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On the Grid

Thanks to its prime geographical position, weather conditions, and natural resources, the potential for renewable energy in Mexico is gaining wider recognition.

With approximately 2,750 MW of installed renewable power generation capacity, exluding hydraulic energy sources, Mexico is shaping up to take full advantage of its resources in wind, solar, and biomass. Currently, electricity generated from these sources represents 4.3% of the country’s total installed capacity. Since 2007, the government has followed plans to increase that percentage to 22%, extending renewable energy resources to more than 2,500 communities nationwide. Mexico is also seeking to expand its energy resources to the US, where there is potential to exchange knowledge and share the wealth of nature.

A GUST OF WIND

Over the past 10 years, renewable energy sourced from wind resources has seen the most development in Mexico. With international investors and public and private support, wind power generation is claimed to have the most potential to benefit local communities and significantly contribute to the power grid. “Concerning wind energy, the country has a 71,000-MW plant factor, and the plants installed in the territory register a performance of 20% above the average, which means that Mexico is one of the most attractive countries in the world to produce electricity through wind energy,” Miguel Ángel Alonso Rubio, Director General of Acciona Energía México, told TBY. Of the total estimated capacity, 11,000 MW is estimated to have factors of at least 30%, well above the averages registered in Europe.

Currently, there are 1,215 MW of installed capacity in Mexico, of which 16% is operated by the Federal Electricity Commission (CFE), and the remainder is commissioned by self-suppliers, small producers, and larger companies such as Iberdrola, Eoliatec, and Acciona, which boasts the largest amount of installed wind capacity in the country. The company is a leader in power generation, with 250 MW of wind power capacity at its Eurus farm in Oaxaca, which can provide electricity to over 600,000 homes.

Projects that will contribute an additional 1,500 MW are currently under various stages of construction, expected to come on stream between 2012 and 2013. One such project will be the largest wind farm in Latin America, and is being carried out through a partnership between Marena Renovables and Danish manufacturer Vestas. Businesses operating in Mexico are increasingly seeking to make use of the new plant’s electricity, including Heineken, Coca-Cola, and Mexican retailer OXXO. Nestlé has also committed to invest in wind turbines in Mexico, as part of its efforts to meet 85% of its electricity demands with wind power.

The government expects the sector to receive $450 million in investments over the coming years, most of which will be centered in Oaxaca and Baja California, where more than eight projects are in the pipeline. Recently, Mexican-based Impulsora launched a project in Puebla state that will have 364 MW in capacity. In addition to providing hundreds of jobs for residents, the project is the first of its kind in the region, and will be used as an educational tool and tourist attraction. Gilberto Marín Quintero, Chairman of Impulsora Latinoamericana de Energía Renovable, told TBY that the company is “studying how we can boost agricultural activities in this area by providing expertise and support to the agricultural communities of the region,” highlighting the important role such a project can play in the development of local people.

HERE COMES THE SUN

Although Mexico is the country with the third-largest capacity for solar energy, high costs of technology and equipment have historically held the industry back. Now, there are currently 1.6 million sqm of solar heaters installed in the country, and the government has followed a plan to increase that number to 1.8 million sqm by the end of 2012.

With an installed capacity of over 28.6 MW, Mexico is already leading Latin America in terms of solar energy production. However, a landmark solar power plant in Baja California is being commissioned near Tecate. The solar farm is planned to have a 450 MW capacity and will be constructed in 50 MW phases. Construction on the first phase will begin in 2012, and the initial section of the plant will be operational by the end of 2013. In collaboration with US-based companies SolFocus and Synergy Technologies, Mexican property developer Grupo Musa aims to provide low-cost, dependable energy to the population. The initial 50 MW will be utilized to meet the company’s own energy needs, but upon completion, at least 120,000 MWh of electricity will be delivered to consumers in Baja California, where available radiation is between 5 and 6 kWh per sqm. “The lowering cost of technology is making these projects viable, and now we do not need subsidies for renewable energy production. We are also manufacturing the products necessary for renewable energy generation, which is more efficient,” Carlos Guzmán Bofill, Director General and CEO of ProMéxico, told TBY.

It has been estimated that solar-thermal and photovoltaic electricity will account for up to 3% of Mexico’s energy supply by 2030, and up to 10% by 2050.

BIOMASS

Considering the agricultural and forest waste that contains energy potential in combination with solid urban waste from the ten main cities of the country, Mexico has the potential to produce 1025 MW of biomass energy, generating 4,507 MWh annually. There is also potential in the sugarcane industry, where it is estimated that power generation could be as much as 3,000 MWh per year.

In an interview with TBY, Jaime Luis Saldaña Méndez, General Director of SEISA, reported that the company “has reached 17 MW in generating capacity using biogas from landfills, and we believe we can increase our capacity to 25 MW over the present decade.” The country currently produces 507 MW of biomass energy, which comprise approximately 1% of Mexico’s total energy output. Many of these projects are carried out through partnerships with local government, and such initiatives have attracted interest from the World Bank, an entity that commends work on the reduction of methane gas emissions.

GOVERNMENT PROMOTION

In line with broader energy goals, the government seeks to elevate the renewable power capacity of Mexico to 16,925 MW, or 22% of its energy matrix, by 2025. The energy commission has been very active in the development of renewable energy, recently launching a variety of initiatives that assign capacities to energy companies in many fields. Although the commission is principally focused on wind capacities in Oaxaca, Baja California, and Tamaulipas, the government has authorized the development of solar power resources in the northeast of the country.The authorities have also encouraged renewable energy producers through tax incentives. Under a new fiscal regime in effect since 2005, companies that invest in machinery and equipment for power generation using renewable sources may deduct up to 100% of their total investments for the tax year. Furthermore, several policy reforms including the creation of an energy bank to support sales to and purchases from the grid, predictable wheeling and lower capacity back-up fees, as well as net metering for small self-suppliers were implemented over the past few years to support fair and transparent access to the grid.

ACROSS BORDERS

With increased access to the grid and expanding capacities, many companies are looking north and south of the border for potential markets and knowledge transfer.

Along the US border, projects from firms such as InterGen and Sempra Energy are beginning to deliver power from the Mexican side to the US. Potential sites near the border have extra opportunity to deliver energy, since the state of California recently approved a regulation stating that 32% of energy production must come from renewable sources by 2020. Looking to the future, Mexico seeks to emulate the Brazilian model, where the mechanism for renewable energy resources is very stable. Although much infrastructure has been built to cope with increasing demands and the expanding industry, there is still room to grow. Adrian Katzew Corenstein, General Manager of Vestas in Mexico, explained that the company “has been successful so far because we have a large infrastructure project in Oaxaca, with the potential to interconnect projects, but there will need to be further investments in infrastructure to interconnect additional megawatts and continue our activity.” It is expected that a combination of biomass, wind, and solar energy will form part of an integrated renewable energy network as Mexico moves closer to meeting its goals.