Solar basks in the light of easier financing in Mexico

The sun is helping to shine a light on ways to combat climate change in Mexico, including the darker recesses of financing that has long shunned renewables projects. 

“We are seeing increased appetite from banks in Mexico to support these types of projects," Gabriel Vigueras, a director at local consulting firm Mexico Energy Partners, told BNamericas.

"While the tenor is quite long relative to the standard corporate transactions,” he added, pointing out that solar financing terms run 15-plus years, versus 5-7 years for standard corporate financing, “the interest from the multi-lateral banks and export credit agencies has been robust.”

Today, Mexico’s total installed solar photovoltaic capacity amounts to 817.85MW of energy, a nearly seven-fold increase since 2015. From January-June of 2019, contracts were signed for 125MW of solar panel installations.

Mexico “can be the undisputed leader in renewables in Latin America,” Patricia Tatto, vice president at ATA Renewables, a Spanish advisory and engineering firm, said at a recent solar energy webinar hosted by interSolar. 

Solar in particular holds promise. Radiation survey maps, a gauge of a country’s potential solar energy generation, indicate that Mexico “has some of the highest radiation levels in the world, making it an attractive region for solar projects,” Paola Moreno, at Mexico Energy Partners, said.   

According to a forecast by ATA Renewables, Mexico could enjoy as much as 2,898MW of energy generated by solar photovoltaic panels by 2024. 

Tatto envisions an “optimistic scenario” in which Mexico’s state-run electricity company (CFE) integrates more and more renewables, reducing emissions while generating an estimated 35% of the nation’s power from clean energy. 

Speaking at the FOMIF solar conference held in Guadalajara on August 28-29, the director general of Mexico’s energy regulatory commission (CRE), Francisco Rojas, said that the state of Jalisco “has been a very successful laboratory” for solar power distribution, according to Energía a Debate. 

A map from the CRE notes that in addition to Jalisco the states of Chihuahua, Nuevo León, and the state of México each generate between 50-100MW of solar energy, as does Mexico City itself. 

This growth has been punctuated by the construction of a number of large solar panel farms, most notably the 2018 opening of Enel Green Power’s Villanueva solar park in the state of Coahuila, the largest solar park in the Western hemisphere.   

Moreno at Mexico Energy Partners explained that in some remote areas, large solar projects were attractive in part because they may qualify for developmental bank financing, especially the IDB ME-L 1172 program, which offers up to US$200mn in direction and contingent loans to cover market risks. 

Overall, the solar photovoltaic market has drawn foreign investment of US$6.65bn to Mexico, creating 55,000 jobs in the sector, according to Rojas at the CRE. Each megawatt of energy created by solar in Mexico directly creates 30 jobs, Rojas said.   

“Democratizing” solar energy

While Mexico’s solar energy market has grown significantly in recent years, key challenges remain. At this stage, Tatto at ATA Renewables said, the key is “democratizing access to solar energy [by bringing it] to small businesses.”

Integration of solar-generated energy with CFE will remain a chore, as will the reality that emerging solar technologies for panel design remain expensive until they can be produced at a wide scale.  

Further, Moreno told BNamericas: “There is currently no regulatory framework related to renewable energy storage, and we don’t expect developers to pursue these investments until there is a known regulatory model to work under.”

Financing had been another impediment, but that is changing.

Power purchase agreements are now being used to back both large-scale and distributed solar projects. Paola Moreno at Mexico Energy Partners cites a project in the state of San Luis Potosi, which was financed with “the backing of energy purchase agreements between the developer and the plants operating nearby.”

“Power purchase agreements, project finance, and development bank incentives all work to support solar projects in Mexico,” she adds.