Renewables shock as Mexico scraps clean energy tender

Mexico cancelled its latest clean energy tender in a surprise move that one leading business group warned could damage investor confidence in the country’s renewables programme, which has contracted 5GW so far.

The government linked the decision to the fact that the new administration headed by Andrés Manuel Lopes Obrador (AMLO) will send a new national development plan to Mexico’s Congress by the end of February.

The tender had already been suspended by energy secretary Rocio Nahle a few days after she was sworn in in early December 2018. At the time, Nahle justified the suspension because new officials needed time to familiarise themselves with the details of the tender process and revise its objectives. By then the tender was in the final stages of pre-qualification and, by the previous official schedule, was due to be concluded in the first quarter of 2019.

This was the fourth clean energy tender that Mexico was set to hold since its 2015 energy reforms, after contracting over 5GW of mostly wind and solar projects in the three previous auctions held in 2016 and 2017. The tenders are seen as the main policy instrument for the country to meet its 35% renewable energy target by 2024, up from about 20% currently.

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With several large investors already lined up for the tender, the cancellation will raise doubts about the continuation of Mexico’s clean energy programme. The government said that although investors can contest the cancellation, it will not refund what companies spent to prepare for the process.

At the time of suspension, most analysts said that it was understandable that a new administration would want to take time to get up to speed, but some urged that the government needed to get the process back on track as quickly as possible.

During the 2018 presidential campaign Rocio and AMLO were strong critics of the energy reform which opened up the oil and gas and power industries to private investments, but investors believed that renewables would be less affected than oil. Although little was said about renewables in the campaign, AMLO, who would become Mexico’s first left-of-centre president, signaled continuation of policies then in place.

In one of the first reactions to the cancellation, the Mexican Business Coordination Council (CCE), one of country’s leading business trade groups, reportedly said that the decision could affect investors’ confidence in the country.

So far the clean energy tenders have attracted over $8bn in investments as tenders contracted new capacity through 15-year, US-dollar indexed PPAs.

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