The 30-year-old Mexican geothermal power generation market is powered by investments from the Federal Electricity Commission (CFE), a public utility. However, its growth beyond 2015 depends on the level of involvement of independent power producers (IPPs).
For greater private investments, either the government should amend regulations to protect investors in the exploration phase or financial institutions must make higher initial investments to lower the risks in the earlier phases.
New analysis from Frost & Sullivan, Analysis of the Mexican Geothermal Power Generation Market, finds that the market drove investments of $182.4 million in 2012 and estimates this to reach $200.2 million in 2017.
"As Mexico is the fourth largest geothermal electricity producer in the world, it is natural that geothermal energy will account for a significant percentage of the electricity matrix," said Frost & Sullivan Energy & Power Research Analyst Gustavo Stainoh. "The need to exploit proven reserves in existing fields has created robust investment opportunities in the market."
Investments made in 2012 will be channeled toward incoming projects listed in the exhibit for SENER-commissioned geothermal projects. The country's energy plan is tilted in favor of wind power and combined cycle power more than geothermal power. While combined installed capacity of cycle and wind power is expected to register a compound annual growth rate (CAGR) of 4.6 per cent and 7.9 per cent, respectively, between 2012 and 2025, geothermal's installed capacity is likely to grow at a CAGR of 2.8 perc ent.
Mexican geothermal sites located on the San Andreas Fault include thermal reservoirs with estimated power generation potential of around 10,640 MW, of which 8,621 MW is available for electricity generation and 983 MW is being tapped.
The mature geothermal power generation market is vulnerable to changes in other Latin America markets; it will be relying on the ability of Chile and Peru to attract investments from European and North American IPPs. Therefore, Mexico has to target venture capitalists and companies willing to invest in high-risk greenfield projects.
"Geothermal power generation has many technical advantages over conventional and alternative power generation technologies," noted Stainoh. "Thus, it is an ideal choice for electricity generation in Mexico, which has the necessary natural resources for geothermal electricity generation."
For more information, visit www.frost.com