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US wind generators looking south as PTC expiration looms  

Credit:  www.power-eng.com 3 April 2012 ~~

US senators voted again last week not to extend the Production Tax Credit (PTC) for wind energy that is set to expire at year-end. This will leave US wind generators looking toward Latin America to diversify portfolios.

“With the US wind market contracting, and the uncertainties in terms of PTC extension, it’s forced wind developers that have primarily been focused on the US during the last five years to start looking at the Latin American markets to hedge their bets and take advantage of higher pricing,” Dino Barajas, a partner at law firm Akin Gump Strauss Hauer & Feld, told BNamericas.

Last week marked the fourth time in 2012 that the Senate has voted not to extend the PTC. The possibility of the PTC drying up could divert a torrent of investment into neighboring Latin America, which is just starting to harness its own wind potential.


Mexico is an attractive launching off point because the financing community is familiar with the electricity sector’s structure. Furthermore, developers that fail on their first attempt to land an IPP contract with state power company CFE can learn the public tender process, then apply lessons to subsequent tenders, Barajas, who has negotiated renewable project finance deals throughout the region, said.

Subsequent projects are less certain in smaller markets while in Brazil, the largest market in Latin America, large projects can be a barrier to entry.

“Local developers dominate the [Brazilian] market. It’s more insulated. Unless you have local participation in a consortium, it’s a tough market to get into. Where you may be looking at a 100MW project in Mexico, you’re probably looking at a 500MW in Brazil. Your investment at risk is much higher,” Barajas said.


Among other US companies now eyeing Mexican wind generation is General Electric (NYSE: GE). Clear rules regarding wheeling costs that did not exist years ago, among other factors, have lured GE to Mexican opportunities, the company’s commercial leader for Latin America and Western US, Rafael Alcalde-Navarro, told BNamericas.

“Before you didn’t know what the use of transmission was going to cost, because it depended where the project was, where the client was, at what time, and where you were going to connect [to the grid]. Now all that is totally transparent because of the rules the government established. It was a big point that was not known and prevented these projects,” Alcalde-Navarro said.

Miguel Ángel Alonso, director general Spanish wind company Acciona’s Mexican subsidiary, the country’s largest generator, told BNamericas he is not concerned about new US players.

“Welcome to the competition. If there’s competition, there will be a market, and if there’s a market, Acciona will continue growing and having a share of that market. The more companies that decide to invest in Mexico, the better for everyone,” Alonso said.

Acciona recently started operations of a plant that brought its Mexican wind capacity to 557MW; including the 251MW Eurus park that is the largest in Latin America. The plant also tipped countrywide capacity over the 1GW milestone.


Copyright 2012 BNamericas.com, Inc.
All Rights Reserved

Source:  www.power-eng.com 3 April 2012

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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