Solar in Mexico and Central America is poised for growth in 2015 and 2016 after what looks to be a quiet year this year, according to a new Bloomberg New Energy Finance report.
BNEF’s analysis of the region predicts a “modest” 193MW this year, but a stronger 355MW in 215 and 456MW in 2016.
Overall, Mexico is forecast to see 100MW of new solar capacity this year, but thereafter other Central American countries are expected to account for the lion’s share of PV growth in the region as they seek to reduce dependence on expensive oil and diesel generation.
“These countries have unusually good wind, solar, geothermal, and hydro-electric power resources. Using these to meet much of the additional electricity demand in coming years, and replacing that costly oil and diesel power, makes sense,” said Yayoi Sekine, Latin America analyst at Bloomberg New Energy Finance. “It is becoming a key plank in the region’s energy policies.”
BNEF predicts that between 2014 and 2016 up to 477MW of new solar capacity installed across Central America, singling out Guatelama, Honduras, El Salvador and Panama as potentially promising markets.
In Mexico, despite good conditions for solar to take root and a healthy 2014 in store, BNEF said utility-scale PV development would “stall” after this year as new market rules are clarified. These are not expected to be fully implemented until 2016, until when BNEF said distributed PV would dominate in Mexico.
In other Central American countries, BNEF said governments were making positive efforts to increase private sector renewable energy generation, with tenders on offer in El Salvador, Panama and Guatemala, and Honduras and Costa Rica both offering feed-in tariffs.
However, the finance picture for solar and renewables in Mexico and Central America continues to be a mixed one. Although Mexico overall looks set to have a record-breaking year for clean energy finance, the US$61 million invested in solar in the first half of 2014 is a long way off the US$216 million invested last year.
Meanwhile, with US$21 million invested in PV so far this year, Central America more broadly is also some way from matching the total last year, when US$58 million went into solar.
Michel Di Capua, head of Americas analysis for Bloomberg New Energy Finance, said: “Renewables are not having everything their own way in these countries. Mexico continues to see strong investment in gas-fired generation, taking advantage of both its domestic resources and its proximity to US shale plays. Hydro-electric has run into some difficulties in Costa Rica and Panama, because of drought.
“And across the Central American region, financing for renewables does not come easily, making the role of development banks and export-import banks vital for projects to get off the ground. But policy is being amended in most countries to encourage stronger investment in wind, solar and geothermal.”