Welcome to the third edition of the Mexico Energy Forum! We are proud to once again bring together the key Mexican and international players who are shaping the evolution of the country’s electricity and renewable energy markets, at this one-day conference focused on those topics that are on the top of the agendas of business and political leaders alike.
Two years have passed since Mexico decided to open its energy sector to private participation, positioning this sector as a catalyst for economic development. However, the eagerly awaited new business opportunities following the Energy Reform are yet to materialize as the past two years were dominated by the definition of the legal and regulatory frameworks, as well as the strengthening of industry regulators and the creation of new institutions. With a new operational framework in place, 2016 is poised to be a turning point as the newfound legal certainty and market stability are expected to trigger a wave of investment. Private players can assert their roles as producers, and new system regulators will ensure that the companies are successfully integrated into the country’s energy matrix. At the same time, the wholesale electricity market will be launched, officially opening the electricity sector to private participation.
Finally, Mexico Business Events and Mexico Business Publishing are pleased to offer you a complimentary copy of Mexico Energy & Sustainability Review 2015/16, the most comprehensive annual review of the Mexican energy sector, which will allow you to continue exploring the industry leaders’ perspectives on the trends that are shaping the energy and sustainability industries in Mexico after today’s conference comes to a conclusion. We wish you a great day!
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PROGRAM
7:30 Registration
8:00 Mexico’s climate change ambitions
Presentation: Rodolfo Lacy Tamayo, Undersecretary for Environmental Planning and Policy at SEMARNAT
9:00 Making clean energy certificates work
Presentation: Jesús Serrano, Commissioner at CRE
9:45 Networking coffee break
10:15 Introducing the wholesale electricity market
Moderator: Jaime de la Rosa, President of AME
Panelist: Daniel Casados, Director General of Blue Coat Systems
Panelist: Edgar Alvarado Domínguez, Director of the Legal Department at CRE
Panelist: Loïc Le Gall, Director of TAS for the Energy Industry at EY
11:15 Transforming the energy sector
Presentation: César Hernández Ochoa, Undersecretary of Electricity at the Ministry of Energy
12:00 Networking coffee break
12:30
Natural gas and power generation
Moderator: Jesús Rodríguez Dávalos, Founding and Managing Partner at Rodríguez Dávalos Abogados
Panelist: Eduardo Fernando Prud’homme, Head of the Technical Management and Planning Unit at CENAGAS
Panelist: Fernando Alonso, Head of Government Affairs at Fermaca
Panelist: Luis Montgomery, Director General and CEO of ACCESGAS
13:30 Networking lunch
15:00 Paradigm shift in distributed power generation
Presentation: Santiago Desentis, Vice President of Sales at SolarCity Mexico
15:30 The role of solar and wind in Mexico’s energy mix
Moderator: Óscar Bernal, Director General of EOSOL Energy de México
Panelist: Adrián Escofet, President of AMDEE
Panelist: Mannti Cummins, Director General of Energía Veleta
Panelist: Héctor Olea, President and CEO of Gauss Energía and President of ASOLMEX
Panelist: Alejandro Díaz de León, CEO of Bancomext
16:30 How can Mexico meet future energy talent demand?
Presentation: Rubén Flores, President of the Human Resources Committee at CFE
17:00 CFE’s Future Ambitions
Presentation: Enrique Ochoa Reza, Director General of CFE
18:00 Networking cocktail
Eosol Energy es una empresa promotora de proyectos de energía, enfocado principalmente en la energía renovable en sus diferentes tecnologías, como pueden ser la eólica, la fotovoltaica, la termosolar y la biomasa.
| MEXICO’S CLIMATE CHANGE AMBITIONS | MAKING CLEAN ENERGY CERTIFICATES WORK
The 2016 edition of Mexico Energy Forum started with the participation of Rodolfo Lacy, Undersecretary of Environmental Planning and Policy at Ministry of Environment, who talked about the climate negotiations held in Paris at the end of 2015 and highlighted the leading role that Mexico played in this summit. In this regard, Mexico’s crowning moment was the introduction of the General Climate Change Law, which makes it the second country to have implemented a regulatory framework regarding its climate change ambitions. Mexico also introduced a carbon tax in which a marginal cost must be covered by industrial actors emitting over 25,000 tonnes of CO2. Lacy also highlighted the importance of the Energy Reform, as this paved the way for the creation of Clean Energy Certificates (CELs) and their trading market, which the Mexican government plans to launch during the present administration.
Lacy commented that Mexico committed to reducing its greenhouse gas emissions by 22% by 2030. For the energy industry, this target implies sourcing 35% power generation from clean energy sources by 2024, and 42% by 2030. To increase the share of clean energies in the power mix, the Undersecretary mentioned that Mexican generators can obtain financing from the different climate funds resulting from the COP21 agreement. Such funds will come from the US$100 billion that developed economies collectively intend to designate each year to climate change mitigation and adaptation projects.
Afterwards, Lacy talked about the open information policy, which is another important subject established in the climate discussions that also affects Mexico’s adaptation and mitigation strategies. Countries that agree on this policy are expected to publish an emissions inventory on a regular basis, which will be monitored and assessed by the UN. Furthermore, all signing countries are obliged to review their INDCs every five years and increment their climate change targets according to their situation. The Undersecretary said that Mexico was one of the first countries to ratify this agreement, as the General Law of Climate Change indicates that the government must reevaluate the country’s climate change program every six years. Before leaving the podium, the Undersecretary reminded the audience that 2015 was the hottest year on record, stressing the importance of decreasing greenhouse emissions, a goal in which the global energy transition plays a crucial role.
Rodolfo Lacy Tamayo
Undersecretary of Environmental Planning & Policy at SEMARNAT
Rodolfo Lacy Tamayo’s career has spanned over 30 years, during which time he has served as a public official, both at federal and local levels, as well as Coordinator of Programs and Projects in the Mario Molina Center for Strategic Studies on Energy and Environment. He later served as Director General of Prevention and Control of Environmental Pollution at the Ministry of Environment, and Managing Partner of the Environmental Specialists Company, overseeing various projects.
In the second presentation, Jesús Serrano dealt with a subject that certainly needs clarity in the electricity industry, which is how the Clean Energy Certificates (CELs) function. He explained that CELs, as stated in the Law of the Electricity Industry, are designed to promote the development of clean energy projects and will be a second source of income for clean energy generators, who were previously only able to profit from the sale of electricity.
Mexico’s clean energy generation goals will determine the amount of clean energy that should be incorporated in to the mix in 2018, 2021, and 2024. This, in turn, forces the purchase of clean energies until the generation objectives are met, and project development and the market will determine the cost to meet the goals. Therefore, bidders will seek projects that require the least additional investment to reach the government’s objectives. In this sense, CELs, explains Serrano, provide an attractive solution.
Both qualified users and clean energy generators have to register in order to participate in the CEL market. In the case of generators, a registration must be submitted, an audit has to be undergone, and a fee paid. Once a registered power central generates clean energy, CENACE will examine the information related to clean generation and then pass that information on to CRE, which will award and register the CELs. The certificates correspond to the previous month in terms of generation and consumption, and generators are free to use them in bilateral transactions, coverage contracts, or to sell them in the market or in CENACE tenders.
The authorities created an online mechanism similar to a bank account in which participants will be able to trade their certificates, and CRE developed a system called DECLARACEL so that players can report their CEL obligations to the authorities every month. The annual declaration has to be presented in May, and fines will be imposed according to the information given at the end of the period. Finally, Serrano explained the details of each certificate, as these will have a 16 character ID that will include information such as the technology used and the date the certificate was granted.
Throughout his professional career, Jesús Serrano has held key positions at Luz y Fuerza del Centro, the National Banking and Securities Commission, the Economic Planning Unit of the Ministry of Finance, the Ministry of Economy, and Banxico. Serrano was appointed Commissioner at CRE by the Senate in September, 2014. Prior to his post at CRE, he collaborated as Director General of Electricity Conduction and Transformation at the Ministry of Energy. Serrano has also had a meaningful trajectory in the academic sector, having taught several courses related to engineering, mathematics, and economics at UNAM, as well as macroeconomics, banking, and financial institutions at Boston University.
Comissioner at CRE
Jesús Serrano
| INTRODUCING THE WHOLESALE ELECTRICITY MARKET
De la Rosa began by highlighting the contributions of the private industry in energy generation from clean and renewable sources, and how private players helped in drafting the wholesale electricity market in a way that ensures a level playing field. The Law of the Electricity Industry creates an independent and strengthened regulator with CENACE, and CRE gains a prominent role in the regulatory side in order to foster a competitive market. “The wholesale electricity market is based on well-established markets, such as PJM, adapting traits to the particularities of Mexico,” he stressed.
De la Rosa took the opportunity to praise the public sector for being open to the private industry’s suggestions in creating a promising market in terms of regulations.
Alvarado proceeded to discuss the challenges CRE has faced in creating an open market after years of CFE’s monopoly, which began in the 1960s. In the 1990s, segments of the energy market were open to private parties, which were able to participate under four modalities, including Independent Power Producers and the small power generator scheme. The Constitutional Amendment, he commented, reserves strategic areas for the productive enterprises of the State, mainly transmission and distribution, although private companies can collaborate as partners of CFE. However, if the State-productive enterprise does not create value and profit, as stated in its mandate, the authorities will be able to open these areas to other players.
“The reform takes place in both market and institutional terms,” Alvarado commented when detailing the strengthening of the operators and regulators. On the market side, private players have more options regarding the way they can participate as generators, suppliers, marketers, and such. Alvarado responded to a question posed by de la Rosa saying that CRE has taken a more active role as a regulator after the reform, as its activities became more defined with the decentralization of the industry. “We still play a crucial part in the central policy-making, but the decision-making process has changed.” He highlighted CRE’s honesty and hard work in determining tariffs, which are based on supply and demand.
Casados began by recounting how his company got involved in the electricity sector, ultimately becoming a key member in the smart grid association. He spoke about the importance of understanding the market in order to introduce the most suitable technologies, and mentioned the relevance of end-to-end consumers in creating information that leads to an improved electricity market in addition to the public, private, and academic sectors.
The microphone was passed to Le Gall, who also mentioned the importance of international best practices in the wholesale market, especially as Mexico undergoes the transition of its energy industry. “The short-term electricity market is composed of the real-time market and the day-in-advance market, which both require robust technological infrastructure,” he stated. Long-term markets are being developed in parallel to the short-term ones, and the long-term contracts entailed will enable the financing of renewable energy projects. The long-term market will rely on tenders for electricity, capacity, and CELs. De la Rosa asked how Le Gall foresees the direction of the market, especially in the light of the tenders. The EY representative responded that it is important to examine the capacity tendered in the upcoming bids, because interested players might not be able to develop projects if the demand does not grow enough for more capacity to be tendered.
Jaime de la Rosa has had a prolific professional trajectory in the Mexican energy industry. In addition to being the acting president of the Mexican Energy Association (AME), he is also the Vice President and an advisor of the World Energy Council, Mexico, and a member of the Renewable Energies and National Energy Strategy Advisory Board. As President and CEO of Alarde Energía México, a company that is currently developing projects amounting to 200 MW, de la Rosa’s business activities involve managing infrastructure and renewable energy projects. Previous positions include President and CEO of Mitsui de México, President of Gas Natural Union Fenosa México, and President and CEO of Union Fenosa México.
Daniel Casados
Director General of Blue Coat Systems
Previous to assuming the position of Director General of Blue Coat Systems México, Daniel Casados worked for Alcatel- Lucent Mexico where he was responsible for direct sales to the oil and transportation sectors, as well as to the public sector. Before assuming responsibility for operations at Blue Coat Systems, Casados spent 11 years at Nortel where he held various positions including Director of Enterprise and Vertical Markets in Mexico, and led a business development team for global accounts and systems integrators in Latin America. Casados holds a degree in electronics and telecommunications from the National Autonomous University of Mexico (UNAM).
Edgar Alvarado Domínguez
Director of the Legal Department at CRE
Before assuming his current position, Edgar Alvarado Domínguez served as Head of the Legislative Link with the Federal Government and Civil Society at the Ministry of the Interior from 2008-2010, and coordinated the President of CRE’s advisors during the 2006-2008 period. He held several positions at the Chamber of Deputies, such as Technical Secretary of the Energy Commission, Juridical Advisor of PAN’s Parliamentary Group, and Coordinator of Advisors of the JuridicalPolitical Area of the Miguel Estrada Uribe Foundation. Alvarado is knowledgeable in juridical, economic, and public policy areas.
Le Gall
Director of TAS for the Energy Industry at EY
Loïc Le Gall is the Executive Director of Transaction Advisory Services (TAS) for the Energy Industry at EY, with a special focus on power and utilities. He has directed the business development strategy of global firms in the energy sector in Mexico, Brazil, Canada, and France, and in the past three years he has gained valuable experience in power generation, transmission, distribution, and telecommunications infrastructure and large civil works. Prior to joining EY, he was a Director of Strategy and Marketing at Abengoa in Mexico, where he led financial, operational and commercial strategies. Le Gall has worked for renowned clients such as Abengoa, EDF Energies Nouvelles, GE Energy, Enel Green Energy, PEMEX, and CFE.
President of AME
Jaime de la Rosa
Loïc
| TRANSFORMING THE ENERGY SECTOR
The arrival of César Hernández Ochoa, Undersecretary of Electricity, was met with enthusiasm among MEF16 attendees, as the Ministry of Energy’s view and expertise is highly relevant to all the actors in the Mexican electricity industry. The Undersecretary began his presentation by highlighting the benefits that the Energy Reform is expected to bring to the Mexican market. According to Hernández Ochoa, the new regulations are expected to decrease the costs of electricity tariffs, promote investment in clean energy projects, and improve the country’s competitiveness.
“The benefits of the Energy Reform are already tangible, as evidenced by the fact that electricity tariffs in Mexico have already decreased for different segments,” he boasted.
Hernández Ochoa proceeded to explain the short-term market, a key element of the wholesale electricity market that was launched in January 2016. The main objective of this market scheme is to boost competitiveness and incentivize generators to improve their operational efficiency and reduce production costs. In this regard, the main incentive is the market rule that gives efficient generators the opportunity to dispatch their electricity first, which was established to promote a decrease in tariffs based on efficiency and competitiveness, not only among private actors but also among CFE subsidiaries. Moreover, the short-term market provides free access to new generators, whose presence is expected to increase in the upcoming yeas.
According to Hernández Ochoa, the long-term tenders are another important element in the wholesale market, as these enable market participants to acquire different products such as clean energy certificates, capacity, or power. The tendering process is organized by CENACE, the independent market operator, using the guidelines established in the regulations. In Hernández Ochoa’s view, one of the most important characteristics of the Mexican scheme is that all generation technologies compete at the same level, including clean and conventional sources. Furthermore, the undersecretary highlighted the fact that the contracts resulting from these tenders are especially designed to provide financial security to private investors backing up energy projects. The first tender carried out in the country was sufficiently successful as it achieved the allocation of 102 million megawatt-hours, 109 million clean energy certificates, and included 468 technical offers and 103 bidders.
Finally, Hernández Ochoa explained the process that CFE has followed so far to restructure its operational organization. As stated in the Law of CFE and the Law of the Electricity Industry, CFE has been separated into a vertical structure that is compatible with the new market rules, including four generation enterprises and different subsidiaries, each one with its own corporative administration. The main objectives of restructuring CFE were to increase the parastatal’s competitiveness and avoid a monopoly in the new market. Before finishing his presentation, Hernández shared the enthusiasm that international players have demonstrated in the face of the transformation of the Mexican electricity sector. “Apart from the Education Reform, the opening of the electricity market has the best potential to increase the country’s international competitiveness. Mexican efforts to transform its energy industry have been recognized in Davos, Abu Dhabi, and at other international summits. The best feedback we have received is the fact that the reform includes all the regulations needed to launch a successful market,” he concluded.
César Hernández Ochoa
Undersecretary of Electricity at the Ministry of Energy
From February 2013, and until his appointment as Undersecretary of Electricity, César Hernández served as Head of the Ministry of Energy’s Legal Affairs Unit. He currently divides his time between working for the Ministry of Energy and serving as Advisor on CFE’s Administrative Board. He has held various positions in the Federal Public Administration, such as Director General for Foreign Trade at the Ministry of Economy and Director General of Long Distance Communication at the Federal Telecommunications Commission.
| NATURAL GAS AND POWER GENERATION
Rodríguez Dávalos opened the panel reminding the audience that back in 1993, the natural gas transportation and pipeline operation segments began allowing private investment, and this was followed by the creation of CRE in 1995. The framework for natural gas that was established back then dictated the country’s natural gas strategy, making this fuel important component in the national energy strategy and pushing the development of IPPs. “By the end of the current administration, the country’s natural gas capacity will increase almost twofold,” he declared.
Rodríguez Dávalos asked ACCESGAS’ Luis Montgomery about the possibility of using CNG for electricity generation, who said this would be inviable, but CNG is suitable for places with no access to natural gas or for cogeneration and trigeneration processes. Montgomery talked about the opportunities for CNG companies developing last-mile projects and said that having an authority like CENAGAS, which administers capacity in a transparent way, is essential for the industry in general and is particularly helpful for shippers tasked with supplying power generation facilities. He also commented that “companies like Fermaca expand the pipeline system, and bring shippers closer to end users, helping companies like ACCESGAS grow. Also, wherever there are pipelines, there are possibilities to build CNG stations, creating even more business opportunities.”
The next question was directed at Alonso and it asked why the authorities are putting so much emphasis on natural gas as a fuel in the energy transition. Alonso, who represents one of the private companies with the most pipelines under development and operation, relayed that a technological change took place in the 1990s placing natural gas at the forefront of electricity generation, a change he points to as the reason why the authorities have chosen natural gas as the transition fuel that also provides benefits in terms of low greenhouse emissions and is economically attractive at the moment. “Natural gas will also work harmoniously with renewables, as these are intermittent and thus require backup energy.” He said having geographical access to cheap gas makes Mexico one of the most competitive countries in the world due to reduction of electricity costs, ultimatly fostering industrial activity.
The moderator introduced Eduardo Prud’home, highlighting his knowledge about the regulatory aspects related to the country’s pipelines, and proceeded to question him about the most relevant changes that the natural gas industry will notice in the transfer of natural gas assets form PEMEX to CENAGAS. Prud’homme said that, despite the reform that took place in the 1990s, a full structural change was not completed. “A pipeline is a monopoly by nature, but its content does not have to be; it can be open and competitive.” In Prud’homme’s view, when PEMEX operated the pipeline system, the parastatal did not make access to natural gas a priority in the sense that it used its pipelines to sell its own gas, leaving other shippers on the sidelines. “Now, as a result of the Energy Reform, CENAGAS will grant access and foster a competitive gas market,” he commented, and added that ensuring the proper functioning of the Natural Gas Pipeline System for all users will be one of CENAGAS’ largest challenges.
Jesús Rodríguez Dávalos
Founding and Managing Partner at Rodríguez Dávalos Abogados
Jesús Rodríguez Dávalos began his career in PEMEX in 1989. At the age of 26, he was posted in Washington D.C., representing PEMEX Gas during the NAFTA negotiations and the deregulation of the natural gas market in the US. After a brief stint at a large US law firm, he returned to Mexico to open his own practice focused on oil, gas, and power, founding Rodríguez Dávalos Abogados (RDA) almost 20 years ago. He has participated in many of the most relevant energy-related projects in Mexico, and he designed the regulatory and legal scheme of the first cross-border wet gas pipeline and the first CNG project. He has served as the leading counsel for the Los Ramones pipeline, as well as several joint ventures between PEMEX and an international energy corporation in their pipelines and storage ventures in Mexico over the last 14 years.
Head of the Technical Management & Planning Unit at CENAGAS
Eduardo Fernando Prud’homme is certified in Environmental Politics and has participated in various energy regulation seminars, having worked in the energy sector for almost 19 years. In 1996, he started working at PEMEX Refining, where he worked in optimization and special studies related to crude oil loading and logistics. During his collaboration within the Political Economy Unit of CRE, he participated in the drafting of several regulations and was responsible for directing two quinquennial revisions of the National Pipeline System rates.
Alonso
Head of Government Affairs at Fermaca
Fernando Alonso has acted as the Head of Government Affairs of Fermaca since his incorporation into the company nine years ago. Prior to this position, he served as a consultant to several companies in the areas of storage, LNG projects and power plants. From 1997 to 2000, he acted as Minister of Energy at the Embassy of Mexico in Washington D.C and he also held the position of Head of Investment Promotion Unit at the Department of Energy from 2000 to 2003, with the responsibility of supporting the private projects in the sector. Alonso was member of the board of PEMEX Gas and Petrochemicals and a representative of the Puebla-Panama Plan. He holds a Bachelor’s degree in Economics from ITAM.
Luis Montgomery
Director General and CEO of ACCESGAS
Luis Montgomery has over 14 years of experience in the Mexican energy business. He holds significant knowledge of the sector and has been involved in the development of the country’s energy market, mainly in the areas of natural gas and renewable energy project development. Montgomery is familiar with the market, its conditions, and the future challenges in Mexico’s energy landscape. Some of his areas of expertise include natural gas distribution and transportation, power generation from renewable sources, off-pipeline CNG distribution, and manufacture of gas fittings. Montgomery has collaborated with the authorities in the development of energy policies and regulations.
Eduardo Fernando Prud’homme
Fernando
February 16, 2016
www.mexicoenergyforum.com
| PARADIGM SHIFT IN DISTRIBUTED POWER GENERATION
Mexico Business Events organizes high level conferences where business and political leaders meet to discuss the key topics that are defining Mexico’s economic future. By connecting each industry’s key stakeholders, our events are accelerating the exchange of vital industry information that is crucial to capitalize on Mexico’s economic potential, and create new business opportunities in an unparalleled networking environment.
May 19, 2016
www.urbansustainabilitysummit.com
July 21, 2016
www.mexicooilandgassummit.com
September 7, 2016
www.mexicohealthsummit.com
September 22, 2016
www.mexicoautomotivesummit.com
October 20, 2016
www.mexicoinfrastructureforum.com
The afternoon session of Mexico Energy Forum 2016 was focused on renewables. To start the green energy discussions, SolarCity Mexico’s Vice President shared his view about the solar energy and distributed generation sectors in Mexico. Initially, Desentis shared the six success factors that helped SolarCity boost solar energy in the US: incentives, costs reductions, financial schemes, process of excellence, a focus on quality and efficiency, and investment in research and development. He explained that the US market represents one of the biggest solar markets worldwide currently and that California alone has around 50 times more solar energy production than Mexico. According to Desentis, if Mexico maintains momentum, solar energy production in the country could reach 1GW by 2020.
Besides the potential growth, the opening of the wholesale electricity market piqued SolarCity’s interest in investing in Mexico, and Desentis explained that the company considers the utilization of net metering schemes to be solid incentives, which involves the accelerated depreciation and the incorporation of clean energy certificates in the Mexican market. Compared to the US, capital costs in Mexico are considerable higher, but in terms of variable costs the latter offers more competitive numbers, mainly due to the cheaper labor cost.
Despite all the benefits, Desentis explained the challenges to overcome to make solar energy successful in Mexico, such as the need to develop a national regulatory framework with a special focus on distributed generation and isolated supply technologies, as well as the potential impact that the separation of CFE could have in the solar sector, especially as a direct competitor.
November 9, 2016
www.mexicoaerospaceforum.com
Santiago Desentis
Vice President of Sales at Solarcity Mexico
Before undertaking the responsibility of ensuring the commercial success of SolarCity Mexico, Santiago Desentis was in charge of executing the Residential and Small Commercial sector for SunEdison. Desentis also worked as Country Manager Mexico and Business Development Latin America and the Caribbean for Yingli Green Energy, where his main role was to draft and carry out the company’s strategy in Mexico with the objective of positioning the firm at the forefront of the sector. During this period, he managed to gain a 20% market share. Other positions he has held include New Product Development Specialist for PREI Latin America, structuring and marketing new products for the Latin American market.
November 23, 2016
www.mexicominingforum.com
November 24, 2016
www.mexicotalentforum.com
| THE ROLE OF SOLAR AND WIND IN MEXICO’S ENERGY MIX
Bernal opened by mentioning the continuous and steady investments in the wind sector; conversely, he pointed out how solar energy has patiently waited for a moment that has not yet arrived. He mentioned that even though the solar sector has flagship projects like Aura Solar I, TAI Durango, and an upcoming 50 MW project, this industry has not received enough support, so he started the discussion by asking the panelists what is needed to make solar energy an adequate competitor of the wind sector.
Escofet pointed out that renewables are a relatively new industry in Mexico, dating roughly eight years back, as the country’s prominent oil industry did not foster the development of other energy sources. He said the wind factors found in the country make projects viable without the need for incentives. “In fact, there are no incentives in Mexico for renewables,” Escofet emphasized, but he did recall mechanisms found in the older framework, such as green wheeling and the energy bank.
“Money does not like uncertainty,” were the opening words of Mannti Cummins to echo on Escofet’s statement about the lack of incentives, which deterred financing institutions from investing in renewable energy projects previous to the reform. “Developers were expected to demonstrate interconnection capacity while offering guaranties when approaching a bank, and that was difficult to the point that the industry became stagnant.” He joked that renewable energy projects become viable when they are supported with someone else’s money.
The solar industry’s voice was heard in Olea’s words, who noted that there are several megawatts of solar power being submitted, and even though the financial and regulatory elements are in place, the projects lack a commercial outlet. “The projects are referred to as ready-to-build for a reason, but they are not realized because they do not have a PPA.” He identified the commercial outlet as the reason why wind power is booming while solar is not. This, in his view, is where the Energy Reform comes into play, as it will provide the necessary elements so that the commercial outlets, such as tenders, can flow. “I do not think CFE has understood its role in the new model. The tender intends to allocate 6,300 GWh in PPAs. With the numbers CFE is offering, I do not think this will be achieved. However, I am confident that the model will be continuously improved, so we have to look out for the second tender.”
Bernal said that the fact that renewables might not be able to participate in the first tender is concerning, and proceeded to ask Díaz de León what the sector looks like from a financing perspective. The head of Bancomext told how project planning was previously carried out in an almost improvised way, so the tenders will bring a certain order to the planning of the sector. “The ecosystem is complicated enough as it is, and the changing costs of technology and development make planning difficult,” he expressed. “The banking sector’s task is to liaise with the market players who know the technology, its costs, and applications, and understand their needs. The key is for projects to be bankable. If they are, the risks can definitely be mitigated.”
Óscar Bernal
Director General of EOSOL Energy de México
Óscar Bernal began his career in logistics, production, process engineering, and business planning and development. He has founded and consolidated energy companies such as EOSOL de México and its subsidiaries, including TAI Durango Uno, a 17 MW photovoltaic park with an additional 50 MW under construction, as well as global consultancy and technical assistance companies. He acted as Director of Business Development at EOSOL Energies Nouvelles, eventually becoming Director of Development LATAM, which is how he began tackling the Mexican market.
Adrián Escofet
President of AMDEE
Adrián Escofet is the CEO of Zapoteca de Energía, Chairman of the Mexican Wind Power Association (AMDEE) and Board Member of the Council for Renewable Energy at the Ministry of Energy. He has more than 20 years of experience in development, design, implementation, and EPC in the field of electric generation projects, covering a wide range of energy sources, including wind, combined cycle, PV, cogeneration, and hydro. In March 2013, he became the CEO of Zapoteca de Energía, a company that focuses on the development of renewable energy projects.
Mannti Cummins
Director General of Energía Veleta
Mannti Cummins has been involved in financing start-ups and early-stage entrepreneurial ventures for over 35 years. His expertise in the energy sector enabled him to lead the formation of joint development agreements with Iberdrola, Oak Creek Energy/Marubeni, Duke Energy, General Electric, Martifer Renewables, and Lincoln Renewable Energy. Cummins is the founder of Frontera Renovable, the company responsible for the development of the Tres Mesas Wind Power projects in Tamaulipas, which have 148.5 MW under construction and are expected to begin commercial operations in 2016. He is also the Director General of Energía Veleta, which has a pipeline of 1,000 MW in Mexico.
President and CEO of Gauss Energía and President of Asolmex
Héctor Olea has 20 years of experience in the energy sector and government contracting. He is currently the President of Gauss Energía, where his strategies have attracted sizeable investments in the power industry. Olea acted as President of CRE, where he directed the design of the regulatory framework for natural gas back in 1995, as well as heading the design of the structural reform of the electricity industry in 2000. Olea was part of the NAFTA negotiation team and has participated in the process of many FTAs with Latin America, the GATT, the Uruguay Round, and the process by which Mexico was included in the OECD.
Alejandro Díaz de León
CEO of BANCOMEXT
In November 2015, Alejandro Diaz de Leon was appointed Chief Executive Officer of Bancomext, the development bank responsible for financing trade, promoting investment, and the productivity and competitiveness of Mexican exporters. From 2011 until November 2015, he served as Head of the Debt Management Office within the Ministry of Finance, where he oversaw domestic and external financing, the oil hedging program, and project finance at the National Infrastructure Fund. He has been recognized by several awards from specialized financial publications such as LatinFinance, Euroweek, Thomson Reuters, Euromoney, Energy Risk, and Global Capital.
Héctor Olea
| HOW CAN MEXICO MEET FUTURE ENERGY TALENT DEMAND?
A topic that is usually ignored in energy-centric conferences is the recruitment, training, and retention of human talent. Nonetheless, adequately trained technicians, engineers, and other general staff are essential for the success of any energy company. With the opening of the wholesale electricity market, CFE will start competing in the market as any other actor does, so human capital is a topic that is more relevant than ever for the parastatal.
Flores explained that changing the paradigm at CFE will definitely be challenging, particularly considering the long period that CFE functioned without any competitor. Now, that the parastatal must work as a regular enterprise and contribute economic value to the country, it will need to enhance its training programs to ensure its employees are prepared to serve the new market.
According to Flores, CFE’s new strategy recognizes that economic incentives alone are not enough to attract and retain human talent. Therefore, the parastatal is currently focusing its efforts on developing a new company culture that includes permanent training, a challenging environment, flexible schedules, tailored incentives, extracurricular activities, growing opportunities, and team building.
Rubén Flores
President of the Board of the Human Resources Committee at CFE
Before joining CFE, Rubén Flores taught for 16 years at the Technological Institute of Higher Education of the East (ITESO). Flores worked for CFE between 1969 and 1994, leaving his position as Director of CENACE in order to assume the role of Commissioner at the Energy Regulatory Commission (CRE). Flores then went on to join the Ministry of Energy, eventually becoming the Undersecretary of Electricity before returning to CRE to serve as Commissioner until 2013. He is currently part of CFE’s first Board of Directors comprised of Independent Advisors, and heads the Compensation and Human Resources Committee.
En RDA brindamos un servicio integral de consejería legal y de negocios en los sectores energético y de infraestructura, con el claro propósito de concretar las expectativas de nuestros clientes. De forma personalizada les llevamos paso a paso desde el diseño de su estrategia de negocio hasta su materialización, ofreciendo soluciones prácticas y eficientes en las distintas fases que este campo tan complejo abarca.
Servicio integral de consejería
legal y de negocios en los sectores energético y de infraestructura
| CFE’S FUTURE AMBITIONS
The most awaited presentation was carried out by CFE’s Director General, Enrique Ochoa Reza. He began by explaining the restructuring process the utility is undergoing in order to become an energy company. In this sense, CFE will have four generation subsidiaries that will compete against each other and private players. A nuclear power unit will also be created, although this will remain part of CFE board for security reasons. Transmission and distribution are now under CENACE’s control, but CFE will have a transmission company that will be independent from the other subsidiaries for accounting purposes, as it will be able to report transmission costs to CENACE, who will use this information to set tariffs. Distribution will be carried out through a subsidiary that will have 16 business units, which corresponds to the number of the country’s current distribution units. The reason behind this division is also related to tariff setting, explained Ochoa Reza. CFE will have a two-way split subsidiary dedicated to power supply; one branch will focus on the basic segment and another will serve qualified users. Finally, CFE will have a commercialization company also split into two branches, one that will sell in the national market and another one that will operate internationally.
Ochoa Reza pointed out that CFE can cover demands of up to 40,000 MW, “so why did we need an energy reform?” he asked and proceeded to answer. “High tariffs negatively affected basic service users and the productivity of the industrial and commercial segments. The question now becomes ‘why were the tariffs so high?’ Well, fuels account to 80% of generations costs.” Ochoa Reza explained that the National Pipeline System was limited and not fully interconnected back in 2012, so fuel oil was principally used for electricity generation. He also pointed out that places with access to natural gas are likely to develop intense industrial activity, which directly impacts the economy. As a result of the National Infrastructure Plan, Mexico will increase its natural gas pipeline network, gasifying most states. In addition, CFE is converting several power plants so that these can run on natural gas instead of fuel oil. “Tariffs take fuel costs into consideration, so replacing fuel oil with more affordable natural gas results in a reduction of tariffs.” Finally, Ochoa Reza spoke about technical and non-technical losses, indicating that in 2012 these amounted to 16% and cost MX$52 million. These figures were reduced to 13.1% and MX$42 million in 2015. “The goal is to hit the 10-11% mark by 2018 so that future generations can take Mexico to the international average of 6%.”
Throughout his career in the public sector, he has served as advisor to the Minister of Energy, has sat on the Board of Directors of PEMEX, as well as holding a senior position at the Federal Electoral Tribunal and the Federal Electoral Institute. In February 2014, he was appointed Director General of CFE, where he has worked on restructuring the now productive enterprise of the State. He holds a Bachelor’s degree in Economics from ITAM and another degree in Law from UNAM, where he is also a professor of Constitutional Law. Furthermore, he has two Master’s degrees and a PhD in Political Science from Columbia University in New York.
¿Cómo convertir una transformación local a una de gran escala?
Descubra los servicios con los que EY ayuda a las organizaciones a diseñar y ejecutar estrategias que impulsen su crecimiento. ey.com/mx
Director General of CFE
Enrique Ochoa Reza
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