Mexico energy authorities have been developing an energy storage strategy to balance out the country’s recent surge in solar power plants. What appears to be the first and largest battery to come online, though, does something else entirely.

The 12-megawatt/12-megawatt-hour device switched on in October to deliver reliability and power quality at a 130-megawatt microgrid serving an automotive factory campus in Monterrey. The device handles spinning reserve, voltage support and frequency for the fully self-contained electrical system.

Seven Wartsila gas engines serve as the workhorses of the microgrid. Developer Arroyo Energy determined that, if one of those engines tripped, it could trigger a reliability or frequency problem. To protect against that disruptive scenario, the company hired storage developer Plus Power to fast-track delivery of a battery, which can respond in milliseconds.

“We needed something that could react extremely fast, as if it were another engine, in case one went offline,” said Matt Ginzberg, principal at Arroyo. “If we blow it, the whole manufacturing campus goes down.”

An outage would have major costs for the industrial client, who Ginzberg declined to name.

“If you’re halfway through painting a car and the power goes off, now what? Or you’re halfway through a weld and the power goes off, now what?” said Brandon Keefe, co-founder of Plus Power.

This is the first commercial operation for the boutique large-scale storage development outfit, which also includes Robert Rudd, formerly Tesla’s utility sales director for energy storage, and Alex Fraenkel, who built the storage program at NextEra Energy Resources. Keefe previously developed utility-scale storage in partnership with Enel at Sovereign Energy Storage.

They procured batteries from Powin Energy and inverters from SMA, and built a custom controller to interface with the generators.

Since the project does not connect to the national grid, the developers could skip some of the interconnection steps a grid-tied system would need. Still, the development cycle showcased how rapidly battery technology can enter service compared to more traditional grid equipment. 

“I didn’t know what a battery was in April of this year, and in October I had an operating battery,” Ginzberg said. "It became apparent how competitive the pricing has become and what a factor storage will play going forward. In a word, I have been indoctrinated."

The battery largely plays an insurance role, allowing the engines to run at higher levels and with higher efficiency. But it still activates daily to deliver power quality, Ginzberg noted.

Behind-the-meter applications are not the storage use case most prominently discussed for Mexico. That would be some form of solar integration, like in the remote Baja Peninsula, where a planned storage plant could be a much cheaper way to absorb new solar production than thousands of kilometers of new transmission line.

Mexico's renewables build-out is underway, and there are already places where storage could play a valuable role on the transmission and distribution grid, said analyst Manan Parikh, who covers Latin American clean energy markets at Wood Mackenzie. The challenge is that there isn't yet a clear mechanism for developing and paying for such storage projects.

"Commercial and industrial is probably where the real opportunity is right now," he said. "That's where the money is."

Industrial customers can move more quickly to buy storage for their own electrical reliability, as well as potential cost savings. Tariffs have risen substantially for large industrials in the last few years, Parikh noted, spurring some to produce their own energy. 

These conditions could make for a healthy C&I storage compared to the U.S, where it is a hard sell in all but a few markets.

“With the change of the tariffs in Mexico, the economics will be more important to more people,” Keefe said. “I think you will see a C&I market coming very quickly.”

One project does not make a trend, and Arroyo itself is an atypical buyer of storage. It's a private equity firm focused on energy investments in the Americas, using in-house commodities expertise to add value to the assets it invests in.

Private equity capital offers a workaround to the project financing hurdles that often obstruct storage deals, especially in brand-new markets. But market activity suggests there aren't many buyers with that kind of money that are comfortable with energy storage at this point in time.