Mexico's energy policy fails to halt booming solar sector - industry leader

Mexico’s photovoltaic installed capacity soared in recent years, jumping to 7.416GW at the end of 2021 from just 171MW in 2017, said solar industry association Asolmex director Nelson Delgado. 

“With this, we’ve almost pulled [equal] even with wind,” said Delgado, speaking at the Mexico Solar Summit/Mexico Energy Forum 2022 that opened Tuesday in Mexico City, adding PV capacity reached 8.2% of the country’s total in 2021 compared to 8.4% for wind. In 2017, PV was only 0.3% of capacity.

The growth comes thanks to Mexico’s natural solar exposure characteristics and ever-growing demand for cheaper, cleaner energy in the country, he said, despite more than three years of political efforts designed to prop up state-owned utility CFE, often at the cost of private investment in renewables. 

Since taking power in 2018, President Andrés Manuel López Obrador has taken ever more aggressive steps to stymie private PV projects, said Delgado, first via regulatory actions, like 2020’s reliability policy, or last year’s non-constitutional reforms to the electricity sector law (LIE) – both of which have been largely held up in the courts.

Delgado also highlighted growth in PV both in utility scale production and distributed generation (DG), as seen in the following graphic using grid operator Cenace and energy regulator CRE data.

Source: Asolmex

Starting in 2017 as smaller than DG, utility-scale capacity has exploded, adding 1.426GW per year in 2017-21, while DG has seen steady growth of around 391MW per year and now stands at roughly one third of the utility-scale total.

DUBIOUS PROJECTIONS

Looking ahead, Delgado also presented the energy ministry’s projections for continued growth in solar that has utility-scale PV climbing to 9.911GW and distributed to 5.009GW by 2024, as seen in this graphic.

Source: Asolmex

But these projections, said Delgado, fail to take into account the uncertainty stirred up by public policy, particularly concerns over the constitutional reform package now under consideration in congress. 

“Unfortunately, I must say that this uncertainty is already affecting investments, despite the fact that there have been multiple [legal] defense mechanisms, and that many of these changes have been stopped by the judiciary,” said Delgado. 

“The current initiative that is being discussed will undoubtedly define the route and trajectory towards which this industry will be directed, but it is clear that whatever happens, the natural conditions that Mexico possesses make it possible to ramp up this technology in a tremendously short period of time, as the figures show.”

In addition to proposing the immediate cancellation of all private power purchase agreements (PPAs), Delgado said that under the proposed reforms CFE would be vertically and horizontally integrated again as an autonomous governmental agency responsible for organizing and directing the electricity sector, eliminating Cenace and CRE.

Without going into further detail about the “irreparable” damage the constitutional reform would do, he added: “What I can say is that until this is resolved, we can't expect as a country to see the kind of levels of growth we've seen in the sector in recent years.” 

Uncertainty and politics aside, Delgado said, Mexico needs 23GW of new capacity just to meet demand in the “next few years,” which can be from anything, though ideally solar would be 10-12GW of this.

CFE, he said, is talking about upgrading or expanding hydro projects to add about 300MW of capacity, and with solar, building a 1GW park in Puerto Peñasco, which Delgado added looks likely to be completed much later than planned in 2028.

But the 1.3GW compared to the 23GW needed, he said, shows just how vital private investment will be.