Mexico’s energy revolution is getting hotter and hotter

If you’re going to electrify transport, it’s critical for that electricity to come from clean energy

Earlier this week, I wrote about the transportation side of Mexico’s transition to cleantech, focusing on electrification of transport. If you’re going to electrify transport, though, it’s critical for that electricity to come from clean energy. Furthermore, electricity used for other purposes (homes, commercial enterprises, industry, etc.) needs to be cleanly generated if Mexico is going to get its air pollution problems under control and meet its climate commitments.

Mexico on it’s way to leading the clean energy trend

The good news is that Mexico has become a clear clean energy leader, and it is eager to grow to become an even bigger player in the clean energy market.

Last year, Mexico was actually the first developing country in the world to submit its climate action plan (Intended Nationally-Determined Contribution, or INDC), an important part of the groundwork that led to COP21’s success. This followed and was surely enabled by the much earlier decision to pass a climate change law, all the way back in 2012. That’s when the country set the target to get 35 percent of its electricity from clean sources by 2024, 40 percent by 2035, and 50 percent by 2050. These targets represent significant growth over the 18.5 percent of electricity supply that came from renewable sources in 2010.

“Mexico clearly understands the threat of climate change and the economic benefits of smart action for its citizens and is now going further,” Jennifer Morgan, Global Director, Climate Program, World Resources Institute, said of the cleantech champion last year after it led the way in the COP21 preparations.

Nonetheless, targets are only targets. What on-the-ground work has been happening to meet these targets?

Mexico – one of the most promising solar markets in Latin America

At the time that Mexico passed its climate change law, it was working to construct the largest wind power project in Latin America, was developing geothermal power plants, and was even dabbling in early-stage wave energy. In 2013, NPD Solarbuzz (now part of IHS) identified Mexico as one of the most promising solar markets in Latin America. That followed 595 percent year-over-year growth in clean energy investment in Mexico in 2012, according to Bloomberg New Energy Finance – $1.9 billion of investment that year turned it into the second-largest clean energy market in Latin America (only trailing Brazil). By 2014, residential solar power and commercial solar power was already reported to be at grid parity in Mexico, even leading several countries that are typically highlighted as solar energy pioneers. In 2015, Mexican investments in clean energy grew another 105 percent, with $4 billion invested, crushing the 2012 total.

However, that was just the beginning. The market has been growing almost continuously, and it is really beginning to heat up now.

GTM Research recently projected that Mexico would represent 29 percent of the hot Latin American market in 2016, and have a compound annual growth rate (CAGR) of 71 percent from 2016 through 2020, nearly double the Latin American region as a whole. An impressive 600 megawatts of solar PV capacity are expected to be installed in Mexico in 2016, but that could even be surpassed if you look at what’s been happening in electricity auctions in the country this year. In a recent utility-scale electricity auction (an auction for electricity from all types of energy sources), solar commanded 72 percent of the awarded capacity. In the process, Mexico recorded the lowest price ever bid (globally) for a solar power plant, and nearly 2 gigawatts (1,720 megawatts) of wind and solar power capacity were awarded to the winning companies.

Steady and dynamic growth

To put 600 MW and 1,720 MW into perspective, Mexico had only 39 MW of solar installed (cumulative total, not annual additions) in 2013, and 1,638 MW of wind. The projects awarded in the March 2016 auction alone are more than double that.

Mexico’s wind power capacity had already grown to over 3,000 MW by the end of 2015 (nearly double its 2013 total), thanks in large part to energy reform passed at the end of 2013. Its solar power capacity had grown to 246 MW by the end of 2015 (more than 6 times its 2013 total). Parts of the energy reform guaranteed renewables access to the grid and opened the market to private-sector participants, paving the way for the huge projects that were bid and awarded earlier this year.

Moving away from capacity additions and looking specifically at electricity production, renewables generated 40,095 GWh of electricity in 2013, but non-hydro renewables accounted for only 12,195 GWh (6,069 GWh from geothermal, 5,755 GWh from wind, 261 GWh from biogas, and only 110 GWh from solar). Looking at growth from 2008 to 2013, though, non-hydro renewables went from 9,800 GWh to 12,195 GWh. When you consider how much capacity was added from 2013 to 2015, and how much more is being added in 2016 (and from the March electricity auction), we are likely to see this figure increase several times over as new data come out.

The International Renewable Energy Agency (IRENA) estimates that Mexico could more than quadruple its renewable energy capacity by 2030. However, growth comes with growing pains if not comprehensively planned and prepared for.

Mexico needs to be careful to enable the efficient use of clean electricity via modern transmission infrastructure. High percentages of renewable energy on the grid require top-of-the-line infrastructure networks, as well as cutting-edge implementation of demand response and smart grid technology. Global leaders like ABB are going to be critical to Mexico’s cleantech revolution ramp up. You can’t narrowly focus on installing renewable energy without building out this critical backbone to support it.

“Consistent with the global context, Mexico is doing its part to promote a bold energy transition towards cleaner, renewable sources,” the President of Mexico, Enrique Peña Nieto, stated earlier this year. Indeed, it is, and that requires bringing global leaders in cleantech into the country to ensure that the promotion of a cleaner future turns into a living reality.

Editor’s note: This is a guest post written by Zachary Shahan, editor of CleanTechnica and Planetsave. The views expressed in this post do not necessarily reflect or represent the views of ABB Ltd or its employees.