HEATING UP

Mexico 2018 | GREEN ECONOMY | FOCUS: GEOTHERMAL ENERGY

Looking to boost geothermal's contribution to its energy matrix, Mexico's efforts to capitalize on the renewable energy's potential are picking up steam.

Despite being number six in the world for installed geothermal capacity, with 975MW, electricity generation via geothermal represents around 2% of the energy matrix in Mexico and less than 1% of the world's output.

But there is great potential to develop geothermal output in Mexico. In 2015, 25% of the energy produced in Mexico came from renewable sources according to the International Renewable Energy Agency (IRENA). The government has set the goal of doubling that proportion by 2050. As per EY's 2017 “Renewable Energy Country Attractiveness Index," Mexico is in the ninth position of the most attractive countries in which to invest in renewable energies.

Thus far, solar and wind power have been drawing most of the attention and, consequently, investments. Geothermal generating capacity has, for all intents and purposes, stagnated since 2000. In the global sphere, Mexico has been losing ground to other countries, such as Italy and New Zealand, that have increased their geothermal capacities. Unlike other countries, Mexico exclusively uses its geothermal resources for electricity generation and not for heating. However, focus is shifting, with both the public and private sectors making moves to enhance geothermal capacity and energy generation. There are currently five geothermal fields being exploited: Cerro Prieto in Baja California, one of the largest geothermal sites in the world with a capacity of 570MW; Los Azufres in Michoacán (248MW); Las Tres Vírgenes in Baja California Sur (10MW); Los Humeros in Puebla (94MW); and San Pedro in Nayarit (35MW).

The Mexican Innovation Center of Research in Geothermal Energy (Cemie-Geo) is working to counter one of the main barriers to geothermal's development during the exploration phase: the uncertainty linked to the location of the resource and its accessibility. Mexico has a great deal of technical expertise with regard to this issue following the early discovery of the Cerro Prieto field in the 1940s. Cemie-Geo is working to create stronger links between academia and industry to increase expertise and develop advanced exploration tools and strategies.

In the public sector, the Mexican government is also interested in fostering investment in geothermal energy and gaining ground as a global leader in this field for two main reasons. One, the cost of electricity generation through heat is the lowest among renewables. Secondly, the National Inventory of Renewable Resources estimates that geothermal has the second-largest potential of renewable resources, only behind solar power. Though, the estimated potential of geothermal is backed only by field studies proving the presence geothermal activity; there are yet no studies on economic or technical feasibility.
As part of the 2014 Energy Reform, the Geothermal Energy Law was passed to create the regulatory framework needed for exploration and exploitation. Further efforts have been made in the field of regulation with the launch of the Clean Energy Certificates (CELs) in 2018. CELs are meant to guarantee that energy sold in the country has a minimum share of renewable sources.

Also in line with energy reform, the Energy Regulatory Commission (CRE) granted the first two licenses for generating geothermal energy in 2015. One of them went to Mexxus Drilling International, a firm that partnered with Icelandic firm Reykjavik Geothermal. The second went to Grupo Dragón, a Mexican firm interested in the Domo de San Pedro project in Nayarit.
Public-private initiatives also tackle the lack of investment in this sector. The Ministry of Energy (Sener), Nacional Financiera (NAFIN), and the Inter-American Development Bank (IDB) jointly created a financial mechanism to mitigate the risk for private firms investing in geothermal. This mechanism is available both for the public utilities firm, the Federal Power Commission (CFE), and for private companies participating in exploration or generation activities.

With public and private sectors on board, the stage is set for Mexico to augment its geothermal capacity, further diversify its energy matrix, and regain some positions in the global geothermal power generation ranking in the years to come.