where good resources are found and the geographic space to install a wind park.” 

But earlier this year, Mexico's energy ministry (Sener) and electric utility (CFE) scuttled auctions that would have boosted the availability of renewable energy generation. 

After a steady climb up Ernst & Young’s annual Renewable Energy Attractiveness Index, Mexico's slipped from 13th place in the ranking in 2018 to 19th in 2019. Ernst & Young noted the cancelled renewables auction for 7GW of wind and solar capacity was “because of a change in Mexico's energy policy” that has “injected uncertainty into the market.”

As new interest in wind and renewables drops off, overall energy production is looking to come from traditional oil and gas. 

At a recent workshop held by Greenpeace and Mexican environmental lobby CEMDA, Carlos Tornel, a researcher at the Universidad Iberoamericana, made the point that Mexico will miss its conditional commitment in the Paris Agreement to reduce greenhouse gas emissions by 30% by 2020, jeopardizing its long-term commitment to reduce greenhouse gas emissions by half by 2050. 

DESPITE CHALLENGES, EXISTING INVESTMENTS SHOW PROMISE

“Although the recent developments have been somewhat disappointing for the renewable energy industry,” Morena said, “we have a positive outlook on several large wind projects under development in the country.”

Existing investments stand to deliver large energy gains and create jobs. Referring to the French utilities company Engie, Morena said: “In Tamaulipas, we expect Engie's two wind projects to provide industrial consumers with viable wind energy options beginning in mid-2021.” 

She also noted that Mexico Energy Partners expects Thermion, a Mexico-based developer, to finish wind parks in Tamaulipas that will bring roughly 800MW online by 2024.

In light of this week's announcement that the Mexican government will inject US$5bn to help Pemex, the latest sign of political favor for traditional oil and gas, Morena said: “We think Mexico’s priorities should be renewables, and we expect the country’s long-term fundamental needs for energy to outweigh the short-term political volatility.”