Mexico Energy Review 2022 - Solar edition by Mexico Business Publishing

8th Edition | May, 2022

Introduction Just a third of the year in, 2022 is already shaping up to be pivotal for Mexico’s industry. Now that the public and private sectors have finally come to grips with the challenges of the COVID-19 pandemic, the added value that can be gained via economic reactivation is tangible. For Mexico’s energy industry, 2022 will be crucial too, albeit for different reasons. The ideological battle between the tenets of the 2014 Energy Reform and the fundamentally different vision of the López Obrador administration is coming to a head, as seen in discussions surrounding the government’s sweeping electricity bill in Open Parliament proceedings and the recent ruling from the Supreme Court regarding the LIE’s constitutionality. Many experts on both sides of the board are speaking out, although the possibility to change the contentious first proposal remains uncertain. Despite the disagreements, a compromise appears to be the most realistic way forward. Nevertheless, no matter the challenges the industry faces, Mexico’s energy sector will persevere. International and local players continue to successfully navigate opportunities, with a particular focus on the country’s solar sector. Mexico’s fundamentals remain as attractive as ever; after all, the country’s world-class manufacturing activity continues to expand. This requires a tremendous amount of energy, no matter who provides it. On-site electricity generation remains an attractive prospect. Boosted by technological progress, solar has rapidly become a “no-brainer” solution to meet energy needs, particularly in the unregulated and therefore de-risked behind-themeter environment. The electricity market and its various utility-scale solar assets can count on lasting interest as well, as companies continue with their mission to become more sustainable while cutting operational costs. Outside of the manufacturing sector, Mexico is moving forward with its electrification efforts. Blessed with excellent solar radiation, areas unconnected to the national grid can benefit from solar-based power production. Furthermore, hybrid technologies based on battery storage and solar promise to remove any issues related to intermittency. Mexico Energy Review 2022 celebrates how far solar technology has come. Shifting the focus to the many opportunities and prospects in the industry, it offers insight into how the solar sector will develop with leading public and private sector participants outlining their views and sharing their experience to accurately paint the Mexican solar industry of the moment.

Table of Contents

Introduction

State of the Industry

Engineering, Procurement & Construction

Operation & Maintenance

Crucial Components

State of the Industry As the López Obrador administration enters its fourth year, much has already changed for Mexico’s energy sector. A major reform still hangs over the industry, just like it has over the past three years. In 2022, industry insiders hope to finally see some clarity emerge following years of regulatory uncertainty. Whatever the outcome of the sector’s reorientation, it has become clear that Mexico’s solar sector has grown and become resilient. Behind the meter, the rise of distributed generation (DG) power generation using photovoltaic solar modules remains strong. For utility-scale projects, greenfield development is becoming difficult, though there is still opportunity to be found. In this chapter, industry experts reveal the inner workings of Mexico’s solar energy industry, how the outlook on its regulation is developing and where they see the biggest opportunities.

https://www.enel.mx/es

State of the Industry

Analysis Mexico’s PV Solar Industry Moving Past the Reform Proposal

View From the Top Veronica Irastorza | Principal | The Brattle Group

View From the Top Héctor García | Co-Founder and Managing Director | Kolya

View From the Top José Jové | CEO | Prana Power

View From the Top Manuel Rodríguez | President of the Energy Commission | Chamber of Deputies

Expert Contributor Claudio Rodríguez | Partner | Holland & Knight

Conference Highlights Solar DG Projects to Thrive in Mexico

Analysis Move From Contentious Reform to Compromise Remains Possible

View From the Top José Zambrano | Director General | Galt Energy

View From the Top Jonah Greenberger | Co-Founder | Bright

View From the Top Mauricio Chapa | Managing Director | Tecsolar

View From the Top Julian Willenbrock | Co-Founder and CEO | Enlight

View From the Top Katia Bernal | CEO | CITRUS

Content Links

ADDITIONS TO INSTALLED CAPACITY, JANUARY - APRIL 2021 (MW)

What previously registered as a regulatory shift is beginning to feel more like a landslide for many private energy companies in

3,113

3200

Mexico’s energy industry. While private utility-scale endeavors are impaired by uncertainty, the public sector might become a

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new driver of activity. Similarly, although permitting is becoming 1,876

a major barrier, distributed generation (DG) could flourish in this new environment. With a worldwide pandemic, issues in global logistics and,

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perhaps more importantly, an adverse regulatory environment within Mexico itself, the stage appears to be set far from optimal for solar energy to grow. Despite this unfavorable environment,

Turbogas Turbogas

Combined Combined Cycle cycle

Efficient Efficient Cogeneration 5 cogeneration

Biomass Biomass 30

Geothermal Geothermal Power 25 power

Source: NREL

Solar Solar

Wind Wind

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640

Hydropower Hydropower 2

State of the Industry | 7

Mexico’s PV Solar Industry Moving Past the Reform Proposal

solar energy continues to grow its footprint. At the end of 2020, SENER estimated that Mexico had 7,026MW of photovoltaic solar capacity installed. Over the past year or so, Mexico has added an impressive amount of solar capacity. According to the Mexican Solar Energy Association (ASOLMEX), the installed solar capacity has grown over 1,800 percent compared to 2017. Much of this capacity is found in the sates of Chihuahua, Sonora and Durango. This explosive growth, laid on foundations set years ago, appears to be coming to a grinding halt as the López Obrador administration advances its mission to temper private development in the energy sector and place state-owned CFE at the helm once again. “We certainly had to adapt to a significant decrease in demand, driven by the sector’s lack of stability. This has been in part due to the legal and regulatory policies implemented by this government, which have discouraged investment in renewable energy developments and projects. I would calculate that we have received around 70 to 80 percent fewer offers during this administration than in the previous one,” said Óscar Fernández López, LATAM Director General, Revergy, in an MBN interview. Even though the Supreme Court has voted on the LIE’s constitutionality while the latest reform proposal is still being discussed by members of Mexico’s Congress, industry insiders argue that much of the damage has been done already by introducing uncertainty where stability is needed. But the downturn in the industry should not be overstated, say insiders. Many expect that solar energy will continue to advance in Mexico. Especially in the area of distributed generation (DG), the mood is optimistic. Part of this is the notion that DG will remain supported no matter how the energy sector is reformed. After the government’s reform proposal caused some confusion, Minister of Energy Nahle took to Twitter to dispel these new rumors. “The [reform] does not propose to eliminate DG,” she said, arguing that the government has been a supporter of the technology since the beginning. “The energy transition is developed further through this type of intermittent technology, which by placing panels on top of homes directly benefits the end user. Energy savings are reflected in a family’s economic savings,” she added. Driven by a relative stability, solar developers hope to make optimal use of a globally growing appetite for renewable energy. “Ten years ago, it was rare to see sustainability as

State of the Industry | 8

a driver for Mexican companies. I would say that seven or eight out of 10 companies are now adopting strategies to become more sustainable. Large multinationals are pushing companies further down the right path but even small family-owned companies are realizing that energy efficiency and decarbonization are a real necessity.” Fernando Tirado, Country Managing Director Mexico, Centrica Business Solutions, told MBN. This need for sustainability is compounded by a greater need for energy in general. “Because Mexico’s energy market is characterized by volatility, red tape and bureaucracy, large corporations are increasingly seeing distributed solar as the only viable and market-safe option for them to cut carbon emissions,” said José Zambrano, Director General of Galt Energy. Because DG solar energy installations are often dubbed a “nobrainer” energy option for C&I companies, the outlook remains positive despite the issues faced by utility-scale developers. “In general, we think that C&I will become the strong majority of our business in about two years. Depending on how energy is subsidized for residential energy users on the side of higher consumption, residential systems could still grow a great deal in popularity,” explained Jonah Greenberger, Co-Founder, Bright, a company heretofore mainly focused on residential solar installations. Nevertheless, DG companies will still have challenges to face, according to Zambrano: “Every time there is a COVID-19 wave, companies backslide into a conservative mode of operations and this has delayed various projects. Moreover, the confluence of these two issues has been further exacerbated by certain media actors who have attempted to frame the federal administration as anti-renewables, which is not the case.” Calling the government anti-renewables would indeed be a generalization. While it is true that López Obrador aims to curb generally clean private power production and favor CFE, the state utility does have significant hydroelectric capacity and plans to expand on this front. However, the government is looking to drive utility-scale solar too. A key example would be the much-discussed Puerto Peñasco solar project. With a titanic 1GW capacity, the project is expected to become the world’s 10 largest solar power plants and the largest in Latin America. It will feature a 100MW battery storage addition, too. Sharing the load of the predicted US$1.685 to US$2 billion investment, state utility CFE is to own 56 percent of Puerto Peñasco, while a newly formed Sonoran state company would own 46 percent. A 1GW solar project would dwarf other endeavors in the sector as a result of its sheer size but Puerto Peñasco is not the only solar project CFE is considering. “Two projects for which we have pending permits are solar energy generation projects commissioned by CFE. We are to construct one of the largest solar farms in the country in the arid state of Chihuahua. The project is expected to generate 180MW of energy. The other smaller project is to be built in Merida, Yucatan, and is expected to generate 40MW,” said Oscar Scolari, CEO of Rengen Energy Solutions “We welcome the Read the complete article More about this topic

state company’s investment in renewable energy and hope to see its continued commitment to the adoption of these technologies.”

VIEW TOP State of the Industry | 9

from the

Q: What are the implications of the new constitutional reform for finance and antitrust regulation? A: In terms of competition, the environment and the energy sector’s efficiency, the proposal has strong implications. It generates a great deal of uncertainty for investors. The reform basically aims to move the industry back to a centralized model, financed by public resources. Importantly, this proposal and its implications go beyond the energy industry and affects sectors such as oil, gas and mining. It is also worrisome that the changes proposed seem to cancel existing generation permits, power purchase agreements (PPAs) and pending processes. Currently, the private sector owns about 48 percent of total installed energy capacity, including the pre-2014 Energy Reform’s Independent Power Producers (IPPs). All of that associated investment that is at risk because of the proposal. Furthermore, anyone can see that the proposal goes clearly against the concept of free competition. It eliminates independent regulators, who serve as referees for this market. They would be consolidated as a part of CFE, which would give the public utility all the advantage in the market, such as controlling the grid as well as pricing transmission and distribution. I do not believe it would be possible to have fair and open access to the network this way. I think that the proposal will be cause for arbitration cases if it

Veronica Irastorza

is voted through. Hopefully, it will not get that far but investors will be harmed so they will have to do what they can to recover what they invested. It is not just large companies that put money down: pension funds and small-scale investors have a stake in

Principal | The Brattle Group

these projects too. Q: How would the reform impact Mexico’s transmission and distribution network, managed by CFE?

State Must Choose Where Private Sector Can Invest and Excel

A: The transmission and distribution network is key for a free competition-based environment. This area has always been in the hands of the state through CFE’s ownership, so that is why it is important to keep CFE vertically and horizontally separated. Many other markets around the world have a similar system, considered one of the only ways to guarantee that all other power producers outside of CFE have access to the grid on an equal footing. The same goes for grid operator CENACE. It should remain outside of CFE’s control and be a referee for all market participants. What is puzzling to me is that despite the government having control over transmission and distribution, there has been little to no investment in that area in recent years. From 2019 to 2020, only 1km of transmission lines was added to the 400Kv system; the overall growth rate has been below 0.1 percent. Q: How could the government centralize the energy sector in a less drastic, and therefore less controversial, manner? A: Certainty is the most important part of the discussion. If the government wants to move back to a centralized model for the industry, it should have a real plan in regard to how to deal

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with Mexico’s massive previous investments and future needs. It would require a long transition to ensure that these investors are not harmed and that the path forward is clear. Changing as abruptly as proposed is troubling, in my opinion. I do not agree with such a centralized model.

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from the

Q: How have the company’s auction projects progressed and where are you focusing your developmental efforts? A: Following the first auction, we developed the 60MW Aguascalientes Potencia project for Canadian Solar, a major company in the sector. In the third auction, we developed once again with Canadian Solar for the 123MW El Mayo solar power plant. We have other projects in various stages of development and we aim to participate in the Wholesale Electricity Market (WEM) at specific nodes where energy prices are higher and congestion is not an issue. Kolya started developing such a project in 2019. We wanted to begin construction in 2020 but the COVID-19 pandemic halted the activity of CRE regulator and grid operator CENACE. For this reason, we could not start the construction for our project located in the State of Mexico. We are also active in other states in the center of the country, such as Hidalgo and Puebla. Q: How does Kolya assure that merchant projects are viable within a challenging environment for developers? A: For such projects, Kolya needs to arrange its development differently. It is better to build them close to the point of consumption for the WEM. This avoids congestion in transmission lines and substations, which is a major issue for

Héctor García

energy traveling from north to south and has even created blackouts across the country. We aim to sell part of the energy on the market through power purchase agreements (PPAs) with private offtakers in a mixed-energy strategy.

Co-Founder and Managing Director | Kolya

We changed the financial strategy for the projects, which are funded by US dollars, to a new model that creates other income sources in Mexican pesos. Part of the project aims to make a profit from the WEM and part of it seeks out the stability of the local industries.

Moving From Congestion To Consumption Creates Opportunity

Q: Where do you see opportunities for greenfield development? A: We are experiencing changes in Mexico’s energy regulation. The government could publish changes to how the market is governed or where development is allowed to happen, as it did recently in regard to who can receive a generation permit. This will likely cancel some projects of which the construction has not started yet, and free up capacity, which will create new spaces to develop renewable energy projects that do meet requirements. Developers need to account for how the grid will operate because previously planned large developments to boost the network have been taken off the table. Furthermore, newer hybrid energy projects provide a great opportunity for CENACE to regulate such combinations; for example, with solar energy and battery storage. In other countries, it was not necessary to receive an interconnection permit without adding storage to the mix. This situation has completely changed since 2018, just like Australia. Mexico has

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similar grid issues to Australia, in relation to large distances without population, so storage can solve many problems created by a spread-out transmission infrastructure and high energy demand. In the future, green hydrogen could also be used in hybrid projects.

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from the

Q: How has Prana’s business developed in recent years? A: Prana Power has switched its focus from owning and operating large utility-scale projects toward distributed generation (DG), as well as new technologies that tie into this niche, such as battery storage, green hydrogen and energy use optimization. Prana Power developed a DG platform around three years ago. We mainly focus on large C&I clients, so our projects are usually between 0.2MW and 0.5MW, depending on the customer’s needs. Residential solar is an interesting niche too, with some houses paying as much as small commercial operations. Nevertheless, it is becoming a bit overcrowded with competitive players. The company has researched the best options for energy projects below the 0.5MW regulation threshold and wants to provide better knowledge to its customers. DG is so much more than just installing solar panels on a rooftop. Energy consumption can be optimized, too. As a result, we have downsized our team substantially. Although we are no longer developing greenfield projects, we have utility-scale projects in their final stages of construction that became operational in 1Q22. Our funding was structured with pension funds, so selling these projects is necessary regardless of the regulatory situation in the market. For now, Prana Power wants to make DG a more sophisticated market and we are looking for partners to make this happen.

José Jové

Q: Financing remains a challenge for DG projects. How has Prana formed partnerships to address this issue? A: Somewhat surprisingly, international players have been

CEO | Prana Power

establishing themselves in Mexico without having a prior presence in the country. We have merged certain parts of our business with such companies: they bring capital and we bring our expertise to the Mexican market. US companies arrive with an aggressive strategy, so we need to manage their expectations on returns

Transitioning From Old Objectives to a Bright DG Future

and growth to some degree. In terms of customers, we have not targeted Triple A clients exclusively because they take too much time to make decisions. We have searched for customers with good track records and credit. Although international funds and companies look for Triple A’s, we know that there is a great deal of opportunity to be found in the stable middle ground. This has kept the business going for now. Rather than financing, logistics and supply chain issues such as scarcity in materials have been bigger problems for Prana Power because they have driven up costs in a business that already has low margins. We have worked to foster partnerships in these areas to add to our expertise and financing. Logistics, availability of equipment and timing are essential for DG projects. Q: How would the reform affect DG regulation? A: At first glance, the bill sent to Congress does not mention whether the government supports DG or not. When examining it carefully, one can see that DG will be affected. Nevertheless, I do not believe the government will touch DG or expand it in scope. It will just leave it the way it is now. Talk of expanding the

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DG threshold to 1MW has been going on for years. There is no major push to make it happen and nobody is raising the issue. This expansion would be a game changer for the market but it could also become a competitor for CFE on the industrial front. For this reason, they will likely keep DG the same for the next year.

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from the

Q: What can be expected of the commission in 2022, particularly as the postponed electricity reform debate continues? A: We extended the period for analysis and discussion because it is a sensitive issue. The reaction has been so broad that we decided not to rush to obtain the final version we will submit for approval. From Jan. 17 to Feb. 15, 2022, there was a full month of open parliament forums broadcasted live on the Congressional channel and closed-door meetings will be held between generating companies and the Political Coordination Board that sought to address the interests of all players. A constitutional reform requires the support of two-thirds of the deputies present on the day of the session. If 500 deputies are in attendance, we would need the support of 333 and the coalition formed by members of the Green Party and MORENA represents 279 deputies. We need 57 more. If our proposal does not reassure those deputies, we will not gain their support. We want the proposal to proceed to benefit all Mexicans. We seek to guarantee access to energy to all Mexicans, which is a human right, and to help the federal economy with lower energy tariffs. Q: What role should CNH and CRE play, whether or not they are absorbed by SENER? A: Before CNH and CRE existed, their functions were performed

Manuel Rodríguez

by the central administration, which is also Germany’s model. In France, part of the related faculties are handled by the central administration through a ministry and the other part by citizen consultations. In Spain, which inspired our current model, there

President of the Energy Commission | Chamber of Deputies

are autonomous organisms. All three models work and have their supporters and detractors. In Mexico, the plan is for these two organizations to return to a central administration but if that point blocks the advancement of the reform, it will likely be reconsidered. Their return to a central administration is controversial and will

Energy Industry Has ‘Intensive but Productive’ Year Ahead

be thoroughly discussed. If the final decision is to leave them as autonomous organisms, then that will happen. Q: What role is the commission playing in overseeing the advances in the construction of the Dos Bocas refinery? A: The Energy Commission contributed by authorizing the yearly budget for that and other refineries. The commission also monitors its progress directly for the Energy Ministry, so we have witnessed its significant advancements. In early 2022, all of the commission’s members will visit the site to oversee its progress to ensure that its construction is being done well. Q: What role will the commission have in CFE’s entrance to the renewable energy market? A: In the energy transition, all growth has to be achieved through transitional combustibles, such as natural gas, or renewable energies. The investment of US$1.6 billion in Puerto Peñasco contributed to Mexico having the most important solar power plant in Latin America and the seventh globally. The investment shows our commitment to integrate more renewable energy sources.

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Puerto Peñasco also needs supportive energy because solar energy is intermittent. Lithium could help in this regard. The reform also wants to capitalize on this resource. This facility is a great accomplishment for the country.

e will soon know if the Constitutional amendment (“Bill”) proposed by Mexican President Andrés Manuel López Obrador will be accepted as is, changed, or rejected. The first scenario, of course, results if the

Bill is approved as originally proposed. This is the worst possible scenario. The Bill is so incoherent, illogical and impractical that, basically, it would lead to a paralysis of the power industry in Mexico. The second scenario, which we feel is the most probable, is still not clear because it will depend on the extent, nature and final draft of amendments made to the Bill, either by allies of the federal government (MORENA, PV and PT) or by the opposition (PRI, PAN, PRD and MC). The third and final scenario is that the Bill is rejected by the opposition and, therefore, the so-called qualified majority

State of the Industry | 13

is not reached by allied parties. In this case, of course, the

Power Industry Landscape in Mexico for 2022 Claudio Rodríguez Partner | Holland & Knight

constitutional articles as amended by the Energy Reform of 2013, and which is the framework in force today, will prevail. This scenario however, is not a happy one, because we foresee that the administrative paralysis, the rejection of new permits, licenses and authorizations by all authorities in the power industry in Mexico (CRE, CENACE, SENER) will simply continue. CFE simply has no financial capacity to satisfy Mexico’s power demand growth. If Mexico is intended to be a foreign investment-friendly country for new industries, a reliable, economic and constant power service is needed. On the other hand, given the structure of CFE, as the one and only buyer of privately produced power, the acquisition rules are contrary to the constitutional standards relating to public procurement (expressly stated as it is), meaning that even if power production is allowed, the process will be opaque and corrupt. Having said that, it is important to bear in mind that some power generation structures, such as distributed generation and isolated generation schemes are growing basically because they do not rely (in some cases) on permits and authorizations from CENACE and CRE and because, if compared with bigger developments, they are easily financed and easier to build and operate. On the other hand, agreements in the hands of private power producers, such as IPP and Power Tenders, and even some self-supply agreements, will prevail not because it is the will of the Bill, but because not doing so will technically bring the system to collapse due to negative capacity and because international arbitrations will be launched (and ultimately won) against Mexico. Indeed, aside from Bilateral Investment Treaties (BITs) in force between Mexico and several countries, Chapter 8 of the USMCA (called T-MEC in Mexico) rules the reserve made by Mexico in the hydrocarbons industry only and, therefore, the modification of the Constitution covered by such a treaty is allowed: (i) to the hydrocarbons’ constitutional framework, not the electricity one, and, (ii) in every case, it can be done only

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if does not affect other provisions of the treaty itself and the rights of Canada and the US. This fact is relevant because the Bill, as it is, is definitively neither covered nor protected by the reserve made by Mexico in USMCA as the Ministry of Energy has said several times. Time to read it.

Conference

State of the Industry | 14

Highlights

Solar DG Projects to Thrive in Mexico Enrique Garduño CEO | Skysense

Carla Ortiz Country Manager Mexico | RER Energy Group

Julian Willenbrock CEO | Enlight

Andres Friedman CEO | Solfium

Ricardo Zúñiga

urrent developments in the Mexican energy sector have fostered major opportunity for the development of distributed generation (DG) projects. Factors such as the global push for sustainability and the country’s own excellent

natural resources are key drivers of success, agreed solar industry experts, although several key challenges remain to be solved. “Mexico is in a privileged situation, with the fifth-highest solar radiation in the world. The DG industry is where we will see the biggest growth in renewable energy development. With relatively low installation costs, solar is a great, profitable investment. Solar-based DG is the future. Eventually, we will see panels on every roof across the country. The question is how to speed up this transition,” says Andres Friedman, CEO, Solfium.

Country Manager | CapWatt Mexico The industry’s traditional power production paradigm is shifting. Rather than relying solely on the traditional centralized utility system, residential and C&I customers are installing DG systems, which employ small-scale technologies to produce on-site electricity below the 0.5MW permitting threshold. Solar DG will play an important role in helping to meet these energy needs and achieving environmental goals at the same time, on the condition that DG customers pay their fair share to keep the grid operating safely and reliably, reported the American Public Power Association. The DG industry is at a crossroads, full of challenges and opportunities, says Enrique Garduño, CEO, Skysense. “Sustainability is increasingly driving company decisions. At the same time, global problems, such as the Russia-Ukraine war, encourage countries to aggressively invest in renewable energy to achieve independence in energy generation.” In 2019, Mexico surpassed the 1,000MW mark for installed DG capacity, which includes a percentage of other technologies outside of solar. By the end of 2021, the country reached 2,000MW. “It took us 12 years to reach the 1,000MW milestone and only two more to surpass the 2,000MW threshold,” says Julian Willenbrock, CEO, Enlight. The energy sector development plan PRODESEN forecasts that the current DG capacity will be doubled by 2025, he adds. Only in 1H21, 246MW of DG were installed across Mexico, involving a total 31,860 contracts. Investment has surpassed US$3.2 billion, according to CRE. Jalisco, Nuevo Leon, the State of Mexico, Chihuahua and Mexico City are the leading DG states.

The focus of the DG industry has changed throughout the years, as well. While it originally aimed for the residential segment, bigger opportunity now looms in the C&I sector. The success of Mexico’s DG is mainly driven by large C&I users, which need to understand how to tackle the benefits and risks that this type of generation project adds to their energy procurement portfolio, wrote María José Treviño, Country Manager, Acclaim Energy, for MBN. The 2,000MW of DG installed capacity represents 2 percent of Mexico’s total generation, points out Carla Ortiz, Country Manager Mexico, RER Energy Group. “Although we have grown tremendously already, the space for further development is still huge. This is just starting. The C&I sector is already growing more than the residential segment.” An example of the growing opportunity in C&I projects is that DG’s installed capacity grew in 2021 despite involving fewer contracts than in 2020, says Willenbrock. This suggests that larger, more profitable projects are constructed on average. For C&I companies, DG solar is crucial for both cost reduction and decarbonization. “Companies will lead the energy transition. Both in Mexico and globally, ESG is becoming crucial for companies. The context within Mexico is ideal for DG development. Companies can take advantage of DG’s potential when considering decarbonizing their entire value chain,” says Friedman. As the Mexican energy market grapples with legal uncertainty due to the federal administration’s energy reform proposal, end users favor the unregulated and therefore de-risked DG industry. “The Mexican energy sector is living one of its worst times in terms of energy regulation. However, this problem is boosting DG, which will be one of the fastest-growing industries. Combining DG with other technologies, such as storage, could be the step toward bigger projects,” says Ricardo Zúñiga, Country Manager, CapWatt Mexico. DG Industry Challenges Although DG resources offer several benefits, they also involve challenges regarding operations, financing, engineering and sales, agree experts. These include external factors, such as costs of components and solar panels. Securing supply availability at both the best price and quality is challenging, says Willenbrock. “It is important to inform the client how our business is impacted by different global trends. Agility in closing deals is of the essence.” A main challenge within Mexico is talent, he adds. “PV systems are not the same for residential use as they are for C&I. The engineering and technical expertise required is different and difficult to find.”

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State of the Industry | 16

Move From Contentious Reform to Compromise Remains Possible The government’s efforts to reform the energy sector have reached the constitutional level. As the campaign is coming to an end, everything still remains to be decided. Signs of the government’s willingness to compromise, however, have started to emerge. Now that 2021’s Electric Industry Law (LIE) bill has been reactivated but not deemed perfectly contitutional, Mexico’s private industry could benefit from a newly emerging middle ground. “The energy sector needs the modifications that can be achieved through the highest legislative level: a constitutional reform,” says Manuel Rodríguez, President of the Energy Commission in the Chamber of Deputies and one of the architects of this new electricity initiative. NGOs, think tanks and business associations have shown their concern regarding the reform, its impact on the investment climate and Mexico’s ability to reach essential climate targets. Recently, Mexico received several high-profile visits from US officials, including Secretary of Energy Jennifer Granholm, and Climate Envoy John Kerry. The way the bill would actually be implemented is anyone’s guess, though the contents of the reform are far-reaching. Among its core tenets are the idea that electricity generation would be considered a strategic activity, reserved for the public sector only. CFE and the Ministry of Energy would absorb all responsibilities regarding supply, planning and control of the sector, including permitting. The state utility would gain a fixed market cap of 54 percent of power produced. This leaves a 46 percent cap for the private sector, although the reform’s first proposal did appear to aim to cancel all private generation contracts at the same time. If the bill were to pass as it stands, it would cause a wealth of legal issues, warn experts. “The bill is so incoherent, illogical and impractical that, basically, it would lead to a paralysis of the power industry in Mexico,” wrote Claudio Rodríguez, Partner, Holland & Knight, for MBN. In the government’s eyes, the sweeping changes would set up the country’s regulation to ensure CFE’s rescue, eliminating what it sees as shady business practices and corruption that arrived with the privatization of the once-public industry. Furthermore, it would allow Mexico to reach its desired energy self-sufficiency and boost its sovereign position. “We want the proposal to benefit all Mexicans. We seek to guarantee access to energy, which is a human right, and to help the federal economy with lower energy tariffs that help companies be more competitive,” says Rodríguez. For the private sector, where many say they see no evidence of shady business practices and would welcome a stronger CFE, the reform poses several key risks. Many point toward the various climate commitments that both the public and private sectors have made. “If we do not produce clean energy in Mexico, then we will fail in the fight against climate change; we could face tariffs and quotas on our products. We will lose market competitiveness,” said Alberto de la Fuente, President, Executive Council of Global Enterprises (CEEG), during the Open Parliament discussion forums regarding the electricity bill.

State of the Industry | 17

Willingness to Compromise Following years of rigid rhetoric from public and private actors, the two extremes of the debate have been clearly laid out. The government alleges that private industry is prone to corruption, signing leonine contracts and enabling the ransacking of Mexico’s energy resources. Meanwhile, the private sector argues that the government merely aims to expropriate energy assets and destroy any progress made to combat climate change by ignoring environmental science and betting fully on outdated fossil fuelfired power plants. Yet, as the Open Parliament discussions evolved, a middle ground began to emerge. Now that Mexico’s Supreme Court reactivated the LIE, a CFE priority in the dispatch and other key parts of the constitutional reform are back on the tabkle, though new amparos could still remove them once again. Yet, rather than seeing this reactivation as purely detrimental, it could also be perceived as a new bridge toward compromise. Hans Kohlsdorf, Co-Founder, Energy To Market, is an outspoken supporter of a constructive approach. “I understand that the media and a good part of the energy industry, me included, are absolutely opposed to the radical modifications to the Constitution that have been presented to Congress. Yet, I sincerely hope that we will urgently try to come up with creative solutions to the real problems in the energy sector,” he wrote for MBN bofore the Supreme Court’s deicision was issued. Kohlsdorf says there are many issues that can be improved upon: government grievances related to the pre-2014 Energy Reform legacy market, as well as the lack of adequate payment for transmission and backup could, and should, be remedied. In fact, the private sector would gain from these improvements, he says. Mexico’s public sector also appears increasingly willing to leave its trenches: “We learned that, unfortunately, in matters as sensitive as energy, interests are broad. Private initiatives and the government have different visions but when there is willingness to listen to one another, bridges can be built that lead to dialogue and agreements,” says Rodríguez. One clear motivator would be the ruling coalition’s lack of a supermajority. As such, it would need to find common ground with opposition parties to vote through a constitutional reform. Rodríguez already discussed how the coalition is open to change the bill, such as in the case of independent regulators CRE and CNH: “In Mexico, the plan is for these two organizations to return to a central administration but if that point blocks the advancement of the reform, it will likely be reconsidered. Their return to a central administration is controversial and will be thoroughly discussed. If the final decision is to leave them as autonomous organisms, then that will happen.” Other media have begun noticing further openings in the previously impermeable government discourse, a major success of the Open Parliament, according to Kohlsdorf. A compromise means both sides of the arguments lose ground. For the government, it means that its a dilluted vision. For private companies, opportunity within a new status quo would still be a far cry from the 2018 reality. Nevertheless, industry experts agree that the current regulatory uncertainty is undermining progress for all. “We foresee that the administrative paralysis, the rejection of new permits, licenses and authorizations by all authorities in the power industry in Mexico will simply continue,” emphasizes Rodríguez. Read the complete article More about this topic

Despite the entrenched standpoints, both sides could win if a suitable compromise is reached. The tenets of the more forgiving LIE may provide the ideal starting point.

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Q: How has Galt’s portfolio evolved during an uncommon year for the Mexican market? A: During the COVID-19 pandemic, the number of corporate clients that have become more environmentally conscious and are now looking at renewables as a way to reduce their carbon footprint has grown. Because Mexico’s energy market is characterized by volatility, red tape and bureaucracy, large corporations are increasingly seeing distributed solar as the only viable and marketsafe option for them to cut carbon emissions. This realization has allowed us to quote over 10 times more projects than we have had in previous years, especially in C&l solar. In 2020, we had the highest deployment of financial projects, cranking out what we had estimated for 18 months in six months’ time. However, every time there is a COVID-19 wave, companies backslide into a conservative mode of operations and this has delayed various projects. Moreover, the confluence of these two issues has been further exacerbated by certain media actors who have attempted to frame the federal administration as antirenewables, which is not the case. Therefore, although there is incredible interest and demand, the market environment has made long-term commitments difficult. Q: There has been a recent uptick in people looking to invest in green financing. Has Galt Energy found it easier

José Zambrano

to attract funds necessary to deploy more projects? A: Historically, we relied on national funding but due to the volatility the peso has experienced in the last eight years, these

Director General | Galt Energy

funds have dried up. The limited amount that exists is being funneled to very safe alternatives, triple-A companies and projects with very high returns. On top of this, we have seen lenders raise their threshold on expected returns based on the scarcity of available capital within the market, which has forced us to look

Galt: Pivoting to Survive

elsewhere. Thankfully, the global energy transition has generated a great deal of disposable capital, mainly from the US. In contrast to Mexico, the US has a nexus of significantly cheaper capital that investors want to deploy and at low-risk-adjusted returns. The benefits are clear and we are now working on transitioning into US-based funding. Q: How have you adapted your solutions to unfamiliar industries? A: The COVID-19 pandemic has forced us to expand our targeting into different industries. These were selected based on how they were impacted and how they performed during the pandemic. Although solar can be used as a defense mechanism by improving a company’s bottom line with savings between 20 and 30 percent with our PPA, we have noticed that companies tend to employ more projects during market demand peaks when they feel most financially confident. For example, we have done several projects for cardboard manufacturing factories that experienced a boom driven by the sudden upswing in e-commerce. We have also worked with companies in the steel industry that have fared well during the pandemic due to high steel prices. This is in contrast to

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the few projects we have completed for a few hospitals and hotels that have been severely impacted by the pandemic and stand to benefit the most from reducing running costs. Based on this observation, we have concentrated our efforts on high performing industries and it has definitely played in our favor.

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Q: How has Bright developed its operations over the past year in the energy sector? A: The pandemic has accelerated the transformation of our customer base to one that is willing to build trust digitally. This move has allowed us to make our sales process much more efficient, resulting in cost savings that we can then pass on to our clients, while attracting more customers. It is a domino effect. Clients are now comfortable meeting representatives over a video call and submitting documents online because they see the value in the savings we provide them by doing it this way. We have been able to nearly double our residential portfolio over the past year. Q: How is Bright working to expand its portfolio outside of its strong residential experience? A: A year ago, we adapted our offering to the commercial and industrial (C&I) segment, which consumes much more electricity than our initial market of high-end homes. Since this move, we have been experiencing explosive growth. There are also challenges in this new segment because it is a new customer base with different underwriting processes. Nevertheless, we are working to provide the same frictionless, highly automated customer experience. For C&I, the solution itself is not so dissimilar. We still use the same inverters for C&I clients and we can secure preferential pricing and

Jonah Greenberger

achieve the cost-efficiency our clients require. However, the sales cycle differs because there are many more decision-makers and the design aspects also vary because of the many types of roofs available. As a result, our process for the design of installations

Co-Founder | Bright

had to change. In residential solar, we could remotely remove the friction in the design process. Q: How are you seeing demand for storage evolve in Mexico’s solar market?

Removing Friction in Solar Installation in the C&I Environment

A: Customers want to pay for storage but the regulatory framework to really promote storage does not exist in Mexico. This is holding back its adoption in the C&I environment. After the blackouts of early 2021, consumers are valuing reliability more than they did initially and they are willing to pay for it as well. We have done some pilots with our partners in Northern Mexico and we think that storage will take off in the next five years. Furthermore, storage has a different value proposition that generally accrues to the benefits utilities want to achieve but the advantages are less diverse for residential and C&I users. If they are to benefit, frequency regulation and other ancillary services should be valued properly. Storage in the right locations can also alleviate transmission and distribution issues so that new lines can be constructed approximately five years later than needed. Small energy users do not really benefit from this; however, utilities do. Q: What is the company doing to further improve its models and processes through standardization? A: Bright works to standardize its models as much as possible

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so that we can then pass on the savings and efficiency to the customer. We have found that customers truly value savings and a frictionless process. This is the same for residential and C&I endusers. The more we can standardize and invest in software for our product, the better our value proposition is.

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Q: Why should companies pick Tecsolar over the competition? A: As our core business, we offer flexible financing so that small businesses can install solar panels and produce their own power via distributed generation (DG). This flexible financing is about giving value to the customer and providing them with energy savings, requiring no investment at all. At the end of the term, customers will have the infrastructure needed that will save them money for years to come. We focus on the needs of small businesses and can adapt to them, which gives us an extra edge over the competition. The system is simple: businesses can pay for the residual value of the photovoltaic solar system at any point in time. Every month, they pay for the use of the equipment. They are paying off this value. Our payment scheme is a little different from the competition because clients get a discount from CFE tariffs, through a micro-PPA. The difference with regular PPAs is that customers get to own the equipment at the end of the term. Furthermore, Tecsolar puts itself in charge of these savings, paying the difference itself if the system does not generate enough savings compared to CFE prices. Our clients can be found within a variety of C&I environments, ranging from mom-and-pop stores to the food producing industry. Q: How does Tecsolar add value through

Mauricio Chapa

monitoring and maintenance? A: Everything starts with monitoring. Companies need to continuously monitor the performance of these systems

Managing Director | Tecsolar

to obtain the best results. Tecsolar works across Mexico, a country that has diverse climate conditions. For instance, the equipment we install in Yucatan is not the same as that which we install in Monterrey. Monitoring is, therefore, of the essence, as well as having people on call who can rapidly

Solar-Based DG Is and Will Be an Easy Decision

remedy problems. Our partners help us add value in this regard. In the end, nothing is more expensive than a system that does not produce optimally, both for us and for the customer. To make monitoring easier, we choose to work with central inverters, mostly using Huawei’s platform. While it is true that string inverters are better for fine-tuning, the benefits of clear monitoring outweigh this customization on DG systems. Statistically, central inverters are less likely to fail. This makes sense: more equipment means more issues can pop up. Q: How does your experience working for an important offtaker like Kellogg’s help you to provide optimal solutions for clients? A: Before I moved to renewable energy, I worked for 10 years in the operations department of Kellogg’s. During that time, I came to have a good macro view of the company, so when I moved to the renewable energy sector and eventually went on to sell PPAs, I could see the value of this experience. I understand how difficult it is for companies to make the best

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choice in how to address their energy supply. There are many options available, which can be daunting for people who are not experts in the matter. Since I have worked on the other side, it is easier to explain all the possibilities to potential clients and to highlight which solution is the best fit for them.

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Q: How can Enlight add value to commercial and industrial players using energy storage? A: We try to add value through all of storage’s capabilities but we also try to look out for a continuity in operations for our customers. First, our storage works as a backup system. We scale the dimensions of the storage to the necessities of clients, matching their investment capabilities. Enlight addresses each project differently based on these characteristics. Storage also adds value by managing electricity use through load shifting and peak shaving. We charge the batteries with solar energy during the day and program them to discharge during peak tariff hours. We know how utilities calculate electricity bills, so we use this information to make our systems react accordingly, lowering the energy costs of our customers. We have also worked on projects with Sungrow and Dynapower. We often use the software that the manufacturer provides but we continue to develop our proprietary software, called Apollo, to tackle storage as well. In general, we use the most convenient tools to match each solution. Q: How do you assess the noise surrounding the energy reform? A: Considering the government’s discourse, there were only two weeks in 2021 where it did not directly address the energy

Julian Willenbrock

sector, causing a great deal of uncertainty. We had to constantly explain the situation Mexico was experiencing to our investors and customers. Many potential end users decided to wait and this affects companies like Enlight. The government’s electricity

Co-Founder and CEO | Enlight

reform proposal from late 2021 has caused even more doubts. We had to do a great deal of lobbying and work with associations to explain in detail that DG is not the focus of this bill. With the US energy secretary and the ambassador to Mexico voicing their concerns about this bill, there is now international pressure

Uncertainty May Push C&I Players to No-Brainer Solar Solution

related to this particular reform. It is still not clear what will happen to DG, although the government has shown signs it favors DG. Minister of Energy Rocío Nahle said she supports this form of private energy generation and state utility CFE has echoed her sentiments. Mexico City, for example, declared itself a “solar city” and is looking to install 18MW of solar on its Central Market. Nevertheless, it is difficult to separate the actual policy direction from political speeches, especially those aimed at investors. Q: How can this environment become an opportunity for companies such as Enlight? A: Many companies are seeing how the government tackles big power producers and are afraid that contracts and deals are at risk. For this reason, they are turning to other options, such as on-site solar. DG can help companies meet clean energy commitments just as well, but companies feel like they have no more options left. We have seen a great deal of interest from big companies that prior to the current situation would have looked at utility scale PPAs but are now looking to make use of their premises to build energy projects on site. In addition, the government has invested little in grid infrastructure.

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This destabilizes the grid, so clients look for greater energy security. Solar energy and storage can help provide security while at the same time delivering clean energy and cutting costs on the electricity bill. At the risk of sounding overly positive, DG is now a major opportunity.

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Q: What have been the main achievements for the company in 2021 and what are your expectations in terms of demand for 2022? A: Last year represented a positive shift for the company. CITRUS was fully dedicated to offering industrial solar heat solutions and industrial process equipment for companies in Mexico’s industrial sector. In 2021, we wanted to take a technological leap so we could tackle the clean energy needs of our clients more efficiently and cost-effectively. We signed a framework agreement with the Sweden-based listed company Absolicon, for the acquisition of its production line of the T160 Solar collector, which will be installed in Mexico. Absolicon has been designing proven solutions that generate steam and hot water for more than 20 years and, just like CITRUS, it is expanding globally. This makes our cooperation very beneficial. Our goal is to manufacture and install the T160 production line shortly. We are planning to develop this business case further with strategic investors. This strategy will serve as the basis for exponential growth over the next two years. We have received a great deal of interest from major industrial companies wanting to adopt Absolicon’s unique solar collector technology solution, which offers an overwhelming 76 percent efficiency in transforming solar radiation to steam to power an industrial process. The

Katia Bernal

pandemic has had an adverse impact on most market but are showing signs of stabilization. Going forward, we expect many companies to bet on efficient processes and secure energy. For this reason, we have a positive outlook on projected

CEO | CITRUS

future growth. Q: What are the main challenges companies face when becoming more efficient in their general energy use?

CITRUS’ Ecosystem Could Completely Decarbonize Industry

A: Industrial paradigms are the issue. It is not a matter of technology or strategy because energy efficiency measures and renewable energy solutions are out there and have proven their worth. Nevertheless, it is more about changing the way companies think about their internal processes. Certain companies have spent decades doing what they do. Hence, adopting to new ways of operating is difficult, especially if their current approach works. Today, industrial companies have sustainability and cost-efficiency goals, which are beginning to open space for new approaches. Awareness regarding sustainability and its benefits is spreading rapidly. It has been our experience that some companies are very open to change, whereas others need to be guided through the process with plenty of examples and explanations. Education is an important part of CITRUS’ work for this reason. For instance, photovoltaic solar and wind energy are much more established concepts than solar heat solutions. This means we sometimes face barriers even when our solutions can provide clear benefits. Generating heat still relies on fossil fuels, even when electricity supply is fully renewable. This makes solar heating an important part of the decarbonization puzzle. Nevertheless, at the end of the day, it is all about the business case. The solution needs to benefit economically as well. For example, we can sell thermal solar energy as a service at a fixed price over 15 years, using a heat purchase agreement. This means that no costly upfront investments from our

customers are required, which enables the Mexican industry to benefit from our solutions. Q: Where can CITRUS add value by integrating its solar heat-based technology with other solutions to fully decarbonize these industrial processes? A: CITRUS’ approach has always been to cater to our client’s needs. For industrial clients, we focus on two things: lowering their contaminating emissions and having them become more competitive by reducing operational costs. Part of this cost is what companies pay for electricity or gas. We approach these challenges using a holistic view. In some cases, it is necessary to synchronize our thermal solar solution with technology based on alternative energy sources, such as renewable biofuels. Using such an approach can fully decarbonize a client’s operations. We are aware that to achieve a full energy transition, we need more than one technology. Q: How does CITRUS’ solutions work to address the industrial production chain? A: CITRUS’ Ecosystem of Solutions was designed to provide a great deal of independence and energy security to industrial companies. The system begins by optimizing energy use, employing what we call a Check-Up. Here, we help people on the technical and electrical front to implement concrete and quick energy efficiency measures aimed at saving costs with minimal investment. The next step for companies is to generate their own power, either thermal or electric. Afterward, the CITRUS Ecosystem includes energy storage technology. This is different from battery storage. Here, we use the TES pod technology produced by the Swedish listed company Azelio, which allows heat to be converted into electricity and more heat whenever and wherever it is needed in the process. In addition, it serves as a backup for the intermittency that can be experienced with solar solutions on a cloudy day. Once this issue has been fully addressed, companies can look toward a selection for specialized, highly efficient equipment that can now be powered by renewable energy at all hours of the day. The core value of our proposition is the following: to offer industrial companies a production line that operates without CO2 emissions, while providing a stable and secure operation. All with a great amount of cost savings. Many companies look at PV solar exclusively, which is a great sign because it shows sustainability concerns are growing. CITRUS knows how to translate its wider ecosystem to cater to the specific needs and heat requirements of industrial companies.

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Energy Reform, Uncertainty Are Damaging Investment in Mexico 03/10/2022

Democratize CFE if It Is to Lead the Energy Transition Leonardo Beltrán Distinguished Visiting Fellow | Columbia University

Tracing the Destination of Mexico’s Energy Policy 03/10/2022

Key Power Producers Share Insight on Global Production Trends 03/09/2022

Energy Reform Halts Billions of Dollars in New Investment 03/22/2022

Matching Recent Growth With a More Promising Solar Future 03/08/2022

The Case for a Constitutional Energy Reform 03/09/2022

If Not for the Air, Then for the Water Pablo Rivero Country Manager | ForeFront Power

Electricity Tariffs: Modernization or Constitutional Changes? Hans Joachim Kohlsdorf Co-Founder | Energy To Market

A Turbulent 2021 Sets the Stage for the Critical Year to Come 12/29/2021

Engineering, Procurement & Construction Just as in any energy project, a solar power plant needs to be engineered first. Components need to be procured next, after which technology is installed and the power plant is constructed. Unlike other technologies, solar faces a unique set of challenges regarding EPC developments. This includes international trends, such as rising supply chain costs, but also dealing with rooftop space issues, as well as Mexico’s unique and varied climate. Boosted by the growing industry, Mexico’s players are growing their expertise in developing solar systems of any size, including residential, commercial, industrial and utilityscale power plants. EPC activities form the heart of this chapter, as leading Mexican executives from major companies share their insights on solar EPC and more.

Engineering, Procurement & Construction

Analysis What Routes Could Evade Utility Solar’s Development Blockade?

View From the Top Jorge Mediavilla | Director General Mexico | Ingeteam

View From the Top Juan Ávila | CEO | Top Energy

View From the Top Armando Muñoz | Commercial Director Mexico | Canadian Solar

View From the Top Manuel Garay | Mexico Country Managing Director | Power Electronics

View From the Top Oscar Scolari | CEO | Rengen Energy Solution

Analysis Supply Chain Disruption Impacts Mexico’s Solar Opportunities

Expert Contributor Pablo Rivero | Country Manager | ForeFront Power

View From the Top Magdiel Camargo | Director General | NRG Ingeniería

View From the Top Christof Kling | Managing Director Mexico | Krannich Solar

View From the Top Roberto Moreno | General Manager Renewable Energy Projects | Solar Power Group

View From the Top Carla Ortiz | Country Manager | RER Energy Solutions

Conference Highlights Favoring a Long-Term Vision for Solar Procurement

Content Links

Engineering, Procurement & Construction | 28

What Routes Could Evade Utility Solar’s Development Blockade? When the López Obrador administration took office, the outlook on private utility-scale solar energy developments shifted to the negative. With a new reform underway, the possibility to finance, permit and construct a successful project might look further away than ever. Still, by focusing on public projects, good locations and advanced technology, some still see opportunity. For years following the 2014 Energy Reform, developing largescale solar projects was relatively straightforward. The technology to deliver record-low levelized costs (LCOE) of energy has only gotten better over the years. Mexico is quite literally sundrenched: its solar radiation, especially in the north and along the western coast, is world-class. Boosted by the certainty of the publicly backed long-term auctions, solar projects were safe investments. For the global industry, the supply chain issues the COVID-19 pandemic brought about are becoming problematic. However, in Mexico, the government’s barriers against private renewable energy development play a much greater role, acknowledge industry insiders. Without the regulatory certainty and market stability required to warrant million-dollar investments, the development drive has almost disappeared. “The challenge is to present viable projects to interested parties that are not alarmed by this transitory administrative direction,” says Oscar Scolari, CEO, Rengen Energy Solutions. Companies could look to government-backed projects to find business in EPC. Many see CFE as a world-class company but it is a new player in the renewable energy environment. Because of this, CFE’s landmark 1,000MW Puerto Peñasco solar project could see significant private sector participation. “The investment of US$1.6 billion in Puerto Peñasco contributed to Mexico having the most important solar power plant in Latin America and the seventh globally. The investment shows our commitment to integrate more renewable energy sources,” says Rodríguez. CFE is looking into more solar energy developments, such as an 18MW power plant to be installed on top of Mexico’s Central Market. “We welcome the state company’s investment in renewable energy and hope to see its continued commitment to the adoption of these technologies,” says Scolari. Scolari’s Rengen has two projects with permits pending, both commissioned by CFE: a 180MW solar project in Chihuahua and an estimated 40MW project in the Yucatan peninsula. For developers, the situation is a little more complicated but some still see space for new projects, says Héctor García, CoFounder and Managing Director, Kolya. The company aims to develop merchant projects to cater to the Wholesale Electricity Market (WEM), so signing power purchase agreements (PPAs) is a possibility, as well. The company has looked to develop projects in the State of Mexico, close to Mexico City’s uncongested energygeneration hubs. The stability of local industry could then become Read the complete article More about this topic

a driver for business. “This avoids congestion in transmission lines and substations, which is a major issue for energy traveling from north to south, which has even created blackouts,” explains García.

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Q: How has Ingeteam’s operation grown and changed over the past year? A: Despite pandemic challenges, we performed well and executed some landmark projects in Mexico last year, which included providing 48 power stations for Iberdrola’s Cuyoaco solar project. Despite our Spanish manufacturing plant experiencing a temporary halt in operations, we delivered and developed solutions on time. In the area of operations and maintenance (O&M) we expanded our experience with companies we had worked with in the past. For instance, Ingeteam signed a contract with Enel for four projects. At the end of 2020, we were pleased to sign a contract to provide control and protection systems for the state utility CFE. This was an important historical achievement for the company in Mexico. It was an incredibly challenging year for everyone but for the company, we can safely say we did quite well. Q: How has the company adapted to the new Labor Reform? A: The reform took us and many others by surprise. It was difficult to assess what the effects of the Labor Reform would be and how we should implement it. Nevertheless, the company responded nimbly, especially around subcontracting. Ingeteam continued to provide its specialized services and that gave our clients peace of mind. The company itself had few issues in adapting, since we do not do any major insourcing or outsourcing. However, it did affect

Jorge Mediavilla

some of our clients in their ability to outsource certain activities. Overall, it has provided Ingeteam with the possibility to gain more contracts since other companies were not as agile in their adaptation processes. The reform benefits employees at the end

Director General Mexico | Ingeteam

of the day, so we hope it improves the quality of life and working conditions for Mexico’s labor force. Q: How would you assess the proposal to reform the energy sector and how could it affect Ingeteam’s business if voted through?

Public Sector Proximity Provides Positive Outlook

A: It is still early when it comes to the reform proposal. It is not yet clear if it will pass through Congress. What is clear is that the proposal could affect us through our clients in the private sector because it generates more uncertainty. Many projects and investments have been stalled. The developments here are carefully monitored by companies like ours. People do not yet know what the implications will be, especially for private renewable energy companies. Despite this uncertainty, our contracts with the public sector mean that we are better positioned. Nevertheless, we are watching these developments closely. Q: What are the main differentiators that helped the company get this major contract with CFE for protection, control and mediation systems? A: It has been challenging getting close to CFE because the utility historically chooses its habitual providers. However, in the past, Ingeteam has worked to change CFE’s mind about the value that our company’s products can provide. The fact that our products have been approved by the Laboratory of Equipment and Materials

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Testing (LAPEM) was an important deciding factor. The project itself was difficult too. For example, we had to deliver 100 pieces of equipment in a short amount of time. After we delivered them, CFE had a positive opinion about us and our products, as well as how we engage with our clients and optimize our processes.

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Q: How has DG grown in the face of a broad range of challenges? A: The energy industry has faced many challenges since the current administration began. If you add the COVID-19 pandemic and its supply chain issues to the mix, this has created a more adverse environment in which companies need to thrive. Despite the many challenges, distributed generation (DG) experienced steady growth. Despite all the changes the sector went through and an added liquidity crunch, the industry continued to thrive. This should be seen as a success story for the industry. Furthermore, customers really like to be in power. No matter the challenges, the appetite for engineering procurement and construction (EPC) or power purchase agreement (PPA)-based DG projects has increased in the past few years. Q: What have been Top Energy’s main achievements within this market environment? A: We have become one of the top players in this industry over the past eight years. The company has installed more than 25 MW in 2021 alone for example. Most of our growth comes from the industry, but also through team’s hard work and passion, twhich has allowed us to develop special projects. For instance, in 2020 we installed a 1.5MW solar system for a major slaughterhouse in Aguascalientes, placed on top of the location’s truck port, with a height of more than 15 meters, making it the highest installation in

Juan Ávila

the continent. Q: How does Top Energy differentiate its business in the increasingly competitive DG solar market?

CEO | Top Energy

A: We have developed projects in other countries and have branches elsewhere. For example, our procurement and import arm is located in the US, where we concentrate our global logistics. We have shipped steel structures to Central America. This grants

Top Energy Brings Mix of Speed, Experience to DG Solar

us a wider experience in the international energy sector and the ability to offer more competitive prices. Nevertheless, we do not base our development on price and experience alone. In fact, our speed is our greatest asset. We are a company that can mount a 0.5MW solar system in just two weeks with a team of eight to 10 people. It allows us to be competitive, even though we offer some of the highest salaries for DG solar technicians and high wages in general. Nevertheless, Top Energy is not especially expensive. Moreover, if a customer finances a project with a credit or lease agreement, they start making payments one month after they receive the money. If your EPC supplier takes three or four months, this greatly increases the cost because the customer will be paying both the lender and the grid at the same time. Another benefit is the company’s established position in the market: we have all the necessary certifications and can comply with changes in the Labor Law much easier than a startup would. In addition, Top Energy is unique because it offers operations and maintenance (O&M) for wind and solar energy in DG and utility scale. We have partnered with SolarCleano, a company that provides solar panel cleaning robots, as well as with Aerones, a company that allows us to support wind farms with conductivity

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tests and blade maintenance via technology. With a team of three people, we can cater to two to three power producers a day, a job that could take a week and a half with manual labor. This quick deployment of tech and people allows us to be more competitive compared to other companies.

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Q: What value does Canadian Solar add to solar projects? A: Canadian Solar has two business units. One is an energy group, which develops projects around the world and then sells them to investors, including those in Mexico. The energy group does not have the obligation to buy solar panels from us. My business group focuses on module systems and services. We provide our technology, quality and great track record to various developers in other regions. The quality of our products is exceptional. All our products are backed up by the latest innovations. We also have a local team in Mexico, which understands the market profoundly and provides local players for a much closer connection. We have been in Mexico since 2014, so we have experience working in segments such as utility scale and distributed generation (DG). One of our differentiators is that we have a varied customer base, plus a good network of distributors, engineers and procurement and construction (EPC) companies. Q: How do you add technological value to your solar panels? A: We were among the first to increase the output of silicon solar cell technologies. Only few companies are switching to the 655-665W modules. We now base our monofacial and bifacial modules on 210mm cells, a new trend in cell sizing. Another innovation comes from silicon-based heterojunction solar cells (Si-HJT), which can help modules reach record levels of

Armando Muñoz

efficiency. This is expected to arrive in the market in late 2022. HJT cells will certainly add value soon. Q: How are policy developments changing the

Commercial Director Mexico | Canadian Solar

environment for DG and Canadian Solar’s approach? A: Commercial and industrial (C&I) customers in the DG environment are an important part of our client base, as well as residential users. We reach these users through local distributors.

High-Level Innovation Drives Mission to Increase Market Share

C&I clients are approached through EPCs, creating a partnership between the EPC, suppliers and manufacturers such as ourselves. We believe that DG will continue to grow despite uncertainties in the market. As of June 2021, Mexico had around 1.7GW of DG installed. By 2024, CRE expects growth to continue and double in size. The market is growing 30 to 40 percent a year. Currently, DG’s threshold to remain unregulated stands at 0.5MW. An initiative seeks to boost it to 1MW. This discussion has been taking place in Congress for about a year. If we can overcome this hurdle, DG would gain more traction. Q: How would you assess the possibility of manufacturing in Mexico? A: Canadian Solar has facilities in China, Vietnam, Thailand and Canada. We used to have a minor facility in Brazil, aimed at the local market. All our products here come from China. At one point, we held discussions to move some manufacturing to Mexico. After doing the analysis, the company decided against it, at least in the near term. In regard to logistics costs, the pandemic has taught us that we need to decentralize operations across the world. Many industries depend on China and we have

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seen issues arise in terms of scarcity and the cost of logistics. This is a good time to begin decentralizing. Mexico has a huge market and has trade agreements with the US and Canada. There are many beneficial opportunities, although its differences with China could be a challenge at first.

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from the

Q: Why is Mexico an interesting market for Power Electronics? A: We have identified an alignment between our technologies and the solutions that the Mexican energy market needs. These solutions are needed despite the slowdown in the renewable energy sector, which we expect will change soon. It will prove to be unsustainable for Mexico to continue walking in the opposite direction amid all the wonderful developments and innovations taking place in energy markets all over the world as the energy transition continues, particularly in the field of energy storage. The energy storage situation in Mexico requires a great deal of attention and work. We need to see the public and private sectors coordinate a more aggressive frontal assault to address the country’s energy storage needs through the initiation of many more projects. Between 2017 and 2019, we installed 2GW of solar generation capacity in Mexico but no storage capacity. This is creating imbalances in the national grid and energy storage is essential to the correct functioning of that grid. Q: How are you adapting its leading inverter solutions to Mexico? A: As a company, we are focused on working with large utility clients, so we cannot get involved in smaller projects or distributed generation. This has somewhat complicated our involvement in the Mexican solar market. Thankfully, we have adapted our structure to compensate for this, acquiring additional business in Mexico

Manuel Garay

through our mobility solutions division, which is taking advantage of the increase in demand for electric vehicle charging stations. Our industrial division in Mexico, through which we are able to service the country’s mining and oil sectors, is very active. This

Mexico Country Managing Director | Power Electronics

includes activity in the artificial lift subsector within shallow water oil and gas operations in Mexico’s globally renowned Campeche Basin. Energy quality and regulatory compliance have also been a significant sector of business for us in Mexico. We have many equipment solutions to offer in that category. All of this has allowed

Renewable Energy Development Leads to Energy Storage Overhaul

us to successfully weather the storm that Mexico’s renewable energy sector is going through, along with its consequential halting of solar energy projects, particularly the larger ones where we are best suited to participate. We will continue to bet on the future of Mexico’s renewable energy development because the magnitude of the potential is simply undeniable. Q: What is your forecast for solar growth in Mexico? A: It is quite hard at the moment to predict what the pace of change will be. However, the energy transition is a globalized process and it is unstoppable. The current federal administration has no chance of standing in its way or even slowing it down. By 2050, the US is expecting to generate between 50 and 60 percent of its energy through renewable sources. By the mere virtue of being its neighbor, Mexico undoubtedly will be influenced by these overriding trends regardless of its current political bent toward hydrocarbon resources. The energy development patterns of the US and Mexico have a historical tendency of mirroring each other. Investment will be detonated in this way. It is simply inevitable. Investment in generation will also detonate investment in storage because electrical grids

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need this type of infrastructure investment to survive the growth that is necessary for increasing energy demand. We are certain that within the next two to three years, Mexico will experience a revolution in its energy storage projects, investments and technologies and we plan to be a part of that revolution.

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from the

Q: How is the company balancing its energy development projects in the face of regulatory volatility? A: Although there have not been any regulatory changes, as determined by the courts, the energy sector remains paralyzed by risk-averse actors. Also, the Regulatory Energy Commission (CRE) has approved only a scarce number of energy generation permits since last year. From personal experience, I can tell you that our petitions have been met with resistance. This behavior has adversely impacted the amplification of two projects that cannot proceed without CRE approval. According to the Association of Industrial Parks, the demand is there but neither Rengen nor other private energy producers can attempt to meet this demand without the proper permitting; nevertheless, it remains an important opportunity to us. Q: How is the company progressing with CFEtendered combined cycle projects? A: We are working with CFE and the individual technologists who will be operating these cogeneration projects that the state company will be premiering. CFE will soon decide which ambitious projects it will be pursuing, choosing from plants in Valladolid, Merida, Tuxpan, San Luis Rio Colorado and two from Baja California. These six projects represent the potential generation of 3,600MW to 4,000MW that CFE is looking to complete. Moreover,

Oscar Scolari

there are 10 dams that the CFE is looking to modernize and thereby increase the efficiency and output of these hydroelectric plants. With these projects in mind, our goal is to aid and continue growing alongside our state partners of 43 years.

CEO | Rengen Energy Solution

Q: Does Rengen think it will be asked to participate in CFE’s renewable energy generation projects? A: Yes, in fact the two projects for which we have pending permits

Rengen Hopeful as EPC Demand Grows

are solar energy generation projects commissioned by CFE. We are to construct one of the largest solar farms in the country, in Chihuahua. The project is expected to generate 180MW of energy. The latter, smaller project, is to be built in Merida, Yucatan, and is expected to generate an estimated 40MW. We welcome the state company’s investment in renewable energy and hope to see its continued commitment to the adoption of these technologies. Q: How does Rengen add value to the operations and maintenance of its energy projects? A: Rengen adds a considerable amount of front-end value, ranging from obtaining required permitting and other processes to financing, which has become a challenge under the current regulatory climate. This does not mean there are no interested investors. Investment capital is idle, outweighing project proposals. The challenge is to present viable projects to interested parties that are not alarmed by this transitory administrative direction. Energy demand has been increasing by an average of 2.5 – 3.1 percent annually but in the past three years, not one MW has been added to the grid. Soon, these energy needs will be compounded by the added demand of completed projects like the Maya and

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Transisthmic trains or Airport Felipe Angeles, which some estimate will require 10 industrial energy generation projects. This market exigency is more than one market actor can meet on its own, thus pointing to an opportunity big enough for contractors, investors and Mexico’s state companies to coalesce and benefit from.

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Supply Chain Disruption Impacts Mexico’s Solar Opportunities EVOLUTION OF INTERCONNECTION CONTRACTS AND TOTAL INSTALLED CAPACITY OF DISTRIBUTED GENERATION IN MEXICO.

After years of progress toward making technology cost-efficient, rising logistics costs due to the global pandemic, a trade war between US and China and shortages in key materials are challenging solar’s development at a previously unseen level. As costs face an unexpected increase, the industry must find the best way to increase competitiveness for greener energy tech. Accoridng to Enrique Garduño, Co-Founder and CEO, Skysense, solar is a commodity-based sector. Core components’ costs weigh massively on the overall cost of the system and thus on its actual viability. For all the sustainability benefits renewable

TOTAL INTERCONNECTION CONTRACTS

energy can bring, their adoption is still mainly driven by simple economics. The National Renewable Energy Laboratory (NREL) documented a decade of sharply declining costs for solar systems, which hit a record low in 2020. More efficient modules, as well as cheaper hardware and inverters, made solar a no-brainer in most countries, especially those with as much sunshine as Mexico. “A significant portion of the cost declines over the past decade can be attributed to an 85 percent cost decline in module price. A decade ago, the module alone cost

14% CIPyME

86% Distributed Generation

around US$2.50/W. Now, an entire utility-scale PV system costs around US$1/W,” said NREL’s Senior Financial Analyst David Feldman last year. Once the price drop began, solar installation began to take off, reaching over 700GW in 2020 at the global level. Data from Mexican solar association ASOLMEX shows that Mexico installed around 6.5GW of this capacity. Supply chain issues are now threatening this development as the price of solar components increased following the pandemic, especially polysilicon, due to the so-called bullwhip effect. Before the pandemic, there was an oversupply of polysilicon

TOTAL INSTALLED CAPACITY (MW)

that helped to address demand when production was halted as the first lockdowns hit. As the economic reactivation advanced, demand skyrocketed but polysilicon production could not keep up. BloombergNEF expects that polysilicon will see a price surge of 29 percent in 2022. In 2023, this pricing forecast will add another whopping 57 percent increase. Cost has been a major factor in increasing solar module prices for the first time in 2021.

15.9% CIPyME

84.1% Distributed Generation

Source: CRE, AMIF, ASOLMEX, ANES, GIZ

Nevertheless, BNEF does not predict a further module price hike for solar modules and even sees potential for a small drop by the end of 2022. It furthermore reported that global solar installations added 191GW in 2021, even amid a challenging environment. In Mexico, analysts report that the slowdown in utility scale projects has moved the problem of rising material costs to the background. Larger projects require more modules, while residential, commercial and industrial projects rely more on to the cost of installation than that of the components. Still, the increase in prices is not without effects. “Raw materials are becoming scarcer, so there are fewer solar panels being produced at a much higher price. Many projects are being postponed as a result,” explained Christof Kling, Managing Director Mexico, Krannich Solar.

Industry experts do signal a different issue that has had a much larger impact: global logistics. “Since the start of the pandemic, logistics have become a nightmare,” Kling explained. Companies have had to learn how to live with cost hikes and an ongoing trade war between the US and China. Because many of the world’s foremost solar technology companies manufacture in China, the line between these two external variables get blurred somewhat. “Importing from China takes much longer and is more expensive. In 2020, the cost of shipping a container was around US$2,500. Today, that same container can cost US$16,000. This crisis will not be resolved any time soon, but when it is, prices will still be relatively high, around US$8,000,” said Roberto Moreno, General Manager Renewable Energy Projects, Solar Power Group. Kling fully agreed on these price developments, adding that prices are dropping somewhat but that the future remains uncertain. “Due to the increased level of insecurity, shipments have become riskier, too, and time frames have increased quite a bit,” Kling added. Opportunity in Logistics “In regard to logistics costs, the pandemic has taught us that we need to decentralize operations across the world,” said Muñoz about the company’s bigger focus on Mexico. “Mexico has a huge market and has trade agreements with the US and Canada. There are many beneficial opportunities, although its differences against China could be a challenge at first,” he added. Canadian Solar decided against manufacturing in Mexico but other companies do see the country as a viable hub. “Mexico is a strategic location for us because it allows the company to access the US market, which has enacted strong protection measures against Chinese companies as part of a wider trade conflict,” said Simon Zhao, President, Solarever. One issue with looking toward the Americas is an increase in costs compared to China’s cheap manufacturing capability. But this no longer an issue, argued Moreno: “Thanks to USMCA, we have gained a competitive advantage during this perfect storm of circumstances. Panels manufactured in the Americas might be more expensive because of their higher quality and cutting-edge technology but that is nothing compared to the costs of shipping and import tariffs.” Industry analysts emphasize that logistics and raw materials are likely temporary issues, though they will certainly linger for the next few years. It is unlikely that all companies will sprint to set up shop in Mexico. Nevertheless, combining the opportunity in logistics and manufacturing with the country’s potential to develop projects will only add to the possibility to grow solar further, even if supply chain costs rise.

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oday, more than 700 million people in 43 countries suffer dramatic water shortages. By 2025, 1.8 billion people will live in regions and countries with absolute shortages of water, and two-thirds of the world’s population will be under water stress.

The consequences of this will range from extreme hunger to diseases and the full extinction of all kinds of species (Other Uses and Types of Water, 2021). The debate between renewable energy and conventional energy has been long and exhausting. Efficiency versus Intermittence, clean versus pollutant, global warming, CO2, costly versus cheap, etc. Every time renewable energy wins a new battle against generation using fossil fuels, a new question mark appears. What if we take a different approach? What is the most important natural resource worldwide? And that, in fact, is disappearing faster and faster every day. I am talking about water.

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Discussions around renewable energy overtaking the energy

If Not for the Air, Then for the Water Pablo Rivero Country Manager | ForeFront Power

matrix have been disputed because of renewable energy’s lack of reliability, which can be solved with a diversified matrix of the different renewable energy sources, plus the exponential advancement in energy storage. Another argument is the cost of installing renewables against cheaper technologies, such as gas-powered facilities; however, in the last five years, we have seen that cost decrease so much that the argument falls apart by itself. Now, what if we add one more advantage, one that could be even more important than all of the others: water waste. There have been many calculations on how much water each megawatt hour of electricity generated from either coal or natural gas uses. For example, researchers from Duke University stated that water is needed in coal production for mining, cleaning and transportation, and it also plays a huge role in processing and transporting natural gas. (DeWeerdt, 2019). Furthermore, according to a new study by Finland’s LUT university, renewables consume between 1 percent and 15 percent of the water that coal and nuclear power plants use to produce 1MWh of output (Emiliano, 2019), which means that 100 percent renewables would result in 95 percent less water consumption for power generation. That is water that could then be used for more important purposes, such as agriculture, aquatic ecosystems and fighting diseases. Different studies estimate that by 2050, global demand for energy will nearly double, while water and food demand is set to increase by over 50 percent. During this stage, solar PV or wind could withdraw up to 200 times less water than a coal power plant to produce the same amount of electricity, making renewables crucial for water sustainability. Making the right decisions now to incentivize renewable energy will avoid greater damage in the future than that already estimated. Renewable energy by itself is a sea of opportunities,

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and when combined with hydration and cleaning processes, the benefits are remarkable. These can range from lower utility prices to efficient and scalable water and energy infrastructure in even the most remote and impoverished villages and towns. Clean energy has only positive implications for everyone.

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Q: What were NRG Ingeniería’s biggest challenges to expand throughout the country? A: NRG Ingeniería, conceived over 12 years ago, is an energy services company specialized in industrial energy installation. The company has grown in tandem with the energy demand in the industrial sector. Our most significant growth period took place within the last five years, following the large-scale renewable energy products that were enabled by the Energy Reform of 2013. As the energy market entered a new era, one of our first projects was with an Italian company. The project faced many challenges in Mexico, including language, cultural and capacity barriers. At the time, we were a relatively small company carrying out a 260MW project. NRG was building the plane as it was flying it, contending with unclear compliance and safety standards and refining construction methods with no projects to reference. This project was uniquely important for the company because it allowed us to grow beyond our perceived capabilities and discover new market avenues. Q: How did the company’s project for automotive company Brose come about and how will the company use this experience to build power plants for other industrial players? A: Brose is one of the first German companies to establish a

Magdiel Camargo

presence in Queretaro. For its second plant in the state, it deferred to NRG Ingeniería to meet its quality standards. Our work spoke for itself and, from that point onward, Brose has deferred to our expertise to carry out various projects, including electrical

Director General | NRG Ingeniería

installation, testing, project coordination and illumination. Ultimately, Brose’s confidence in NRG Ingeniería is proof of our work and essential to building a reputation abroad, providing valuable assets in a highly competitive market.

Prospects Abound in Distributed Energy Sector:

Q: The energy market has contracted amid the uncertainty generated by the proposed energy reform. How has NRG Ingeniería adapted to this new environment? A: The looming energy reform has undoubtedly cast a shadow of uncertainty over Mexico’s energy market. Nevertheless, there are options for organizations to pursue. The principal challenge is communicating that although the renewable energy sector is on hiatus, there are many viable prospects within the distributed energy sector. We are facing this challenge through strategic partnerships, such as our consolidation with Siemens Energy. This alliance promotes the adoption of new products and creates financial solutions to provide clients a holistic alternative. Market projects for 2022 look good and we are optimistic that we will begin to break ground on some projects. Q: What objectives does NRG Ingenería plan to accomplish by the end of 2022? A: NRG Ingeneria has two main objectives for 2022: to keep promoting the development of distributed energy projects in partnership with Siemens Energy and the continued research and

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analysis of electrical testing. We had several projects in this field during the past few years so we accumulated fixed capital assets for them; it would be wasteful not to use them. Finally, we look forward to the resumption of energy projects that were either put on hold or on notice. Either way, we look forward to a busy year.

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from the

Q: How important is the Mexican market for Krannich Solar? A: Krannich Solar is a German company and our focus is on distributed generation (DG) for residential, commercial and industrial environments. Krannich is also a 100 percent distributionfocused company, so we do not work in installation, engineering or other parts of the business outside of distribution and customer support. The company decided to come to Mexico because it saw many opportunities in the country. Mexico is among the top countries with most solar potential. The government is perhaps not fully supporting the renewable solar industry but we think it is important to be present in the market and show our long-term commitment. There is still a market close to 500MW to benefit from. The market will hopefully pick up faster in the future, just like we are seeing in Brazil over the last years. Q: What is the main challenge for a distributor in the market and how do you work to overcome it? A: Since the pandemic, logistics have become a nightmare. Prices have increased heavily: we used to pay US$2,500 for a container from China to Mexico. This year, we had to pay up to eight times that amount. We are seeing prices drop somewhat, but you cannot foretell the future. Due to the increased level of insecurity, shipments have become riskier too and time frames have increased quite a bit. Furthermore, raw materials are becoming scarcer so

Christof Kling

there are fewer solar panels being produced at a much higher price. Many projects are being postponed as a result. These issues are global and outside of our control. Nevertheless,

Managing Director Mexico | Krannich Solar

we hold conversations with our customers to manage expectations and provide an optimal service. It is new to see prices on the rise after decades of cheaper costs. Despite this, we have encouraged customers to place orders before prices increase even further. In any case, open communication with customers is essential.

Distributor Supports DG Growth Despite Challenges

Another major tool for Krannich is communication via webinars, face-to-face meetings and newsletters. Q: What important partnerships are helping the company grow its market penetration? A: All our partnerships are very important to succeed with the business and cover the needs of our customers. Jinko and GoodWe are recent examples to grow our market penetration in Mexico. In 2021, Jinko Solar was our No. 1 brand, followed by Axitec and Canadian Solar. Over the past few years, we have grown with them, having known the companies for a long time and gaining extra support from their side to overcome current problems in the market. Jinko and Canadian Solar are Tier 1 manufacturers and consistently top-rated, with state-of-the-art technology. More importantly, their solutions work very well in the Mexican context, which cannot be said for every solar panel player. We began our Mexican relationship with GoodWe two years ago, when the market was dominated by European brands. Today, Chinese brands are gaining ground. They are cheaper but their reliability can be excellent. Our global partnership with

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the company helps us to decrease the necessary tech support. Krannich also supports other brands. In terms of inverters, we are long-term partners of Fronius, SMA and SolarEdge, as well APS & Enphase in microinverters. We aim to maintain and offer a diversified portfolio of products.

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from the

Q: What sets Solar Power Group (SPG) apart from other solar distributors in the Mexican market? A: Customers choose SPG because we have a wide range of services available. These include education through our Solar Power Group Academy, systems design, project development, project management, commissioning and very well-prepared tech support. Many customers prefer to call us before they contact the manufacturer because they say we have better resources, fast response times and no cumbersome bureaucratic processes. SPG counts on the expertise of architects and civil engineers to provide integral support for racking and shading. Mexico’s solar market might be growing but it is still very much in its earliest stages, which means installers sometimes require extra backup. Furthermore, our partnership with PROINSO has helped us to define this portfolio and establish our inverter solutions. We understand the needs of installers and try to provide solutions. In addition, we try to help with anything outside of the traditional distribution to remove hurdles and provide benefits. Financing, for example, is a major obstacle because financiers care mostly about large-scale projects. If these funds want to boost their green investments, they need to look at smaller projects as well. For this reason, we have joined forces with a leasing company to connect clients with

Roberto Moreno

prolific offtakers. Q: How has the pandemic’s growing digital transformation benefited the company’s operations?

General Manager Renewable Energy Projects | Solar Power Group

A: Last year, SPG invested heavily to establish itself in the online sphere. This includes Salesforces’ customer relationship management (CRM) platform, as well as connecting our other teams to online platforms. Every part of the company now

Reaching New Heights in Solar Distribution With Integral Backup

runs on technology, including invoicing and tech support. For instance, we approach every tech support case like a sales opportunity. This means that every team is interconnected. Q: How are changes in Mexico’s energy sector affecting demand for solar solutions? A: Mexico’s distributed generation (DG) market is not being affected by the political changes impacting the overall sector but companies are afraid to invest nonetheless because they are not sure what will happen in the future. Money talks, so when there is wariness in the sector, people put investments on hold. The current challenge is to educate companies so that stakeholders can make accurate decisions. At the end of the day, this is a financial decision. If solar companies were more sophisticated, they could convince potential clients and make the sale. Q: Which solar-focused business segments are generating the most demand in the Mexican market? A: The number of C&I projects is growing rapidly. This is

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related to the uncertainty in the industry: everybody wants to install solar solutions now so that if something happens in terms of regulation, their contracts would be respected. Uncertainty affects the residential sector more negatively. C&I players are simply looking to get installations done quickly.

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from the

Q: How has RER Energy’s portfolio improved over the past year and what challenges did you face? A: Regulatory challenges and technology opportunities were the main topics of last year. The transition from standalone solar to the creation of microgrids is here and we are glad to be part of it. Our company has consolidated as an industry expert; as challenges and opportunities appear, we constantly reinvent ourselves and prepare for the future. The most important thing for us in these transitions is to maintain our core values and our focus on the end customer. This year, we are introducing new financing options for our storage and solar solutions, which is allowing us to reach a growth rate much higher than the industry’s. The ability to grow and contract according to market demand is a skill that the company is getting really good at. This year, in particular, the market demanded accelerated vertical growth from us, which we addressed, along with the integration of new technological and financial solutions. Q: What is the importance of diversification, specifically for CNI companies? A: Understanding that energy demand will soon surpass the existing energy infrastructure is essential to understanding the

Carla Ortiz

importance of Distributed Generation (DG) solar PV. Installing this technology will be critical to maintaining some stability in the fractionalized Mexican energy market where infrastructure is acutely uneven. At a time when most energy infrastructure

Country Manager | RER Energy Solutions

projects are paused or completely on hold, this foreseeable outcome has become clear, prompting most industrial and commercial energy consumers to recognize DG solar as a lowhanging fruit with great short-term returns.

Client-Retention Focus Leads to Success

Q: What do you expect from the CNI sector now that the energy reform has been rejected in Congress? A: The CNI sector faced less regulatory risk in the energy reform conversations than other renewable energy markets. However since the legal framework was unclear, there were companies holding back on making decisions. With more certainty, it is clear that growth will be much higher this year than the 66 percent rate we saw last year. Q: How does RER Energy guide clients in building solar system projects according to their energy needs? A: Although RER Energy specializes in financing solutions for commercial and industrial clients within the Mexican energy market, it is far from all that we do. The company prides itself on its 100 percent client retention rate since 2008 when our solar division emerged in the US market. Underpinning this success rate is our added value proposition, which is imparted through data-driven energy consulting that eventually leads our clients to look to us as energy partners.

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Moreover, we understand that required energy capacity or compliance standards can change over time, which is why we have worked so diligently to become local experts. When the time comes, we can accurately guide our clients through the scaling process to attain the highest, optimal results.

Conference

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Highlights

Favoring a LongTerm Vision for Solar Procurement Karla Cedano President | ANES

Luis Olivera Solar Engineer | Enel Green Power

Juan Ávila CEO | Top Energy

Mario Pani Managing Director | BayWa Solar Projects

nvestment planners of solar projects must find several ways to isolate their strategies from financial pressures that favor short-term thinking. Procurement decisions must be made with a long-term vision in mind, one that contemplates the maximum longevity for each project, say

solar development industry leaders. Karla Cedano, President, National Solar Energy Association (ANES), contextualized the issue within Mexico’s solar history: “The PV solar industry in Mexico started 40 years ago. Back then, the biggest challenges were technological and scientific. When these barriers were overcome, the business challenge arose. Now, our biggest challenge is financing.” Cedano believes that when balancing the initial costs of a project against its eventual levelized cost of energy (LCOE), those in charge of making procurement decisions must consider that availability of technology was the industry’s central issue in the past. Now that a wider variety of options is available, they should consider technologies that are top-ofthe-line, despite the seemingly outsized initial expenses they might represent. Managing Director of BayWa Solar Projects Mario Pani has extensive experience in the development of utility scale projects. He agrees with Cedano’s assessment: “When making a technological decision, it is best to look for the highest efficiency and the lowest costs for power generation and operating in the long term.” In Pani’s view, considering the longevity of a solar project is key to accurately assess the capabilities that the procured technology should possess. During an interview with MBN, Pani’s approach to long-term thinking revealed that additional value could be generated if the future of a project was guaranteed to its investors. “Not many developers can sell the asset as a long-term investment and also support hundreds of millions of dollars in contracts with our guarantees. The final buyer knows that we will handle any risk stemming from the project and that also increases the value of the project.” Conditions specific to a project must also be considered to maximize the value of procurement decisions. “It is necessary to consider all environmental aspects when choosing the technology that best suits (developers). This will lead to the best cost-benefit outcome,” says Luis Olivera, Solar Engineer, Enel Green Power. Olivera also emphasized that

the knowledge among distributors, developers and engineering, procurement and construction firms (EPCs) regarding current technology must be as extensive as possible if they hope to keep initial costs down while choosing the best possible options. “As solar technologies became better known in the market, this also had an impact on their price. Technological awareness can play a part in making higher-end choices that are easier to budget,” says Olivera. Juan Ávila, CEO, Top Energy, highlights the difference in procurement priorities between utility scale and distributed generation (DG) projects, which are below 0.5MW in the Mexican context: “DG consumers do not make the same cost-to-benefit trade-off as large PV solar power producers do. DG consumers weigh the short-term investment more heavily.” Ávila also stresses that it is essential to integrate technologies like battery storage into a project’s procurement strategy, since a project’s potentially complete independence needs to be measured throughout the process. “All technologies procured should empower the user to become as independent as possible. That includes the creation of a storage system associated with your power generation system.” In Ávila’s view, the added cost of implementing energy backup is worth it, even in the short term. Ávila agrees with Olivera’s point regarding the availability of information, noting that “10 years ago, nobody understood the solar sector at all. Approaching financing and leasing entities was a bit of a nightmare and Multiple Purpose Financial Institutions (SOFOMs) were very hard to convince. Nowadays, capital financing resources are more readily available, to the point that they have practically tripled.” Industry experts agree that the sector’s chief procurement issues are no longer just technological in nature. Instead, political, regulatory and even educational issues are generating greater supply chain and financing-related barriers than the limits of available technology did in the sector’s past. Issues resulting from the COVID-19 pandemic have drastically increased solar module prices. While industry leaders are cautious with their predictions regarding how long it would take for solar module prices to drop again, they emphasize that short-term profitability is not as relevant as it seems, especially given the growing interest in less conventional types of projects, such as floating solar. Pani adds that when a project claims to be too profitable in the short term, “it is usually a sign that something is very wrong.”

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Paving the Way for Latin America’s Renewables Boom Enrique González Executive Vice President of Investor Relations and Communications | Cox Energy America

Succeeding in Mexico’s Energy Market Is Still Possible 03/08/2022

Operation & Maintenance The concept of operations and maintenance (O&M) appears to be relatively straightforward: operate a power plant successfully to ensure it reaches its full potential and maintain its components to sustain a stable output. However, even small solar systems feature a variety of intricate components. As technology progresses, solar systems promise to become even more complex. Fortunately, the tools for monitoring a system’s performance and to speed up maintenance are up to the challenge and continue to improve. As good as solar’s already excellent levelized cost of energy is, it can be boosted further by pushing the technology’s yield and longevity. The solar experts featured in this chapter explain issues regarding the operation and maintenance of solar projects and how to ensure their profitability in an adverse environment.

Operation & Maintenance

Analysis How to Optimize Large Solar Parks in an Adverse Environment

Conference Highlights Putting Data at the Forefront of Asset Management

View From the Top Carlos Egido | CEO | Centauro Energía

View From the Top Ernesto Najera | Business Development Director Latin America | K2 Systems

View From the Top Michel Yehuda | General Manager Fortive Business Unit | DOMINION GLOBAL

View From the Top José Buganza | CEO | Enegence

Analysis Training, Installation Vital for DG Solar’s Longevity

View From the Top Fernando Tirado | Country Managing Director Mexico | Centrica Business Solutions

View From the Top Luis Calderón | CEO | Solarvatio

View From the Top Alfredo Beltran | Director General | Greenlux

View From the Top Andres Friedman | Co-Founder and CEO | Solfium

Content Links

NUMBER OF KEY PRIVATE SOLAR POWER PLANTS

Mexico’s challenging regulatory environment does not invite many new large-scale projects but what about the massive investments

made in power plants that have already been developed? Experts argue that by optimizing the operations, maintenance, marketing and social scope of utility-scale solar parks in the country, their stakeholder value could remain radiant.

Though other renewable energy technologies have a prominent position in the Mexican energy mix, it is utility-scale solar that 2

experienced the largest growth following the 2014 Energy Reform’s development boom. “We have more solar projects mainly because, in recent years, solar has been growing much more aggressively in Mexico. This means that there was simply more opportunity in

this area,” says Carlos Egido, CEO, Centauro Energía, about the company’s largely solar-based power-producing portfolio.

Puebla

Hidalgo

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The risk of regulatory change that came with the López Obrador Chihuahua

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How to Optimize Large Solar Parks in an Adverse Environment

administration’s mission to put the energy sector’s power back in the state’s hands has clouded the possibility for greenfield solar project development. Nevertheless, more than 6GW of utility-scale solar capacity remains operational, according to ASOLMEX. The challenge remains for owners, operators and marketers to optimize

Source: SENER with information from CENACE

the value of such projects. Knowing that the clean energy capacity in the country will likely not go to waste no matter what reforms are passed, there are several options to reinforce a project’s worth. If a solar project is to add value, it must operate according to expectations. An appropriate approach toward operations and maintenance (O&M) is therefore crucial. But solar power plants feature complicated technological structures: a 100MW park can easily feature between 300,000 and 400,000 modules and requires numerous matching inverters, though the number varies depending on the technology. “Without a proper assessment, power plants can suffer significant energy losses due to cumulative error,” says Rafael Sanchez, Division Manager, OCA Global, adding that failures can be either prevented or corrected via monitoring and quality control inspections. “Solar modules can suffer different failures, such as micro cracks, hotspots and PID (degradation). If operators do not control these issues from the beginning, they will eventually have a big impact on how much energy the power plant will produce,” Sanchez adds. Fortunately, technology helps break down this daunting task. O&M providers have evolved slowly over the years, from engineering, procurement and construction (EPC) firms offering straightforward services to an entirely new ecosystem boosted by state-of-the-art technology. Drones can be used for remote inspections, while robots can be utilized to efficiently clean large numbers of photovoltaic solar modules. By using software, operations can be overseen from anywhere and the desired preventive maintenance approach suddenly becomes achievable.

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Projects can furthermore be improved by integrating technology. Battery storage is often pointed out as an important option to add to existing solar projects.

Conference

Highlights Operation & Maintenance | 48

olar power facilities require high-end data management systems to maximize their value, says Chiara Secco, Country Manager of Green Power Monitor. Should data management be a top priority for

builders and operators of solar energy assets? The answer to this question could define the financial success and economic viability of projects, according to Chiara Secco, Country Manager for Mexico and Central America, Green Power Monitor (GPM). “You will find that what truly leads to a return on investment (ROI) on your solar asset is how well you collect, use and store your data,” says Secco. The platforms and tools provided by GPM are designed with this in mind. Essentially, the value of a solar asset cannot be maximized without a monitoring and control approach that integrates state-of-the-art data management into an asset’s daily operations. “When you are in the control and asset management business, your main task is to maximize the performance of your clients’ assets.”

Putting Data at the Forefront of Asset Management

Crucially, there is a difference between on-site and off-site

Chiara Secco

makes these processes transparent in real time. These on-

Country Manager Mexico and Central America | Green Power Monitor

data management solutions, according to Secco. A perfect technological integration must be made between these categories, yet each tool must address the separate needs that each category represents. On-site solutions include SCADA systems that function as in-plant controllers for utility-scale power plants. The gathering and storage of data that these systems manage must be reliable, just like the software that site systems also need to be designed with field technicians and control room operators in mind, adapting usability to the specific needs of on-site personnel. A more ambitious on-site solution is a Power Plant Controller (PPC), which provides direct control over all devices. An important success factor for PPCs is their flexibility, as issues regarding compatibility and the evolving Grid Code requirements can generate unexpected data management problems for operators. Remote solutions need to be centralized within one system to be as useful as possible to operators. Secco mentions the scalability of GPM’s centralized solutions as one of their main advantages, equipped for managing either a smaller number of utility scale assets or various distributed generation (DG) systems that can be composed of dispersed technology. A centralized solution can simultaneously perform the functions of asset management and O&M management and can generate automatic reporting, which can be styled in line with a company’s corporate image. “As we generate more of this data, we begin to ask what the data can do and what it has to say about the asset’s functioning beyond the more essential decision-making that it can support,” adds Secco. As an asset’s data generation increases, tools such as GPM’s can define specific problems regarding devices and operational conditions. This leads to advanced preventive maintenance strategies and, therefore, creates even higher cost savings, increasing an asset’s ROI further. “Asset management companies say they can already do this but through technology,

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we want to empower the independence of operators so they can find these savings and optimizations during their day-to-day operations,” says Secco.

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from the

Q: How did Macquarie’s move to Mexico lead to the creation of a new renewable portfolio under the Centauro Energía banner? A: Centauro began its operations approximately two and a half years ago. It acquired several assets that make up the company’s current asset base, consisting of both a wind and a solar portfolio. Our wind farms are selling their energy under power purchase agreements (PPAs). Furthermore, Centauro has solar projects in the north of Mexico operating within the Wholesale Electricity Market (WEM) and also with an important part of their capacity contracted through bilateral PPAs. Centauro diversifies its portfolio by not betting on just one technology. We have more solar projects mainly because in recent years, solar has been growing much more aggressively in Mexico and this means that there was simply more opportunity in this area. Q: How does Centauro Energía assess potential acquisitions? A: We are working to optimize the results of both our wind and solar portfolios rather than looking for new acquisitions at the moment. Centauro Energía is building a strong team in terms of experience and resources, focusing on operating assets.

Carlos Egido

Currently, we think it is probably not the best time to begin new ventures, such as developments and greenfield projects. Nevertheless, we are keeping this door open as we understand both Mexico’s fundamentals and the electricity sector itself in

CEO | Centauro Energía

a long-term view Q: How does the company see its chances in the spot market? A: The solar projects that Centauro operates in have a spot

Optimizing an Already Prime Renewable Asset Portfolio

market sales component but we are now adding an increasing amount of MWs under PPAs. This provides a mixed basis for income, which is part stable through long-term contracts and part variable through the spot market. For the past four years, the market has behaved somewhat strangely, with a great deal of capacity coming in over time. In the last few months, this situation appears to have stabilized, with prices increasing, which is part of a trend that power producers like us have anticipated. The spot market is always a bit of a risk. Trying to get a clear view of a market as young as Mexico´s by examining the spot market prices is difficult, especially when trying to calculate for the longer term. Fueling this market is equally difficult. After all, the current regulatory framework was formed in 2014, so we have just a little over five years of operational time under these rules. Q: Could a lack of greenfield development advance the trend toward higher prices in the future? A: It is difficult to say but that could be the case. If the penetration of new power plants, both renewable and efficient CCGT, continues to be cut, then prices will probably go up. If

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this does not occur and energy consumption does not pick up as we expect it to, we could experience peaks and lows in terms of energy prices for a time. It would mean that the market would not be maturing. As market participants, we need to be ready to deal with unconsidered market conditions.

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Q: K2 Systems recently rebranded from Everest Solar Systems in North America. Why was this necessary? A: The company started out as K2 Systems in 2004 in Germany. When we began opening offices around the world, we discovered that we were not able to use the name K2 in Mexico and in the US. That is why in Mexico we are known as Everest Solar Systems, reflecting in both company names a reference to the world’s two highest mountains because we still incorporated the same philosophy, culture and solutions. Now, we can use the same branding worldwide, which we think is an important step for the company. People can see us as one, unified, strong player that can provide customers with strong services and expertise around the world. Q: Why is Mexico an important market for K2’s globally? A: K2 has always considered Mexico a booming market, especially after utility-scale projects experienced a great deal of growth. We also cater to the local distributed generation (DG) market, where we have seen a big increase in business. DG-based capacity practically doubled in recent years, notwithstanding a slowdown during the pandemic and recent uncertainty in the market. I do believe that if electricity prices go up, solar demand will grow even more. For these reasons, the company decided to open a service office in Mexico, which I opened four years ago. This

Ernesto Najera

office is important because it represents our hub for technology and product development for Latin America and the US. It also functions as a service hub for all Latin American markets.

Business Development Director Latin America | K2 Systems

Q: What impact does a proper solution have on the efficiency and long-term productivity of a solar system? A: This is precisely where K2 Systems differentiates itself from the usual fare in the industry. A photovoltaic solar module has a

Optimal Racking and Mounting Ensures Solar Longevity and Safety

life cycle of around 25 years and can easily outlive its warranty. Inverters are built to last as well. If you do not have a proper racking system or mounting solution to match this longevity, your solution will not last. Without the optimal solution, panels can come under stress, can get damaged or even fly away under strong winds in the worst-case scenario. Global warming has brought stronger winds and hurricanes. All this needs to be considered in designs. A properly built mounting system allows you to sleep well, knowing that the installation will stand strong for the next 25 years. If you install it properly, your installation will have a higher energy yield. Nevertheless, the most important factor is safety. You need to protect the module, the roof and everyone around it. Q: How does K2 add value in mounting and racking systems? A: Solar modules represent the biggest investment within a system, more than half of it. Therefore, they attract the highest amount of investment for improvements. Panels change every few months in capacity, size and weight, so you have to be able to adapt quickly to be able to protect these modules. We are constantly looking at what module manufacturers are doing and working to be ahead of these innovations with our product development team.

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Furthermore, to make solar cost-effective, timing and speed is of the essence. Projects need to be installed smoothly because hiring specialized installation personnel is a costly matter. For this reason, we try to add value for installers by understanding their business and supporting them in becoming more productive.

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Q: What challenges did DOMINION face over the past year? A: The biggest challenge was the macroeconomic situation, since we are focused on industrial businesses, technology and telecommunications, among other areas. Cash flows were restricted and our customers’ ability to pay on time diminished. We were not sure if some of our distributors would be able to survive last year. The exchange, inflation and interest rates added to the difficulties in operations, as did local security. COVID-19 and its health protocols were very challenging, to say the least. Health, safety, empathy and support for our employees were essential, allowing them to remain safe, engaged and productive. Another challenging issue was long lead times. Delivery times for semiconductors or industrial solutions are about three to five times longer than before. It is still a major challenge that we are solving with our suppliers and distributors. Nevertheless, our partners’ commitment and support have been essential to DOMINION’s outperforming the market. In Mexico, Fortive Corporation is our main partner and supplier. Fortive’s outstanding partnership and engagement have been key to our success. Q: How did the company set about to solve these issues? A: DOMINION’s strategic philosophy is: it is not what we do but how we do it. Our vision and search for efficiency has led us to

Michel Yehuda

offer our clients a wide range of solutions and services in many different industries. At DOMINION, we base our strategy on four core concepts, each involving the letter D.

General Manager Fortive Business Unit | DOMINION GLOBAL

Digitalization is the first core concept. Our processes and solutions have always been digital, so when we had to move to a home/ hybrid office environment, there was no need to reinvent the wheel. Diversification is our second concept: we have a diverse solutions

Four D’s Ensure Results in Both Public and Private Environments

and services portfolio in almost 35 countries. If one business area or geography falters, another usually has an uptick. That said, we have always focused on our customers’ success. In 2009, we supplied thermal imagers to the main Mexican airports. In 2020, this technology became relevant again. We visited these airports, to see whether they were still using our technology and found out they were not employing it optimally. We immediately helped them make optimal use of it, without any additional cost. We’ve ensured our customer’s success, 11 years after we installed these solutions. Decentralization is the third core concept. The company has a great deal of flexibility and autonomy in different markets. Each Business Unit can choose where to focus or allocate its resources, which is rare for a company of our size. Finally, our fourth “D” is Discipline, as in financial discipline. This concept has been essential for the company to overcome the market’s volatility. Our finances are solid, achieving a strong, positive cash flow even during the pandemic. Our stock price has been growing steadily and outperforming the market. We could even add another concept: Diversity. In our Fortive

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business unit, almost 40 percent of the managers are women. Our diversity has been very successful in making the company more efficient. With our long-standing focus on ESG and social responsibility, we add value to local communities and clients in every project.

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Q: How does Enegence’s multidisciplinary expertise and use of data and AI give the company a competitive edge in the consultancy market? A: When Enegence was constituted, it was mainly focused on offering our clients regulatory, operational, strategy and consulting services related to the wholesale electricity market. Since then, the company has evolved, adapting technologies, and creating software needed to analyze and generate market intelligence and an operational platform for our clients. This added-value service has allowed us to help our clients make their operations safer, more efficient, and more cost-effective — an important capability in commodity markets such as electricity. In other words, our multidisciplinary background coupled with SMART, our intelligence and operational software, provides our clients with the tools needed to make informed business decisions that reduce costs and increase their likelihood for survival in such a competitive market. Q: How does Enegence’s SMART software provide greater market visibility in such a volatile market? A: In the wholesale electricity market, energy (locational marginal prices or LMPs) and capacity prices, are volatile. To forecast prices accurately, our SMART software must take into account infrastructure, for example in transmission of

José Buganza

energy and generation capacity, as well as statistical and technical data, like generation parameters. The data needs to be regularly adjusted with updated information of the Mexican power system, so that our software can forecast long-term

CEO | Enegence

LMPs and capacity prices within the first standard deviation. Also, it is important to consider that currently there are infrastructure uncertainties, such as the lack of visibility about new generation projects and the expansion of transmission

Providing Certainty in a Volatile Energy Market

lines, as well as others that could result from the latest energy reform bill, for example cancelling the self-supply scheme that needs to be considered when forecasting prices. Nevertheless, knowing and understanding these constraints are essential because the more information we are able to feed in, the better approach to certainty SMART will have in different scenarios. Q: How is Enegence advising clients in relation to the uncertainty in the sector and how does that influence end users’ decisions? A: We are advising our end-user clients that have a Qualified User profile to make the transition from either the basic service supply or self-supply to the Wholesale Electricity Market for two main reasons. Currently, if end-users are not receiving energy from a Qualified Supplier, then they must be sourcing energy either from the self-supply scheme, which mostly predates the Energy Industry Law (LIE) issued in August 2014, or from the basic service supply provided by CFE Basic Service Supplier scheme. In the former option, there is a regime called an interconnected legacy contract which is now facing scrutiny and a transition process under the latest version of the energy reform currently under revision by Congress. The bilateral modifications outlined in the reform, if passed, are seemingly intended to force end users with a Qualified User profile into the Wholesale Electricity Market anyway.

Alternatively, the basic service supply provided by CFE Basic Service Supplier entails a regulated tariff with no opportunity to negotiate bilateral contracts among end users and CFE Basic Service Supplier. Under this scheme, the state energy company charges a set price calculated by CRE following a publicly available methodology. The underlying caveat is that the regulatory tariff calculated by CRE is wholly contingent on CFE’s cost of operation and cost of generation, which has steadily increased due to remaining inefficiencies and higher input costs. Moreover, if the Federal Revenue Office disagrees with the CRE’s calculated tariff, it can bypass the agency’s authority and stipulate a new tariff for any tariff group it desires. This is a risk that reduces electricity price viability at a time when energy prices are expected to rise. It is important to mention that even if the energy reform bill passes, it is very unlikely that end users are left without energy. At most, they would receive Basic Service Supply or a similar scheme because energy would be provided by CFE anyways under a regulated tariff. Overall, these consequences serve as incentives for companies to enter the Wholesale Electricity Market. Q: What is the company’s role in the development of an Emission Trading System (ETS) to cut down CO2 emissions? A: Enegence was hired to develop Mexico’s guidelines for the ETS’ monitoring system, whose main function is to ensure that market participants of the ETS are not abusing their power positions to drive the price of emissions up or down in their favor. This oversight is particularly important in an energy market where state producers, CFE and PEMEX, are also among the highest carbon emission polluters. Enegence was also hired to develop the market stability mechanisms for Mexico’s ETS pilot program to provide the guidelines for the design of the ETS. As part of our task, we worked on fine-tuning market stability mechanisms that will maintain both emission allowances and carbon credit prices under certain thresholds using different economic mechanisms such as cost containment reserves, emissions containment reserves, hard floors and ceilings. The objective is to strike a balance that works to incentivize innovation that reduces carbon emissions without hindering local and foreign investment. With these parameters identified, the next step is to move on to software development, which we expect to begin during 1Q22.

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Operation & Maintenance | 54

Training, Installation Vital for DG Solar’s Longevity Although technology manufacturers are adjusting their warranties to longer PV system life cycles, none of these guarantees applies to shoddily installed or maintained systems. Experts, therefore, are shifting the focus to best practices in installation: meeting these standards is a key challenge for Mexico’s up-and-coming distributed generation (DG) industry. The average useful life of a solar power plant has grown significantly. While expectations stood at 10 years back in 2008, by 2020, this had increased to 33 years, according to the Lawrence Berkeley National Laboratory (LBNL). For utility-scale developers and smaller-scale self-suppliers alike, this provides a useful “tail” in the life cycle of a project, through which returns on investment can continue to add value as operational expenditures do not necessarily have to increase. Technology manufacturers have caught on, now offering between 25 and 30 years of warranty for their product. “For many years, the standard was 25 years for 80 percent of the original power output. We introduced a warranty of 30 years and close to 85 percent using our bifacial modules for this original output,” Iván Reyes, Latin America Utility Director, LONGi Green Energy Technology, said in a 2020 MBN interview. Components might even last longer. “A photovoltaic solar module has a life cycle of around 25 years and can easily outlive its warranty. Inverters are built to last, as well,” explains Ernesto Najera, Business Development Director for Latin America, K2 Systems. According to the National Renewable Energy Laboratory (NREL), the upper range of a PV solar project’s useful life is as much as 40 years. With these predictions, current solar technology has the potential to outlive any wind or cogeneration installation. Yet, to reach this long life, many more factors come into play. As important as the core technology of a system is, industry insiders agree that the way systems are installed is key to ensure proper functionality. “Equipment is important but a correct installation provides quality for the long run,” emphasizes Enrique Garduño, Co-Founder and CEO, Skysense. To begin with, solar systems need a good racking system or mounting solution, says Najera. “Without the optimal solution, panels can come under stress, can get damaged or even fly away under strong winds in the worst-case scenario. Global warming has brought stronger winds and hurricanes. All this needs to be considered in designs,” he says. Safety is, therefore, the most important factor for any installation. After all, equipment should not only protect investments made but the people surrounding them, too. “A properly built mounting system allows you to sleep well,

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knowing that the installation will stand strong for the next 25 years. If you install it properly, the system will have a higher energy yield,” Najera adds. Smaller DG systems can easily take up a lot of space, making its design a complicated matter. Fortunately, technology is easing these efforts, particularly for smaller systems. “Once customers are ready to proceed, we match them with our local installers and send our drones to take measurements and show them what the installation will look like without being too intrusive,” says Andrés Friedman, Co-Founder and CEO, Solfium. Still, for larger systems in the commercial and industrial (C&I) environment, other factors are at play. Here, the design aspect changes due to the many types of roofs that can be encountered in different environments, says Co-Founder, Bright Jonah Greenberger. “As a result, our process for the design of installations had to change. In residential solar projects, we could remotely remove the friction in the design process. For C&I, this would be impossible without seeing the site in person.” Technology may be beneficial but boots on the ground continue to be the best way to move forward in some cases. Training Boosts Quality Even in processes boosted by digitalization and components of automation, people will eventually participate in the installation of the system. In a market where solar development, particularly in the DG environment, is poised for explosive growth, this creates challenges. “For one, increased competition could lead companies to race to the bottom when it comes to the price offer. Low pricing is often at the expense of quality or even safety. This is a situation we should completely avoid,” says Najera. But even if a project is adequately priced and planned, the skills of the workforce need to be up to scratch. “Solar is becoming trendy in Mexico, meaning that more professionals are coming into the field. Nonetheless, the sector needs to do even more work,” continues Najera. Najera argues that many institutions can provide certified training, while also having good methods and manuals for installations. Furthermore, many companies are willing to invest in certifications to prove their merit to potential clients. “We provide fully trained and certified installers to create a superior customer experience across the whole country. The ultimate goal is to empower new entrepreneurs in solar installation projects and set them up for success,” concurs Friedman. When it comes to ensuring all components are installed correctly, a little support for the people working in the field can go a long way. “If our clients have any questions, we will support them right away so that the solar system can be Read the complete article More about this topic

installed correctly and as fast as possible. Building trust with the installer network is essential for an adequate operation,” concludes Najera.

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Q: How can Centrica Business Solutions (CBS) ensure efficient and cost-effective energy management? A: CBS is part of the UK-based Centrica, which has over 200 years of history. CBS was founded a couple of years ago and has worked to adopt emerging trends, such as centralization of operations and decarbonization. Independence from large utilities through behind-the-meter solutions has been another major trend. CBS has been doing business in Mexico for three years and has signed 30 contracts so far. This is quite a good start and we have performed well so far but the pandemic has hampered the progress of some new projects. CBS is a great energy partner for its clients because our core business is not to install solutions, sell products or provide services just to make a sale. Our core business is to get to know the customer, their facilities and objectives and then to provide a custom solution that meets their needs. Some customers are looking to become more productive and greener, while others would like to save costs. Frequently, they wish to do both. CBS does not just sell one product. We have a wide range of solutions, all of which are oriented toward energy efficiency and decarbonization. The solutions are goal-oriented and help our customers meet objectives for the short, medium and long term, depending on the project.

Fernando Tirado

Q: How can CBS tie its solutions into the growing number of on-site energy installations? A: How we tailor a solution that tracks the energy supply and the

Country Managing Director Mexico | Centrica Business Solutions

efficiency of its use goes back to the core of CBS’ added value. However, before we ever suggest the use of, for example, a solar on-site energy installation, we would install our Panoramic Power solution. We can then measure up to three months of a company’s energy use and identify its actual needs. The solution could then

Energy Partner Helps Get Most Out of Electricity Use

include solar panels, battery storage for peak-shaving purposes, cogeneration or EV-charging. Our solution is also an administration tool for the EV-fleets that companies like Grupo Bimbo and CocaCola possess. Knowing when and where to charge this fleet is essential to optimize energy use. For on-site solar installations, optimal engineering is crucial. End-users leave a lot of money on the table by making mistakes in how a system is installed, even though mounting panels is not rocket science. Q: How is the company further addressing its own internal sustainability? A: We have strongly reduced our CO2 emissions in recent years. Now, our plan is to reduce 35 percent of our total emissions within the next five years. I believe that this question of internal sustainability is an important one. Companies often brag how their work enhances the world’s sustainability but changes need to occur within these companies first to be truly sustainable. If you do not create a sustainability-minded environment and culture from the root of the company, working to ensure it becomes entrenched within operations and among employees, then you cannot have a great impact on the outside world. Fortunately, we are seeing

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a growing number of companies doing what we are trying to do here. This is also evolving rapidly in Mexico. Ten years ago, it was rare to see sustainability as a driver for Mexican companies. I would say that seven or eight out of 10 companies are now adopting strategies to become more sustainable.

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Q: How has Solarvatio’s business evolved throughout the years? A: It has been several years since we began our project. Throughout this time, the Mexican solar energy market has evolved exponentially. In the beginning, Mexican solar energy companies were scarce. The price of a solar module in 2011 was approximately US$4/W. At this cost, the number of photovoltaic panels installed for end users was practically zero, as solar energy was simply not affordable. We started our business by focusing on rural electrification projects, which aim to reduce energy poverty. We worked with different organizations and foundations, as well as with all three levels of government. These rural electrification projects helped position the company in the market. As we implemented them, global acceptance of solar energy increased and its cost decreased, leading to the current boom in demand for distributed generation (DG). Having started as solar panel installers, working with a group of people dedicated to the construction of electric power distribution networks, it was simple to migrate to the DG niche and seize new opportunities there. Q: What are the main challenges the company faces when installing solar systems in rural communities? A: One of the main barriers to installing solar systems in remote

Luis Calderón

rural areas is training the end user. It is extremely hard to find technicians to maintain solar systems in off-grid areas, even today. To tackle the problem, we developed a training program for community members. We create local jobs by shaping people

CEO | Solarvatio

within these communities into local technicians and installers. Though they have no previous experience, we train them to become qualified in PV solar maintenance. When we develop our projects, we always immerse ourselves

Solar Systems Help to Combat Energy Poverty

in the local community. Talent is the most important factor for these types of projects. With our training strategy, we create a positive impact. These communities have not had stable access to electricity before, which means a system such as this transforms their lives for the better. Q: Solarvatio manufactures its panels in Oaxaca. What are the advantages and challenges that local manufacturing brings to the company and its clients? A: Setting this up was a big challenge and we worked with many partners during the ramp-up phase of our manufacturing facility. In the beginning, we relied on technology transfer from our partners to create solar modules. People who believed in Solarvatio’s project gave us the opportunity to connect with suppliers and certification entities. These same people connected us with the global safety certification company UL in the US. This company then certified our modules, which granted us easy access to the US market. Our challenge in Mexico is that we cannot compete with Chinese market leaders in terms of module price. However, Solarvatio’s

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strong suit is that we manufacture our own modules and also install them. Our customers feel confident when buying our modules because we are a one-stop shop: we manufacture, install, provide warranties and provide maintenance. This integral solution is what differentiates us from our competitors.

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Q: How has the company faced demand amid the pandemic and regulatory uncertainty surrounding the electricity reform? A: The government’s efforts to change energy regulation and the resulting uncertainty have only made things more complicated. In 2021, we experienced a great deal of interest in our solutions for distributed generation (DG). We continue to grow in residential and small commercial segments. In the commercial and industrial (C&I) environment, interest has increased but decision-making has been slowed down considerably. Greenlux has closed 3MW and has a pipeline of around 15MW but uncertainty has had the biggest impact here. In September, the government was about to make a decision on the electricity reform but then postponed that until March or April 2022. Regardless, we do not see the reform impacting DG. Clusters, chambers and associations are making a great effort to push DG. On the other side, SENER, CFE and the government have all confirmed that DG provides benefits and will remain unaffected. Once this has been fully confirmed, we can forge ahead with many projects. If the reform is canceled or passes in a way that is acceptable to the market, we think we can do well in 2022 and expand our pipeline. We would have around 8MW of probable projects and another 7MW that are less likely but still good prospects. Q: What is the importance of clusters, association and industry chambers for the development of solar-based DG?

Alfredo Beltran

A: These organizations have many renowned, experienced professionals and experts among their ranks, which help to explain issues to political leaders. We work together to help the

Director General | Greenlux

government understand the industry. They do not act in bad faith but could benefit from a deeper understanding of solar DG’s benefits. In general, we also believe that utility-scale renewable energy projects coming from private companies are a boon to Mexico’s competitiveness but they have similar channels to

DG Company Solves Solar’s Wider Sustainability Puzzle

communicate these advantages. We, therefore, focus on our own environment. Greenlux itself is part of the Energy Cluster of Nuevo Leon, the Mexican Association of the Photovoltaic Industry (AMIF) and the National Chamber of the Energy Industry (PROCNIE). These associations help to spread the word of what solar can do for people. Nuevo Leon’s governor, Samuel García, presented a minister for energy matters. His idea of green taxes and bonds, supported by the cluster, have been replicated in other states, such as Zacatecas and San Luis Potosi. This has given sustainability measures a major boost, which is something every state government should aim to do. Q: How does Greenlux arrange operations and maintenance (O&M) for its clients? A: A complete system is divided between several inverters, each linked to 40 and up to 100 solar modules. This divides the system in sections, which can be monitored remotely. There are daily generation reports that add up. Companies can also link this with consumption monitoring, so they know exactly how much they consume and generate at any given moment. Clients can choose to take care of O&M themselves, or sign an O&M contract that

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makes us their energy department. We then ensure the system’s performance for its entire life cycle, including cleaning and warranty checks. For the latter, we use drones and heatmapping. DG solar systems have many components exposed to the elements, so it pays to check the systems at least once a year.

VIEW TOP Operation & Maintenance | 59

from the

Q: What is the importance of solar-based distributed generation (DG) in the fight against global climate change? A: Many people across the world are talking about the importance of reaching net zero targets. The recent COP26 highlighted the magnitude of the challenge to achieve these goals by 2050. Studies show that to reach net zero, we should not only stop investing in new coal, oil and gas projects, we would also need to quadruple our wind and solar capacity by 2030. For solar, this is the equivalent of adding the capacity of the world’s largest solar park every day. Not all countries have both the capacity and the land available to build solar parks on such a scale. Expanding utility-scale solar projects needs to be part of the net zero roadmap, but we think that the acceleration of DG should be a bigger part of this solution. Our vision is to make solar energy as ubiquitous as a television or refrigerator. That way, anyone can generate energy at the point of consumption, limiting further investment in transmission lines or distribution capacity. Q: What convinced Solfium to get started in the Mexican market? A: Solfium is a tech startup within the solar energy environment. We see a big opportunity in the DG market in Mexico and many other countries. We decided to begin in Mexico due to the tremendous potential in the country, as well as the founders’

Andres Friedman

personal connection and presence in Mexico. Solar energy is the cheapest way to generate electricity in most parts of the world; Mexico and Latin America are no exception.

Co-Founder and CEO | Solfium

Nevertheless, there is still a lag in the adoption of solar energy in the country despite the attractive economics. The costs of a system can be amortized within three to four years on average, whereas the system itself lasts 25 years. Despite this, the average share of solar power in the Latin American energy mix is 3.6

Startup Leverages Tech to Accelerate Solar Adoption

percent. This makes an interesting business case to push solar energy, especially from a sustainability point of view. This year, we will focus on implementing our first customer partnerships, further developing our technology, and addressing our potential pipeline of US$55 million of projects lined up stemming from our customer agreements. We will also continue to develop our foundations in order to scale up quickly. Social impact projects, including supporting co-ops and small businesses like local bakery Pan Q Ayuda transition to solar energy, also play an important role in our work and is aligned with our mission. Furthermore, Solfium was recognized by the Geneva-based Solar Impulse Foundation as one of the ‘1000+ profitable solutions to protect the environment’, lauded for the efficiency of its solution. We are the only solar technology company in Mexico to have this distinction. Q: How did Solfium reconfigure its value chain to focus on customer experience via its technology? A: Solfium figured out that if solar energy was to be adopted over time, the customer’s journey needed to be easy and accessible.

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For this reason, Solfium reconfigured the solar ecosystem to put the customer front and center. We have created technology that makes solar easy and accessible via a mobile app. The goal of this app is to make solar as simple as ordering an Uber: clients input their electricity consumption and get an instant quote.

They can also chat with our experts about the specifics of the system. Once customers are ready to proceed, we match them with our local installers and send our drones to take measurements and show them what the installation would look like without being too intrusive. The installation and post-installation customer support is also coordinated via the app. The company partners directly with manufacturers to offer a premium product at a competitive price, delivered in the form of a kit that ships directly to the customer. By standardizing our offering and having the manufacturers as partners, the customer receives better support when compared to traditional companies. We bring a menu of financing options via financing partners, such as banks and fintechs, that are integrated into our app. These include unicorn startup dLocal as well as local Mexican bank CIBanco. Solfium also partners with logistics companies to optimize the value chain. Finally, we provide fully trained and certified installers to create a superior customer experience across the whole country. The goal is to empower new entrepreneurs in solar installation and set them up for success. With the app, we schedule the installation and monitor the entire experience and provide all the support needed afterward, including warranty support and system upgrades. The app is a real one-stop-shop for the end user. Q: What opportunities has Solfium identified in the C&I and residential sectors? A: We see a big opportunity across the entire range of the market. Small commercial activity is particularly interesting. For instance, Solfium recently completed a project for a corner store, of which there are more than 1.2 million in the country. These stores pay much for their electricity and want to add more fridges to increase their product offerings without raising costs or becoming less sustainable. With our app, we can help them switch seamlessly to solar energy. For now, battery storage is not yet a part of this optimal value proposition but this will likely change in the future as battery costs continue to decline. Furthermore, Solfium is already working with industrial customers. Here, the paradigm has shifted: many companies want to become more sustainable. As a tech service provider, we can offer them a turnkey solution to go beyond their immediate installation below the 0.5MW threshold of distributed generation. These companies care about their value chains too, so we help them to address the energy needs of their workers. With home office, an employee’s house is almost an extension of the company, so we support companies that want to help their employees adopt solar at home.

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Crucial Components A solar system is only as good as its components. While many factors determine whether a system can yield its desired returns, components still represent the most significant part of the investment. Industry experts often point out how it has become genuinely difficult to keep track of developments related to PV solar modules. Not long ago, having a 350W panel meant peak efficiency was already in reach. Now, companies are comfortably pushing past the 600W capacity. Key components such as inverters are evolving to match this output. Hybrid technology related to battery storage and green hydrogen are increasingly becoming a variable in solar’s potential as well, rapidly growing to become ubiquitous. In this chapter, the technology behind solar energy’s success is examined. Industry experts highlight advancements but also discuss how this technology factors into a wider project.

Crucial Components

Analysis Utility-Scale Tech Can Take Solar From Big to Massive

View From the Top Ivan Michel | Sales Director Mexico | SMA America

View From the Top Enrique Garduño | Co-Founder and CEO | Skysense

Expert Contributor Fernando Tirado | Country Manager | Centrica Business Solutions

View From the Top Sergio Rodríguez | Service Manager Mexico and Latam | Ginlong Solis

Conference Highlights A Global Reshuffle for Logistics and Key Component Manufacturing

Analysis Solar System Components Continue to Mature

Expert Contributor Alejandro Fajer | CEO and Co-Founder | Quartux Mexico

View From the Top César Alor | Country Manager | FIMER

View From the Top Vladimir Ruiz | SE Director Mexico and Central America | Fronius

View From the Top Alejandro Sánchez | Director General | CyberPower Systems

View From the Top Simon Zhao | President | Solarever

Content Links

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Utility-Scale Tech Can Take Solar From Big to Massive Utility-scale projects are growing increasingly bigger. In fact, CFE’s 1GW Puerto Peñasco solar project is big enough to break into the current global Top 5 in terms of size. Tech advances and sound economics are making solar’s upsizing possible, though some question the approach of building such massive power plants. Several components allow utility-scale solar projects to grow in size while decreasing the levelized cost of energy. Inverters, tracking and racking solutions all play an important role but solar modules are key. “Solar modules represent the biggest investment within a system, more than half of it, and they attract the highest amount of investment for improvements,” says Ernesto Najera, Business Development Director for Latin America, K2 Systems.

INDEXED PRICES FOR PV MODULE-RELATED COMMODITIES, 2020 - 2021 1.8

— PV-Grade

Silicon

Glass

— Copper

— Steel

— Silver

— PV Module

1.4

March 2021

February 2021

January 2021

December 2020

November 2020

October 2020

August 2020

July 2020

June 2020

September 2020

Source: IEA

May 2020

April 2020

March 2020

February 2020

0.6

January 2020

1.0

Perhaps the real question is whether utility-scale solar should be Mexico’s bet for the future in the first place. Some rightfully question the merits of solar superprojects, which take up massive amounts of space and might not even be that efficient in terms of transmission. “It makes little sense to produce power in one area if you need to transmit it over vast distances and lose a great deal of energy in the process. Utility scale might be a business with vast quantities of money involved but if transmission is a problem, then it makes more sense to produce power via DG,” says Vladimir Ruiz, SE Director for Mexico and Central America, Fronius. Even though Ruiz speaks for a company that focuses on DG, leading independent analysts share his view, though not DNV GL. “We foresee utility-scale PV dominating electricity generation Read the complete article More about this topic

because of its favorable economies of scale, outweighing the savings in transmission costs brought by decentralized microgrid installations,” the company states.

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from the

Q: What is Mexico’s contribution to SMA’s 2.5GW of installed equipment in Latin America? A: Customers in the region value SMA’s experience and trust the company’s solutions and technologies that have been field-proven worldwide with more than 100 GW of installed capacity. In a rapidly evolving sector like solar, SMA understands the value of long-term performance and we have worked hard to adapt and provide solutions as the industry changes. These guiding principles have allowed us to solidify our presence in a market that has challenged many other manufacturers after only a couple years. Put simply, our work in Mexico’s distributed generation market has allowed us to showcase our services and technologies to the wider Latin American market. Q: Which solution is most in demand for distributed generation bay installations in Mexico? A: Our Sunny Boy series, available in power classes ranging from 3.0 to 7.7KW, is a robust and a preferred solution for residential projects. On the commercial side, our CORE1 inverter with 33, 50 and 62.5kWof models is a holistic solution and is the only freestanding inverter on the market. Moreover, it does not require long cables or fuses, it can handle exposure to direct sunlight and does not require combiner boxes because it has six maximum power point trackers (MPPTs). It also features ShadeFix optimization,

Ivan Michel

which helps it produce more energy – even under shaded conditions. With so many integrated, cost-saving features and technology that increases lifetime energy harvest, it is no surprise that this solution is preferred by Mexico’s commercial integrators.

Sales Director Mexico | SMA America

Q: Can CORE1 sync with other technologies or software to intelligently optimize self-consumption of energy? A: SMA technology is used to generate, store, and manage

SMA: An Integrated Solar Solution

energy. We are compatible with a variety of third-party devices that provide energy solutions to home and business owners, as well as electrical utilities. Sunny Portal is changing the way integrators view PV investments by opening a pathway to new and exciting revenue streams. This platform will ensure the successful integration and intercommunication of technologies and software as new features and technologies continue to be added to these energy systems. SMA continues to develop new technologies to meet tomorrow’s demand. This particularly includes battery storage technology for our systems, of which we have nearly 4GW installed globally. This accumulated experience has made us one of the biggest players in the field. Q: What is your view of the storage segment in Mexico? A: Mexico is still in its relative infancy with regard to battery system adoption, mainly because of subsidizing tariffs, which make its wider adoption more challenging. However, there is growing domestic interest and we see a clear path for SMA to emerge as a storage leader in the region. The commercial segment is especially eager to adopt battery solutions that are capable of supporting other important auxiliary services that could be scaled up for

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application to CFE’s energy grid. Although market demand is present and growing, the generation of any formal projects will likely be absent for a couple of years. Mexico’s transition process will be slower in comparison to the European market, but when the domestic market is ready, SMA will be there to assist.

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from the

Q: What are Skysense’s biggest success stories in the Mexican market? A: We consider a project a success story when we achieve a great result for our clients and they recommend us to others. Some of our projects date back nine years. Several clients have gone on to become friends or investors of Skysense, which is a point of pride for the company. Skysense began in the residential sector, just like many other mature solar companies. We later moved to cater to the C&I sector but not before installing solar panels in over 1,000 houses. C&I demand took off in 2Q18 because of a change in how the grid operator calculates demand terms. Our first 0.5MW solar system, which is the current permitting threshold, began in June 2018 and is one of the first Mexican systems of this type. Another major success was over the course of 2021, when we installed a 3MW solar roof for a client that owns a carport parking location that includes a battery energy storage system (BESS). Overall, we installed more than 10MW in 2021. Q: What were the main factors driving Skysense’s growth? A: There are three main factors. Firstly, 2020 represented a year of major economic contraction. In 2021, economic

Enrique Garduño

reactivation meant there was a great deal of money in the market. Solar assets are long term and have a good return on investment (ROI), so it made sense to invest in solar, especially as inflation was becoming problematic. Finally, the market´s

Co-Founder and CEO | Skysense

awareness regarding the need for sustainable strategies grew significantly compared to previous years. Other companies, such as solar suppliers, experienced much more demand in 2021 compared to 2019.

Applying Solar Experience in The Battery Storage Environment

Q: How does the company set itself apart from competitors in the design, engineering and integration of solar systems for C&I clients? A: Solar is a commodity-based sector: solar panels, inverters and structures are all commodities. Nevertheless, there are factors that can set companies apart. Skysense is an experienced company, operating since 2013. Furthermore, we are flexible in how clients acquire solar systems, based on their cash flow, as well as on the technology that best suits them. We can propose an upfront fee, leases and payment terms to meet fiscal requirements. Another selling point is Skysense’s policy that makes operations and maintenance (O&M) its own responsibility. For instance, we guarantee a certain amount of KWh generated for a period of 10 years. Any technical risks are on us, no matter how the system has been acquired. Q: How does the company assure quality in the technology it installs? A: The company has worked arduously to build long-term relationships with solar distributors. In addition, Skysense has

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been using the same brand of photovoltaic solar panels for the past five years. We also make sure that the components we work with are internationally certified and we have a team dedicated to quality assurance. Equipment is, of course, important but a correct installation provides quality for the long run.

n today’s market conditions, all organizations must pay close attention to risk. It is imperative to understand and prepare for everything, from financial feasibility to cyberattacks that can disrupt the market and derail the longevity of an organization. Climate change is arguably the biggest and most complicated

risk an organization faces in the long term. The solutions can seem complex and expensive and organizations must decide not only what they can do in the long term but, also, what can be done imminently. In a global environment in which the UN General Assembly has highlighted the need to almost triple the installed capacity of renewable energy in the next 10 years (from 2,800GW to 8,000GW in 2030), Mexico and the rest of the world are naturally on the way toward decarbonization and energy transition. Despite the current government’s prioritization of fossil energy projects, the Mexican government’s “Transition strategy to promote the use of cleaner technologies and fuels,” published in

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the Official Gazette of the Federation in 2020, mentioned that the

Energy Efficiency: The First Step on the Road to Net Zero Fernando Tirado Country Manager | Centrica Business Solutions

country aims to achieve 35 percent of total electricity generation from clean energy by 2024, 39.9 percent by 2033 and 50 percent by 2050. Is this goal feasible? We still have a very long way to go but the good news is that in the private sector, large companies in the country, such as CEMEX, Bimbo, Volkswagen and Walmart, are leading the way toward decarbonization. More and more companies (regardless of size) are making an effort to reduce their environmental footprint and work sustainably, generating a positive impact in terms of environmental care, the development of local communities and their own business. Energy efficiency offers a unique opportunity to save money and reduce your impact on the environment; it’s a win-win. Why are not more Mexican organizations taking advantage of this? The main reason we see is lack of knowledge. How do I start? Will it be expensive? Will it mean I have to stop operations? Is the Mexican regulatory framework adverse? The national energy sector is as fascinating as it is complex, so a decision like this may seem difficult, but we must not lose sight of this fact: making better use of resources invariably results in savings, regardless of whether you are in China or Mexico. This is what energy efficiency refers to. It is a concept that is not only beneficial but necessary. As far as we know, Mexico aims to reduce greenhouse gas emissions by 22 percent and short-lived climate pollutants (SLCPs) by 51 percent by 2030. The private sector will play a key role in achieving this, so I want you to think about taking the first step. Learn about the options that exist to advise you, because, while you do not need to be an expert in sustainability to realize that reducing carbon emissions is vital, you do need an expert to guide you to achieve it. The regulatory framework is changing and, therefore, it is important to have an early vision of the existing possibilities depending on the needs of each one. Like everything else, a jacket may fit you perfectly but it may be too tight for me, or the other way around. This is the world of energy simply put.In terms of

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costs and the impact on the operation of facilities, I do not want to get too technical but, spoiler alert: yes, it is possible to lead a business that is economically profitable and environmentally responsible and no, there is no significant impact on the production times of plants and businesses.

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from the

Q: How do you assess demand for the company’s string inverters in Mexico’s current market conditions? A: It is a difficult environment to operate in because of the political atmosphere, marked by a great deal of uncertainty regarding the Wholesale Electricity Market (WEM) and utilityscale project development. The development of large, renewable energy projects is at a complete standstill but distributed generation (DG) has grown exponentially, especially since the beginning of the pandemic. This situation has been somewhat surprising for Solis: We initially feared the worst for our sales over 2020 but after July, the DG market kicked in and we have experienced greater demand. Mexican end consumers have placed their trust in the solar industry, which has been the best news of the past year. Q: In which sectors do you see the biggest potential for demand? A: At the moment, DG represents the only hope for the solar market. Many companies that were previously focused on utilityscale projects are looking toward DG to maintain their business. Outside of this segment, residential users will continue to pursue solar solutions. The sun is out there and we have the technology to make it a success. In addition, policy favors small-scale solar. If there are no major changes, we expect the market for residential users to continue growing. With blackouts and higher energy

Sergio Rodríguez

prices becoming an issue, more people will want energy security, especially via hybrid solutions. Q: What sets Ginlong Solis’ solutions apart from the

Service Manager Mexico and Latam | Ginlong Solis

heavy competition in the inverter business? A: Solis has been in the Mexican market since 2013, backed by strong partnerships with local distributors. These partnerships, coupled with the growth of the solar sector that flourished after

DG Solar Democratizes Energy; Storage Empowers Its Users

the 2014 Energy Reform, have helped Solis to penetrate the market and establish itself as a trusted and high-quality brand. There are many competitors, but we have a 35-40 percent market share. Our long-term partnerships, strong after-sales service and low failure rate have made this success possible. Q: How is Ginlong working to ensure increased demand in DG solar solutions? A: In 2020, we brought a new factory online, which allows us to achieve 20GW of production per year. This is a big improvement on our previous capacity of 5GW. It came at the right time for the solar industry: Raw materials are scarcer and logistics costs are increasing, so our increased capacity has helped us to become more efficient in meeting the growing global demand. Q: How does the company adapt its solutions and support and retain its clients? A: We have been able to improve our products significantly and have adapted our solutions to the Mexican market. If the market requires anything new, we work to provide it. We have

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also improved the internal quality of our inverters. They can now withstand the grid’s instability. In 2020, we introduced our 60K LV inverter for 220v projects, which is the only solution at this capacity in the market. This came about as a response to client demand that want to save on the transformer requierements.

Conference

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Highlights

A Global Reshuffle for Logistics and Key Component Manufacturing Adhara Perales Sales Manager Mexico and Central America | Canadian Solar

Roberto Moreno Director General | Solar Power Group

Iván Reyes Utility Director Latam | LONGi Solar

Kevin Gutiérrez Vice President of Inverter Business | HUAWEI Mexico

Sergio Rodríguez Manager Mexico and Latam | Solís

olar energy generation technology companies were blindsided by the overnight supply chain stress produced by the COVID-19 pandemic, which led to price hikes on input materials and shipping container bottlenecks as companies saw their

operations restricted and countries shut down their borders. Like adjacent market sectors, solar companies, too, saw themselves obligated to adapt and learn to mitigate the risks in front of them. As industry leaders anticipate a return to pre-pandemic economic activity and fluidity, companies look forward to refining their processes and to new market opportunities. Mexico’s energy market came under considerable strain during the pandemic from both heightened end-user and industrial demand from a booming e-commerce sector. This stands to be further complicated by rising logistical costs, which are effectively undermining Mexico’s nascent solar energy sector. “The intersection of international and domestic logistical challenges has effectively put Mexico’s photovoltaics panels subsector on pause,” says Roberto Moreno, Director General, Solar Power Group. Global interconnectedness has many recognized benefits but it has also made companies more interdependent, which proved to be a challenge during the global pandemic. The COVID-19 pandemic and now the Ukrainian crisis have driven a dramatic rise in logistics costs, increasing container costs from 1,500-1,800 to 14,000 just two weeks ago. This is on top of domestic logistical challenges, such as tax disputes between national institutions and foreign market players, thereby straining and undermining a still-developing market sector. As an international equipment manufacturer, Huawei relies heavily on the fluidity of supply chain mobility across the globe. The company prepared for potential disruptions and contemplated reactionary countermeasures but this proved to be ineffective given that the company could not anticipate where these disruptions would manifest along its supply chain. The most impactful challenges were COVID-19 outbreaks, which in one case slowed production down to a trickle and

forced the company to push back on delivery times. Identifying that it needed better vertical visibility, the company organized its known inputs and assets and referenced market forecasts to calculate timeline estimates so that it could relay this information to clients. “Planning strategies allowed us to combat the lack of containers and increased logistics costs. Companies had to adapt to advanced demand models and adjust their delivery times to new conditions,” says Kevin Gutiérrez, Vice President, Huawei Mexico’s inverter business. Uncertainty was another factor hindering the market’s competitiveness. Nevertheless, the pandemic fostered digitization efforts, which will assuredly create a better return on investment in the long-term, according to Sergio Rodriguez, Manager for Mexico and Latin America, Solis. The energy plant project Solis had planned, meant to grow its productive capacity from 5GW to 20GW, was slightly delayed. Prioritizing local relationships with its global partners was key, especially as an internal exporter. To gain better control of costs, the company chose to discuss monthly, weekly and even daily demand of semiconductor components, prompting the most demand and data-driven project the company has ever led and a necessary one considering how constricted the market had become. Moreover, the company also expanded its provider network to be able to complete its project successfully, says Rodríguez. The logistical challenges that arose helped to drive innovation in the sector, forcing companies to think of creative solutions. However, it was the freshly approved solar projects that suffered, which were on the receiving end of price hikes as a result of higher input costs and logistics taxes. Still, some of the mitigating strategies that were developed culminated in a more efficient and productive operational process. This was the case for LONGi, a company that even included volatility in prices within contracts, a previously unthinkable tool in the sector. “The process is still incomplete but the pandemic has exposed fault lines that will become tomorrow’s business and operational standards. Demand has not fallen and as prices stabilize or destabilize, market players will be able to react based on acquired wisdom,” says Ivan Reyes, Utility Director, LONGi Solar.

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Crucial Components | 72

Solar System Components Continue to Mature Drawn to a market that is growing with the shift to photovoltaic solar-based distributed generation (DG), technology manufacturers continue to develop their portfolios to support the burgeoning industry. Besides modules, the role of inverters is growing, along with the integration of hybrid technology, such as battery storage and green hydrogen, for greater efficiency and lower intermittency. In Mexico, DG installations are 99 percent PV solar. Though other promising technologies such as biomass and cogeneration exist, DG solar remains the most popular. Data from Zumma Energy Consulting shows that by January 2021, the technology represented 1,388MW of installed capacity spread across 165,000 contracts. In 2020, 365MW of capacity was added. Analysts see the commercial and industrial (C&I) segment as the main catalyst for growth, though industry insiders also see considerable opportunity in residential systems. Compared to the post-2014 Energy Reform boom, 365MW of growth a year might not seem like much compared to the thousands of MWs the long-term energy auctions and subsequent merchant projects brought to the market. But in an environment where a push for regulatory change makes large-scale developments close to impossible, the unregulated DG industry below the 0.5MW threshold becomes more interesting. “At the moment, DG represents the only hope for the solar market. Many companies that were previously focused on utility-scale projects are looking toward DG to maintain their business,” says Sergio Rodríguez, Service Manager for Mexico and Latin America, Solis. Yet, seeing DG as the only avenue toward profits is too narrow a view considering the technology’s benefits. “In any case, DG is democratizing the energy sector. With current regulation, almost anyone can have access to their own energy,” he says. The globally growing market provides an opportunity for technology. Besides the solar modules themselves, other core solar system components are necessary. For instance, no solar system could produce serviceable electricity without an inverter, which functions as the brain of the system. Costs for a single inverter can vary depending on the size of the system but are generally above US$1,000. How many are needed mainly depends on the type: a 0.5MW solar system can place over 1,000 panels under one socalled central inverter or use several string inverters instead. The choice between central or string inverters is not an easy one, since many factors are at play and several voices bring contrasting opinions. “To make monitoring easier, we choose to work with central inverters,” Mauricio Chapa, Managing Director, Tecsolar, says. “While it is true that string inverters are better for fine-tuning, the benefits of clear monitoring outweigh this customization on DG systems,” he adds. “We developed and launched the new 350KW string inverter together with the medium voltage compartment station because we are seeing more solar and EPC interest in large projects with

Crucial Components | 73

string inverters,” says César Alor, Country Manager Mexico, FIMER, on the side of string inverters. FIMER joins companies such as Huawei in pushing the more customizable string inverter but has not shut itself off from central inverters. “This allows us to provide the best of both solutions,” Alor says. The issue between inverter types aside, these crucial components can be developed to add further value to solar systems, whether grid-tied or isolated. “We have also improved the internal quality of our inverters. They can now withstand the grid’s instability,” Rodríguez explains when asked how his company had worked to improve its technology to meet Latin America’s specific challenges. “We also have a low-voltage 60KW large inverter, which means a transformer is no longer necessary. This is particularly useful for Latin American applications in the C&I segment,” Rodríguez says. After inverters comes battery storage. “Companies can save a great deal of money with a storage system when they shift across the schedule that pertains to Mexico’s tariffs, which feature lower costs at night and higher costs in the late afternoon,” explains Enrique Garduño, Co-Founder and CEO, Skysense. But not everyone agrees that the technology is that helpful considering changes in energy billing. “I do not foresee major growth for storage in the C&I segment. Utilities have changed the way they charge C&I energy users. For instance, a few years ago, end-users were very aware of the benefits of peak-shaving solutions. Now, people do not seem very interested in how storage can achieve this,” says Roberto Moreno, General Manager, Renewable Energy Projects for Solar Power Group. Nevertheless, Moreno adds that he is “quite excited” about the concept itself and that more isolated areas with limited access to the grid can benefit greatly. Especially after the introduction of the Grid Code 2.0, storage’s stability can add further value. “Companies can bring the power factor back to one, as it is a big source of reactive energy or as much as a major factory could need,” Garduño says. Battery storage itself is relatively straightforward. The real innovation is happening in the software that can trigger such added value. “As any great driver will tell you, having the best car is not enough to win the race. Once the right system design is selected, a smart and efficient software control is crucial for an efficient and trustworthy operation,” wrote Alejandro Fajer, CEO and Co-Founder, Quartux Mexico, for MBN. Another point to consider is how software integrates with hardware. “Customers are getting disjointed offers and there are a lot of false expectations being created. If you do not control the software, it is very difficult to offer performance guarantees in terms of an integrated hardware and software solution,” says David Fernandes, CFO of ON Energy Storage, speaking at Mexico Energy Forum. Not all companies are putting all their money on battery storage, either, says Vladimir Ruiz, Senior Executive Director for Mexico and Central America, Fronius. “In all honesty, the company does not fully believe in lead- or lithium-based battery storage since they are not considered an optimal solution for the long term, although they can overcome today’s problems of intermittency in solar generation to be fully competitive with other energy sources,” Ruiz says, adding that solar energy itself can do peak shaving or load shifting to a degree. Instead, Fronius considers another up-andRead the complete article More about this topic

coming technology. “In the past decade, we have been focusing more on green hydrogen,” he says. “We are betting on hydrogen because it is an abundant, potential resource, just like silicon.”

exico’s electricity sector had to wait until the last day of 2021 to receive the best news of the year. On Dec. 31, the Official Gazette of the Federation officially posted the second version of the National Electricity Grid Code, which

establishes the criteria for better efficiency, reliability, continuity, security and sustainability of the SEN (National Electricity Grid). Whether it was the date or a general disinterest from the public, not a lot of attention was addressed to a publication that might just be the only concrete countrywide action taken toward a more reliable electricity grid and an important step on the path to renewable generation. Originally published in 2016, this new version holds key differences that indicate a stricter surveillance with clearer obligations but with the same fierce repercussions (fines of 2-10 percent of net income or minimum salaries of MX$50,000-MX$200,000 (US$2,400-US$9,700)). The document now specifies exactly who are the obligated, to what extent they are obligated, and

Crucial Components | 74

the compliance requirements. It even officially includes the

Mexico Takes a Step Toward Grid Stability, 100 Percent Renewables Alejandro Fajer CEO and Co-Founder | Quartux Mexico

document template that needs to be submitted for conformity with the code. From my perspective, this version is no longer in the experimental phase (which might have been the case with the original) but has learned from its first implementation and is now actively establishing timelines and clear binary requirements, with guidelines and documents necessary for its completion. It is the authority’s invitation to comply by saying: here are the instruments, the formats, the steps and everything necessary so that you can satisfy all requirements in the given timeline. For me, the composition of the document points to a stronger surveillance and stricter monitoring of the code that will only result in a higher policy adoption rate and thus a more reliable grid. This is great news, considering that the obligations apply to ALL players in the industry: generation, final users, intermediaries (CFE Transmission and Distribution) and even regulatory entities, such as CENACE, CRE and SENER. In my opinion, it is the first recent, unbiased document that prioritizes the reliability of the electricity system rather than following the interests of specific players. A clear example is the modification in the merit order of dispatch where renewables are being lowered and hydroelectric and nuclear generation are given priority. Although it is not the optimal economic dispatch order, it is important to consider that it is not an economical matter but rather one of reliability of the system as a whole, regardless of individual benefits. It is this “raison d`être” that is being respected throughout the whole document and which I find appropriate given Mexico’s current energy situation. Reliability of the grid has been the main catalyst of the long-term dispute between the public and private sectors and, ultimately, a hindrance for accelerated renewable generation entry. On the one hand, private companies are eager to take advantage of Mexico’s potential for renewable generation (as seen in the 2017 auctions), as it makes a strong business case and the demand is more than available. On the other hand, public authorities have in their hands an oversaturated national grid (mainly because of a 40 percent increase in consumption since 2010 and the little investment

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made in grid infrastructure) that becomes only more fragile with intermittent generation. Documents and policies such as this one that directly attack the reliability problem head-on, and with no beneficiary but the grid itself, is just what the country needs to settle this long-term dispute.

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from the

Q: What strategies has FIMER implemented to remain competitive in Latin America? A: We have based our 2022 business development in Latin America on three pillars. The first is our team comprises talented, young individuals who support the growth of our company. The second pillar is our renewed product portfolio that we launched at the end of 2021. We have launched new products in the residential segment as well as our hybrid inverter that supports our growth plans in the commercial and industrial sectors. The third pillar is to provide enough channel partners across Latin America. Q: When working with distributors, how does FIMER ensure client loyalty? A: We are a European company and our products are 100 percent made in Italy. Our only manufacturing plant for string inverters is located near Florence. We carefully assess who will be our representative in a region or country because we need to be certain that they will have enough inventory to support local sales and the technical skills to provide advice and customer service. Q: What advantage does FIMER provide by having central and string inverters? A: We developed and launched the new 350kW string inverter

César Alor

together with the medium voltage compartment station because we are seeing more solar and EPC interest in large projects with string inverters. Some customers are looking for central inverters as a preferred solution when developing projects above 30MW. That

Country Manager | FIMER

is why we have two different but integrated R&D departments, one that focuses on string inverters and the other on central inverters. This allows us to provide the best of both solutions. We talk about the advantages of both with our customers, assess their needs and choose according to those needs.

FIMER Consolidates Market Share Growth in Latin America

Q: What are your demand expectations for your utility and distributed generation (DG) projects? A: The demand depends on the region. For instance, Mexico will focus at least for the next three years on DG. However, we also have new markets that are growing rapidly. In Colombia, for example, you have DG together with large-scale storage projects. Chile is seeing strong growth in solar energy generation. Smaller markets like Uruguay and Argentina are focused more on distributed generation. Others, such as Ecuador, Bolivia and Peru, are looking to consolidate new sources of energy and they face the task of settling all the bases for the development of renewable energy markets. Central America is also growing at an interesting pace. Q: What have been the benefits of your ABB acquisition in boosting your R&D efforts? A: Considering the knowledge we acquired in 2020 with ABB, we have released some new products. We launched the PVS-10/33, which are six new inverters (10, 12.5, 15, 20, 30, and 33), in June

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2021. Last September, we also launched our new solution of PVS350, 300 and 260, with the new medium-voltage compartment station that integrates all the string inverters with the step-up transformer. In late 2021, we launched the new PowerOne, PowerTrio and PowerX batteries for storage.

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from the

Q: How are the pandemic and the government’s policy direction affecting demand for Fronius’ solutions? A: We want to achieve a global reduction in emissions and are committed to global sustainability. We are not only present in the solar industry but also in welding equipment and electric vehicle (EV) charging stations for the automotive sector. The company has been involved in this area since we opened our Mexico City office in 2006. We installed our first inverter in 2008, so we have a history in Mexico that dates to before the 2014 Energy Reform. In Mexico, utility-scale projects have pretty much stopped entirely but this is not a major issue for Fronius because we are not involved in massive, centralized energy projects. It makes little sense to produce power in one area if you need to transmit it over vast distances and lose a great deal of energy in the process. Utility scale might be a business with vast quantities of money involved but if transmission is a problem, then it makes more sense to produce power via distributed generation (DG). We provide products for decentralized DG applications as our core business. If people can have a figurative money factory on their own roof, then why not use it? Q: Inverters are becoming a more competitive business. How has the company been working to set its solutions apart?

Vladimir Ruiz

A: Fronius has been working to integrate battery storage for years. Though, in all honesty, the company does not fully believe in lead- or lithium-based battery storage since they are not considered an optimal solution for the long term, although

SE Director Mexico and Central America | Fronius

they can overcome today’s problems of intermittency in solar generation. Even without storage, solar is already ideal for peak shaving or load shifting. Fronius offers mostly grid-tied solutions. All inverters communicate openly with several brands outside of the Fronius sphere, even with energy solutions that are not solar-

Green Hydrogen: The Future of Hybrid Solar Solutions

based at all, such as diesel or natural gas. In the past decade, we have been focusing more on green hydrogen. We have a solution called SolHub, which produces hydrogen as an electrolyzer using solar energy. This hydrogen can then be re-used by various vehicles, such as the public buses in Austria. We are betting on hydrogen because it is an abundant potential resource, just like silicon. Q: What is the biggest issue holding back Mexico’s energy transition from a technological viewpoint? A: The country has many opportunities to improve its energy efficiency, an issue that needs to be dealt with before the country begins looking toward the latest technologies. Another problem in Mexico is that of installation, which fails at times. In general, technology is improving but Mexico still needs to work to adapt its technology. Training is another challenge, particularly in the DG environment. Since utility-scale development has stopped, many large-scale developers and EPCs have stepped down to the medium and low-voltage work surrounding DG projects. Fronius does not need to provide explanations to these companies that

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have worked in a more complex area and can adapt easily. The issue is that many companies are entering the DG market without proper training and know-how. In these cases, Fronius can support these companies with its knowledge and experience to foster a more knowledgeable Mexican energy sector.

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from the

Q: Why is it important to have an uninterruptible power supply? A: Historically, the energy quality in Mexico has never been the best. Factors like urbanization or the weather have affected energy quality. All the technology that surrounds your home, business, or industry needs to be provided with clean, highquality and uninterruptible energy. We manufacture electrical devices that prevent power outages, electrical surges and voltage spikes. When you implement power-protection solutions you ensure the continuity and quality of all home and office operations and activities. The pandemic strengthened the relevance of having reliable energy supply because homes were transformed into operation centers for productive activities, where technological devices became crucial for the fulfillment of our daily tasks. Therefore, power-protection services guarantee that, independently of the quality of the energy outside, operations inside your location will be safe. Q: What are some success stories for CyberPower in Mexico that reflect the company’s added value? A: One of the advantages of power-protection solutions is that they are more like a commodity. All electronic devices, such as telecommunications equipment or surveillance systems, need to be fed with clean and constant energy, which is why it is

Alejandro Sánchez

so critical to have a power-protection solution. Regarding the implementation of our solutions, the healthcare sector stands out. During the past two years, millions of people have sought medical attention at hospitals. All the medical equipment that

Director General | CyberPower Systems

helps keep patients alive needs to be secured by a powerprotection device. Another segment that strongly benefits from our solutions are data centers. Due to the recent acceleration of the digital transformation, societies have evolved toward remote work and, therefore, the need to use cloud-based applications

Power Protection Solutions Are Essential in the Digital Era

and other technologies backed by large data centers has increased. The data center industry has been growing in Queretaro and requires many data protection solutions. Q: What has Queretaro’s role been in the positioning of Mexico within the data centers industry? A: About 15 years ago, Queretaro became a prominent location to open and develop data centers. Today, there are at least five large projects in Queretaro that include top global providers, such as Microsoft and others from Brazil. Mexico is positioning itself as a technology hub for Latin America. The Queretaro government has been very supportive, since it has invested large sums to provide the infrastructure needed to attract foreign investment for the industry. This past year, the data center business in Queretaro became a leading contributor to the state’s GDP. There are many expectations to grow the business, attract investment and become more strategic in the global business, since data centers can provide support locally, regionally and globally. In addition, the recent administration in Queretaro created an Energy Agency that will work to connect CFE with the private

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sector working in the data centers industry. This is a great opportunity for the government to invest in and develop this sector and to take care of the future of energy generation, with an eye toward green solutions that can provide reliable energy supply for the industry.

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from the

Q: How did the pandemic complicate business for photovoltaic solar panel manufacturers? A: Solarever’s mission is still the same: to be the most innovative, efficient and reliable developer of solar technology. We are Mexico’s top manufacturer of solar panels and a market leader for their distribution. To this end, we have three factories and five distribution centers in the country. Mexico is a strategic location for us because it allows the company to access the US market, which has enacted strong protection measures against Chinese companies as part of a wider trade conflict. We had a difficult time last year because the pandemic slowed down business and the supply chain, all while we invested US$20 million in our new factory in Tecoman, Colima. After operating in Mexico for many years, we felt the need to expand, especially to cater more to the growing US market. Our new factory now operates at a 500MW installed capacity per year. Following the opening of our third Mexican factory in January 2021, we were already obtaining positive sales trends: we experienced a huge closing in 2020 and have taken steps to further improve the company. Solarever continues to be strongly committed to the Mexican market and wants to boost innovation here. For this reason,

Simon Zhao

we have donated a solar laboratory to the renowned UNAM university. The project also features a top Chinese university, since China’s renewable energy technology is world-leading. We wanted to generate our own technology in Mexico to

President | Solarever

support major economic growth in the future. Q: How has demand for PV-based solar evolved in Mexico for Solarever?

Manufacturing the Decentralized Energy of the Future

A: Demand can be divided into two sectors: utility scale, featuring giant solar projects, and distributed generation (DG), characterized by small, decentralized projects. In the utility scale environment, the government’s policy direction has had a massive impact. It is exceedingly hard to get a permit to generate electricity but even before this point, it was a challenge to become interconnected by CENACE. For large-scale projects, the market has mostly stopped, except for the finalization of some projects that were already under way. These previous projects entering into operation masked the situation, which is now clear beyond doubt. In DG, the goal is to generate energy for the end user’s own use. This area has been affected much less, although the market has grown at a slower pace than we had hoped, around 20 percent, because of the pandemic and regulatory uncertainty. This means the market is not as great as it was before but it continues to move forward because of lowering costs and better technology. Many companies want to install solar panels to meet climate goals and be socially responsible. Solar energy is also much cheaper than the traditional CFE bill. I expect that DG will continue to grow for these reasons. What is more, Minister of Energy Rocío Nahle has recently said that while the government aims to reform the energy sector, DG-based energy will continue to be supported by the government, along with storage and energy efficiency. The Mexican grid is not very strong, which is a liability. Massive

solar projects can have a major impact on the grid, whereas small decentralized projects support it. I do not fully agree with the move to stop permitting but I understand the government’s arguments in wanting to protect the grid’s stability. Q: How is Solarever adapting its R&D and product portfolio toward the specific needs Mexico has now and will have in the near future? A: The government is aware of how important DG and storage is. Solarever is quite lucky because all of its business is aligned with what the government aims to further develop. In solar generation, our goal is to expand our manufacturing capabilities. Regarding storage, we are developing our own lithium battery for storage systems, as well as our storage inverters. It is some of the best technology on the market: even though we distribute GROWATT and Tesla, among others, Solarever’s own technology stands out in comparison. It is a better match for the voltage and frequency requirements of the Mexican market. Moreover, Solarever will begin promoting its own electric vehicle (EV) in early 2022. It is based on technology that is also very cost-effective. This is a major stumbling block for EVs. A Tesla is a really magnificent car but it is very expensive and, therefore, only available to the rich. Our EV will market below MX$300,000 (US$14,500). It could revolutionize Mexico’s automotive industry by making EVs available to everyone. A change needs to be made within Mexico. Its automotive industry is a pillar of the economy but it focuses on traditional cars. In the US and Europe, people are slowly stepping away from manufacturing and buying traditional cars as everyone switches to EVs. Where should Mexico’s industry go? By slowly adapting the manufacturing industry toward EVs, the automotive market will survive. Q: What is a main challenge you see that Mexico would need to overcome to become a technological leader and innovator? A: R&D is essential. The best way to become a market leader is to improve technology while decreasing costs. The problem is that in Mexico, we do not have that much capacity to really innovate technology. Another issue is that the government does not provide optimal support for innovation. New technology companies like Tesla and Amazon lost a lot of money at first. If we do not have the appropriate regulatory and financial support and an environment where this innovation can flourish without companies going under, innovation will not take off in Mexico.

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For Mexico’s Energy Storage Development, The Time is Now 03/10/2022

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Siemens Energy Inaugurates Mexico City Headquarters 12/07/2021

Energy Efficiency: The First Step on the Road to Net Zero Fernando Tirado Country Manager | Centrica Business Solutions

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Minsait Strives To Be Ideal Digitalization Partner Guillermo Bilbao Director | Minsait

More Output, Less Maintenance to Temper Water Crises Manuel Arredondo Country Manager Mexico | ZNShine Solar

Acronyms AC

Alternating current

GNV

Vehicular natural gas

AMDEE

Mexican wind energy association

Gigawatt

AMGN

Mexican natural gas association

IEA

International Energy Agency

ASOLMEX

Mexican solar energy association

IRENA

BESS

International renewable energy agency

Battery Energy Storage System

C&I

Joint venture

Commercial and industrial

CAPEX

LCOE

Levelized cost of energy

Capital expenditure

CEL

LIE

Electrical industry law

Clean energy certificates

CENACE

LNG

Liquefied natural gas

National energy control center

CFE

MBN

Mexico business news

Federal electricity commission

CNG

Megawatt

Compressed natural gas

CRE

O&M

Operations and maintenance

Energy regulatory commission

PEMEX

Petróleos Mexicanos

Direct current

PPA

Power purchase agreement

Distributed generation

EIA

Energy Information Administration

PRODESEN

National electricity system development program

EMAT

Electromagnetic acoustic transducer

Photovoltaics

EPC

Qualified Suppliers

Engineering, procurement and construction

R&D

Research and development

ESG

Environmental, social and corporate governance

SENER

Ministry of Energy

ETRM

Energy trading risk management

USMCA

United States-MexicoCanada agreement

GDP

Gross domestic product

WEM

Wholesale electricity market

GEMS

Grid energy management system

WTG

Wind turbine generator

Advertising Index Mexico Natural Gas Forum Enel Green Power

Circutor

Iberdrola

CapWatt 15

Mitsui

Citrus

LONGi

Hitachi ABB Power Grids RER Energy Group ATCO

Energía Real 71 Forefront Power 79

Index 6, 9

Brattle Group Bright

Ingeteam 29

6, 8, 11, 19, 55, 80

Canadian Solar

10, 31, 35, 38, 70

Centauro Energía

47, 49

Centrica Business Solutions Chamber of Deputies

Kolya 6, 10, 28

8, 56, 68, 80

NRG Ingeniería

Power Electronics 32 Prana Power

CyberPower Systems

50, 54, 65

Krannich Solar 34, 38

6, 12, 16

6, 22, 23

CITRUS

K2 Systems

6, 11

Quartux 73, 74

DOMINION GLOBAL 51

Rengen Energy Solutions

Enegence 52, 53

RER Energy

Enlight 6, 14, 21

Skysense 14, 34, 54, 67, 73

FIMER

73, 75

SMA

ForeFront Power

24, 36

Fronius 38, 65, 73, 76 Galt

Greenlux

14, 15, 40

38, 66

Solarever

35, 78, 79

Solar Power Group 35, 39, 70, 73

6, 8, 18

Ginlong Solis

Solarvatio 57 69

Solfium 14, 55, 59, 60

Tecsolar 6, 20, 72

Green Power Monitor Holland & Knight

8, 28, 33

6, 13, 16

Top Energy

30, 41, 42

Photo Credits Cover

EnvatoElements

Invenergy

Array Technologies

DNV-GL

The Brattle Group

Green Power Monitor

Kolya

Centauro Energía

Prana Power

K2 Systems

Manuel Rodríguez

DOMINION GLOBAL

Holland & Knight

Enegence

MSS 2022

Centrica Business Solutions

Galt Energy

Solarvatio

Bright

Greenlux

Tecsolar

Solfium

Enlight

X-Elio

CITRUS

DHAMMA ENERGY

Array Technologies

SMA America

Invenergy

Skysense

Ingeteam

Centrica Business Solutions

Top Energy

Ginlong Solis

Canadian Solar

MBE

Power Electronics

Quartux Mexico

Rengen Energy Solution

FIMER

ForeFront Power

Fronius

NRG Ingeniería

CyberPower Systems

Krannich Solar

Solarever

Solar Power Group

ARRAY TECHNOLOGIES

RER Energy Solutions

Back Cover

MSS 2022

Enel Green Power

Credits Journalist & Industry Analyst: Cas Biekmann Journalist & Industry Analyst: María José Goytia Editor: José Escobedo Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Publication Coordinator: Natalia Rojo Commercial Manager: Mirjam Schipper Content Partnership Coordinator: Alexa Villarruel Content Partnership Coordinator: Miguel García Content Partnership Coordinator: Mariana Rodríguez Content Partnership Coordinator: Christopher Reyes Junior Graphic Designer: Valeria Villanueva Junior Graphic Designer: Paulina Quiroz Graphic Designer: Marcela Muñoz Ledo Senior Graphic Designer: Mónica López Design Director: Marcos González Web Development: Omar Sánchez Collaborator: Pedro Alcalá Collaborator: Cinthya Alaniz Collaborator: Antonio Gozain Director General: Jeroen Posma

ALL RIGHTS RESERVED © Mexico Energy Review S.A. de C.V., 2022. This annual publication contains material protected under International, US and Mexican Laws, as well as international treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system without express written permission from Mexico Business Publications S.A. de C.V. Mexico Energy Review is a registered trademark. The publisher has made all reasonable efforts to provide accurate information and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising from any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.

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