Mexico’s already well-developed solar power industry is expected to grow even further over the next decade. Solar resources in Mexico are among the best in the world, with annual daily solar irradiance levels ranging between 4.4 kWh/m2 and 6.3 kWh/m2. With the country's solar capacity reaching 10GW at the end of 2021, we expect solar energy to continue to present attractive opportunities for project developers and industrial consumers.
Government Policies and Lower Costs are Fueling Demand
The market is favorable for solar energy projects thanks to low equipment costs, strong renewable energy policies, and several national solar power programs. Solar panels in Mexico cost an average of $3.07 per watt, and we expect this to decrease further as the development of solar projects becomes more commonplace.
The Government of Mexico (GoM) has also helped to support the development of solar generation across the country, taking advantage of Mexico’s average of 300 days of sunshine a year. It has extended a simple permit procedure for solar projects of a 500 kW to 2 MW capacity and offers several subsidies for solar systems. In fact, systems below 500 kWp do not need any permitting and can reduce energy spending by up to 40%.
Mexico is well suited for residential rooftop solar installations, and we expect the market to grow by roughly 10% to 15% annually through 2025. With the high cost of electricity, many are being encouraged to convert their systems to solar. This can also help tackle the uncertainty of blackouts in regions that have a higher risk of power outages.
Utility-Scale Solar is Attractive but Challenges Remain
At the utility scale, Mexico has more than 60 utility-scale solar parks across 15 states, with a combined investment of more than $8 billion. Mexico is also supporting its solar operations with the development of several solar energy plants that include lithium-ion battery storage facilities.
However, the sector still faces some restrictions such as a lack of land for solar operations. Recently, the cancellation of a fourth solar energy auction round also halted plans for developing the industry. Infrastructure challenges, such as Mexico’s weak electricity grid, could further impede the sector.
Installed Solar Capacity Enjoys Rapid Growth
The GoM announced ambitious renewable energy goals in its 2012 climate law, aiming for the country's energy mix to be 35% renewable energy by 2025 and 50% by 2050. We expect solar energy to make up roughly 6% to 7% of energy consumption by 2030, and this will support the government's aim of reducing greenhouse gas emissions.
The GoM has proposed a large solar project in Puerto Peñasco, Sonora, one of the world’s best regions for solar power generation. The project is being developed by Mexican utility company CFE and is expected to be the largest PV facility in Latin America. The Puerto Peñasco solar farm sits on 2,000 hectares, with a projected cost of $2 billion.
CFE has already launched several solar projects and hopes to expand its portfolio further in line with Mexico’s renewable energy goals. We expect the country’s total installed solar capacity to grow by roughly 50% by 2025.
Our Outlook Remains Positive
We expect solar power in Mexico to continue to present attractive opportunities driven by favorable government policies and better economics for project developers. The solar irradiance levels and the continued focus on corporate sustainability will also continue to support strong demand for solar power in Mexico. Contact us to learn more about accessing low-cost solar power in Mexico. Savings from on-site solar can range between 20% and 40% with no upfront costs. Contact us today.