Mexico Energy Insights
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Mexico’s renewable energy auctions benefited from the experiences of other countries, so results have generally been better. According to IRENA, 53% of Mexican solar energy auction projects were on time, while only 37% experienced delays.
The Mexican dilemma is a delicate balance for both long-term buyers of power, and for the government. Natural gas stabilizes electricity prices and it provides reliability to the power grid.
Mexico is experiencing an increasing demand for infrastructure and services due to its economic growth and accelerated urban densification. This has led to a vast increase of energy consumption, as well as greenhouse gas emissions.
For many years, the market for clean energy was limited by unstable prices. Energy prices are generally difficult to predict, but clean energy adds the uncertainty of new technologies and the weather. Within a small area, spot prices for wind power can literally go whichever way the wind blows. However, virtual power purchase agreements (PPAs) are creating new ways to reduce price volatility and expand the market for clean energy.
A power purchase agreement sets out the terms of a bi-lateral agreement in which one organization buys energy from another. The main elements of a power purchase agreement include the price for capacity, the price for energy (basically, the marginal cost of electricity), and the number of years that it will last.
Mexico was the first country to commit to specific targets under the Paris Climate Agreement, and achieving those targets is driving solar energy in the country.
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