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The clean energy transition is crucially important for Mexico’s numerous citizens and industrial activities to foster sustainable development, avert severe consequences of drastic climate change and cut costs toward a higher degree of competitiveness. Nevertheless, clashing governmental visions have disrupted some of the much-needed certainty to develop longterm energy projects needed to reach these goals, which has forced the industry to adapt to a new reality.
Though an uncertain environment remains, Mexico’s energy sector is marked by a diversity and vibrancy that creates opportunities even though the previous models focused on utility-scale renewable development no longer excel. Distributed generation assets have gradually gained their place in the market. Meanwhile, driven by an expanding network, natural gas increases its reach. Domestic production could even replace the record-amount of natural gas import toward the future. Aligned with the government’s goals of safety and reliability, Mexico’s transmission and distribution grid requires a massive overhaul, however. Budding technologies like battery storage and green hydrogen offer new avenues to speed up the energy transition and the social aspect of energy projects remains as important as ever.
Mexico Energy Forum 2021 Echo gathered the key actors that shape Mexico’s energy environment and provided a platform to discuss the opportunities and challenges in the country. In doing so, the energy sector’s leaders emphasized the potential for continuous growth within the energy industry.
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• 27 pivot
• 3M Electrical Markets
• AB Energy Mexico
• ABB poWEr G rIDS MEXICo S.A. DE C.V.
• ACCIo NA ENErGIA
• AES México
• Agencia de Energía del Estado de puebla
• AILA Energy
• Aisin Mexicana, S.A. de C.V.
• Alleans renewables
• Almexa
• AMDEE (Asociación Meicana de Energía Eólica)
• AME
• Ammper
• Argus Media
• Arteli
• Artelia Cal y Mayor
• Asociación Mexicana de Gas Natural, A.C.
• ASo LMEX
• Baker McKenzie
• Biopappel
• BoCAr G ro U p
• Bombas rodase
• B p Energia Mexico
• Brella Ltd
• BUAp
• Burgess Norton
• Cacheaux, Cavazos & Newton
• Capwatt Mexico
• CENACE
• CENAGAS
• Centauro Energia
• CFE CALIFICADoS
• Chint Mexico
• CI rCUTor México, Centro América y Caribe
• Coca-Cola FEMSA
• Comexhidro
• Comisón reguladora de Energía
• Corporativo AGA GAMI
• Costco
• Cr E
• Cuprum
• DeAcero
• Deloitte
• DG pIE
• DNV GL
• Dominion México
• Edison Enegy
• El puerto de Liverpool
• Element Fleet
• ENEL Green power Mexico
• Energía real
• Energia renovable Conmar, SA de CV
• Energy Agency of the State of puebla
• Energy to Market
• ENESTAS
• Engie México
• Enicon Energy and Infrastructure Co.
• Enix
• Enphase Energy
• Exterran
• Fermaca
• FIH Mexico Industry
• Finergreen
• Finsolar
• Forefront power
• Fresh Energy Consulting
• FrV
• FSE Suministradora Fenix
• Gallo Abogados, S.C.
• GE Gas power
• GED
• Generac
• GNU Gas Natural
• Gonzalez Calvillo
• Green powerMonitor a DNV company
• Gruma
• Grupo ABSA
• Grupo Bimbo
• G rU po CU prUM
• Grupo Desarrollo Infrastructura
• Grupo Mexico Infraestructura
• Hartree Consulting
• Haynes Boone, LLp
• Heineken México
• Hitachi ABB power Grids
• H o LLAND & KNIGHT LLp
• Hotels & resort Bahía principe: riviera Maya
• Iberdrola México
• IEnova
• IGSA
• indra
• INErCo México
• International SoS
• Invenergy
• Jones Day
• KEMET de Mexico SA de CV
• Kiewit
• Kilpatrick Group
• K pMG Cardenas Dosal SC
• Latin American rainmakers
• Lo NGi Solar
• MANDo Corpor ATIo N MEXICo / pU rCHASING
• Marcos & Asociados, consultoría energética
• MEr M/EG p
• Mexico Business
• Mexico Energy review
• Mexico’s National Energy Control Center
• MexicoView
• Ministry of Economy and Labor of Nuevo Leon
• MINSAIT
• Mitsui & Co. power Americas
• Naturgy
• Nemak
• Nexus Energía Mx
• Nordex
• Northland power Energía
• oCA Global
• oleum
• o N Energy Storage
• or BIA
• orGANIZACIo N SorIANA
• panasonic de México
• pFIFFNEr Instrument
Transformers Ltd.
• picarro, Inc. - Energy
• poWEr ELECTro NICS
• pp G INDUSTrIES
• p Q Barcon
• prana power
• promotora Energetica e3 SA de CV
• proTErr A CApITAL
• real Alloy Mexico
• r Er Energy Group
• rolls royce power Systems
• rosatom Latin America
• roSEN Group Mexico
• royal Eagle Capital partners
• Saint Gobain
• Santamarina y Steta
• Schweitzer Engineering Laboratories
• Seadust Cancun Family resort
• SECr ETArÍA DE DESArro LLo ECo NÓMICo
• SUSTENTABLE
• Secretaría de Economía y Trabajo de Nuevo León
• Secretaría de Energía
• Seisa Energia
• SEL
• Servicios Tecnicos Consutec
• SHAB INGENIErIA
• Siemens Energy
• SJSU
• SKF DE MEXICo
• SM p Four Seasons de Mexico
• Smurfit Kappa
• State Government of Nuevo Leon
• Surtigas S.A E.S. p
• Taghleef
• TC ENErGIA
• Tecnimont México S.A. de C.V.
• Ternium
• Terra Energy
• The Brattle Group
• Trafigura
• Tuto power
• TUV rheinland Mexico
• UL
• Vector renewables
• Vera & Asociados
• Vernell Industries S.A. de C.V.
• Von Wobeser y Sierra
• Wärtsilä
SEPTEMBER 1 ST , 2021
09:00 NUEVO LEON’S ENERGY SECTOR DEVELOPMENT
Speaker: Jorge Gorozpe, Energy Director at the Ministry of Economy and Labor of Nuevo León
09:30 SONORA’S ENERGY SECTOR DEVELOPMENT
Speaker: Dr. Rafael Cabanillas, Energy representative at Transition team of Next Sonora’s Government
09:15 LEGAL CERTAINTY IN MEXICO’S ENERGY REGULATION ENVIRONMENT
Moderator: Yolanda Villegas, Founder & partner at oleum Servicios
Panelists: Edmond Grieger, partner and Head of Energy & Environmental practive at Von Wobeser y Sierra
Valeria Vazquez Maulén, Maulén, Energy and resources Leader Mexico-Central America at Deloitte
Sofía Tamayo Gutiérrez, regulatory Affairs at AES México
Claudio Rodríguez-Galán, partner International Energy practice at Holland & Knight
11:00 NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
12:00 BEHIND-THE-METER STORAGE OPPORTUNITIES
Speaker: David Fernandes, CFo and Country Manager Mexico at o N Energy Storage
12:15 HYBRID PROJECT POTENTIAL IN MEXICO
Moderator: Mirjam Schipper, Energy Industry Lead at Mexico Business
Panelists: Raul Carral, Business Development Latin America North at Wärtsilä
David Fatzinger, Vp & Country Manager Mexico at Invenergy LLC
Bruno Riga, Country Manager Mexico at Enel Green power
13:00 ON-SITE GENERATION, THE VIABLE SOLUTION
Speaker: Ricardo Zúñiga, Country Manager at CapWatt
13:15 ENERGY MANAGEMENT STRATEGIES
Moderator: Guillermo Bilbao, Director of Energy Business Mexico at Minsait
Panelists: Carla Ortiz, Country Manager Mexico at r Er Energy Group
Sean McCoy-Cador, Director of Energy Supply at Edison Energy
Santiago Villagomez, CEo of Energía real
Katya Somohano, Energy Director at Deacero
14:00 NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
15:00 CRUCIAL STEPS TOWARD MEXICO’S GRID-CODE COMPLIANCE
Speaker: Monica Samudio, Country Managing Director Mexico & Central America at Circutor
15:20 TECHNOLOGY FOR POWER QUALITY OPTIMIZATION
Speaker: René Mendoza, Segment Leader power Quality at Hitachi ABB power Grids Mexico
15:40 TRANSMISSION & DISTRIBUTION OF THE FUTURE
Moderator: Karla Albarrán, Member of the Association of Women in renewable Energy Mexico (MEr M)
Panelists: Santiago Barcón, Director General at p Q Barcon
Fidelmar Molina, Government Affairs and power Generation Business Development at Hitachi ABB power Grids
Ivette Castillo, North LATAM Commercial Executive at GE Grid Solutions
16:30 THE STATE OF AFFAIRS FOR DECARBONIZATION OF MEXICO’S ENERGY INDUSTRY
Speaker: Arturo Carranza, Independent Advisor at the Federal Electricity Commission (CFE)
17:00 END OF DAY 1
SEPTEMBER 2 ND , 2021
09:00 ELECTRICITY GENERATION: AN ENABLER FOR THE WELL-BEING OF EVERY MEXICAN
Speaker: Ramon Moreno, president of the Mexican Energy Association (AME)
09:30 A BRIGHT FUTURE FOR NATURAL GAS IN MEXICO
Speaker: Warren Levy, CEo at Jaguar E&p
10:00 THE FUTURE OF GAS-FUELED POWER GENERATION
Moderator: Jorge Sandoval, Director General of the Mexican Natural Gas Association (AMGN)
Panelists: Ramon Moreno, CEo of Mitsui & Co. power Americas
Marco Vera, Managing Director at GE power Mexico
11:00 NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
12:00 GAS INFRASTRUCTURE, TRANSPORT AND DISTRIBUTION
Moderator: Malvin Delgado, International Energy Business Director at picarro
Panelists: Gustavo Nunez, Managing Director Sector Mexico & Central America at roSEN
Alvaro Corona, Coo of Gas Transportation and Distribution at ENGIE Mexico
Areli Covarrubias, Commercial Director at IEnova
Rafael Mercado , Commercial Director at Naturgy Mexico
13:00 PUBLIC-PRIVATE COLLABORATION TO SET SOCIAL IMPACT STANDARDS
Speaker: Héctor Sánchez López, Independent Member of the Board of Directors at the Federal Electricity Commission (CFE)
13:15 ENERGY PROJECTS: OPTIMAL SOCIAL AND ENVIRONMENTAL IMPACT
Moderator: Julia González Romero, Elected Counsel at González Calvillo
Panelists: María Cristina Hernández Calzada, partner at Vera & Asociados
Montserrat Palomar, Head of Sustainability at Enel Green power MXCA
Héctor Sánchez López, Independent Member of the Board of Directors at the Federal Electricity Commission (CFE)
14:00 NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
15:00 GEOTHERMAL ENERGY: OBJECTIVES AND OPPORTUNITIES
Speaker: Enrique Papadimitriou, Director General of GEoTEr renovables de México
09:15 MEXICO’S NUCLEAR FUTURE
Speaker: Manuel Fernández Ordoñez, radioactive Waste Director at Tecnatom
00:00 PANEL TITLE
Moderator: Veronica Zapata Oviedo, Member of the Association of Women in renewable Energy Mexico (MEr M)
Panelists: Fernando Tovar, CEo and Country Manager of ENGIE Mexico Jeroen Visser , Global Director Hydrogen at Northland power Israel Hurtado, president of the Mexican Hydrogen Association
09:15 ELECTROMOBILITY IN THE MEXICAN CONTEXT
Speaker: Indira Kempis, Senator of the State of Nuevo León
17:00 END OF DAY 2
NUEVO LEON TO KEEP UP WITH ENERGY CHALLENGES
Nuevo Leon, one of the most economically dynamic states in Mexico, aims to continue growing in the energy sector, where opportunities and challenges emerge in similar amounts. The objective of affordable and clean energy, included in the UN’s 17 Sustainable Development Goals, is clear, but the transition to clean, efficient energy requires project promotion and continuity.
“(The Energy r eform) attracted foreign investment in the energy sector. Nuevo Leon doubled its energy production and is now the third state in wind energy investment and second in distribution,” said Jorge Gorozpe, Energy Director at the Ministry of Economy and Labor of Nuevo Leon (SEyTNL).
Manufacturing plays a key role in Nuevo Leon’s economy. With US$37.8 million in exports, which represents 9 percent of the national manufacturing exports of 2020, this sector represents 26 percent of the state’s economy. Mass production also means mass energy consumption. Nuevo Leon is the biggest electricity consumer in the country and the challenge is to keep energy production at sustainable levels, considering a smooth transition to clean, efficient energy.
This is the purpose of the Energy Direction of SEyTNL, which also promotes the growth of energy infrastructure and strengthening of human capital in the state. “Electricity consumption will keep growing and we will have to continue producing. o ur goal is to be the most efficient energy consumers (in the country),” said Gorozpe.
“(The Energy Reform) attracted foreign investment in the energy sector. Nuevo Leon doubled its energy production and is now the third state in wind energy investment and second in distribution.”
Jorge Gorozpe
Energy Director at the Ministry of Economy and Labor of Nuevo Leon (SEyTNL)
Energy efficiency is one of the state’s priorities. Nuevo Leon became one of the first states to implement energy management systems in two public buildings, resulting in a decrease of over 4.2 million kWh in consumption and savings of MX$1 million (US$50,000) per year, according to Gorozpe.
The local government is also working on “awareness campaigns focused on public officials” and collaborates with federal institutions like C o NUEE, “hosting inperson and virtual workshops on energy efficiency in the hospitality, real estate and air conditioning industries,” said Gorozpe.
The government of Nuevo Leon has worked closely with municipalities, learning about their specific needs and supporting them, while promoting gender equality in the sector, through virtual and in-person seminars. The Energy Direction of SEyTNL has also implemented polls to have more precise data of each territory of the state and hosted energy projects in collaboration with public and private universities, such as ITESM, UANL, UDEM and U r , working closely with the Embassy of Denmark, one of the leading countries in clean energy matters. “We created the ‘Wind r ace’ in collaboration with Cubico, which was a literal race around a wind farm to promote these projects and raise environmental awareness,” said Gorozpe.
Despite the impending government transition in Nuevo Leon, the Energy Direction of SEyTNL has pending projects, such as signing the Energy policy of Nuevo Leon, the gender equality agenda in the sector and the promotion of renewable energy and new technologies. To ensure continuity, the federal government will play a key role in Nuevo Leon’s energy sector’s growth. “We are the second state with more energy project and we have to work with the federal government to keep growing our transmission and distribution grid,” said Gorozpe.
1GW SOLAR PLANT PART OF SONORA’S GRAND ENERGY TRANSITION PLANS
Sonora is gearing up to become a crucial cog in Mexico’s energy transition. Aiming to make good use of its brilliant solar radiation, the state wants to wean itself off natural gas imports through a much-discussed 1GW solar project. The project is expected to not only benefit Sonora but the grid-isolated Baja California peninsula.
“Sonora has a strong dependence on outside energy sources,” said r afael Cabanillas, a researcher at the University of Sonora (Unison) and a member of the newly elected state government’s ‘Transition Team’ on energy and sustainable development issues. “There is still a long way toward selfsufficiency to supply the state’s industry. yet, our yearly solar radiation is among the highest around the world.”
With a population of close to 3 million and a surface stretching past 179km2, the Northern Mexican state of Sonora uses quite a lot of energy for its residential, commercial, industrial and agricultural activities. The state’s thermometers often show figures higher than 35°C in the summer months, which means that a decent quality of life makes energyintensive cooling processes essential. Unfortunately, this makes energy costs rise rapidly. Around 4,488 kWh are consumed annually by Sonoran homes on average, more than four times the consumption of a home in Mexico City. Almost 5 percent of the nation’s energy use is consumed in Sonora. To make prices bearable, the federal government needs to heavily subsidize ene rgy rates.
“There is still a long way toward selfsufficiency to supply the state’s industry. Yet, our yearly solar radiation is among the highest around the world.”
Rafael Cabanillas Energy Representative at Transition team of Next Sonora’s Government
Sonora is mostly reliant on imports to produce the power it needs. Cabanillas explained that most of the electricity consumed in Sonora is generated by burning dry natural gas imported from the US. “Sonora has an index of 0.18 in terms of energy independence when looking at figures from 2017. The national index is at 0.76,” he stated. The price of imported gas is less of an issue: “Imports are not an issue of cost, as importing dry gas from the US is quite cheap, but of energy independence, which the federal government values, too,” emphasized Cabanillas. Mexico’s pipeline infrastructure is expanded constantly as testament of the benefits of low-cost natural gas.
Still, this dependency can cause problems. The fact that Sonora is reliant on imports means that the state is vulnerable to the conditions in Texas, as seen during a winter storm that halted gas production in February. When exports were halted, Mexico’s energy mix took a hit. Sonora, however, has access to another important energy source: solar. The state’s Direct Normal Irradiance lies between 6.26 and 7.89 Kwh/m2 per day. Using only a fraction of the Sonoran Desert, the state could generate more energy than Mexico needs in its entirety. private companies, attracted to the Mexican market after the 2014 Energy reform, already benefit from this excellent irradiance. Companies such as Iberdrola, IEnova, Engie, Acciona and X-Elio all have photovoltaic solar parks in various places across the state.
Newly elected governor of Sonora, Alfonso Durazo, knows the potential solar energy brings to the state, as well. Enjoying a good relationship with president Andres Manuel López obrador, Durazo has been tasked to make Sonora a key state for Mexico’s clean energy transition. “López o brador asked Durazo to ensure Sonora would spearhead a solar-based pilot project, which would boost renewable energy generation. This
move also disproved rumors that the government was against renewable energy,” said C abanillas.
At the heart of Sonora’s solar mission lies the notorious puerto peñasco project. With a titanic 1GW capacity, the project would be among the world’s 10 largest solar power plants and the largest in Latin America. It will feature a 100MW battery storage addition, too. Sharing the load of the predicted US$1.685 to US$2 billion investment, state utility CFE is to own 56 percent of p uerto p eñasco, while a newly formed Sonoran state company would own 46 percent. Cabanillas described the project as a “home run” for the state’s sustainable development initiative. Sonora’s state-owned company opens a range of interesting possibilities, too, although Cabanillas points out that the full scope of what Sonora can do with this company remains to be defined.
The benefits of p uerto p eñasco go beyond Sonora. In fact, the state of Baja
California perhaps stands to gain the most because the project will be paramount in interconnecting the heretofore electrically isolated northern part of the peninsula. Baja California Sur would also be connected to this local grid through a submarine 400kV transmission line.
To make these landmark projects a success, Sonora aims to improve the legal framework on which it bases its energy transition. The state’s energy commission needs reinforcing and the state company to be involved in the solar project needs to be founded. p uerto p eñasco will not be Sonora’s only focus. The state plans to promote Sonora in the energy sector via the construction of further solar projects, boosting electric and hybrid vehicles, biofuel use, distributed generation (DG), cogeneration, wind energy and much more. Forty DG solar projects, each 0.5MW, will bring 20MW of capacity at a cost of US$20 million. Ann additional 20MW wind farm will require US$22 million, according to C abanillas.
ENERGY REGULATION: OPPORTUNITIES IN COLLABORATION
The attempted changes proposed by the current administration to Mexico’s energy reality are still clouding investors’ vision, but industry experts assure that there are still plentiful opportunities in the sector and underline the necessity of publicprivate collaboration to ensure Mexico’s successful energy transition into the 21s t century.
Legal uncertainty has fraught Mexico’s energy sector since Congress passed president Andres Manuel López o brador’s renewed Electrical Industry Law (LIE) bill in March of this year. The proposed reform has met resistance from private companies whom have pointed to the administration’s obvious effort to reform the economic hierarchy with state companies Federal Electricity Commission (CFE) and p EMEX at the top. A clear violation to the principles of free competition anchored in the 25th article of the Mexican Constitution’s Energy reform.
The fear and ambivalence that has marked the energy sector during this tumultuous regulatory period in Mexico, even internationally, has led to a more organized and cohesive sector in which concerns and technical analyses are shared, with the latter also being encouraged, said Valeria Vázquez, partner at Deloitte. “As actors in the energy sector, we need to understand regulations, their implications and how they could affect the sector.”
r eadiness and understanding are key to pivot according to regulatory changes, should they come to fruition. For this however, as pointed out by Claudio r odriguez-Galán, p artner at Thompson and Knight, companies must first make a clear distinction of what is legally binding and what is dogmatic. Doing so will help companies make strategic decisions based on legal certainty instead of fear and speculation. This thought process puts into perspective how preemptive risk-adverse
decisions may be premature, considering how the LIE bill has been continuously stunted since its introduction to Congress. o nly 24hrs after its promulgation, the bill had been definitively suspended by Judge Gómez Fierro due to violations to the right to free market competition as underlined in Art. 25th of the Constitution.
It was feared that during the mid-term elections (June 6th), the president’s political party M or ENA, would be able to gain the supermajority needed to amend the constitution and push the LIE bill through. However, people placed a de facto referendum on the administration which had been notably hostile towards foreign investors given its nationalistic view on the utilization of resources. The market reacted positively, gaining nearly 1 percent during early Monday, June 7, trading after months of volatility. A month later and after a court lifted the indefinite judicial suspension issued against the LIE bill – as judges ruled that there were no general direct effects on companies – private players had the option to push for new legal protection measures against specific parts of the reform that could directly affect their business. The Supreme Court will have the final say; results are unclear but industry insiders highlight how the entity has fulfilled its role as a political tie-breaker. In other words, even though private market players have observed a volatile market, the judicial system has repeatedly stood firm in the face of political pressures and intereste d parties.
Given the circumstances, the president drafted a new, more palatable reform in which he granted CFE the capacity to produce and distribute 54 percent of the nation’s energy, while leaving the
“As actors in the energy sector, we need to understand regulations, their implications and how they could affect the sector.”
Valeria Vázquez Partner at Deloitte
remaining 46 percent to the private sector. This is the first sign of compromise and readiness to work with private energy providers, although the resubmission was met with a wave of amparos. Lifting these will be no easy task: “These matters do not have a black and white answer. Not all rulings will move the same way,” said Vázquez in previous interview with MBN. “The issues will be interpreted differently by various courts. However, I do not believe that the energy sector’s model will be changed through these decisions.” All that remains now is to observe how these cases play out in court and prepare accordingly.
As the battered sector looks towards an inevitable global energy transition, experts emphasize the need for public-private dialogue and combined efforts to not only meet growing energy demand but to ensure Mexico’s successful energy transition. Despite challenging conditions plaguing 2020 and 2021, demand has not been stifled, not from direct consumers or other energy sectors that are also racing against the clock to reduce their carbon footprint, according to Edmond Grieger, p artner at Von Wobeser y Sierra.
As the sector moves forward, energy producers must work within their current limitations to offer creative ESG solutions if they wish to remain competitive. Although CFE has reduced the number of market competitors, it has established tenders for companies to offer services, a possible opening for future cooperation. This is an opportunity for the private sector to fill energy sector niches in which they are more knowledgeable and efficient. “ p ublic and private sectors should come together to generate a much higher value in the energy sector, instead of competing with each other,” said r odríguez-Galán. There are limitations, but even within that narrow space, there are still business opportunities that can be exploited “through creativity and a proper regulatory strategy,” says Sofía Tamayo, r egulatory Affairs at A ES México.
Beyond the federal level, energy actors should look to work directly with state and local groups involved in the regions where they hope to develop projects to avoid disruptions and delays. Tamayo highlighted the CFE and TC Energy Tuxpan-Tula gas pipeline in p uebla that got delayed for having “caused problems for the indigenous residents of the Sierra
“Public and private sectors should come together to generate a much higher value in the energy sector, instead of competing with each other.”
Claudio Rodriguez-Galán
Partner
at Thompson and Knight
de puebla, increasing costs by hundreds of millions of dollars.”
In conclusion, although this may have not been the regulatory framework that market actors envisioned upon entering in 2015, it is the existing one, and just like any other market disruption industry actors must adapt or die out. In this case, a strategic development map must account for regulatory contingencies and ESG practices that consider social and environmental implications. The good news is that energy demand is here to stay and unequivocally essential to the development of Mexico’s economy, therefore there should be plentiful business opportunities for companies to fill were CFE alone cannot and it waits for the Supreme Court to deliver a verdict.
ON-SITE ENERGY PROJECTS, BASIS FOR THE ENERGY TRANSITION
Driven by regulatory changes and a need for excellent power quality in places not optimally connected to the grid, the development of energy projects in Mexico is increasingly moving from utility-scale toward on-site distributed generation. Here, technologies such as solar, storage and cogeneration take the lead.
“As we all know, this is not the best time for the power sector in Mexico. But tough times also mean that there are different opportunities to make use of,” said r icardo Zúñiga, Country Manager Mexico of Capwatt, a company that focuses on developing clean energy projects for customers in the commercial and industrial (C&I) environment.
Especially for projects on the smaller scale, perspectives remain attractive. Under 0.5MW capacity, no permitting is needed. But even larger projects ranging from 5 to 10MW are viable because they do not have a severe impact on the grid’s functioning and can provide energy to remote locations or isolated areas, such as in Mexico’s two peninsulas. “Baja California and yucatan need capacity to grow economically, but they do not have access to the nationally
interconnected grid or even to an adequate fuel supply,” said Zúñiga. Taken together, these factors are greatly increasing the demand for on-site power solutions.
o n-site power production facilities are far from a new trend, emphasizes Zúñiga. Before the onset of the 2014 Energy r eform heralded colossal investments in utility-scale projects, private power plants focused on self-supply. Now that the regulatory certainty necessary to develop utility-scale projects has taken a hit under a governmental restructuring of the industry, Zúñiga sees projects turn toward fewer MWs and on site generation for large-scale energy users. For this reason, Capwatt has elected Mexico as its third location after p ortugal and Spain. The company is not alone, as many other companies turn their attention to smaller-scale project development and aim to cater to the growing demand of C&I clients, who look for competitive prices and cleaner energy supplies to meet ESG benchmarks.
“Efficient and well-designed power plants are the best options for companies,” said Zúñiga, stressing that reliability, quality and energy efficiency are of the essence. “What
we consider to be most important for onsite projects is that they are tailor made,” he added. In terms of the technology used, solar is often mentioned as an excellent solution. Especially in combination with battery storage, it is a stable and costefficient solution. Albeit less popular in the Mexican context, natural gas-fueled power production facilities provide a great opportunity for companies too, especially if their production processes need significant r cooling.
“What we consider to be most important for on-site projects is that they are tailor made.”
Ricardo Zúñiga
Country Manager Mexico of Capwatt
Zúñiga highlights the company recently saw a permit go through. “We saw it as a message that projects will run and have a future. p rojects will flow again soon, hopefully,” he continued.
Another issue is the funding of smaller projects. “Financing is difficult. Development and commercial banks only looked at projects on the large scale; 5-10MW projects were not considered interesting at all. But the situation is changing because banks are adapting and evolving,” he said. In the current environment, it is becoming less viable to build US$500 million power plants and more logically to build a large amount of DG-based power plants.
These energy projects are not without issues to solve, however. Zúñiga mentions the problem of permitting needed for projects above 0.5MW, a process that has stopped almost entirely during the CoVID-19 pandemic. This leads to despair for some. “Clients sometimes think they need to wait for years before a project comes online,” he said. Nevertheless,
Zúñiga emphasizes that the time to act is now for clients interested in addressing their energy supply. reservations can be taken away by showing the benefits that could have been achieved in the past. “Every time clients take more than five years to make a decision, they can see the money being left on the table,” he said. “I really want to send a message to industrial and other large energy consumers: we really cannot wait and should take measures into our own hands to make the transition. Let us do better,” concluded Zúñiga.
MAKING SENSE OF ENERGY MANAGEMENT AND ITS CLEAR BENEFITS
For commercial and industrial players in Mexico, there are plenty of options available to gain cheaper electricity prices and boost sustainability rates. So many, in fact, that the possibility is almost dizzying. Industry experts shine a light on how companies can make the best decisions with the options available.
“We now live in a world of options,” said Carla o rtiz, Country Manager Mexico at solar energy developer r Er Energy Group. “This has not always been a reality for Mexico, where the market was covered by a single entity, state-owned utility CFE, until the Energy reform was instigated in 2014. Today, there is an option to address your own energy supply,” pointed out Katya
Somohano, Energy Director at globally leading steel and wire producer Deacero.
Cutting energy costs, often a Top 3 expense for companies, and addressing sustainability are among the main reasons why companies would switch to the electricity market or build an on-site energy project. “Being able to meet ESG goals and have visibility on energy costs while achieving savings is essential,” said Santiago Villagomez, CEo of solar developer Energía real. Villagomez said that his clients often used to be “frustrated,” not only with the lack of options available to them but because they did not understand their untransparent energy bills at all. This is a crucial issue for energy users, said Guillermo Bilbao, Director of Energy
Business Mexico at Minsait. “Visibility and transparency give power to the energy user,” he said. yet many companies are a little fearful of entering a new environment like the energy market. Nevertheless, Sean McCoy-Cador, Director of Energy Supply at Edison Energy, believes that it is better to make the switch sooner rather than later. “If you wait too long, your decision will never be the optimal decision. It is all about entering the market to unlock the benefits in the longer term even if it does not pay off right away,” he said.
The motivations to move to Mexico’s wholesale electricity market (WEM) are therefore clear. Even though it is still a young market, it already shows vibrant activity. According to CENACE’s latest figures, the market features two basic suppliers catering to conventional domestic energy users, 53 qualified suppliers, 109 power generators, 21 non-supplying commercializing entities such as natural gas suppliers and CFE as the only so-called intermediation generator. Deacero is the only qualified user to also actively participate in the market due to its large capacity demand and the type of electricit y it uses.
o ne of the main options available is the ever-popular power purchase agreement ( ppA). This is a contract signed between an offtaker, a qualified user in this case as they have a demand of more than 1MW and
are signed up to the market, and a qualified supplier that facilitates the access of the user to the WEM. Somohano highlighted some of the benefits of these ppAs. “Energy users can directly decide which energy technology they want to use, so 100 percent renewable energy is a possibility, often at a low cost.” Through creative solutions, a tailor-made energy supply can even hedge risks. But the biggest advantage of singing a ppA is cost. “The long term gives you the big advantage of a low price,” said McCoy. Some companies prefer to buy electricity in the short term on the spot market, but many consultants advice toward the benefit of a 10 to 15-year contract, a solution that perfectly suits power producers too.
Although the supply-focused ppA remains as popular as ever, innovative solar developers such as r Er Energy and Energía real offer a different model. They construct a small solar installation for clients, absorbing the risk of the investment in the technology on behalf of the user. They then sign a longterm ppA with the client. After this period, the client can keep the installation if they so choose. According to o rtiz, this approach has another benefit: “There is no regulation slowing down behind-the-meter solutions.” Villagomez, whose company recently attracted important capital from riverstone Holdings, highlights the potential of these players to attract financing. Taking on debt to build even small solar projects can
be challenging, “but banks are looking to sponsor energy experts that facilitate small energy projects because they can mitigate the risks of their investment,” explained Villagomez.
plenty of opportunity remains on the table, but industry experts agree that one issue is essential to make any form of supply a success: energy efficiency. “If you cannot make a good use of your supply, you leave most of the benefits on the table,” said Somohano. This efficiency can be more complicated than expected at a first glance. Extensive monitoring and data gathering is required to fully understand C&I operations. once energy use is adequately understood, companies often need to change their productive processes by turning on heavy machinery when electricity prices are lower, for example. “Understanding energy
efficiency comes first, then people will tailor their options and finally companies will improve their consumption,” outlined McCoy. o rtiz stressed that in the realities of the market, this often goes differently. Clients begin by adapting an on-site energy solution and become a more sophisticated energy user in the process. “Solar can be a good start to become more energy efficient,” she said.
o ne added advantage of becoming a more knowledgeable energy user is that companies can comply more easily with the grid code, an issue that regulatory commission C r E will likely soon enforce through high fines for those that do not meet stringent requirements. “However, the grid code is not only about regulatory compliance, it helps to save costs and be optimally efficient, too,” said Bilbao.
INNOVATIVE SOLUTIONS FOR BEHIND-THE-METER STORAGE
Battery storage systems are increasingly playing a pivotal role in the balance between renewable energy and the replacement of fossil fuels. Companies like o N Energy Storage are starting to offer behind-themeter battery energy storage systems (BESS), aiming to help clients reduce costs and become more efficient consumers, but these systems still have road to cover to become an industry-wide solution.
“There are very few BESS solutions for commercial industrial customers, the market is really fragmented and it is hard to find a single entity that can take responsibility and the risk of a project,” said David Fernandes, CFo of o N Energy Storage.
“As developers, we offer easy-tounderstand and clear commercial offers. These can be no-money-down, zero investment offers or capital sales of equipment.”
David Fernandes CFO of ON Energy Storage
o N Energy Storage is focused on C&I opportunities in various markets across Latin and North America, with over 50 in-house software, engineering, operations, data science and power markets professionals. The company offers end-to-end solutions built around a management platform for peak-shaving, U p S, microgrid, green hydrogen, frequency regulation, energy shifting and wholesale market prediction. What differentiates o N Energy Storage from its competitors is that it has a fully automated, 100 percent proprietary electronics manufacturing service (EMS) and wholesale market predictive software integrated into its battery storage technology. The company has 12 registered patents in energy hardware, software and 5 projects in construction in Mexico, which total 13.5MWh.
BESS projects are in their “infancy,” according to Fernandes, who mentioned that hardware vendors prefer to only offer “one-size-fits-most” solutions, while software vendors “refuse to customize their US-designed platforms to emerging markets.” Storage is not a “set it and forget
it” technology, however. “Customers are getting disjointed offers and there are a lot of false expectations being created. If you do not control the software, it is very difficult to offer performance guarantees in terms of an integrated hardware/software solution.”
The energy storage market continues growing and so does o N Energy Storage, which recently signed a joint development agreement with Enel X to finance Storage-as-a-Service projects. With this partnership, o N takes care of 100 percent of the technological solutions, from concept to operation and maintenance, for common clients.
o N Energy Storage offers end-to-end service delivery as it fully controls data generated by the software, allowing us to do value stackings, explained Fernandes. “o ne-stop shopping for these applications is the effective way to mitigate risks. It is less expensive, more reliable and has a higher ro I. At o N Energy Storage, we develop innovative commercial models. We finance certain systems for credit-worthy
customers at 100 percent and we do all the design and engineering of the E p C, operating our own systems and providing guarantees of their performance,” said Fernandes.
BESS project optimization is on the revenue side, according to Fernandes. The possibility of storing energy from renewables, such as solar and wind sources to use them when needed the most is crucial for BESS applications. “In both peru and Mexico, o N Energy Storage offer the most aggressive performance guarantees in terms of production, capacity, power consumption rate correction and energy shifting,” said Fernandes.
“As developers, we offer easy-to-understand and clear commercial offers. These can be no-money-down, zero investment offers or capital sales of equipment,” said Fernandes. Savings generated by o N Energy Storage’s system can reach up to 40 percent in certain markets, depending on their structure and the customer’s consumption profile. “We have in-house tools to do all the necessary analysis.”
THE FUTURE OF HYBRIDIZATION IN MEXICO
Hybrid energy projects – the integration of renewable energy generation technology with traditional energy generation systems – are growing in popularity across the world. Industry experts agree that affordability, reliability and sustainability make these systems an ideal alternative for Mexico.
“With hybridization and battery storage, you basically store excess of energy that is generated with renewable power in batteries or, potentially, in other types of fuels in the future. It is incredible what we can do, putting emissions down while having very reliable, economical and efficient systems,” said r aúl Carral, Business Development Latin America North at Wärtsilä.
Hybrid systems combine renewables and fossil fuels efficiently and in the most economical way. “Today, the cheapest
energy comes from renewable sources. Their penetration will only increase due to economic reasons,” said Carral, who explained that the problem to solve is the intermittency and reliability of these sources. Hybridization offers a solution through the combination of cheap energy from renewables and flexible generation, which comes from power plants based on natural gas and future fuels, such as hydrogen, that are mainly generated via green sources.
Mexico’s need for hybridization has to do with the market’s commitment to support renewables and to boost transmission systems’ capacities. “When there is less capability in the transmission system or a lacking commitment to the introduction of renewables, we start leaning toward solutions that are closer to load points. The
closer we get to the load, the more reason we have to move toward hybrid solutions that could better fit the demand profile,” said David Fatzinger, Vice p resident and Country Manager Mexico at Invenergy LLC.
Behind-the-meter storage remains crucial in the balance between renewable energy and fossil fuels. “It provides flexibility; you can do a lot with the storage to shift the generation to your peak hours or you can use it for stabilizing supply of electricity. We used to always focus on the largest generation assets because they were the most efficient and that drove us to these large wholesale solutions. The smaller generation options, however, are now getting a lot closer to the efficiency of large generation systems, making them a more adequate option. As the battery cost comes down, we will see more hybrid solutions closer to the load,” said Fatzinger.
According to Carral, power plants can now turn on an off very efficienty, even considering variations in load and generation. “If you compare this to large combined cycles, today we can achieve even better performance. It is incredible what you can do today with a lower investment,” he said.
Hybridization in the Mexican Market
Currently the big discussion in Mexico is the future of renewables in general. “We look for a balanced energy dispatch that
allows greater renewables participation,” said Bruno riga, Country Manager Mexico at Enel Green p ower. While there is big potential in the Mexican market, a clear regulatory framework and requirement standardization is needed for hybridization to consolidate in the country.
Wind and solar, in particular, are mature enough to cover the technical, commercial needs in the industry when working together with storage technologies.
“Hybridization of power plants promises to increase the load factor thanks to complementarity, improving the stability of the electricity supply and speeding up connection times,” said riga.
Enel Green p ower is already exploring the possibilities of building these kinds of flexible power plants in other countries, according to riga: “We are leaders in hybrid renewable energy storage projects, with five plants under construction in Texas, which are part of a big business plan in the US. We are also exploring new opportunities in other country, such as Chile, where we operate a photovoltaic solar park coupled with a wind farm.” positive as this may be, companies like Invenergy, Wärtsilä and Enel also have the responsibility to those kinds of examples to Mexico to help the country move forward, according to Fatzinger.
“This is especially true when introducing technologies that still are not well defined in the country.”
With isolated renewable projects across Mexico, there are opportunities both in adding hybrid elements to existing projects and building new ones right from the start.
“If clients really understand the way they use electricity, then they will probably come up with a new hybrid solution. Those are opportunities for a one-stop solution.
If you are not completely aware of the way you use electricity, then staging into a solution over time will make sense,” said Fatzinger.
Enel is already advancing toward hydrogen, another element that could play a role in renewable energy projects in Mexico.
“Hydrogen is best used as a complement to electrification and it can support the decarbonization in some industries. It needs to be 100 percent produced from renewable sources to reduce the impact of carbon. The main problem today is its cost, but advancing technology and hydrogen’s competitiveness, this may be a big opportunity for Mexico,” said riga.
ENERGY COMPLIANCE BETTER THAN THE ALTERNATIVE
As global economies ramp up their energy transition efforts to meet commitments made under the 2015 p aris Climate Agreement, energy grid compliance will play a critical role in economic development, while reducing energy costs through increased operational efficiency and longer asset life at an individual level.
“As the new ‘Grid Code’ is implemented, benefits in cost reduction and operational improvement will be accessible,” says Mónica Samudio, Country Managing Director Mexico and Central America at Circutor.
“The challenges of implementing the ‘Grid Code’ include mainly implementation deadlines, standards and technical and financial expertise.”
Mónica
Samudio
Country Managing Director Mexico and Central America at Circutor
Compliance is essential to the economy as a whole. Although standards are strict, they were fomented to avoid energy disruptions like the one observed at San Carlos Solar park in December 2020. The event forced the national grid operator to shut down at 2:27pm during peak energy consumption hours in 12 states, representing an unknown loss of economic productivity.
Currently, Mexico’s renewable energy generation stands at 20 percent of total energy consumption, less than half of what is needed to reach the 43 percent set for 2030 by the federal government. However, the energy sector and the regulatory environment surrounding it have changed drastically since Mexico joined the p aris Climate agreement, with new market players in generation and compliance that help to ensure the stability of the en ergy grid.
“The challenges of implementing the ‘Grid Code’ include mainly implementation deadlines, standards and technical and financial expertise,” said Samudio. To address this, Circutor works with clients to establish an action plan built around consumer needs. This expert analysis not only looks at compliance gaps, but at financial optimization so the investment in compliance standards pays for itself in the long term thus adding value to the client. Moreover, before even starting, Circutor works with FIDE to assess the feasibility of any given project so clients are completely convinced that their investment will pay dividends. “Aside from financial concerns, updating compliance helps increase worker safety, reducing 25 percent of reported fatalities associated with the energy sector in Latin America,” said Samudio.
After all modifications have been made, Circutor engages in continuous monitoring to properly escalate operations if at any point clients decide to increase production or expand their capabilities. o verall, they cover the process end to end so when Cr E
compliance agents come to check, clients can avoid costly fines.
Even though this added investment may seem unnecessary, compliance is a small
price to pay to strengthen the backbone of the energy sector relative to system failures and their crucial implications to the country’s economic competitiveness, added Samudio.
MUCH LEFT TO DO FOR MEXICO’S SUSTAINABILITY GOALS
Climate change has already forced many countries to act but to complete the clean energy transition, much work remains to be done. For developing economies like Mexico, the challenge is even greater. How is Mexico doing regarding the decarbonization of its energy industry and what can it do to improve?
“We find ourselves in a decisive year, at the start of a decisive decade, when it comes down to really kickstarting the energy transition,” said Arturo Carranza, Independent Advisor at CFE. According to Carranza, there are several reasons why this transition is picking up speed. First, the effects of climate change are downright unsettling and people are strongly aware of this. To stave off effects worse than a temperature increase of 1.5°C, which is already expected to happen, as well as all the disastrous effects that would come with it, global greenhouse gas emissions need to be practically zero by 2050. The global energy sector causes 75 percent of these emissions, which means that decarbonization needs to be addressed the most urgently.
“To decarbonize, we need to mobilize massive amounts of financing and work together to obtain optimal results,” Carranza said. Another crucial reason is economics, as renewable energy is cheaper than ever beating fossil fuel-based power generation.
“In 2020, a dollar invested in wind and solar projects generated four times more than a dollar invested in the same technologies 10 years ago.”
Arturo Carranza Independent Advisor at CFE
The end of this price drop is not in sight yet, either. “In 2020, a dollar invested in wind and solar projects generated four times more than a dollar invested in the same technologies 10 years ago,” said Carranza. The social aspect is equally essential toward the energy transition. According to Carranza, 10 percent of the global population lives under extreme poverty, struggling to meet basic needs including energy. In general, Carranza stresses that poorer areas need to rely on dirtier forms of energy to generate electricity, giving governments plenty of incentives to rectify this inequality through a more sustainable and inclusive economy. “The energy transition should leave nobody behind,” Carranza underlined.
A growing number of countries has signed up to reach net zero emissions by 2050 to prevent the world’s temperature from increasing too much. Higher temperatures have already worsened the frequency and effects of natural disasters such as hurricanes, floods and droughts. A common, shared responsibility is crucial, said Carranza: “We are all responsible to reach the same global sustainability goals in the end. To achieve this, we need to completely transform the energy systems that support our economies.” This transformation requires investment, infrastructure and technology, all working at optimal levels. “It requires talent and insight from decision-makers to build the instruments we need to make the green energy transition happen,” he said. r educing emissions means that energy use should become more efficient too. “By changing consumption habits drastically, 55 percent of global emissions can be avoided,” continued Carranza. p eople should not only think about how they produce energy but how they use it, as well.
The transition is already well underway. “ renewables were the only energy sources that did not suffer during the worst of the pandemic lockdowns,” explained Carranza. But the same pandemic has caused a lot of problems: “The economic recession has deepened in several countries and their ability to drive a sustainable recovery is limited,” he warns.
The different speed at which countries embrace sustainability deeply impacts the global energy transition. “Developing economies represent two thirds of the global population but only one fifth of the clean energy investment. What is more, they only have access to 10 percent of the world’s financial capabilities,” he stated. This poses a problem: if the energy transition does not accelerate, the goals that need to be achieved remain forever out of sight. The low costs of wind and solar energy luckily can turn the tables for developing economies, thinks Carranza. “Finding and establishing the right conditions for these grand investments and installing renewable energy rapidly is one of the biggest challenges of our time,” he said.
So, what is the status of Mexico’ developing economy within this transition? Carranza said that Mexico has committed to reducing greenhouse gas emissions by 22 percent and carbon emissions by 51 percent by
2030, against numbers from 2013. The country’s growing share of clean energy helps in this regard: the share of clean energy in the power production matrix has grown by 12.19 percent from 2020 to April 2021. This increase is driven mainly by wind and solar projects that were undergoing operational tests when the last pro DESEN concluded, giving clean energy a boost from 25,594 MW to 28,714 MW. Nevertheless, industry insiders warn that renewable energy development is not going as fast as it should in an uncertain environment. Carranza agrees that more renewable capacity is needed. Furthermore, energy use should be optimized, promoting electric vehicles, sustainable financing and a cleaner economy.
The role of the government is paramount: “The government has the opportunity to develop and implement credible plans to meet reasonable targets that foster investor, industry and citizen confidence,” stressed Carranza. Through concrete action, the integration of sustainable financing and the construction of the energy transition under a long-term vision can ensure Mexico becomes a sustainable economy. “The upcoming economic package for 2022 and a potential third package of infrastructure represent excellent opportunities to advance this on the short term,” Carranza concluded.
TECHNOLOGY SOLUTIONS FOR INCREASED OPTIMIZATION
Grid code compliance ensures the working integrity of the national grid as a whole and taking into consideration the number of market players and ongoing development of infrastructure, a lot can go wrong. To avoid disruption, hefty fines are meant to incentivize compliance. However strict guidelines make this process difficult, which means that outsourcing this problem to specialized partners is sometimes best. “Hitachi ABB can provide solutions to comply with the Grid Code depending on specific scenarios, from power factors to imbalance parameters,” says ren é Mendoza.
In this new regulatory landscape, energy producers were given three years to meet compliance in two main areas, power quality and information communication technologies (ICT) to avoid legal and fiscal consequences. p enalties, outlined in Art. 65 or the Electrical Industry Law, entail between 2 and 10 percent of the gross income received in the previous year and/or a fine of 50 thousand to 200,000 minimum wages. Clearly, the bigger operations are, the more inclined companies are to comply with the standards established by C r E. More so, improving power quality in elements like the load factor reduces
energy consumption thus reducing costs and improving production processes.
Hitachi ABB has experience working with all power producers and has power solutions depending on the established investment and technological needs. Inrush capacitor bank solutions are normally applied to bigger projects that face potency problems. Harmonic problems can depend on scale so filters, detuned capacitor banks and high-pass filters come in different models and sizes to accommodate the scale of energy generators. Flicker and unbalance issues are typically addressed with static
“The
company’s work is guaranteed in every aspect from start to finish to, above all, ensure a favorable outcome for clients.”
René
Mendoza
Segment Leader Power Quality at Hitachi ABB Power Grids Mexico
var compensators, static synchronous compensators and SVC light. Lastly, dynamic compensation solutions that are typically associated with renewable energy producers can be compensated with series capacitor banks, voltage source converters and SVCs. These varied solutions demonstrate Hitachi ABB’s flexibility and varied approaches to technology solutions for energy production as demonstrated in the company’s expansive portfolio.
In reality, more often than not, it is not hard to find the technology needed to best address a specific problem, said Mendoza. Before determining what technologies and solutions are needed, data needs to be generated for analysis. After determining a solution, analysis and approval from client is required so Hitachi ABB can follow through with its implementation. “The company’s work is guaranteed in every aspect from start to finish to, above all, ensure a favorable outcome for clients,” said Mendoza.
TRANSMISSION, DISTRIBUTION: CHALLENGES OF THE FUTURE
Mexico’s transmission and distribution lines face all kinds of challenges, from geographical to operational. While the grid is mature and no expansion plans are in the works, it does need modernization to help the country head toward a brighter future, according to industr y experts.
“There is 20, 25, 30-year-old equipment, also analog tools still migrating to digital. Given Mexico’s geography, this grid is exposed to natural disasters, earthquakes and now also to new challenges due to climate change,” said Ivette Castillo, North LATAM Commercial Executive at GE Grid Solutions.
As it lays exposed outdoors, the grid could suffer many types of damages, which is forcing operators to use budgets for operational and repairing purposes rather than in its modernization. The grid is also “exposed to demand and consumers’ behavioral changes caused by the pandemic because people are consuming differently
and using more devices. Also, industrial users are changing consumption behavior,” said Castillo. These changes are making it impossible to ignore the issues the grid faces.
Whether it is modernizing the grid or recurring to battery energy storage and hybrid systems, it is urgent to take action in Mexico with investments, explained Santiago Barcón, Director General of p Q Barcon. “When auctions opened, modern transmission lines that enable the use of renewables should have been constructed and not the other way around. Now, we do have renewables but cannot dispatch them,” said Barcón. He also warned that “The grid is reaching its renewables handle limit.”
Given the difficulties of operating the Mexican grid, CFE’s staff has to be ready for new challenges every day, said Fidelmar Molina, Government Affairs and p ower Generation Business Development at
Hitachi ABB p ower Grids. Under these circumstances, Molina labeled CFE engineers and managers’ job as titanic: “Mexico has the best electrical engineers taking care of the grid, with a lot of experience in the managerial level.”
In terms of challenges for the grid across the world, natural disasters and the renewables transition are not inherent to Mexico, according to Molina. “CFE has the same worries as other electric companies in the world and is following the same path as them, aiming to make the grid digital, intelligent and more resilient. For instance, the US$1 trillion infrastructure plan includes US$70 billion destined exclusively to electricity, with only US$2.5 billion intended for new transmission lines and roughly US$15 billion to make a more resilient grid,” said Molina.
The progress made with the combination of fossil fuels and renewable resources brought new challenges to the electricity industry and challenged the stability within the grid. However, supporting technologies, such as synchronous, voltage and balance condensers, help alleviating this in stability.
“Technology is very important. We need monitoring to understand where and why failures happen. There is a lot of protection, production, automation and monitoring technology and intelligent systems not only on our grid, but across the world,” said
Castillo. He also highlighted that capacity limitation and climate change were the main issues challenging the Mexican grid.
“We should be talking about reducing the impact to the planet, decarbonizing our generation base. We have to talk about modernization and technology but also about our responsibility and investments to reduce the climate change,” added Castillo.
The grid code also plays a key role in the transmission and distribution lines, so both the private and public sectors have to work together to ensure the stability and reliability of Mexico’s transmission and distribution infrastructure, according to Barcón. “The grid code, published five years ago, aimed to change the regulation in the load centers. There used to be a lot of discretion in this regard and industrials complained about it. However, now they are still having problems with these regulations and there is an inconsistency there. We want the generation side to be upheld but we do not want to be subject to the grid code because it is very costly,” said Barcón.
There is a wrong perception in the industry about the system and how responsibilities should be shared, said Molina. He explained that CFE is not the only one responsible of the grid’s stability because everyone in the industry has to contribute. “It is a shared responsibility. For instance, from everybody turning on the A/C in Sinaloa at the same time to an electronic oven in a steel plant
or wind farms, all our actions matter,” said Molina.
Mexico’s transmission and distribution future will depend on important investments, on
how the grid is modernized and on the collaborative work of key players, both public and private, to help maintain its stability as it transitions to more efficient, cleaner energy sources.
ELECTRICITY GENERATION: LAST CHANCE TO PREVENT A CLIMATE CRISIS
Climate change has pushed companies from all sectors to accelerate the energy transition toward renewables. However, time is running out and the chances of stopping a climate crisis are dwindling. “We are all involved in this issue: civil society, the public sector and private companies in the electricity sector. We take it as our own commitment in which we must not fail,” said r amón Moreno, p resident of the Mexican Energy Association (AME).
Although the Mexican economy has not yet overcome the effects of the pandemic, according to estimates by the International Monetary Fund (IMF), economic growth this year is expected to reach 6.3 percent, particularly due to the rebound from a very low base in 2020. Globally, growth is expected to reach 6 percent in 2021 and 4.9 percent in 2022. “Mexico’s growth has been uneven compared to other countries such as the US and China, where GD p s are already higher than they were before the pandemic,” says Moreno. “This has been driven by factors such as the pace of vaccination strategies.”
This uneven growth has not only been seen among countries but among industries, as well. While sectors such as tourism, aerospace and entertainment are still
“Mexico’s growth has been uneven compared to other countries such as the US and China, where GDPs are already higher than they were before the pandemic.”
Ramón Moreno President of the Mexican Energy Association (AME)
struggling to recover, others such as technology have not fared too poorly. In Mexico alone, exports of technology goods to the US fell by only 2 percent in 2020, while all other exports fell by almost 11 percent.
The digitalization driven by the crisis has also sparked a change in corporate culture, with energy companies being no exception. The transition to renewable energy has been one of the pacesetting trends for organizations in recent years. Between 2000 and 2020, renewables’ installation worldwide has gone from 750GW to 2,800GW, while costs have fallen drastically by almost 85 percent during that same period, said Moreno. Among renewable energies, he adds, solar has been crowned the king of all and will be one of the most produced by 2025 compared to coal, according to the International Energy Agency (IEA).
Driven by consumers’ need for more energy, the pandemic also demonstrated to suppliers that electricity systems can absorb more renewable energy production than originally thought. Thus, the pace of renewable power plant installation has continued unabated, with record-breaking installations in 2020. The pace is expected to continue and gradually increase. However, Moreno warns, the clock is ticking and the rate needs to be even further sped up if we are to keep the global temperature rise at adequate levels.
“We are already seeing the effects of climate change through events that have happened around the world this year,” Moreno said. “The consumer is becoming more and more aware that they are looking for renewable and clean energy in the services and products they use.”
The Mexican Energy Association, present in 22 states in Mexico, seeks to coordinate power generation companies to strengthen their operations in the country and encourage investment and project development. “These are companies that invest for the long term and therefore want the country and the national electricity system to do well above all else,” Moreno explains. Members of the association, which
include companies such as Naturgy, Fisterra Energy, Iberdrola Mexico, IEnova and Mitsui power Americas, are all committed to global and local emissions reduction and climate change mitigation goals, said Moreno. Companies are not only dedicated to investing in renewable energy but are also trying to explore new options “focused on digitalization toward reducing emissions,” said Moreno.
MEXICO IS READY TO BE A NATURAL GAS PRODUCTION GIANT: JAGUAR E&P
Although renewable energy is gaining ground, in a country like Mexico, limited by the constraints of an aging transmission grid, the energy mix should perhaps be more conventional and diversified. The equally costefficient and effective use of natural gas is an attractive prospect. This fuel might still have a fair share of emissions but it burns much cleaner than many other solutions used today, especially in remote and underprivileged areas of the country. “It is a tragedy that we are using high-sulfur bunker oil to produce electricity today. The reason is simply that many power producers do not have access to natural gas,” said Warren Levy, CEo of Jaguar Exploration & production, a private producer of oil and gas found on land.
“By switching to natural gas, Mexico can fundamentally change its carbon footprint toward the future and boost its development at the same time.”
Warren Levy CEO of Jaguar Exploration & Production
neither pipelines nor compressed gas are accessible, people are forced to burn even more primitive and pollution fuels to generate energy. In the north of the country, economic development has moved ahead much faster than in other parts because it has the easiest access to natural gas. Spreading the benefits of the fossil fuel to the south can lead to significant economic benefits. “By switching to natural gas, Mexico can fundamentally change its carbon footprint toward the future and boost its development at the same time,” said Levy.
Just like most experts in the Mexican energy sector, Levy knows that natural gas use has risen significantly over the past decades and will likely only increase in the decades to come, as Mexico trades in fuel oil and coal for cheaper and cleaner natural gas sources without exchanging the stability that conventional power generation is known for. In more remote areas where
Most natural gas in Mexico is produced as a byproduct of oil production, which adds the complication of releasing harmful emissions into the air through ineffective flaring. Gas production is not at all a priority for Mexico’s N o C, p EMEX, which uses almost all the natural gas it does produce for its own business processes. Consequently, Mexico needs to import its natural gas from the US, more specifically from the state of Texas. Gas prices coming from Texas’ famous Burgos Basin are low, so Levy emphasizes that cost-effectiveness is not the issue at all. “But it is a risk in terms of self-sufficiency, as we could see in February of this year when 40 million Mexicans were left without electricity because extreme weather conditions in Texas led to a temporary halt in exports,” he said.
Through these imports, Mexico leaves a lot of money on the table that could be otherwise gained by producing the resource. Using government data regarding natural
gas sales, Levy estimates Mexico loses out on US$6.7 billion dollars of value per year. “The real problem is not just the billions of dollars, it is the trickle-down effect that the local supply chain could take advantage of, which would effectively multiply this value,” explained Levy.
Mexico used to be a net exporter of natural gas. In fact, most of the infrastructure that is now used for imports was originally constructed to feed gas into the US instead. So why is Mexico no longer a hub for production? Levy said domestic production dropped off steeply after 2008, when p EMEX actively decided to focus its investments elsewhere and make use of cheap pipeline gas coming from the US to reach higher profits.
Levy, however, does not agree with this approach. “Some people believe producing in Mexico is not a profitable business. We wholeheartedly disagree.” The expert on
exploration efforts highlights that much of the geography that makes Texas such a great location for natural gas production stretches right across the border and into Mexican territory. Across the Mexican side of the Gulf of Mexico, more opportunity for exploration exists in states like Veracruz and Tampico. Even offshore production would be viable, although oil platforms would need to be adapted to make this possible. plenty of investment would be needed, however. Using the company’s estimations for its own goals, around US$4-5 billion would be necessary to address 7 percent of Mexico’s natural gas demand. “But the real challenge is how to get truly creative and ensure the entire country gains access to this gas,” Levy warned.
p rivate companies can play an important role in these efforts. “Companies like Jaguar can help the government in ensuring that environmental safety and social development happens the way it should in Mexico,” said Levy.
NATURAL GAS’ ONGOING REVOLUTION
Until the battery storage capacity needed to battle renewable energy intermittency becomes more accessible, the cleanest fossil fuel, natural gas, will continue to hold an essential role in the global energy transition.
As Mexico’s energy demands continue to grow exponentially in tandem with a swelling population, there is an understandable
urgency to address the current pitfalls that Mexico currently faces related to natural gas, including climate change, expanding distribution infrastructure, storage and increasing domestic production capacity.
“Gas is a very important fuel. Mexican geography and access to this resource make
it the best solution for energy demand in the country,” said Marco Vera, Managing Director at GE power Mexico.
In Mexico, addressing demand means expanding natural gas infrastructure to regions with energy deficits, namely the southeast region. Bringing natural gas to this underdeveloped region is a priority given that “states with natural gas enjoy greater development. This resource generates industry, new companies and employment. Gas impacts the whole economic chain,” according to Jorge Sandoval, Director General of the Mexican Natural Gas Association (AMGN).
Deficiencies in the natural gas pipeline are present across Mexico. Even states with existing and functional infrastructure lack proper interconnectivity between pipelines. “This includes large interstate pipelines or last-mile pipelines that connect with local distribution companies or individual projects,” Geoff Street, Director of Natural Gas o rigination at Tenaska Marketing Ventures, told MBN. Before this infrastructure gets built, however, Mexico needs to consider how it is going to feed the system the natural gas volume it needs, which currently depends heavily on imports from Texas, which has been struggling with climate disruptions of its own.
As natural weather events become more frequent and more extreme, climate change has come to the forefront and become the central concern of international governments given its known capacity to destroy critical energy infrastructure. With such salient implications it has become an unmistakable priority to reinforce and expand existing infrastructure to not hamper economic activity and growth. After freezing subzero temperatures swept Texas, leaving some 4.7 million users in Northern Mexico without electricity for several days, it was clear not only that climate change vulnerabilities should be assessed in future projects but, perhaps more importantly, that Mexico’s dependence on imports had to be addressed.
There are plenty of international producers to choose from, including Mexico’s USMCA trading partner Canada or sanctioned russia. Another possible avenue, as pointed out by CNH Commissioner Héctor Moreira, is to start developing the country’s natural gas production capabilities, especially if the country intends to meet its growing exponential demand and reach energy sovereignty. Mexico has vast untapped natural gas resources it could it exploit but Mexico currently lacks production capacity. Until Mexico reaches this point, however, it could also look at storage capacity to
prevent disruption. Natural gas storage is a solution that only recently has been revisited but José García, p resident of AMGN, sees this as the ideal solution. “It is important to push storage policies to prevent situations like these from happening,” he said.
Considering sustainability targets, Mexico needs to be weary of methane leaks stemming from burning other fossil fuels. Daniel Zavala, a senior scientist at EDF reports that 4.7 percent of the methane produced in Mexico is leaked into the atmosphere, an average twice as high as that of the US. Zavala notes that this is a very high rate even at the global level. While it is difficult to avoid, it is absolutely possible to erase methane leaks from existence. “There is no need for this pollution. It is just completely unnecessary,” said Steve Hamburg, Chief Scientist at EDF to The Scientific American publication. “There are cost-effective strategies to capture harmful emissions. It is about paying attention and making the necessary investments.” Failure to take preventative steps threatens to
undermine the purpose of using natural gas in cogeneration and efforts to reduce Mexico’s global carbon footprint.
Looking towards the future, although natural gas plays an important role in cogeneration now, what will happen when this transitional resource is no longer needed? r amon Moreno, CEo of Mitsui & Co. power Americas recognizes natural gas’ contribution to the energy sector will eventually come to a close and in preparation, industry leaders are looking at hydrogen as the next evolutionary step for the sector. Vera points out that GE p ower has been working with hydrogen technology for the past 30 years and counts with 75 turbines that run either completely on hydrogen or a combination with other fuels. What has changed however is the technology surrounding hydrogen has recently made it cleaner and more efficient to produce. yet, this sector is still in the early stages of development and just like with photovoltaics back in the day, “more investment is needed to get past the initial technology curb,” said Vera.
NATURAL GAS ACCESS: ENGINE FOR ECONOMIC DEVELOPMENT
Natural gas is nowadays seen as one of the main and most relevant energy sources. Its high power efficiency for both domestic and industrial use, as well as its environmental performance, have positioned it as a transition source towards decarbonization. However, the challenges to increase access to this fuel and the lack of awareness of its benefits continue to be a stumbling block to reaching its full potential.
In Mexico, natural gas consumption has increased considerably in recent years.
“This makes it clear that natural gas is the most abundant, reliable and secure energy source available to leverage Mexico’s development.”
Malvin Delgado
International Energy Business Director of Picarro
According to the Ministry of Energy (SENE r), it is estimated that by 2031 the demand for natural gas in the country will increase by 30 percent compared to 2016. While it is true that Mexico has important natural gas reserves in states like Tabasco, Tamaulipas, Veracruz and Nuevo Leon and in territorial waters, it is also a reality that the US, without having the largest reserves of natural gas, has positioned itself as the largest producer of this resource worldwide with a production close to 25 percent of what the whole world consumes. “This makes it clear that natural gas is the most abundant, reliable and secure energy source available to leverage Mexico’s development,” said Malvin Delgado, International Energy Business Director of picarro.
Areli Covarrubias, Commercial Director of IEnova, says the key to seize the advantages of natural gas is to keep in mind its role as
a driver of economic development. “Where natural gas is available, industry, jobs and indirect economic spillover arise naturally,” she says. “The greater the presence of natural gas, the lower the levels of poverty.”
In Nuevo Leon, one of the entities with the highest demand for natural gas, GD p is expected to increase from 3.4 percent to 5.2 percent by the end of 2021, Nuevo Leon’s Chamber of the Transformation Industry (CAINT r A) said in April. By comparison, Mexico City would have to show an average annual GD p growth of more than 4 percent over the next three years to reach prepandemic levels.
Targeting regions that do not yet have as much demand for natural gas as others is also an important step toward creating greater access and economic benefits for more than just a few parts of the country.
“Unfortunately there are still many places where families use wood or coal to generate energy,” says rafael Mercado, Commercial Director at Naturgy Mexico, a multinational pioneer in natural gas distribution founded in 1990.
Bringing this resource to every corner of the country and meeting the growing demand in the coming years poses major challenges, however. While private sector investments will continue to be necessary, the technical know-how to optimize infrastructure and make it safer and more accessible will be one of the main obstacles toward reaching natural gas’ full potential. “Coherent policies supportive of the development of the natural gas sector in the country must also be implemented,” Delgado said.
“By switching to natural gas, Mexico can fundamentally change its carbon footprint toward the future and boost its development at the same time.”
Héctor Sánchez López Independent Member of the Board of Directors at Mexico’s state-owned utility CFE
Licensing is one of the biggest challenges in developing a pipeline transportation system or any other energy infrastructure project, explains Covarrubias, adding that while this has always been a huge hurdle, companies knew that if they met the requirements and established mitigation plans focused on taking care of the environment and communities, infrastructure could be built. Now, however, this is not enough. According to Covarrubias, the rules of the game have changed and today it is necessary to demonstrate that construction brings value to the area where the project is being built. “This has to be demonstrated not only in front of government agencies but now, more than ever, in front of society.”
“In Mexico, we need society to ask for this infrastructure. Communities must know what the long-term benefits of these projects will be; they accept them and embrace them as their own,” she says. Non-standardized requirements for each municipality and region of the country pose a challenge for companies in the natural gas sector, nevertheless, says Alvaro Corona, C oo of Gas Transportation and Distribution at ENGIE Mexico. A common front needs to be formed among companies to raise awareness of what natural gas projects mean for communities and their development, adds Corona. In addition, public policies that encourage the use and deployment of this infrastructure are crucial.
Despite the challenges, companies in the sector have not neglected technological innovation to generate accurate and reliable information for the safe operation of their projects, says Gustavo Nunez, Managing Director Sector for Mexico and Central America of ro SEN. “There are already solutions that can identify faults and threats as small as 3mm up to very critical threats such as fissures,” he explains. AI, Big Data and machine learning are already bearing fruit in the industry through corrective and predictive maintenance of pipelines to avoid greater environmental impacts.
EMPHASIS ON SOCIAL IMPACT KEY TO MEXICO’S ENERGY TRANSITION
A significant part of Mexico’s population is indigenous, living on land valuable to renewable energy developers and therefore to the energy transition. Setting the highest social impact standards for energy companies is essential to ensure that these projects are fair and sustainable, but regulation remains somewhat undefined.
Data from the Mexican government shows that Mexico counts about 16.9 million indigenous citizens, representing around 13 percent of the entire population. This already suggests that infrastructure projects are likely to intersect with indigenous communities, but the reality of Mexico’s geography ensures that this becomes even more likely. “The state of o axaca is a prime example. Here, both a high number of indigenous peoples and excellent renewable potential for wind energy, for example, are found,” said Héctor Sánchez López, Independent Member of the Board of Directors at Mexico’s state-owned utility CFE.
To guide energy developers in their interactions with communities, Mexico has established an indigenous consultation process, which is carried out prior to any development to assess its social impact and aims to be “free, informed and in good faith.” The consultation process
is evaluated by the sector’s regulatory commission, C r E. Sánchez highlights that renewable energy projects often have a profound impact on the local economy and on the way of life of these communities, making a social evaluation essential to the success of the project and the well-being of the community involved. This consultation is not the only process developers need to keep in mind. In addition, they need to complete an environmental impact assessment, which is judged by SEMA r NAT. “The environmental impact assessment does not only aim to protect the environment; it works to preserve and restore the land and its flora and fauna as best as possible,” Sán chez said.
Foreign investment laws protect developers against the loss of previous investment if social engagement does not go as well as planned, mentioned Sánchez. He explains that social issues can strand projects indefinitely, which makes a good ending for either community or company a much less likely outcome. While this protection exists, it is simply not the preferred outcome for lengthy project development processes. Companies therefore have every motivation to engage communities the right way from the beginning. But this is no simple task: “There is no set of laws that explains exactly how the consultation process should be done or that really show us the right way,” Sánchez stated. While laws state that indigenous communities have the right to determine their own development and that they should share in the benefits of infrastructure constructed on their land, the way this pans out is not written. At times, these rights can even clash.
For Sánchez, this issue needs to be addressed. “We need to solve these issues, so the clean energy transition can develop further and benefits from clean energy projects can be shared in a fair manner,” he said. The global energy transition is not standing still and indigenous communities themselves could greatly benefit from having access to
renewable energy on their land, so they can replace harmful fossil fuels. Expanding on the legal framework will ensure that companies have better guidelines available. “Secondary laws can help to clarify what really needs to be done,” he said, warning that in some cases, companies wrongly thought of the consultation process as a “formality”.
Even though the state can intervene to set the rules of the consultation, Sánchez emphasizes that companies have the responsibility to do all they can to meet community needs. Communities, on the other side of the equation, can consider the benefits of becoming an integral part of Mexico’s clean energy transition.
POSITIVE PROJECT IMPACT: LEVER FOR GLOBAL SUSTAINABILITY
Scientists warn that the world can no longer stall the energy transition and must halt disastrous climate change. For a more sustainable world, companies need to ensure that projects at the root of this transition leave a net positive impact, too. Addressing the social and environmental responsibilities of these projects is the way to start, agree experts.
The energy sector has a major role in battling climate change: “The energy industry has a huge environmental responsibility. If our sector does what it has to do, we could decrease the world’s Co2 emissions by 90 percent,” said Montserrat p alomar, Head of Sustainability at Enel Green power. But renewable energy projects are not without environmental and social impact. If the world is to make a sustainable energy transition, it is to be sustainable through and through.
palomar stresses the responsibility companies have in ensuring that projects are done
sustainably in every sense of the word. “If energy is clean and sustainable, it can serve as a root for greater sustainability across other sectors and segments,” said palomar. Building sustainable projects is not at all impossible because many stellar examples already exist in Mexico and elsewhere.
o ne major factor is collaboration, palomar said. “This change does not depend on government, population and business separately. We need to work together.” If projects have a negative impact, everyone involved loses, said Julia González romero, Elected Counsel at González Calvillo. “Tackling this process the wrong way means that projects get halted and communities experience harm. Nobody benefits from such a situation,” she said.
Héctor Sánchez López, Independent Member of the Board of Directors at CFE, completely agrees on the responsibility various actors have in making the world more sustainable
through an equitable and fair process. He particularly highlights the responsibility of those that have the capital to enact change. “Investors have to be socially and environmentally responsible,” he said, adding that “selfish” investments for pure financial gains should no longer be part of anyone’s portfolio if crucial climate goals are to be achieved. In that sense, investors can focus on new technology such as storage. “If we have sufficient storage, we can truly boost the energy transition,” said Sánchez.
“Overall, geothermal energy offers a very attractive ROI, minimal maintenance costs and is easily operable...”
Enrique Papadimitriou Director General of GEOTER Renewables
accountability, Sánchez firmly believes that this is an issue that should be arranged between companies and communities. “The Mexican government used to get involved in the past, but addressing local impacts is truly the responsibility of companies. In the end, communities can benefit a lot from renewable energy,” he said.
María Cristina Hernández Calzada, partner at Vera & Asociados, agrees with the notion that some companies are perhaps not doing enough. Nevertheless, she argued that the government has done a good job in strengthening the environmental requirements that intersect with indigenous consultation processes. “We are headed the right way. The government might be a bit short on human resources to do its evaluations efficiently but it is setting very positive and higher standards,” she said.
r esponsibility, duty and accountability are especially applicable to companies developing energy projects, added Sánchez. He lamented that while individuals can even go to prison for breaking environmental laws, large companies often get off easy. Sánchez also criticized the notion of “offsetting” negative effects in one area by generating benefits elsewhere. Even though more stringent legal requirements can help foster
The optimal approach differs for every project because social and environmental characteristics are never the same. To really know how the table is set, it pays to invest in adequate research and then formulate an optimal engagement plan. “The social investment companies make always pays itself right back. It translates to a healthy relationship with communities during the entire project’s life cycle,” she said.
REDISCOVERING THE POTENTIAL OF GEOTHERMAL TECHNOLOGY
Geothermal technology has been around since the 60s, yet it still remains relatively unknown in comparison to other renewable energy technologies. As this technology garners more attention through proven successes and adaptabilities, GE o TE r r enewables intends to capitalize on the technology’s growing interest and is even exploring hybrid systems with photovoltaics. “ o ne of the biggest challenges of introducing technology to a new market is to present it to potential clients. The recent challenges involving the Energy r eform have hampered the advance of renewable energies but our goal is to show clients the workings and benefits of geothermal energy,” said
Enrique p apadimitriou, Director General of GEoTEr renewables.
The Spanish company made its way to Mexico in 2016 establishing itself in energy efficiency consultancy and importing technical solutions in climate control systems, domestic hot water, and even electricity generation. Just last year, the company completed its first infrastructure project in Aguascalientes producing 840kW of electricity for a country club. As a nascent sector, the company suffered with the arrival of the pandemic losing potential clients to trimmed expenditures and/or inactivity. Nevertheless, it was able to secure a project in Valle de Bravo, which has expectedly
moved at a slower pace compared to other projects due to the current financial and regulatory circumstances.
With an end to the pandemic crisis in sight, GEoTEr is looking forward to a revitalized economy so that it can resume its efforts to capture interest in geothermal technology. At the moment, the biggest opportunity for the company has been in geothermal heat pumps, mainly to warm up pools, opening projects in the r ivera Maya, Queretaro, Baja California and Mexico City. o verall, the company’s main objective is to give this technology greater exposure so that hesitant clients feel more comfortable adapting these technologies after seeing the savings and adaptabilities it could offer.
GEoTE r has recently run into a new area of exploration after finding a geothermal energy niche through hybrid solutions that
involve photovoltaics says p apadimitriou. This unconventional approach provides significant economic benefits and has a lot of potential, he adds. The company is now exploring how to scale this hybrid solution and looking at investment options. “overall, geothermal energy offers a very attractive roI, minimal maintenance costs and is easily operable, making it particularly attractive for residential consumers says papadimitriou.
So far, Mexico has installed 951MW of geothermal energy, coming from five operational fields: Cerro prieto, Los Azufres, Los Humeros, Las Tres Vírgenes and Domo de San pedro. 97 percent of this is owned by state utility CFE, according to IEA Geothermal, although exploration permits have been granted to private companies. As this technology builds on its merits and gains its rightful notoriety it is expected to see wider application at different scales.
REVISITING NUCLEAR TECHNOLOGY TOWARD GREATER EFFICIENCY
It is time to revisit the potential of nuclear energy technologies as Mexico attempts to reconfigure its energy generation infrastructure to move away from fossil fuel dependency. “It is not only about how many renewables you use but how many you do not use. Closing nuclear plants with no carbon emissions while leaving carbon plants operating will not help in the fight against climate change,” says Manuel Fernández o rdoñez, r adioactive Waste Director at Tecnatom.
The Spanish company focused on nuclear technology solutions, management and optimization technologies works on over
“In light of these revelations, it may make more sense to redirect investments toward an energy mix that ensures energy security and both economic and environmental sustainability.”
Manuel Fernández Ordoñez Radioactive Waste Director at Tecnatom
250 projects a year through 10 international subsidiaries. It starts its analysis with the Kaya Identity, which calculates the expected carbon emission of a country based on four main variables: population, GDp per capita, energy intensity and carbon intensity.
Mexico currently has 127.6 million people and is expected to reach 137 million by 2030 according to demographic forecasting from Euromonitor international. The country’s GD p has steadily grown 33 percent since 1990 and o ur World Data, indicates that the country’s energy consumption has decreased in tandem with technological advances, highlighting breakthroughs in more efficient energy consumption despite higher demand. Lastly, Mexico’s carbon intensity is on par with the global average, remaining relatively stable for the past thirty years. Collectively, these variables indicate that Mexico has a growing population, a growing economy, refined energy consumption and a stable carbon emission rate. Going forward, Mexico stands to reduce carbon emissions through the holistic application of different
renewable energy technologies, but it still needs to address inefficiencies in its energy sector, which produces the most carbon emissions.
It is widely known that Mexico has a salient overreliance on natural gas, as it compromises 80 percent of energy production. “To better understand the implications of relying too heavily on natural gas, we point to a comparative study between France with over 40 GW of nuclear energy and Germany with less than 15 GW of nuclear energy. Unsurprisingly, nuclear technology has allowed France to cut carbon emissions significantly. As of September 2021, the country had a carbon intensity of 44g. Meanwhile, even though it has installed significant renewable generation plants, it has also phased out less polluting options, leading to a carbon intensity marker of 399g,” said Fernández.
“In light of these revelations, it may make more sense to redirect investments toward
an energy mix that ensures energy security and both economic and environmental sustainability,” said Fernández. “Nuclear is a key contender in this transformation.” Mexico already produces 4 percent of its electricity through a nuclear plant in Laguna Verde, which also represents 14 percent of its clean energy. Fernández highlights that the operation factor has only increased at both of Laguna Verde’s units, delivering 141TWh and 127TWh since they came into operation, respectively.
Toward the future, Mexico considers a strong nuclear plan that will represent 11,509MW by 2050 according to CENACE’s revised pAM r NT (2021-2035) document. However, the technology to be used in these new developments is still unknown, with different alternatives available including SM r , fast and thorium reactors. r egardless, “nuclear technology is in constant evolution and the future looks very promising for this energy source,” said Fernández.
GREEN HYDROGEN POTENTIAL FOR PROJECT DEVELOPMENT
Beyond reducing its carbon footprint, Mexico can attract investment and foster economic growth in neglected regions
through the production and use of green hydrogen. However, there is still a long way to go before this resource is recognized as a viable alternative by society and businesses in the country.
“Today, more than ever, it is clear that a country with energy availability is a country that will experience economic growth,” said Fernando Tovar, CE o and Country Manager of ENGIE Mexico. This has boosted hydrogen’s potential as an alternative energy source. The trend toward green energy, driven by new consumer demands, has also boosted the recognition of this energy resource. “It is no longer a choice that a company or a country makes but a matter of consumer demand for products with a lower carbon footprint. This includes not only the materials from which a product is made but also the energy used to manufacture it. p roducers, faced with demand, have been looking for green energy alternatives,” said Tovar.
Green hydrogen is generated from renewable energies through a process called water electrolysis, through which oxygen is separated from hydrogen. Unlike grey or blue hydrogen, this process is considered clean and an essential piece in the energy transition puzzle, explained Veronica Zapata o viedo, Member of the Association of Women in renewable Energy Mexico (MEr M).
The electrification trend has permeated several industrial and consumer activities, although electricity generation still considers fossil fuels. However, hydrogen can also participate in this transformation and there are specific niches where this green fuel can be an ideal alternative. “For industries like steel, chemicals or oil and gas that need a gaseous energy source and currently rely on natural gas, hydrogen provides an answer,” said Tovar.
In February this year, multiple severe winter storms caused power outages in Texas. record-low temperatures caused the state’s electric grid operator to lose control of the power supply, leaving millions without access to power, water and food for days. Without a resource to warm themselves, the total death toll rose to more than 210, according to the New york Times. Further investigation later revealed that one of the causes was inadequately winterized natural gas equipment.
According to Jeroen Visser, Global Director for Hydrogen at Northland p ower, 30 percent of economic activities can be electrified. This percentage represents 45 percent of global Co2 emissions. “Hydrogen provides access to clean and affordable energy. This resource makes clean energy global and democratized. Global trade is the game-changer for me,” he says.
Global efforts towards energy transition and decarbonization established in the 2030 Agenda approved in 2015 and the paris Agreement signed in 2016 have also paved the way for green hydrogen, says Israel Hurtado, p resident of the Mexican Hydrogen Association. This new fuel, however, has several milestones ahead, including a decrease in its cost, which is predicted to start falling in 2025 following its widespread use. “This already happened with solar energy eight years ago. It used to cost around US$3.5 million to install a Megawatt of solar power and now it is around US$600,000,” Hurtado says. Today, there are already diverse uses and applications of hydrogen in industries like automotive, maritime and aerospace. Just in August, the 24 Hours of Le Mans, the oldest active endurance event in the racing industry, announced that hydrogen cars will be able to compete in 2025. “I do not see any other solution in the short term to reduce and stop global warming,” Hurtado says. “Efforts so far have failed.”
