If the wind industry ran a popularity contest then Mexico’s president, Enrique Pena Nieto, would surely be vying for top spot.
Last week, Nieto publicly confirmed there would be no limits on inbound renewable energy investors. Mexico, it would appear, is open for business.
And, on the face of it, that spells good news.
It has been 76 years since the Mexican state took control of energy generation. But that is due to end this year with a package of energy market reforms, approved in December, that could lead to a wind power boom. The Mexican government says there’s potential for up to 1.5GW to be built each year until 2020.
The government is currently hammering out details of the secondary legislation needed to implement such radical reform. This is due to be finalised next month.
What all this means of course, is that it will be far easier for foreign firms to invest. Indeed, the government hopes that by ending state control of energy generation it will increase electricity generation by 80% by 2030.
As a result, the Mexican Wind Energy Association has already set an ambition to achieve 12GW by 2022; and energy minister Pedro Joaquin Coldwell last week told delegates at the Mexico Wind Power 2014 conference that he wants to grow the country’s total wind capacity from around 2GW now to 9.5GW by 2018. He even suggested 20GW would be “economically viable” by 2020.
That is impressive talk. And it’s certainly good news for the likes of Gamesa that said in its 2013 results that it expected most of its growth in 2014 to come in Latin America.
However, whether these ambitions can be achieved will depend to a greater or lesser degree on the final energy policy details – due to be thrashed out in the coming weeks.
And while Nieto’s statement certainly fills many with optimism, the lack of any investor ceiling may not necessarily be a panacea.
While it makes sense for the country to do what it can to attract companies that can help it achieve its renewable energy goals, Mexico should also be wary of making promises that suggest businesses can do whatever they want.
This may attract applause from the industry in the short-term; but investors, manufacturers and developers must also ensure that they enter the Mexican market with their eyes open and with a clear understanding of the long-term benefits and the risks.
It’s easy for Nieto to suggest that there will no investment limits, but such a bullish stance suggests little thought has gone into the long-term strategy.
Yes, limits can be restrictive. However, when implemented effectively, they can become the foundations for genuine market certainty and future growth.
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