Enel uses for the first time bifacial solar panels, which are 15% more efficient

Tlaxco, Mexico — Enel Green Power sees industrial power generation interest in Mexico eventually shifting from gas-fired generation to renewables plus battery storage, the company's country manager said Tuesday.

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"Mexico has exceptional renewable resources, making clean power more competitive against conventional fossils plants," said Paolo Romanacci at an event commemorating the installation of the first solar panel at its Magdalena-II project in Tlaxco, Tascala.

This trend will become stronger as storage batteries become more efficient, he said.

"We believe that with solar plus storage we can be competitive against combined cycle-gas," Romanacci said. "Is Mexico not going to have more combined cycles in the future? I can't say for sure, but certainly we will see fewer gas units installed than previously forecasted," he added.

How much solar plus batteries will be installed in Mexico in the future will also depend on customer adoption of this technology, Romanacci said.

"There might be some users who are more conservative and will prefer to rely on [thermal] generation," he said.

However, other customers prefer to invest in renewables due to their fix generation cost as a shield against gas price volatility, Romanacci added.

"Gas prices could be low now, but no-one knows how prices will be in 10 to 20 years," he said. "We see gas prices going up, and I believe this creates uncertainty for clients regarding power tariffs."

Historically, renewable generation has always been more competitive than expected, he added. Similarly, the competitiveness of storage battery technology is advancing rapidly, following the trend experienced by solar generation in recent decades.

NEW BIFACIAL SOLAR PANEL TECHNOLOGY

Magdalena II has a generation capacity of 220 MW. However, with future expansions the project could reach 1 GW of generation capacity. It is expected to be completed by the end of 2019, Romanacci said.

This is the first project in Mexico where bifacial technology is being used. This is also the first time Enel has used this technology worldwide. It is 15% more efficient than the previous generation of solar panels, he said.

Magdalena II will generate 660,000 GWh/year to three undisclosed anchor clients. New phases will be built as new bilateral agreements with users are signed. These panels can generate power from their rear side by capturing solar radiation reflected in the floor, Romanacci said.

"This allows for smarter use of the land and greater power generation," he said.

Solar radiation in Tlaxcala state is good but not as superb as other regions of Mexico where power generators secured power purchase agreements at $20/MWh during Mexico's third long-term electricity auction in 2017.

However, Tlaxcala's location in central Mexico gives it a competitive edge by avoiding congestion bottlenecks in reaching Mexico City and Puebla. The congestion can increase power prices by dozens of dollars per megawatt, he added.

"The differential in transmission costs makes building solar generation in Tlaxcala highly competitive," he added.

FIVE-YEAR AGREEMENTS

Magdalena is Enel's first generation project fully financed through bilateral agreements in Mexico's wholesale electricity market, introduced by the country's landmark 2013 energy reform.

"The PPA market is growing exponentially not only in Mexico, but the world," said Romanacci.

Power users are seeking bilateral agreements for renewable generation due to its low cost, and to help fight climate change, he noted. "Political and regulatory uncertainties regarding power tariffs in Mexico are making users seek bilateral contracts."

Enel sees a significant opportunity in PPAs to grow its business in Mexico amid the suspension of the country's long-term electricity auctions by the President Andres Manuel Lopez Obrador. However, project financing challenges are hindering the growth of new renewable generation projects anchored by bilateral agreements, Romanacci said. Ideally, projects need 10-year PPAs to obtain financing, but users in Mexico are seeking five-year agreements. "This is an issue [impacting] the company's ability to plan their operations beyond five years," he said.

Enel's wholesale electricity supply subsidiary currently provides power to 17,000 load points to more than 10,000 users. The company expects to have 2.9 GW of renewable generation capacity in operation by 2020.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com