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Negocios ProMéxico |

14 May 2013

| Negocios ProMéxico

May 2013

Guest Opinion photos archive

Mexico: A Competitive Platform

for Clean Energy Projects

Mexico’s commitments towards reducing emmisions and using cleaner energy sources represent an important business niche.

The rapid growth of emerg-ing countries has caused an increase in the energy demands of their population, a demand that has already surpassed the current supply of energy generation and use. That im-balance has created a window of opportunity around energy-efficient systems worldwide.

Cities are significant ener-gy consumer nodes. They are suitable for potential micro-generation and use of energy efficient devices on the side of demand. In urban areas, the services, building and industrial sectors have crucial opportunities in solar thermal power generation and utiliza-tion, while the public services sector can also leverage water pumping, public lighting, wa-ter and waste treatment and massive public transportation

by enrique rebolledo*

systems. On the supply side, Latin America has important manufacturing clusters that could incorporate technolo-gies which are common in industrialized countries but non-existent in the region, mainly due to a lack of infor-mation about their benefits, technical knowledge and com-mercial efforts.

In the international arena, Mexico has made commit-ments to reduce emissions and use cleaner energy sources, setting goals to those ends. Companies with high energy consumption or large CO2 emissions are search-ing for proven technology options that enable them to reduce both their energy consumption and the risks associated with greenhouse gas emission regulations. The evermore obvious opportuni-ties include the integration of renewable energies, co-gen-eration, energy assessment of waste and a new approach to processes that increase en-ergy efficiency.

According to Ernst & Young’s Renewable Energy Country Attractiveness Index for 2012, Mexico has the highest rates for solar power (18th globally) and the second (25th globally) for wind power in Latin America, only after Brazil. In 2012, installed wind capacity came to 1GW, with investment growth estimates in the industry at 20 billion usd for the next decade. Mareña Renovables has launched the most ambitious project in Latin America, with more than

396 MW in wind power, and a value of 961 million usd. For its part, Gamesa has installed more than 74MW with an investment of close to 160 mil-lion usd. Finally, by the end of 2012, the framework for small-scale renewable energy tender offers (<30MW) was created to promote invest-ments by allowing installations to contribute to the power grid through the use of technolo-gies such as solar photovoltaic and thermal, co-generation and small hydro.

Mexico is committed to generating 35% of its electric-ity through renewable sources by 2024 (currently at 12%). In order to do so, several laws and regulations have been passed, above all to facilitate interconnection to the power grid. Wind power potential is estimated to reach a capacity of 12 GW by 2020, while in thermal solar energy, more than 1.66 million square me-ters have been installed with a potential for a further 23.5 million square meters by 2020.

Since 2011, every new house built with Esta es tu casa gov-ernment housing grants must incorporate ecological criteria, such as solar water heaters, efficient lighting, thermal iso-lation and low-consumption appliances, based on the cli-mate and region in which they are built or remodeled.

Furthermore, and result-ing from the approval of the General Climate Change Law (2012) in Mexico, an internal emission trading system is planned, possibly linked to

Resulting from the approval of the General Climate Change Law (2012) in Mexico, an internal emission trading system is planned, possibly linked to other international initiatives, as a tool for the country to achieve its goal of reducing carbon dioxide (CO2eq) emissions by 30% in 2020 and by 50% in 2050.

other international initiatives, as a tool for the country to achieve its goal of reducing car-bon dioxide (CO2eq) emissions by 30% in 2020 and by 50% in 2050. That system would define a method to distribute emission rights at facility level, defining a cap for regulated sectors and promoting trade between installations that show different cost structures to improve their energy and environmental performance. Trade arises from the options offered by regulated entities, either by assessing costs of an onsite reduction, or through the acquisition of reduction certificates in the market as a more convenient option. Enti-ties with lower emissions than those assigned will be able to sell their excess certificates to other entities that find purchas-ing certificates more profitable

than reducing emissions on an internal level. Exchange would be made through a mechanism similar to the stock exchange.

In addition, that market could be linked to the Cali-fornian market through the Climate Action Reserve (an ex-perienced, trusted and efficient offset registry to serve the car-bon market), and to the North America 2050 (NA2050) partnership in the long term (a group of US states and Cana-dian provinces committed to policies that move their juris-dictions toward a low-carbon economy), creating an impor-tant opportunity for technol-ogy transfer and investment in the Mexican industry.

Within that context, the Mexican energy sector accounts for close to 67% of greenhouse gas emissions (CO

2eq) and en-ergy consumption is expected to

increase by 3.3% annually until 2030. In other words, this mar-ket could reach a value of 2.295 billion usd by 2020 (equal to 153 million of tCO2eq) associ-ated to the energy sector alone, based on prices of emission reduction certificates observed in California during the first tender of 2012. Even more interesting is the possibility of approaching international mar-kets in other sectors that require investment –such as agriculture and transport– which could improve its financial and envi-ronmental performance through sustainability practices.

In short, the closeness and availability of supply chains related to trade with North America and the Asian Pa-cific Corridor make Mexico a potential partner to leverage knowledge, manufacturing and export in the energy efficiency

and renewable energies market. Between 2005 and 2011, more than 4.77 trillion usd were invested in clean energies in Mexico (92% in wind power).

Mexico is a competitive destination for strategic alli-ances with American compa-nies. The country’s growth po-tential also demands technical skills and specialized training which, combined with poten-tial energy and tax reforms, natural growth in consump-tion and technological ad-vances, make Mexico a place of operations and growth. But most importantly, this land-scape illustrates an important niche in the area of renewable energies and energy efficiency management that hasn’t been tapped into as yet. n

* CEO of Bajo en Carbono.

www.bajoencarbono.com

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