• Sector : Sustainable Energy
  • Location : Mexico
  • Involvement : Investment + TA, Investment, TA

Overview

SCF plans to invest in Luxun, a renewable energy company and enter into a joint venture with another renewable energy company that will provide projects to the Platform to rapidly develop, install and operate rooftop solar for Distributed Generation taking advantage of the country’s vast solar irradiance.

Both companies have four years of track record in the Distributed Generation scheme (<500kW of capacity), providing Power Purchase Agreements, leasing and long-term financing for the commercial & industrial (C&I) Sectors. The companies are involved across all steps of the value chain from marketing, development, procurement, construction (supervision), operation and asset management.

The Challenge

Mexico’s energy mix is dominated by oil and gas, with oil accounting for almost half of the total. Mexico has a constant growing electricity sector, with demand increasing on average by 1.6% per year since 2000.

Distributed generation (DG) solar projects can help Mexico reduce its reliance on fossil fuels and avoid emissions. They are smaller and less regulated, with a threshold of 500 kilowatts – enough to power about 200 households.

In addition, it will contribute to the generation of direct and indirect employment and skills development in the communities, given that there will be multiple installations across the country.

SCF’s Involvement

1. Proposed Investment

SCF is evaluating an investment to become the funding partner for the entire development, procurement, installation supervision, and operation of the solar PV assets. The initial capital will go towards the construction of +9MW with signed Power Purchase Agreements (PPAs). The following rounds of investments are expected to finance the construction of new assets and support the continuous business development of the platform. The capital deployment is expected to be over the next four years and expected to be around $40m.

2. Technical Assistance

The project has received technical assistance from SCF in the form of an Environmental & Social Impacts Assessments (ESIA) and Environmental and Social Management Plan (ESMP).

The ESIA serves to identify potential environmental and social risks and impacts arising from Luxun’s activities at the company level. The methodology observes the International Finance Corporation (IFC) Environmental and Social Sustainability Performance Standards and the General EHS Guidelines, Gold Standard standards, as well as other applicable international best practices.

Based on the findings of the ESIA, an ESMP will be prepared for the prevention, mitigation, and performance improvement measures, processes, and procedures to address the identified ES risks and impacts.

Our Target Impact

Our aim, alongside our local partners, is to support and scale up the renewable energy platform to develop, install and operate solar PV assets to offer clean energy to the C&I clients that currently have a reduced number of options for their electricity supply. We expect the project will positively impact the following Sustainable Development Goals: 

  • SDG 7 Affordable and Clean Energy

    SDG 7 Affordable and Clean Energy

    The project should generate 256,000 MWh of clean and affordable energy for industrial and commercial use per year.

  • SDG 8 Decent Work and Economic Growth

    SDG 8 Decent Work and Economic Growth

    Create direct and indirect employment and skills development in the communities, given that there will be multiple installations across the country. Integrate more women into the processes, such as in the operation and maintenance phase.

    Additionally, we expect that the reliable supply of electricity at a constant and cheaper tariff will attract more companies to Mexico as a nearshoring effect supporting the growth of the Mexican economy.

  • SDG 13 Climate Action

    SDG 13 Climate Action

    We estimate that from 2027 onwards thanks to the project 126,464 tons of CO2 will be avoided emissions per year by replacing power generation from primarily coal-powered electricity sources.

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