IDB funding expansion of wind power farms in Mexico

The IDB has approved $102M in partial financing for two wind power projects in Oaxaca,  Mexico that are a part of its strategy to diversify its energy matrix while reducing greenhouse gas emissions.

According to a press release the project which will total 318MW, aims at establishing a critical mass of renewable energy in the country, providing clean energy to private companies and generating jobs and payments to low-income rural communities.

The strategy was outlined in legislation approved in November 2008 and includes a Special Programme to Exploit Renewable Energy and Special Climate Change Programme that will contribute to the country’s aspirational goal prepared by President Felipe Calderon, of reducing emissions by 50% of their year 2000 levels by 2050.

The IDB board approved a $50M loan for the 250.5MW Eurus wind farm currently being developed by Acciona Energia Mexico a wholly owned subsidiary of Spain’s Acciona Energia. This is the largest wind power project built in Latin America and the Caribbean.

The release said too Mexico’s Cemex, a global producer of cement and concrete is an equity partner in the Eurus project and will buy all its electricity  under a 20-year self-supply power purchase agreement. Cemex expects Eurus and other self-supply projects to meet a significant percentage of the energy needs of its Mexico operations.

The IDB will also facilitate an additional loan of up to $30M from the Clean Technology Fund of the Climate Investment Fund for the Eurus project for which the total cost will be close to $600 million. Additional long-term financing is expected to be approved for the project by other multilateral lenders, development finance institutions and commercial banks.

Also, the IDB separately approved up to $280M Mexican pesos (about $21M) for a 67.5 MW wind farm currently under development by Electrica del Valle de Mexico, S de RL De CV, an affiliate of EDF Energies Nouvelles SA of France.

Four subsidiaries of Wal-Mart de Mexico, one of the country’s largest retail chains will buy power from the project under a 15-year self-supply power purchase agreement, as part of Wal-Mart’s goal of using 100% renewable power in its Mexico operations.

The release said too the loan combined with credits expected from multilateral and bilateral lenders could cover as much as $103 million of the EMV project’s $190M total cost. Both projects have included certified emission reduction credits in their plans. The Eurus project will benefit from the sale of carbon credits for a total of 600,000 tons of avoided CO2 emissions per year. The EVM project is currently in the process of obtaining credits for up to 168,000 tons of avoided CO2 emissions per year.

The IDB said the land on which the turbines of both projects are located has been leased from local ejidos, a traditional Mexican system of communal land ownership that is widespread in the country’s rural areas. These projects will generate jobs and a steady flow of income from leases for these communities.  Both projects will take advantage of strong winds in the state Oaxaca which is considered to have some of the planet’s best wind power potential. Mexico plans to develop at least 2500 MW of wind power capacity in this state. Permits to develop some 2000 MW (including the one partly financed by the IDB) have already been issued to private developers.

The Mexican government estimates that about $5 billion will be invested to build these new wind farms by 2012. They are also expected to meet about 4% of the country’s electricity demand and generate some 10,000 jobs directly or indirectly, during the building of the facilities. About 374 permanent jobs will also be created for operating and maintaining the farms.