Solar Energy Opportunities in Mexico

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The sun is shining, literally and figuratively, on the energy industry in Mexico as solar energy opportunities are on the rise. While Mexico is all set to allow oil extraction by foreign companies, it is also attracting investors to a much cleaner source of energy – sunshine.

Mexico, which is one of the top ten oil producing countries in the world, is moving towards cleaner energy. The country has plans to generate 35% of its power using clean sources such as solar projects, by 2026. The goal is to reduce emissions and create a diverse energy matrix. External factors, such as the decreasing prices of solar panels, are also helping Mexico achieve this goal. Pricey oil-driven power makes the cheaper solar energy a more viable option, opening a world of solar energy opportunities in the country.

Interest from foreign stakeholders is also spurring on Mexican solar energy projects. As a result, the country’s solar power market is enjoying a transformational phase. Numerous small and medium sized solar power projects have also propped up recently.

First Solar, one of the biggest manufactures of solar panels in the US, recently purchased a project pipeline, marking the company’s entry into Mexico’s utility-scale solar market. As a company of First Solar’s stature lays the groundwork for solar business expansion in Mexico, it becomes clear that the Mexican solar market is primed for sustainable growth.

Another investor, the local energy company Gauss Energia recently launched a photovoltaic plant in Mexico, the biggest one in Latin America. Gauss Energia is also contemplating a different model for funding new projects. The model, known as self-supply, is already being used for funding Mexican wind farms. Energy developers will benefit from long-term power purchase agreements with non-state enterprises that will purchase electricity at fixed rates.

With such initiatives arising from the private sector, the government is also developing encouraging programs such as the Small Electricity Producers’ Program. Under this program, the state utility Comisión Federal de Electricidad (CFE) purchases up to 30 megawatts of power from solar projects. CFE offers 20-year agreements that are pegged at 98% of the area’s average cost of power generation in the preceding year.

In addition to its environmental benefits, solar power generation also makes economic sense. The 4 million energy users, 3.5 million of which are commercial users, will certainly benefit from the cheaper solar energy. A net metering system will also benefit installations under 500KW by crediting generations for unused power.

Mexico has no shortage of solar resources. Approximately 70% of the country receives incoming solar radiation, or insolation, that is higher than 4.5 kilowatt hours per square meter on a daily basis. These are remarkable numbers. Mexico’s average insolation is nearly 60% higher than that in Germany, a country that has the largest market for solar products in the world.

The solar power market is already fairly competitive in Mexico’s northern areas, which enjoy higher-than-national average solar resources. Mexico’s solar sector is without a doubt attracting numerous interested parties, locally and from beyond borders.

Mexican Senate has just approved the liberalisation of the energy market in Mexico. Even though the Reform focuses more on oil than electricity, it seems that such market will provide opportunities for solar generators to grow in Mexico. During first quarter of 2014, the Government will publish the Renewable Energy Strategy that will uncover specific goals and projects in that area.