Dino Barajas Quoted by Energy Advisor on Mexico Renewables Panorama, Outlook
Akin Gump cross-border transactions partner Dino Barajas was quoted by Energy Advisor, a publication of Inter-American Dialogue, on the state and outlook for the country’s renewable energy sector.
Barajas said, “Mexico’s renewable energy sector has once again become the lightning rod for foreign investment in Latin America. Brazil, Chile and Argentina are still giving Mexico a run for its money, but the longevity of Mexico’s renewable energy continues to give developers and long-term investors comfort that its attractiveness will not be just a flash in the pan.”
Looking at the individual power sources within the renewables category, he noted, “Solar is currently the most active sector for newer investors, given the ability to scale up projects over time as developers find suitable long-term offtakers after starting with smaller investments.”
Regarding windpower, he said, however, “More established Mexican renewable energy players have continued to develop larger wind developments, given that they have been in the market for longer periods and understand the intricacies of the legal matrix and where the niche opportunities may lie.”
Barajas noted that investors’ larger sunk costs in developing large projects has the effect of making them more aggressive competitors for Mexico’s electricity demand, adding that, if solar installation costs continue to fall, “solar developers will likely gain the upper hand, because solar developments may be more agile at starting small to meet opportunistic market openings and then scaling up as footholds are gained throughout the country.”
He closed by noting that project-finance lenders’ risk appetite will ultimately determine the course and speed of development in Mexico’s growing renewable energy market. Regarding the market’s future, Barajas said, “As the energy production portfolio continues to become more diversified, it will be Mexico’s consumers who will benefit from natural hedges against hydrocarbon fuel pricing spikes with a diverse energy production basket. I predict the announcement of more large-scale projects as investors continue to make large bets on the Mexican energy market.”