Deutsche Bank MD expects grid parity ahead for Mexican solar PV market

Solar PV has recently been handed a huge responsibility, and solar proponents may now rejoice as the world finally expects solar power to fill the role of the global electricity providing powerhouse.

While the global PV market rang in around 42 GW at the end of 2014, the worldwide market is now gaining even more momentum with emerging markets boasting impressive projects coming down the pipeline during 2015. Vishal Shah, Managing Director at Deutsche Bank, former Director of Barclays Capital, and Vice President of Lehman Brothers, shares his insight about the current situation of the global PV market in Mexico and what to expect for this growing market in the years ahead.

The Mexican solar market is very dynamic, with various smaller markets that exist in terms of variable pricing models. For Mr. Shah, who will participate as a speaker in the Solar Finance Tour Mexico (9-13 March 2015), the Mexican market is particularly of interest due to the opportunities that reside within.

“There are the electricity consumers that basically consume above the 150 kWh range, and that segment of the market is very attractive for solar. That grade of 22 cents per kWh, once the consumption increases above 150 kWh, makes solar very competitive. With the cost of solar production at present in Mexico, and given the amount of sun resources located there, we are looking at grid parity for all consumers above the 150 kWh consumption range.”

In the longer term, the potential for growth is large, considering electricity prices have grown at an average rate of 8-10% per annum in Mexico and energy demand is growing rapidly. Asserts Mr. Shah, “I don’t see that [the electricity prices] changing, so the grid parity situation in Mexico is only going to get better.”

Mr. Shah believes that the Mexican market will cross the 1 GW mark in 2016, with the forecasted growth potentially reaching 3GW by 2020. “2016-17 will be a transitional year where we may see really strong growth, but it will be at the low base. The Mexican market is going to be very active for developers in 2015, and in 2016 Mexico will break the 1 GW barrier, so I would not be surprised if the market reaches 3 to 4 GW by 2020 the way the market is headed.”

To the skeptical developers and investors deliberating whether or not now is the time to get involved with the massive Mexican solar pipeline, Mr. Shah offers, “Project development is a risky business; that being said, you need to hedge your bets and take on some development risk. The policy environment is only going to improve from our standpoint, and there is a real opportunity for developers who have some sort of a personal advantage. Understanding the market, preparing the right financing options once the policies are streamlined, this is the best approach in our opinion.”

Mr. Shah will participate as a speaker at the Solar Project Development and Finance Tour Mexico ( organized by Solarplaza from March 9-13, 2015, where he will further explicate the expectations for solar growth within Mexico, and what the recent changes in regulation mean for solar developers waiting to get involved in the market.

The Solar Finance Tour is the all-inclusive trade mission for international business developers and investors eager to expand their solar business into Latin America´s most attractive solar market. The Tour will be a unique opportunity to meet the decision makers of all the relevant Mexican stakeholders: government, banks, investors, advisors, utilities, solar companies, and more.

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