Enel will generate the cheapest energy in the world in Mexico

Renewable energy

Fortunately, we have a new record established by Mexico. The cheapest electricity in the world will be generated, as of 2020, in the Mexican state of Coahuila (north of the country)

The Ministry of Energy (SENER) and the National Center for Energy Control (CENACE) they have made known the first results of the long-term Electricity Auction 2017 that place the price at a historical record

46 bidders submitted their bids, 16 of which were selected as appropriate. This auction will allow power generation companies to obtain contracts for the sale of clean energy and power. A $ 2,369 million investment in 15 new power plants.

Within these 16, the Italian ENEL Green Power which offered the lowest price1.77 cents per kWh generated by photovoltaic energy, breaking the previous record offered by a Saudi Arabian company, which was 1.79 cents per kWh.

If the forecasts are met, it is expected that throughout 2019 or the end of 2018 the rates will decrease even more until reaching 1 cent per kWh

investing in renewable energy will increase global GDP

Unfortunately, being a small project with respect to the electricity needs of Mexico as a whole, the companies do not expect it to have a immediate incidence in the prices that consumers pay. On the other hand, it does open an important vein for the cost of energy borne by homes and companies to fall sharply in the not too distant future.

Renewables outperform coal

According to Enel, the electricity will be generated at the Amistad wind farm, located near Ciudad Acuña. In addition, the company has pointed out that one of the reasons for the price being so low is the synergies with the first phases of the park: the infrastructure and the interconnection have already been built.

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Mexico and other countries

According to Bloomberg, Mexico, Chile, the United Arab Emirates and Saudi Arabia repeatedly compete in their auctions to see where electricity is generated by lowest price. In all cases, the energy comes from renewable energies. Under such tight competition circumstances, it remains to be seen how long the North American country will be able to retain the record.

"Mexico is one of the most attractive countries, especially for those companies looking for long-term contracts," Ana Verena Lima, analyst at Bloomberg New Energy Finance. The general conditions for the generation of renewable electricity, whether wind or solar, are "very good." "And companies, in addition, can choose in what currency establish the contract, in pesos or dollars ”. This last factor is very important, despite the fact that the Mexican peso is the most liquid currency in the emerging world, the growing doubts about the renegotiation of the North American Free Trade Agreement (FTA) that unites the Latin American country with the United States and Canada since 1994 have introduced enormous volatility on the currency.

Trump favors the coal industry

In fact, the award to Enel is a price milestone, fortunately, the continuous reduction in the award prices of the energy that is auctioned in Mexico has been a constant since the approval of the energy reform in 2013.

The average cost of producing renewable energy - basically solar and wind - in the latest auctions is around $ 20 per MWh. «Recently, the International Energy Agency [IEA] announced with great fanfare that the world price of new renewable auctions was around $ 30 per MWh worldwide.

But it is that Mexico is 10 dollars below, the lowest on the planet.

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Cost reduction

What explains this continuous cost reduction?

  • the increasing presence of participants in the auctions (higher supply), which generates "brutal competition" in the Mexican market.
  • Comission that 35% of the energy consumed by the country in 2024 comes from clean sources.
  • the technological learning curve, both in Photovoltaic Solar Energy as in wind power and, above all, the fact that Mexico was the last country in the OECD in deregulating the electricity market.
  • There is an appetite: “In these circumstances, many companies are willing to invest in that country. The auction mechanism is being a success in the short term, the question is whether it will also be so in the long term.

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