Mexico Energy Forum 2022 -Impact Report by Mexico Business Publishing

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Leaders of the national energy industry joined Mexico Solar Summit and Mexico Energy Forum 2022 to shine their light on various issues, sharing their experiences as the sector stands on the verge of a significant regulation change. On the back of some complex years for the industry, players are gearing up to benefit from new opportunities brought by technological innovation and the promise of a greater regulatory certainty. Pushed by a global move toward decarbonization, companies need to address supply chain issues to emerge as profitable drivers of sustainability. As part of the traditional Mexico Energy Forum, Mexico Solar Summit celebrated its inaugural edition on March 8. Gathering all relevant stakeholders along the supply chain of solar, both photovoltaic and thermal, the event featured discussions on the latest trends regarding the development of distributed generation (DG), as well as the development and optimization of Mexico’s groundbreaking utility-scale projects. On March 9-10, energy sector experts from both public and private sectors outlined their knowledge and, at times, diverging visions on how the industry should move forward during Mexico Energy Forum. Examining complicated issues such as the electrification of Mexico’s unconnected areas and the ever-evolving global green energy push yielded a wealth of insight. Mexico Solar Summit and Energy Forum proved that despite the challenges in the energy industry, it is possible to drive innovation and create value that pushes through any barrier. 2022 will be a pivotal year for the energy sector. By sharing deeper understanding, players can develop their business no matter how the industry shapes up toward the future.

C onfe r ence I mpac t

244

companies

548

conference participants

Breakdown by job title

9% President / Partner 19% CEO / Director General 24% Senior Manager / Manager

30% Vice President /Director 6% Energy Director 12% Analyst / Advisor

speakers

Conference social media impact

sponsors

4,228 visitors to the conference website

Pre-conference social media impact

21,294 direct impressions during MSS and MEF 2.06% click through rate during MSS and MEF 4.91% conference engagement rate

35,622 direct pre-conference LinkedIn impressions 2.97% pre-conference click through rate 4.9% pre-conference engagement rate

Mexico’s leading B2B conference organizer introduces the world’s leading event networking platform. Delivering intent-based matchmaking powered by Artificial Intelligence that connects the right people. Network, no matter where you are.

354

Matchmaking

participants

3,143

matchmaking communications

187

1:1 meetings conducted

2,119 Trading Total

3,995

318 Recruitment 973 Investment

C ompan y At t endance • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

AB Energy Mexico ABRASIVOS AUSTROMEX, S.A. DE C.V. Acclaim Energy Acura Group ADLV Energia de Mexico AES Agencia Estatal de Energía de Hidalgo AHMSA AINDA ALACRITY Canada Aldesa Almexa AME ANES Aosenuma Arauco Arbomex ASOLMEX Ata Renewables ATCO ATIK CAPITAL Baker McKenzie Balam Energy BAS Corporation Bayer BayWa r.e. Beetmann Bergen Engines BID Energy BioMérieux BIOPAPPEL BlackRock BNamericas BOCAR GROUP Bodycote Bosch Breakthrough IP Brimex Energy Bron Energy Bureau Veritas C&A Cacheaux, Cavazos & Newton CANACINTRA Canadian Solar Canel’s Capwatt Carbon Power Mexico Carbon Trust Casares CEM Capital Cemex Centauro Energia CFE CHINT Cinepolis CIPRO CIRCUTOR CITRUS Climatik Coburch SA de CV Colliers

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Comexhidro COPARMEX Costco Cydsa DANFOSS Deacero Delegación General de Québec en México Deloitte Diurna Energy Inc DNV EcoValue ELECNOR EMS Latin America Enel Green Power Energía Infra Energía Real Energia Renovable Energia renovable Conmar, SA de CV Energía Verde Alternativa S.A.P.I. de C.V. Engie Enix, S. C. Enlight Environmental Resources Management ENVIROSENSE SA DE CV Epscon Estrategiablue Exterran Falck Renewables Mexico Fimer Mexico Finergreen Finsolar G-advisory México GALICIA ABOGADOS Gallo Abogados, S.C. GENERAC POWER SYSTEMS General Electric General Motors Gonzalez Calvillo SC Goodrich Riquelme y Asoc. Gransolar México Green Growth Group México Green Power Monitor GreenID Gruma Grupo ABSA Grupo AIEn Grupo Dragon Grupo Industrial Saltillo (Draxton) Grupo México Energía Grupo TMM Grupo Trinova GUANAJUATO STATE GOVERNMENT Hartree Consulting Heineken Mexico Hella Automotive Hexagon PPM Hitachi Energy USA Inc Holland & Knight LLP HUAWEI Hunt Iberdrola

C ompan y At t endance • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

INGETEAM Internovum Solar InTrust Invenergy INVENTIVE POWER IPD Latin America Irvin Automotive Itam Jaguar Solar Johnson & Johnson Kepler Kiewit Kilpatrick KOLYA Desarrollos Renovables KPMG Latin American Rainmakers Logicalis Logreen World Energy SAPI de CV LONGi Solar Luxem Marcos & Asociados, consultoría energética MB Renovables MCA Group Mexico Business Mexico’s National Energy Control Center MexicoView Mextypsa Mitsui & Co. Power Americas Modulo Solar Monilab Global Motion Mexico MPC Capital MXUS Public Relations NAFIN / Bancomext NATURGY México Nemak Nestlé México NeuralSolar Nexus Energía Mx Nippon Steel Trading Mexico Noatum Logistics Nohemí Netherlands Embassy in Mexico Nordex Group Northland Power NRG INGENIERÍA ELECTROMECÁNICA SA DE CV NxtLab ODG ENERGY SAPI DE CV On.Energy ORBIA ORGANIZACIÓN SORIANA Otovo P21Energia Pantaleon Energía PepsiCo PFIFFNER Instrument Transformers Ltd.. Picarro, Inc. POWER ELECTRONICS PPG PQBarcon Prana Power PROSEA PROYECTO PUENTE

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Public Power Utility Pv magazine PwC Quartux México Reden RER Energy Group RIC ENERGY Ride the wind RM Pharma Specialists Rosatom Latin America Roxtec de México SACE PARKAN SA DE CV Sacromonte Ganuc de México SC Saint Gobain Salerno y Asociados Expertos en Energía SECRETARÍA DE DESARROLLO ECONÓMICO SUSTENTABLE Secretaria de Seguridad Ciudadana de la CDMX Sempra Infraestructura Sices Siemens Gamesa Renewable Energy Signify Sinia Renovables Skysense SMA Solar Smurfit Kappa Solar Power Group Solardec Solarever Tecnología de América, S.A. de C.V. Solfium SOLIS Soluciones Integrales FRAP Stellasolar Energy Systems Sungrow MX SURA Investment Management Taak Strategy Group Tec de Monterrey Tecsolar TERNIUM TI FLUID SYSTEMS TIBA Tlalli Energia Tokyo Gas America Ltd. Top Energy Total Eren Totalenergies Tradeon Energy Trina Solar TÜV Rheinland UL Empowering Trust Ultatek Automation Vansertec Green Energy Vector Renewables Vera & Asociados Vita Renewable Energy, LLC Walworth Wood Mackenzie WTS Energy X-ELIO ZNShine Zuma Energía

P r og r am D ay 1 08:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

09:00

STATE OF THE SOLAR INDUSTRY

Speaker: Nelson Delgado, ASOLMEX 09:30

CRITICAL SUCCESS FACTORS FOR SOLAR PROJECT DEVELOPMENT IN MEXICO

Speaker: Armando Gómez, X-Elio México 10:00

SCALING DOWN: RISING OPPORTUNITIES IN DG PROJECT DEVELOPMENT

Moderator: Enrique Garduño, Skysense Panelists: Carla Ortiz, RER Energy Group Julian Willenbrock, Enlight Andrés Friedman, Solfium Ricardo Zúñiga, CapWatt Mexico 11:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

12:00

MONITORING, CONTROL & ASSET MANAGEMENT

Speaker: Chiara Secco, GreenPowerMonitor 12:15

PROCUREMENT DECISION-MAKING: INITIAL INVESTMENT VS. TOTAL COST OF OWNERSHIP

Moderator: Karla Cedano, ANES Panelists: Luis Olivera, Enel Green Power Juan Ávila, Top Energy Mario Pani, BayWa Solar Projects 13:00

MARKET DISRUPTION: ONLINE MARKETPLACE FOR RESIDENTIAL SOLAR INSTALLATIONS

Speaker: Olivier Aizac, Otovo 13:15

THE GLOBAL RESTRUCTURING OF LOGISTICS AND KEY COMPONENT MANUFACTURING

Moderator: Adhara Perales, Canadian Solar Panelists: Roberto Moreno, Solar Power Group Iván Reyes, LONGi Solar Kevin Gutiérrez, HUAWEI Mexico Sergio Rodríguez, Solis 14:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

15:00

TO HYBRIDIZE OR NOT TO HYBRIDIZE?

Speaker: João Gama, CapWatt 15:20

SOLAR HEAT FOR INDUSTRIAL PROCESSES: A KEY FOR DECARBONIZATION

Speaker: Katia Bernal, Citrus 15:40

MEXICO AS A MANUFACTURING HUB: CHALLENGES AND OPPORTUNITIES

Moderator: Javier Romero Durand, AMFEF Panelists: Daniel García, Módulo Solar Simon Zhao, Solarever Katia Bernal, Citrus Luis Calderón, Solarvatio

P R O G R A M D AY 2

08:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

09:00

1GW SOLAR PLANT CENTRAL TO SONORA’S ENERGY TRANSITION

Speaker: Dr. Alfonso Durazo, State of Sonora 09:15

THE INITIATIVE OF THE CONSTITUTIONAL ELECTRICITY REFORM

Speaker: Mario Morales Vielmas, CFE 10:00

LARGE-SCALE ENERGY NEEDS: INDUSTRY PERSPECTIVES

Moderator: Hans Kohlsdorf, Energy 2 Market Panelists: Gustavo Ortega, CAMIMEX Diego Arjona Arguelles, CANACINTRA Carlos Hernández, COPARMEX 11:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

12:00

FROM SUPPLIER TO PARTNER: THE RISE OF ENERGY ADVISORY

Speaker: Montserrat Palomar, Enel Green Power 12:15

GRID CODE 2.0: CHALLENGES AND OPPORTUNITIES

Moderator: Santiago Barcón, PQBarcon Panelists: Héctor Beltrán, CIGRE Mexico Alejandro Reynoso, Diram Monica Samudio, Circutor 13:00

FUTURE-PROOFING ENERGY CONTRACTS

Moderator: Edmond Grieger, Von Wobeser Panelists: María José Treviño, Acclaim Energy Diego Arriola, NXTLab Santiago Villagómez, Energía Real Lilian Alves, Mitsui & Co. Power Americas 14:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

15:00

AMEXHIDRO: THE FUTURE FOR HYDROPOWER IN MEXICO

Speaker: Jacobo Merkler, AMEXHIDRO 15:40

GLOBAL PRODUCTION TRENDS: POWER PRODUCERS’ PERSPECTIVES

Moderator: Ana Ludlow, ENGIE Panelists: Bruno Riga, Enel Green Power Mexico Freddy Obando, AES Gerardo Guerra Pérez, EDF Renewable Energy José Luis García Perez, Zuma Energía

P R O G R A M D AY 3

09:00

ENERGY TRANSITION LAW, ELECTRIC REFORM, ENERGY POLICY: WHERE IS MEXICO HEADED?

Speaker: Víctor Florencio Ramírez, Platform Mexico Climate and Energy (PMCE) 09:30

BOOSTING LEGAL CERTAINTY AND POSITIVE IMPACT VIA INDIGENOUS CONSULTATION AND SOCIAL IMPACT EVALUATION

Speakers: María Cristina Hernández, Vera & Asociados Luis Vera, Vera & Asociados 10:00

EXPLORING PATHWAYS FOR MEXICO’S ENERGY SECTOR DEVELOPMENT

Moderator: Claudio Rodríguez, Holland & Knight Panelists: Alfredo Álvarez, EY Jorge Pedroza, PwC Valeria Vázquez Maulen, Deloitte Benjamin Torres-Barron, Baker McKenzie Javier Mundo, KPMG 11:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

12:00

BATTERY STORAGE SUPPLY CHAIN AND PROJECT INTEGRATION

Moderator: Carla Ortíz, RER Energy Group Panelists: Emmanuel Moctezuma, AES Patricia Tatto, ATA Renewables Alexandro Debler, Siemens Energy Miguel Osio, Sempra 13:00

FLEXIBLE POWER AND MICROGRIDS FOR RELIABLE AND COST-EFFECTIVE ELECTRICITY

Speaker: Theodore Lorentzos, Bergen Engines LATAM 13:15

ENERGIZING MEXICO’S UNCONNECTED AREAS

Moderator: Mirjam Schipper, Mexico Business Panelists: Aldrich Richter, Bergen Engines LATAM David Martínez, Envision LATAM Norma Almanza, Generac LATAM David Muñoz Andrade, DIurna Energy 14:00

NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS

15:00

ENERGY STORAGE INNOVATION & DEVELOPMENTS

Speaker: Isaac López, Tesla Energy 15:20

SOLVING CYBERSECURITY PROBLEMS

Speaker: Bharadwaj Vasudevan, Hitachi Energy Noth America 15:40

DIGITIZING MEXICO’S ENERGY SYSTEMS

Moderator: Ricardo Delfín, KPMG Panelists: Guillermo Bilbao, Minsait Bharadwaj Vasudevan, Hitachi Energy North America Alan Castillo, Naturgy Mexico 16:30

SOLVING CYBERSECURITY PROBLEMS

Speaker: Leonardo Beltrán, Columbia University

C onfe r ence H ighligh t s MATCHING RECENT GROWTH WITH A MORE PROMISING SOLAR FUTURE M exico’s so la r e n e rgy se c to r h a s

2021, which fails to meet the government’s

demonstrated remarkable growth over the

previously established target of 30 percent

last five years, but several factors could

renewable energy generation by 2021.

potentially limit further development in

Within this renewable energy percentage,

the short term, said ASOLMEX Managing

p h o tovo l t a i c s o l a r- b a s e d e l e c t r i c i t y

Director, Nelson Delgado.

generation represents 5 . 3 percent, compared to 6.5 percent of wind energy

The installed capacity for solar energy

and 10.7 of hydroelectric energy. Most

generation in Mexico has experienced a truly

growth has been concentrated in large,

unique streak of exponential growth during

utility-scale solar PV projects developed

the past five years, according to ASOLMEX’s

between 2017 and 2021. Back in 2017,

figures. In 2017, installed solar capacity

most of solar ’s installed capacity was

accounted for 171MW, which represented

focused on distributed generation (DG).

only 4 p e rce nt of th e installe d win d capacity at the time, as well as a minuscule

Much of the current capacity is

percentage of all installed capacity in the

geographically dispersed along the

country. While 2021 figures are not yet final,

most sun-drenched regions of Mexico,

Delgado said that it can be reliably asserted

co n ce ntrate d m a in ly in th e n o r th e rn

that the year’s installed solar capacity

plateau states. Sonora is at the top of

amounted to approximately 7,416MW.

this list, with 1 , 257MW of utility scale

“Today, solar PV generation represents 8.2

solar capacity installed. The state will see

percent of the country’s installed capacity,”

much more to come as the 1GW Puerto

said Delgado.

Peñasco project goes through its initial phases in 2022. The state-owned project has the ambition to become the largest

“This is not a war, but a discussion

solar generation project in Latin America.

that must be depolarized. The future

Nevertheless, Delgado considers these

of the country and of the electrical

state-by-state numbers to be low overall.

system must remain central, as well

“We are very far away from exhausting

as the sustainable future of upcoming

the potential of Mexico for this kind of

generations ”

generation.” In terms of DG, Delgado’s

Nelson Delgado

data shows that there are clear examples of

Managing Director | ASOLMEX

states that have more effectively deployed their resources to incentivize these kinds of developments and projects. As a result, states like Nuevo Leon and Jalisco show

However, this growth has not been matched

up clearly on the map when compared to

in infrastructure development as Mexico’s

neighboring states.

transmission infrastructure has grown at a much slower pace. This lack of balance is

Despite the results in the solar segment, the

behind 86 percent of the alerts regarding

legal and regulatory uncertainty in which the

operating status are explained by the lack

sector finds itself will not allow the growth for

of transmission infrastructure, according

solar PV generation projected for 2024, says

to Delgado.

Delgado. Furthermore, he emphasized that even if SENER’s targets were met, the country

Despite this growth in the solar sector,

would still fall short of its clean energy goals.

Mexico’s energy generation matrix remains

Legal uncertainty could reduce the pace

fossil fuel-driven at 71.4 percent against

of new investment, which is necessary for

28.6 of renewable energy generation in

growth to continue as projected.

C onfe r ence H ighligh t s The approval of López Obrador’s energy

surrounding electricity generation. “This

reform adds to the uncertainty plaguing the

is not a war, but a discussion that must be

sector. According to Delgado, CFE would

depolarized. The future of the country and

be once again vertically and horizontally

of the electrical system must remain central,

integrated as an autonomous governmental

as well as the sustainable future of upcoming

agency responsible for organizing and

generations,” said Delgado, highlighting

dire c tin g th e e l e c tricit y se c to r. T h is

DG’s growth through information and

eliminates independent regulators and

technology distribution, in parallel with new

independent grid operator CENACE. The

government incentives. “Companies must

initiative also proposes the immediate

understand that solar power is aligned with

cancellation of all private Power Purchase

their energy cost structures. They should

Agreements (PPAs).

become more aware about their energy needs and how this energy reaches them,

Despite the challenges, private sector

so that they can begin to understand why

leaders are still hoping for a successful

solar energy must be part of their strategies

resolution to the current discussions

and budgets,” concluded Delgado.

SUCCEEDING IN MEXICO’S ENERGY MARKET IS STILL POSSIBLE Constant regulatory changes, ambiguous

The federal administration has actively

p u blic p olic y a n d th e th re at of a d e

attempted to shift the sector’s regulation

facto absorption of regulating bodies

in favor of its lumbering state companies,

has splintered investor confidence in

PEMEX and CFE, to the detriment of the

Mexico’s energy market, bringing solar

wider electricity market and its end users.

project development down to a trickle.

Three years after the administration took

Nevertheless, Mexico’s growing economy

office, the complex navigation of Mexico’s

and market demand make these projects

convoluted energy market has driven

worthwhile. Through strict adherence to

away foreign investment, which formed an

critical success factors, as outlined by

essential building block of Mexico’s scarce

Armando Gómez, Country Manager, X-Elio,

capital market. With fewer investment

companies can still successfully grow their

offers coming in, companies have had to

project portfolios.

adapt by mastering the volatile regulatory environment via consultancy services.

“Before the pandemic and the government

In turn, this has motivated companies to

crackdown, developing solar PV in Mexico

pivot toward new market opportunities,

was relatively easy, at least on paper.

including distributed generation (DG).

Today, Mexico remains an attractive market but development is much more complex,”

According to Gómez, this is not to say that

said Gómez.

large-scale solar project developments are entirely unfeasible. Mexico’s energy

X- E l i o , l i ke m a ny re n ewa b l e e n e r g y

market is facing considerable pressure

companies, came to Mexico lured by the

to expand due to market grow th and

promise of a stable energy market. From

demographic expansion. Even though

2016 onward, the company has steadily

Mexico has added an impressive amount

grown its asset portfolio across the country,

of solar capacity since 2017 by increasing

now representing a generation capacity of

its installed MWs around 1,800 percent in

650MW. With the completion of its fifth power

five years, industry experts anticipate that

plant earlier this year, X-Elio now has a total of

Mexico will soon reach an energy deficit

five projects, exemplifying a possible timeline

unless it is able to produce more energy.

in which companies can expect to build one

This factor is often underrepresented in

of the largest privately-owned solar portfolios

future projections, said Gómez. As this

within Mexico’s regulatory environment.

looming realization sets in, it is imperative

C onfe r ence H ighligh t s to help companies get potential projects

Based on an informed strategy, companies

off the ground.

should prioritize risk management throughout the entire project development process . This involves a constant

“Before the pandemic and the

reassessment of risks, adapting mitigation

government crackdown, developing

s t r a t e g i e s a n d r e fi n i n g fl e x i b i l i t y .

solar PV in Mexico was relatively

Companies also stand to benefit from

easy, at least on paper. Today,

formulating partnerships with regional

Mexico remains an attractive market

p a r tn e r s , w h o a l re a d y k n ow h ow to

but development is much more

navigate the local energy market. “Being

complex ”

prepared is key. This will make adapting or

Armando Gómez

pivoting as efficient and cost-effective as

Country Manager | X-Elio

possible,” said Gómez. A key guiding principle relates to budget m a n a g e m e nt , which d e p e n ding o n a

Focusing on malleable critical success

company’s elected margins strategy will

f a c to r s will h e lp so l a r co m p a n i e s to

have an implicit effect on its overhead costs.

navigate the market with the flexibility they

It is an international assumption that solar

need, Gómez said. Primarily, a company’s

project development in Mexico is cheap.

development plans should be superseded

Nevertheless, the low material, labor and

by adequate short, medium and long-term

further input costs are not comparable to the

plans. These plans should not only be

complexity of navigating regulation, which

informed by available market intelligence

is what makes development expensive.

but should consider possible regulatory c h a n g e s . D e li b e rati n g s u c h p o s si b l e

Overall, X-Elio still envisions an attractive

outcomes is essential to generate flexibility

future solar market, said Gómez. While

and, ultimately, allow for company survival.

the dust that regulatory changes created

Unprepared players will often encounter

here settles, companies can still build

u nfo re se e n c h a ll e n g e s , m a k i n g th e i r

out Mexico’s renewable energy sector in

pivoting time-consuming and costly.

other niches.

SOLAR DG PROJECTS TO THRIVE IN MEXICO Current developments in the Mexican energy

across the country. The question is how

sector have fostered major opportunity for

to speed up this transition,” said Andres

the development of distributed generation

Friedman, CEO, Solfium.

(DG) projects. Factors such as a global push for sustainability and the country’s own

The industry’s traditional power production

excellent natural resources are key driving

paradigm is shifting. Rather than relying

factors success, agreed solar industry

solely on the traditional centralized utility

experts, although several key challenges

system, residential and C&I customers

remain to be solved.

are installing DG systems, which employ small-scale technologies to produce on-

“Mexico is in a privileged situation, with

site electricity below the 0.5MW permitting

the fif th highest solar radiation in the

threshold. Solar DG will play an important

world. The DG industry is where we will

role in helping to meet these energy needs

see the biggest grow th in renewable

and achieving environmental goals at

energy development. With relatively low

the same time, on the condition that DG

installation costs, solar is a great, profitable

customers pay their fair share to keep the

investment. Solar-based DG is the future.

grid operating safely and reliably, reported

Eventually, we will see panels in every roof

the American Public Power Association.

C onfe r ence H ighligh t s

The DG industry is at a crossroads, full of

C&I users, which need to understand how

challenges and opportunities, said Enrique

to tackle the benefits and risks that this

Garduño, CEO, Skysense. “Sustainability is

type of generation project adds to their

increasingly driving company decisions. At

energy procurement portfolio, wrote María

the same time, global problems such as the

José Treviño, Country Manager, Acclaim

Russia-Ukraine war encourage countries

Energy for MBN . The 2,000MW of DG

to a g g r e s s i ve l y i nve s t i n r e n e w a b l e

installed capacity represents 2 percent

energy to achieve independence in energy

of Mexico’s total generation, pointed out

generation.”

Carla Ortiz, Country Manager Mexico, RER Energy Group. “Although we have grown

In 2019, Mexico surpassed the 1,000MW

tremendously already, the space for further

mark for installed DG capacity, which also

development is still huge. This is just

includes a minimum percentage of other

starting. The C&I sector is already growing

technologies outside of solar. By the end

more than the residential segment.”

of 2021, the country reached 2,000MW, said Julian Willenbrock, CEO, Enlight. “It

An example of growing opportunity in

took us 12 years to reach the 1,000MW

C&I projects is that DG’s installed capacity

milestone and only two more to surpass

grew in 202 1 despite involving fewer

the 2,0 0 0 MW threshold .” The energy

contracts than in 2020, said Willenbrock.

se c tor developm e nt pla n P RO D E S EN

This suggests that larger, more profitable

forecasts that this current DG capacity will

projects are constructed on average.

be doubled by 2025, he added. Only in 1H21, 246MW of DG were installed across

For C&I companies, DG solar is a

Mexico, involving a total 31,860 contracts.

crucial tool for both cost reduction and

Investment has surpassed US$3.2 billion,

decarbonization. “Companies will lead

according to CRE. Jalisco, Nuevo Leon, the

the energy transition . Both in Mexico

State of Mexico, Chihuahua and Mexico

and globally, ESG is becoming crucial for

City are the leading DG states.

companies. The context within Mexico is ideal for DG development. The country

The focus of the DG industry has changed

is privileged because of its solar energy

th ro ug h o ut th e ye a r s , a s we ll . W hile

resources, whereas the market is pressing

it originally aimed for the residential

toward cleaner energy in general.

segment, bigger opportunity now looms

Companies can take advantage of DG’s

in the C&I sector. The success of Mexico’s

potential when considering to decarbonize

DG in Mexico is mainly driven by large

their entire value chain,” said Friedman.

C onfe r ence H ighligh t s As the Mexican energy market grapples

supply availability at both the best price

with legal uncertainty due to the a new

and quality is challenging, said Willenbrock.

energy reform proposal, end users favor

“It is important to inform the client how

the unregulated and therefore de-risked

our business is impacted by different global

DG industry. “The Mexican energy sector

trends. Closing deals in an agile way is of the

is living one of its worst times in terms of

essence.” A main challenge within Mexico is

energy regulation. However, this problem is

talent, he added. “PV systems are not the

boosting DG, which will be one of the fastest-

same for residential use as they are for C&I.

growing industries. Combining DG with other

The engineering and technical expertise

technologies, such as storage, could be the

required is different and difficult to find.”

step toward bigger projects,” said Ricardo Zúñiga, Country Manager, CapWatt Mexico.

Engineering, installation and sales challenges are related to each other, said

DG Industry Challenges

Ortiz, who added that the DG industry must become a more professional sector.

Alth o ugh D G reso urces offe r seve ral

“Clients are often confused. There is too

benefits, they also involve challenges

much offer in the market. We need a

regarding operations, financing, engineering

standardization of processes, certifications

and sales , agreed the exper ts . These

and rigor at inspection units . Q uality

include external factors, such as costs of

is crucial, especially in these times of

components and solar panels. Securing

growth,” she said.

PUTTING DATA AT THE FOREFRONT OF ASSET MANAGEMENT Should data management be a top priority

this idea in mind. Essentially, the value

for builders and operators of solar energy

of a solar asset cannot be maximized

a s s et s? T h e a n s we r to th i s q u e s ti o n

without a monitoring and control

c a n d e fi n e th e fi n a n cia l su cce s s a n d

approach that integrates state-of-the-art

economic viability of projects, according

data management into an asset ’s daily

to Chiara Secco, Country Manager for

operations. “When you are in the control

Mexico and Central America, Green Power

and asset management business, your main

Monitor (GPM).

task is to maximize the performance of your clients’ assets.” Crucially, there is a difference between on-

“As we generate more of this data, we begin to ask what the data can do and what it has to say about the asset’s functioning beyond the more essential decision-making that it can support”

Chiara Secco Country Manager Mexico & Central America | GreenPowerMonitor

site and off-site data management solutions, according to Secco. A perfect technological integration must be made between these categories, yet each tool must address the separate needs that each category represents . O n -site solutions include SCADA systems that function as in-plant controllers for utility-scale power plants. The gathering and storage of data that these systems manage must be reliable, just like the software that makes these processes transparent in real time. These on-site

“You will find that what truly leads to a

systems also need to be designed with field

return on investment (ROI) on your solar

technicians and control room operators in

asset is how well you collect, use and store

mind, adapting usability to the specific needs

your data,” said Secco. The platforms and

of on-site personnel. A more ambitious on-

tools provided by GPM are designed with

site solution is a Power Plant Controller (PPC),

C onfe r ence H ighligh t s which provides direct control over all devices.

can be styled in line with a company’s

An important success factor for PPCs is their

corporate image.

flexibility, as issues regarding compatibility and the evolving Grid Code requirements

“As we generate more of this data, we begin

can generate unexpected data management

to ask what the data can do and what it has to

problems for operators.

say about the asset’s functioning beyond the more essential decision-making that it can

Remote solutions need to be centralized

support,” added Secco. As an asset’s data

within one system to be as usef ul as

generation increases, tools such as GPM’s

possible to operators. Secco mentions

can define specific problems regarding

t h e s c a l a b i l i t y o f G P M ’s c e n t r a l ize d

devices and operational conditions. This

solutions as one of their main advantages,

leads to advanced preventive maintenance

equipped for managing either a smaller

strategies and therefore creates even higher

amount of utility scale assets or various

cost savings, increasing an asset ’s ROI

distrib ute d g e n e ration (D G) syste ms

further. “Asset management companies

th a t c a n b e co m p o s e d of d i s p e r s e d

say they can already do this, but through

technology. A centralized solution can

technology we want to empower the

simultaneously perform the functions of

independence of operators so they can find

asset management, O&M management and

these savings and optimizations during their

can generate automatic reporting, which

day-to-day operations,” concluded Secco.

FAVORING A LONG-TERM VISION FOR SOLAR PROCUREMENT Investment planners of solar projects must

is financing.” Cedano believes that when

find several ways to isolate their strategies

balancing the initial costs of a project against

from financial pressures that favor short

its eventual levelized cost of energy (LCOE),

term thinking. Procurement decisions must

those in charge of making procurement

be made with a long-term vision in mind, one

decisions must consider that availability of

that contemplates the maximum longevity for

technology was the industry’s central issue in

each project, say solar development industry

the past. Now that a wider variety of options is

leaders.

available, they should contemplate opting for technologies that are top-of-the-line, despite the seemingly outsized initial expenses they

“As solar technologies became better

might represent.

known in the market, this also had an impact on their price.

Managing Director of BayWa Solar Projects,

Technological awareness can play a

Mario Pani, gathered extensive experience

part in making higher-end choices

in the development of utility scale projects.

that are easier to budget”

He agrees with Cedano’s assessment: “When

Luis Olivera Solar Engineer | Enel Green Power

making a technological decision, it is best to look for the highest efficiency and the lowest costs for power generation and operating in the long term.” In Pani’s view, considering the longevity of a solar project is key to accurately

Karla Cedano, President, National Solar

assess the capabilities that the procured

Energy Association (ANES), contextualized

technology should possess. During his last

this issue within Mexico’s solar history: “The

interview with MBN, Pani’s approach to long-

PV solar industry in Mexico started 40 years

term thinking revealed that additional value

ago. Back then, the biggest challenges

could be generated if the future of a project

were technological and scientific. When

was guaranteed to its investors, or as he put

these barriers were overcome, the business

it: “Not many developers can sell the asset

challenge arose. Now, our biggest challenge

as a long-term investment and also support

C onfe r ence H ighligh t s hundreds of millions of dollars in contracts

to be measured throughout the process. “All

with our guarantees. The final buyer knows

technologies procured should empower

that we will handle any risk stemming from

the user to become as independent as

the project, and that also increases the value

possible. That includes the creation of a

of the project.”

storage system associated with your power generation system.” In Ávila’s view, the

Conditions specific to a project must

added cost of implementing energy backup

also be considered to maximize the value

is worth its significant extra cost, even on the

of procurement decisions. Luis Olivera,

short term. Ávila agreed with Olivera’s point

Solar Engineer, Enel Green Power, gave

regarding the availability of information,

a perceptive example. “It is necessary to

noting that “10 years ago nobody understood

consider all environmental aspects to choose

the solar sector at all. Approaching financing

the technology that best suits [developers].

and leasing entities was a bit of a nightmare

This will lead to the best cost-benefit

and Multiple Purpose Financial Institutions

outcome.” Olivera also emphasized that the

(SOFOMs) were very hard to convince.

knowledge which distributors, developers and

Nowadays, capital financing resources are

engineering, procurement and construction

more readily available, to the point that they

fi rms (EP C s) h ave re ga rding curre nt

have practically tripled.”

technology must be as extensive as possible if they hope to keep initial costs down while

The industr y exper ts agreed that the

choosing the best possible options. “As solar

sector’s chief procurement issues were no

technologies became better known in the

longer just technological in nature. Instead,

market, this also had an impact on their price.

political, regulatory and even educational

Technological awareness can play a part in

issues were generating a lot more supply

making higher-end choices that are easier to

chain and financing-related barriers than

budget,” outlined Olivera.

the limits of available technology did in the sector’s past. Issues by the COVID-19

Juan Ávila, CEO, Top Energy highlighted the

pandemic’s dreaded bullwhip effect have

difference in procurement priorities between

drastically increased solar module prices.

utility scale and distributed generation (DG)

While the industry leaders were cautious

projects, which are below 0.5MW in the

with their predictions regarding how long

Mexican context: “DG consumers do not

it would take for solar module prices to

make the same cost to benefit trade-off

drop again, they emphasized that short

as large PV solar power producers do. DG

term profitability was not as relevant as

consumers weigh the short-term investment

it seemed in the sector, especially given

more heavily.” Avila also stressed that it

the growing interest in less conventional

was essential to integrate technologies

types of projects like floating solar. Pani

like b at te r y s to ra g e into a p roje c t ’s

concluded that when a project claims to be

procurement strategy, since a project’s

too profitable in the short term, “it is usually

potentially complete independence needed

a sign that something is very wrong.”

A DISRUPTIVE ONLINE MARKETPLACE FOR RESIDENTIAL SOLAR SYSTEMS Adopting a solar system can be a research-

costs. A further expansion in Latin America

intensive and complicated process for the

remains in the cards for the company.

average end user. The originally Norwegian company Otovo has capitalized on this

“ We managed to build a market offer

market demand for a simplified process,

completely different from the way business

which in turn allowed the company to

was functioning. Our energy marketplace

expand through Europe as families look to

matches homeowners, who are looking

go green in the face of skyrocketing energy

for a trustworthy service with installers,

C onfe r ence H ighligh t s who want to encounter steady work,” said

In comparison to US and Australia, Europe

Olivier Aizac, Board Member, Otovo.

still has a low solar market penetration, thereby pointing toward a greater market

Despite its foundation in Norway, where

potential. The company expects to see its

solar radiation is a limited resource, Otovo’s

greatest short-term growth in Southern

value proposition bec ame a strength

European cities, which have greater sun

during the global pandemic. This allowed

exp osu re . O tovo is a lre a dy p l a n n i n g

it to flawlessly scale and enter an additional

additional expansions in the region. If

six European countries. Providing such a

it is able to sustain its momentum, the

holistic solution proved to be a profitable

company plans to launch in eight additional

service in Europe. It has disrupted the

European countries by 2023, an potential

photovoltaic solar market and fostered a

representing 40 percent of the European

greater adoption of the technology across

market, according Aizac. In the long term,

the region. Trimming down the complete

the company looks to exploit the residential

shopping experience to a couple of clicks

density of European countries , which

allowed Otovo to expand across the entire

represents a market double that of the

European continent over the span of three

United States.

years, during which the company helped install more than 120,000 solar systems.

O tovo ’s s u c c e s s p r ove s t h a t o n l i n e marketplace spaces can be a boon to

Otovo is the only pan-European market

any industrial sector, even the somewhat

player with this commercial strategy,

convoluted energy market. The company’s

summarized best as a marketplace that

a p p lic atio n c re ate d a vi r tu o u s c ycl e

connects homeowners with solar installers

that yielded greater transparency for

on its own marketplace platform. Otovo’s

homeowners and raised financial prospects

exponential growth Otovo rests on record-

for the installers that receive well-defined

high energy costs, as well as end-user

projects. This increased market confidence

demand to have greater control over

for both sides, as Otovo also handles the

energy consumption. The market’s growth

money collection and payout. Currently, the

is supported by federal entities across the

company has a network of 500 of installers,

EU, which have provided policy support

although it is confident it can increase this

with the aim to cut carbon emissions and

database further.

reduce a dependency on energy exports. Examples include a 2022 proposal for a

Looking

zero percent VAT on solar panels, which

opportunities, the company is exploring

could effectively reduce installation costs

th re e m a in ave n u e s: b at te r y s to ra g e

between 20 and 25 percent.

development, leasing options and an entry

toward

future

market

into the Brazilian market. Though a move to the Mexican market is less likely for the time being, Aizac confirmed the company is exploring the option too. Battery storage technology has become commercially accessible and an attractive addition to people looking to consume more of the energy they produce, while reducing the energy bill and having energy stored in case of emergencies. Aizac said this is becoming increasingly relevant in the face of the world’s interconnected energy dependency, as exposed by the Ukraine crisis. “Batteries are now becoming

C onfe r ence H ighligh t s a relevant investment for homeowners, as

on the development of a leasing service

you can consume more of the energy you

that would allow end users to bypass the

produce, reduce your energy bill and benefit

full payment option, which proved to be

from emergency energy,” summarized Aizac.

a dealbreaker for many would-be buyers. Otovo said it will collect more data to be

Addressing finance, a main barrier to entry

able to construct its solar as a service

for solar energy, the company is working

(SaaS) solution.

A GLOBAL RESHUFFLE FOR LOGISTICS AND KEY COMPONENT MANUFACTURING S o l a r e n e rg y g e n e rati o n te c h n o l o g y

intersection of international and domestic

c o m p a n i e s w h e re b l i n d s i d e d by th e

logistical challenges has effectively put

overnight supply chain stress produced by

Mexico’s photovoltaics panels sub-sector

the COVID-19 pandemic, which led to price

on pause,” said Roberto Moreno, Director

hikes on input materials, variant outbreaks

General, Solar Power Group.

and shipping container bottlenecks. Like adjacent market sectors, solar companies,

G lobal inte rconn e c te dn ess has ma ny

too, saw themselves obligated to adapt

recognized benefits, but it has also made

and learn to mitigate the risks in front of

companies more interdependent, which

them. As industry leaders anticipate a

proved to be a challenge during the global

return to pre-pandemic economic activity

pandemic. The COVID-19 pandemic, and

and fluidity, companies look forward to

now the Ukrainian crisis, have driven a

refining their processes and new market

dramatic rise in logistics costs, rising

opportunities.

container costs from US$1500-US$1800 to US$14,000 just two weeks ago. This is

M exico’s e n e rg y m a r ket c a m e u n d e r

on top of domestic logistical challenges

considerable strain during the pandemic

such as tax disputes between national

f ro m b oth h e i g hte n e d e n d - u s e r a n d

institutions and foreign market players,

industrial demand from a booming

thereby straining and undermining a still-

e-commerce sector. This stands to be

developing market sector.

further complicated by rising logistical costs, which are effectively undermining

Mexico’s nascent solar energy sector. “The

manufacturer, Huawei relies heavily on

international

equipment

C onfe r ence H ighligh t s the fluidity of supply chain mobility across

was key, especially as an internal exporter.

the globe. The company prepared for

To g a i n b et te r co ntro l of co s t s , th e

potential disruptions and contemplated

company opted to discuss monthly, weekly

reactionar y countermeasures but this

and even daily demand of semiconductors,

proved to be ineffective given that the

prompting the most demand and data-

compa ny could not a nticipate wh e re

driven project the company has led and

these disruptions would manifest along its

a necessary one given how constricted

supply chain. The most impactful challenge

the market had become. Moreover, the

where COVID-19 outbreaks, which in one

com pa ny also expa n d e d it s p rovid e r

case slowed production down to a trickle

network to be able to complete its project

and forced the company to push back on

said Rodríguez.

delivery times. Identifying that it needed better vertical visibility, the company

The logistical challenges that arose helped

organized its known inputs, assets and

to drive innovation in the sector, forcing

referenced market forecasts to calculate

companies to think of creative solutions.

timeline estimates so that it could relay

However, it was the freshly approved solar

this information to clients . “ Planning

projects that suffered, which were on the

strategies allowed us to combat the lack

receiving end of price hikes as a result of

of containers and increased logistics costs.

higher input costs and logistical taxes.

We had to adapt to advanced demand

Still, some of the mitigating strategies

models and adjust delivery times,” said

that we re develope d culminate d in a

Kevin Gutiérrez, Vice President of Inverter

more efficient and productive operational

Business, Huawei Mexico.

process. This was the case for LONGi, a company that even managed to include

Uncertainty was another factor hindering

volatility in prices within contracts , a

the market. Nevertheless, the pandemic

previously unthinkable tool in the sector.

fostered digitization, which will assuredly

“The process in still incomplete, but the

create a better return on investment in the

pandemic has exposed fault lines that

long-term, according to Sergio Rodriguez,

will become tomorrow ’s business and

Manager Mexico & Latam, Solis. The energy

operational standards. Demand has not

plant project Solis had planned, meant to

fallen and as prices stabilize or destabilize,

grow its productive capacity from 5GW to

market players will be able to react based

20GW, was slightly delayed. Prioritizing

o n wi s d o m ,” s a i d Iva n Reye s , U tilit y

local relationships with its global partners

Director, LONGi Solar.

HYBRID PROJECTS HAVE POTENTIAL IN MEXICO: CAPWATT Decarbonizing energy production and

conjunction. Such a system can be based

reducing emissions has become a global

on conventional energy, renewable energy

priority. Hybrid systems that combine

or storage systems, all of which share

the most competitive renewable energy

an access point and connection to the

technologies are effective at optimizing

electrical grid or to the internal network of a

efficiency while delivering clean energy,

consumer. “Hybrid projects with renewable

in hybrid installations. What is more, they

technology make sense when its power

can be further complemented by storage

generation profiles can complement each

s y s te m s , s a i d J o ã o G a m a , B u s i n e s s

other in order to mitigate the variability

Development Director, Capwatt, an option

and intermittency of renewable resources,

that has been pioneered in Mexico too.

often based on wind and solar energy,” said Gama.

A hybrid system is an electricity generation system in which two or more

Some of the most common hybrid blends

power producing technologies operate in

involve either wind and solar, small-scale

C onfe r ence H ighligh t s hydro and solar, or solar and storage,

Though more investment is needed to

among others. Hybrid systems efficiently

generate a higher level of consumer trust

complement technologies, allow for better

for their implementation, IRENA emphasizes

forecasting and generate a better overall

that hybrid systems have a bright future

generation profile. Furthermore, they allow

ahead. Although the installed capacity

users to make better use of natural resources

of battery storage is still relatively small,

and ensure that the power produced is of

it is a the market segment experiencing

better quality and with a higher reliability,

rapid growth, as it shows dropping costs

to the grid operator’s benefit, said Gama.

and strong improvements in performance

Battery storage technology specifically

over time.

boosts energy security and the push to reach climate change goals, efficiently integrating

Hybrid projects, including those with battery

power systems and improving the stability,

storage, still have not been developed

flexibility, reliability and resilience of the

steadily in Mexico, said Gama. He highlighted

power grid, agrees the International Energy

the “major advantages” that the country has

Agency (IEA).

in terms of its geographical conditions and renewable energy potential. “CRE recognizes the importance of storage. It is developing

“Hybrid projects with renewable technology make sense when its power

policies and a legal framework to improve its adoption,” Gama said.

generation profiles can complement each other in order to mitigate the variability

Mexico has a wind and photovoltaic solar

and intermittency of renewable resources,

hybrid project in Ojuelos, Jalisco. La Paz,

often based on wind and solar energy”

Baja California houses two photovoltaic

João Gama Business Development Director | CapWatt

solar and battery storage hybrid power pla nt s . G a m a o utlin e d C a pwat t ’s par ticipation in Por tugal ’s G raciólic a project. “ We established a long-term alliance for the development, operation

Applied to on-site generation systems,

and maintenance of the hybrid renewable

hybridization offers energy efficiency

project in Graciosa Island.”

optimization and benefits in terms of savings, explained Gama, who added that there is a

The hybrid micro-grid project at Isla Graciosa

wide range of technologies that can adapt to

has a capacity of 4.5MW through its wind

unique client needs. Among the optimization

farm, 1MW through its solar plant and 7.4MW

benefits, Gama sees an “increase in load

via a battery system, which provides 2.6 MWh

factor for renewable facilities, an efficient

on its own. Capwatt’s own corporate office

back-up energy source, a way to reduce

also features a hybrid project, said Gama.

risk of unpredictable intermittency and

The office boasts a system featuring on-

possibility to lower the environmental

site solar generation, in addition to battery

impact.” In addition, these systems generate

storage systems of 320KW and a network

more power, save more costs and reduce the

to distribute electricity, thermal energy and

need for separate permits.

water to over 25 consumption points.

SOLAR HEAT IS CRUCIAL FOR INDUSTRY DECARBONIZATION Industrial processes are on the path toward

heating demand sustainably, making net-zero

decarbonization by using renewable sources

manufacturing a tangible reality, said Katia

of energy. Heat remains the most frequently

Bernal, CEO, CITRUS.

used form energy around the world, but most of it is generated through fossil fuels.

In countries where agriculture, textiles,

Solar heat systems can meet this massive

cement and food processing industries are

C onfe r ence H ighligh t s important industries, solar thermal energy

energy consumption. Half of this demand

can provide the hot air and water needed

is below 400°C, show IRENA’s numbers.

for curing, drying, dyeing, washing, boiling,

Currently, around 40 percent of industrial

pasteurizing and sterilizing, according to

primary energy consumption is covered by

IRENA. Solar heat helps replace fossil fuels

natural gas, another 41 percent by fuel oil.

used for heating processes, including natural

Thermal solar has the potential to provide

gas, LP gas, diesel and fuel oil. Using these

15EJ of heat by 2030, which is around

polluting fuels is no longer sustainable, said

10 percent of the total global industrial

Bernal, as companies operating in Mexico

energy demand.

such as Bimbo, Unilever and Coca-Cola have committed to net-zero goals toward the

CITRUS has already developed solar heat

near future.

projects in Mexico, said Bernal. At Unilever, the company installed a system to generate

“Heat represents around 67 percent of

hot water at 80°C and processed water

Mexico’s energy demand. The sun is an

at 110°C. The solar heat system was also

unlimited renewable heating source, capable

implemented at another company in Mexico,

of meeting this demand. All the products we

where they heat 9000 liters of water a day at

see at the supermarket need steam and water

120°C, cutting 114 tons of CO2 emissions per

to be produced,” said Bernal.

year and saving 76,000 liters of LP gas. Despite the technical potential and economic

“Under a Heat Purchase Agreement

benefits of using solar heat in industrial

(HPA), companies require zero initial

processes, development levels remain

investment. CITRUS installs and

quite low due to poor policy-making and

operates the system and the client

high upfront investments, which are usually

pays a constant price for its clean

barriers for small and mid-sized companies,

energy.”

Katia Bernal CEO | Citrus

proves IRENA. Therefore, offering different purchasing options is important for clients, said Bernal. “We offer an option where clients buy the project and benefit from tax incentives, while

The integration of solar heat into industrial

getting an ROI between 1 to 5 years. However,

processes is not always easy, explained

CITRUS also offers leasing, where clients pay

Bernal. However, companies like CITRUS,

a monthly fee. By the end of the contract,

which has 15 years of experience, engineer

they have the chance to buy the system at its

these systems to be integrated optimally

residual cost.”

in in d u s tria l p ro ce s se s . “ O u r sys te m reduces costs and CO2 emissions in several

More of these options are materializing in

industries, such as food and beverages,

the market, added Bernal. “Under a Heat

mining , automotive, chemic als and

Purchase Agreement (HPA), companies

pharmaceutical production, among others.”

require zero initial investment. CITRUS installs and operates the system and

Globally, industrial process heat accounts for

the client pays a constant price for its

more than two-thirds of the total industrial

clean energy.”

MEXICO COULD HAVE BRIGHT FUTURE AS SOLAR MANUFACTURING HUB As Mexico continues to enjoy the benefits

industries, the possibility of developing

of a nearshoring boom that is restructuring

g l o b a l l y c o m p e ti ti ve m a n u f a c t u r i n g

inves tm e nt s a cross a ll th e co u ntr y ’s

capabilities for solar energy components

C onfe r ence H ighligh t s becomes increasingly viable, according to

central to Mexican solar manufacturers

energy sector experts.

despite the size of the Mexican market. Mexican manufacturing and logistical

Javier Romero, General Manager, EcoValue,

capabilities need to be developed with

established the groundwork for this positive

the US in mind to generate the amount of

perspective by claiming that “the size of

investment needed to make Mexico reach

the economy and Mexico’s place within the

its full potential as a solar manufacturing

sunbelt are some of the country’s competitive

hub. Zhao also highlighted the question of

advantages for solar manufacturing.” In

innovation and technological development

Romero’s view, these conditions should be

as central to the manufacturing sector’s

enough to clarify why the establishment of

growth: he noted that Solarever works with

a manufacturing hub in Mexico is a worthy

American engineers and UNAM researchers

investment. The advantages extend to

to address what he argues is a “lack of

both the manufacturing of photovoltaic

continuous innovation” in the Mexican

solar components as well as thermal solar

solar market.

elements. The nearshoring boom is creating As President of Solarever, Simon Zhao also

opportunities for Mexican solar

believes in the manufacturing potential of

manufacturers as more project developers

Mexico: “Mexico represents a massive market

understand the benefits of shorter supply

with ample solar resources. We also have

chains, less regulatory expenses and simpler

high energy costs. These conditions increase

logistical systems . “ We have become

the potential for the consolidation of solar

aware of the efficiency of shorter supply

generation and its entire production chain,”

chains. Mexico has a privileged position as

he said. Zhao believes that energy costs as

it connects with the US market and is also

defined and offered by some of the market’s

a platform to Central and South America,”

most important power brokers, such as CFE

said Daniel García, Director General, Módulo

and PEMEX, are currently too high when

Solar. García claims that Mexico’s position is

compared to the country’s available energy

also benefited by its renown in the general

resources. In Zhao’s opinion, Mexico’s solar

manufacturing environment. As he puts it,

resources are competitive at a global level,

“In Mexico, we have a long manufacturing

not just in a Latin America comparison. He

tradition. We have skilled labor, good

also highlights the enormous opportunities

engineering and competitive costs, all

generated by the country’s proximity to the

attractive characteristics for manufacturing

US, which would almost definitely become

investment.”

C onfe r ence H ighligh t s Th e grow th of M exico’s solar e n e rgy

options . “Cer tainty and confidence in

industry may also generate a growth in

the regulatory framework are the best

solar manufacturing through a natural

incentives needed for local investment

m a t u r a ti o n p ro c e s s , s u g g e s te d L u i s

in the solar industry,” added Bernal. She

Calderón, CEO, Solarvatio: “Now that the

also noted that a “manufacturing hub

Mexican solar energy market matures,

needs to have objectives in common .

it will move toward the development of

Incredible synergy can be found between

manufacturing around the solar economy.”

competitors , but a more amicable

H o w e ve r, C a l d e r o n a l s o n o t e d t h a t

environment in which clients are not given

installers need to play a more active role

any reason to mistrust the technology is

in this process. “We must transit toward

essential. This mistrust can develop when

developing demand for components to be

competitors are constantly spreading

made and bought in Mexico by installers.

rumors about each other.” Romero agreed,

As project developers, a larger awareness

noting that “competitors badmouthing

r e g a r d i n g t h e n e e d to b u y M ex i c a n

each other ultimately affects us all. It has

components should be fostered, along with

the potential of discouraging both national

an understanding from manufacturers that

and international investment.”

supply lines need to be kept as national as possible in order to generate real collective

All exper ts agreed that local content

benefits.”

requirements were bound to increase over time, creating more incentives to

Katia Bernal, CEO, CITRUS, argued that

grow national manufacturing capabilities.

incentives must be put in place if Mexico

The use of local content also becomes an

is to become a solar manufacturing hub.

issue of logistical response times: more

“There is a lack of financing incentives

local content means a higher degree of

for solar manufacturing companies.

reliability when responding to issues .

We n e e d m o re l o c a l s u p p l i e r s ,” s h e

Zhao noted that the presence of national

said. Bernal underscored that Mexico’s

i nve s to r s i s a l re a d y s i g n i fi c a nt . T h i s

interest rates are not a great incentive

activity can be boosted by further public

for investment at the moment, so the

sector involvement, including CONACYT

industry needs to make itself more robust

investment in renewable energy projects

by securing a diverse portfolio of financing

for factories and manufacturing centers..

SONORA PUTS ITS ENERGY AMBITIONS ON THE TABLE S o n o r a i s o n a p ath to b e co m e o n e

transition, according to Sonora Governor

of Mexico’s most important states for

Alfonso Durazo.

renewable energy development, as well as a benchmark for political strategies that

The infrastructure development plans of

benefit the acceleration of Mexico’s energy

this state government centralize energy and logistics to take as much advantage a s p o s s i b l e o f S o n o r a ’s p r i v i l e g e d

“We believe there should be no conflict between the aims of social justice and those of the energy transition. Ending poverty, guaranteeing energy security and attracting investment must be the end goals of all policy design”

Dr. Alfonso Durazo Governor | State of Sonora

geography. Among the state’s advantages are 179,000km of strongly solar-irradiated territor y, 8 0 0 km of Gulf of C alifornia coastline and over 5 8 0 km of borders with the US, specifically with the states of Arizona and New Mexico. The benefits that these characteristics provide have led to the development of the ‘Northwest Gate’ infrastructure development strategy, one of the most ambitious of its kind. The

C onfe r ence H ighligh t s strategy includes the expansion of the port

the construction of an electric vehicle

at Guaymas to double its capacity and

(EV) charging station network, as well as

become a competitive logistical option for

other large-scale electrified transportation

the North Pacific region, the development

infrastructure projects.

of so-called ‘fiscal corridors’ to facilitate the transborder traffic of merchandise,

Durazo highlighted one of the center

the renovation of six border crossings

pieces of the government’s overall energy

and the construction of the Guaymas-

transition strategy, the Puerto Peñasco

Chihuahua highway, among other key

solar park. With a gigantic capacity of

construction works.

1GW, it will be the largest solar energy generation project on the continent and

These infrastructure ambitions are tied

the seventh-largest in the world. However,

to Sonora’s energy ambitions. They will

Durazo mentioned that state investment

be an important part of Sonora’s goal

is also focused on distributed generation

to become a net expor ter of energy,

(DG) projects and other small power plants

a high - minde d goal conside ring that

that seek to build stable energy for smaller

Sonora is one of Mexico’s biggest energy

and more independent communities in

consumers and one of the highest paying

the State. Durazo’s government aims to

energy markets, partly due to the state’s

integrate the development of indigenous

climate-related peaks in both summer

communities into these plans by creating

and winter. Sonora wants to build an

sp e cial e co n o mic zo n es wh e re th ese

energy ecosystem in which state, federal

benefits can be shared. “We believe there

a n d p rivate inve s tm e nt is inte g rate d

should be no conflict between the aims

into Sonora’s energy supply chains. This

of social justice and those of the energy

includes the mining of key minerals, or as

transition. Ending poverty, guaranteeing

Durazo put it, “The ecosystem will also

energy security and attracting investment

allow for the extraction of rare minerals

must be the end goals of all policy design,”

such as lithium, which will allow Sonora to

said Durazo. The gravity of Sonora’s vision

strengthen electromobility and facilitate

is consolidated in its objective to have 100

technology for the installation of the

percent of all energy consumption by the

largest solar park in the Americas.” Durazo

state government come from renewable

furthermore plans to prepare Sonora for

sources by the end of the administration

a future defined by electromobility by

in 2027. “Sonora is open for business and

creating investment plans that lead to

clean energy,” concluded Durazo.

THE CASE FOR A CONSTITUTIONAL ENERGY REFORM The institutional framework draf ted in

“Energy generation is not a commodity in

the 2014 Energy Reform has put state

the way that private energy producers treat

utility CFE at a competitive disadvantage

it. Today, we can see the negative results

compared to private energy producers

of this perspective,” said Morales. Prior to

and failed to reach its intended objectives,

the nationalization of the energy market

said M ario M orales Vielmas , Dire c tor

in 1960, private energy producers had

General of Legacy Contract Mediation,

only brought the grid to about 45 percent

C FE . According to M orales , it is now

of Mexico’s inhabitants . These power

crucial to step in and avoid the institutional

producers where mainly concentrated in

entrenchment of a framework that does

urban and industrial centers where they

not serve the people of Mexico. Charged

could profit from a concentrated market

w i t h t h e r e s p o n s i b i l i t y o f p rov i d i n g

demand. Therefore, companies left the

a n d s afe g ua rding a p ublic g o o d , th e

country’s rural fringes untouched. Following

state should play an active role in the

the sector’s nationalization, it would not be

energy market.

until 1996 that private players were allowed

C onfe r ence H ighligh t s to participate in the market again. From that

resistance by the private sector: a total of

point forward, CFE would play a primary role

4,250 amparos suspended the measure only

in providing grid access to 94.7 percent of

day after it was published.

the population up to the year 2000. Even if it is at times considered to be inefficient, the

“The government attempted to make minor

state company has been key to providing

changes to regulation before resorting to

access to electricity as a public good.

promoting a constitutional reform. However, these previous attempts were stopped by

“The government attempted to make minor changes to regulation before resorting to promoting a constitutional reform. However, these previous attempts were stopped by private sector lawsuits”

Mario Morales Vielmas

General Director of Intermediation and Legacy Contracts | CFE

private sector lawsuits,” said Morales. Private power producers have not been afraid to flex their newfound legal protection, but their production capacity remains significantly lower than CFE’s. Private companies currently generate 30 percent of Mexico’s total consumption, CFE produces the remaining 70 percent. Moreover, the selfsupply legacy market meets 15 percent of the country’s energy demand, working through what CFE calls a “black market” rife with illegal partnerships and unpaid wheeling charges.

After achieving near-total coverage, the

Overall, the rise of new power producers

public focus shifted toward developing

obligated CFE to purchase energy via

renewable energy resources in the face of

auctions. However, Morales underlined

climate change’s ramifications. To propel

the proposed changes the energy reform

the country toward its objectives in a timely

failed to produce as the most important. The

manner, state leaders had to reconcile the

reform did not manage to reduce electricity

use of legacy infrastructure built by CFE over

costs, guarantee the supply of energy to

decades while harnessing the efficiency of the

all people, create an organized energy

private sector. The resolution to this challenge

transition or prevent fiscal malpractices.

was the 2014 Energy Reform, a sound first

Considering these failures, the federal

attempt at addressing the inefficiencies of

government now wants to control 5 4

the utility. However, the reform’s “deliberate

percent of all energy generation. President

fragmentation” handicapped the company,

López Obrador does aim to respect the

said Morales. “As a result of the 2014

private capacity already in place, but new

Energy Reform, CFE was fragmented into

expansions should be made solely by the

subsidiaries, which reduced its ability to

state utility.

compete economically,” he added. “The State must regulate the sector to After realizing that the Energy Reform failed

prevent that the electricity market’s power

to engender the changes necessary to meet

is handed to a few private groups,” said

policy objectives, the current government

Morales, who pointed toward the issue of

opted to refine it. The revised Electricity

Spain. In the Spanish electricity market,

Industry Law (LIE) proposal sought to meet

prices have surged because a small group

shortfalls regarding grid reliability, distribute

of power producers decided to control their

clean energy certificates (CELs) fairer, to

output to manipulate prices in their favor.

actualize the cost of transmission, fix issues

For this reason, Morales argues that the

regarding the pre-2014 reform’s legacy

state needs to oversee the market. “The

market and include COVID-19 containment

Spanish government wishes it could do

measures. The finalized proposal, introduced

what the Mexican government does now,”

in March 2021, was met with overwhelming

he concluded.

C onfe r ence H ighligh t s ENERGY IS CRUCIAL FOR MEXICO’S VARIED INDUSTRIES Energy plays a critic al role in the

consumed by users comes from renewable

development of countries. Industries across

energy sources.

Mexico are increasingly demanding more electricity, but most of the grid was built

CELs and Energy Attributes Certificates

when this demand was substantially lower.

(EACs) will continue to play an important

While this poses a challenge, an open

role in the automotive industry, said Diego

market and dialogue with all stakeholders

Arjona Argüelles, President, CANACINTRA’s

can help to fix problems and keep Mexico

Energy Commission: “ The Mexican

competitive in the global market, agreed

automotive industry is enormous. Beyond

industry experts.

OEMs, suppliers across the entire value chain that export parts to North America or the

“There must be electricity for everyone,

EU may need to prove that their operations

without blackouts. To reach competitive

are sustainable. Traceability therefore plays

prices, an open market is essential. Mexico

an important role in the industry.”

needs a strong CFE and consumers must comply with the Grid Code. Transmission

The automotive industry is one of Mexico’s

and distribution should keep pace with the

most impor tant sec tors , contributing

country’s growth, too. We must continue

around 3 percent to the country’s GDP.

transitioning toward clean energy, respect

Automotive manufacturing has become

the rule of law and see private investment

more complex during the past decade,

as a complement to CFE’s business ,”

both due to advanced vehicle technology

s u m m a r ize d C a r l o s H e r n á n d ez , V i ce

and automated manufacturing. In 2013, light

President of Renewables, COPARMEX.

and heavy vehicle production consumed 3883.3GWh, making it the tenth largest

Mexican industries face diverse energy

energy consumer in the country, reported

challenges, including electricity demand,

the energy ministry.

generating sufficient heat and facilitating the sustainable transition to renewable

Another important industry for the Mexican

energy consumption. Following 2015’s Paris

economy is the mining sector, which

Agreements, Mexico committed to generate

represents 2.3 percent of the country’s GDP.

35 percent of its energy using clean sources.

Energy is one of the biggest expenses for

To measure compliance with these emission

mining companies, constituting approximately

reduction goals, Clean Energy Certificates

30 percent of total cash operating costs,

(CELs) were created. CELs certify that an

according to Deloitte. Energy management

adequate percentage of the electricity

solutions offer significant opportunity to the mining sector. Companies can reduce energy consumption by 15 to 20 percent in their existing mines through an effective energy management program, as well as up to 50 percent in new mines by designing them with energy efficiency in mind. Renewables are set to become a mainstream energy source for mining companies, as they have the possibility to lower operating costs and improve their safety, reliability and sustainability. In Mexico, the mining industry was the fourth largest energy consumer during 2020, consuming over 10,800GWh, said Gustavo Ortega, President, CAMIMEX’s

C onfe r ence H ighligh t s Energy Division. “The mining sector is actively

most of the grid was built when electricity

working to reduce its carbon footprint. Thirty-

demand was not as high as it currently is.

one percent of the energy it consumed in

“Natural gas use has increased and Mexico

2020 came from renewable energy sources.

has a great opportunity to produce it itself

We are also focusing heavily on energy

instead of importing from the US,” said

efficiency.”

Kohlsdorf. Mexico has a big opportunity to grow its industry and continue being a key

The energy sector’s own manufacturing is

US trade partner.

increasingly seeing Mexican participation. “The presence of national components in wind

Social issues continue to grow in importance

energy’s supply chain was close to zero in the

for various industries. However, it has always

past. Currently, more parts of wind turbines are

been at the core of the mining business,

being manufactured in Mexico. Nevertheless,

explained Ortega. “We work in marginalized

legal certainty is crucial for more investment

a re as . Wh e n mining a rrives to th ese

to arrive and increase this participation,” said

communities, roads, schools and positive

Ortega. Mexico is also a major producer of

community engagements are developed,”

transmission and distribution cables and

he said. Long-term energy auctions should

transformers, said Arjona. There are over

include this social angle, said Hernández:

110 cable manufacturers present in the

“Contracts should be given to companies

country, creating a MX$50 million (US$2.5

that have the biggest positive social impact,

million) yearly business, according to Market

beyond the ever-important business case.”

Data Mexico. Nuevo Leon, Baja California

Discussing the current potential changes

and Sonora are the major cable producers

to the regulatory framework of the 2014

in Mexico.

Energy Reform, the experts agreed that it is important to listen to all stakeholders

Energy drives the development of Mexico’s

before taking a decision, including players

industries, said Hans Kohlsdorf, Founding

from different industries.

Partner, Energy 2 Market. He pointed out that

THE BENEFITS AND RESPONSIBILITIES OF A SUSTAINABILITY PARTNER Suppliers of renewable energy are

considering social and environmental issues

b e c o m i n g awa re o f h ow m u c h th e i r

when making their purchasing choice. This

clients need them to build a much broader

leads companies to bet on Corporate Social

spectrum of options and services that can

Responsibility (CSR) strategies.” In her view,

reflect a sustainable image and agenda,

it is not the role of a sustainability partner

according to Enel Green Power’s Head of

to question or interrogate these motives

Sustainability, Montserrat Palomar.

but to align themselves with the causes of each company. The partners should use

The rise of new roles for clean energy

these incentives as a springboard to insert

p ro d u ce r s , su c h a s En e rgy Adviso r y

sustainability goals into every facet of a

and Sustainability Partner, happened in

company’s strategy. “Sustainability is no

response to corporate incentives that make

longer an added value but an integral part

sustainability an incrementally larger part

of business strategy,” insisted Palomar.

of company identities. Some corporations are looking to completely overhaul their

According to Palomar, sustainability solutions

organizational paradigm to since rely

are not created in isolation, particularly

fulfill social responsibility goals, whereas

when it comes to energy use. Therefore, a

others are simply adapting to new legal

good sustainability partner advises clients

requirements or customer demands. As

to adopt an ecosystem scheme where the

Palomar put it, “Consumers are increasingly

impact of actions and the development of

C onfe r ence H ighligh t s supply chains are continuously considered.

deeply respects human rights, so the

Sustainability partners generate value for

environmental impact of renewable energy

their clients but do not seek exclusivity in

construction projects is just as important

their relationships. This associate might

as its impact on communities. Overlooking

already be the same company that supplies

this issue can lead to unfortunate situations,

the client with green energy, but does not

exemplified by the social turmoil at some

aim to be the client’s only supplier of this

wind farms in Mexico’s southeastern states.

kind. In other words, a sustainability partner

“The value of clean energy needs to be

seeks to expand its range of services and

democratized,” added Palomar.

advisory so that it can avoid conflicts of interest, which generate decisions that only

Ultimately, one of the most important

benefit the partner.

functions a sustainability partner fulfills is offloading the client’s environmental and

Palomar believes that cleaning up a client’s

social risk. If this associate does the research

energy consumption model can solve many

and networking necessary to guarantee that

sustainability issues at their root. Therefore,

all companies in a supply chain have strong

clean energy producers and suppliers are

commitments to sustainability, climate

ideal for the role of sustainability partner.

action and human rights, the client can lean

The impact generated by clean energy

on this information to make contracting and

consumption, especially by large corporate

purchasing decisions in a risk-free space.

entities, is immediate and reaches further

“We can ask suppliers for specific metrics

than other possible changes. Palomar also

and evaluate them. Our ultimate goal is to

argued that energy companies also need

guarantee the social and ethical performance

to point a critical lens inward and address

of all companies involved so that those

sustainability issues in the construction

achievements can be added to our own

o f r e n e w a b l e e n e r g y p owe r p l a n t s .

and become part of our value and service

Sustainability integrates social goals and

offering to clients,” concludes Palomar.

THE NEW HOUSE RULES: GRID CODE 2.0 B uilding on acquired experience and

The code is an important tool to safeguard

acknowledged shortfalls, Mexico’s Energy

the desired efficiency, quality, reliability,

Regulatory Commission (CRE) recently

continuity, safety and stability of the

drafted and published the Grid 2.0 Code.

National Electric System (SEN). While

C onfe r ence H ighligh t s the verbose and complex document may

Challenges to Implement Ahead

present challenges for market players, satisfying new compliance standards will

The Grid Code 2.0 brings along various

help bring greater stability to the country’s

c h a l l e n g e s w i t h i t s a i m to a d d r e s s

grid even as it faces an accelerated energy

discrepancies at interconnections and load

transition.

centers. This a previously unmonitored environment, said Monica Samudio, Country

“ It is not about moving against or in

Managing Director, Circutor. Those that need

favor of certain groups, but rather about

to comply face a time crunch in which they

thinking in a more social mindset that

are expected to prepare and meet new

considers all end- users ,” said H éc tor

compliance standards. One of the biggest

Beltrán, Member of the Board of Directors

changes comes for companies in medium

of the International Council, CIGRE Mexico.

voltage with a load center demand of above 1MW. Before, these players were formally only

W h e n th e e nti re e n e rg y m a r ket wa s

required to balance current. Now, they need

controlled by CFE, there was no need for

to mind the power factor and quality too.

an exceedingly complex national energy grid. The introduction of the 2014 Energy

En e rg y u s e r s m u s t co m e u p with a n

Reform changed everything- Within two

approach informed by a detailed grid

years, CFE had constructed access to the

study that indicates where their shortfalls

grid for a wide variety of companies. The

are so that they can address them

reform’s purpose was to provide an equal

swiftly. As to how much it would cost to

play field in which market participants

comply, Samudio suggests to get close to

could participate and avoid overcharges,

companies with experience in the matter

disruptions and blackouts. As problems

fi r s t to e s t a b l i s h a n a d e q u ate , co s t-

arose over time, it became clear that

effective plan first, before worrying about

the previously guiding framework and

the price. A greater energy efficiency

co m p l i a n ce s t a n d a rd s n e e d e d to b e

because of this plan’s implementation

adapted in order to bring better stability

would be a major added benefit. “In any

to the grid.

case, compliance will be cheaper than paying fines,” Samudio said.

“Mexico’s energy grid has learned from various best international practices and

T h e n ew G r i d C o d e i s a n ex p a n s i ve

applied them domestically,” said Alejandro

d o c u m e n t , d e t a i l i n g m a n y s p e c i fi c

Reynoso, Director, Diram. This knowledge

functions and responsibilities for each

comes partially from the commitments

market player, which includes CFE and

outlined in the 2015 Paris Agreements.

grid operator CENACE . Consequently,

This has not been a simple process but it

the principal challenge for many will be

has been worthwhile, explained Reynoso.

accessing the right technical-regulatory

C onfe r ence H ighligh t s expertise. This requires close study to

e ffi c i e n tl y tr a n s p o r ti n g e n e r g y f ro m

understand the code’s implications and

source to end users.

strict implementation of remedies, all while dealing with several gray areas, said Hector

The experts agreed that CRE’s formation

Beltran, Member of the Board of Directors

of a knowledgeable consulting committee

of the International Council, CIGRE Mexico.

h a d b e e n a wise m ove , as it allowe d

A failure to refer to experts will likely lead

exper ts from both public and private

to erroneous works plans, involving costly

se c tors to com bin e th eir knowle dge .

mistakes ranging from missing compliance

Relying on a single institution to create

sta n da rds to un n e cess a rily following

regulation would be suboptimal, argued

compliance standards required for other

t h e ex p e r t s . T h e r e f o r e , C R E s h o u l d

functions.

continue to open its doors for industry participants and specialists to refine the

Load centers are becoming more efficient,

Grid Code further. Ultimately, the Grid

yielding a greater holding capacity. This

Code 2.0 dictates how players should

leads to greater a vulnerability for the grid,

act within the system, aiming to protect

as the bigger size comes with a matching

the SEN from disruptions. It therefore

capacity to cause disturbances. Good

stands outside of the regulatory noise

connection standards for load centers

within the Wholesale Electricity Market

are therefore of the essence. Adequate

(WEM), as the document does not mention

planning , operation and coordination

anything regarding tariffs, power purchase

will be impor tant as the system faces

agreements (PPAs) or energy costs. “The

continued challenges regarding

Grid Code’s use will not change, which is

intermittency and other disruptions while

a strength,” concluded Beltrán.

REDUCING RISKS, BUILDING LEGAL PRECAUTIONS IN ENERGY CONTRACTS Despite its strong recent grow th , the

all legal precautions and understanding

energy sector is going through uncertain

the nature of contracts to mitigate risks,

times due to regulator y issues , which

agreed industry experts.

erode the trust of players aiming to close long-term power purchasing agreements

“There are several contracts that were

(PPAs). Although this uncertainty remains

signed a long time ago, when situations

a reality, it is possible to continue doing

such as th e pa nde mic or th e curre nt

business in the energy sector by taking

electricity reform proposal were

C onfe r ence H ighligh t s almost unimaginable. Contrac ts must

to sign up when rates are low and offer

be structured to protect both parties.

greater flexibility to shop around for better

T h e m a i n c o n c e r n i s to u n d e r s t a n d

rates when contracts run out. Long-term

everything about contracts, including their

PPAs offer stable and predictable rates,

implications. It is vital to comprehend all

but require a greater level of commitment,

its components from the very beginning,

according to Constellation. Even climate

as well as its future scenarios and risks,”

change itself has become an additional

said María José Treviño, Country Manager,

risk regarding changing contract terms,

Acclaim Energy.

pointed outEdmond Grieger, Partner, Von Wobeser y Sierra.

The number of energy companies competing in the Mexican energy market has grown

The Mexican energy market evolved rapidly

exponentially over the past years. New

and already boasts a lot of investment and

available options created different contract

strong internal competition. However, it

risks. Other more external factors, such as

is still not a buyer’s market, said Santiago

the Ukraine and Russia conflict elevating

Villagomez, CEO, Energía Real. “It is a

gas prices, higher exchange rates and rising

strange situation for the sector. Legal

inflation caused further threats to stability.

uncertainty is driving all players to more

All this risk must be shared between the

complicated negotiations and contracts

seller, buyer and intermediaries, said Diego

with different terms.” Regarding distributed

Arriola, Founding Board Member, NxtLab.

generation (DG), Villagomez explained that

Getting rid of Mexico’s pre-2014 Energy

short-term commitments are thwarting

Refo rm l e g a c y se lf-su p p ly co ntra c t s

business due to DG’s unique offer compared

therefore makes sense, since these contracts

to self-supply and qualified supply. “When

are outdated. “The migration toward the new

clients ask for shorter terms, it becomes

Electricity Industry Law (LIE) was expected.

complicated. In DG, you must be able to

Self-supply contracts have a deadline

amortize the investment for a particular

defined in the interconnection contract, too.

project on the long term.”

PPAs must be transformed optimally way to distribute risks,” Arriola said.

Qualified supply is the supply of electricity within the wholesale electricity market (WEM) to industrial customers who have

“You must consider the

electricity demands over 1 MW, explained

environment and current

Lilian Alves, Director of Strategic Planning,

uncertainty. Both client and

Mitsui & Co. Power Americas. Contracts

supplier should be aware of

must be revised with close attention, she

the situation and understand

agreed. “You must consider the environment

the contract they are signing.”

and current uncertainty. Both client and

Lilian Alves

Director of Strategic Planning | Mitsui & Co. Power Americas

supplier should be aware of the situation and understand the contract they are signing.” Sometimes, clients need help to understand all the components within contracts, said Alves. “We translate concepts and make

The first set of risks in energy contracts

comparisons for clients so that they feel

includes factors affecting the base level of

more comfortable with what is written.”

fees charged, including their credit, billing

Mitsui also runs simulations of bills before

and renewal. Another important decision

signing contracts. “These simulations cover

is whether to make short-term or long-

normal cases, aligned with what is expected,

term contracts. Currently, legal uncertainty

as well as unplanned phenomena such as a

is driving players to prefer short-term

higher gas price or increased CFE rates. The

commitments, which create the opportunity

simulations allow the client to understand the

C onfe r ence H ighligh t s contract, providing them with knowledge so

to the right advice can help companies

that they feel more comfortable throughout

reduce costs, mitigate risk and secure an

the contract’s term.”

improved energy reliability, said Treviño.

Navigating the Mexican energy market is

PPAs must be explained to clients by

no easy endeavor. However, having internal

outlining their consumption profile, the

organization, external support and access

product they buy, the final price to be paid and possible penalties in case the contract is canceled. Further information regarding

“Hydroelectric power arrived in

permits and regulations, as well as about

Mexico at the beginning of the

f a c to r s like fo rce m a je u re situ atio n s

20th century, the first

or regulator y changes should also be

installations were located at

provided, said Arriola. Understanding

textile factories.”

a n d f uture - p ro ofi ng co ntra c t s in th e

Jacobo Mekler

President | AMEXHIDRO

energy sector is more important than ever amid global uncertainty, settled the energy experts.

SEEKING CLARITY REGARDING THE POTENTIAL OF HYDROPOWER Deciding how important hydroelectric

in the calculations for the future potential

power will be in the energy transition and

of hydroelectricity. Merkler compared the

in a hypothetical future clean energy matrix

assessments made by the Ministry of Energy

is complicated, given the many advantages

with those made by the National Commission

and disadvantages that must be weighted

for the Efficient Use of Energy (CONUEE).

against each to reach a proper conclusion,

His findings were exceedingly unusual.

asserted Jacobo Merkler, President, Mexican

CONUEE’s 2009 briefing claimed that future

A sso ciatio n of Hyd ro e le c tric En e rgy

hydroelectric power potential in Mexico varied

(AMEXHIDRO).

between 19,600MW and 53,00MW. However, SENER found that potential to be 5,500MW in

Merkler established that hydropower might

2014 and 1,631MW in 2016. Merkler noted that

be the oldest of Mexico’s renewable energy

this decrease is not common when measuring

sources: “Hydroelectric power arrived in

the potential of other energy sources, whether

Mexico at the beginning of the 20th century,

renewable or not. He then theorized that an

the first installations were located at textile

important factor behind these irregularities

factories.” Large hydroelectric projects such

may be that the underlying information is not

as Infiernillo and Chicoasen are fundamental

being gathered and made available as it used

c h a p te r s i n t h e h i s to r y o f M ex i c a n

to be. “We have stopped measuring the flow

infrastructure and nation-building. According

of rivers like we used to. This lack of data leads

to the energy ministry’s numbers, as found in

to these uneven conclusions,” he said.

the latest PRODESEN, hydropower capacity in Mexico amounted to 12,614MW by the

Merkler believes that the advantages of

end of 2020. It accounted for 14 percent of

hydroelectric power are well known and

Mexico’s total energy matrix and 44 percent of

established: “Due to its dispatchability and

its renewable capacity. Most of this capacity

ability to foster control, hydroelectric power

can be found around Mexico’s Pacific coast,

allows other intermittent renewable energies

particularly in the states of Chiapas, Guerrero

to participate in the energy mix. While the

and Nayarit.

development of a hydroelectric project takes between 7 and 8 years, its useful life

It is precisely in government documents such

is between 50 to 100 years. In Mexico, the

as the PRODESEN that a discrepancy arises

average age of a hydroelectric plant is 46

C onfe r ence H ighligh t s years.” Hydropower’s investment needs

complexity exponentially when it comes

are the highest when compared to popular

to development. “According to Mexico’s

renewable energy categories, costing

general water laws, power production

US$1,800,000/MW, as opposed to wind’s

ra n k s s eve nth i n wate r co n s u m pti o n

US$300,000/MW and solar’s US$120,000/

priorit y, be hind human consumption ,

MW. Nevertheless, its ability to generate a

animal consumption, agriculture and other

positive economic spillover regarding added

considerations. Furthermore, the Kyoto

value leaves wind and solar far behind.

Protocols limit how much energy a hydro dam can generate in relation to the amount

The disadvantages of hydropower can

of land it has to flood, so that limits the

be more difficult to discern, since the

scale of projects too,” emphasized Merkler.

social and environmental impact of each project must be assessed individually.

There is also the question of innovation:

All hydroelectric power projects must

whereas solar and wind power technologies

c o n s i d e r m o r e t h a n t h e i r te r r i to r i a l

have evolved continuously over the past

impact over neighboring communities

decade, reducing their cost and increasing

and ecosyste ms , as do all re n ewable

their efficiency, hydropower components

e n e r g y p r o j e c t s . Ye t h y d r o p o w e r

have changed little. Merkler concluded that

projects must also consider the water

a concerted effort from public authorities

rights of communities and farmers that

is needed to grant hydroelectric power

could be hundreds of kilometers down

its highest possible position in Mexico’s

the river. Therefore, all the legal and

energy matrix. Nonetheless, the ambition

social risk calculations that come with

that these developments could evoke must

hyd r o p o w e r p r o j e c t s i n c r e a s e t h e i r

also be tempered with its limitations.

KEY POWER PRODUCERS SHARE INSIGHT ON GLOBAL PRODUCTION TRENDS The COVID-19 pandemic underlined the

face on the back of a war between Russia

importance of renewable energy resources,

and Ukraine. Already, European consumers

which in 2021 demonstrated their resilience

are seeing dramatic price hikes, which will

in face of the pandemic’s challenges. What

have a reverberating effect throughout the

is more, private companies renewed their

economy. “Access to electricity is a human

commitments to the energy transition

right to which companies in the energy

through more aggressive ESG practices, with

sector must be committed,” said Gerardo

more than 21 percent of the world’s largest

Pérez, Vice President and Country Manager

companies outlining net-zero commitments,

Mexico, EDF Renewable Energy.

said Ana Ludlow, Chief Commercial Officer, ENGIE. Combined, these demands are

Although most economies have begun

pushing energy markets around the globe

their energy transition years ago, the surge

to develop national energy transition

of energy demand during the COVID-19

strategies and generate more power while

pandemic confirmed that countries must

reducing fossil fuel dependency.

accelerate their efforts. Solar and turbine technology has advanced dramatically.

The emergence of a global digital

Even though cutting energy costs will play

economy during the COVID-19 pandemic

a role in fomenting greater adoption, it

has highlighted the importance energy

should be completed with complementary

g e n e r ati o n p l ays i n th e d a i ly l ife of

technologies, such as other renewable

consumers and, by extension, the economy.

technologies, battery storage capacity, and

Energy disruptions have a salient impact

data-analysis. “At ENEL, we have already

on economic productivity, most recently

begun to develop various large -scale

exemplified by the energy crisis Europeans

projects involving solar, wind and energy

C onfe r ence H ighligh t s come for this reason, according to the International Energy Agency (IEA). For now, the business case for hybrids needs to be built out further. “Markets are trying to define a standard for hybrid projects that incorporates battery storage,” said Freddy Obando, Vice President Mexico, Central America & Caribbean, AES. In 2021, demand for renewable technology surged, in turn has renewing existing fears related to how to tackle its problematic intermittency. However, “ The drive to d e c a r b o n ize s ys te m s h a s co nv i n ce d stakeholders that renewable energy is the go-to solution,” said José Luis García, CEO, storage as a holistic and cost-competitive

Zuma Energía.

solution,” said Public institutions and companies alike have Bruno Riga, Country Manager, Enel Green

understood that they cannot get in the way

Power Mexico. “The fact that renewable

of the global energy transition. Emerging

energy is f undamental to the energy

economies have trouble guaranteeing the

transition is largely because of the efforts

reliability of their energy systems, especially

made by power producers years ago,”

in the global south where markets are

added Riga.

not yet mature but grids are aging. New applications, such as data analysis applied

Renewable energy technology has gotten

to energy generation, stand to revolutionize

cheaper and more efficient. The greater

the sector and make energy generation more

competitiveness that storage capacity

efficient. “Data management will provide

provides can mitigate an important deficit

real-time insight into how the customer uses

in renewable energy generation. Current

energy while producers analyze how they

projections indicate that global battery

deliver energy,” said García.

capacity will grow 56 percent over the next few years, to reach an estimated

Moreover, while the technology for the

storage capacity of 260GW by 2040.

commercial production of green hydrogen

This capacity can provide the control and

is only at its beginnings , it will likely

flexibility needed to address intermittency,

play a critical role in global efforts to

one of the biggest problems plaguing

decarbonize within the next years. There

the use of renewable energy generation.

are currently more than 350 pilot projects

Altogether, the potential to hybridize has

in development, which promise to add a

made renewable energy technology the

54MW of green hydrogen capacity to the

most attractive global option. Renewables

global energy market. Its main inhibitor, as

will like see an accelerated adoption

with many new technologies, is overcoming

in 2022 in the following four years to

the technology-cost barrier.

TRACING THE DESTINATION OF MEXICO’S ENERGY POLICY As the legislative conversations surrounding

Victor Florencio Ramírez, Spokesman,

the latest electricity reform head toward

Platform Mexico Climate and Energy.

Congress’ spring sessions, currently available information can help clarify what the impact

Ramírez believes that to calculate the impact

would be of this reform should it pass, said

of the current changes on the electricity

C onfe r ence H ighligh t s

sector, the industry must take stock of

the alterations, no new intermittent power

what exactly changed first. Back in Dec.

production was allowed into the system,

2018, “independent energy producers had

effectively favoring CFE’s thermoelectric

energy contracts that were valid until 2046

plants over renewable energy generation.

and self-supply legacy contracts were valid

By March 2021, a new reform was put on

until 2039. This included combined cycle

the table, which resulted in widely reported

generation and even some wind energy, along

lawsuits and subsequent amparos. This led

with considerable middle and long term-

to a new proposal to change the constitution

auctions accounting for up to 9GW,” said

and avoid further lawsuits in Oct. 2021. The

Ramírez. There were five major projects for

reform proposal will now be discussed by

the expansion of transmission infrastructure,

both chambers of Congress.

considered necessary to solve problems for the national electricity grid.

Throughout these developments, Ramírez noted that government officials were

That December, the government enacted

warned that the changes oppose the open

several policies to halt these developments.

market policies that could keep down energy

This includes the cancellation of all further

costs, the original goal of the government.

auctions, in a manner that Ramírez Cabrera

However, the chief criticism of these policies

personally “considers to be illegal.” Tenders

was their lack of environmental awareness.

fo r th e co ns tru c tio n of tra nsmissio n

Many critics pointed toward the increase in

infrastructure were canceled, although the

fuel oil’s production and consumption as an

Mexicali-Hermosillo transmission project was

example of negative outcomes for Mexico’s

later relaunched as part of the 1GW Puerto

climate change mitigation goals. Ramírez

Peñasco solar project. No further generation

emphasized that the energy ministry’s

permits were issued and uncertainty crept up

own data admits the issue by calculating

on the sector’s private initiative. Before the

an increase in emissions for 2024 if the

efforts to reform the sector materialized, the

reform passes. Such a surge would not allow

COVID-19 pandemic “is used as an excuse” to

Mexico to meet its 2015 Paris Agreements

change CENACE policies in Apr. 2020. With

commitments. The Ministry of Energy’s numbers also claim that renewable energy generation would begin to recover by 2025,

“The most expensive power

but Ramírez highlighted that this will be

producer we have in Mexico is

impossible if renewable projects, many of

CFE. Therefore, electricity

them privately developed, do not begin their

costs will inevitably increase if

development at this very moment.

the reform is approved.”

Victor Florencio Ramírez Cabrera

Spokesman| Platform Mexico Climate and Energy (PMCE)

CFE’s data reveals that, should the reform pass, a lot of new capacity will be added through combined cycle plants. However, Ramírez questions the degree to which this is possible if the utility’s six combined cycle

C onfe r ence H ighligh t s plants still in tendering processes are not

contemplate a significant increase in

finished by then. Furthermore, a decrease

this kind of energy if the reform passes.

in self-supply and wind energy capacity due

This could be explained by the expected

to several failing contracting modalities will

drought conditions over the coming years.

also represent a serious blow to Mexico’s

If the reform passes, the possibly largest

renewable energy capability.

cause of rising energy prices would be

Cabrera also argued that while the president

most expensive power producer we have

has touted hydroelectric power as the most

in Mexico is CFE. Therefore, electricity

important aspect of his environmental

costs will inevitably increase if the reform

energy agenda, CFE’s numbers do not

is approved,” he concluded.

CFE’s bigger role in the energy sector. “The

INDIGENOUS CONSULTATION, SOCIAL IMPACT EVALUATION DRIVE CERTAINTY Developers are increasingly considering

citizen consultation process required for its

environmental, social and governance (ESG)

approval,” said Luis Vera, Founding Partner,

factors as part of their analysis to identify

Vera & Asociados.

material risks before following through with capital investment. Mexico’s regulatory

Vera outlined the three main instruments

environment provides the energy sector

of social participation: an environmental

with guidelines meant to identify ESG-

impact assessment, a social impact

related risk factors.

assessment and an indigenous consultation. Company outreach to local communities,

T h e c o u n t r y ’s s t r i n g e n t r e g u l a t o r y

whether written or verbal, is important:

requirements were not meant as an inhibitor

it demonstrates initiative and respect

to project development but rather to ensure

toward the communities the company

its timely and successful completion. Central

intends to become a part of. It also enables

to this process is a community-informed

communities to articulate their concerns,

d eve l o p m e n t s tr a te g y, w h i c h a l l ows

which in turn helps both parties identify

companies to build projects that create

appropriate solutions to problems that

added value to the communities in which

could ultimately disrupt development.

they will reside, rooted in a foundation of

However, this process should not be initiated

social legitimacy. “ What differentiates

haphazardly, warns Vera. Ideally, it should

an environmental impac t assessment

be preceded with companies trying to

from any other government permit is the

understand community members, including

C onfe r ence H ighligh t s their cultural nuances, language dialects,

Potential omissions or a failure to take the

demographics and predicted concerns.

process seriously could have very costly

Otherwise, companies risk butchering

repercussions for companies. What is

their developments even before they can

more, social pressure has repeatedly led

begin to take shape.

to project delays and damaged business images, which has a salient impact on

An adequate social impact evaluation

overhead costs, totaling millions of dollars.

i nvo l ve s t h e i d e n t i fi c a t i o n o f s o c i a l

In figures, 25 percent of companies had their

concerns and a rigorous effort to involve all

project proposals turned down because

affected stakeholders in the deliberation

they failed to turn in reports, 14 percent

and development of proposed projects.

saw their project annulled in courts due to

Beyond being a helpful practice to help

community litigations and 28 percent of

secure financing, it has become a legal

projects have faced fierce social resistance

obligation under the 2014 Energy Reform,

during development.

which has formalized the evaluation criteria and outlined compliance standards. “In

Indigenous consultation considers to propose

this regard, the social impact assessment

energy projects directly to the Indigenous

should be understood more as a process

communities that would be affected. The

th a n a s a s tu dy,” s a id M a ría C ris tin a

overarching goal is to develop a strategy

Hernández, Partner, Vera & Asociados.

through which both parties can benefit

Comprehending this process will help

from the project’s development. The input

companies develop well-rounded social

of Indigenous people is especially important

impact and investment reports necessary

regarding impact on the environment, which

to file for permits. The reports should

often serves as a lifeline to communities. In

include information regarding the project’s

Mexico, there are an estimated 6 million

a re a s of i n fl u e n ce , th e i d e nti fi c atio n

people who speak an Indigenous language,

and charac terization of communities ,

spread out across the country’s territory.

prediction and estimation of positive and

Here, the indigenous consultation process

negative social impacts and, finally, a full

facilitates negotiations in good faith, free

social investment plan.

from intimidation or bribery.

ENERGY REFORM, UNCERTAINTY ARE DAMAGING INVESTMENT IN MEXICO Whereas the future of the energy reform

invested in energy will begin their legal fight.

proposed by President Andrés Manuel

However, there will be no new investments

López Obrador is still unknown, the legal

under this uncertainty,” said Alfredo Álvarez,

uncertainty it caused is already damaging

Partner and Energy Segment Leader, EY.

i nve s tm e nt , a s we ll a s th e co u ntr y ’s competitiveness, agreed industry experts.

In 2014, articles 25, 27 and 28 of the Mexican

The future of the country is at stake and all

Constitution were reformed under former

voices must be heard to pass the reform

president Enrique Peña Nieto’s Energy

with the necessary changes, a process that

Reform, explained Claudio Rodríguez, Partner,

must be resolved promptly, they added.

Holland & Knight. “This was a significant shift. It was the first time that political consensus

“The future of the electricity market itself

was reached across the board. The wholesale

is not the most important for Mexico. What

electricity market (WEM) was established and

is at stake is the country’s competitiveness.

grid operator CENACE, which already existed,

Electricity costs influence how competitive

became an autonomous organization.”

a country is in all industries, which directly impacts employment rates. The worst part is

The 2014 Energy Reform provided Mexico

the uncertainty. Companies that have already

with a historic opportunity to revitalize

C onfe r ence H ighligh t s its energy sector and bolster the overall

of Energy would be a step backwards. The

economy, wrote G oldman S achs . The

2014 Energy Reform achieved a lot, boosted

country’s vast oil resources, including

by an open vision regarding competition and

offshore and unconventional fields, were

how to attract local and foreign investment,”

opened to international companies without

said Javier Mundo, Development Director

privatizing state-owned assets. In the

and Energy Specialist, KPMG.

electricity sector, the existing transmission and distribution infrastructure remained in

CN H played a central role in the

CFE’s hands. However, the reform fostered

organization of the bidding rounds

private sector participation in the other

through which new operators have

parts of the WEM.

entered Mexico’s upstream oil and gas environment, as reported by MBN. It also

“Out of their own conviction and business culture, companies will always respect what the law says. However, companies are entitled to defend their businesses.”

Jorge Pedroza

Director of Energy | PwC

generated significant revenue for the state by commercializing all available Mexican hydrocarbons data to these new operators. Through the creation of CNH, the Mexican government retains ownership over all data pertaining to oil and gas resources. All operators must repor t the results of their exploration campaigns to CNH by law. Since the commission is widely respected as a fair caretaker, operators were usually willing to hand over this

S in ce Pre sid e nt Ló p ez O b ra d o r ’s

valuable information.

administration began in 2018, uncertainty arose in the energy, oil and gas sectors

The country faces three scenarios

because of the president’s far-reaching

regarding the new reform’s approval,

campaign promises to rescue PEME X

said Rodríguez. It can be rejected, which

and CFE at the cost of further private

is “very unlikely,” approved verbatim, or

participation. By the end of 2021, López

approved “with substantial changes,” as

Obrador had sent an initiative to Mexico’s

the most probable scenario.

Congress to reform articles 25, 27 and 28. This reform was originally known as the

Regardless of what scenario ensues, the

electricity reform since its main intention

challenge comes with its implementation,

is to create greater state control over the

said Jorge Pedroza, Director of Energy,

electrical sector, eliminating competition

PwC. “Following the 2014 Energy Reform,

to favor CFE. If passed to the letter, the

i t w a s a c h a l l e n g e to t r a n s l a te t h i s

reform could seriously harm the country’s

written law to the real-life operations

development, the experts agreed.

of companies. Whatever the outcome, the real point is to see how the resulting

Although the reform was originally thought

document’s tenets will materialize in the

to be focused on electricity, the oil and gas

sector.” Although the 2014 Energy Reform

industry is also implicated, as it proposes

provided legal certainty on several fronts,

the elimination of the Energy Regulatory

many others remained pending. Some

C o m m is sio n (C R E ) a n d th e N atio n a l

issues were solved and others forgotten,

Hydrocarbons Commission (CNH). These

recognized Pedroza . Companies must

independent regulators have the autonomy

be prepared to deal with these risks and

to foster a fair competition between state-

resort to legal action, he added. “Out of

owned and private companies in the market.

their own conviction and business culture, companies will always respect what the

“In the oil and gas sector, suppressing CNH

law says. However, companies are entitled

and handing over its functions to the Ministry

to defend their businesses,” Pedroza said.

C onfe r ence H ighligh t s For Mexico, the most beneficial outcome

that companies are regulated, it is legal

is that the reform is passed as soon as

uncertainty and sudden rules changes,”

possible, whatever the outcome may be,

concluded Vázquez.

said Álvarez. “No one is investing because there are no clear rules in the sector.

All stakeholders must carry out efforts to

Even if there were, the government does

foster an efficient electricity sector for the

not comply and tries to push secondary

overall good of Mexico, said Vázquez: “We

regulations. No matter if the new reform’s

need to continue developing our oil and gas industry, to take optimal advantage of our natural resources.” International implications play a key role in the future of Mexico’s energy sector and the economy in general, said Benjamín TorresBarrón, Principal, Baker McKenzie, who explained that regardless the outcome of López Obrador’s reform, “the damage has been already done, due to the message it sent and the uncertainty it created.” Beyond Mexico’s international sustainability commitments, the USMCA has already been enforced. The agreement has mechanisms to protect US company investments in Mexico, he added.

rules are downright bad or unfair, there will still be investment in Mexico. We will

To a d d re s s th e refo rm a n d cre ate a

not have the world’s best energy prices,

dialogue between diverse players, the Open

but there will always be investment when

Parliament forums were created. It included

the rules are clear even if they are not

the private sector’s insight through the

evenhanded,” he emphasized.

participation of associations such as CCE, CONCAMIN, CANACINTRA and COPARMEX.

Pathways for Mexico’s Energy Sector Development

On Feb. 28, the parliament ended following 42 days of discussions, 25 open forums and presentations of 135 expert panelists.

None of the possible scenarios would

Congress remains divided on the reform’s

be actively catastrophic, argued Valeria

approval, reported MBN. While discussions

Vázquez, Energy Segment Leader, Deloitte.

surrounding the new reform will continue

Energy sectors across the world, from

during the following weeks, it is crucial for

hydrocarbons to electricity, are highly-

Mexico that it passes promptly. However, it

regulated industries. Countries have the

should pass with as many amendments as

sovereign mandate to regulate their natural

possible to reestablish trust in the sector, so

resources, she added. “The problem is not

that it can continue attracting investment.

FOR MEXICO’S ENERGY STORAGE DEVELOPMENT, THE TIME IS NOW As Mexico’s generation capacity continues

Carla Ortíz, Country Manager, RER Energy

to increase at a pace that its transmission

Group, highlighted that the relevance of

infrastructure cannot keep up with, the

storage discussions in the industry has

development of storage infrastructure

never been as high as it is now, especially

becomes even more urgent if the Mexican

since storage project development is

electricity system is to function efficiently

understood as a vital part of the global

and reliably, agree industry experts.

energy transition. “We have waited a long

C onfe r ence H ighligh t s time for this great leap forward in the energy

their efficiency increases, it becomes clear

transition, which is now beginning to gain

that batteries are a great ally to achieve

momentum in Mexico,” said Ortíz. She also

decarbonization,” he said.

mentioned that the development of demand for such infrastructure is a process that

Alexandro Debler, Sales Director Industrial

other countries have already experienced

Power Generation, Siemens Energy, agreed

organically. This gives Mexico a chance to

with Moctezuma. He argued that Mexico

learn and get ahead of the demand, which

must begin boosting the competitiveness

will inevitably show up if it does not exist

of its nationally manufactured battery

already. As Ortíz put it, “Other countries

products. “The implementation of battery

have invested a lot of time to perfect

storage, both in existing power production

their storage systems. If this knowledge

projects and in the industrial future, is the

is exploited, the learning curve for Mexico

potential energy area with the greatest

could be shorter and more efficient.”

benefit for Mexico,” he emphasized. Debler said that battery storage created a new

Emmanuel Moctezuma, Energy Storage

way of managing costs for operators, since

Business Development Director, AES ,

energy could be bought at lower prices and

s p e c i fi c a l l y n o te d C h i l e a n d t h e U S

sold when prices increased. While lithium

a s su cce s s s to rie s . H e di ff e re ntiate d

is currently the leading energy storage

between the construction of large scale-

technology, hydrogen would end up being

storage projects and the participation

the industry standard as its use continued

of Mexico in the supply chain of storage

to expand globally, predicted Debler.

co m p o n e nt s , s p e ci fi c a lly th e lith i u m required for battery technology. “There

Patricia Tatto, Americas Vice President,

is an opportunity for lithium batteries

ATA Renewables, underscored the fact

to be manufactured in Mexico, although

that energy storage is key for renewable

it will take some time for the country to

energy generation due to the role it plays

reach the level of competitiveness we

in flattening and stabilizing these peak-

are seeing at Asian manufacturers,” said

prone energy sources: “Regulating the

Moctezuma. He made a parallel between

frequency of the electrical system and

battery and solar panel manufacturing.

guaranteeing the reliability of the grid

Mexico’s manufacturing capability for both

are priorities for Mexico,” she said. Debler

types of components is slowly growing

agreed, adding that “the implementation

toward the competitiveness of products

of b at te ries is n ot o n ly at tra c tive to

from Asian markets, a benchmark they are

combat intermittency in renewable energy,

fated to reach. Moctezuma also noted that

but can also help in geothermal energy

battery storage projects were essential

generation and in the frequency regulation

to meeting decarbonization goals, a fact

of the power grid.” Tatto also expected

that will become increasingly clearer

a u to m a ti o n te c h n o l o g i e s to p l ay a n

as the economic s of launching these

increasingly larger role in the development

projects start to look plausible. “As the

of storage projects. Through these tools,

costs of storage systems decrease and

electrical grids can be stabilized further via the prediction of peaks, which in turn

“Other countries have invested a lot of time to perfect their storage systems. If this knowledge is exploited, the learning curve for Mexico could be shorter and more efficient.”

Carla Ortiz

Country Manager | RER Energy Group

makes the grid more efficient and resilient. Miguel Osio, Director of Development and M&A, Sempra Infrastructure, highlighted one of the most important larger-scale storage projects in Mexico, the Volta de Mexicali (VDM) power plant. Though it is located in Baja California, the project actually supplies energy to the US-side of

C onfe r ence H ighligh t s

California, using its first phase featuring

needed flexible power into the grid. He

a 1 0 0 MW c apacit y. In the f uture, the

noted that one of the most important

project could grow as large as 500MW.

obstacles standing in the way of storage

Osio mentioned that VDM exemplified

development in Mexico continues to be the

a key trend: “the energy future is based

legal and regulatory certainty of projects.

on renewable energies, such as wind and

“Hopefully, we will soon have clarity from

solar PV Generation.” As such, storage

the authorities regarding regulation, so

is increasingly needed to inject much-

storage projects can take off,” said Osio.

FLEXIBLE POWER, MICROGRIDS FOR RELIABLE & CHEAP ELECTRICITY The changing composition of energy

intermittency has been dealt with. Other

grids has introduced connectivity and

challenges related to this intermittency is

coordination problems, which made them

the stability of the grid, a problem that has

vulnerable to disruptions. By providing

been recently compounded by extreme

stability and control, microgrids represent

weather events. These challenges have

a great market opportunity for Mexico.

created market demand for microgrids,

The technology will likely play a critical

which provide flexible, agile and robust

role in the energy transition of global

energy distribution from end-to-end, a vital

economies too.

requirement for critical infrastructures that depend on stable energy resources.

“The traditional power grid brings larges c a l e g e n e r a ti o n to e n d - co n s u m e r s .

This demand has allowed Bergen Engines

However, the challenges of the 21st century

to grow their global installed capacity to

demand a modern and more flexible grid,”

5000MW, mostly via cogeneration power

said Theodore Lorentzos, Regional Sales

plants. In Mexico, they have a portfolio

a n d B usin ess D eve lo p m e nt M a n ag e r,

of six power plants with a total capacity

Bergen Engines.

of 75MW, concentrated mostly around industrial centers that opted for alternative

The public has put increased pressure

energy sources until Mexico’s energy

on international governments to reduce

grid is fully modernized. Starting in this

their carbon footprint. While governments

country, Bergen has already expanded to

have made strides, they will or cannot

two neighboring economies, prompting

f ully co m m it to a co m p l ete n et-ze ro

the company to open a service center

energy transition until renewable energy

in Queretaro, which is to be inaugurated

C onfe r ence H ighligh t s later this year. The center forms part of the

be built with a combination of technology

company’s larger ambition to spread out to

as required by budgetar y limitations ,

other Latin American economies that face

as well as ge ogra phic constraint s or

similar challenges: unstable grid systems,

strengths,” said Lorentzos. Bergen provides

stringent climate change goals and a

medium-speed natural gas generating sets

growing energy demand. In fact, climate

that include multiple groups of motors that

change itself is poses challenges too, as

provide the ultimate flexibility and control,

grids struggle with unique weather events

able to start and stop almost instantly on

such as last year’s Texas winter storm.

demand. Furthermore, these systems can be completely independent from energy

Until economies can fully mitigate these

grids using their own fuels and dispatch.

challenges , microgrids will remain an

All these benefits come without the need

attractive solution for Latin America’s

to raise carbon emissions. Engines can later

diverse industries, each with their own

even be retrofitted to function with green

specific needs. “A Microgrid is not a physical

hydrogen, thereby giving it adaptability to

type of infrastructure. It is a concept that can

evolve as the energy transition progresses.

PUBLIC-PRIVATE COOPERATION WOULD ELECTRIFY ISOLATED PENINSULAS The territorial coverage of Mexico’s national

efficiency,” said David Martínez, Director,

electricity system is close to 99 percent.

Envision LATAM.

However, public and private sectors must collaborate to reach the full 100 percent.

The history of electricity generation in

E n e r g y q u a l i t y s h o u l d b e i m p rove d

Mexico began in 1879. On Sept. 27, 1960,

substantially in some key areas such as the

when former President Adolfo López

Baja California and Yucatan peninsulas,

Mateos nationalized the electricity industry,

agreed industry experts.

the grid’s coverage was below 45 percent. C u r r e n t l y, C F E ’s c ove r a g e p r ov i d e s electricity access to 98.95 percent of the

“We must change the old vision

country’s population, following 1,587 rural

of a utility-based centralized

and Indigenous community electrification

energy system and migrate to a

projects carried out in 2019. CFE has over

decentralization of energy

335,000 transmission towers and sub-

sources. Communities could

transmission systems, including 110,187km

become self-sustainable this

of transmission lines and 2200 substations.

way.”

Aldrich Richter

Managing Director | Bergen Engines LATAM

Historically, CFE has done a great job electrifying Mexico, said Aldrich Richter, M a n a g i n g D i r e c t o r L ATA M , B e r g e n Engines: “Currently, most parts of the countr y are interconnec ted and have access to electricity. The problem lies in the

“The country’s electricity supply must

quality of electricity that reaches remote

be reliable and cost-efficient. Solutions

and underprivileged areas, which suffer

are often considered for to provisionally

from incorrect voltage, energy spikes and

solve problems on the short term, due to

current variations. This slows down the

budget cuts and the public sector’s debt.

development of these communities.”

It is time to make a deep diagnosis and establish a long-term plan for the economic

Although there are several challenges

development of Mexico, taking advantage

linked to technology, grid capacity or

of technology, digitalization and energy

resource availability, solutions are already

C onfe r ence H ighligh t s out there, said Norma Almanza, Director,

Energy: “ This challenge prevents the

Generac LATAM. “Mexico’s big challenge

implementation of electrification plans

is the change of mentalit y needed to

seeking to reach distant places such fishing

adopt new technology,” added Almanza.

communities and the mountains. In addition,

This shift must occur in four different key

demographic acceleration and migration

areas: the government, manufacturers,

have caused service regularization trouble

technology suppliers and academia.

in Tijuana, where small areas are left without electricity.”

Changing this mentality is indeed essential, agreed Richter. “We must change the old

Though Baja California faces serious supply

vision of a utility-based centralized energy

challenges, its coverage looks decent, said

system and migrate to a decentralization of

Muñoz. “We are still missing 0.7 percent of

energy sources. Communities could become

coverage, which is the most difficult part

self-sustainable this way,” he continued.

either due to legal troubles or distance

All challenges are solvable without major

issues ,” he added . Possible solutions

complications because technology is already

include microgrids, distributed generation

there, he added. “It is about political will and

(DG) and isolated photovoltaic solar

investment,” decided Richter.

systems, he added. “Through public-private collaboration we can take solutions to these

Although Yucatan and Baja California

communities to achieve the 100 percent

face similar problems, both have specific

coverage, at least in Baja California,” Muñoz

challenges to solve. “Both peninsulas need

concluded.

access to clean transition fuels, such as natural gas. They both have natural resources

Energizing Yucatan

like wind, sun, as well as a great potential for battery storage systems. This technology

Yucatan is a “paradise of opportunities,”

has already been developed, now it should

said Martínez. However, it faces technical

be implemented,” explained Richter.

challenges. The state has a precarious energy supply due to its isolation from the

Electrifying Baja California

rest of the national grid and insufficient access to the natural gas pipeline system,

B aja C alifornia’s gird system is

as reported by MBN. In 4Q21, Mauricio Vila

interconnected to the US via two 230kV

Dosal, Governor, Yucatan, and Minister of

alternating current transmission lines.

Energy Rocío Nahle discussed CFE plans

Baja California Sur’s electricity system

to construct two gas-fired combined cycle

is completely isolated from the national

power plants in Merida and Valladolid,

grid, however.

with a co m bin e d inves tm e nt of ove r US$650 million.

Baja California’s multitude of challenges begin with uncertainty in land tenure,

The peninsula’s electricity demand grows

said David Muñoz Andrade, CEO, Diurna

by 8 percent per year, almost triple the

C onfe r ence H ighligh t s Mexican average, said Martínez. “Currently,

On the other hand, the transmission line

Yucatan misses an added installed capacity

that connects Yucatan to the rest of the

of 200MW. By summer 2022, the situation

country presents yet another challenge, said

will worsen due to the heat,” he continued.

Martínez: “Blackouts happen because the

CFE dispatches around 40 percent of the

line is designed for up to 1050 MW. However,

electricity used in Yucatan. “The company

the line is oversaturated and overheated.

operates with obsolete power plants by

CENACE frequently turns it off to protect

using different fuels. Combined cycle

it.” Solutions such as renewable energy

centrals often operate using diesel. Power

plants and DG must be interconnected.

plants need to confront operational failures,

Better long-term planning is required, with

intensive maintenance and fuel shortages,”

collaboration between the public and private

continued Martínez.

sector,” he added.

NAVIGATING THE INCREASING COMPLEXITY OF ENERGY CYBERSECURITY Demand for cybersecurity services from

increase through 2020 and 2021, as COVID-19

energy facility operators has skyrocketed

drove cyber espionage activity and created

as more high-profile attacks reach headlines.

opportunity for cybercriminals.” According

However, the complexity of a landscape

to the 2021 ENISA Threat Landscape report,

now filled with new regulatory norms,

the Phishing-as-a-Service (PhaaS) business

standards and methodologies has increased

model has been prevalent in past years

signifi c a ntly as we ll , s aid B h a ra dwaj

but is now gaining more momentum and

Vasudevan, Technical Sales, Hitachi Energy

relevance. The Ransomware as a Service

North America.

(RaaS) business model increased greatly in 2021 , becoming one of the largest

Vasudevan chooses to limit the concept of

criminal enterprises in the niche. This is

cybersecurity in clear terms: “Cybersecurity

particularly relevant to Mexico given the

encompasses all measures taken to protect

globally infamous ransomware attack on

communication and automation systems

PEMEX in 2019, considered a precedent for

against unauthorized access, attacks,

this increase of activity and a reference for

disruptions or loss.” He said that companies

understanding the 2021 Colonial Pipeline

beginning their cybersecurity journey can

ransomware attack in the US. These attacks

easily become overwhelmed by the length

are, in Vasudevan’s words, “highly impactful

of the process. All the more reason to begin

on costs.”

the adoption process as early as possible. This is especially the case for energy

This risk has given rise to many new

infrastructure, which is experiencing a

norms, regulations and standards to verify

digital transformation and a parallel adoption

the shielding of international energy

of automation systems. As he puts it,

i nf ra s tr u c tu re . Th ey va r y g re atly by

“Moving into the digital era with confidence

jurisdiction, but one of the most relevant

requires automated, evolving and resilient

standards is the US-based NERC- CIP.

cybersecurity solutions that can overcome

Compliance with NERC-CIP is referred to

significant challenges.”

by Vasudevan as “a good guideline and binding document when it comes to what

Vasudevan explained that the threat

an operator can expect in Mexico.” The

environment has increased exponentially.

relevance of each one of the norms within

Eve r y n ove l te c h n o l o g y f o r e n e r g y

these regulatory packages varies, depending

facilities creates a new network of possible

on whether it refers to technical standards

vulnerabilities, as well as new ways to

to be considered by manufacturers or

exploit old weaknesses. He highlighted that

managerial standards to be heeded by

“cybersecurity attacks have continued to

administrators. For example, Vasudevan

C onfe r ence H ighligh t s notes that IEC62351 and IEEE 1686 are more

to learn why that period was chosen for

relevant to manufacturers, while IEC62443

that access point. The difference between

(former ISO99), NERC-CIP and ISO27000 are

physical and virtual access points is also

more relevant to organizational processes.

key: having an unauthorized person on site is just as much of a cybersecurity matter as

There are many more norms and procedures.

anything happening online. Vulnerabilities

Vasudevan encourages operators to go

need to be identified on both sides of that

beyond following simple procedures and

coin. “The convergence of international

ask what motivates their limitations. For

standards is key for achieving secure

example, if a procedure calls for a password

and interoperable systems,” concluded

to be changed every 90 days, it is important

Vasudevan.

DIGITALIZATION: A GAME CHANGER FOR ENERGY MARKETS W h i l e e n e r g y p l aye r s c h a m p i o n t h e

Until recently, digital innovations were

realization of net-zero energy markets,

singularly reser ved to make hardware

regulators were concerned with how to

te ch n olo gies m o re cos t e ff e c tive , so

operate and regulate such an environment,

that renewable energy systems could

as customers struggled to understand new

become more widely accessible. This

processes. Digitalization promises to solve

neglected internal processes and consumer

these issues by providing market players

requirements . For example, solar and

with the tools to intelligently run complex

wind technology grow their productive

operations. New technology solutions and

capacity exponentially on a yearly basis

hardware applications promise to continue

whilst becoming increasingly cheaper.

making energy generation more efficient

T h e s e a d va n ce s h ave h e l p e d to a d d

whilst providing companies with ways to

162GW, 62 percent of all power generation

explore new market niches, according to

capacity, to the global energy market in

industry experts.

2020, effectively displacing the cheapest fossil fuel option: coal. Utility-scale solar

“The fourth industrial revolution is here

technology has seen the greatest reduction

a n d th e e n e rgy se c to r is o n ce again

in costs, falling a dramatic 85 percent in a

playing a substantial role,” said Ricardo

decade. Now, in most major countries, this

Delfín, Partner and Leader of Industry and

technology is cheaper than coal and gas, a

Markets, KPMG.

fact represented by falling global prices in

C onfe r ence H ighligh t s levelized cost of electricity (LCOE), which

producers can analyze and utilize it: the

fell an additional 13 percent in 2020.

so-called data paradox. As the ‘petroleum of th e n ew a g e ’, th e e n e r g y m a r ke t stands to benefit substantially from data

“Today, power generation

collection, analysis and standardization.

companies have a massive amount

The lat ter has the most signific ance,

of information available at any

where superseding this problem now

given time and place. This

stands to avoid the entrenchment of

drastically improves decision-

disconnect between market players. “A

making.”

lot emphasis and technology has been

Guillermo Bilbao

created to utilize data, but very little effort

Director of Energy & Industry Business | Minsait

has gone into standardizing the data as it is collected at the source,” said Bharadwaj Vasudevan, Technical Sales, Hitachi Energy North America

While these advances should be applauded,

Moreover, to reap the greatest benefits,

the market has largely failed to address

data analysis should be coupled with

end-user demand, a shortfall that was

artificial intelligence and machine learning

recognized by leading market players

so that companies can anticipate new

during the past two years. Created as an

market opportunities as they begin to arise.

inherently innovative market sector, energy

“Today, power generation companies have

players across global economies have been

a massive amount of information available

unafraid to adopt digital solutions. Central

at any given time and place. This drastically

to this metamorphosis is the emergence of a

improves decision-making,” said Guillermo

global data-driven circular economy, which

Bilbao, Director of Energy & Industr y

currently produces data faster than energy

Business, Minsait.

TIME TO TAKE ACTION AGAINST GLOBAL WARMING C l i m a te c h a n g e i s a l r e a d y a r e a l i t y

has launched a series of meetings with world

and all industries must take immediate

leaders since 1972, aiming to build a mitigation

action to mitigate the negative effects of

plan to address challenges ahead. In 1988, the

global warming, said Leonardo Beltrán,

Intergovernmental Panel on Climate Change

Distinguished Visiting Fellow, Columbia

(IPCC) was created and in 1994, the UN began

University’s Center on Global Energy Policy.

hosting the first high-level meetings, called

The sector must work to diversify its energy

Climate Conferences (COPs).

mix before it is too late, he emphasized. The effects of climate change impact Global industry has had a big impact in the

different regions in the world differently,

planet’s temperature disparity. “From the

explained Beltrán. In Mexico, the effects of

1860s to 2022, we have had a temperature

global warming are already noticeable. They

increase of 1C. Human activities make up

will keep getting worse if no action is taken.

almost 100 percent of this increase,” said

“Mexico is one of the big losers if we do not

Beltrán. If the world wants to stop the

increase our global warming action plans.

negative effects of global warming, it is

We must work at both the national and

already time to take drastic action.

international level,” he said.

The impact of human activities on climate

During COP meetings, Mexico has joined

has been documented and led organizations

the initiative of the Nationally Determined

such as the UN to join forces with several

Contributions (NDCs), which form the

countries to fight climate change. The UN

h e a r t of th e CO P s . T h e co u n tr y h a s

C onfe r ence H ighligh t s set its own goals , which are included

it will be easier to reach our goals than

in the Energy Transition Law. Mexico’s

if we wait for tomorrow.” All sectors ,

commitment is focused on increasing

including energy, industrial manufacturing,

power generation through clean energy

transportation and mobility, must take

sources and by reducing CO2 emissions. It

immediate action , he added. In terms

committed to generate at least 35 percent

of electricity generation, Latin America

of its electricity through clean sources by

and the Caribbean are one of the most

2024 and 45 percent by 2030. To achieve

sustainable regions, said Beltrán: “Six out

this, the country has abundant renewable

of every 10MW generated in the region

resources at its disposal, including solar,

come from sustainable sources.” Although

wind, geothermal and hydropower. As

the path toward net zero is still long and

time goes by, the possibility to shape the

full of challenges, the region has already

ideal energy mix decreases, said Beltrán:

made progress by taking advantage of its

“If we use a diverse energy mix today,

natural resources.