Jalisco, Mexico - In April, Mexican firm Fortius opened the 8-megawatt Jalisco I solar plant, making it the first merchant solar plant in Mexico in the wake of the country's market reforms. It is now planning a second similar project.

It was a groundbreaking development. But it's too early say whether merchant PV (Photovoltaics) is going to take off in Mexico.

With record-low solar prices in last year's auctions and investor confidence rattled by currency depreciation, such projects appear to be high-risk.

Unlike utility-scale plants anchored by long-term power-purchase agreements, merchant solar plants sell electricity into the wholesale market, and require reliability of demand and definition of price over the long term to guarantee a healthy return on investment.

Fortius' director general for solar, Sergio Alcalde, told GTM he is confident that the business model can work, however.

"The two auctions last year reinforced investor and developer confidence in Mexico's electric power market, and which, coupled with the country's solar potential, are creating opportunities, aided by local government promotion of the energy sector," he said.

"We'll see the country upholstered in solar panels in a few years' time."

He said the $14 million merchant project will generate certainty and confidence for similar developments in Mexico.

Once the second 8-megawatt project is up and running, it will supply electricity to 32,000 low-income households, which will consume 70 percent of the electricity generated by the plant. The company also plans to target local industries, said Alcalde.

Fortius is in talks with at least six other offtakers, and will develop the second phase of the plant in conjunction with SolarCity. The developer plans to build other larger-scale projects alongside Solar City as well.

Alcalde said support from local authorities and the Jalisco state government on permit and land acquisition for the 25,000-panel plant was important for executing the project. The Jalisco I plant was built on a dry lake bed to mitigate its environmental impact.

In mid-2016, Jalisco launched an energy promotion agency aimed at growing renewables use in the state with the country's fourth-largest energy consumption. Other local projects in the pipeline include a 100-megawatt PV park planned by Jinko Solar after last March's power auction.