Big hopes in private capital pushing geothermal development in Mexico

Mexico City Cathedral, Mexico (source: flickr/ Francisco Diez, creative commons)
Francisco Rojas 18 Feb 2015

Mexico is leveraging towards public-private partnerships (PPPs) as opposed to independent power producer (IPP) schemes in order to develop geothermal projects. Will it pay off?

As covered previously, Mexico is looking to opening new business schemes by bolstering public-private partnerships to develop geothermal projects in the country. The state utility, Comision Federal de Electricidad (CFE) is trying to bring new players into the market.

In a recent article from BN Americas, Mexico is touted for having great potential yet little development. The cause; geothermal “is a capital intensive energy source and the CFE has not been able to allocate funds to the sector”. In order to address this, Mexico is undergoing an energy reform to make the market more attractive to investors and incentivise public-private partnerships (PPPs) as opposed to independent power producer (IPP) which was the prevalent strategy.

According to the same source, project financing director Chris McCormick said at an energy forum in Mexico City that “Sener (Energy Ministry in Mexico) will launch the geothermal ’round zero’ during the current quarter to determine which projects will be developed by the CFE and which ones will be tendered to the private sector” and he also mentioned that “long-term PPAs will come about and project financing will be cheaper as capital becomes easier to procure for the sector.”

Great growth is expected in the Mexican geothermal sector according to “Luis Carlos Gutiérrez Negrín, president of the Mexican geothermal association (AGM), said last month the sector would grow 40% by 2020 to surpass 1,400MW through US$1.6bn in investments.”

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Source: BN Americas