As Mexico stalls major solar projects, companies turn to smaller workarounds

Workers install solar panels on the roof of the Central de Abastos wholesale market as part of a rooftop solar project by the local government to become the world’s largest urban solar farm, Mexico City, Mexico July 27, 2022.REUTERS/Luis Cortes/File Photo

MEXICO CITY, Aug 22 (Reuters) – As alternative energy projects stall in Mexico due to controversial energy reforms, companies are turning to smaller-scale renewable options that allow businesses to cut carbon emissions, avoiding a fight with Mexican regulators.

Solar companies and energy analysts say they are seeing an unprecedented increase in smaller and less regulated distributed generation (DG) solar projects in Mexico with a cap of 500 kilowatts – enough to power about 200 households.

Bread maker Grupo Bimbo ( BIMBOA.MX ) and French energy firm Engie ( ENGIE.PA ) are among the growing number of DG applicants. While these projects often provide only 10% or 20% of the company’s energy needs, they currently appear to be “the only game in town,” according to Andres Friedman, CEO of Canadian-Mexican solar startup Solfium.

Even with the projected explosive growth in DG, analysts doubt it will be enough to successfully address Mexico’s energy transition, given government policies favoring electricity from fossil fuels.

But for many companies, they are the best option, as DG projects do not require a generation permit and approval takes weeks, compared to months or years for utility-scale projects. It is likely to remain that way – at least for now – said analysts who do not foresee changes in DG regulation in the near future.

As BTicino customers of German industrial manufacturer Prettl and Legrand Group (LEGD. PA).

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Mexico is at loggerheads with key trading partners the United States and Canada over President Andres Manuel Lopez Obrador’s initiative to strengthen state control of the energy market. The United States has called for talks with Mexico to resolve the dispute, arguing that the move is unfair to US companies and likely violates a regional trade agreement. read more

Lopez Obrador’s pursuit of at least nine major projects of more than 1,000 megawatts (MW) by major developers such as German company BayWa ( BYWGnx.DE ) and Italy’s Enel ( ENEI.MI ) has sown deep uncertainty in the renewable energy sector. According to Valentina Izquierdo, a Mexican solar analyst at Wood Mackenzie, they are waiting for approval from the state energy regulator.

Spain’s Iberdrola ( IBE.MC ) already has a 100MW wind farm under construction and has been denied a generation permit.

The vast majority of distributed generation projects in Mexico rely on on-site, easy-to-install solar panels rather than large wind turbines.

“Commercial and industrial customers in Mexico currently have no other options, so this has pushed more customers into the DG market,” Izquierdo said.

Enlight, a Mexican solar company that focuses on DG projects for industrial customers, said it has customers considering using renewable energy from larger sources, but the political climate has pushed them to DG as a more proactive step toward their ESG commitments.

“There’s been tremendous growth for these types of customers, certain industries with very aggressive decarbonization goals, like the automotive industry,” said Oscar Garcia, chief development officer at Enlight, which works with Grupo. Bimbo.

Sector experts have estimated that the investments of the Head Office in Mexico in the last eight years have exceeded 3.5 billion dollars, and another 500 million dollars are expected by the end of this year.

Green Party (PVEM) lawmaker Nayeli Arlen Fernandez Cruz has also attempted to increase the threshold for DG projects, which is lower than countries such as Brazil and Colombia, to double the capacity to 1 MW.

Mexico’s latest electricity development plan for 2022-2036 delays the country’s commitment to get 35% of its energy from renewable sources by 2024 by seven years. Now he says it will only be possible until 2031.

But DG is still emerging as a key area of growth in renewables—the best-case scenario is projected to reach about 16,500 cumulative megawatts by 2036, an increase of about 725%. In contrast, scenarios for utility-scale solar or wind projects were not included, a sign that the government may continue to hold them back.

“This allows us to comment on whether multiple permits can be issued for utility-scale renewable energy projects,” said Maria Jose Trevino, country manager at Acclaim Energy, a consulting firm.

Reporting by Cassandra Garrison; Edited by Stephen Eisenhammer and Marguerita Choy

Our standards: Thomson Reuters Trust Principles.

Cassandra Garrison

Thomson Reuters

Mexican reporter focusing on climate change and companies with an emphasis on telecommunications. Formerly based in Santiago de Chile and Buenos Aires, Argentina’s debt crisis includes the US-China influence struggle in Latin America and the coronavirus pandemic.