Solar PVs dominance of Mexicos inaugural Clean Energy Auction in which it claimed 74% of the contracts offered has compelled analysts at GTM Research to revise their installation forecasts upwards for 2016 to 646 MW.
Last year, Mexico added 104 MW of solar PV, meaning this years revised forecast represents a growth rate year-over-year of 521%. This bullish revisit stems from solar PVs performance in the countrys auction, in which seven leading developers secured 1,860 MW of solar PV capacity, with all 11 projects receiving four million Clean Energy Certificates (CELs) in the process.
Solar picks up the pace
GTM Researchs Latin America PV Playbook, in which it analyzes the nations solar portfolio and plans, found that Mexico ended 2015 with 246 MW of cumulative solar PV capacity installed. The analysts had forecast growth of 382 MW of new solar for 2016, of which the bulk 300 MW would be in the large-scale sector. All of this capacity was expected under projects "grandfathered" under the now-discontinued new energy transition law, with no further demand for the year anticipated.
Even prior to Marchs auction, GTM expected solar to secure not more than 200 MW back in January, but quickly increased that estimate to 500 MW following a burst of interest from large international developers in the then-forthcoming auction.
In securing more than 1.8 GW of PV projects, however, solar has outperformed all forecasts, prompting the GTM revision upwards for the year to 646 MW of new capacity. In 2017, that figure is expected to reach 1,513 MW a growth rate of 134% as opposed to a previous 77% growth forecast.
Also noteworthy, GTM Research said, was the average contract price of $50.7/MWh, which was described as "very aggressive", particularly considering its broad range: Enel Green Powers proposed 437 MW solar project was awarded a strike price of $35.44/MWh, while Photoemeris Sustentables 29 MW farm closed at $67.5/MWh.
In comparing these average large-scale prices to other enigmatic solar markets, Mexico comes out favourably, besting the likes of India, Peru and a pre-ITC extension U.S.
"Clearly the solar industry globally has seen an opportunity in Mexico that has already been acknowledged by the likes of SolarCity last year," wrote GTMS Mohit Anand. "Low labor costs, excellent irradiation, a stable economy, and a strong PPA by a government-backed utility in the auction are some of the common reasons why local developers and experienced international players alike have flocked to Mexico for a piece of the solar pie."
Based on government clean energy ambitions Mexico is targeting 35% renewable penetration by 2024, rising to 45% by 3036 GTM Research adds that annual solar PV installations in the country could reach between 4-6 GW by 2030.
Mexicos strength lies in its attractive internal rates of return (IRR) for developers, while the countrys ties and proximity to the U.S. make international, low-cost financing easier to come by, particularly as many contracts are secured on a U.S.-dollar-denomination basis. The size of the projects awarded in the auction average 150 MW is also helping to keep costs down, GTMs analysis added.
The auctions completion deadlines of January-March 2018 could add pressure on some developers, and there may be a delay or overspill of around 300 MW of projects into 2018, the analysts add, but the general consensus is one of unstinting positivity that the ball really is rolling now for Mexicos solar market.