Keys to Success for Wind Energy in Mexico
Mexico’s wind energy capacity has rapidly increased over the last decade, putting it in a good position to become a regional leader in wind power. The country’s wind output goes hand-in-hand with a growing solar energy sector, which contributes to Mexico’s steadily expanding renewable energy mix. We believe seeking greater private investment in the sector could help develop Mexico’s wind energy industry further, creating new jobs and boosting the local economy.
Mexico is the Seventh-Largest Wind Energy Producer
The cumulative installed wind capacity in Mexico totalled 8.3 GW in 2021 and it represents roughly 9% of the country's total electricity generation. This puts Mexico in seventh place globally for wind production, with 3,175 turbines across 69 power plants in 15 states.
Mexico was an early adopter of wind energy technology, inaugurating its first wind farm in 2009. The Eurus wind power operations were developed in Oaxaca by Spanish firm ACCIONA at a cost of $550 million, with an initial production capacity of 250 MW, to provide renewable power for industrial manufacturing.
Mexico’s installed capacity of wind power increased by 136% during President Andrés Manuel López Obrador’s (AMLO) first three years in office, achieving $13 billion in investment. This is mainly owing to previously approved wind farm development plans, according to Leopoldo Rodríguez Olivé, President of the Mexican Wind Energy Association (AMDEE).
The wind energy industry has been supported significantly by the drop in wind power technology prices, falling by 70% over the last decade, with one kilowatt of wind energy generation now costing approximately $26.
Our Outlook Remains Stable
The outlook is uncertain for 2022 following legislative and regulatory changes introduced in the electricity sector last year. We think that wind energy investments could decrease by 30% to 40% in 2022, as private firms face regulatory uncertainty. We expect roughly $1 billion in total annual wind investments in 2022, compared to $1.5 billion in 2021.
The change in the law now allows for state-run electricity company CFE to use fossil fuel sources for its electricity, discouraging private investment in more efficient renewable energy developments. This comes as part of President AMLO’s plan to nationalise Mexico’s energy sector to establish greater energy security.
The Long-Term Potential for Wind Generation Remains Strong
We believe that Mexico has the potential to develop its wind energy sector substantially over the next decade through greater private investment. The US Department of Energy believes Mexico’s national wind energy potential totals 3,670 GW, with 670 GW in the northwest of the country, 744 GW in the southeast, and 110 GW in Baja California Sur.
To succeed in the development of its wind capacity, we believe Mexico must continue to hold successful renewable energy auctions, offering competitive pricing for investors. In addition, providing community ownership to wind projects often helps achieve a ‘buy-in’ from local residents. Diminishing the potential for conflict could help projects to be developed more quickly, avoiding costly delays.
If Mexico’s wind energy industry is developed to its full potential, it could provide thousands of construction and operational jobs across several states. It will also boost the national economy by helping to develop local and regional supply chains and contribute to Mexico’s already strong manufacturing sector. Further, we expect it to provide greater low-cost electricity to rural areas, boosting energy security across the country.
Investments in Wind Generation Can Improve Economic Growth
Mexico is well on its way to becoming a regional wind energy hub, with thousands of wind turbines across half of its states. We expect that attracting greater private investment through renewable energy auctions will help Mexico to develop its wind energy industry further, supporting the creation of new direct and indirect jobs and boosting the national economy.