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Mexico

Mexico

Smaller players emerge to be counted

The Mexican market has 1.4GW online, according to Mexican wind association Amdee. This marks a 270% leap on the 520MW cumulative total reached by the end of 2011.

Slow start… Chile has good wind but only 205MW installed through a lack of long-term PPAs (pic: Juan Pablo Garnham)
Slow start… Chile has good wind but only 205MW installed through a lack of long-term PPAs (pic: Juan Pablo Garnham)

This may still lag considerably behind Brazil's 2.7GW, but Amdee expects Mexico to finish 2013 with at least 600MW more wind capacity.

Mexico has avoided the grid bottlenecks that currently afflict Brazil through the use of so-called open seasons, points out Ramon Fiestas, who chairs the Latin American committee of the Global Wind Energy Council (GWEC). These are periods in which federal grid operator Comision Federal de Energia (CFE) invites developers to make offers strictly linked to available grid capacity.

But developers are detecting a change in tone from CFE as it struggles to balance ever larger amounts of wind nationwide. Over 95% of Mexico's installed wind capacity is in the state of Oaxaca, one of the windiest spots on the planet. CFE is finalising the next open season for just over 2GW of new capacity in Oaxaca, but says there are hold-ups due to problems in establishing the costs of new power lines, which are be financed by developers. Rising voices of concern say the delays are due to CFE's growing resistance to wind. Delays are also affecting further calls for new wind capacity, each at around 700MW, for the states of Tamaulipas and Baja California.

Action on the ground in Oaxaca remains frenetic. Spanish energy group Gas Natural Fenosa has started building its 234MW Bii Hioxo project in the south of the state. Earlier this year Italian utility Enel commissioned its 144MW Bii Nee Stipa wind project in the Juchitan de Zaragoza district, and French utility EDF has started building the 164MW Bii Stinu wind project, in which Japan's Mitsui has bought a 50% stake. Amdee expects that arbitration taking place between developers and local wind-energy opponents will eventually allow development of the 396MW Marenas project in San Dionisio del Mar and the 137MW Piedra Larga II.

Long-term doubts

Even if the new open seasons are launched, the grid capacity eventually up for grabs will not cover the sum of existing projects in those states, let alone new ones coming up, says Leopoldo Rodriguez, board member and former president of Amdee.

However, Rodriguez is optimistic that Mexico's central government, which took office in December 2012, will push forward pro-wind measures. One of its first moves was to ratify the climate change law of October 2012, prioritising a 35% renewable electricity target to 2025, up from 25% by the end of 2012.

Environment secretary Juan Jose Guerra has also fostered a report compiled by consultants PriceWaterhouseCoopers (PWC) illustrating a minimum of 12GW of wind capacity to be viable nationwide by 2020, with little or even no price support mechanism, because of Mexico's strong and constant winds.

Based on the report, Guerra sympathises with Amdee's demand for regulation to free grid access to numerous small wind projects of up to 30MW, distributed across the country. How this political support finally pans out, however, remains to be seen.

Meanwhile, Oaxaca is losing ground to other states. The Comexhidro project in Nuevo Leon has ordered 22MW of turbines from GE. Vestas is supplying the 54MW Porvenir in Tamaulipas and the 50MW Los Altos project in Jalisco. Also in Jalisco, Spain's Eoliatec has started building the 120MW Ojuelos project. In March, US utility Sempra Energy won a power purchase agreement (PPA) in the US state of California for its 156MW Sierra de Juarez project in Baja California. That state also made a call to tender on the 50MW Rumorosa II project and local developer Geomex has claimed land rights for an 850MW development there. Projects are also sprouting across Chiapas, Chihuahua and Veracruz.

Uruguay growth plans

Uruguay is hotly tipped as the next big wind-power player in Latin America. State-run grid operator Usinas y Trasmisiones Electricas (UTE) believes 400MW of new capacity will be up or being built this year, an 800% leap on the 54MW cumulative capacity to the end of 2012.

The pro-wind catalyst came in 2010 when the government set a 1.2GW wind target to 2015, equivalent to around half of Uruguay's total installed electricity capacity. Since 2011, UTE has signed provisional and final PPAs for 22 wind projects totalling more than 900MW.

This year alone, turbine manufacturers Vestas, Enercon and Nordex claim to have picked up orders totalling 339MW. In June, Vestas started building French developer Akuo Energy's 42MW Minas project. Vestas is also preparing to build the 90MW Pintado project in the Florida region for local developer Cofusa. In both cases, 3MW turbines will be used.

An adviser to Enercon says the Germany company will start installing 2MW machines this autumn at the 100MW Esperanza wind complex in Peralta, developed by a German-Uruguayan joint venture called Agua Leguas. Enercon also has permits to set up a concrete tower manufacturing unit in the nearby town of Paso del Toro to feed the project.

Earlier this year, Germany's Nordex won two turbine deals to supply a total of 45 units of 2.4MW: one for Akuo's 50MW Florida project, the other for the 67.2MW Artigas development in the Colony of Juan Pablo Terra, developed by UTE itself. The grid operator has doubled the capacity it intends to develop itself to 400MW.

Developers are delighted with state and local authorities pushing wind-power development. A 90% reduction in business tax for wind operators for the first four years, together with other fiscal and duty breaks compensate for a feed-in tariff of just $64/MWh. And even if administrative bottlenecks prevent targets being reached by 2015, the developing momentum means they will probably be met sooner or later, according to Brian Gaylord, lead Latin America analyst at Make Consulting.

Chilean finance needs

Chile has some of the world's best winds and high wholesale electricity prices of $100-200/MWh. Wind operators do not need a feed-in tariff but simply a long-term specific mechanism granting renewables priority access to the grid, together with a solid structure for long-term PPAs, according to Fiestas.

Nevertheless, such mechanisms are totally lacking at present, keeping cumulative capacity at just 205MW, despite the 2GW of projects long-since licensed and a further 2GW lined up for approval. Only developers with deep pockets, such as utilities, or with special financing arrangements, are moving forward.

A large part of Irish developer Mainstream Renewable Power's 400MW project portfolio in Chile, for instance, is tied up with Chinese manufacturer Goldwind. The turbine maker is providing finance for its Latin American projects through its investment arm, Goldwind Capital. Goldwind is providing 1.5MW turbines for Mainstream's 33MW Negrete Cuel project in southern Chile, as well as its 240MW Ckani project in Antofagasta region, where it has also taken a 50% development stake.

Similarly, Enel Green Power connected its 90MW Talinay wind plant in Coquimbo region in March. The plant uses Vestas 2MW turbines. Talinay also clinched a 12-year, EUR110 million loan backed by the Danish government's export credit agency EKF. Insiders widely view that finance deal as a Danish intervention to aid an emblematic national manufacturer.

But the head of steam gathering behind Chile's potentially huge market could be released in the next year or so, following approval by congress in June of a new energy law setting a 25% renewable electricity target to 2025. This figure is an increase on the 20% target initially proposed in February 2012, a signal of growing enthusiasm for renewables. At the time of writing, the law remains to be ratified by the senate. Whether it pans out into specific regulation underpinning PPAs for small and large developers alike remains to be seen.

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