Mexico Solar Photovoltaic (PV) Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The market for solar photovoltaic (PV) in Mexico is expected to grow at a CAGR of approximately 8.90% during the forecast period of 2022 – 2027. With the COVID-19 pandemic in 2020, the market with no severe impact, as the market witnessed growth in 2020 with the addition of nearly 1.2 GW of solar photovoltaic (PV) installed capacity. Further, no delay of solar PV work has been recorded in 2020. Factors such as the extension of a simple permit procedure for Solar PV projects between 500 kW to 2 MW in size under net metering and the government initiatives to increase and promote the solar PV market in the country are attributed to driving the demand for solar PV in Mexico. In addition, the declining costs of solar technologies are becoming competitive with fossil fuel sources, and additional subsidies on solar systems are driving the solar PV market further. On the other hand, in the absence of any new initiatives, limited land, factors such as cancellation of the fourth auction round by the new government, and an underdeveloped power grid of Mexico are expected to hinder the growth of the solar PV market in the coming years.

Key Highlights

• Utility-scale is expected to account for the largest share in the Mexican solar PV market by deployment owing to the higher investments and larger installed capacity.
• In Mexico, the solar financing wave is being fueled in large part by Mexico’s renewable energy goals, which are for 35% by 2024 and 50% by 2050. Such ambitious goals are likely to open up new stream of investments in the Mexican solar market during the forecast period.
• Demand for decentralized solar energy systems is expected to support the growth of the market.

Key Market Trends

Increasing Deployment of Utility-scale Projects

• Solar energy has established itself as one of the renewable energies with the largest presence in Mexico. This can be demonstrated by the presence of 69 utility-scale solar parks with an aggregate installed capacity of 4.8 GW, as of July 2020.
• The utility-scale project, along with commercial and residential projects has helped the country to have an installed capacity of around 5.6 GW, till 2020.
• Further, the country is expected to have significant growth in the utility sector on account of government initiatives like the 2021–2035 Development Program of the National Electrical System. As per the program, the country is likely to increase power generation from clean renewable sources to reduce air pollution.
• Hence, in alignment, the government aims to target 35% of the country's electricity to be produced from renewable energies by 2024. Hence, such a scenario would boost up the utility segment during the study period.
• Several projects like Sonora solar project in Puerto Penasco, amounting to nearly USD 100 million is expected to get commission by late 2023 or early 2024. Further, Energia Aljaval's 300 MW project in Chihuahua state is expected to be commission in late 2021. Hence, with upcoming projects, and governmnet support, the segment is expected to have significant growth during the forecast period.

Increasing Demand for Decentralized Solar Energy Systems is Expected to Drive the Market

• Decentralized solar systems, also called as distributed solar energy systems, are small-scale, self-supply solar energy systems that are less than 0.5 MW in capacity and connected to a distribution circuit with a high concentration of load centers. These solar generators do not need a CRE permit for installation.
• Initially, these small-scale solar systems were established in rural areas that are not connected to the national grid. However, gradually, residential and commercial buildings in the urban areas also began installing solar PV panels.
• Though distributed solar generation is still in a nascent stage in Mexico, it witnessed rapid growth in the last few years. One of the major factors driving the growth of distributed solar generation is the reduction in the cost of solar PV systems. As of February 2022, average solar energy systems in Mexico cost USD 3.07 per watt, which is expected to reduce further with technological development, and the inflow of solar panels from various countries.
• As of 2020, more than 100,000 roofs on commercial buildings, industrial buildings, and homes have distributed solar PV installations. This number is projected to increase to around 650,000, by 2023.
• Hence, owing to the aforementioned factors, the decentralized solar energy systems in the country are likely to grow, which, in turn, is likely to act as a key driver to the market studied, during the forecast period.

Competitive Landscape

The solar photovoltaic (PV) market of Mexico is moderately fragmented. The key players in this market include Enel SpA, Engie SA, Canadian Solar Inc., Risen Energy Co. Ltd and Hanwha Q Cells Co. Ltd. among others.

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