The awarding of the first projects under the mixed scheme promoted by the Federal Electricity Commission (CFE) left an open question for much of the sector: what factors ultimately tipped the scales in favor of the selected initiatives and what did the Mexican state-owned company demand during the negotiations to reach the decision?
Ricardo Hurtado González, CEO of Terralia, exclusively revealed to Energía Estratégica how the four rounds of negotiations with the Federal Electricity Commission (CFE) led to the awarding of the El Chorro project, a 705 MW wind farm accompanied by 317 MW of three-hour storage capacity, equivalent to approximately 952 MWh of BESS (Best Energy Storage System). The development, considered the largest wind farm selected under the mixed scheme, also achieved a price close to $50 per MWh and a target Internal Rate of Return (IRR) of 14.5%.
Far from being a simple submission of bids, the process involved economic adjustments, technical reviews and concrete modifications to the original configuration of the project.
“ This project started with 705 MW and 30% battery storage for three hours. Later, as we progressed in negotiations with CFE, the battery capacity was increased to 45% of the total capacity ,” Hurtado González stated in an interview with the website.
According to the executive, much of the discussion focused on the economic indicators of the proposal, the expected profitability, and the validation of costs with suppliers, in search of a structure that would be attractive to both the developer and the state-owned company.
“ Improve your indicator in this area, lower the IRR a little, check with your suppliers ,” the CEO reminded, referring to some of the observations made during the working sessions.
For Terralia, the end result was an initiative with an investment of nearly $1 billion, backed by a 25-year power purchase agreement and conditions that allowed for a balance between market expectations and CFE's objectives.
“ In the end, our assessment is that it was literally a win-win, both for them and for us ,” he said.
As Hurtado González explained, the awarding process took place over approximately one month and was marked by a series of weekly meetings between the developers and the agencies involved in evaluating the proposals. Far from being a purely documentary review, these meetings allowed for discussions on the technical, financial, and operational aspects of each project.
“ After four meetings, one each week, we arrived at a result that pleased everyone ,” said the CEO of Terralia.
According to the executive, one of the aspects that most impressed him was the level of coordination among the various entities that participated in the negotiations. Representatives from the Ministry of Energy, the National Energy Commission, the National Energy Control Center (CENACE), and various departments of the Federal Electricity Commission were present at the meetings.
For the executive, the experience contrasted with other processes he has experienced during his career in the Mexican energy sector: “ I personally have been in the energy world for 16 years and I had never seen such a good openness from the Federal Commission nor such flexibility in a negotiation .”
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However, Hurtado González believes that the awarding of the contract did not begin during the last four weeks of negotiations, but several years earlier.
“ When nobody believed that the market was going to be unlocked, we continued that process of searching for land and identifying the best spots to develop projects ,” he says.
This strategy allowed the company to enter tenders with a mature portfolio ready to compete. Terralia currently has approximately 10 GW under development in wind and solar photovoltaic projects, primarily concentrated in Mexico.
“ As Mexicans, we proudly believe in our country and where we are. That's why we invest in this ,” said Hurtado González.
Although El Chorro was awarded the contract, it wasn't the only project Terralia submitted to the public-private partnership scheme. The company also participated with a project located in Campeche, which ultimately didn't move forward due to capacity limitations in the region.
“ They told us that Champotón was definitely not going to be included because there was already a congestion of renewable energy projects in the southeast ,” the executive explained.
It's worth noting that 55% of the projects that advanced in the process were not awarded contracts for various reasons, such as network saturation or failure to meet environmental impact requirements. Furthermore, the economic component was a decisive factor, with proposals offering significantly higher prices than those ultimately selected, in some cases exceeding $70 per MWh.
What's next for Terralia and for Mexico
The company is currently working on the necessary permits and studies to achieve Ready to Build status during 2027, with the goal of subsequently starting construction of the park and achieving commercial operation in December 2029.
In parallel, Terralia has already presented a 240 MWh storage project in Monterrey to participate in the exclusive battery scheme , while promoting an additional portfolio of close to 1.2 GW between solar and wind energy.
For Hurtado González, successfully navigating the bidding process for the mixed scheme also represents an advantage for future calls for tenders. The executive believes that the experience gained during the negotiations, as well as the understanding of the technical and economic criteria prioritized by the authorities, will allow the company to be better prepared for the new contracting mechanisms being promoted by the Mexican government.
“ We have participated in all the funding opportunities convened by the Government ,” the CEO emphasized, adding that the company will continue to invest in new generation and storage projects in the country.
“ Between now and 2035, I believe there will be a huge energy development boom in Mexico . I think CFE is taking a very good approach to all of this, and we will be here to invest and develop ,” Hurtado González concluded.
