Mexican tender suspension 'understandable'

Assuming no further unwelcome changes are to follow, the suspension of Mexico's fourth clean energy auction is unlikely to dent investors confidence, according to a senior analyst.

Bidding is likely to be re-opened in February (pic: Siemens Gamesa)
Bidding is likely to be re-opened in February (pic: Siemens Gamesa)

Mexico’s grid operator and regulator Cenace (the National Energy Control Centre) announced a halt to the 5.9TWh tender on 3 December, a day before bids were due.

Brian Gaylord, senior analyst of Latin America at Wood Mackenzie Power and Renewables (formerly Make Consulting), expects bidding will resume in late February 2019, with results announced in early March.

He describes the suspension as "not positive", but predictable following new president, Andrés Manuel López Obrador (known as Amlo), being sworn in on 1 December.

"It’s understandable with a new government," Gaylord told Windpower Monthly. "Obviously, you know they want to leave their mark on things."

"I think there will be more scrutiny in the oil and gas markets because those companies are taking control of Mexico’s natural resources. But there will be less change with the electricity auctions, especially renewables."

As long as volume and rules governing Mexico’s clean energy auctions stay as they are, investors’ confidence shouldn’t be dented, Gaylord said.

He added: "I haven’t seen anything indicating that Amlo is going to change that."

Mexico was one of the first Latin American countries to move to an auction system for renewable energy, holding its first clean energy tender in 2015.

Previously, wind farm operators were reliant on selling electricity to corporate and industrial off-takers.

"Mexico was kind of a pioneer for the corporate PPA which people are talking about everywhere right now," Gaylord observed.

Wind and solar PV dominated Mexico’s three previous clean energy tenders in 2015, 2016, and 2017.

In November 2017, wind secured 45% of the PPAs on offer in November 2017.

When the fourth tender does eventually run, it will be difficult to predict the results, Gaylord added.

Wind could be "shut out" by "aggressive" solar bids, he said, but equally, contracts could be split between the two technologies. "You never know", Gaylord said.

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