Mexico sees steady growth as Mexico Windpower looms

Next month, the Mexican wind energy association (AMDEE) and the Global Wind Energy Council are set to host their Mexico Windpower conference in Mexico City.

This comes at an interesting time for the Mexican wind industry. Bloomberg New Energy Finance reported this month that large project finance deals for wind and solar farms grew by a stunning 516% year-on-year to $6.2bn in 2017.

That isn’t only a wind figure, but it does show that there is a wave of investment into renewables projects in Mexico from which wind developers are benefiting. We should not underestimate the significance of this, given that that government only opened Mexico’s power system to private investors in 2013.

BNEF also raised the possibility that Mexico could overtake Brazil as the second most active renewables market in the Americas, after the US, in 2018. The BNEF statistics show that renewables project finance deals in Brazil in 2017 totalled $6.2bn too – exactly the same level as Mexico – with an annual rise of 10%.

So will Mexico overtake Brazil? It is an intriguing possibility – but, as far as wind is concerned, we still expect to see more growth in Brazil in the coming year.

First, that $6.2bn investment figure for Mexican renewables in 2017 hides the fact that we didn’t actually see many large wind project finance deals reported last year.

A quick look in our deals database uncovers the $1.2bn close at the Eolica del Sur last May; the $600m close for Zuma’s 424MW Reynosa; and a $220m debt deal at Cubico’s 250MW El Mezquite, in which Cubico is also set to invest around $100m.

That only gets us to $2.1bn. The overall annual figure is likely to be higher than that, and it represents good progress from the $1bn of project finance deals that the Global Wind Energy Council reported for 2015 and $900m in 2016. Even so, it tells us that we would be unwise to attribute most of the 516% year-on-year growth to wind. Solar is playing a vital role in Mexico's green growth too.

This is borne out in 2016 and 2017 renewables auction results.

Wind developers picked up a solid 43% and 47% of available support in 2016 and 2017 tenders respectively, and more support went to solar both times. Companies including Enel, Engie and Ienova are winning vital government backing – Enel is planning to build wind farms totalling 593MW in Mexico, for example – but growth is steady rather than spectacular.

As a result, we expect wind farm completions and investments in Mexico to keep trailing Brazil in 2018; and Mexico's leaders need to inject more momentum if the country is to hit a target of bringing $23.6bn investment into wind between 2017 and 2020. That’s to be expected: Mexico is still developing a support system where Brazil has one that is up-and running – and, crucially, Brazil has kept attracting money through its recession.

And finally, we think the 2017 renewables project finance statistics for Mexico in this research may end up being too high. Crucially, the Mexican Supreme Court this month ordered a halt to work on the 396MW Eolica del Sur, because it decided that the local Zapotec community had not been properly consulted about it.

Macquarie and Mitsubishi are developing the project with backing from investors including Mexico’s government, and we see a good chance of work re-starting.

However, the Inter-American Development Bank now lists the project as cancelled. If so, the $6.2bn deals agreed in Mexico last year would not translate into $6.2bn of investment, as you need to strip out Eolica del Sur's $1.2bn. It would be a blow for the market, not necessarily a disaster, but does highlight some of the teething problems that come with the establishment of a new market.

And you can bet it’ll be a big focus at next month's conference.

Next month, the Mexican wind energy association (AMDEE) and the Global Wind Energy Council are set to host their Mexico Windpower conference in Mexico City.

This comes at an interesting time for the Mexican wind industry. Bloomberg New Energy Finance reported this month that large project finance deals for wind and solar farms grew by a stunning 516% year-on-year to $6.2bn in 2017.

That isn’t only a wind figure, but it does show that there is a wave of investment into renewables projects in Mexico from which wind developers are benefiting. We should not underestimate the significance of this, given that that government only opened Mexico’s power system to private investors in 2013.

BNEF also raised the possibility that Mexico could overtake Brazil as the second most active renewables market in the Americas, after the US, in 2018. The BNEF statistics show that renewables project finance deals in Brazil in 2017 totalled $6.2bn too – exactly the same level as Mexico – with an annual rise of 10%.

So will Mexico overtake Brazil? It is an intriguing possibility – but, as far as wind is concerned, we still expect to see more growth in Brazil in the coming year.

First, that $6.2bn investment figure for Mexican renewables in 2017 hides the fact that we didn’t actually see many large wind project finance deals reported last year.

A quick look in our deals database uncovers the $1.2bn close at the Eolica del Sur last May; the $600m close for Zuma’s 424MW Reynosa; and a $220m debt deal at Cubico’s 250MW El Mezquite, in which Cubico is also set to invest around $100m.

That only gets us to $2.1bn. The overall annual figure is likely to be higher than that, and it represents good progress from the $1bn of project finance deals that the Global Wind Energy Council reported for 2015 and $900m in 2016. Even so, it tells us that we would be unwise to attribute most of the 516% year-on-year growth to wind. Solar is playing a vital role in Mexico's green growth too.

This is borne out in 2016 and 2017 renewables auction results.

Wind developers picked up a solid 43% and 47% of available support in 2016 and 2017 tenders respectively, and more support went to solar both times. Companies including Enel, Engie and Ienova are winning vital government backing – Enel is planning to build wind farms totalling 593MW in Mexico, for example – but growth is steady rather than spectacular.

As a result, we expect wind farm completions and investments in Mexico to keep trailing Brazil in 2018; and Mexico's leaders need to inject more momentum if the country is to hit a target of bringing $23.6bn investment into wind between 2017 and 2020. That’s to be expected: Mexico is still developing a support system where Brazil has one that is up-and running – and, crucially, Brazil has kept attracting money through its recession.

And finally, we think the 2017 renewables project finance statistics for Mexico in this research may end up being too high. Crucially, the Mexican Supreme Court this month ordered a halt to work on the 396MW Eolica del Sur, because it decided that the local Zapotec community had not been properly consulted about it.

Macquarie and Mitsubishi are developing the project with backing from investors including Mexico’s government, and we see a good chance of work re-starting.

However, the Inter-American Development Bank now lists the project as cancelled. If so, the $6.2bn deals agreed in Mexico last year would not translate into $6.2bn of investment, as you need to strip out Eolica del Sur's $1.2bn. It would be a blow for the market, not necessarily a disaster, but does highlight some of the teething problems that come with the establishment of a new market.

And you can bet it’ll be a big focus at next month's conference.

Next month, the Mexican wind energy association (AMDEE) and the Global Wind Energy Council are set to host their Mexico Windpower conference in Mexico City.

This comes at an interesting time for the Mexican wind industry. Bloomberg New Energy Finance reported this month that large project finance deals for wind and solar farms grew by a stunning 516% year-on-year to $6.2bn in 2017.

That isn’t only a wind figure, but it does show that there is a wave of investment into renewables projects in Mexico from which wind developers are benefiting. We should not underestimate the significance of this, given that that government only opened Mexico’s power system to private investors in 2013.

BNEF also raised the possibility that Mexico could overtake Brazil as the second most active renewables market in the Americas, after the US, in 2018. The BNEF statistics show that renewables project finance deals in Brazil in 2017 totalled $6.2bn too – exactly the same level as Mexico – with an annual rise of 10%.

So will Mexico overtake Brazil? It is an intriguing possibility – but, as far as wind is concerned, we still expect to see more growth in Brazil in the coming year.

First, that $6.2bn investment figure for Mexican renewables in 2017 hides the fact that we didn’t actually see many large wind project finance deals reported last year.

A quick look in our deals database uncovers the $1.2bn close at the Eolica del Sur last May; the $600m close for Zuma’s 424MW Reynosa; and a $220m debt deal at Cubico’s 250MW El Mezquite, in which Cubico is also set to invest around $100m.

That only gets us to $2.1bn. The overall annual figure is likely to be higher than that, and it represents good progress from the $1bn of project finance deals that the Global Wind Energy Council reported for 2015 and $900m in 2016. Even so, it tells us that we would be unwise to attribute most of the 516% year-on-year growth to wind. Solar is playing a vital role in Mexico's green growth too.

This is borne out in 2016 and 2017 renewables auction results.

Wind developers picked up a solid 43% and 47% of available support in 2016 and 2017 tenders respectively, and more support went to solar both times. Companies including Enel, Engie and Ienova are winning vital government backing – Enel is planning to build wind farms totalling 593MW in Mexico, for example – but growth is steady rather than spectacular.

As a result, we expect wind farm completions and investments in Mexico to keep trailing Brazil in 2018; and Mexico's leaders need to inject more momentum if the country is to hit a target of bringing $23.6bn investment into wind between 2017 and 2020. That’s to be expected: Mexico is still developing a support system where Brazil has one that is up-and running – and, crucially, Brazil has kept attracting money through its recession.

And finally, we think the 2017 renewables project finance statistics for Mexico in this research may end up being too high. Crucially, the Mexican Supreme Court this month ordered a halt to work on the 396MW Eolica del Sur, because it decided that the local Zapotec community had not been properly consulted about it.

Macquarie and Mitsubishi are developing the project with backing from investors including Mexico’s government, and we see a good chance of work re-starting.

However, the Inter-American Development Bank now lists the project as cancelled. If so, the $6.2bn deals agreed in Mexico last year would not translate into $6.2bn of investment, as you need to strip out Eolica del Sur's $1.2bn. It would be a blow for the market, not necessarily a disaster, but does highlight some of the teething problems that come with the establishment of a new market.

And you can bet it’ll be a big focus at next month's conference.