Mexico brimming with solar growth potential

NEXTracker's manufacturing and sales activities in Mexico are growing and the company is optimistic the good times will continue as the country moves forward with its solar power build out. NEXTracker's senior sales director for the Americas, Alejo López, tells BNamericas more.

BNamericas: NEXTracker has expanded its manufacturing presence in Mexico and is supplying the 754MW Villanueva solar plant under construction by Enel Green Power México, so things are looking good for the company in the country, particularly as solar power development is beginning to surge. 

Alejo López: Mexico is a key market for us, not only as a market in which to sell our products but also as a country in which there is a very sophisticated framework in which we want to participate. Our parent company, Flextronics, has a long history in Mexico, with a presence of more than 20 years with large manufacturing plants in various states. 

BNamericas: Are you therefore supplying Villanueva with locally produced components?

López: We're supplying it with 50% of local components; we use locally produced products as much as possible in all markets, which allows us to be more competitive, and Mexico is a country in which we can do that: manufacture locally and be competitive. 

BNamericas: Is that company policy or is it a response to local content rules?

López: It's a strategic move. As well as making us more competitive it gives our clients the advantage of using local products. In some countries, such as Brazil, there are stringent local content rules, and which allow for access to finance for our clients, for example, and in Chile we have an alliance with a large local manufacturer, but in Mexico there is no such local content requirement for solar components.

BNamericas: Manufacturing locally also makes sense as Mexico imposes a 15% tariff on solar panel imports.

López: Mexico's economy ministry launched a program to make solar components exempt from tariffs – Prosec – coinciding with the first electric power auctions in 2016, given that the photovoltaic industry would be operating at a disadvantage if one of its main components, panels, are subject to tariffs, compared with other energy industries such as wind. 

BNamericas: Wind has always dominated renewable energy in Mexico, but solar is now emerging as a major power source, at a time when wind power is also experiencing opposition from local communities.

López: We are now seeing major growth potential in Mexico's solar sector, the areas of development of solar projects are not so susceptible to opposition, as they are less encroaching, and the impact they have is much smaller. The economic fundamentals are also very good, and we are very optimistic of solar power growth in Mexico.

BNamericas: The solar prices achieved in the electric power auctions in Mexico are among the lowest in the world.

López: Yes, such low prices and without subsidies are very competitive and they mark a trend of how prices are falling globally, and there is still much potential to reduce costs, but I think we have touched bottom now. We can still go lower and see how we can improve costs, but we can't keep going down and reduce prices irrationally. The prices in Mexico are sustainable, however, and projects can be developed as a result, both small- and large-scale utility projects.