A Look At The Solar Market In Mexico

by Trefis Team
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The market for solar power in Mexico has been undergoing a steady transformation due to interest from foreign project developers, as well as the recent construction of a series of  small and mid-scale projects. In early August, First Solar (NASDAQ:FSLR), one of America’s largest solar panel manufactures and  project developers, entered the Mexican utility-scale solar market through its purchase of a project pipeline from power plant developer Element Power. These projects, which are located in the State of Sonora in Northwestern Mexico, could lay the groundwork for First Solar’s expansion in the country. In this note, we take a brief look at the Mexican solar market and where it could be headed.

Trefis has a $43 price estimate for First Solar, which is almost in line with the current market price.

Strong Solar Resources Weighed Down Lack Of Strong Incentive Framework

Mexico has abundant solar resources. About 70% of the country receives an insolation greater than 4.5 kilowatt hours (kWh) per square meter every day and the average insolation in the country is almost 60% higher than that of Germany, which is one of the world’s largest markets for solar products. ((Clean technica)) Despite the abundant resources, solar power remains economically unviable in most parts of the country since the average cost of electricity is just about $0.12 per kWh. Additionally, Mexico lacks an attractive incentive framework for solar power and the government does not  subsidize large scale-solar power plants. [1] However, the country does provide net metering for installations under 500 KW.

Near Term Pockets For Growth

Although solar power is not economically viable in many parts of the country, it is already quite competitive in the Northern part of the country, where solar resources are above the national average, as well as in places such as Baja California where retail electricity prices are as high as $0.30 per kWh. Solar power could also be increasingly viable for commercial and industrial applications since some of Mexico’s largest businesses have seen their electricity rates more than double over the last decade, with prices rising from around $0.06 per kWh in 2003 to over $0.13 per kWh currently. [2] Going forward, we believe that installations should see strong growth in other parts of the country as well, as the prices for solar power systems continue to fall.

See Our Complete Analysis For First Solar Here

New Projects Licences, Government’s Renewables Target Will Lend Impetus To Solar Installations

Despite some challenges, interest in the country’s solar sector is growing. Earlier this year, Martifer Solar, a project developer, began work on a 30 MW solar power plant in the Baja California region. Upon completion, the project will be Latin America’s largest solar power plant. [3] Additionally, several international developers including Germany’s Saferay GmbH and Spain’s Grupotec Tecnologia Solar SL own licenses to build solar plants in the country. [1] At present, the government has issued permits for around 215 MW of solar plants and has plans to significantly ramp up renewable generation capacity. By the year 2035, the government aims to derive about 35% of the country’s electricity from clean sources. [1] At present, renewable sources account for around 15% of the country’s total generation capacity, with solar and wind projects accounting for just about 1.5% of the capacity.
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Notes:
  1. Bloomberg [] [] []
  2. Reuters []
  3. Clean technica []
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  • commented 6 months ago
  • tags: FSLR SPWR
  • What are there renewables are you watching?