Mexico leads Central American clean energy boom

Mexico is set to achieve record levels of clean energy investments this year, further reinforcing Central America's status as a leading emerging clean tech market.

New research conducted by Bloomberg New Energy Finance (BNEF) illustrates how Mexico enjoyed US$1.3 billion of clean energy investment in the first half of 2014, taking it close to the US$1.6 billion mark recorded throughout the previous year.

Mexico's new Climate Change Act, the liberalisation of the country's energy sector, strong wind and solar resources, and its reliance on expensive fossil fuel power have all contributied to driving investment in the clean energy sector.

Yayoi Sekine, Latin America analyst at BNEF, said: "One of the striking things about this region is the very high exposure to expensive oil- and diesel-based generation. This makes up 20 per cent of installed capacity in Mexico and 42 per cent in Central America. Yet these countries have unusually good wind, solar, geothermal and hydro-electric power resources. Using these to meet much of the additional electricity demand in coming years, and replacing that costly oil and diesel power, makes sense. It is becoming a key plank in the region's energy policies."

Central American states including Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama are still to follow Mexico's lead in the sector with investment in the first half of this year reaching US$317 million.

BNEF research that the drivers for renewable energy investment in these countries are potentially stronger than they are for Mexico and they predicted that new wind capacity in Mexico and Central America will reach 1.3GW this year, exceeding 2012's record of 757MW.

Projections for 2015 and 2016 suggest that more than 1.3GW of capacity could be added each year.

New solar capacity is also expected to grow rapidly in the coming years, from 193MW this year to 355MW in 2015 and 456MW in 2016.