Mexico Solar Energy Market Outlook to 2030

Mexico Solar Energy Market Overview

• The Mexico solar energy market, valued at USD 5.5 billion, is driven primarily by favorable government policies, high solar irradiation, and increasing demand for renewable energy sources. Factors such as the national targets set by the Energy Transition Law, which requires a higher percentage of clean energy in the energy mix, have accelerated solar adoption. Additionally, falling solar panel prices have improved accessibility, spurring significant growth across residential, commercial, and utility sectors.

• The dominant cities in Mexico's solar market are Mexico City, Monterrey, and Guadalajara, due to their high population density, energy demand, and established industrial and commercial infrastructure. The regions strategic location and high levels of solar irradiation make it ideal for solar energy projects. Additionally, northern states like Sonora and Chihuahua are prominent in utility-scale solar farms, leveraging expansive, unshaded landscapes and proximity to the United States market.
• The Mexican government has enacted regulations to support distributed generation, including rooftop solar systems, under the regulatory framework for net metering and net billing. By 2023, these measures have facilitated over 3 GW of installed distributed solar capacity, including 700 MWof new installations added during the year which is particularly popular in residential and small commercial sectors. The regulatory support enables end-users to offset energy costs through self-generation, thus fostering the growth of the distributed generation market.

Mexico Solar Energy Market Segmentation

By Technology Type: The Mexico solar energy market is segmented by technology into photovoltaic (PV) and concentrated solar power (CSP). Photovoltaic (PV) technology dominates the market share due to its cost-effectiveness, ease of installation, and compatibility with both residential and utility-scale applications. PV technology has witnessed robust adoption across both urban and rural areas, driven by falling costs and the availability of distributed generation incentives.

By Solar Module: The market is also segmented by solar module type into monocrystalline, polycrystalline, and thin film modules. Monocrystalline modules are the preferred choice in Mexico due to their higher efficiency and suitability for high-irradiation regions. These modules dominate the commercial and industrial sectors, as they provide better performance and are more efficient in limited space, which is essential for rooftop solar installations in urban centers.

Mexico Solar Energy Market Competitive Landscape

The Mexico solar energy market is dominated by both local and international players, each bringing unique strengths in project development, financing, and technology. Major players include:

Mexico Solar Energy Market Analysis

Growth Drivers

• Renewable Energy Targets: Mexico's Energy Transition Law mandates that 35% of the nation's electricity consumption be sourced from clean energy by 2024. As of 2021, clean energy accounted for 26.7% of electricity generation, necessitating an additional 42.56 TWh to meet the 2024 target. The National Development Plan aligns with this objective, emphasizing the expansion of renewable energy infrastructure to achieve these goals.
• Rising Electricity Demand: Mexico's electricity consumption is projected to increase from 358,670 GWh in 2024 to 495,781 GWh by 2038, reflecting a 38.2% rise. This growing demand underscores the need for substantial investment in energy generation, with solar power positioned as a key contributor to bridging the demand-supply gap.
• Solar Irradiation: Mexico's geographical location endows it with an average solar irradiation of 4.4 kWh/m to 6.3 kWh/m per day, ranking among the highest globally. This abundant solar resource positions the country favorably for extensive solar energy development, offering significant potential for both utility-scale and distributed solar projects.

Challenges

• Policy Uncertainty: Recent shifts in Mexico's energy policies have introduced uncertainties affecting investor confidence in the renewable sector. In 2024, Claudia Sheinbaum has expressed a commitment to increasing the share of renewable energy in Mexico's electricity generation to 45% by 2030. Modifications to regulations governing energy generation and distribution have led to concerns about the stability and predictability of the market environment.
• Infrastructure and Grid Limitations: Mexico's existing energy infrastructure faces challenges in accommodating the integration of new solar projects. The regulatory framework has been volatile, discouraging private investment in renewable energy projects. The Mexican government has prioritized state-owned enterprises like the Federal Electric Commission (CFE), which limits opportunities for private sector participation in the renewable energy market.

Mexico Solar Energy Market Future Outlook

Over the next five years, the Mexico solar energy market is expected to experience sustained growth, driven by factors such as government policies promoting renewable energy adoption, ongoing technological advancements in solar panel efficiency, and increased investment in utility-scale solar projects. Expanding interest in distributed generation, particularly for residential and small commercial applications, is also anticipated to drive growth as consumers seek alternatives to conventional energy sources in light of rising electricity costs.

Market Opportunities

• Distributed Generation and Rooftop Solar (Residential, Commercial Applications): The adoption of distributed generation systems, including rooftop solar installations, has been on the rise in Mexico. By January 2021, there were over165,000 solar distributed generation (DG) contractsin Mexico, representing a total installed capacity of1,388 MW, with solar PV making up nearly all of this capacity. This trend presents significant opportunities for market expansion in decentralized energy solutions.
• Advancements in Solar Technology: Technological advancements have led to increased photovoltaic efficiency and the integration of battery storage systems, enhancing the reliability and effectiveness of solar energy solutions. Over the past few decades, solar panel efficiency has improved dramatically. Early solar panels had conversion efficiencies around 10%, while modern panels can achieve efficiencies exceeding 20% to 25%. These developments contribute to the viability and attractiveness of solar investments, supporting the sector's growth.