Joint ventures involving Spain-based energy company Aljaval have received electric energy generation approval for eight solar power projects with a combined capacity of 220MW in Mexico. Javier Mas Abad, Aljaval deputy director, spoke to PV Tech about the strong future for solar in Mexico despite difficulties in gaining finance.
Why is Aljaval having difficulty gaining competitive financing for solar projects in Mexico?
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We need two or three months for financing our first projects. For the moment it is going to be complicated. Why? In Mexico you can sign a ‘small producer’ permit that allows you to operate in a spot market. The first main issue is the price of the spot market is influenced by the low oil price. Secondly the last two years have been good years in terms of water so the hydro plants have been working well. These two issues are not allowing finance for the projects that are under the small producer permit.
For example, the price in the North where some of our projects will be connected is around US$55-65 per MWh, while around one year ago the price was around US$140-145 per MWh. The price is more than 50% lower.
The other possibility in Mexico is through a Power Purchase Agreement (PPA) scheme but not all the necessary laws have been implemented yet so we have to wait.
How are these two issues affecting Aljaval?
There are a lot of investors interested in the Mexican market. We have sponsors and investors who want to remain in high PPAs in the projects for 20-25 years, but we are not able to close the agreements unless we have a PPA or something that can solve this price issue.
What other projects are in Aljaval’s pipeline for Mexico?
We have 18 projects of around 30MW each, which is around 500MW, ready for construction this year or in 2016. We are starting with new developments under the energy reforms published in August last year.
What attracted you to these large deployments in Mexico?
Mexico is one of the top places in terms of solar resources and also for wind. It is a stable country in terms of political and macro economical figures. They have a big population with energy demand that is increasing year by year. We think it is going to be one of the biggest markets in the next year.
The main difference between now and two years ago is that Mexico is implementing a big energy reform with a lot of new laws. There are a lot of things to understand and do, but from our point of view the energy reforms allow us to develop a lot of private projects in Mexico – not just renewable energy but also oil and gas.
What is the most important change in the reform?
The Mexican Government has tried to introduce private companies into a country that was focused in just one national company Comisión Federal de Electricidad. This is their main change from just one national utility to a lot of companies that are allowed to participate in the market. It is necessary to take some time in order to implement this new market. Mexico has moved forward with the energy reform. We share this point of view with all the parties involved in the market.
I think Mexico is very interesting for the investors and the parties involved in the renewable energy market. The market will continue increasing.