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April 28, 2015 | How to Unlock Mexico’s Hidden Growth
As other markets around the world mature, investors are turning to Mexico and its potentially enormous, as-yet untapped, solar market for growth. Multinational companies are champing at the bit to participate in a market so rife with possibilities, with its ideal insolation and low operating costs.
Recently, the government, which controls the energy sector in the country, has proposed new laws that will significantly liberalize the energy sector. The private sector supports the proposals, providing a counterbalance to the current vested interests. Potential investors have argued for years that the current electricity-delivery system is inefficient and ineffective.
With an open market, innovations will come more quickly, allowing more citizens to receive low-cost electricity and raising the overall standard of living. That’s where solar can play a significant role, assuming the laws, expected to go into effect next year, remain on schedule.
Large utility-scale projects are receiving the most attention for two primary reasons:
– Banks understand large-scale projects as more bankable because of their investments around the world. As a result, those projects receive funding more easily.
– CFE understands how to work with large projects because of its experience building large fossil-fuel burning plants. It knows how to create an infrastructure to meet the citizens’ needs. It also allows CFE to keep primary control of the Mexican electric grid as required by the Mexican constitution.
But the sleeping giant in the Mexican solar sector is commercial rooftops. At the moment, companies are able to install up to 500 kW on a rooftop without any special permits. There’s a generous tariff providing an incentive for businesses to add solar, tempting commercial building owners to generate their own electricity and gain at least some freedom from the government-run grid.
One bump on the road to explosive growth is the 500 kW size limitation, but experts and industry insiders believe the government will soon lift the restriction. For multinational commercial players (U.S. retailers like Wal-Mart or car company GM, for example), the change can’t come soon enough. Large corporations often have large, flat roofs that currently neither produce nor save money. Many of those rooftops could hold up to 1 MW of solar energy — a prospect that excites both companies and commercial investors alike.
The Mexican government is taking the necessary steps to allow Mexico to become a shining example about how to create a solar industry properly. Streamlining regulations and opening the market to international competition are only the beginning. Look for the market to grow dramatically in 2016 and 2017.