Global Onshore Wind Market Report

Mexico’s renewable sector is primarily driven by climate change legislation adopted in 2012 that aims to generate 35% of electricity from renewables by 2024 and 50% by 2050 (Power Technology, 2022). The latest figures suggest that Mexico is well on track to meet the interim targets, as it is only 9% behind the 2024 target. To increase capacity addition, Mexico pledged at COP27 to expand combined solar and wind capacities from the current 16GW to more than 40GW by 2030, with $48 billion of investment earmarked for this purpose (Gobierno De Mexico, 2022). The investment will focus on expanding unexploited wind and solar potential, primarily in the south-eastern region, which is the richest in this regard. Such locations also offer the scope for cross-border export to meet demand in the Central American region.

In recent years, distributed generation (DG) has gained significant momentum in Mexico compared to large-scale wind and solar projects, which stalled due to policy uncertainty. According to the Energy Regulatory Commission (CRE), nationwide distributed generation grew by 30% between 2021 and 2022, with installed capacity by the end of 2022 standing at 2.6GW. DG projects do not require generation permits, and securing approvals requires only a week’s time, making them more attractive than utility-scale renewable projects. 

Although space and capacity are restricted, distributed generation has recently become highly competitive, and municipal incentives surrounding it are expanding swiftly. Therefore, corporates are showing significant interest in small-scale renewable projects to amplify their renewable portfolio while bypassing regulatory convolutions in Mexico. Hence, in 2022, distributed generation assisted Mexico in attracting $3.5 billion in investments (Mexico Business News, 2023). This segment is expected to be a key driver for onshore wind growth.

A study published in April 2022 by NREL suggests that Mexico has a strong pipeline of renewable energy projects. The study reveals that the combined pipeline of wind and solar projects amounts to 15.3GW, with 4.8GW in the construction phase, 3.9GW in the permitting stage, and 6.5GW in the early development stage (BNAMERICAS, 2022). Despite the lack of public support for renewable projects, Mexico’s renewable sector has seen remarkable growth due to private sector investments. The untapped regions of Mexico present an opportunity to attract more investments from private sector developers despite the current issues of permit delays, project suspensions, and regulatory uncertainties.

Recently, the Mexican government has shown its intention to address investors’ concerns about market risks by signing renewable energy deals themselves and increasing the Federal renewable portfolio. In June 2022, President Andrés Manuel López Obrador’s office announced that it had signed a deal with 17 US renewable energy companies to build around 1.8GW of wind and solar energy projects in Mexico (PV Tech, 2022). Some of these projects are planned for cross-border energy exports, with an aim to develop transmission interconnections alongside. To further alleviate the uncertainties, in April 2023, the Mexican energy association AME announced its acquisition of Mexico Iberdrola’s 13 power plants with an investment of $6 billion. These efforts were made to attract more investments in the clean energy sector (Iberdrola, 2023).

Mexico presents a significant opportunity for renewable energy developers, as the country’s energy regulator, CFE, aims to maintain a 50% renewable project market share. Mexican authorities plan to add wind farms to industrial parks, with four out of ten parks being solely powered by wind farms. In May 2023, Mexico plans to launch tenders for six industrial parks built along the 300km rail corridor to power the Tehuantepec isthmus rail corridor between Oaxaca and Veracruz states (BNAMERICAS, 2023).

In addition to supporting the energy sector, the authorities are focused on strengthening Mexico’s transmission network. Developing grid infrastructure and transmission lines is of utmost importance, given the increasing demand for grid and transmission lines from various renewable energy projects. To assist in this regard, the Secretariat of Energy (SENER) announced its plans to upgrade the electric system by developing transmission, distribution projects and commercialisation of the electric system on June 1, 2022 (ITA, 2023). Furthermore, state-level initiatives are also underway to ramp up transmission line development. For instance, Mexico’s Querétaro state plans to build 900MW (140km) of new transmission capacity next year, investing $300 million (BNAMERICAS, 2023).

Additionally, Mexico has all the necessary elements to become a significant market for smart grids. The energy regulator for Mexico, CRE, created a smart grid Roadmap in 2020, indicating how the smart grid market could grow to $12.1 billion by 2023. The annual investment in this sector is expected to increase from $205 million in 2014 to $2.1 billion in 2023 (Energy Digital, 2020).