Mexican wind energy boom plays out on gusty shores

LA VENTOSA, Mexico Mon May 14, 2012 7:18pm BST

1 of 5. Wind turbines are seen in La Ventosa February 7, 2012.

Credit: Reuters/Jorge Luis Plata

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LA VENTOSA, Mexico (Reuters) - On an arid plain where sudden gusts of wind can rip roofs off buildings and knock over tractor trailers, Mexico is building a new engine for its energy future.

Surrounded by towering turbines in every direction, the town of La Ventosa - which means "the windy place" in Spanish - is at the heart of a wind power boom in the country.

Mexico, the world's 14th biggest economy, still punches well below its weight in terms of wind energy, ranking 24th on the planet in installed capacity last year, according to the Global Wind Energy Council (GWEC).

But the market is growing fast. By the end of this year, the national wind energy association expects Mexico to jump to number 20 on the list, which is dominated by wealthy European nations, the United States, China and India.

"We're talking about the largest growth in wind power projects anywhere in the world," President Felipe Calderon said recently near La Ventosa at the opening of Latin America's largest wind park owned by Spanish company Acciona SA, a long row of turbines whirring behind him.

Producing just 3 megawatts of wind power in 2005, Mexico now has nearly 400 times that, and will have 2 gigawatts (GW) by the end of 2012, says the Mexican Wind Energy Association, or AMEE.

Though it only accounts for a fraction of the 2011 global total of nearly 240 GW, by the beginning of next year, Mexico's installed wind power potential should equal almost 4 percent of the country's own energy needs.

The planned build-up will make Mexico's wind industry the fastest growing in the Group of 20 economic powers this year, said Steve Sawyer, secretary general of the Brussels-based GWEC. He also said Mexico's net addition to installed capacity in 2012 could be the fifth highest of any country.

Most of the increase will come from giant wind farms along the Isthmus of Tehuantepec, the narrowest point between the Pacific Ocean and the Gulf of Mexico. Eighteen of Mexico's 27 wind plants now operate around La Ventosa.

Acciona says its $600 million project alone will be enough to power 700,000 Mexican homes, generating 306 MW of energy with 204 turbines. That investment will be followed later this year by an even bigger wind farm owned by the Macquarie Group's Mexico hedge fund, in partnership with Mitsubishi Corp and PGGM, a leading Dutch pension fund.

By turning to wind, Mexico aims to reduce its dependence on fossil fuels that now power some 80 percent of electricity.

"It has the potential to transform how Mexico gets and uses energy," said V. John White, director of California's Center for Energy Efficiency and Renewable Technologies.

AMEE President Leopoldo Rodriguez expects Mexico's total wind power supply to hit 4 GW by 2015, and go as high as 12 GW in 2020 - enough to cover about 15 percent of future energy needs. The United States, by comparison, aims to generate 20 percent of its electricity with wind by 2030.

All told, the government estimates Mexico's total wind power potential at 71 GW - a figure well beyond the 51 GW of installed energy capacity in Latin America's No. 2 economy last year.

NATURAL WIND TUNNEL

The difference in temperature between the Gulf of Mexico and the Pacific Ocean in the southern state of Oaxaca creates one of the planet's strongest wind tunnels as gusts tear through gaps in the Sierra Madre mountains.

"When the wind blows hard here, buses fall over and entire trees are uprooted," said La Ventosa shopkeeper Miriam Luis.

At the other end of the country, Mexico will begin its first-ever wind power exports next year to San Diego, California from a giant farm in the Baja California peninsula.

The government is giving incentives to companies to use wind energy and Cemex, one of the world's largest cement makers, bread maker Grupo Bimbo, the Mexican arm of Wal-Mart, and mining company Penoles are among the corporations signing up.

The Federal Electricity Commission, or CFC, offers companies a discount on electricity prices if they sign long-term power contracts with wind farms. As a result, the CFC is able to seek international financing at attractive rates to improve transmission infrastructure and promote the boom.

Some firms take advantage of government tax breaks to build the farms themselves and others simply buy the energy from wind plants already being built, mainly by Spanish developers.

Under the government's scheme, companies get credit for feeding the national grid with extra electricity they don't use, leading to savings up to 10 percent on their electricity bills.

Investors can also make good money from wind projects in emerging markets such as Mexico, said Rupesh Madlani, head of clean technology research at Barclays Capital.

Rates of return in Mexico are "comfortably over 10 percent" compared with 8 percent for western Europe, and 10 percent for many developing nations, Madlani said.

OPPOSITION

Calderon, a conservative, has won praise for his environmental policies but he cannot seek a second term at a presidential election in July so it will be up to his successor to advance his green plans in the world's no. 7 oil producer.

In a sign of continuity, Congress recently passed a climate change law mandating that more than a third of Mexico's energy will come from renewable sources in 15 years. The law would lead to a 12 percent drop in absolute emissions from 2005 levels by 2020, according to a research note by HSBC.

Renewable energy, including hydropower and solar, generates more than a fifth of Mexico's electricity. The government also plans to build new dams and install more solar panels.

But the towering wind parks, and the foreign developers behind them, are not entirely welcome in Oaxaca.

Activists complain that locals only see a small share of benefits from projects that have cluttered the isthmus with hulking turbines. Indigenous groups in Oaxaca say that small farmers have been duped into leasing their land below market rates to make way for the rapid expansion.

The turbines, some 26-stories high, have dramatically changed southern Mexico's picturesque mountains and coastline.

Hundreds of acres of corn, bean and sorghum fields have been rented out to wind companies for existing farms or ones under construction.

Some residents complain they were not properly informed beforehand about the scale of the development and now either want more money from the big companies or want them gone.

"For us, the wind isn't just a resource, it's part of our life from nature that shouldn't be sold," said activist Bettina Cruz, a native Zapotec speaker. She was briefly arrested this year for organizing noisy protests to block the wind farms.

In most lease agreements, companies pay for the "right to wind" and allow farmers access to their land even if it falls within the park's boundaries.

Opponents say they are often arbitrarily fenced out of their land in violation of the agreements and that irrigation canals and fields have been destroyed during construction.

The projects mostly create temporary jobs, not permanent employment, meaning the impact on long-term economic development is limited in Oaxaca, one of Mexico's poorest states.

The companies counter that the lease agreements are fair and can provide an extra source of income to poor farmers.

Under "right to wind" leases, landowners on Acciona's wind park receive some 14,000 pesos ($1,000) a year - nearly half an average annual salary in the area - per 2.5 acres (1 hectare), said Amado Marin, head of a local farmers' cooperative. They can get even more if their plot is host to a turbine or a road.

With every new turbine, though, subsistence farming practices that date back centuries are slowly disappearing.

"Farmers are not planting anymore. You don't see the typical local fruit as much. The corn that used to be planted everywhere, is gone," said Javier Valvivieso, a highway worker in La Ventosa. "Instead, it's the wind business." ($1 = 13.56 pesos)

(Additional reporting by Mica Rosenberg; Editing by Dave Graham, Kieran Murray and Marguerita Choy)

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