Mexico’s Long-Term Energy Auction 2.0: The Matrix Reloaded            

They say that sequels are never as good as the original film. But when it comes to energy auctions in Latin America, the opposite may be proving true. On September 28 this year, Mexico officially announced the results of its second long-term energy auction (LTEA). The outcome not only overshadowed that of the first round, held in late March, it also confirmed that the country is stepping up its renewable energy game. Moreover, it is running head-to-head with more mature Latin American power markets Chile and Brazil, where energy auctions have become a key tool for renewable energy growth. Mexican energy authorities still face numerous challenges that will likely keep the domestic clean energy market from consolidating quickly. But for now, private sector interests and government efforts appear to be aligned and on track.   If you are looking for a hero in Latin America’s clean energy narrative, Mexico is a good choice. Just look at the shift it made from the country’s first to second LTEA: 67% more energy products, almost three times more firm capacity offered, over twice as many winning bidders, 86% more power generation capacity to honor long-term PPAs, and on top of that, new record-low prices. Where to start? Here are two punch lines for your next networking cocktail:

  • Unsubsidized solar energy sees new benchmark in Latin America.
    Consorcio Fotowatio made its parent company, Madrid-based Fotowatio Renewable Ventures (FRV), proud with its 300-MW Potosí Solar project win. Scheduled to start operations in late June 2019, this solar PV park will deliver over 779 GWh and 779,161 clean energy certificates (CELs) to the Federal Electricity Commission (CFE) per year, at a mind-blowing US$ 26.99/MWh. That means a new record for unsubsidized solar energy in Latin America —Spain’s Solarpack had set the previous record at US$ 29.10/MWh in Chile’s 2015/01 auction, just over one month before. Japan’s Marubeni and China’s JinkoSolar, which together quoted as low as US$ 24.18/MWh at the Abu Dhabi Water and Electricity Authority’s 350-MW solar tender on September 19, still hold the world record. Notably, JinkoSolar was one of the ten victors in Mexico’s first LTEA. And, FRV is no longer a “pure Spanish horse”: in April 2015, it was acquired by Saudi-led Abdul Latif Jameel (ALJ), the largest solar PV developer in the Gulf Cooperation Council, and a global leader in this rapidly growing business. Mexico’s renewables recipe just got spicier.
  • Wind energy catches up, yielding the most competitive bid price by regional standards. Italy’s Enel Green Power reaffirmed its position in Mexico’s green energy field, this time winning with a 100-MW wind farm, to be located in the state of Tamaulipas. The project is slated to come on line on June 30, 2019. It will produce 399 GWh, and 399,129 CELs per year, at an estimated US$ 32 per combined unit. This price is a new benchmark in Latin America, and is enough to establish a standard for onshore wind development in Mexico’s electricity industry, though it is still a few bucks away from the US$ 25/MWh world record set in Morocco’s 850-MW wind tender early this year. Enel also made some jaws drop at the first LTEA: its winning solar PV projects, which will total 787 MW of installed capacity, will start delivering 2,250 GWh and 2.25 million CELs per year in 2018. These volumes represent 42% of all the clean energy and CELs allocated in Mexico’s late-March reverse auction.

Now zoom out, and you will notice that Mexico’s plans to become greener are starting to bear fruit. Beginning in 2018-2019, the 15-to-20-year PPAs stemming from both LTEAs will help the CFE service regulated consumers with 14.31 TWh/year, sourced from renewables. This total accounts for roughly 5.5% of the average gross generation estimated for 2015-2016. It is still a modest figure, but new volumes will be adding up, provided the Mexican government secures yearly, incremental energy tenders. The long-term objective: to make wind and solar, the country’s leading renewables, account for 22% of the power generation matrix by 2030, up from today’s 4%. Such levels will help Mexico achieve a 25% cut in greenhouse gas emissions by 2030.

Can Mexican Energy Auctions Dodge the Bullets?

To access the rest of this report, please click on the link below.

This report also offers insight on the following:

  • Up-to-date details on key energy auctions across Latin America
  • Brazil’s energy auction promise
  • The grand finale of Argentina’s RenovAr 1.0 bid
  • Cuba’s green energy revolution
  • IDB’s role in Nicaragua’s grid expansion plans
  • Policy and Regulatory Developments: More LAC countries join the Paris Agreement; Chile further strengthens solar industry
  • Stakeholder Mapping: The CEO of Costa Rica’s Electricity Institute (ICE)

Document Information

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Pages: 8
Graphs:

  • Mexico’s Second LTEA: Allocation of Energy Products per Source Type
  • Country by Country Energy Auctions and Products Offered (Mexico, Argentina, Brazil, Chile, El Salvador)
  • Cuba’s Renewable Power Generation Capacity 2006-2015
  • Cuba’s Energy Produced per Source Type 2006-2014
  • LAC Signatories and Parties to the Paris Agreements
  • Roadmap for the Transforma Solar Program (Chile)

 

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