Exploring the potential for renewable energy cooperatives in Mexico

Abstract

Mexico is currently transitioning to a low-carbon electricity production that has a specific goal of producing at least 50\% of its electricity from clean energy sources by 2050. Following the liberalization of its electricity sector in late 2013, private actors joined the Mexican government's efforts to increase the share of renewable energy; however, the mechanisms placed to attract investment continue to favor the incumbents and the model of large-scale, privately owned, and internationally financed projects. These projects produced new forms of spatial and social inequalities, which led to criticism and conflicts from civil society and indigenous groups at the local level. Theories on socio-technical transitions study the shifts within large socio-technical systems and recognize technological innovation's role for the required transition. However, technological innovation alone is not sufficient to achieve the required changes. It depends on other elements within the socio-technological system, such as business models. The role of business models remains underexplored; therefore, this research intends to contribute to the emerging literature linking socio-technical transitions and business model theory. Using the framework proposed by Wainstein and Bumpus (2016), this research aims to understand the role of business models as part of the socio-technical regime and as a device to commercialize technological innovation. Over the last decade, new business models, like the ones implemented by renewable energy cooperatives (REScoops), are proving to be a driving force to transition to low-carbon energy generation. A REScoop is a business model where citizens jointly own and participate in renewable energy or energy efficiency projects. Despite the observed benefits, countries with apparent proper conditions, like Mexico, have not succeeded in implementing this business model. Therefore this research aims to understand the limiting factors by conducting a case study to answer the following main research question: What are the challenges and opportunities for the potential use and adoption of the renewable energy cooperative business model in the context of the Mexican energy transition?. Implementing the conceptual framework combining business models with socio-technical transition theory from a multilevel perspective proved to be useful in understanding specific dynamics and business models' roles within the Mexican energy transition. While the Electric Industry Law of 2014 liberalized the Mexican electricity sector and created the required conditions for REScoops to participate, the secondary laws and the regime's pressures impose a series of entry barriers for REScoops to compete in the electricity market at a large-scale. However, the REScoop business model can be implemented at the distributed generation level. This research introduced four potential business models that could be developed under the current circumstances and regulatory conditions. These business models shall be carefully examined and adapted to the host communities' specific needs and resources. The collective generation business model, in particular, can play an important role in promoting RES. This report closes with a series of recommendations for different actors and recommendations for further research.