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electricity market

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AleaSoft reviews the news about the European electricity markets and the factors that most influenced their prices and those that were most commented in the news of the sector, along with other topics such as PPAs.

The CO2 emission rights price has carried the bad reputation earned during 2018 over into 2019, when its tremendous upward race tripled its price in a few months and dragged along with it the price of electricity markets across Europe. So far in 2019, the price of CO2 has continued at very high levels, exceeding even the levels reached is September last year, but at least its explosive upward race has slowed down. Even so, the CO2 and the trading of emission rights continued to be present in the news of the sector. This is due to the close relationship that the emission rights keep with the fight for the reduction of greenhouse gas emissions and against climate change.

In January, the Royal Decree that was already preparing the ground for the fourth phase of the European Union Emissions Trading System (EU ETS) for CO2 and other greenhouse gases as of 2021 was published. Already then, AleaSoft mentioned that, although emission rights are an essential tool for the decarbonisation of the electricity generation, the impact it has on the competitiveness of the electrointensive industry compared to other countries outside the EU ETS, known as the carbon leakage, should not be underestimated.

The electrointensive industry also occupied many headlines these months, especially after the latest results of interruptible power allocation auctions. According to the Association of Companies with Great Energy Consumption (AEGE, for its acronym in Spanish), these results, which have been the worst in the history of the auctions, aggravate the loss of competitiveness of the companies with large electricity consumption, so they asked the government to take urgent measures to resolve this competitive disadvantage.

Another aspect that also concerns the electrointensive industry is another of the highlighted headlines’ topics, especially during April: the return of the 7% tax on electricity generation. This is how the IVPEE, the Tax on the Value of Electric Energy Production, is popularly known. This tax, levied with 7% the energy sold in the market, was reintroduced as of April 1 after a temporary six-month suspension. According to AleaSoft’s estimations at that time, the price of the electricity market could increase between 2% and 5% at first.

In addition to the electrointensive industry, the reintroduction of the tax on generation also affected the competitiveness of Spanish combined cycle power plants and thermal power plants compared to its Portuguese and French competitors that do not have this additional tax burden and, thanks to international interconnections, they can sell their most competitive energy in the Spanish electricity market.

Regarding the capacity of international interconnections, on March 26, the European Parliament definitively approved the reform of the European electricity market, which already had the approval of the European Union Council and the Parliament permanent representatives. This reform classifies as urgent the need to increase the capacity of these interconnections and that this capacity should be available to the wholesale markets, in order to adequately integrate the increase in renewable production and advance towards the decarbonisation of the electricity system.

It also made the news in this 2019 the confirmation of the trend of the volatility decrease of the price in the electricity markets thanks, among others, to the increase in the capacity of international interconnections, especially with France. The interconnections act as a shock absorber for prices, increasing the flow of imports or exports when prices between two markets tend to separate.
On the other hand, the gas and coal fuels prices for electricity generation were the protagonists, but for the opposite case of the price of CO2: to go down. During 2018 the price of TTF gas and API 2 coal, the reference in the European continent, rose in tandem with the price of CO2 emission rights and peaked in September. Since then, and throughout the first half of 2019, the prices of these two fuels have not stopped falling, reaching minimum values of several years.

Also during this first part of the year the shutdown calendar of the Spanish nuclear power plants, after fifty years of the commissioning of the first power plant was announced. This calendar, agreed between the shareholders of the power plants and Enresa, places the closure of the last power plant in 2035. If the calendar is finally met, the nuclear energy will have been present in the Spanish electricity mix for almost seventy years.

This agreement to put an end to nuclear power in Spain has led to the questioning of emission reduction targets for 2030, given that nuclear energy represents a virtually constant electricity production and without CO2 emissions. Its disappearance from the generation mix will give more prominence to gas combined cycles as a backup for non-dispatchable renewable energies which, while less polluting than coal-fired plants, are CO2 emitters.

The total shutdown or a decrease of nuclear power is planned in several countries such as Germany, France, Belgium and Sweden in their plans to achieve the environmental objectives of 2030. However there are other countries, such as Finland, which plan to increase their nuclear capacity or, like Poland, to start using it in the next twenty years.

But the shutdown of nuclear power plants will not only impact CO2 emissions. The disappearance of a stable base production that makes market offers at zero price will have an undeniable impact on the electricity market price. The closure of each nuclear reactor will lead to an increase in the electricity market price. The magnitude of this increase will depend on the state of renewable power implementation at that time. Once again, uncertain and potentially catastrophic forecasts for the electricity consumers appear.

Faced with these uncertainties, it is essential to properly manage the market price risk. For a large energy consumer to manage that risk and assess their options between buying in the spot market, futures markets and a PPA, he must now have a clear answer to the question: what is the probability that the average market price in 2030 will be above 50 €/MWh?

Source: Aleasoft

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European electricity markets

Since April 1, prices in Europe have had certain stability. The rise in the CO2 emission price was offset by lower gas and coal prices and also by the slight decrease in electricity demand due to the better weather conditions in spring, with somewhat higher temperatures and more hours of sunshine in this 40-day period. The price fluctuations in this period are mainly due to variations in wind energy production, especially in Germany and Spain, which are the European leaders generating energy with this technology. In the case of Germany, prices could have been stable at 40 €/MWh but when there was a lot of wind they fell below this value, even reaching negative values on April 22 at 14 €/MWh. In the Spanish electricity market, fluctuations in wind energy production caused prices in the band between 40 €/MWh and 60 €/MWh. Also in this period of 40 days there were fluctuations in temperature and in solar energy production.


Electricity futures

The prices of European electricity futures for the third quarter of 2019 increased in most markets between 0.3% and 1.6% on Friday, May 10, compared to Friday of previous week. In the case of the OMIP market of Spain and Portugal, as well as the MTE market operated by GME, they remain unchanged, while the UK futures decreased in both the ICE and EEX markets.
In the case of futures for 2020, the increase was more widespread between 0.5% and 1.4%. Only the MTE market operated by GME remained unchanged and the UK’s ICE and EEX markets declined, as did the future for the third quarter of this year.

Wind and solar energy production

In the second week of May, the wind energy production had an increase in the main European markets except in Germany with a drop of 3.3%. The increase in France was 58%, in Portugal 99%, in Spain 36%, and in Italy 37%.
For the current week, the third of May, a decline in wind energy production is forecasted after the rise of the previous week. The most pronounced fall is expected in Italy and Portugal, somewhat less in Spain and France, and even a slight increase in Germany.

As for solar energy production, which includes photovoltaic and solar thermal technologies, during the second week of May fell by 4.3% in Germany, while in Spain the fall reached 20% with respect to the previous week. For its part, in Italy the previous week registered an increase of 5.3% in the solar energy production.
For the current week it is expected a decrease in solar energy production in Italy of about 20%, while in Germany and Spain the trend is expected to be bullish between 15% and 20%.

 

Source: AleaSoft

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FuturENERGY Dec. 18 - Jan. 2019

At a recent seminar on renewable energy, I was asked if, with the entry of the capacity awarded under the 2016 and 2017 auctions, the electricity market price would reduce. Now that we are in a period of change, with a new year preceded by a change in Government and a change in energy model, a look back at the past would help answer this question…By José María González Moya, Managing Director of APPA Renovables.

DESCARGA / DOWNLOAD PDF

 

 

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AleaSoft regards as very unrealistic the electricity market price scenarios that feature a very low retribution for PV production in the next ten years.

Why forecasting the market price captured by the PV at 10 €/MWh on average for all 2030 is not realistic? It is clear that with such a price, no technology is profitable. The markets are designed to find the balance between the price paid by consumers and the price received by producers and that is beneficial for both. One need only look the long-term forecast of the MIBEL price that AleaSoft made at the end of 2010. Since then, the price of the Iberian market has been oscillating due to the specific conditions of each year, but the average annual price has remained around an equilibrium point between 45 and 55 €/MWh.

Even being relatively elastic and being able to alternate periods with high prices that favour producers and periods with low prices that favour consumers, a price far from the equilibrium point of the market is not sustainable at the long term, at least for one of the two parts. Therefore, it is not realistic for a technology to receive on average a price as low as 10 €/MWh for a whole year, for example. In the long term, the market self-regulates. That is to say, if the price during sunny hours was systematically so low, the demand, especially the new demand arising from the electrification of transport, with the charge of the batteries, would tend to concentrate in those hours, increasing at the same time the price. In the same way, with such low prices, energy export would increase to the maximum available capacity of the interconnection with France that can grow by 6 GW more until 2030, which, in turn, would increase the price again. We must not forget that technologies such as reversible hydroelectric pumping stations and new storage technologies such as batteries will move the demand from the most expensive hours to the cheapest ones, flattening the price curve and preventing the price from dropping.

On the other hand, with such pessimistic forecasts, the investment in photovoltaic parks would be greatly reduced, so that photovoltaics could not reduce the price in those hours either.

In addition, we must bear in mind that the behaviour of agents when making offers in the market depends on the price, and will not offer systematically at a price with which they cannot cover their costs and recover the investment. There is already an example with the zero prices that were usually registered in the Iberian market until the beginning of 2014. Since then, they have not appeared again because the wind energy parks changed their strategy when it comes to bidding. The average of the 100 hours with the lowest price in 2013 and 2014 was zero €/MWh, in 2015 it rose to 8.37 €/MWh, 3.89 €/MWh in 2016, and in 2017 it reached 14.53 €/MWh.

It is true that the photovoltaic technology has a not very flexible time structure of production, it can only produce electricity during sunny hours, which does not allow it to participate strategically in the market and has to settle for the price registered during the central hours of the day. It is clear that the increase in photovoltaic power will decrease the price in the hours when it produces more electricity, so that its price weighting factor will be less than one, and the price it will receive will be lower than the average market price. But AleaSoft forecasts estimate that this decrease in the perceived price compared to the average market price cannot be so low in the next 20 years.

The medium and long-term price forecasts made by AleaSoft provide a very different picture. The current situation of the market of high prices pushed by the price of CO2 emissions rights and fossil fuels for the generation of electricity (gas and coal), and the imminent installation of new renewable power, suggest that in the next years the price will have a tendency to recede. Although the specific behaviour of each year will depend on the weather conditions encountered: wind, rain and temperatures.

In the long term, the upward trend in the price of gas due to the global increase in demand, and the commitments of European countries to close coal-fires thermal power plants and to reduce nuclear power, contradict that the average price received by photovoltaics for a whole year may go down to 10 €/MWh. Perhaps, the models used have been of fundamental variables type with a fixed demand that has not taken into account the market equilibrium. If the flexibility of the demand against the hourly prices is not taken into account, one can get unlikely results like this one.

Source: AleaSoft

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José Manuel Entrecanales, Chairman and CEO of Acciona, on the 30th May called on the international investment community to show “social and environmental responsibility” in order to speed the decarbonisation of economies.

In his speech at the Annual General Meeting, Mr Entrecanales acknowledged that “rapid progress is being made in the introduction of elements that select and discriminate in favour” companies like Acciona, which work to develop sustainable economies around the world.

“However, even leading the main sustainability indices (…) does not guarantee the recognition of most of the financial sector or the global investment establishment,” Acciona ‘s Chairman and CEO said. “As long as shareholders and financiers fail to make social and environmental responsibility key variables in their investment decisions, progress [in decarbonization] will be slow.”

Mr Entrecanales highlighted Acciona ‘s main business results in 2017: EBITDA of €1,275 million (+7%), sales of €7,254 million (+21%), ordinary profit before tax of €382 million (+22%) and more than 37,000 employees (+14%) worldwide.

“These results, slightly above the company’s forecasts, allow us to propose a dividend of €3 per share, 4.3% higher than last year and consistent with our objective of maintaining balanced dividend growth,” Mr Entrecanales said.

Regarding the outlook for 2018, the Chairman expects moderate growth in EBITDA on a comparable basis following the sale of assets. The Net Debt/EBITDA ratio will continue to fall with a view to keeping the ratio below four. This objective will be achieved by growing operating profit, given that the sale of Trasmediterránea and of the solar thermal plants in Spain “concludes the divestment phase with the aim of reducing debt,” the Chairman said.

Main countries

Mr Entrecanales called on the Spanish government to invest more in infrastructure, and to promote the renewable energy sector “with enthusiasm” now that Spain’s economic crisis was over and the country was “much more competitive”.

The Chairman and CEO of Acciona expressed his optimism about Mexico, “where this year we will exceed 1,000 MW of installed wind and photovoltaic capacity and where we are developing construction projects for hospitals, roads, power plants, transmission networks and real estate development“. Among Acciona’s many projects in Mexico, the Group is part of a consortium that is building the New International Airport in Mexico City.

Chile “continues to be our main market in South America with a strong portfolio of renewable energy and infrastructure projects,” Mr Entrecanales noted. The Company has major projects under construction and has also invested in its airport baggage handling business in Chile. The Company’s energy division, meanwhile, has successfully signed a number of bilateral renewable energy contracts (PPAs) with entities such as Google, Empresa Nacional de Minería de Chile (ENAMI) and Falabella, the largest retailer in Chile.

In Australia, Mr Entrecanales highlighted the strategic importance of last year’s acquisition of Geotech, a mid-sized engineering and construction group, which has strengthened Acciona ‘s position in the domestic infrastructure market. He added that “the renewed strength of the renewable electricity market following the imminent dismantling of most of the old coal-fired power plants augurs well for a promising future in energy too”.

In the United States, he said Acciona had “solid prospects” in its main business activities, with state governments, city councils, large companies and a large majority of public opinion in favour of renewable energy, despite the scepticism of the current Administration.

About Canada, Mr Entrecanales highlighted the recently awarded projects for two water treatment plants and the €1.2 billion Site C dam that is currently under construction.

Turning to the Middle East, Acciona ‘s Chairman and CEO said: “It is one of the regions in which we have grown the most in recent years in Infrastructure and Energy, with desalination plants, the largest photovoltaic plant in the world, wind power plants, urban services and large urban transport infrastructures”.

Mr Entrecanales said Acciona ‘s immediate objectives were to consolidate its presence in its key countries and their hinterland, and to increase Acciona’s presence in Africa, with the prospect of new business in Namibia, Kenya, Ethiopia, Ivory Coast and Tanzania.

Main resolutions of the General Meeting

The Shareholders’ Meeting approved the balance sheet and accounts for 2017, as well as the distribution of a gross dividend of 3 euros per share (+4.3%) and the proposed redemption of up to 5% of the company’s capital as an additional formula for shareholder remuneration. The dividend will be paid to shareholders on 2 July.

The assembly appointed Javier Sendagorta and José María Pacheco as new independent directors, replacing Jaime Castellanos and Fernando Rodés.

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The total market demand for renewable electricity documented with Guarantees of Origin increased from 367 TWh in 2016 to 471 TWh in 2017, an impressive 28.3% increase. Although the growth is more evenly dispersed than earlier, the large countries still play an important role. Germany and France are both showing significant increase in customer uptake, and Germany has for the first time surpassed 91 TWh in total demand.

“The renewable electricity market in Europe continues to grow steeply,” says Tom Lindberg, Managing Director in ECOHZ, commenting on statistics from the Association of Issuing Bodies (AIB).“The market is also more robust and more balanced than ever before.”

Market value in 2017 two to three times greater than 2016

European consumers and corporates are increasingly fulfilling their green energy intentions by documenting their renewable purchases. Current market prices are reflecting this growing interest as the market reaches new levels of maturity. With the balance between supply and demand continuing to improve, the prices in the wholesale market have increased steadily compared to prices just a year ago.

With even the lowest prices hovering around EUR 0.65 for a standard, unspecified Guarantee of Origin in the wholesale market, the total market value has reached new levels. When also including volumes from markets using non-EECS Guarantees of Origin (150-180 TWh), the value of the European market is conservatively estimated to be EUR 450 million. This is more than two to three times higher than a year ago.

Wind and solar with greatest increase in market consumption

Although hydro power still is the largest source of renewable electricity available, the fastest increase in consumer uptake is experienced from wind and solar sources. It is likely that the share of wind and solar would be even higher if countries like Germany and France did not limit the issuing of Guarantees of Origin from power plants that have received support. As many of these power plants are either wind or solar, the result is a constricted supply from the newest technologies.

Total supply continues to increase

Compared to the same period in 2016, 2017 has experienced a higher supply of issued Guarantees of Origin to the market. The total supply is per date 410 TWh, but will likely increase with at least 100 TWh as the 2017 statistics are further updated in 2018. This confirms a lower growth in supply than in demand, and is comparable to the 2016 supply of 509 TWh.

Prices will most likely continue to increase

Although renewable power production (hydro, wind & solar) in Europe will continue to vary, and thus impact the volume of issued Guarantees of Origin, there are strong signals indicating that demand will continue to grow faster. This will continue to put pressure on today’s market prices.

“With new multinationals joining the global RE100 initiative, we are confident that renewable demand will continue. Although prices are higher than ever before, they still are not reflecting the actual marginal value of renewables compared to fossil alternatives. We can thus expect the prices to be further pressured upward the next few years,” says Lindberg.

 

Source: ECOHZ

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European Parliament’s Committee on Industry, Research and Energy (ITRE) voted on Wednesday February 21 to modernise the EU’s electricity market, striving to give consumers more choice and greater energy security. The ITRE amended four legislative proposals on the EU electricity market. They are part of the so-called Clean Energy package and a step closer to an Energy Union

According to the ITRE, more competition in the electricity market, better information to consumers and small energy producers and plans to tackle shortages during crises are addressed in this energy package. The measures would provide comparison tools on energy providers, transparent bills and contracts, as well as help consumers who produce their own electricity and enhance regional cooperation during electricity crises due to natural disasters or attacks.

MEPs also want member states to consider additional payments to capacity providers only as a last resort and under certain conditions.

Giving more power to consumers

• A comparison tool should be available in each EU country, displaying and ranking rates and tariffs from all suppliers, with an impartial algorithm and independent from suppliers;
• Consumers should be able to withdraw from a contract without facing penalties, and a summary of key conditions should be included on the first page;
• By January 2022, switching supplier should take no longer than 24 hours;
• Bills should display the actual amount of energy consumed, the payment due date, contact details of the company, as well as rules on switching provider and dispute settlement.

Active energy consumers

MEPs do not want consumers who generate, consume and sell energy to be discriminated against (also called “prosumers” – active energy consumers, because they both consume and produce electricity).

MEPs agreed in particular on clear conditions for creating and managing local energy communities, i.e. groups of people producing and consuming energy locally. These local networks should contribute to the costs of the electricity system they connect to and not distort competition, MEPs added.

Measures to tackle energy crisis

In the event of an electricity supply shortage, MEPs agreed on national and regional measures to be implemented before and during crises to ensure that supply is not stopped due to e.g. adverse weather conditions or malicious attacks, such as malware or hacking.

Regional coordination centres should help to draft crisis planning scenarios, while the European Agency for the Cooperation of Energy Regulators (ACER) should be able to ensure that they comply with their obligations.

Source: European Parliament

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Two of Spain’s business associations of reference for renewable energy, AEE and APPA, have recently reported multi-million euro losses facing the sector because the Ministry has miscalculated the electricity market price. The effect of these losses will be seen from now on with the publication of the new economic parameters confirming that the calculation mistakes made for the first half-period have not been resolved.

A press release from APPA in early December reported that between 2014 and 2016 (first half-period) renewables lost €930m in expected remuneration: €574m directly corresponding to unrecognised payments and €356m to be reimbursed throughout the service life of the installations. It also reported that having made the same mistake, losses for the 2017-2019 period could rise to €664m, resulting in a cumulative loss of €1.238bn for the 2014-2019 period.

The AEE calculations indicate that wind power losses in the first half-period would have reached €630m, from which the sector will receive €212m in compensation, barely 36% of the amount that should have been earned and which will moreover be distributed over the service life of the installations, representing some €22m per year.

As such the worst fears of the sector have been confirmed. Despite both business associations understanding that the new Ministry calculation should take the prices handled by the future markets as a basis, the government has made the same mistake again. The ministerial order amending the remuneration parameters sent to the CNMC (National Commission on Financial Markets and Competition) has again used 52 €/MWh as a reference price – the same figure as the previous half-period – rather than 41.32 € which is the futures markets benchmark price. For this reason, over the next three years, wind power will accrue around €400m (38%) less than it should.

The end of the first three-year half-period marks the first milestone since the Energy Reform came into effect. This has demonstrated both the instability of the system and its arbitrary nature, as companies are not achieving the reasonable level of profitability, and as such less income, established by a law that is mired in uncertainty and a prevailing lack of investor confidence in the sector over recent years.

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Enerray, subsidiary of SECI Energia, subholding of Maccaferri Group, just attended the Mexico Power Finance and Investment Summit, scheduled for June 28-30, at Affinia Hotel, Manhattan, New York City: main topic of this 3-days-long summit was the pivotal time of Mexico’s electricity market.

Within the end of 2016, Enerray will have 1 GWp of solar capacity installed globally, distributed across 12 countries, as well as an equivalent amount of O&M contracts. Thanks to these figures, Enerray is among leading solar installer in several countries, demonstrating its expertise in solar development: indeed, Enerray is building a 254 MWp solar farm in Brasil, the biggest in Latam, and additional over 100 MWp are under design.

Mexico is now at the beginning of a brand-new wholesale power market paradigm: the senate approved that by 2018 Mexico must generate 25% of its power from clean sources and in this way, Mexico plans 24 transmission and distribution projects and further 25.000 km of transmission lines over the next 15 years for a total investment amount of USD$ 13.4 billion. On January 2016 the operations of a new market era officially begun and this has been followed by the launch of the first-ever long-term electricity contract auctions.

Enerray established a complete Mexican structure for its commercialization, distribution, and technical operations in Mexico in 2014 also investing US$500,000 in a solar rooftop installation for its offices in Queretaro, which represents its first step as an EPC company in Mexico. Rooftop projects in commercial and industrial facilities currently dominate Enerray’s core business in the country also offering services for utility-scale solar parks.

In Mexico, part of its strategy consists in approaching international power producers that are willing to enter the market, offering them its EPC services: an almost 100 MWp’s MOU has been signed and the construction is scheduled by December 2016. In Mexico, Enerray has developed several projects, which are already running successfully: among others there is the solar installation developed for Cinépolis, one of the largest cinema chains in Mexico.

This project was particularly intensive and required a highly-complex engineering proposal: 300 KWp with a production capacity of 526 MWh of clean energy per year, avoiding carbon emissions of 296 tons/year. This project, meaningful in terms of savings related to electric power, can be replied in other cinemas and entertainment structures as well.

Considering the new regulations and new opportunities, Mexico is surely an interesting market for any player in the industry and for investors as well.

 

Source: Enerray

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The development of Mexico’s solar sector will likely mirror that of its northern neighbor and other developed countries, but with location-specific characteristics and some unique obstacles. As Mexico’s wholesale power market launches, a clearer roadmap of the country’s solar development is emerging. However, there are market headwinds, speakers and panelists at GTM Research’s Solar Summit in Mexico City agreed.

And while important lessons can be learned from solar development elsewhere, Mexico faces some unique hurdles, summit attendees learned. Obstacles include a lack of awareness among potential customers of the benefits of switching to solar, a lack of capital among residents and access to financing for larger-scale projects, in addition to uncertainty as to how the nascent wholesale power market will play out.

Mexico’s solar growth is likely to be slower than in the U.S., which increased from a cumulative 2 GW in 2010 to around 26 GW by the end of 2015, with Mexico’s installed capacity currently at less than 1 GW and likely to only add around 2 to 3 GW by 2020. “On a comparative development timeline, Mexico is currently in 2004 in terms of U.S. installed capacity by that year, and is at the stage Germany was at 20 years ago“, GTM Research’s Shayle Kann said during the summit. At that time in the U.S., the fastest growth in the country was the commercial PV market, which hit 203 MW by 2009. But in Mexico, utility-scale solar is expected to lead growth, at least during the next decade.

Summit panelists identified policy and regulatory uncertainty as the biggest obstacles to the growth of utility-scale solar, followed by a lack of competitiveness and availability of capital. “Solar will have a hard time competing in Mexico over the next two or three years due to a lack of available capital,” according to panelist Pablo Otin, VP for emerging markets at 8minutenergy.

Compared to the U.S., where residential solar has now topped 2 GW and seen four straight years of 50% growth, residential solar in Mexico is likely to see the slowest growth, panelists agreed. A month-on-month drop in electricity prices by the CFE throughout 2015 has removed residents’ incentive for switching to solar. In addition, the installation outlay surpasses the average annual electricity bill, making developers’ customer acquisition work that much harder. “Residents are not yet convinced of the savings solar could offer“, Rogelio Nochebuena, Chief Operating Officer at renewables firm Servicios Ambientales de Baja California (SERAMBC), said during the summit. But as the market is deregulated and private firms bid for generation contracts in auctions, the first of which is slated for March 31, electricity prices are expected to rise, which will revive the incentive to convert to solar.

Panelists cited increasing retail electricity prices as the biggest driver of solar growth in Mexico, followed by increased access to capital and a revised tender process, with resource-specific auctions. “Let solar compete against itself and not against other energy sources,” said Marco Garcia, Chief Commercial Officer of California-based NEXTracker, which already builds components at its Mexico facility.

The solar content of the first auction has yet to be revealed, but panelists predicted solar would make up around 10% of the total projects up for grabs.

A lack of economic competitiveness was also cited as one of the biggest barriers to residential solar development in Mexico.

But Mexico is also an attractive solar manufacturing market, according to GTM Research SVP Shayle Kann. Solar component manufacturing is moving to domestic markets in other countries, and there is the potential for that to happen in Mexico, he said, citing the current 15% import tariff on panels as an incentive, in addition to Mexico’s proximity to the U.S., one of the world’s largest solar markets, which could become an export destination. “The country has enormous potential but lacks manufacturing clusters,” Nochebuena of SERAMBC said.

Panelists dialed down their optimism regarding how big a market share domestic manufacturers could secure in the short term. “You can only build a certain number of factories in five years,” Otin of 8minutenergy said, predicting that the percentage of domestic manufacturing would remain well below 25% by 2020.

Panelists were also conservative in their estimates of Mexico’s installed solar capacity by 2020, predicting that it is likely to total between 2 and 3 GW. But the ambition exists to surpass that amount, and the government is committed to ironing out the issues concerning regulation that are currently causing a project bottleneck, according to GTM Research senior solar market analyst Mohit Anand. “Despite all the challenges, solar is poised to be a key player in Mexico,” he said.

solar-summit2FuturENERGY at Solar Summit Mexico

FuturENERGY was present at Solar Summit Mexico, an event at which, apart from distributing copies of the magazine that attendees were able to collect from the registration desks, FuturENERGY also enjoyed direct participation thanks to the presence of our Mexico delegate, Gloria Ortiz, whose meetings with different companies provided us with a first-hand opportunity to take stock of the Mexican solar market.

The photo shows Gloria with Héctor Olea, President of Asolmex and the CEO of Gauss Energía.

 

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