DAVID MACIAS

Mexico 2021 | GREEN ECONOMY | VIP INTERVIEW

TBY talks to David Macias, Smart Solar Director of Iberdrola, about a unique business model, market share in Mexico, and electricity grid challenges in the country.

Can you elaborate on your Smart Solar program and the business model behind this project that makes it profitable for Iberdrola and the companies that use it?

Iberdrola has been present in Mexico for more than 20 years, working in line with the development of the country. Before Smart Solar started, our business model was to build power generation plants and sell the energy to our commercial and industrial clients. With Smart Solar now, we do the same, though the electricity generations units are built within the facilities of our clients. We use a roof, the parking space, or a piece of land close to the facility, and we install some photovoltaic units that are directly connected to the customer's grid and will constantly generate electricity that we sell to the client. By doing this, Iberdrola invests in the photovoltaic system. We run the financial risks, and the client does not have to make an investment. The client gains savings through the energy that we generate through our solar panels, which are sold at a competitive price. That price does not include additional rates for the use of the grid because the energy is being generated and consumed in the same place. We developed the company in 2018, drew up all the contract schemes and the entire internal process that would be related to the business in 2019, and started offering our services in 2020. By the end of the year, we were able to sign our first contracts.

How many companies in Mexico are using your services?

We signed five contracts in 2020, and these projects are currently being executed. We expect them to start generating electricity for our clients by mid-2021. For 2021, we have signed agreements to install 30 units that will represent 15MW of generation capacity. Each system will have 500kW. We want to add more clients and power plants to these Smart Solar projects in 2021. We provide these services in every location in Mexico. We are focusing on manufacturing companies, companies that offer storage service, firms in the logistics sector, and food and beverage companies, among others. Such firms can install our solar panels in their factories or distribution centers.

Could you elaborate on the bureaucratic processes to develop these projects?

This is an additional advantage of Smart Solar; projects that are under 500kW do not require a change in the energy supply or the issuance of a license for energy generation, which speed up the process. It can take up to nine months to develop each project after the contract is signed. We are focusing on SMEs in the industrial area, including chemicals, automotive, and manufacturing, as well as companies that offer commercial services. We could include retail stores, hotels, or any other company that consumes energy.

There were some power outages in Mexico in early 2021. Will companies increasingly seek alternative energy suppliers because of that?

A photovoltaic solution will not resolve the issue of a power cut, though we are more likely to see clients seeking alternatives for cheaper and cleaner energy. We are talking about energy being generated from solar power, and it will not only bring an economic benefit, but environmental benefits as well. For every MW/h generated by a photovoltaic system, there is a reduction of half a ton of CO2 emissions per year. Many companies are focused on the reduction of CO2 emissions, so we help them to achieve that goal without requiring the client to make an investment. Iberdrola makes the investment and runs with the financial risks connected to the program. We also cover the maintenance works of the assets during the contract duration so that clients can focus on their businesses.

What strategies are you implementing to promote this service in Mexico?

Before the lockdown, we were conducting presentations at industrial events. With the pandemic, that turned into webinars to talk about distributed generation and renewable energy. Smart Solar is operating under the distributed generation scheme. These webinars have been extremely useful to let clients know that there are different options. They no longer need to invest in these systems; it can be done with an investment from Iberdrola, and they pay a more competitive price for the energy that these panels generate than the current rates.

What are the most common questions or doubts about the program?

One of the most common questions is if Smart Solar can solve power outages; this is not the case. Another question is if the energy generated will only supply a part of an industrial unit, though that is also not always the case. The panels generate electricity and supply it to a specific area of a factory, but if they are not using that energy, it can be sent to other parts of the industrial units. Another possibility is to sell the energy that has been generated to the grid under different schemes. Many think the energy will only be consumed where the generation facility is located, but that does not have to be the case. It can also be a revenue source for companies if they sell their energy to the grid.

What are your expectations for 2021?

We want more companies to discover these schemes. More companies are realizing there are different options to access energy. We offer a power purchase agreement (PPA) under a solar power generation facility installed in their factories. Our expectation is to see an increase in the demand for these solutions, which do not require a change in the energy supplier, are easy to install, and will bring economic and environmental benefits.