Energy sovereignty and self-sufficiency are the two main priorities for the López Obrador administration’s National Development Plan. This paradigm has resulted in changes to the legal framework determined by the Energy Reform. Today, three official documents seek to establish the policy for renewable energies, energy transition and climate change, building their ideological foundation on the concept of sovereignty. This concept when applied to the energy sector faces great difficulty when the intent is to apply a pro-state public policy to pro-market ideals. By the same token, the private sector needs to look for ways to promote sustainability without losing competitiveness.
In addition, it is important to establish what entities and how renewable energy projects should be financed within a regulatory framework that boosts energy transition while solving Mexico’s electricity shortages and distribution challenges.
Considering the recent modifications the country’s energy sector faces, Mexico Energy Forum brings together national and international leaders, including the industry’s top public officials, who are shaping the country’s energy sector. The forum presents a great opportunity for industry experts to discuss trends, topics and concerns within an effective and targeted networking platform.
Now in its seventh edition, Mexico Energy Forum 2020’s agenda has been carefully designed by knowledgeable analysts in consultation with business insiders to address the future of the energy industry in Mexico. The topics to be discussed range from national self-sufficiency, financing trends, technological innovations and the legal framework, to comprehensive strategies for procuring a solid value chain for energy projects. Mexico Energy Forum 2020 is set to provide eye-opening insights to all industry stakeholders.
Quick Look:
“It
is a really good group of professionals from the industry. I see a lot of familiar faces, a lot of decision-makers, people who are leading the industry in new directions. It has been a great event.”
INCLUDING:
∙ Manuel Rodríguez, President of the Energy Commission of the Chamber of Deputies
∙ Areli Covarrubias, Commercial Director Natural Gas at IENova
∙ Ramón Basanta, CEO at ATCO Energía
∙ Adrian Katzew, CEO at Zuma Energía
∙ Marian Aguirre, Director of Energy Sector Financing at BANCOMEXT
∙ José Jové, CEO of Prana Power
∙ Patricia Tatto, Vice President of ATA Renewables, President of MERM
∙ Francisco Salazar, Director General and Partner of ENIX/Trust
∙ Jeff Pavlovic, Director General of Bravos Energía
TOP SPEAKERS
∙ Miguel Alonso, Director General of México and Centroamérica at ACCIONA Energía
Jeff Pavlovic, Director General of Bravos Energía
Ramón Basanta, CEO at ATCO Energía
COMPANY ATTENDANCE
Abb México, S.a. De C.v.
Accendo Banco
Acclaim Energy
Adm México
Agencia De Energía Del Estado De Puebla
Ame
Amfef
Amgn
Ampper / Index Infraestructura
Antuko
Arbomex
Asian Pacific Development Corp.
Asociación Nacional De Energía Solar A.c.
Atco Energía
Atik Capital
Baker Mckenzie
Banorte
Banverde
Basf Mexicana S.a De C.v.
Baywa R.e.
Benemérita Universidad Autónoma De Puebla.
Braskem Idesa Servicios Sa De Cv
Bw
Bxh Construimos Interiores
Cacheaux, Cavazos & Newton
Cámara Arabe Mexicana De Industria Y Comercio
Cámara De Diputados
Camara Mexicano-Alemana De Comercio E Industria
Capwatt
Cfe Calificados
Cmr
Comglobal
Conecta Cultura Sc
Consultor Independiente
Corev De Mexico Sa De Cv
E2m
Econ
Edecsa
Embajada De Holanda
Embajada De La Federación De Rusia
Emerson
Enertis
Enestas Natural Gas
Engie
Enix
Enlight
Enuma
Erm
Fenix
Fide
Fisterra Energy
Full Spectrum
G Advisory Mexico Sc
Galicia Abogados
Gallo Abogados, S.c.
Ge Renewable Energy
Gnu Gas Natural
Gobierno Del Estado De Chihuahua
Goodrich Riquelme Y Asociados, Ac Government Of Tabasco
Grs Gran Solar
Grupo Codinsa
Grupo Tmm
Grupo Walworth Industrial De Valvulas
Hartree Consultores
Holland & Knight
15 MEMBERS
284
Holland House Mexico
Huawei Hunt
Iberdrola
Ignus Energy
Inerco
Informa Markets
Intercam Banco
Invenergy
Inventive Power Sapi De Cv
Itam
Jinko Solar
Kiewit
Kpmg Cárdenas Dosal Sc
Latin American Rainmakers
Man Energy
Mexico2
Mitsui Power Americas
Na Solutions
Natura Est
Newaark Knigt
Nicro Bolta
Nissan Mexicana
Nordex Group
Nrgi Broker
Obras Pinturas Mexar
Oca Global
Ontier
Orgware Mx
Pnnamotec
Promotora Energética E3
Proterra Capital
Pv Magazine México
Qbd Group
Ramadasa
Representación Del Gobierno De Alberta En México
Embajada De Canadá
Robert Gordon University
Rod General Contractor
Rosatom Latin America
Saavi Energía
Salerno Y Asociados
Schweitzer Engineering Laboratories
Secretaría De Desarrollo Económico Del Estado De Durango
Secretaría Del Medio Ambiente, Energías Y Desarrollo
Sustentable
Siemens Gamesa
Solar Power Mexico
Soltec
Soluciones Integrales Frap
Sowitec
Sumitomo Corporation De México, S.a. De C.v.
Swiss Business Hub
Taak Strategy Group
Top Management
Trefilados Inoxidables De México
Unam
Valeco
Vestas
Willscot
Wood Mackenzie
Zuma Energía
Mexico Business Communication
Mexico Business News
PROGRAM
07:30 REGISTRATION
08:30 THE ROAD TO ENERGY SELF SUFFICIENCY
Presentation: Manuel Rodríguez, President of the Energy Commission of the Chamber of Deputies
09:30 THE FUTURE OF NATURAL GAS IN MEXICO'S ENERGY MIX
Moderator: Benjamín Torres-Barrón, Partner at Baker McKenzie
Panelists: Areli Covarrubias, Commercial Director Natural Gas at IENova
David Vizcarrondo, Director Strategic Accounts Latin America at Emerson
Ramón Basanta, CEO at ATCO Energía
10:15 NETWORKING COFFEE BREAK
11:00 ZUMA ENERGÍA: MAKING RENEWABLE ENERGY FINANCE WORK
Presentation: Adrian Katzew, CEO at Zuma Energía
11:20 THE FUTURE OF CELS IN RENEWABLE ENERGY FINANCE
Presentation: Eduardo Piquero, Director General at MÉXICO2
11:40 CRITICAL SUCCESS FACTORS FOR FINANCING RENEWABLE ENERGY PROJECTS IN MEXICO
Moderator: José Urteaga, Senior Energy Specialist at the Inter-American Development Bank
Panelists: Cecilia Latapi, Executive Coordinator of the Green Finance Advisory Council
Marian Aguirre, Director of Energy Sector Financing at BANCOMEXT
Salomón Amkie, Director Head of Power and Energy of Citibanamex
María José Treviño, Country Manager of Acclaim Energy
Hélène Dimitracopoulos, CFO of Zuma Energía
12:30 NETWORKING COFFEE BREAK
13:00 DEVELOPMENT OUTLOOK FOR MEXICO'S SOLAR ENERGY SECTOR
Moderator: Casiopea Ramirez, Partner at Fresh Energy Consulting and Adviser to ASOLMEX
Panelists: José Jové Cassis, CEO of Prana Power
Juan Ávila, Director General of Top Energy
Patricia Tatto, Vice President of ATA Renewables, President of MERM
13:45 NETWORKING LUNCH BREAK
15:15 POWER PRODUCERS AND PRIVATE AUCTIONS
Moderator: Francisco Salazar, Director General and Partner of ENIX/Trust
Panelists: Eduardo Arriola, Originator at Vitol Group
Jeff Pavlovic, Director General of Bravos Energía
Leonardo Beltran, Board Member of SEforALL, Consultant at World Bank
Miguel Alonso, Mexico Country Manager of ACCIONA Energía
KEY SPEAKER
MANUEL RODRÍGUEZ
President of the Energy Commission of the Chamber of Deputies
Manuel Rodríguez is a Mexican politician from Tabasco. He studied law at the Universidad Juárez Autónoma de Tabasco (UJAT), obtained three Master’s degrees from the Sorbonne University (PantheonAssas University, Paris II), and is a Founder and Federal Deputy of the Morena party. Rodríguez has a 30year career in public administration. He has been a Deputy Minister three times for Tabasco.
HOW WILL MEXICO ACHIEVE ENERGY SELF-SUFFICIENCY?
The National Development Plan 2019-20124 was at the heart of the first presentation of Mexico Energy Forum 2020. Manuel Rodríguez, President of the Energy Commission of the Chamber of Deputies, highlighted the government’s plans regarding energy sovereignty, mapping out the country’s strategy moving forward, including gas, oil and renewables.
Mexico has prepared an ambitious plan to achieve energy sovereignty, sustainability and self-sufficiency. And while the drastic drop in oil prices this week is top of mind, it will not change Mexico’s strategy, Manuel Rodríguez, President of the Energy Commission of the Chamber of Deputies, told the Mexico Energy Forum 2020 audience on Wednesday at Mexico City’s Sheraton Maria Isabel hotel. “It is not the first time we have seen oil prices plummet and it will not be the last time either. We are certain that the market will recover as we have seen it recover in the past,” he said.
To achieve self-sufficiency, Mexico will focus on oil and gas as well as renewables. Regarding oil, the first order of business, Rodríguez said, was to reverse PEMEX’s 50 percent oil production decline since 2004. Storage is another important element in the strategy. "Storage continues to be the great challenge of renewable energy development," he said. At the moment, Mexico has an oil storage capacity of three days, and just two days for gas. Focusing on refined products, Rodríguez said the country imports around 70 percent of its products and 90 percent of gas. The goal is to reverse these trends by refinancing PEMEX’s debt. “The NOC has tools to reverse its fortune,” he said. “By aiming to foster the contracting of local companies for operations, communities nearby are poised to benefit as well. Storage capacity is aimed to increase to 14 days by 2021.” Furthermore, with the Dos Bocas refinery about to be built and the six current refineries improved, importing refined product will be less of a necessity as Mexico will be able to provide 70 percent of the fuels in consumes by itself, he added.
Gas is another benchmark for Rodríguez. “Currently, only 20 states in Mexico are gasified, and without natural gas, it is very difficult to develop the industry. The goal is to do it by the end of AMLO’s administration and recover the lag in certain areas of
Mexico,” he said. A zero-emission fuel, natural gas is widely present in the north and center of the country.
Renewables are another important pillar in Mexico’s energy portfolio. Rodríguez said that 22.5 percent of the country’s energy comes from renewable sources. "The current goal for 2024 is that 35 percent of Mexico's energy mix is composed of renewable sources. We hope to even surpass that goal,” he said.
HIGHLIGHTS 2020
"Storage continues to be the great challenge of renewable energy development"
Manuel Rodríguez, President of the Energy Commission of the Chamber of Deputies
Rodríguez also discussed the Energy Commission’s approval of a reform to article 29 of the Energy Transition Law to include the promotion of electric power generation programs on federal government real estate. Another initiative from the commission is related to stability. Energy projects are planned ahead for the maximum of a presidential term. By planning ahead for 15 to 30 years, investors would have the certainty to invest billions of dollars, according to the commission. The commission as drafted an initiative to create the Center for Energy Analysis and Development Studies (CEADE) to provide technical support for its legislative work.
Addressing concerns from an audience member that with the renewed focus on oil, renewables and other sources of energy would suffer, Rodríguez sought to dispel anxieties. President López Obrador is committed to supporting the Energy Reform and is open to the industry’s concerns, incorporating their remarks in new policy, Rodríguez said.
NATURAL GAS PAVES THE ROAD TO THE FUTURE
Mexico Energy Forum 2020’s first panel discussion, held on Wednesday at Mexico City’s Sheraton María Isabel hotel, covered the commodity considered to be the most realistic and best-positioned path toward the transition to a decarbonized future: natural gas. While still technically a hydrocarbon and non-renewable resource, natural gas continues to be the best option to fulfill global energy demand while a decades-long comprehensive transition to renewable sources can take place, according to the panelists.
Moderator and Baker and McKenzie Partner Benjamín Torres-Barrón began the conversation by establishing some of the basic characteristics of natural gas that define it as this best option: its generous abundance, its corresponding consistently low prices and the way in which it enables cheap energy granted it what Torres-Barrón termed “21st century protagonism” as a source of power. He then narrowed down his focus for his first question to the panel, which concerned the role that the natural gas sector must play in the Mexican economy.
IEnova Natural Gas Commercial Director Areli Covarrubias responded by elaborating on Torres-Barrón’s remarks on the advantages of natural gas. She added that natural gas’ cleaner emission profile coupled with its price made it the natural alternative engine for Mexico’s industrial and socioeconomic development. She then detailed IEnova’s experience with Mexico’s natural gas systems, which Covarrubias said was marked by the asymmetry between supply and demand. Supply was limited for a number of infrastructural reasons that made everything more difficult as demand continued to increase, leading power generators that depend on a natural gas feed to reach points of desperation where they “seasonally find themselves grasping to get natural gas from whatever
KEY SPEAKER
ARELI COVARRUBIAS
Commercial Director Natural Gas at IENova
Areli Covarrubias has more than 12 years of experience in the energy sector. Her previous positions include Business and Commercial Manager and member of the Regulatory and External Affairs team at IEnova. Before coming to IEnova, she was Legislative Adviser and Account Executive for energy matters at Guerra Castellanos & Asociados. Covarrubias is President of the Transport Committee of the Mexican Natural Gas Association.
HIGHLIGHTS 2020
sources they can.” She highlighted the need for a more robust supply platform and more long-term investment in its growth.
ATCO Energía CEO Ramón Basanta agreed with the need for this platform and that the issues were infrastructural, especially given the oversupply available in the US and the fact that low natural gas futures proved that oversupply could be expected to continue for the long term, also necessitating long-term investments. Basanta was clear about the role of natural gas in his assertions. "Natural gas is not a zero-emission fuel; however, for Mexico, it is the fuel with a shorter-term impact to reduce emissions." He added that the actual future of zero emission energy would probably depend on the development of green hydrogen, which technologically still has a number of obstacles in its development. Basanta also noted that natural gas should, in the relative short term, be able to generate the approximately 16 percent of Mexico’s energy mix currently occupied by fuel oil and coal.
Emerson Strategic Accounts Director for Latin America David Vizcarrondo used his time to describe the technologically advanced state of natural gas monitoring and predictive systems, underlining Emerson’s relationship with CENAGAS along the way to illustrate the public institution’s capabilities to draw its development plans based on accurate digitalized simulations. In Vizcarrondo’s estimation, “automation enables reliable operation and supply.”
KEY SPEAKER
RAMÓN BASANTA
CEO at ATCO Energía Ramón Basanta has over 20 years of experience in trading of refined products, gas and power in the Mexican and US markets. In 2016, he joined ATCO Mexico and developed business opportunities in the power generation and midstream segments. Basanta holds a Bachelor’s in chemical engineering from UNAM, a financial engineering specialization from McGill University and MBA from ITAM.
While Torres-Barrón continued his positivity regarding natural gas, later choosing to make note of its “little price volatility” and the “certainty” that it grants to users and investors, he also asked panelists to detail the most important obstacles to this resource’s development in Mexico. Covarrubias identified permitting, in particular environmental permits required before project construction can begin and whose issuing was particularly halted during 2019, and community engagement as the two most pressing issues to solve for more projects to go forward more quickly. Basanta identified the main obstruction to be the fact that natural gas in Mexico did not yet operate under a “fully functioning market, not in terms of liquidity, volume, price transparency, information symmetry, or any number of other variables that define a market functioning properly.” Basanta continued by declaring that “the path of pipelines and the general shape of distribution networks needs to be drawn by easily identifiable market needs and incentives rather than regulators or the ideology of a political party.” He concluded his remarks by saying that “without a functioning natural gas market, Mexico will not be able to build a functioning electricity market.”
MAKING RENEWABLE ENERGY FINANCE WORK
Renewable energy is finding its way in the Mexican industry, but projects in Mexico require long-term financing to be successful while the industry needs to face several challenges to take advantage of the country's potential, CEO of Zuma Energía Adrian Katzew told the Mexico Energy Forum 2020 audience on Wednesday at Mexico City’s Sheraton Maria Isabel hotel.
"Development banking plays a vital role in financing energy projects because those are projects that have to be financed for the long term. Commercial banking has been limited in this regard. Mexico should be open to long-term contracts as we see
HIGHLIGHTS 2020
in Brazil. These contracts contribute to investment certainty and encourage new projects,” Katzew pointed out.
Another major challenge facing electricity markets is losing money on projects and how to recover it. "Markets are designed around price or cost. Cost-based models do not have a price differential and this affects long-term projects. An example to follow is Brazil, which has developed longterm contracts that provide certainty to the investment and motivates companies to develop new projects."
In Katzew's view, the optimal development of renewable energy in Mexico depends on three key issues: transmission infrastructure, commercialization schemes and long-term system planning.
“The path of pipelines and the general shape of distribution networks needs to be drawn by easily identifiable market needs and incentives rather than regulators or the ideology of a political party”
Ramón Basanta, CEO at ATCO Energía
In September 2018, Zuma Energía inaugurated the largest wind farm in Mexico and one of the largest in Latin America, which has the capacity to produce 424MW to supply power to 900,000 residents. The project, located in the Charco Escondido ejido of Reynosa, Tamaulipas, has an area of 8,000ha with 123 turbines that provide clean energy, thus avoiding emissions to the atmosphere of 739,000 tons of CO2 per year.
Despite all the challenges that the industry faces in Mexico, having the necessary elements and with the right support, a clean and renewable future is not so far away, Katzew said. He highlighted the financing of Zuma Energía’s project, which totaled US$600 million and was achieved through development and commercial banks. “The Mexico-Reynosa wind farm was the first auction project to be financed. There was always dialogue with the private sector and there was always feedback from the financial sector and that needs to be done with every single project,” he added.
KEY SPEAKER
ADRIAN KATZEW CEO at Zuma Energía
Adrian Katzew has over 15 years of experience in the financing, construction, development and management of renewable energy projects. Before founding Zuma, Katzew was Vice President of Vestas where he was responsible for the execution of more than 1,000MW. Previously, he was Vice President of Market Development at First Solar in Europe, the Middle East and Africa.
HIGHLIGHTS 2020
"It is important to have private companies backing us up in the challenges that society will face in the coming years, such as climate change”
Eduardo Piquero, Director General at MÉXICO2
KEY SPEAKER
MARIAN AGUIRRE
Director of Energy Sector
Financing at BANCOMEXT
Marian Aguirre is an economist, graduated from TEC de Monterrey, has a Master's degree in finance and economics from the International University of Catalonia, and serves as Director of Financing for the Energy Sector at the National Foreign Trade Bank, SNC (BANCOMEXT), which is part of the Development Bank of the Mexican Banking System. Throughout her career she has financed projects worth over MX$35 billion.
This project is part of the second long-term electricity auction organized by the Ministry of Energy (Sener) and the National Center for Energy Control (Cenace) held in September 2016, in which Zuma Energía was the winner of a portfolio totaling 725MW in renewable energy, 424MW of which is delivered by the Reynosa wind farm.
THE FUTURE OF CELS IN RENEWABLE ENERGY FINANCE
CELs will be ever more important in Mexico’s diversified energy market, and supportive financing is key to reach renewable energy goals. On Wednesday at the Mexico Energy Forum, MÉXICO2’s Director General Eduardo Piquero explained what lies ahead for CELs in energy financing. “It is important to have private companies backing us up in the challenges that society will face in the coming years, such as climate change,” Piquero said, adding that CELs would be key.
A CEL, in short, is the Mexican term for a Renewable Energy Certificate. This is a negotiable asset, proving that electricity has been generated by a renewable, and thus green, energy source.
CELs play an important role in different countries. Eduardo Piquero highlighted the US case, where its commitment to clean energy for both companies and end users, enforced on various governmental levels as well as associations and NGOs, ensures compliance with regulations. He stressed that the “voluntary” segment of renewable energy users has grown significantly over the past years. Backed up by government requirements, it has become an attractive market for investors as well.
One reason for the success of renewables in the US is that there is confidence in its surrounding regulatory system. Piquero argued that this is not necessarily the case in Mexico, due to the government’s proposal to add old CFE plants as capable of issuing CELs. “The CELs market will not disappear, but the absence of legal certainty casts doubts on its effectiveness,” he said. Furthermore, he warned that a steep increase in CELs being available will collapse prices, and effectively end its role as an instrument for financing new projects. Another issue is the lack of transparency: although no fines for noncompliance have been issued in Mexico as of yet, this might not be due to Mexican companies having a spotless record.
HIGHLIGHTS 2020
Although Piquero mentioned much work needed to be done to protect CELs’ benefits for Mexico, he placed renewable energy at the highest importance looking toward the future. The current oil price war provides a glimpse at how the market would be without hydrocarbons. Piquero said he believes fossil fuels will not be able to compete with renewables. Although the oil market will recover due to a cycle in which investments drops, supply decreases and prices rice once again, he said that each bounce back to the top will be smaller than the last. Renewable energy, however, will continue its upward trend. “Renewable resources are much more competitive than they were before, and they will continue their advance,” Piquero said. Oil companies are aware of this, and it contributed to some of the sector’s giants to start heavily investing in renewables. “The collapse in oil prices will usher in a transition in the energy industry. The energy transition is knocking on the door, and the shift will happen sooner than one might expect,” Piquero concluded.
As he answered questions from the attendees of the forum, Piquero acknowledged that despite renewables’ potential in Mexico, barriers related to storage as well as finding financing would need to be addressed. After all, Mexico has such great promise that Piquero considered it strange that the country did not have more projects under construction, as he said that Mexico is, in potential, as resourceful in terms of sunlight as Saudi Arabia is with oil. By overcoming its hurdles, Mexico might yet make good on its potential.
INVESTOR EDUCATION CRUCIAL TO RENEWABLE FINANCING
The second panel discussion at Mexico Energy Forum 2020 on Wednesday at Mexico City’s Sheraton María Isabel hotel explored a subject that involved the interests of everybody in the room: how best to finance renewable energy projects, and how that process should change in the coming years.
This discussion was contextualized and anchored by the current oil price war and collapse in addition to corresponding global reevaluations of investing strategies by banks and companies in the energy sector. Panel moderator José Urteaga, Senior Energy Specialist at the Inter-American Development Bank, explicitly mentioned this context in his opening remarks, during which he cited the Mexican maya oil mix hitting an abysmal US$27 per barrel. At the same time, he tempered these implications with statistics that left clear the continuing dominance of oil and gas: of the US$1.8 billion invested worldwide in energy projects during 2018, close to 44 percent was invested in hydrocarbon projects. This illustrates the dire need for massive change in the way renewable energy projects are financed, Urteaga said. It is crucial for environmental reasons that these investments be triggered and facilitated as quickly as possible if the global economy is to remain “under the UN’s worst predictions in terms of rising temperatures.”
KEY SPEAKER
JOSÉ JOVÉ CASSIS CEO of Prana Power
José Jové started in Prana’s commercial operations, both on the utility scale side and the commercial and industrial distributed generation business. He later transitioned to CEO, consolidating Prana’s position as a developer and operator of utility scale solar assets as well as gasbased generation projects a chemical engineer, Jové has an MBA from the University of Phoenix.
“Links and networks of feedback and mutual understanding between project developers and investors”
Cecilia
Latapi,
Executive Coordinator of the Green Finance Advisory Council
Green Finance Advisory Council Executive Coordinator Cecilia Latapi clearly voiced the need for legal certainty for investors in Mexico’s renewable projects. At the same time, she also made it clear that investors, financiers and financial institutions needed to educate themselves, adopt new mindsets and be more open and adaptable when it comes to structuring their support for and involvement in renewable energy projects. She heeded the call for “hybrid schemes that respond to the new needs of innovative projects.”
HIGHLIGHTS 2020
Latapi also said that she has seen positive movement toward this broader perspective from investors as she described what she called the “links and networks of feedback and mutual understanding between project developers and investors.”
KEY SPEAKER
PATRICIA TATTO
Vice President of ATA Renewables, President of MERM
Patricia Tatto has served as a technical adviser and business guide in the creation of strategies for the industry in new markets. As Vice President for Ata Renewables America, she advises the entire value chain on the successful implementation of large-scale renewable energy projects. She founded and is the president of Women in Renewable Energy Mexico AC. Tatto holds a law degree from the Universidad Iberoamericana.
BANCOMEXT Director of Energy Sector Financing Mariana Aguirre elaborated on Latapi’s remarks by explaining that the technical variety of energy project financing schemes and the high degree of PPA pliability meant that developers and investors should have access to the tools they need, provided they understand that these projects represent long-term investments “from 10 to 21 years on average.” Aguirre also made it clear that firms, funds and banks needed to further study the variables that could affect the conditions of their contracts with developers. Here, she also referenced recent developments by describing the way in which COVID-19’s shutting down of Chinese ports was affecting the supply of solar panels and reshaping the market for the production of these components.
Citibanamex Director Head of Power and Energy Salomón Amkie underlined the fact that macro factors for renewable energy project investment in Mexico were actually quite flattering and beneficial. It is the regulatory and contracting nuances and uncertainties that needed to be defined to trigger larger volumes of interest from banks and sponsors, he said. Until these uncertainties are eliminated, he admitted that “it makes sense for banks to be cautious.” Acclaim Energy Country Manager María José Treviño agreed, highlighting the fact that “concrete decisions need to be taken by public institutions to address these uncertainties,” which include transmission infrastructure, data sharing and social engagement.
To this list, Zuma Energía CFO Hélene Dimitracopoulos added the question of local content. While she acknowledged that Mexico had tremendous potential in its human resources and national supply capacity, she also noted the gap that remains between that potential and the fundamentals necessary in any renewable energy national workforce. Dimitracopoulos said that closing this gap and the role that public institutions play in its closing were important elements to consider for
HIGHLIGHTS 2020
investors, who at the same time needed to educate themselves regarding what their role was in this process.
SOLAR ENERGY DEVELOPMENT IN MEXICO IS JUST 1MW AWAY
Distributed generation in the domestic industrial sector and in small and mediumsized companies is the alternative for the solar industry in Mexico, agreed panelists discussing the Development Outlook for Mexico's Solar Energy Sector at the Mexico Energy Forum 2020 on Wednesday at Mexico City's Sheraton Maria Isabel hotel.
“For us, the biggest challenge is clarity in the rules of the game. There are too many rumors and uncertainties, making investors nervous. For a year, we have been cautious and we have not been very involved, but at the same time we have not stopped and the distributed generation for us has been incredible. At the commercial level, there is investment and the market is still dynamic," said José Jové Cassis, CEO of Prana Power.
Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels and combined heat and power. Distributed generation may serve a single structure, such as a home or business, or it may be part of a microgrid, such as at a major industrial facility.
When connected to the electric utility’s lower-voltage distribution lines, distributed generation can help support the delivery of clean, reliable power to additional customers and reduce electricity losses along transmission and distribution lines. However, the Federal Electricity Commission (CFE) does not allow this.
Currently, the exempt generation cap is 0.5MW per installation, but the industry seeks to bring this ceiling to 1MW. This change could boost the speed of adoption of distributed generation. According to data from Asolmex and PwC, Mexico is
KEY SPEAKER
FRANCISCO SALAZAR
Director General and Partner of ENIX/Trust
Francisco Salazar is founding partner of Enix SC, Gadex, SC and Trust Intelligence of Entorno, SC. Since 2016 he has been the Coordinator of the International Conference of Regulators (ICER). In April 2017 he became member of the Mexican Council of International Affairs (Comexi). From 2005 to 2015 he was Commissioner President of the Energy Regulatory Commission. He is considered a pioneer of the Energy Reform.
HIGHLIGHTS 2020
about to reach 1,000MW of distributed generation and by 2024 it estimates that could reach 6,000MW. This means that the current law of the electrical industry contains a cap for energy generation that does not require permits from the Energy Regulatory Commission.
“Before, solar energy did not think about megaprojects, it was focused on small businesses because there were limits to commercialization. However, the industry has stopped its projects and is again focused on the domestic industry. Hopefully, this will change with the proposal in Congress to modify this regulation,” said Casiopea Ramírez, Partner at Fresh Energy Consulting and Adviser to ASOLMEX.
In the Chamber of Deputies, people like Hernán Salinas seek to modify this. In his consideration, decentralized power generation is recognized for its high impact on socioeconomic issues. “Distributed Generation is a way to reduce energy poverty that affects around 12.4 million Mexicans. This type of generation has the ability to provide access to electricity in communities far from the main generation areas,” said Salinas in February at the Congress.
“There are more than 3,000 players in the market and this translates to a benefit for the consumer. We have prices that we did not see three years ago and now they are a reality because there are more competitors and better projects; however, we have come across requirements that CFE requests that are out of reality and that kill a project,” explained Juan Ávila, Director General of Top Energy.
KEY SPEAKER
JEFF PAVLOVIC
Director General of Bravos Energía Jeff Pavlovic was previously Managing Director of Electric Industry Coordination and Managing Director of Generation and Transmission at the Ministry of Energy and Unit Leader of Modernization at CFE. Also, he was Manager of Generation Control and Dispatch for Xcel Energy in Denver, Colorado. He began his career as a financial analyst at LEK Consulting, where he specialized in the unbundling of electric utilities.
Another challenge noted by Patricia Tatto, Vice President of ATA Renewables and President of MERM, is that there is a lack of transparency in the CFE auction process. “We see dynamism in the market but also a stagnation of large-scale projects. There is a lot of buying and selling and we hope that the opportunities will equalize over the course of the year.”
MEXICO'S ENERGY MARKET BOOSTED BY PRIVATE AUCTIONS
Mexico’s energy market has a great deal of potential. Although bigger projects have been put on hold, private auctions are being created to fill the void, according to the final panel discussion on Wednesday, at the Mexico Energy Forum 2020 at Mexico City’s Sheraton Maria Isabel hotel. Leonardo Beltran and Francisco Salazar moderated the panel that included Jeff Pavlovic, Miguel Alonso and Eduardo Arriola.
The panel highlighted the experiences of renewable energy producers, exemplified by Alonso, Country Manager of ACCIONA Energía. While he said it is true that bigger projects have slowed down, the company is nonetheless committed to advancing its operations in Mexico. "We are installing and operating 500MW in Mexico through a variety of projects. We plan to continue with our current strategy,” he said. "Mexico's goals haven't changed but the energy model has shifted to give CFE a larger role, and we must adapt.” The panel agreed that large-scale projects are a necessity for consumers because they keep prices down and efficiency up.
HIGHLIGHTS 2020
Indeed, the side of the energy industry focused on purchase and sale of projects is quite active in Mexico. Alonso said he did not believe new auctions would happen soon. It seems the industry agrees, and two companies are stepping into the ring to provide opportunity: Vitol Group and Bravos Energía. The companies have founded private auctions, boosting the industry by providing a new platform on which it can trade. These auctions are apolitical in nature, merely seeking to facilitate trade, said Arriola, Originator at Vitol, and Pavlovic, Director General of Bravos Energía.
Beltran highlighted the importance of legal certainty. The panelists agreed that for investors, longer contracts and a certainty that previously set rules would be respected are key. Beltran argued that the platform has great potential due to the fact that agreements are made between private players, who can keep it transparent. Added Arriola: "To make contracting procedures more efficient, a framing contracting model needs to be established.” The government, however, needs to provide stability in the rule of law as well, as giving investors the notion that regulation might change at any moment puts them off.
There are bound to be some flaws in agreeing on the terms of engagement among interest groups. "It is common for the efficiency of market design to clash with the individual rights of stakeholders. Mexico is no different,” Pavlovic said. In the end, he suggested, small flaws here carry less weight than the heavy potential investments the auctions enable. By keeping bilateral contracts simple, smaller companies can enter the fray as well, instead of seeing this part of the market dominated by a few big players. This, in turn, can decrease energy bills all around.
To conclude, the panel agreed that synergy between the private and public sectors is needed to reach Mexico’s ambitious goals regarding energy. Infrastructure and project development need to be boosted, for instance. If both sides of the sector work harmoniously, there is much to be gained.
KEY SPEAKER
MIGUEL ALONSO
CEO of Mitsui Power Americas Miguel Alonso has led ACCIONA ENERGIA’s operations in Mexico and Central America since 2008. In 2018, he was named one of the Top 100 Leaders of the Energy Sector by Petroleo & Energia magazine. Acciona Energia operates 1,144MW in Mexico and 50MW in Costa Rica. Alonso holds a Master’s degree in marketing and commercial negotiations from Universidad Publica de Navarra.
MARCH 10, 2021
MEXICO CITY
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