Renewable
Energy Program in Mexico -
Analysis and Results
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to Top)
In
this issue we have featured Sandia’s ongoing program
in Mexico to field photovoltaic and other renewable energy
systems in a way that will sustain their use in the future.
Sponsored by the Department of Energy, Sandia began work
in Mexico in the early 1990s, initially to explore and
strengthen opportunities for the US renewables industry
in Mexico. Finding that the climate in Mexico was favorable,
the department initiated the Mexico program. In late 1992,
the Mexico office of the US Agency for International Development
(USAID) joined the DOE in the ongoing project because
their goals are synergistic; while USAID promotes environmentally
sound economic and social development in Mexico, DOE supports
the provision of technical assistance and involvement
of the U.S. industry.
Since
the inception of the program, more than 100 kilowatts
of renewable energy systems—virtually all of them
involving U.S. suppliers in partnership with Mexican
industry—have been installed in Mexico and have
formed the foundation for much replication. Mexico represents
an attractive market for the U.S. renewable energy industry,
because more than 5 million Mexicans in 88,000 villages
do not have access to grid-supplied electricity, and
more than 100,000 rural communities are in need of potable
water. In addition, at least 600,000 ranches need water
for livestock and/or irrigation. If these requirements
were supplied by a reasonable mix of grid extension
and renewable-energy systems, these markets for renewables
would total more than a billion dollars.
Focus of the Program
The goals of the Mexico Renewable Energy Program are
to promote use of renewable energy systems, enhance
economic and social development in Mexico, create new
business opportunities for U.S. industry, and offset
greenhouse gas emissions. The original concept was,
and still is, focused on rural, off-grid, productive-use
applications of renewable energy, particularly photovoltaics
and small wind, with some interest in small hydropower
and solar thermal systems. Productive-use applications
are those that provide an economic or social benefit
to the user of the technology, such as water pumping
for agricultural use or lighting for an ecotourism facility.
Because of the income they provide, productive-use applications
provide a built-in means for paying for a renewable
energy system.
This
focus on productive uses distinguishes the Sandia program
from other major efforts to introduce photovoltaics
into Mexico. For instance, the Mexican government, in
partnership with the national utility, initiated a program
in the early 1990s to provide electricity using photovoltaic
systems primarily for lighting and other uses, such
as radios and possibly televisions, in remote areas
of the country where grid extension is too costly or
unfeasible. To date, some 1,250 rural communities have
been electrified, with as many as 40,000 small solar
systems having been installed in Mexico (at the time
the article was written). These systems are intended
for domestic use, rather than to increase economic productivity,
and are not specifically focused on increasing economic
productivity.
Structure
of the Program
Many
of the principles of the Mexico Renewable Energy Program
are based on Sandia’s Photovoltaic Systems Assistance
Center, which has been working for more than 10 years
to increase the use of photovoltaics by agencies and organizations.
In essence, the philosophy of the PVSAC advocates partnering
with established organizations, working within established
and funded programs, developing in-house champions in
the user organization for projects, and providing technical
assistance, training, and hands-on experience to build
institutional capacity to use the technology. The PVSAC
is careful not to do one-of-a-kind applications, technical
demonstration projects, or projects that are not economically,
financially, and institutionally viable and technically
feasible because of its overarching concern that the projects
be replicable.
Sandia’s
Mexico program models its work on six basic tenets:
This
article describes the successes of the program in the
context of these six components.
Program
Results to Date
More
than 180 pilot renewable energy systems have been installed
under Sandia’s Mexico program using this model, and
they represent more than 100 kilowatts of power, providing
services for more than 15,000 rural Mexicans in nine states.
Their geographic distribution is shown in Figure 1 (p.2).
These systems were chosen to have high visibility and
high impact, for instance they are being used in communal
ranches, villages, and bio-diversity reserves where many
people will directly benefit from their use and many others
will be able to observe these benefits.
Figure
2 shows the cumulative capacity of projects installed
for each fiscal year that the program has been in existence.
The trend in the graph shows that the rate of implementation
has been increasing steadily over the years, and is based
primarily on increased familiarity with photovoltaic and
other technologies on the part of partners, local suppliers,
and end users.
All
of these renewable energy systems were installed through
partnerships with in-country organizations and help to
meet the various needs of these partners. Applications
include water pumping for livestock and communities; facilities
power for research stations, ranger stations, and ecotourism
hotels; and communications systems. Figure 3 (p.4) shows
the distribution of applications and technologies as applied
to installations through the program. As can be seen in
this Figure, the majority of the systems and capacity
installed through the program use photovoltaic technology.
How
the program achieved these results using the tenets of
the model
Partnerships:
Many partnerships have been formed through
this program to address the diverse cultural, technical,
social, and institutional issues that Sandia has faced
in working to meet program goals. The program implementation
team itself is comprised of several organizations with
complimentary strengths. In Mexico, partnerships have
been formed with several organizations that already have
experience with renewable energy technologies and others
that had not had any experience prior to the program.
The program’s greatest results have come from project
implementation activities with rural development and conservation
organizations who were new to renewables when the program
began.
A multi-institutional
implementation team has been formed, with the National
Renewable Energy Laboratory partnering on several key
aspects of the program, such as wind technical assistance
and resource assessment. Other members of the team include
South-West Technology Development Institute, Winrock International,
Enersol Associates, and Ecoturismo & Nuevas Tecnologías.
The combination of these and other organizations brings
a diverse set of talents to the program team.
Several
partnerships have been developed with institutions in
Mexico that are already involved with renewable energy
on various levels. As part of the U.S./Mexico Bi-National
Agreement, Sandia collaborates with the Mexican Commission
for Energy Savings on the development of tools and programs
to increase renewable energy acceptance in Mexico. Sandia
has also formed agreements with the National Solar Energy
Association and the Center for Energy Research of the
National Autonomous University. Collaborations with the
Federal Electricity Commission and the Mexican Foundation
for Rural Development are also underway. These partnerships
form the foundation of the program’s successes.
Approximately
120 of the systems represented in the above figures were
installed in partnership with an agricultural development
organization named Fideicomiso de Riesgo Compartido (FIRCO),
an agency under the Mexican Secretary of Agriculture.
Through its offices in each Mexican state, FIRCO engineers
and technicians work with agricultural producers, such
as ranchers, to improve and modernize their techniques,
thus increasing their productivity. For example, a FIRCO
engineer in the state of Sonora might assist a small rancher
in arranging to buy a system to pump, store, and deliver
water to his cattle, increasing the amount of water available
and usable land on his ranch. Before the development of
FIRCO’s partnership with Sandia, all such projects
included gasoline or diesel-powered pumps. Now, however,
FIRCO personnel are encouraging ranchers to utilize renewable
energy technologies when feasible, and are overseeing
the installation of renewable energy systems.
In the
state of Chihuahua, more than a dozen development organizations,
academic institutions, and municipal governments have
formed the Renewable Energy Working Group. Through its
partnership with Sandia, this group has overseen the installation
of more than 40 water pumping systems for ranching and
community water supply. The group is now beginning to
implement an innovative financing program within the state
specifically for renewable energy technologies that will
be accessible for both productive use and home lighting
applications. Based on these successes, the working group
concept is being encouraged in other states throughout
the country.
Another
important set of partnerships involves working with organizations
devoted to conservation of natural resources and sustainable
development in communities located near protected natural
areas to incorporate the use of renewable energy in these
activities (see Case Study on the Chajul Biological Research
Station).
Capacity
Building: Sandia’s
Mexico team has placed great emphasis on assisting partners
in building the capacity necessary to independently evaluate
and develop projects by offering formal training workshops
that often include hands-on installation experience, focused
field activities, and in-depth reviews of suppliers’
quotes for proposed systems. More than 1,600 people have
been trained in various aspects of implementing renewable
energy projects, including technical design, installation
and acceptance tests, and related issues such as proposal
writing and development of financing programs and policies.
Engineers, technicians, suppliers, and decision-makers
in 90 institutions in 14 Mexican states have received
this training and have utilized their resulting capabilities
to develop program activities and projects in these states.
Technical
Assistance: Sandia
and NREL provide technical assistance to program partners
in a variety of forms. Working with partners, Sandia has
assisted the development of technical specifications for
installed systems, and has also worked with local suppliers
to assure that they understand what is required to meet
these specifications. NREL has conducted extensive studies
of solar and wind resources in Mexico, and has developed
resource maps of the country and specific regions. These
maps are valuable tools for partner organizations and
systems suppliers as they work to determine the most feasible
regions for renewable energy technologies. These and other
forms of technical assistance are provided as part of
the capacity building process. In addition to assisting
program partners in making informed decisions about the
appropriate use of renewable energy technologies, this
work provides in-country access to specialized expertise.
Pilot
Project Implementation: Implementing pilot projects
is a way to realize the use of renewable energy systems.
After fielding about 180 pilot projects, Sandia and its
partners are building the foundations of growing, sustainable
markets. Local suppliers have a better technical understanding
of the integration of photovoltaic systems and have learned
that with adequate planning, little cost is required to
maintain installed systems. As a result of this and an
increased demand, prices to end users have been declining
in areas where the program is well established, as is
shown in Figure 4 (p.6). This can be seen in the cases
of both Baja California Sur and Chihuahua, where the program
has been active for at least three years, and—more
important—has gone through several cycles of project
development and procurement.
One
way Sandia helps end users overcome the perceived risks
associated with the introduction of new technologies is
to share the cost of pilot system installations. Because
photovoltaic and wind systems involve considerably higher
initial investments than conventional gasoline or diesel-powered
systems, by using USAID funds to share these initial investments,
project engineers and end users are more willing to assess
the value of these new technologies.
As customers
gain more experience, and installed systems gain visibility,
the perceived risk reduces over time, as does the Sandia
contribution. Figure 5 illustrates this trend. In the
cases of Baja California Sur and Chihuahua, increased
consumer confidence based on early installations has led
to a greater willingness to invest in photovoltaic systems.
The in-country cost share trend shown for Baja Sur reflects
the incorporation of a major national development program,
whereas the Chihuahua trend reflects willingness on the
part of the end users to pay a greater percentage of the
system costs. The data shown for the overall program are
less conclusive, because they blend the results from several
distinct geographic regions in different stages of program
implementation.
Sandia
helps to share the costs of these projects through contractual
arrangements with its partners, but the partners purchase
the equipment from the suppliers. Thus, systems installed
through the program are truly pilot projects, and after
Sandia’s involvement diminishes, partners will have
the fully-developed capacity to continue to purchase renewable
energy systems.
The
value of this program to the U.S. renewable energy industry
is in the increased access to Mexican markets through
local system suppliers. Therefore, the importance of including
U.S. and Mexican industries in all aspects of the program
cannot be overemphasized. On a local level, sustainability
and growth of markets can only be assured if a strong
supply infrastructure exists, and if installed systems
function reliably over time. Therefore, Sandia works closely
with local suppliers to help them strengthen their ability
to deliver high-quality systems at reasonable costs to
end users.
As part
of this process, Sandia works to facilitate the formation
of partnerships between U.S. and Mexican suppliers. To
date, more than 40 Mexican and U.S. companies have participated
in the program, through attendance and presentations at
training courses, installation of pilot systems, and the
development of their own training programs. Several U.S./Mexican
supplier partnerships have been formed, resulting in greater
customer satisfaction and strong, growing local markets
for photovoltaic systems (see Case Study on Water Pumping).
Replication:
Project
replication, or growing sustainable markets, is the program’s
ultimate measure of success or failure, and can occur
in a number of ways. As partner institutions gain familiarity
with the use of renewable energy technologies, they begin
to implement new projects on their own. This generally
occurs within a specific region first and then spreads
to new regions. Through these activities, other related
institutions become familiar with the merits of renewables
and initiate projects as well. For example, in Chiapas,
the success of projects that were installed with partner
conservation organizations led to nearby municipal governments
electing to use community funds to purchase photovoltaic
systems for their constituents’ houses.
The
potential for this type of replication can be huge, given
that budgets for development organizations can be in the
millions, even billions of dollars. Private-sector spin-off
replication occurs as a result of successful pilot projects.
For replication to be substantial, several factors must
be adequately addressed: the local population must know
the technology and what it can provide; quality products
and services must be available locally; and the ability
to pay for the technology must exist. For the latter reason,
access to applicable financing mechanisms is key.
In efforts
to assess program effectiveness, the Sandia team has been
collecting data related to replication based on pilot
projects. Table 1 (p.12) shows four specific examples
of replicated projects that fall into the categories mentioned
above.
These
data are preliminary, and Sandia is focusing more effort
on obtaining this type of information from partners, end
users, and suppliers in the future. However, based on
solid examples of project replication, the data serve
to demonstrate that the Mexico Renewable Energy Program
is beginning to create the intended effects.
Perhaps
the greatest example of program success to date is a proposal
that FIRCO is developing for the World Bank and the Global
Environment Facility, through which FIRCO intends to dramatically
increase the rate of project implementation achieved in
partnership with Sandia. Whereas FIRCO and Sandia succeeded
in installing approximately 120 photovoltaic water pumping
systems in the last five years, FIRCO is developing a
program that will result in as many as 5,000 photovoltaic
and wind systems installed nationwide over the next five
years.
Monitoring:
To
evaluate the effectiveness of a program, continuous monitoring
of results is necessary. Monitoring activities must be
designed into the program at its inception, and should
focus on several issues, including the technical, social,
economic, and environmental impacts of the appropriate
use of the technologies and applications. The majority
of monitoring data come from interviews with partner agencies,
suppliers, and end users, and from visits to specific
sample sites. For some complex or novel systems, performance
monitoring equipment is installed and analytical reports
are developed.
For
this program, an extensive database is being maintained
at Southwest Technology Development Institute, and all
applicable project and program information is being collected
from field personnel. Maintaining this database allows
program personnel to conduct analyses and make necessary
adjustments along the way. As the program continues its
transition from direct implementation of pilot projects
to further replication and institutionalization of partner
organizations, these monitoring efforts will continually
grow in importance. For this reason, monitoring activities
under the program are being redefined to address new issues.
Sandia
is collecting and will continue to collect data to determine
whether maintenance is being performed, and on the quality
and types of maintenance, as well as on customer satisfaction
with the systems. This information comes from program
partners, vendors, and from surveys of customers. Because
the program is built on the strength of continued partnerships,
Sandia is in a position to collect valuable data regarding
the installed systems. Preliminary indications are that
appropriate maintenance is being performed when needed
and that end users are extremely pleased with their systems.
The data and analysis are preliminary and will be a major
focus of program activities in the future. These preliminary
results, however, provide indications of expected program
results and also illustrate the types of data that are
being collected.
Lessons
learned in the Mexico Program
Implementing
this program has provided a wealth of information about
what works—and also what doesn’t. The key lessons
learned follow; the first two are really Photovoltaic
Systems Assistance Center philosophies that were reconfirmed.
- Solid
partnerships are essential: A program such as this one
depends for its success on working with in-country organizations
and with industry, in this case, on both sides of the
border. In addition, the program team itself, which
is composed of members from different organizations,
must function well together. It is important to choose
partners carefully.
- The
program must be focused to make the most of available
resources: In other words, do one thing well rather
than many things poorly. When successes are realized
in this focused manner, new opportunities can be pursued
later. In general, many more options for partnering
and tapping into opportunities exist than resources
can support; therefore, focus, limit, and succeed in
a few locations, then expand. Similarly, emphasize projects
that have a high probability of replication. One-of-a-kind
efforts can quickly tap valuable resources, while offering
little in the way of long-term returns.
- Development
issues must be integrated with, even given precedence
over, pushing technology or environmental issues: The
initial impetus for the program was to create new opportunities
for U.S. business and to offset greenhouse gas emissions.
However, it did not take long for the program to realize
that if it were going to succeed and have any lasting
effects, the work had to be done from a development
perspective first.
- Pilot
projects should be used as a tool, not an end: Pilot
projects should be installed to establish growing and
sustainable markets, not to be able to point to the
number of installations accomplished during the project.
Their primary value is as tools for training and building
the capacity of implementing organizations, business,
and the user community. The real measure of their success
is in the replication of projects that results from
the program.
- Provisions
should be made to improve the capacity of local business:
The success of this program depends greatly on providing
training and technical assistance to local suppliers
of renewable energy systems. The improved capacity of
local suppliers in Mexico has led to greater consumer
confidence and to better quality products.
- Contracting
mismatches must be addressed properly: Contracting and
legal staff must be involved early in a program such
as this one—especially involving a foreign government—to
avoid delays and misunderstandings as the program progresses.
The differences in requirements for procurements and
sharing of funds between the U.S. and a foreign government
can be substantial.
-
Measuring replication requires a concerted effort and
significant resources: The Mexico program has a monitoring
process in place, but it does not yet do an adequate
job of tracking replication. Adequate resources must
be allocated to ensure monitoring of replication if
the true impact of the program is to be known.
- Multi-year
planning and budgeting are essential: Government-funded
programs generally impose a one-year cycle on which
to base planning and budgeting. This program has greatly
benefited from multi-year funding, mainly because the
results of a program such as this one tend to show up
toward the end of several years’ effort.
There
are several issues to be addressed as the Sandia team
continues to work with its Mexican partners on the broader
acceptance of renewable energy technologies in Mexico.
One of the most critical areas still needing attention
is facilitation of financing mechanisms for renewable
energy systems through banks or non-government organizations.
The Mexican financial crisis that began in late 1994 with
the devaluation of the peso and interest rates in excess
of 70% effectively derailed activities in this area. By
late 1997, interest rates had settled to around 20% for
rural loans, but the Asian and Russian financial crises
in 1998 provoked an increase in Mexican interest rates
to around 35-40%.
In addition,
more program monitoring is desirable, in particular, data
regarding renewable energy business development, as is
data on spin-off replications (market growth), analysis
of customer satisfaction, and information on the effect
renewable energy systems are having on local economic
development via the productive-use applications.
Increasing
the renewable energy industry’s involvement in the
program is another area needing attention. Also, given
the estimated size of the markets in Mexico, the program
would like to get more U.S. companies interested in Mexico.
If FIRCO’s proposed replication program is initiated
this year, all of these issues will require increased
attention.
Although
the work under this program has so far emphasized photovoltaics,
the basic program model is applicable to other technologies
and other locations. With technical help from the National
Renewable Energy Laboratory, several small wind systems
have been installed in Mexico, in efforts to lay the foundations
of sustainable wind markets. USAID is adapting this model
for its energy efficiency programs. Also, Sandia is working
with its partners to assess and demonstrate the applicability
of the Mexico program model in other international settings,
such as in Central or South America.
