Sugar mills in Mexico produce more than 15 million tons of bagasse every year. While this by-product of sugar production is used as fuel in sugar mills, half of it is usually wasted through inefficient incineration. This means that its power production potential of up to 3000 GWh/year is lost.
UNEP DTU Partnership has developed a financial structure with a central SPV (special Purpose Vehicle) to finance, construct and operate the connection of Mexican sugar mills to the national grid. This way excess power production from more efficent use of bagasse can be sold back to the grid, maing the business case for efficient inceneration while lowering ghg emissions.
The SPV works on the basis of a rotating, non-profit financial model that improves not only the business case for the sugar mills, but eases all grid connection processes and procedures. At the same time, the SPV may engage in power trading on behalf of the sugar mills in order to improve their revenues from participating in the newly reformed electricity market.
The NAMA for sugar mills comes from the bilateral energy and climate change cooperation program between Mexico and Denmark. The Danish Energy Agency together with UNEP DTU Partnership and the implementing partners in Mexico – the Ministry of Energy and the Sugar Industry Chamber – developed a winning concept for the NAMA Facility’s Detailed Preparation Phase.
The facility has financed the final conceptual design building solid business cases for a number of sugar mills and securing investment commitments from a number of sugar mills for their own plant upgrades.
In the medium term alone, the NAMA is expected to reduce about 1 million tCO2e/year.
This project contributes to the following Sustainable Development Goals:
Focus area: Climate Planning and Policy, Empowering climate action in developing countries
Country / Region: Mexico