Solar Market Potential in Mexico

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Solar Market Potential in Mexico

Intersolar Europe 2016, Export forum: Energy Solutions Made in Germany

Munich, June 23, 2016

c Gauss Energia

Alberto Valdés

President

Mexican Solar Association

Joscha Rosenbusch

Principal Advisor GIZ

Programa Energia Solar a Gran

Escala en México (DKTI-Solar)

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Program “Energía Solar a Gran Escala en México”

German Climate and Technology Initiative - DKTI

Präsentationstitel hier eintragen

30.06.2016

Objective:

Improve the technological, financial and organisational conditions for

large scale solar energy applications in Mexico

Areas of work:

Market introduction of

innovative solar

technologies

Solar financing

capacities

Mecanisms for policy

coordination between

public and private

sector

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Solar Process

Heat

PV

Power Plants

Program “Energía Solar a Gran Escala en México”

German Climate and Technology Initiative - DKTI

Public

Private

Academia and

Innovation

Financing

On behalf of:

BMZ - Federal Ministry for

Economic Cooperation and

Development

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Power sector clean generation goals

30.06.2016

Clean generation

• Fossil fuel based plant

with CCS

• Hydro

• Nuclear

• Any renewable energy

source (wind, solar,

bioenergy, others).

• Efficient cogeneration

(definition by CRE)

20% 25%

30% 35%

40%

50%

2015 2018 2021 2024 2033 2053

clean

conventional

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Fuente: KPMG, Mexico Energy Conference

The new model of the

electricity market

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Reform implementation timeline (selection)

30.06.2016

08/14 10/14 03/15 05/15 09/15 12/15 01/16 03/16 07/16 10/16 2018

Electricity

Industry

Law

Creation

of

CENACE

Clean

energy

certificates

(CEL)

guidelines

5% clean

energy

oblication by

2018

1st

PRODESEN

Energy

transition law

& legal

unbundling

CFE

Results 1st

long term

auction

Principles

power

market

framework

Pase 1

day ahead

and real

time market

Medium

Term

Auction

Rules

Real operation

day ahead,

real time an

CEL market

General

Provisions

Distributed

Generation

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Incentives & support for Solar

30.06.2016

Accelerated depreciation

100% of investments in machinery and equipment used for renewable energy generation. Include fixed assets, expenses and deferred charges. Min 5 years operation

Clean Energy Certificates (CELs)

Mandate to generate 5% of overall consumption by clean energy in 2018. All market participants that consume electricity in the system must comply with the mandate and can use CELs to meet obligations. Solar is a sources eligible for CELs.(1CEL=1MWh)

Net Metering Billing credit for excess electricity generated by RE facilities of retail electricity _consumer

Sustainable Energy Fund

R&D Renewable energy and energy efficiency.

Projects and calls managed by SENER and CONACYT

Source: GIZ, BNEF, Ley del Impuesto sobre la Renta, SENER, Ley Federal de Derechos

Auctions Regulated Austions for Electricity suppliers (eg CFE) for clean energy, capaity and CELs

other Non-discriminatory network access; reation of wholesale markets, Improved

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Avarage end user electricity prices 2006-2015

30.06.2016

• Subventioned prices

for Households and

Agriculture below

Industry, Business

and Service-sector

• Average price higher

than in the USA

Source

:

CFE Household Business Industry Services Agriculture

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Photovoltaic prices drop

1,8

1,5

1,1

0,9

0,7

0,6

0,5

2009 2010 2011 2012 2013 2014 2015

COST PER WATT PV MODULE

US

$/ Wp

Año

359

248

157

125 97,5 84

64

47

2009 2010 2011 2012 2013 2014 2015 2016

LEVELIZED COST ELECTRICITY

FOR PHOTOVOLTAIC SYSTEMS

US

$/ M Wh

Año

Fuente: Bloomberg

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Large Scale Solar Power

Market opportunities

Spot

market

• Merchant solar projects: selling electricity and clean energy

certificates (CELs) on the spot.

Bilateral contracts

• Medium- to long-term PPA contracts with large consumers or

qualified suppliers.

Auctions

• 15-year energy and 20-year CEL PPA contract with CFE.

• Depending on the technology, 15-year capacity contract may be

applicable.

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Corporate PPA

30.06.2016 34 28 - 9 8 - 27 - 42 25 277 125 172 301 266 801 275 0 100 200 300 400 500 600 700 800 900 1999 2000 2001 2002 2003 2004 2005 2006 2007 20 0 8 2009 2010 2011 2012 2013 2014 2015

Wind Biomass & Waste Small hydro Geothermal Solar

Source: CRE, Bloomberg New Energy Finance

Total clean energy capacity installed by

technology (MW) and commissioning date

(1999-2015)

• 2.4GW clean energy PPAs with

corporates

• 2009 increase: wind

• Uncertainty by energy reform: 2015

• Almost 1GW projects to be

commissioned until 2018

• Industrials waiting for price development

• Partner shy away from signing long term

PPA

• Consumer to comply with 5% clean

energy by 2018 : significant cost of non

compliance

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Long Term Auction

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• 15-year contracts on offer

• Bids in $/MW

• Firm capacity, able to generate at the system’s 100 most-critical hours

• Projects sign a contract to have a given amount of capacity available at a determined zone and dispatch electricity to the spot market when required .

Capacity

• Bids in $/MWh

• Only clean energy

technologies to participate in the auction (both

baseload and intermittent)

• If the source is intermittent, hourly benchmarks

references (factores de

ajuste horário) will be

applied to determine final revenue

• Non-intermittent source pricing is much simpler with contracts paying at a

straight $/MWh rate.

• Bids in $/CEL

• Clean energy-only

• Projects may be located in any part of the grid system

Energy

Clean energy

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Solar

85%

Wind

15%

Renewable power on first

auction in Mexico

Renewables distribution on 1

st

_Auction

Solar

74%

Wind

26%

Renewable Energy on first

Auction in Mexico

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Page 14 30.0 40.0 50.0 60.0 70.0 80.0 0.0 0.5 1.0 1.5 2.0 2.5 En e l Su n powe r Acciona Energ y JinkoSolar Inve st me nt Alarde En vi sion & Vive E ne rg ía Aldesa Recurre nt En ergy The rmi on En erg y Alte r En ersu n

Energy (TWh) CEL(m) Price $/MWh

Mexico’s 1

st

_{power auction winners by energy (TWh),}

CELs (m) and price ($/MWh)

30.06.2016 _{USD1 = MXN 17.32}

Source: CENACE, Bloomberg New Energy Finance

• A total of 5.4TWh of

power and 5.4m CELs

was contracted

• The auction’s average

contract price was

$47.6/MWh

• The lowest bid of

$35.5/MWh came from

a solar project being

developed by Enel

Green Power

30.0 40.0 50.0 60.0 70.0 80.0 0.0 0.5 1.0 1.5 2.0 2.5 En e l Su n powe r Acciona Energ y JinkoSolar Inve st me nt Alarde En vi sion & Vive E ne rg ía Aldesa Recurre nt En ergy The rmi on En erg y Alte r En ersu n

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Potential market for DG

0 500000 1000000 1500000 2000000 2500000 3000000 3500000

Instalaciones potenciales

Market Size for DG

Usuarios DAC

Instalaciones Comercios

Instalaciones Industriales

With a

penetration level

of 5% renewable

energies gets

installed capacity

of 3 GW

Fuente: CFE

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Page 16 source: CFE-CRE

2,7

6,7

16,1

31,7

55,7

85,0

0

10

20

30

40

50

60

70

80

90 MW installed per year

PV Distributed Generation - Market Evolution

source: ANES / CFE-CRE

Fuente: Informe sobre la Participación de Energías Renovables en la Generación de Electricidad en México, al 30 de junio del 2015.

2015

Solar

41 MW

2028

Solar

1,2 GW

MW

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Guideline Solar Distributed Generation (02/2016)

DG Products Definition of DG Compensation model

Tarif regulation Business model CEL obligation

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Page 18 30.06.2016

Source: IRENA Global Atlas

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

DKTI - Programa de Energía Solar a Gran Escala en México (DKTI Solar)

Joscha Rosenbusch

Asesor Principal / Programmkomponentenleiter

T +52 (55) 5536 0330 M +52 (1) (55) 4354 3898 E joscha.rosenbusch@giz.de I www.giz.de/mexiko