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Mexico's Push To Install 3,000 MW of Wind by 2014

Mexico's nascent wind power industry is working to install up to 3,000 MW of wind power generation by 2014, six times more than the 500 MW currently online, according to industry participants.

"The projects have taken off and we should have nearly 3,000 MW in three years," predicts Fernando Tejeda, president of the Latin American Wind Energy Association, based in Guadalajara, adding that they are likely to cost US $5bn.

While adding 2,500 MW in three years might be tough for such an immature market, Eduardo Centeno of the Mexican Wind Power Association agrees the feat is possible. "The government is launching a lot of economic incentives to make this happen," he points out, adding that more will likely be introduced in future.

Such incentives include exemptions on equipment imports and schemes to lower a project's depreciation and amortization costs over its first ten years.

As the market comes together, some of Spain's largest energy companies are moving in. Iberia's renewable energy giants Iberdrola, Acciona and Gamesa are leading the largest wind park initiative - the 2,000 MW Oaxaca juggernaut that is set to come online in approximately three years.

Another large undertaking is under way in Baja California where the Spanish electricity company Union Fenosa has teamed with US-based Sempra Energy to build two parks capable of generating 800 MW. However, their output will be siphoned across the border to California, not to Mexico's grid. A slew of other smaller projects should add another 400 MW to the country's power grid, observers say.

Oaxaca Venture

With 300,0000 inhabitants, Oaxaca is a windy region in Southern Mexico resting 1555 meters over the sea. The wind is so strong that 7,000 houses lost their roofs when a cold front passed through this past February.

The upcoming project will see the installation of 13 to 14 wind parks to raise output to 2,500 MW by 2014. Of the 14 parks, only four are government sponsored. Overall, only 20% of all the planned wind power capacity installations will be bankrolled by the state. Some people worry that the government isn't setting aside enough money to encourage more development.

"We need more domestic funds to support these projects as most of them are project financed by international banks," says Tejeda. "We also need a feed-in tariff and I hope the government will include this eventually."

Centeno says such an initiative is not currently on the drawing board, but that the current incentives are enough to attract foreign investors.

That was also the view of Miguel Angel Alonso, director of Acciona Wind Power Mexico, who says the Oaxaca return rates are "very attractive." He declined to talk about Acciona’s competitors' projects or to comment on specific government policies to develop the wind industry, however. Acciona recently won a concession to build a 300 MW project in partnership with Mexican cement giant Cemex that will sell its electricity to the Comision Federal de Electricidad.

Selling electricity directly to the state is rare. Around 80-90% of the turbines expected to tower across Mexico will feed corporate clients – so far Walmart and Cemex – with others expected to follow.

Stronger Wind

Tejeda says Acciona and the other Spanish firms will strike gold in Oaxaca. This is because the region's wind flows more furiously than many other parts of the world.

"Oaxaca has a lot more wind than Brazil or Europe so you get a higher output/cost benefit," Tejeda explains, adding that the complex's wind-turbine efficiency ratings stand at 40% compared to 20% in Spain, Denmark or Germany.

Like Tejeda, Gustavo Camougnani, a Greenpeace campaigner, says the state must do more to support a domestic industry instead of allowing foreign firms to dominate in the market.

"We need more of this energy to reach Mexicans, not just a bunch of rich corporates," he says, noting Felipe Calderon administration's current plans as having "little ambition."

"Wind blows harder in Mexico than other countries and it's in fact much more abundant than in Spain. So why has Spain succeeded?" Cayuga asks. "They have invested, something that the Mexican government is failing do to because it still mainly sees itself as an oil producing country. It needs to change its mindset or it won't develop its renewable energy potential."

If the government got more serious about wind, it could have as much as 43,300 MW of installed capacity by 2030, Camougnani predicts, citing Greenpeace studies.

Tejeda was more positive about the government’s involvement, however, noting that the wind energy that will soon come online will help cut industrial CO2 emissions from growing industries. While the government could do more, "it has done a lot and the legal framework is in place."

He expects Mexico to continue to develop its wind market to someday supply 20% of its electricity needs, down from a meagre 1% currently.

At least when compared to Latin American's other wind giant, Mexico's industry will rank second when Oaxaca is completed, Tejeda says. But certain technical glitches could delay the towering projects. Tejeda acknowledges many grid connection challenges remain and must be solved before Oaxaca comes online.

"We don't know how the grid is going to react once 2,000 MW suddenly switch in," he says. "There is no experience about how to do this in Mexico but hopefully we will learn little by little."

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