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Mexico could reach its goal of generating half of its power from clean energy16 years sooner than expected, according to Leonardo Beltran, Mexico's deputysecretary for energy transition at Mexico's Energy Secretariat (SENER).

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Based on the current growth rate, and the effectiveness of the marketmechanism implemented by the country's energy reforms, Mexico could achieveits goal of generating half its electricity using clean energy sources by2034, Beltran told S&P Global Platts on the sidelines of the Mexico EnergySeries on April 20.

"We have great confidence we can achieve this forecast," Beltran said.

The country has a policy in place under its energy transition law to achievethe goal by 2050, supported by clean energy certificate (CEL) requirements andlong-term electricity auctions.

Under this law, Mexico also must generate 37.7% of its electricity using cleangeneration by 2030. The deputy secretary said Mexico will likely achieve that2030 goal by 2024.

He said these more aggressive projections are based on current trends in placeand the continuation of current policies and market mechanisms.

Analysts agree these more aggressive goals are technically feasible, butseveral also said that other policy changes would likely be needed.

"Mexico has the renewable resources and could implement the enablingtechnologies to integrate large amounts of intermittent renewables and retaina reliable grid," said Jim Heidell, director for utilities with PA Consultingin Denver.

Analysts from Genscape and IPD Latin America also told S&P Global Platts thatthe more aggressive projections are possible if Mexico includes cogenerationand nuclear power in the "clean energy" bucket.

The PA executive noted SENER's policy goal is in line with goals set by someUS states, such as California and New York, which aim to generate half theirpower using clean sources by 2030.

Challenges to overcome

However, Heidell said there are several important challenges Mexico mustovercome. Long-term auctions need to be improved to help support developmentof additional clean generation sources, including hydropower, geothermal,cogeneration and nuclear power.

In addition, new retail suppliers entering Mexico's market also "have less ofan appetite" to sign the long-term contracts required by developers to obtainfinancing to build low-cost clean generation, Heidell noted.

As more solar capacity is installed, Mexico also will "get the duck curve,which would dramatically depress the daytime prices while keeping the pressureon the current high evening-time prices," Heidell said. This will result inlower capacity factor for thermal resources, increasing capacity costs."Suppliers need to factor in the cost of following load in all hours," Heidellsaid.

As a result, Mexico needs policy changes to compensate for this dynamic andprovide grid stability, including mechanisms to support storage and fastresponse thermal units, he added.

"California and New York are pursuing and evaluating those types of policies,and I believe Mexico would have to as well," Heidell said.

--Rocco Canonica, rcanonica@spglobal.com

--Daniel Rodriguez, newsdesk@spglobal.com