Fortunately, we have a new record set by Mexico. Starting in 2020, the cheapest electricity in the world will be produced in the Mexican state of Coahuila, located in the north of the country.
This milestone has been achieved thanks to the joint efforts of the Ministry of Energy (SENER) and the National Energy Control Center (CENACE), which recently announced the preliminary results of the 2017 Long-Term Electricity Auction.
In that auction, a total of 46 bidders submitted offers, of which 16 were deemed valid. Among them, the Italian company ENEL Green Power stood out by offering the lowest price : 1.77 cents per kWh, thus breaking the previous world record of 1.79 cents, which until then had been held by a Saudi Arabian company.
The impact of these auctions is significant, as they boost investment in renewable energy. With the 2017 auction, $2,369 billion is expected to be allocated for the construction of 15 new power plants in Mexico. However, while this is a notable step forward, given that it is a relatively small project compared to the country's total needs, an immediate impact on consumer prices is not anticipated.
How were these record prices achieved?
Part of this great achievement is due to the strategic location of the Amistad wind farm, near Ciudad Acuña, and the synergies generated during the project's initial phases. Because the infrastructure and interconnection were already in place, it was possible to significantly reduce costs , which contributed to offering such a competitive price.
Furthermore, technological advancements in the renewable energy sector, particularly in wind and solar technologies , are expected to continue reducing production costs. According to forecasts, tariffs could decrease even further, reaching as low as 1 cent per kWh by the end of 2018 or during 2019.
Mexico and its role in the global energy market
Over the past few years, Mexico has been a key participant in international clean energy auctions, competing alongside countries like Chile, the United Arab Emirates, and Saudi Arabia to generate electricity at the lowest possible cost. All of these projects utilize renewable energy sources , such as solar and wind power, which has significantly transformed the global energy landscape.
According to data from Bloomberg New Energy Finance , factors such as the high liquidity of the Mexican peso and the possibility of establishing contracts in both pesos and dollars have favored the attraction of foreign investment in long-term projects in Mexico, making it one of the most attractive markets for renewable energy generation.
However, despite these achievements, the Mexican market faces uncertainty due to issues related to the renegotiation of the North American Free Trade Agreement (NAFTA), which has caused currency volatility and could affect the stability of future investments.
Mexico's competitiveness in the field of renewable energy
Since the approval of the energy reform in 2013, Mexico has seen a continuous drop in the prices of clean energy contracts. While the global average production price of renewable energy is around $30 per MWh according to the International Energy Agency (IEA), in Mexico this price is significantly lower, ranging between $10 and $20 per MWh , which keeps the country as the world leader in affordable energy.
For example, according to Severo López-Mestre, director of the consultancy Galo Energy, the average production cost in the Mexican market is around 60 dollars per MWh, more than three times the cost proposed by ENEL in its new project in Coahuila.
Factors driving cost reduction in renewable energy
The downward trend in prices in Mexico is influenced by several factors:
- El increased competition at auctions, which increases supply and generates 'brutal competition' in the market.
- El commitment national goal of 35% of the country's energy coming from clean sources by 2024.
- Technology development and learning curve, especially in solar PV and wind energy.
- The process of deregulation of the electricity market, which has opened up numerous investment opportunities.
Additionally, the industry has experienced continuous improvement in technological efficiency , with advances such as more efficient turbines and greater use of artificial intelligence to optimize wind and solar power plants.
These factors have contributed to the country being able to offer record prices in the production of clean energy, positioning itself ahead of other countries in terms of generation costs.
If these advances continue, Mexico will be able to continue leading the world in sustainable energy production.