Off the Grid.

Solar power gets a warm welcome in rural Mexico.

A NEW DAY MAY BE DAWNING FOR THE MILLIONS OF LATIN Americans living without electricity, many of whom reside so far from national grids that connecting these households is prohibitively expensive for even the region's wealthiest countries.

Solar power, specifically photovoltaic (PV) electricity, has been growing exponentially over the past decade, with global sales now surpassing US$1 billion annually and Fortune 500 companies pouring billions into research and development. Where are the sales going? The biggest consumers in the developing world are Brazil and Mexico.

Sunlight, or solar radiation, is transformed into power through a semiconductor unit, or PV cell. The electricity output using this method is expected to reach 1,900 megawatts by 2010, with the United States, the largest producer of solar panels, accounting for more than 30% of the global market. It exports some 70% of its production, worth an estimated $250 million in 1999 and an estimated $300 million in 2000. Mexico and Brazil each individually buy solar panels worth roughly $10 million annually.

There's a good reason that Mexico and Brazil are such big buyers of solar power. In Mexico, some 5 million people, or about 5% of the population, live in villages considered too remote for grid extension; in Brazil some 20 million live off the grid.

That demand for alternative forms of energy is why solar purveyors are beginning to focus their attention southward. Leading solar technology manufacturer United Solar, for example, recently announced plans to dramatically expand its Tijuana-based PV plant to a 25-megawatt annual capacity with an eye on the Mexican market. Belgium industrial powerhouse Bekaert is also getting in on the action, spending $84 million to buy 60% of the plant.

"To us, the production base is not a means to just having a Mexican plant, we are very interested in being an important factor in alternative energy in Mexico," says United Solar President and Chief Executive Stanford Ovshinsky, who recently graced the pages of Time magazine as one of its "Heroes for the Planet." "We didn't go down there to be another border plant, but as a way to take the first steps into Mexico as well as Central and South America."

But providing photovoltaic electricity in less-developed countries is no easy task, and Mexico is no exception. Even small systems are expensive to buy and install. And while the real price is averaged over a 20-year expected lifespan, for most rural dwellers a lack of upfront capital to meet high start-up costs and a scarcity of credit represent tough market barriers.

General Motor's Ovonics unit donated 28 solar modules this past May to the tiny hamlets of El Sabino, El Naranjo and Sicuandi, which are tucked away in the Sierra Sur mountains in the southern state of Oaxaca, but the local government still had to spend $300,000 on installation and related expenses. It will eventually pay more than $1 million to equip the communities with an additional 85 modules.

Despite the costs, the Mexican government regards the photovoltaic method as the best for providing power to remote dwellers and has undertaken an aggressive rural solar program. While about 50,000 small home systems have been installed -- 40,000 by the government -- another 250,000 are still needed by rural dwellers, says Carlos Gonzalez Navarro, head of the department of rural electrification for the government-run Federal Electricity Commission.

That's just the beginning. Large systems are expected to meet widespread use in the eco-tourism industry to power hotels and other facilities in remote leisure and archeological sites. A number of hotels and eco-destinations are already using solar power along the Caribbean coast, including tourist resort Las Ranitas and condo community Paraiso Tucan, both located on the Riviera Maya south of Cancun.

While photovoltaic usage is growing in rural areas, it's still too pricey to gain wide acceptance in town, according to Jorge M. Huacuz, a solar market expert and researcher at Mexico's Institute for Electricity Research. "Most urban applications for solar are still too expensive to compete with conventional sources," Huacuz says.

That may change someday. Cost reduction has been dramatic in the past two decades: a 10-fold drop since 1980 to current levels of around $4 per watt for the panels. The U.S. National Renewable Energy Laboratory predicts another 50% reduction in the coming decade. In many remote areas, the solar equipment is already competitively priced: a typical monthly loan repayment or lease for a small system is currently comparable to average monthly outlays made by developing-world families for other sources of power, according to the World Bank, and solar power is safer, cleaner and more reliable.

Remote water-pumping applications also represent an important niche for PV solar systems. "In Mexico, between 10,000 and 15,000 small family farms and ranches could be best served by PV-powered water pumps," Huacuz says.

There are telecommunications applications as well. The Mexican government, in partnership with Telefonos de Mexico, has installed more than 12,000 solar-powered phone-repeating stations and hundreds of emergency roadside call boxes. The government has plans to deploy another 4,000 to 5,000 solar-powered emergency rural phones, according to Jorge Silberstein, Mexico's deputy communications minister. Remote wireless telecom relay stations could also become significant users of solar systems: Cellular use in Mexico jumped 128% to 7.6 million users last year and is seen to be continuing its upward trajectory.

According to Huacuz, annual photovoltaic power growth in Mexico should average 10% to 15% over the next three to five years. To date, Mexico has about 11 megawatts of installed solar capacity, a tiny fraction of the country's 35,000 megawatts of total energy-generating capacity.

But the sun provides clean, renewable and decentralized power, an attractive option for rural folk who have waited for years for electricity to come to their areas. Technological advances, cost reductions and growing environmental concerns are also beginning to make it more attractive vis-a-vis other energy options overall. With its large number of potential consumers, Mexico and the rest of Latin America represent a bright growth area for solar marketers.