While Mexico has long been an energy producer thanks to its plentiful oil reserves, foreign investment in its energy market has been rather difficult due to the fact that the oil industry was nationalized and is now under the thumb of PEMEX, the Mexican oil monopoly. At first glance, this might mean that when private investors from abroad see that there’s going to be some energy grid construction in Mexico, they might not get too excited.
However, there’s a very good reason why foreign companies should get excited about this planned energy grid construction that’s happening in the country south of the United States: this energy grid will be powered by solar resources, not fossil fuels.
The solar market in Mexico is located on cheap land that’s right in the middle of the southern sun-belt in the desert states of Chihuahua and Sonora; furthermore, the area receives so much sun that some experts are saying that a small patch of land (25 square kilometers) will provide sufficient solar power to supply all of Mexico’s electricity needs.
Because legislation has been passed in Mexico’s government to reduce carbon emissions by 30% in the next seven years, companies have been switching over to renewable energy resources. Natural gas in Mexico is in limited supply, so there’s been a big push to develop solar power.
But what does this mean for foreign companies? Well, first of all, Mexico is planning on making the grid far bigger than it needs to be to meet present demand so that surplus energy produced can be exported to the United States. The U.S. has been described as a “guzzler of electricity”, and during U.S. president Obama’s recent visit to Mexico City, the American head of state spoke of energy partnerships between the two neighbors.
This means that companies that specialize in cross-border transport infrastructure will have a lucrative market exporting energy from the solar fields in Mexico to the United States.
Furthermore, PEMEX doesn’t control renewables, and there is only one utility to deal with, the CFE (Comisión Federal de Electricidad). This means that independent companies that produce solar power can set up shop in Mexico and start contributing towards the grid.
This might sound easy, but already there have been several investors who have been unsuccessful with their solar companies in Mexico: although the land is cheap and sun is plentiful, the country doesn’t have the solar infrastructure or know-how just yet and solar producers are more or less on their own to learn the ropes. Some, unfortunately, have gone in with a profound lack of knowledge and have used obsolete solar panel technology.
“You’ve got to bring your own support when you come to this country, there is nobody here that knows solar, there is nobody here that knows wind,” said John Skibinski, CEO of Global Renewables Group, which has a subsidiary in Mexico.”
“It’s new to the country and it requires training, development as well as pilot installations. We’ve done that for the utilities, the banks and the government we’ve shown with pilot installations how we can reduce GHG emissions. They are highly interested in new technology – they don’t want solar panels that are 15 years old, 100W panels not going to cut it and they are already looking at 115W.”
“I have seen 50 independent power producers apply for power plant generation – two of them got approved,” he said.
“The other 48 were on the wrong place on the grid. You’ve got to do your homework when you want to put in an installation into Mexico. A utility will deny your application if it doesn’t fit their needs, they are very good at what they do in terms of their grid.”
As seen in the remarks above, companies that know what they’re doing will have plenty of opportunities: foreign specialists in solar power can build power plants, and they can also train, consult, and share knowledge with local Mexican firms.