With major solar projects stalled in Mexico, companies turn to smaller workarounds

Record ID: 1685745

  • Title: With major solar projects stalled in Mexico, companies turn to smaller workarounds
  • Date: 22nd August 2022
  • Summary: TULA, HIDALGO, MEXICO (FILE - JUNE 22, 2020) (REUTERS) EXTERIOR OF THERMOELECTRIC POWER STATION VARIOUS OF SMOKE CLOUD COMING OUT OF CHIMNEYS ELECTRICITY PYLONS
  • Embargoed: 5th September 2022 11:56
  • Keywords: Mexico electricity power renewable energy solar energy
  • Location: VARIOUS LOCATIONS, MEXICO
  • City: VARIOUS LOCATIONS, MEXICO
  • Country: Mexico
  • Topics: Environment,South America / Central America
  • Reuters ID: LVA002962220082022RP1
  • Aspect Ratio: 16:9
  • Story Text: With large wind and solar projects stalled in Mexico due to controversial energy reforms, companies are increasingly turning to smaller-scale renewable options that allow businesses to cut carbon emissions while dodging fights with Mexican regulators.
    Solar companies and energy analysts said they are seeing an unprecedented surge in so-called 'distributed generation' - or DG- solar projects which are smaller and less regulated with a threshold in Mexico of 500 kilowatts - enough to power about 200 households.
    Even with the explosive growth predicted in DG, analysts doubt it will be enough for Mexico to successfully address its energy transition, given that the country seeks to continue generating electricity through the burning of fuel.
    But for many companies they are the best option, with DG projects not requiring a generation permit and having an approval process of weeks, versus the months or years, it takes for utility-scale projects. It's likely to stay that way too - at least for now - said analysts, who do not foresee changes to DG regulation in the near future.
    Enlight, a Mexican solar company that focuses on DG projects for industrial customers, said it had clients that considered tapping renewable energy from larger sources, but the political climate swayed them to DG as a more proactive step towards their own ESG (Environmental, Social and Governance) commitments.
    According to Englight's chief growth officer Oscar Garcia, the company is seeing a substantial increase in requests for information and in customers, who are deciding to switch to renewable energies.
    Mexico is embroiled in tensions with the United States and Canada, its major trade partners, over President Andres Manuel Lopez Obrador's drive to tighten state control of the energy market. The United States has demanded dispute settlement talks with Mexico, arguing the move is unfair to U.S. companies and likely in breach of a regional trade deal.
    Lopez Obrador's quest has infused deep uncertainty in the renewable energy sector as at least nine major projects amounting to more than 1,000 megawatts by large developers like German company BayWa and Italy's Enel, are currently stalled as they await permitting from the state power regulator.
    Sector experts have estimated DG investments in Mexico have topped $3.5 billion in the last eight years, with another $500 million expected by the end of this year.
    There are also attempts to increase the threshold for DG projects, which is lower than in countries like Brazil and Colombia, with Green Party (PVEM) lawmaker Nayeli Arlen Fernandez Cruz pushing to double the capacity to 1 megawatt.
    Mexico's most recent electricity development plan, for 2022 through 2036, delays by seven years the country's previous commitment to generate 35% of its energy from renewable sources by 2024. It now says that will only be possible by 2031.
    But distributed generation still features as a major area of growth in renewable sources - forecast to reach nearly 16,500 cumulative megawatts by 2036, under the best case scenario, an increase of nearly 725%. In contrast, it did not include scenarios for utility-scale solar or wind projects, a sign the government could continue holding them back.
    (Production: Carlos Carrillo, Liamar Ramos)
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