Since the implementation of the national energy reform policy in 2013, the Mexican solar market has been on the brink of rapid growth, but had yet to take off—until now. It took the energy auctions of 2016—which awarded 4 GW of major solar PV project contracts—and the subsequent financing, development and construction starts of several of those projects to signal the beginning of the Mexican utility solar boom. Upcoming auctions will likely add several more gigawatts to the contracted project pipeline, plus big private companies are coming out with tenders for large solar plants.
What makes the Mexican solar opportunity distinctive is the lack of government subsidies in these auctions. Although there are renewable portfolio standards in place, it is essentially an unsubsidized, purely lowest-cost market, where solar competes with other energy generation sources strictly on the basis of project economics. During the first pair of energy auctions, solar won most of the contracts, beating out wind bids regularly and convincingly, with PPA pricing going as low as $33 per megawatt-hour (MWh). In Mexico, it’s that annual kilowatt-hour gain from trackers that drives the bid process and has caught the attention of developers.
NEXTracker has been active in the Latin American market since the company’s inception. Some of our first project wins came in Chile and Honduras, where hundreds of megawatts of our single-axis trackers are helping to harvest the ample sun there. We have a strong presence in the region, including in Mexico, which like northern Chile, has some of the best solar resource in the world in terms of DNI, or direct normal irradiance. These conditions, along with the availability of abundant cheap land and the low-cost market’s focus on getting as much energy production out of each system as possible, make Mexico perfect for tracker-based utility-scale and large distributed-generation solar installations. Take a quick look at some of our first projects in Chile in this video.
We’ve already supplied our first utility project—and the first large-scale single-axis tracker installation—in Mexico, a 16 MW solar farm for Buenavista Renewables in Chihuahua state. Speaking of scale, our latest Mexican project takes it to a new level. We have begun shipments to what will be the largest solar power plant in the Western Hemisphere—and our largest supply win to date. This 750 MW-plus project in northern Mexico is not only significant in terms of scale, it will also mark the first deployment of our new advanced SCADA (supervisory control and data acquisition) software platform, which will bring a step change in tracker system intelligence and plant performance optimization to our customers.
Given the sometimes-challenging financing environment in the Mexican market, working with the only investment-grade tracker company boosts the confidence of our customers. Our extensive production, supply chain and logistics infrastructure represents an important competitive advantage enjoyed by NEXTracker in Mexico. Thanks to the large manufacturing footprint and long-standing bankability of our parent company Flex, we can produce our systems locally and deliver in record time We have a significant team on the ground, comprised of people with extensive knowledge of the market, solid construction backgrounds, and strong contacts in the regional and global developer, EPC and utility communities. On the training front, many of our global EPC partners are taking advantage of our PowerworX Academy certification programs and learning how to install and work with our tracker systems.
We’re looking forward to participating in this year’s MIREC week, the annual gathering of many of the leading Mexican and Latin American clean energy marketplace players. For years, there’s been a running joke about having this great event in Mexico City but wondering when the Mexican solar market would finally take off. Well, that joke has run its course. Although project financing, grid interconnection and other challenges remain, the gigawatt age of la energía solar has finally arrived in Mexico.