SolarCity Corp To Invest $1 Billion In Mexico Unit Over Five Years

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SolarCity Corp To Invest $1 Billion In Mexico Unit Over Five Years

SolarCity’s Mexico unit aims to invest around $1 billion over the next five years, it said on Tuesday. Mexico has been slow in taking advantage of solar power even when it has abundant solar potential. Instead, it has opted for less expensive natural gas.

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SolarCity investing big in Mexico

David Arelle, SolarCity’s Mexico president, told Reuters that the projected outlay will rely on Mexico keeping an incentive called net metering, which requires utilities to purchase extra power produced by the rooftop solar panels, at current levels.

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Arelle told Reuters, “We estimate that if things work out the way they should, over the next five years our investment could reach about $1 billion.”

Arelle sees sector-wide investments as large as $3 billion over the same period as well.

In Mexico, net metering for solar projects is covered at up to 500 Kilowatts of installed capacity, but Arelle showed concern that the government could push it to as low as 50 kilowatts due to pressure on public finances, notes Reuters.

Noting that net metering was essential to project finance, he said, “That would kill the business.”

Net metering provides buyers certainty on the price of the electricity over several years, he said.

Arelle said SolarCity could add around 2,000 employees over the next two years if the 500-kilowatt threshold is maintained. The company is planning 30 megawatts’ worth of solar projects in Mexico this year and 50 megawatts’ worth of projects there next year.

New regulations that cover the net metering threshold will be finalized before the end of the year, said Vania Guerrero, a spokeswoman for Mexico’s energy regulator, CRE. However, she did not comment on whether the current cap would be changed.

Is the Tesla and SolarCity Corp deal proving its worth?

In other SolarCity news, the only big reason Tesla was censured for buying the solar installer was because no one understood how the clean energy giant would assist the electric car making giant as both the companies operate in different business segments. But in a recent development, the automaker has won a big contract of 34MWh of energy storage for water facilities. It is perhaps the biggest agreement between AMS and Elon Musk’s EV maker, as the latter will provide 500MWh of energy storage to the former. Though this may justify the SolarCity deal to some extent, there are still doubts surrounding the deal.

On Tuesday, SolarCity shares closed up 0.1% at $20. Year to date, the stock is down almost 61%, while in the last year, it is down almost 52%.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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