Analysis: Mixed signals from Mexican auction

MEXICO: Mexico's first ever power auction packed many surprises for the wind industry, both positive and negative.

Acciona claims 20% of Mexico’s 3.1GW of online wind, and looks set to supply more

The 15-year power purchase agreements (PPAs) — finalised 30 March but yet to be signed and sealed — will be with state utility Comision Federal de Energia (CFE) for power to be delivered from 2018.

The auction organised by Mexico's energy secretariat Sener highlighted renewables' competitiveness. Combined solar and wind prices averaged $47.78/MWh, the lowest achieved in any major wind market according to Mexican wind association Amdee.

That consolidates the price lead of wind and solar PV over conventional power achieved in recent years across Brazil, Peru, Chile, Morocco and South Africa.

Solar distortion

Nevertheless, wind won rights to PPAs linked to just 394MW of capacity, far short of the 1.5GW the sector had hoped for, according to Make Consulting's Latin America specialist Brian Gaylord. Wind power prices averaged $55/MWh, with a low of $42/MWh.

Wind's allocation is also well below the 1.7GW of PPAs allocated to solar PV, which bid at even more competitive prices, averaging $45/MWh and with the lowest at $35/MWh.

In energy terms, wind's allocation was around 20% of the total 5.4GWh annual allocation. Wind also won 5.4 million clean energy certificates (CEL) associated with the capacity allocated; again, a fifth of the total allocation.

"It seems clear the solar companies bid rock bottom prices to get a foothold in [Mexico] where they have not been present to date," said Global Wind Energy Council (GWEC) secretary general Steve Sawyer.

It remains to be seen if the PV players can really build at those prices. But, said Sawyer, "the auction terms are flexible enough to postpone or even cancel the PPA without penalties".

Amdee's managing director, Hector Trevino, expects prices will rise in subsequent auctions. The next one will be later this spring, with 1.5GW of capacity to be traded and results expected by autumn, GWEC said.

Those companies with solar PPA allocations are "singular" and "unrepresentative of general market investors", explained a Mexican wind consultant.

Global utility Enel, which has deep pockets and is already active in cornering a share of Mexico's power market — renewables and conventional — won the PV stakes with nearly 1GW.

Other companies distorting the playing field are PV equipment manufacturers, which also won considerable allocations. Manufacturer SunPower, for instance, was allocated PPAs for 500MW.

Manufacturers rule

But wind manufacturers also are suspected of undercutting. "Half of wind's allocation went to groups that sell wind turbines," said the consultant.

Specifically, Spain's Acciona — already claiming 20% of Mexico's 3.1GW of online wind — won PPA rights for its 168MW El Cortijo wind development project in Tamaulipas state, where it plans to install 3MW turbines supplied by the recently-merged Nordex-Acciona manufacturer.

Similarly, PPAs were allocated to the 90MW Energias Renovables de la Peninsula project in Yucatan, in which Chinese turbine manufacturer Envision acquired a controlling stake last year from Vive Energia.

Undercutting was not the only reason Mexico's stalwart wind developers — especially Iberdrola and Gamesa — were left out of the picture.

Spanish manufacturer Gamesa, which claims to be behind over 1.7GW of Mexico's 3GW of installed capacity, told Windpower Monthly it did not bid, perhaps wary of competing with potential clients — some of which were allocated PPAs. Iberdrola declined to comment.

Geographical distortion

Despite not having such excellent winds as other Mexican states, hurricane-prone Yucatan cornered 57% of wind power PPAs in the auction.

That is because the opening bidding prices set by regulator Sener favoured certain substations with higher energy demand clearly limiting the market uptake, explained Sawyer.

Whether regulator Sener removes the geographical bias from subsequent auctions, focusing instead on ensuring the cleanest and cheapest national energy model, remains to be seen.

But despite the shortfalls and glitches (such as the initial publication of incorrect auction results, subsequently corrected) the very fact the auction was held "is a positive step" for wind, said Trevino from Amdee. "Now it's time to learn the lessons," added Sawyer.