Global Solar PV Market Report

Although energy regulations have changed, Mexico has taken significant steps toward achieving its energy transition by allowing companies to invest in rooftop solar, also known as  distributed  generation, and generate their own electricity within their facilities. By policy norms, distribution generation refers to  the plant capacities up to 500kW. Such smaller systems are increasingly permeating the Mexican energy mix, especially now that larger-scale projects are being put on hold due to sector uncertainty.

In Mexico, distributed generation is gaining traction because it is the only thing moving forward, unaffected by new policies. In contrast to utility-scale projects, DG projects do not need a generation permit and can be approved in a matter of weeks instead of months or years. Distributed generation has become very competitive in recent years, and local incentives around it are growing quickly, although space and capacity are limited. Consequently, companies are increasingly turning to smaller-scale renewable options to reduce their carbon emissions while avoiding regulatory complications in Mexico. The sector enjoyed an annual growth rate of 45% between 2020 and 2021 and installations have increased significantly over the last decade.

At COP27, Mexico committed to expand its combined solar and wind capacity from 16GW currently to over 40GW by 2030. To expand clean energy capacity as targeted, Mexico also presented a preliminary investment plan for up to $46 billion, which will be largely targeted towards the development of untapped solar potential, as the country has some of the best locations for large utility-scale solar PV plants that remain to be commercially exploited by prospective investors and developers seeking projects at locations with competitive costs. The country’s southeast region is particularly rich in this regard.

Solar thermal energy is progressing at an accelerated pace in Mexico. With c.4GW of installed solar thermal capacity, Mexico has the largest number of solar heating systems for industry in the world. Despite its dynamism, it still has enormous potential that could trigger investments worth at least US$634 billion. Solar thermal energy along with distributed generation are boosting solar energy’s installed capacity, since large-scale projects are being stopped because of uncertainty generated by the new energy policy.

As a result of the energy reform (2013-2014), the industrial sector has expressed a strong interest in renewable energy projects. Private sector participants recognize that there are still challenges to developing and participating in these projects, including permit delays, transmission constraints, policy changes, and a lack of return on investment. It is important to note that small-scale projects face lesser permitting hurdles than larger projects. While these challenges exist, the industrial and commercial sectors offer significant opportunities for energy exports.

Commercial deployment of energy storage solutions could be a catalyst for the Mexican solar PV market, especially in the small-scale or rooftop solar segment. Although, compared with more widespread developments in the US and several European countries, Mexico’s energy storage operations are in their infancy, the advancement of battery materials and related technologies is making this segment more attractive, while at the same time falling battery costs are encouraging smaller energy companies to invest. To combat more frequent blackouts, Mexico has recently developed hybrid power stations that generate solar power and store battery power. In January 2023, The Ministry of Environment and Natural Resources (Semarnat) authorised the construction of a transmission line for the Puerto Peñasco Photovoltaic Power Plant. Once completed, the full $1.6 billion project will have a generating capacity of 1GW of solar PV and 190MW of battery energy storage.

Meanwhile, the grid infrastructure has a significant scope of investment considering the rising demand on the network from varied renewable energy generation resources. In this regard, on June 1, 2022, the Secretariat of Energy (“Secretaría de Energía or SENER”) published the 2022- 2036 National Electrical System Development Program (“PRODESEN”), which specifically includes provisions concerning the modernization of the electrical system, which includes combined cycle, transmission, and distribution projects. In addition, Mexico has all of the key characteristics to develop into a robust smart grid market. Earlier in 2020, Mexico’s energy regulator Comision Reguladora de Energia (CRE) developed a smart grid Roadmap that highlighted the potential of the smart grid market to reach $12.1 billion by 2023, with annual spending ramping up from $205 million in 2014 to $2.1 billion per year in 2023.