FIDE to shrink solar panel support, small companies to be the most affected

The Electric Energy Savings Trust (FIDE in Spanish) is currently on a pause that will serve to restructure its operations for the future, but it will be operational again before the end of the year. At that point, the Trust announced, the percentage of the budget allocated to distributed generation will be reduced, partly due to the unexpected success of the program. All of this is despite the fact that FIDE will not suffer budget cuts in real terms.

“FIDE’s purpose is achieving energy savings through various technologies. There is a high demand for photovoltaic systems, and for us, this was something new, since these are not specifically savings. The market we were used to got out of balance, and we had to lower the intention for photovoltaics to balance it with savings (...) That’s why we will go to the market with less support for photovoltaics.”

Arturo Sánchez Requena, Deputy Director of Programs, FIDE

Sánchez Requena explained that the change in administration presented an opportunity to review the actions of the Trust and the programs it undertakes, which was compounded by the lack of allocated resources to pause the operation of various programs, including the Eco-credit for distributed generation.

The “Distributed Generation Projects Program Using Photovoltaic Systems in the Business Sector” was created in 2014 with the aim of facilitating the energy migration of SMEs, and gained momentum the following year when subsidies for 10% of the total cost of the equipment were approved. In 2018, FIDE migrated the financing to the Eco-Credit Business program, which was in charge until its pause.

FIDE is waiting for its resource proposal to be approved, although they have had positive approaches with the authorities, so they do not expect the total funds to be modified compared to previous years.

Between 2013 and 2018, the Trust reported 1,999 photovoltaic projects financed with an amount of 678.54 million pesos. This represents only 7.2% of the 11,315 million pesos allocated to FIDE projects. On average, these projects received a subsidy of 14%, which Sánchez revealed will be eliminated.

FIDE also supports households, but the effect of the reductions will be smaller: currently, the subsidy is only 10% (which has been in place since 2015). Additionally, credit mechanisms in the market offer better interest rates than those available to businesses. By 2018, the Trust had supported 1,041 projects of this type.

An expert in the sector, who preferred not to be quoted, explained that “the negative impact will be significant,” as the amount financed by 2018 represents 2% of the contracts and 3% of the installed capacity. Therefore, these 4 months of inactivity and future cuts could slow down the growth of solar generation.

A demonstration of the barriers in this market has been previously exposed by the German Cooperation for Sustainable Development in Mexico (GIZ), an international agency that belongs to the German government. One of its most important activities is carried out in conjunction with the Mexican Banking Association (ABM), with the goal of having commercial banks develop products to meet this demand. “There are already banks offering them, but the market volume is larger than this offer.”

In some provincial areas, such as Hidalgo and Puebla, companies dedicated to installing panels have reported concerns about the impact they are already seeing on their sales and the potential impact of the future distribution of resources, as FIDE financing represents between 40% and 60% of their sales.

However, Asolmex remains optimistic. Just yesterday, the Association released a statement congratulating the growth of 117% in the number of solar rooftops during the first half of this year. However, this trend still carries the financing that FIDE provided during the previous year.

Additionally, 75% of the reported growth is concentrated in households, reflecting the difficulties faced by SMEs attempting to access solar generation. Despite this, Asolmex expects that by 2023, 650,000 solar generation contracts will be reached: a 550% increase compared to the current figure.