Mexican distributed generation market ready for growth

The distributed power generation market in Mexico is expected to grow steadily despite the monopoly of one company, which has limited market potential to an extent through subsidies and strong grid interconnection regulations. The market will witness strong demand from oil, gas and mining companies in Eastern Mexico, a region not served by the national grid.

Analysis from Frost & Sullivan finds that the market earned revenues of more than $217.6 million in 2012 and estimates this to reach $370.2 million in 2017 at a compound annual growth rate of 11.2 percent.

Insufficient centralized electricity, which has compelled several consumers to generate their own power, along with incomplete grid facilities in large isolated areas, offer huge scope for the distributed generation market in Mexico.

However, distributed generation providers’ reliance on electricity subsidies coupled with grid integration issues in isolated areas make market development uncertain. Energy subsidies have added to the challenge, as artificially low electricity prices for most consumers in the country reduce opportunities for distributed generation technologies, which have become a costly alternative to grids.

In fact, although distributed generation technologies reduce transmission costs and provide the benefit of local energy management and economies of scale, their startup costs are higher than that of centralized electricity production, further affecting adoption.

To stay competitive, technology providers in Mexico need to focus on clients in the mining as well as oil and gas verticals. Investments in gensets, rather than in renewable energy sources such as wind, solar and small hydro power plants, will widen market scope.

“Internal combustion generating sets will remain the preferred solution,” concluded Cataife. “Nevertheless, market revenues from renewable energy solutions are expected to increase in the medium to long term.”

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