Strong Fundamentals for Energy Storage in Mexico

Strong Fundamentals for Energy Storage

Mexico’s energy storage operations are in their nascent stage compared to more widespread developments in the U.S. and several European countries. However, we expect Mexico to develop its energy storage technologies significantly over the next decade, as well as its lithium mining industry, as it increases its renewable energy capacity as part of a global green energy transition.

Energy Storage Systems in Mexico

Solar power has come a long way in Mexico, with 6,160 MW of cumulative utility-scale solar capacity at the end of 2021. However, the country’s battery storage facilities are still limited, meaning that power generation is not optimized. As solar power can only be produced during daylight hours, battery storage allows this energy to be saved for use during the night. During low-demand hours, solar power can be directed towards batteries rather than to the grid to provide power during peak hours of high demand.

In response to more frequent blackouts, Mexico recently developed hybrid plants that have both a solar power generating capacity and battery storage capabilities. As Mexico expands its solar market, we expect companies to increase their investment in battery storage operations to optimize the solar power generated across the country.

But Mexico will have to improve its regulatory framework for renewable energy for the industry to become more efficient and attractive to investors. Many view solar power as expensive due to outdated perceptions of the energy source. Greater standardization, including clearly defining energy storage systems, through a clear regulatory structure will help to promote solar power in areas where there is abundant sun and large areas of suitable land to develop operations.

The Fundamentals for Energy Storage Remain Strong

Battery storage is available across many electronic devices and has become a vital component in our daily lives. Lithium-ion batteries are well known for keeping our laptops, phones and other devices running, but are little-talked-about when it comes to large-scale energy projects. Bigger storage options are being seen in electric vehicles but battery storage for solar energy operations is still underfunded and underdeveloped.

Despite the lack of public awareness of just how important energy storage solutions are, a report from the World Economic Forum’s Global Battery Alliance suggests that electric vehicles and energy storage systems will achieve some of the greatest industry growth in the coming decades. They will be a vital part of the green energy transition, expected to attain post profits of around $300 billion and investment of $440 billion at the global level. In addition, they could add around 10 million jobs to the energy sector and support a 30% decrease in greenhouse gas emissions by the end of the decade.

The Future of Lithium in Mexico

We believe Mexico will be key to the future of the development of lithium batteries as home to the world’s largest single lithium field – “La Ventana” in Sonora. The country likely holds around 17 other deposits, across Baja California Sur, Coahuila, San Luis Potosí, Sonora and Zacatecas, that are largely undeveloped. As demand for lithium increases, alongside battery storage innovations, we expect Mexico to be key to the much-anticipated electric vehicle boom and other battery developments.

However, the recent nationalization of Mexico’s lithium reserves, under the President Andrés Manuel López Obrador (AMLO) administration, could hinder the development of the lithium market by restricting private investment and isolating the country from the development taking place in the rest of the Americas.

Some countries that already hold lithium concessions in Mexico are worried for their future as AMLO increasingly seeks to nationalize the country’s energy industry to boost national energy security. There are also concerns that labelling lithium as a strategic metal could violate the United States-Mexico-Canada Agreement (USMCA).

Our Outlook Remains Positive

Mexico has the potential to leverage its resource power, with its huge lithium reserves, to play an integral role in the future of the global battery sector. However, the nationalization of its energy sector could somewhat hinder this possibility. Nevertheless, we expect greater investment in battery storage facilities, alongside renewable energy projects, across the country to help Mexico develop its storage capabilities substantially to achieve greater energy security.