IMPACT REPORT
MEXICO ENERGY FORUM 2021
Livestream Sponsor
Networking Platform Sponsor
Gold Sponsors
Silver Sponsors
2021 Energy remains a key driver for development in any country, but Mexico’s strong industrial character elevates its position perhaps even further. Mexico has also joined many other countries in a path to decarbonization, aiming for an ambitious 35 percent clean energy generation capacity by 2024.
Nevertheless, the outlook for the Mexican energy industry is shifting. After years of growing private participation, the sector now sees the government taking back the reins on the Energy Reform and working to reorient the sector to bolster state-owned CFE.
Despite these policy changes, the market still presents several areas of opportunity, and new ones are opening up due to advancements in technology regarding solar, wind and natural gas. In addition, industry stakeholders stress that Mexico’s outlook for the long term is still bright, regardless of what private participation might look like.
During the first virtual edition of Mexico Energy Forum’s 2021 edition, 382 industry leaders joined the two-day summit to highlight the industries’ latest developments. Experts outlined the latest trends and investment opportunities. Furthermore, the forum also provided unique networking opportunities through the intent-based, AI-driven matchmaking technology platform Brella.
On Mexico’s road to meet its clean energy goals, the country’s energy sector’s new stage is being set. No matter what the outcome will be, the private sector will continue to foster Mexico’s energy potential to make it the primary lever for the country’s development.
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C O N F E R E N C E I M PAC T CONFERENCE IMPACT
212
companies
58
14
speakers
How would you rate the quality of the conference program and speakers?
sponsors Breakdown by job title
visitors to the program on MBE website 7,446
conference participants
382
CONFERENCE SOCIAL MEDIA IMPACT
18,460
direct impressions during MEF
click through rate during MEF
3.32%
conference engagement rate
7.59%
42% Meets expectations 25% Exceeds expectations 31% Greatly exceeds expectations
6.2% President/ Board member/ Partner 16.9% CEO/ CFO/ COO/ Director General/ Country Manager 31.5% VP/ Director 28.8% Senior Manager/ Manager 6.2% Energy Director/ Energy Manager 11.0% Engineer/ Analyst
PRE- CONFERENCE SOCIAL MEDIA IMPACT
direct pre-conference LinkedIn impressions
89,937
pre-conference click through rate
3.90%
pre-conference engagement rate
5.41%
C O N F E R E N C E I M PAC T
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.
2,409 matchmaking communications
327 participants
How would you rate the quality of the matchmaking on Brella?
314 1:1 meetings conducted
57% Meets expectations 42% Greatly exceeds expectations
MATCHMAKING INTENTIONS
1,784 600
Total
2,563
179
Trading
Recruitment Investment
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C ompany Attendance • AB Energy Mexico
• Cinepolis
• Frakblock.io
• ABI Administración Bienes Inmuebles
• CIPSA Electrificaciones
• FrontierView
• Acciona
• Circutor
• FSE Suministradora Fenix
• Acclaim Energy
• CIR-MEX
• FUGRO
• Ace Oil Tools
• Citi
• G-advisory México
• ADLV Energia de Mexico
• Clifford Chance
• Gallo Abogados
• Advance Real Estate
• Climatik
• GE Grid Solutions
• AILA Energy
• Coca-Cola FEMSA
• GE Power
• Alsea
• Continental
• GE Renewable Energy
• Alten Renewable Energy Group
• Corporativo AGA GAMI
• General Delegation of Québec
• American Chamber of Commerce
• Costco de México
• General Electric
• American Petroleum Institute
• Creative Foam de México
• General Motors
• AOSocial
• CrossDock Supply
• Genesal Energy
• Apotex
• Deacero
• GIZ
• Arctech Solar
• DNV GL
• Gonzalez Calvillo
• ATA Renewables
• Dow Mexico
• Government of Alberta
• ATF Avtotransformator
• E2M
• Government of Nuevo Leon
• Atlantica Sustainable Infrastructure
• Eaton - Crouse Hinds
• Government of Ontario
• Balam Energy
• EDF Renewables
• Government of Querétaro
• Bayer de México
• Edison Energy
• Government of Sonora
• BBVA
• EDRIVE
• GPI Next Energy
• bioMérieux
• Embassy of Switzerland
• GREENCO
• Bodycote
• Enel Green Power
• GreenPowerMonitor
• Bonatti SpA
• Energy Agency of Hidalgo
• Grupo ABSA
• Bosch México
• Energy Agency of Puebla
• Grupo Bimbo
• British Chamber of Commerce
• Energy Agency of Veracruz
• Grupo Mexico
• British Embassy
• Energy Regulatory Commission (CRE)
• Grupo México Energía
• BRP
• Energyza
• Grupo Mexico Infraestructura
• Bureau Veritas
• ENGIE
• Grupo R
• C&A
• Envision Energy
• Cacheaux, Cavazos & Newton
• Erco Energy and Industrial Solutions
• Canel’s
• ERM
• Capwatt Mexico
• Exterran
• Carbon Trust
• Fastenal
• Casares Carrillo
• Fermaca
• Chamber of Deputees of Mexico
• FIH Mexico Industry
• Huawei
• CI Group
• Forefront Power
• Hunt Energy
• Hacienda Montecristo • Hartree Consulting • HEC • Hitachi ABB • Hotels & Resort Bahía Principe: Riviera Maya
C ompany Attendance • Stabilis Energy
• Iberdrola
• Ontex
• IEnova
• ORBIA
• Indra
• PA Consulting Group
• INERCO
• Pantaleon Energía
• Institute of the Americas
• Pardgen
• Suministradora Fénix
• Itam
• Pilgrim’s Mexico
• TC Energy
• JCI / CBRE
• Primero Energia
• Jinko Solar
• Productos Arpapel
• Starr Companies • Stellasolar Energy Systems
• Techgen • Tecnatom
• JLL México
• Productos Verde Valle
• Johnson & Johnson
• Proterra Capital
• Jones Day
• Publika
• Kannbal Consulting
• Quartux
• Kiewit
• Quimera Energy Efficiency
• Kilpatrick
• Reckitt Benckiser
• Ternium
• KPMG
• RelyOn Nutec
• Thompson & Knight
• Lear Corp
• REPSA Group
• Locusview
• RER Energy Group
• LONGi Solar
• Risen Energy
• Lukoil lubricants Mexico
• Risoul y Cia.
• MAN Energy Solutions
• RM Pharma Specialists
• Mexican Petroleum Institute
• Rosatom Latin America
• Mitiga CO2
• ROSEN Group
• Mitsui & Co. Power Americas
• Royal Eagle Capital Partners
• TÜV Rheinland
• MPC capital
• Saint Gobain
• Vansertec Green Energy
• Murguia / Aries
• Saipem America
• NATGAS
• Sánchez Devanny Eseverri
• National Hydrocarbons
• Schneider Electric
Commission (CNH)
• Schweitzer Engineering Laboratories
• Nemak
• Scottish Development International
• NERA
• Seadust Cancun Family Resort
• Tecnimont • Telmex • Tenaska Marketing Ventures
• TI FLUID SYSTEMS • Tiendas Soriana • Timken • Tradeon Energy • Trafigura
• Vector Renewables • Veolus • Vera & Asociados • Vestas • Vista Oil & Gas
• Nestlé
• SEISA
• Nextracker
• SENER Energy
• Von Wobeser y Sierra
• Nexus Energía
• SER Consultores
• Wärtsilä
• Nordex Group
• Siemens
• Northland Power Energía
• Siemens Gamesa
• Norton Rose Fulbright
• SKF
• OCA Global
• Smurfit Kappa
• Wood Mackenzie • WTS Energy • Zumma Energy Consulting
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MARCH 10 TH , 2021 08:00
NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
08:55
WELCOME ADDRES
09:00 IMPLICATIONS OF THE ELECTRICITY REFORM Speaker: María de los Ángeles Huerta del Río, Federal Deputee, Congress of Mexico
10:00 OUTLOOK: IMPACT OF ECONOMIC GROWTH ON ENERGY DEMAND Moderator: Claudio Rodríguez, Partner of International Energy Practice at Thompson & Knight Panelists: Leonardo Beltrán Rodríguez, Non-Resident Fellow at the Institute of the Americas Carlos Serrano, Chief Economist at BBVA México Alejandro Valerio, Associate Practice Leader at FrontierView Veronica Irastorza, Associate Director at NERA Economic Consulting
11:00 FINANCING TRENDS IN MEXICO’S CURRENT ENERGY LANDSCAPE Moderator: Alan Sakar, Senior Associate at Clifford Chance Panelists: Salomon Amkie, Director of Banking, Capital Markets and Advisory at Citi Ruben Cruz, Energy & Natural Resources Lead Partner at KPMG Alejandro Mendez, CEO at Royal Eagle Capital Partners
12:00
NETWORKING OPPORTUNITY - AI POWERED 1:1 MEETINGS
12:30 POWER PRODUCER PRIORITIES Moderator: Patricia Tatto, Vice President America at ATA Renewables Panelists: Fernando Tovar, CEO and Country Manager at Engie Mexico Ramon Moreno Vergara, CEO at Mitsui & Co. Power Americas Gerardo Pérez Guerra, Vice-President & Country Manager at EDF Renewables México Bruno Riga, Country Manager at Enel Green Power Mexico
13:30
NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
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14:30
GUIDING OFF-TAKERS TO SUCCESS WITH PPAS AND DISTRIBUTED POWER GENERATION Moderator: Edmond Grieger, Partner and Head of Energy & Environmental Practice at Von Wobeser & Sierra Panelists: Pablo Rivero, Country Manager for Mexico at ForeFront Power Diego Blumenkron, Sales Director at Northland Power Energía Ruth Guevara, CEO and Founding Partner at Zumma Energy Consulting
15:15 UNLOCKING THE ELECTRICITY MARKET VIA ASSETS, SUPPLY AND END-USERS Moderator: Angie Soto, Director General of Nexus Energía MX Panelists: Victor Ureta, Director Operations and Risk at Acclaim Energy Lilian Alves, Director of Strategic Planning at Mitsui & Co. Power Americas Hans Kohlsdorf, Founding Partner at Energy to Market Sean McCoy, Director of Energy Services Mexico at Edison Energy
16:00 THE ROAD TOWARD ENERGY TRANSITION: THE UK CASE STUDY Speaker: Mauricio Riveros, Manager en Carbon Trust México
16:15
CORPORATE ESG AND ENERGY EFFICIENCY: BEST PRACTICES IN THE C&I SECTORS Moderator: Elizabeth Mosqueda, Senior Manager at Carbon Trust Mexico Panelists: Monica Samudio, Country Managing Director at Circutor Enrique González Haas, Zone President at Schneider Electric Montserrat Batta García, Energy Manager at Continental Veronica Ordoñez Montes, Innovation & Technology Manager at Soriana
17:00
NETWORKING OPPORTUNITY - AI POWERED 1:1 MEETINGS
19:00
END OF DAY 1
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MARCH 11 TH , 2021 08:00
NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
08:55
WELCOME ADDRESS
09:00 THE VISION OF CNH REGARDING MEXICO’S GAS SECTOR DEVELOPMENT Speaker: Hector Moreira, Commissioner at the National Comission of Hydrocarbons (CNH)
09:45 FROM SOURCE TO CONSUMER: GAS DISTRIBUTION AND INFRASTRUCTURE Moderator: Diana Piñeda, Partner at González Calvillo Panelists: Areli Covarrubias, Commercial Director at IEnova Hector Moreira, Commissioner at the National Hydrocarbons Commission José Aparicio, CEO of Siemens Energy Mexico Aldrich Richter, Managing Director of MAN Energy Solutions Mexico Alma Monserrat Flores Estrada, Expert in Regulation
10:45
LEADERSHIP IN UNCERTAIN TIMES: CHALLENGES AND OPPORTUNITIES FOR THE PIPELINE INDUSTRY Speaker: Jan Frowijn, Vice President USA, Mexico & Central America at ROSEN
11:10 EXPLORE THE UNEXPLORED WITH DIGITAL CONSTRUCTION TOOLS Speaker: Nathan Shabot, Business Development Director LATAM at Locusview
11:35 CHALLENGES AND OPPORTUNITIES IN SMALL UTILITY SOLAR PROJECTS Speaker: Fermin Pérez Casares, Commercial Manager at ForeFront Power
12:00
NETWORKING OPPORTUNITY - AI POWERED 1:1 MEETINGS
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12:30 INNOVATION IS KEY: PROGRESS AND OPPORTUNITY IN SOLAR TECHNOLOGY Moderator: Carla Ortiz Fuentes, County Manager Mexico at RER Energy Group Panelists: Kevin Gutiérrez, Sales VP of Inverter Business at HUAWEI Mexico Alberto Cuter, General Manager LATAM & Italy at Jinko Solar Alejo López, Vice President Latin America at Nextracker
13:15 OPPORTUNITIES ACROSS THE WIND INDUSTRY PROJECT LIFE CYCLE Moderator: Veronica Zapata Oviedo, Kino Asset Manager at Enel Green Power Panelists: Enric Català Roig, Senior Sales Director of LATAM at Vestas Albert Sunyer Folch, Country Manager México at Nordex & Acciona Windpower David Martínez, Director de SPV’s Mexico at Envision Energy Grisell García Moncada, Head of Marketing at Acciona Mexico
14:00
NETWORKING OPPORTUNITY - AI-POWERED 1:1 MEETINGS
15:15 FLEXIBLE POWER SOLUTIONS Speaker: Raul Carral, Business Development Mexico, Central America & Caribbean at Wärtsilä
15:15 PREPARING FOR THE FUTURE: STORAGE SOLUTIONS AND GRID STABILITY Moderator: Rosanety Barrios, Independent Energy Analyst Panelists: Gianni Moreno, International Sales & Marketing Director at Hitachi ABB Power Grids Alejandro Fajer, Co-Founder & CEO of Quartux Mexico Ivette Castillo, Commercial Director North America at GE Grid Solutions Raul Carral, Business Development Mexico, Central America & Caribbean at Wärtsilä Guillermo García Alcocer, Profesor at ITAM and ex-president commissioner at CRE
16:15 BACK TO THE FUTURE Speaker: Enrique Ochoa Reza, Deputee for Michoacán and Secretary of the Energy Commission in the Chamber of Deputees
17:00
NETWORKING OPPORTUNITY - AI POWERED 1:1 MEETINGS
19:00
END OF MEXICO ENERGY FORUM 2021
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H ighlights
ELECTRICITY REFORM AIMS TO CREATE LEVEL PLAYING FIELD Kicking off Mexico Energy Forum, Ángeles Huerta, Deputy of governing party MORENA for District 24 of Naucalpan, opened with a presentation explaining the government’s alterations to the Electricity Industry Law, which was approved by Mexico’s Senate last week. “The reform published yesterday in the official gazette has several key points that I would like to highlight,” Huerta said, adding that it was based on Art. 5 and 28 of the Constitution. “Electricity is very important for our development and national security. It protects our sovereignty,” she continued. It is he government’s responsibility to secure and provide electricity to the citizens of the country. “In the US, we saw what happened recently in Texas. This translates to the need for the government to guarantee energy for its citizens,” she added The proposed changes in what the media has dubbed the “Energy Counter-Reform” have been the subject of intense debate. “We will not eliminate the electricity sector,” Huerta stressed, emphasizing the government’s aim to “protect the public service of energy.” “We are now attempting to change the characteristics of the economic dispatch to one focused on stability, which means that it will be based on delivering energy efficiently,” she explained. For the government, strengthening CFE is the central objective of the changes that
passed through Congress. The current market configuration, Huerta highlighted, is severely damaging CFE. “CFE suffered losses of MX$16 billion (US$760.1 million), having to pay for energy that was not delivered in the end due to unfair contracts,” she pointed out. A further issue of the Energy Reform identified by Huerta is the apparent lack of planning in the electricity system, focusing on lowering costs instead of careful planning. “We have a large number of permits that are doubling the energy requirements of some places in the country. We cannot have such a disbalance between demand and supply,” she argued, pointing at northern states and the Yucatan peninsula, specifically. Baja California needs more capacity, as well. “CFE already has two power plants in Baja California but more capacity is welcome,” Huerta continued. However, the counter-reform is not meant to go directly against the efforts of the private sector, Huerta stresses. “The initiative creates a level playing field for both the private sector and CFE.” Huerta explains that the longterm electricity auctions took variable costs into account, which favored wind and solar from private companies. But the issue the government points out is that of fixed costs associated with transmission and distribution, all of which falls on the shoulders of CFE. “This is not free and only CFE pays for this,” she said. “CFE is an efficient production company, so how did we arrive to this dire situation for the
H ighlights state utility? This is not what Mexico’s people want or what the 4T aims to do,” she stated. One of the main reasons for the problematic situation CFE finds itself in is what President López Obrador has called “leonine contracts” signed by previous governments. “We hope that we can renegotiate some of those contracts,” she said. “We need fair, transparent business in the energy sector.” An issue identified by critics of the government’s policy, however, is what the counter-reform would mean for Mexico’s climate goals. “Of all the energy produced, 20 percent is clean energy. Half of that is produced by CFE, even without receiving clean energy certificates.” Even though Huerta argues that Mexico’s emissions are quite low compared to those of the US, China or the
EU, she notes that Mexico does aim to generate more clean energy. “CFE’s current plans call for the reactivation of hydroelectric plants as part of the company’s renewable energy initiatives.” Other plans include new small hydropower development. “If we live in a country where we can build large-scale clean energy power plants, this of course means we are taking that option into account, as well,” she added. “Generating clean energy relying fully on public costs is not sustainable,” Huerta warns. The much-criticized use of PEMEX’s fuel oil by CFE remains a factor in the energy mix. “We have to work to turn fuel oil into less of a problem. All oil-producing countries produce fuel oil and this should not be wasted. But investment in power plants to reduce harmful emissions is crucial, as well,” she concluded.
CERTAINTY TO BOOST ENERGY INVESTMENT Mexico needs to include renewable energy in its path toward energy transition. This was one of the conclusions drawn during the panel “Outlook: Impact of Economic Growth on Energy Demand,” on Wednesday, Mar. 10, during Mexico Energy Forum 2021. “Mexico needs more transparent legislation regarding electricity to meet global energy goals,” said Claudio Rodríguez, Partner of International Energy Practice at Thompson & Knight. “There is a trend towards renewable energy due to its lower costs and good impact on the environment.” Panelists discussed the main problems Mexico is facing in terms of energy supply, especially in ensuring reliable electricity availability throughout the country. “We have a great challenge in electricity. Recently, the blackouts caused by the cold wave in Texas showed the vulnerability of our infrastructure and how we cannot depend on the volatility of other markets,” Leonardo Beltrán Rodríguez, NonResident Fellow at the Institute of the Americas, explained. Beltrán said that basing energy production on fuels can have a significant impact on both public health and the environment. In his opinion, urban areas will be more vulnerable because of their proximity to industrial centers. This approach will also mean Mexico will not be able to meet its environmental goals. Beltrán added that electricity policies have an impact on businesses in a country that sends 80 to 90 percent of its exports to the US.
Beltrán recently told MBN that the 2021 policy agenda in Mexico would benefit from strengthening and enhancing bilateral and multilateral engagement and that the country should take advantage of the international collaborative clean energy innovation landscape, which can accelerate the country’s economic recovery and put it on track toward deep decarbonization. Carlos Serrano, Chief Economist of BBVA Mexico, explained that the country suffered a sharp drop in electricity demand in 2020 with figures not seen since 1930. However, he added that the international scenario will see an economic recovery at different speeds. “We expect the US to have a strong recovery and 7 percent GDP growth. Meanwhile, Mexico is expected to grow between 5 and 6 percent, although it will not be until 2022 when Mexico will return to its 2019 figures,” said Serrano. However, with the new Electricity Law, Mexico
“We expect the US to have a strong recovery and 7 percent GDP growth. Meanwhile, Mexico is expected to grow between 5 and 6 percent, although it will not be until 2022 when Mexico will return to its 2019 figures ” Carlos Serrano
Chief Economist at BBVA México
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H ighlights
runs the risk of decreasing investments not only in energy but also in other sectors such as automotive, where the use of renewable energy is more significant. Serrano emphasized that the government must invest in supply capacity that would allow CFE to provide energy in the event of an emergency, such as the recent one in Texas. In terms of strategic decisions, BBVA recently announced that between 2030 and 2040 it will stop financing companies that use coal as an energy source. The decision is included in BBVA’s new Environmental and Social Framework, which is aligned with the proposal of the Intergovernmental Panel on Climate Change (IPCC). “Mexico needs to lift the economy and promote energy policies that increase investment,” said Alejandro Valerio, Associate Practice Leader at FrontierView, adding that recent policies are not aligned with USMCA, which could lead to more discussions between the Mexican and US governments. Valerio explained that the Mexican government’s preference for natural gas is affecting the country’s energy capacity.
“Renewable energies are the way to ensure cheaper electricity tariffs, which would make us more competitive, and the sustainable development of the country.” Veronica Irastorza
Associate Director of NERA Economic Consulting
In addition, he said that if investments are not promoted, Mexico will not reach its goal of generating 35 percent of its energy from renewable sources. “Energy investments need certainty for long-term contracts and projects of up to 20 or 30 years in some cases. Public policies must adjust to that reality,” he said. Veronica Irastorza, Associate Director of NERA Economic Consulting, explained that electricity demand has been growing steadily for the past 20 years. However, in 2020 it had a significant drop due to the impact of the pandemic on industrial sectors. “Energy security and the use of renewable energy are critical today, as today’s decisions will have an impact on the future. We need to make sure we choose what is best for the country,” she said, before explaining that the Mexican energy sector has always been politicized and polarized. She also stressed that the country is making important decisions to ensure greater energy security. The future of the Mexican energy sector will depend on the country’s economy and industrial sectors, she concluded. Irastorza recently published an article on La Lista, in which she explained that many governments have developed post-COVID-19 recovery plans focusing on sustainable practices and stressed that Mexico’s energy sovereignty will only be possible through renewable energies. “Renewable energies are the way to ensure cheaper electricity tariffs, which would make us more competitive, and the sustainable development of the country,” she wrote.
H ighlights PROJECT FINANCING TO WEATHER ALL STORMS Despite the increasing complexity of Mexico’s political situation in terms of energy policy, financing trends will adapt thanks to the ongoing and overwhelming interest in the country’s potential. This idea was echoed by key decision-makers who participated in the second panel of Mexico Energy Forum 2021 on Wednesday, Mar. 10, titled “Financing Trends in Mexico’s Current Energy Landscape.” The panel seeked to define what kind of projects and structures will be within the interests of investors in Mexico’s energy market. The panel was moderated by Alan Sakar, Senior Associate at Clifford Chance, who highlighted the gap that will open up between two different future scenarios: one in which recently passed energy laws are struck down as unconstitutional and another in which the laws are upheld and enforced exactly as they are today. “The counterreform moves ahead. We will experience changes in trends and businesses but the sector will continue onward, regardless,” said Sakar, who also mentioned his work with the World Energy Council to highlight what they consider to be the three core dimensions that define energy sustainability: energy security, energy equity and environmental sustainability of energy systems. While panelist Rubén Cruz, KPMG Mexico Energy and Natural Resources Lead Partner, agreed with these assumptions, he also noted that in the eyes of investors, Mexico’s political situation today is closer to that of countries like Chile and Malaysia, than to the US or Canada. Cruz also mentioned Mexico’s status as an importer of energy resources. “Mexico is a net importer of energy. In the last 10 years, our dependence on fossil fuels has increased.” Cruz’s solution is to focus investments on building domestic inventories, something that could only be done by financing storage projects. “We need to focus our investments on mitigating our dependence by building storage capacity and diversifying our energy mix,” he said. In Cruz’s view, investment in renewable projects would contribute not only to environmental sustainability but also to energy security. He contrasted CFE’s focus on renovating existing hydro and turbine plants, which do contribute to both environmental sustainability and energy
security, with the renovation of combined cycle plants, which increase reliance on US natural gas. Overall, Cruz saw an increasing focus on financing smaller energy projects oriented at distributed generation, self-supply and generation of less than 5MW. This also included rooftop solar panels for isolated supply projects, such as real estate developments, clusters and industrial parks. Panelist Alejandro Méndez, CEO of Royal Eagle Capital Partners, agreed with Cruz saying these are the kind of projects that banks and institutional investors will be looking at. Méndez provided a direct investor’s perspective, making it clear that interest in Mexico and its enormous potential is alive and well, despite competition from other countries in the region that are also undergoing ambitious decarbonization and liberation plans, like Chile and Colombia. “We see legal certainty as something almost fundamental for investment. Social and environmental licenses, interconnections and rights of way are all crucial,” Méndez explained, adding that his portfolio includes hydro, solar and waste-to-energy projects, as well as green energy projects in specific locations. He expects banks to back more of these projects, especially as public bodies such as the CFE will be under pressure to keep transmission and distribution infrastructure as up to date as possible.
“The counter-reform moves ahead. We will experience changes in trends and businesses but the sector will continue onward, regardless ” Alan Sakar
Senior Associate at Clifford Chance
According to panelist Salomon Amkie, Director of Banking, Capital Markets and Advisory at Citi, the complication created by the latest energy laws must be faced against the massive potential and investor appetite that still remains in the country. “A lot of investment arrived after the energy reform. If clear rules are reestablished and the route forward is clear, investors will renew their large investment appetite. Mexico’s potential is massive,” he declared. Amkie agreed with Méndez, saying it is simply a matter of translating the political vision of this government to project de-risking
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H ighlights strategies. “We experienced snow and a lack of water and electricity in Texas last month. These unprecedented black swan events need to be included in the risk assessment of every new project,” said Méndez. Cruz reaffirmed investors’ interest in the country but also used the oil and gas sector as an example of the variety of responses that private players could have. “A lot depends
on the risk appetite and long-term vision of investors. We will see which companies consolidate in the market and find new niches and which ones pull out.” Amkie also said that Citi’s strategy is yet to be defined depending on the market’s response. “We will have to look at new opportunities depending on how the government renegotiates its contracts with private players and how it sets the new rules of the game.”
MEXICO’S POWER PRODUCERS READY TO SUPPORT ENERGY TRANSITION The paradigm shift in the Mexican energy sector was the main topic of discussion during the fourth panel of Mexico Business Forum 2021 on Wednesday, Mar. 10, entitled “Power Producers’ Priorities.” Experts agreed on several topics including the legal framework, protecting investments, transmission and distribution, the energy transition and new technologies to help drive the sector forward. Moderated by Patricia Tatto, Vice President America of ATA Renewables, the conversation furthermore included Fernando Tovar, CEO and Country Manager of Engie México; Ramón Moreno, CEO of Mitsui & Co. Power Americas; Gerardo Pérez, Vice President and Country Manager of EDF Renewables México and Bruno Riga, Country Manager of Enel Green Power Mexico. Tovar, spearheading the French energy multinational, acknowledged that there is “tremendous uncertainty” in the sector as a result of numerous regulatory changes and measures in recent years. “This poses a risk for existing investments but also for potential new investment,” he said. Because of this, Engie is could make use of the instruments provided by law to protect its investments. “It is even more important to look forward, however,” Tovar said. “Engie is a multinational company that respects the rules of the country where it operates. If the government wants to change those rules, we will adapt to the new situation and look for new opportunities.”
“Renewable energy is not just the future; they are already very much present.” Bruno Riga
Country Manager at Enel Green Power Mexico
In this regard, natural gas storage offer interesting prospects. Both cogeneration and new thermal power generation CFE plants are among the main opportunities, but it is also necessary to strengthen the electricity system. Tovar sees a possibility in a sector where CFE and private players complement each other. “The environment seems to be us or them; CFE against the private sector. I do not subscribe to this way of thinking because there is space for both. There is no conflict between strengthening CFE and having private participation in the market, after all.” “CFE is a crucial player in the energy market and will continue to be so. Private companies need to operate in the space that is granted to them,” agreed Moreno. “We will always try to grow further here and position ourselves where possible,” he said, noting that combined cycle and other large-scale power plants are key to Mexico’s future. Mitsui would also protect its investment through the tools provided by law. The area of power generation and commercialization would remain as important as ever for the Japanese energy giant’s Mexican arm, as distributed energy generation, lower gas prices and digitalization offer interesting new opportunities for the company. “We maintain our commitment to Mexico’s energy transition. This includes public and private consumers, as well as communities throughout the countries. Our projects should benefit Mexican families first and foremost,” said Pérez. He noted that EDF Renewables adapts quickly to changes in the sector but that it has also learned to be patient. “Of course, rules can change but they should not be applied retro-actively,” he pointed out. Furthermore, he noted that the company’s
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experts could help solve Mexico’s challenges regarding its transmission network. Enel’s newly appointed Country Manager Bruno Riga started his speech by acknowledging Mexico’s great renewable potential. “It is a country in which we want to continue to invest,” he asserted. Despite momentary challenges, Riga concurred that a long-term perspective is crucial for Enel. “We are all lucky to work for companies that have a long-term vision. Problems can always arise in the short term but we need a clear vision of where we want to go.” After all, the advancement of renewable energy can no longer be halted. “Renewable energy is not just the future; they are already very much present,” Riga added, pointing out the growing demand for electromobility. One of the biggest challenges that needs to be addressed is the aging distribution network in Mexico. Because of its fragility, intermittent renewable energy integration has become a particular focal point for the government. “The discussion about renewable energy’s reliability and stability is a valid discussion,” Moreno pointed out. But after the last gas shortage in Texas, Mexico faced problems due to its high reliance on gas imports. “We need to invest in the transmission network. It is the key to reliability, to decarbonization and even energy independence,” he said. Flexible power plants
that can start up fast when needed, as well as battery storage, can help foster the system’s reliability. But auxiliary services, providing storage and stability, are currently not adequately incentivized or rewarded. Tovar, whose company already owns and operates a solar power plant featuring battery storage, agreed with this notion. Other than battery storage, hydro capacity and even hydrogen could be used to store energy. “This is the future,” Tovar said about green hydrogen. “We already have hybrid power plants, with integrated wind and solar developments,” Riga said, adding that these technologies could help to improve the energy system. “Hydrogen will be incredibly important for decarbonization,” said Riga, although a golden business model has not yet been established in this area, he highlighted. Other trends mentioned by Riga were distributed generation, smart grids and electric vehicles. “We have to change the paradigm of how we see the market. We need to generate new models that enable the transition to green energy,” Riga pointed out. Pérez agreed that storage could offer many benefits, even to end-users. “Storage represents a great potential for solving the main difficulties faced by transmission and distribution networks,” he said. Clients are key and companies should listen to their demands, the panelists concluded.
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H ighlights MIGRATING TO A NEW MARKET DYNAMIC: PROS AND CONS Experts participating in the panel “Guiding OffTakers to Success With PPAs and Distributed Power Generation” at Mexico Energy Forum 2021 on Wednesday, Mar. 10, agreed that the current situation in the Mexican energy sector is pushing companies toward a new energy market dynamic, something that in their opinion has to be seen not as a challenge but as an opportunity. “Despite the new reforms and uncertainty, companies want to move forward with PPA contracts. We can help them to meet their needs,” said Edmond Grieger, Partner and Head of Von Wobeser & Sierra’s Energy and Environment Practice. Diego Blumenkron, Sales Director at Northland Power Energía, explained the importance of understanding the current needs and trends in the Mexican energy sector. For him, in 2016, the energy sector was marginalized but today it is a highly competitive sector. Blumenkron also explained that since Northland is a buy-side and sell-side company, it wants to have a strong, competitive and stable internal matrix and the right tools to solve its customers’ problems. “Consumers want new supplies and products that promote ESG practices, such as clean energy,” he added. He shared that the company is offering a very attractive system for the energy market that includes natural gas, distributed generation, coal, clean energy, among other alternatives, which allows the customer to stop relying on a single resource. “We are combining the best of each offering and taking advantage of the resources we have in the market to offer a better proposition to our customers,” he said. Pablo Rivero, Country Manager for Mexico at ForeFront Power, explained the main differences between distributed energy and centralized generation. According to his presentation, the former needs fewer customers to cover market
“The new market to which companies are migrating includes more than 4,000 companies. This represents a new opportunity for the market to provide more certainty, better contracts and more tailored solutions ” Ruth Guevara
CEO and Founding Partner of Zumma Energy Consulting
risk, while the latter is more suitable for larger projects and more vulnerable to market prices. Rivero added that there are two reasons for companies to finance distributed generation: lack of capital, which increased due to the pandemic, and high maintenance costs. He also agreed that uncertainty caused by recent laws and the pandemic have pushed many companies to switch markets. “Buyers have been concerned about the impact this new regulatory framework could have on their contracts. They are hoping contract migrations to this new market will be possible,” he said.
“The new market to which companies are migrating includes more than 4,000 companies. This represents a new opportunity for the market to provide more certainty, better contracts and more tailored solutions,” said Ruth Guevara, CEO and Founding Partner of Zumma Energy Consulting. Guevara added that Mexico has grown in clean energy, especially solar, as it has been the most accepted by customers and the easiest to implement. The main motivation for this shift has been environmental objectives, as customers are increasingly looking for cleaner energy. “This is a dynamic market that will continue to grow. With the COVID-19 pandemic, we have learned that our offer has to be more flexible,” said Guevara, who concluded that uncertainty in the sector has always been present. However, companies are protected by contracts, which he believes allows both sides to understand each other better. Blumenkron discussed the opportunities opening up this year for the energy sector in areas such as storage and batteries, which can serve as an option to offload distribution lines. “We need to identify the new trends that are coming and what customers need to offer more flexible solutions to help them in this new energy migration,” he concluded.
H ighlights ELECTRICITY MARKET WALKS BUT NOW IT MUST RUN The Mexican wholesale electricity market is still incipient despite the many opportunities that exist to accelerate its growth. This was the general principle that was discussed and agreed upon during the fifth panel of Mexico Energy Forum 2021 on Wednesday, Mar. 10: “Unlocking the Electricity Market Via Assets, Supply and End-Users.” The panel was moderated by Angie Soto, Managing Director of Nexus Energía MX, who offered the panelists a space in which they could contribute not only their experiences but also their own theories and explanations as to why, as she said, “are there still not millions of qualified users in the Mexican wholesale electricity market.” “Even though the growth of qualified users seems slow, you have to compare it to previous years. In reality, the growth rate has increased a lot if you compare the small growth from 2016 to 2017 with the much faster growth seen after 2018. This is a process of change and restructuring that has taken up to a decade in other countries, so this transition in Mexico has been much faster,” Panelist Lilian Alves, Director of Strategic Planning at Mitsui & Co. Power Americas, noted. Alves also evaluated her company’s experience in the market as positive. “As the second largest operator of power plants in Mexico, our sales in the wholesale electricity market have been significant. Our portfolio of services includes the representation of customers who are entering the wholesale electricity market. These representation ser vices will be increasingly necessary as government changes are likely to grow the need for commercial and industrial customers to find comprehensive energy solutions for their operations. We want to be much closer to what would be the downstream segment of the market. Since last year, we have been developing our distribution capabilities and this amounts to a vote of confidence in the future of the Mexican wholesale electricity market.” Alves’ statements were echoed by Hans Kohlsdorf, Founding Partner of Energy to Market. “We have to explain to customers how they can incorporate solutions regarding their energy supply while taking advantage of energy efficiency and demand control technologies.
We have failed to convey how relatively easy it is to become a qualified user. It is a fairly easy and uncomplicated process,” Kohlsdorf said. He also made it clear that on-site generation is a global trend that will not stop. Moreover, trends like that make it imperative for more customers to seek their place in the wholesale electricity market. “This is the time to buy power. The more people get scared, the more opportunities arise. All we have to do is talk to our customers about the changes they would have to implement,” Kohlsdorf said. Panelist Víctor Ureta, Director of Operations and Risk at Acclaim Energy, agreed on the existence of an information problem. “There is still a great lack of knowledge at the end-user level. We need to make a big effort to reduce this problem.” Ureta pointed out that the market exploded between 2019 and 2020 but a large number of questions remained unanswered among qualified suppliers. He also stressed the need to promote investment to ensure energy supply and its quality. “Securing energy supply is a risk management effort, especially if customers opt for experienced qualified suppliers and consultants. Scary stories about the nature of the wholesale electricity market need to be dispelled.” Alves pointed out that “there are several options available to qualified users in the electricity market. The number of possibilities can be a bit dizzying, so we have to work to advise on the most optimal solution. For some customers, service interruption can mean long delays if their operations and assembly lines take a day or more to get back online, so uninterrupted service is their top priority. Other customers may have very tight budget policies, so price predictability will be their top priority. The pandemic has caused companies to define their needs and objectives much more clearly, so we can help them translate this into better contracting conditions. While it is true that the new energy laws complicate our offerings, our faith in the future development of
There is still a great lack of knowledge at the end-user level. We need to make a big effort to reduce this problem.” Víctor Ureta
Director of Operations and Risk at Acclaim Energy
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H ighlights Mexico’s wholesale electricity market has not been shaken.” Panelist Sean McCoy, Director of Energy Ser vices for Mexico at Edison Energy, concurred, albeit with some reservations, with the panel’s conclusions. “Access to
reliable and immediate information should be a fundamental part of the electricity market. It is what has made other markets so successful. However, this will not fix the fact that if CRE does not release more permits, we will experience a shortage in the supply of renewable energy in a few years.”
THE UK: CASE STUDY ON THE ROAD TOWARD ENERGY TRANSITION The UK is increasingly seen as a world leader in decarbonization. Coming from a high dependency on coal, the government has implemented various policies to boost its clean energy development. The Carbon Trust acts as a partner, helping companies and governments like the UK to decarbonize. Mauricio Riveros, Manager of Carbon Trust México, outlined the UK’s energy transition as a case study during a presentation at Mexico Energy Forum 2021 on Wednesday, Mar. 10. The UK’s climate change policy was launched in 2008, when the government committed to reducing emissions by 80 percent by 2020 compared to 1990s levels. In 2018, it introduced its Clean Growth Strategy, focused on industrial activity, which greatly boosted the development of offshore wind energy. In 2019, the country updated its Climate Change Act to make the 2050 target legally binding. “The government ’s projections continue to show that there is still some way to go
to reach the targets. However, the country has shown that economic success and environmental sustainability can go hand in hand,” Riveros said. The UK’s electricity mix has switched from being based mostly on coal and natural gas to focus on gas and renewable energy. Nuclear power still plays a role in the matrix, as well. “Distributed solar and wind are the main renewable sources in the UK,” added Riveros. Offshore wind, however, is the biggest component of renewable energy. “The UK currently has the highest installed capacity of offshore wind in the world,” showed Rivero. With the Offshore Wind Sector Deal, the country committed to installing 30GW of offshore wind by 2030, which increased to 40GW in recent years. However, experts predict that the country will need between 75 and 85GW to reach its net-zero emissions target. Riveros stressed that this is not impossible, as wind
H ighlights energy may soon not require incentives. “Wind projects are becoming increasingly profitable and have reached a point where they no longer need subsidies to be profitable.” Decoupling the UK economy from coal was crucial to meeting 2050 targets and the pandemic seemed to have at least one positive effect on the country in this regard. “In 2020, the UK experienced its longest coal-free spell, one of 67 days, partly due to lower energy demand,” Riveros said. Despite this, the UK’s energy matrix is still dominated by fossil fuels. “The government is promoting electrification, greenhouses, heating networks and clean hydrogen as alternatives,” Riveros said. Hydrogen and battery storage are key to the UK’s energy transition for another reason, as the government plans to use them to make the national electricity system more flexible. In the UK, buildings are the second largest source of emissions, after transport. With 90 percent of buildings still relying on fossil fuels, energy efficiency measures implemented at a
large scale will also be important. Investment is needed in other areas as well, said Riveros. Increased distribution and transmission driven by peak demand increase. Back-up generation needs to be enhanced as well to deal with renewable intermittency, among other measures. “Furthermore, smart technologies enabled by our increasingly digital world can help consumers to take control of their energy use and reduce their bills,” said Riveros. However, one of the largest components of the energy transition will come from the public sector with the Ten Points Plan for a Green Industrial Revolution, featuring an estimated private investment of US$58.5 billion in energy, buildings, transport, innovation and the natural environment by 2030.
“The government is promoting electrification, greenhouses, heating networks and clean hydrogen as alternatives ” Mauricio Riveros
Manager en Carbon Trust México
ESG INVESTMENT FOR HIGHER PROFITABILIT Y Investments in equipment and infrastructure may be seen as an additional expense at the beginning. However, they will turn into savings in the long run. This was one of the conclusions reached during the last panel of Mexico Energy Forum 2021 on Wednesday, Mar. 10, titled “Corporate ESG and Energy Efficiency: Best Practices in the C&I Sectors.” Experts agreed that ESG practices have become essential to companies’ business plans and it is no longer feasible to ignore these issues. The panel was moderated by Elizabeth Mosqueda, Senior Manager at Carbon Trust Mexico, and the conversation also included Mónica Samudio, Country Managing Director at Circutor; Enrique González Haas, Area President at Schneider Electric; Montserrat Batta García, Energy Manager at Continental and Verónica Ordóñez Montes, Innovation and Technology Manager at Soriana. “ESG practices have paved the way to many opportunities; their implementation will not only bring us environmental but also economic and labour benefits,” said Samudio, who added that implementing responsible energy practices promotes business development, worker safety and much-needed energy investments in this
day and age. “Energy efficiency also represents a social contribution: electrical accidents cause 25 percent of deaths at industrial sites worldwide,” she said. At a recent interview with MBN, Circuitor said that it expects to be recognized as the top company to help clients to comply with Mexico’s network code requirements. The company said it can help clients improve their production process and become more costeffective. Furthermore, the company aims to be a pioneer when it comes to products that meet regulatory standards. González said that the Mexican electricity system has a solid infrastructure. However, many resources are being wasted, usually by companies that do not know how to use their resources efficiently. He remarked that this problem can be solved, as today the sector has good technologies. “The ideal would be to design infrastructure from the beginning so that it can be energy efficient. However, companies do not always have this vision and choose cheaper options.” If companies incorporate technologies, they can identify and collect data that can be useful to reduce operating costs and improve their profitability. “This is a big
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H ighlights bet for companies to make. However, we need a culture change so other companies know that a big investment can turn into long-term savings,” he said. Schneider Electric has developed an integrated offer of technologies and solutions supporting the transition to a more electric, digital, decarbonized and decentralized energy system. Sustainability is at the core of the company’s business plan and this has been reinforced due to the new challenges brought by the COVID-19 pandemic. González explained that within the company’s five pillars, climate is the No. 1. In 2019, the company announced its commitment to carbon neutrality with three new actions: “accelerating its 2030 goal of carbon neutrality by demonstrating carbon neutrality in its extended ecosystem by 2025, achieving net-zero operational emissions by 2030 as part of validated SBT target and engaging with suppliers toward a net-zero supply chain by 2050.” Ordóñez explained how the company has become a good example when incorporating ESG practices. “We have achieved energy efficiency by analyzing consumption, making a plan and managing it while monitoring energy use.” She agreed that the main challenges to incorporating these practices is that from the outside, they can be seen as an investment that might not generate short-term benefits, something that did not happen at Soriana. Batta García concluded that to obtain effective results, the key to success is to have teams with specialized people. “You have to train the team to commit to ESG practices, as they will decide how to incorporate these practices into the company’s business plan. We, as a company, have a responsibility to put the best of our talent at the helm,” she said. Montserrat Batta García, Continental’s Energy Manager, concluded that in order to have effective results, teams with specialized people are the key to success. The team must be trained to become
“ESG practices have paved the way to many opportunities; their implementation will not only bring us environmental but also economic and labour benefits” Mónica Samudio
Country Managing Director at Circutor
committed to ESG practices, since they will decide how these practices are incorporated in the company’s business plan. “We, as a company, have a responsibility to put the best of our people in charge. “ At Continental, there is a group responsible for sustainabilit y management, which promotes and monitors the implementation of sustainability strategies and their impact. The company is convinced that a sustainable and responsible business approach increases the company’s ability to meet the needs of the future. Its approach includes market analyses, customer discussions and a stakeholder survey. Continental strives 100 percent of carbon neutrality in its entire value chain, emission-free mobility and industries and responsible sourcing and business alliances, reported the company. However, one of the largest components of the energy transition will come from the public sector with the Ten Points Plan for a Green Industrial Revolution, featuring an estimated private investment of US$58.5 billion in energy, buildings, transport, innovation and the natural environment by 2030.
H ighlights MEXICO’S FUTURE IS TIED TO THAT OF NATURAL GAS The gasification of Mexico’s energy value chains will prove essential to the country’s future competitiveness. This was the theme that characterized the opening presentation of Mexico Energy Forum 2021 on Thursday, Mar. 11, titled “The Vision of CNH Regarding Mexico’s Gas Sector Development.” CNH Commissioner Héctor Moreira began his presentation by stating he wished to present a thorough reexamination of the importance of natural gas, while also making it clear that his views would not represent those of CNH. Moreira presented an overview of the natural gas production process derived from oil and gas exploitation. The reason why he went over this process was to connect that extraction process to the different kinds of natural gas commodities that can reach the market and how they are valued, depending on their relative humidity: the more humid the gas, the more valuable it is due to the larger variety of uses it can find in a larger portfolio of industries. Moreira said the natural gas Mexico imports from the US is dry gas and that by relying too much on US imports, Mexico is also adding lower quality gas to its national inventories. “The US sells us dry gas, which has none of the expensive liquid condensates that are beneficial for various industries associated with natural gas.” Moreira later explained the gaps that exist between natural gas production and consumption, this with the intention of illustrating Mexico’s overreliance on US natural gas imports. “PEMEX consumes an important part of the gas it produces. As a result, 67 percent of dry gas needs to be imported from the US, around 5.57Bcfd in 2019. This makes us very dependent.” Moreira also addressed the recent weather events in Texas. “If Texas sneezes, Mexico gets pneumonia; 58 percent of all electricity in Mexico is generated through the constant flow of Texas’ natural gas.” Moreira highlighted this dependence as a unique situation. “Mexico might be the country that depends on another country the most and not because we import too much natural gas. Some countries, like Japan or South Korea, import 100 percent of the natural gas they consume. However, they purchase this gas from different countries and sources.”
The presentation continued with a breakdown of the advantages of natural gas, while also pointing out some of its disadvantages. For example, transportation of natural gas is a much more complicated logistical and infrastructural affair when compared to oil, particularly given the need for specialized vessels and port facilities. The investment needed for this type of infrastructure in Mexico is a matter of great concern, said Moreira. However, natural gas is the cheapest fuel in the world and electricity made from natural gas is the cheapest in the world, as well. Moreira highlighted Trump’s administration efforts to restart the US coal industry to illustrate that even this dirt cheap fossil fuel was more expensive than natural gas.
“Renewable energies are not completely free of emissions, either. Producing a solar panel has an environmental impact. Therefore, one needs to make balanced choices.” Héctor Moreira
Commissioner at the National Comission of Hydrocarbons (CNH)
The only thing that made coal marginally cheaper in specific situations was the presence of existing, but very old plants (meaning no new construction or development was necessary) and government support. Moreira also compared natural gas to renewable energy, noting that while renewable energy presented little transportation or production costs, it also had a real storage and backup problem. He also noted that renewable energy was not necessarily cleaner than natural gas. “Renewable energies are not completely free of emissions, either. Producing a solar panel has an environmental impact. Therefore, one needs to make balanced choices.” As a CNH Commissioner, Moreira provided information on Mexico’s abundant natural gas resources. “Mexico is not an oil country; it is a gas country. Our resources are the sixth largest in the world.” Moreira concluded by offering a historical perspective, noting that natural gas is likely to play a role in the 21st century, just like oil played in the 20th and coal played in the 19th century. “Natural gas and renewable energy will keep growing in the coming years, while gasoline will slowly lose relevance.”
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H ighlights NATURAL GAS TO BOOST MEXICO’S DEVELOPMENT Natural gas is a transitional resource that is allowing Mexico to go from fossil fuels to renewable energy. However, this transition does not need go too fast and the country can take advantage of this resource to boost its development. This was one of the conclusions reached during the second panel of Mexico Energy Forum 2021 on Thursday, Mar. 11, titled “From Source to Consumer: Gas Distribution and Infrastructure.” Experts agreed that natural gas is and will be the most important resource for generating energy in the coming years in Mexico and that recent blackouts have demonstrated the importance of improving natural gas infrastructure to increase the country’s energy security. The panel was moderated by Diana Piñeda, Partner at González Calvillo, who managed the discussion between Areli Covarrubias, Commercial Director at IEnova; José Aparicio, CEO of Siemens Energy Mexico, Aldrich Richter, Managing Director of MAN Energy Solutions Mexico and Alma Monserrat Flores Estrada, Expert in Regulation. “The blackouts caused by the situation in Texas have demonstrated the vulnerability of the country. These events greatly affected CFE but above all, users and industries,” said Piñeda. She added that Mexico needs to guarantee the supply of natural gas in difficult situations and that it cannot depend on another country (US) for its energy security. Covarrubias explained that in the last 15 years, Mexico has made an important effort to strengthen its infrastructure. “Ten years ago, we had very restricted systems and natural gas could only be used for specific industries and areas. Today, we have a completely different panorama.” Covarrubias said that to increase Mexico’s energy security, the country has to diversify its energy sources and improve the current natural gas infrastructure to meet
“If we add energy storage to our power plants, based on combined cycle technology, we can help prevent blackouts by ensuring stable energy around the clock.” José Aparicio
CEO of Siemens Energy Mexico
national demand. Mexico needs to have natural gas storage in case of an emergency and, according to Covarrubias, it is important to start with these projects, since they take a long time to implement. In addition, there must be operational coordination among permit holders, especially when demand is greater; coordinated planning for the expansion of the country’s infrastructure; infrastructure modifications to reach marginalized areas and the implementation of storage terminals, as they continue to be essential for the operation of the natural gas system. Aparicio, emphasized that natural gas remains the main resource for energy generation in Mexico. “If we add energy storage to our power plants, based on combined cycle technology, we can help prevent blackouts by ensuring stable energy around the clock,” he said. Aparacio also mentioned there is a tendency to use hydrogen. However, he emphasized that natural gas remains the favorite resource. Natural gas is cheaper, as breaking hydrogen is very expensive. Nevertheless, hydrogen prices could decrease in the coming years and it is becoming a popular option to achieve a net zero emissions target. “This hydrogen trend is very popular in Europe, especially in the automotive industry. Mexico also has extreme potential for it. However, its transition has just begun and the country should take advantage of the many opportunities it has with natural gas.” In a recent interview, Aparicio told MBN that Mexico is in a process of transition regarding energy, with drivers like climate change and decentralization. In addition, the pandemic has also shaped the industry. Siemens Energy is working with CFE and other players to provide technology, enhance their cybersecurity, develop combined cycle designs and prepare them to meet Mexico’s growing energy demand. “We are here to support projects and promote hybrid systems but we do not only work on energy generation. We are about to commission an important infrastructure project, a large compression station for one of the main operators of natural gas infrastructure in the country.” Richter highlighted that natural gas is a transition resource from more polluting resources to renewable energy and explained that the
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Mexican transition could last a long time, which is the perfect opportunity for the country. Many countries have joined the natural gas trend, as renewables have the problem of fluctuations. However, these problems can be solved by incorporating a sophisticated operator system that predicts these fluctuations or by having robust storage infrastructure. Storage systems from MAN Energy Solutions can solve many of the problems renewable energy sources present. These are designed specifically to store renewably produced surplus energy, to make it available when needed and reduce problems associated with energy fluctuations. The stored energy can also be used directly in the form of heat, cold or as fuel for transportation. Energy storage not only ensures a sustainable, reliable and economic power supply, but also integrates energy-consuming sectors with power producers. Richter emphasized that having efficient storage systems will be the link between natural gas and renewable energies. Ritcher agreed that hydrogen energy is expensive, since breaking its bonds costs a lot of money and energy. However, it is a great bet. “Japan is betting on hydrogen not to generate energy but to use it in transportation. It is a great example and Mexico could join this country in the future.” Flores Estrada emphasized that natural gas is the most important resource for the development of the Mexican economy. There have been many
efforts made by the government to improve the natural gas supply problem. “However, we need to increase them to meet the demand,” she said. Among the government’s efforts is the balance in adjustment that sought to buy liquefied natural gas to mitigate shortages, as well as the strengthening of the transportation system and development of projects to guarantee gas supply and its storage. SENER’s five-year plan (2020-2024) has a new portfolio of projects that seek to promote natural gas storage. However, we need to strengthen energy policy and infrastructure development to have uninterrupted supply, said Flores Estrada. CENEGAS evaluations have shown there is much infrastructure that can increase supply coverage. Therefore, it is important to carry out joint evaluations for its improvement, in addition to promoting integrated systems. Flores highlighted that virtual pipelines could be a new solution to supply problems, especially in the south where there are hard-to-reach areas. “By ensuring fast delivery, we can help these areas develop faster,” she said.
“Japan is betting on hydrogen not to generate energy but to use it in transportation. It is a great example and Mexico could join this country in the future.” Aldrich Richter
Managing Director of MAN Energy Solutions Mexico
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H ighlights CRISIS MANAGEMENT CRUCIAL FOR COMPANY SURVIVAL In a short presentation, Jan Frowijn, Vice President USA, Mexico & Central America of ROSEN, outlined some of the challenges all companies are currently facing and the specific hurdles and opportunities the pipeline sector has dealt with during these uncertain times. Crisis management is crucial in this regard but new technologies also broaden the horizon for the pipeline sector, Frowijn said during Mexico Energy Forum on Thursday, Mar. 11. ROSEN is a worldwide provider of integrity process chain solutions for various industries, mainly the energy sector. The company develops in-house engineering tools and software. In Mexico, ROSEN focuses mostly on pipeline inspection and integrity management, which includes monitoring and measurements within these pipelines. “We are present in more than 120 countries worldwide but Mexico remains one of our biggest commitments. We have been here for the past 30 years,” said Frowijn. In Mexico, as in other countries, one obvious challenge dominates the discussion. “COVID-19 has generated both a health and an economic crisis,” Frowijn said. “Nobody expected we would have virtual events one year later,” he added. But this is not the only challenge. Especially for pipeline operators, environmental conditions leading to a freeze in Texas blocking gas supply for multiple days posed another unexpected issue to deal with.
The uncertainty and the struggles people have had to confront clearly bring the need for adequate crisis management to the foreground. “Crisis management is about finding the right actions, following up on training and preparation to get the company through tough times,” Frowijn outlined. “Any approach to leadership and crisis management must begin with risk assessment and subsequent preparedness.” Planning and preparedness thus come first, followed by gathering the right information and making important decisions. “Making critical decisions in times of crisis can be very difficult,” emphasizes Frowijn, adding that during the current crisis, many companies had to make difficult choices regarding the size of their workforce. But dealing with remote work has also been a challenge. The existing company culture proved to be a major factor in the survival of companies. “Under pressure, both the best and worst in an organization will come to surface,” he said. In dealing with a crisis, external factors and stakeholders are equally important. Good relationships built over time can make all the difference and by being in touch with the market, companies can take on new opportunities. At the end of the day, a crisis is also a chance to work better. “Never waste a good crisis, Churchill once said. This is still true,” notes Frowijn.
H ighlights These approaches to crisis management are applicable to any company or organization. Nevertheless, Frowijn also took some time to address issues specific to the pipeline sector. Even though having ‘boots on the ground’ was complicated, technologies are a major opportunity for companies looking to monitor flows and assess integrity of infrastructure. Furthermore, Frowijn addressed one of the biggest future opportunities in the area of energy: hydrogen. “Globally, green and blue hydrogen will, almost without a doubt, be part of the future’s clean energy mix,” Frowijn noted.
One of the biggest benefits of hydrogen is that it resembles gas, in a way. It can therefore be transported through gas pipelines and used for fuel in certain natural gas power plants. Nevertheless, the infrastructure needs to be adapted and long-term effects of hydrogen instead of gas flowing through structures need to be examined. Due to the high hydrogen content, pipelines could be more susceptible to cracking. Furthermore, inspection tools and components that move through pipelines could also be affected. Much work therefore remains to be done, Frowijn concluded.
DIGITALIZATION IN CONSTRUCTION REMAINS AS URGENT AS EVER The use of digital tools in construction processes will be of increasing relevance to Mexico’s energy development, given the infrastructure developments that must be finalized to reach the country’s ambitious goals. That much was clear during Mexico Energy Forum 2021’s presentation titled, “Explore the Unexplored With Digital Construction Tools,” imparted by Nathan Shabot, Business Development Director for Latin American at Locusview, on Thursday, Mar. 11. Shabot began his presentation by asking the audience if they believed that operators and developers in their sector would be interested in technologies that could reduce their paperwork and information processing by up to 70 percent, their costs by 50 percent and their onsite supervision time by 20 percent. Shabot said these are the kinds of advantages that can be provided by digital construction tools. “Mexico faces a digitization challenge but this is the future and we must adapt. Locusview wants to be Mexico’s main ally in this transition.” These tools will face great demand given the growth rate of construction in different sectors by 2032. The examples Shabot mentioned included the 29 percent expected growth in transmission lines, 60 percent in renewable energy plants, 30 percent in natural gas transportation infrastructure and 100 percent in telecommunications infrastructure. Shabot expects these rates to support construction that will aid smart grids and distributed energy generation, which by then will have a strong digital technology component as part of their construction process.
All of these growth targets, in Shabot’s estimation, present three distinct challenges for construction companies, developers and EPCs: operational efficiency must be increased, risk must be reduced and financial efficiency must soar as well. Shabot, however, believes that Locusview digital construction tools can provide solutions for all of these challenges. Originally an Israeli-American company founded in 2014, Locusview now participates in development projects in India, Mexico, Greece, Ireland and the UK. Its objective is to build “the world’s best digital construction management platform.” The company has worked with major energy companies, including Iberdrola and Duke Energy.
“Mexico faces a digitization challenge but this is the future and we must adapt. Locusview wants to be Mexico’s main ally in this transition.” Nathan Shabot
Business Development Director for Latin American at Locusview
One of the issues that led to the founding of Locusview is that over half of all infrastructure in the US was built and installed between the 1950s and 1960s, with no data recollection policies in place. Over time, this led to significant accidents like the San Bruno explosion in 2010. Regulation has been introduced to integrate all distribution networks and grids but that has created a need to manage all of the data that these integrations have generated. The ultimate goal of digital construction platforms like the one provided by Locusview is to solve the myriad of issues
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created by paper-based and analog construction processes, such as logistical bottlenecks due to outdated communication between onsite and offsite, traceability of documents and materials, lack of efficient standardization and imprecise logging of dig sites and finds. Digital tools can increase the project’s visibility while minimizing the kind of human error that delays projects and ROI timelines. Locusview’s platform achieves all of this by providing a number of integrated tools for each project. For example, it can generate a digital twin for your project, manage all financial operations and control all transactions, as well as
follow up on all aspects of project management and prepare packages and deliverables for a project’s closing process. Shabot explained that the platform can move seamlessly between mobile and web applications and be a part of a project throughout all phases of development. It is also coupled with hardware components that are designed for use in construction environments. Shabot concluded his presentation by clarifying that these types of platforms will prove invaluable to all major players in the market: “Our digital construction platform provides all the project information to monitor it in real time and have automatic report generation.”
CHALLENGES IN THE ENERGY SECTOR CAN BE OPPORTUNITIES Fermín Pérez Casares, Commercial Manager of ForeFront Power, shared the main challenges and opportunities present within the Mexican energy sector and the importance of having true cooperation between the private sector and the government to boost the development of the country. This, during the panel of Mexico Energy Forum 2021 on Thursday, Mar. 11, titled “Challenges and Opportunities in Small Utility Solar Projects.” Before going into details regarding industry challenges, Pérez explained the differences between generation projects. Distributed generation projects are installed to generate clean electricity for inhouse consumption but
“The future of the sector depends on the actions and decisions we take today. Cooperation between sectors would increase certainty and boost the growth of the sector.” Fermín Pérez Casares
Commercial Manager of ForeFront Power
also to sell it to other off-takers. Isolated supply is the generation or importation of electrical energy to satisfy a company’s own needs, while local generation is the production or importation of electrical energy to satisfy the consumption of one or more end users that belong to the same group. Pérez also highlighted the types of interconnection available depending on the type of generation: net metering can be found in 99.8 percent of the PV projects in Mexico, net billing is energy injected into the grid that is taken as a balance in favor for energyconsuming companies, while total sale is all the energy generated by a PV project sold at market prices. The sector’s main concerns include possible conflicts over some energy policies that are not aligned with international agreements like USMCA, which could lead to reduced investments, compromising the growth and development of the country, and a negative environmental impact, driving Mexico away from international targets. “The changes made to the electricity bill will likely increase energy costs. This will create more demand for on-
H ighlights site energy generation, especially if it does not need permitting because it remains behind the meter,” said Pérez. The main challenges that exist today are in transmission and distribution of energy, as well as in the political uncertainty brought by changing the rules of the sector. “The private initiative only wants to help Mexico to boost its energy development. If the government provides clear and reliable rules, companies will adapt to this new reality.” Pablo Rivero, Country Manager of ForeFront Power, shared Pérez’s point of view and explained during an interview with MBN that Mexico is dealing with an economic situation that has never been seen before. He emphasized that the country will need to experience greater economic stability before companies feel confident to move ahead with projects regarding their energy use and supply. Pérez stressed that efforts should be made to inform about the importance and benefits of renewable energy, since there are many
misconceptions that have resulted in an increased rejection of green energy. “In the last 10 years, the costs of solar energy have fallen dramatically, making the technology increasingly viable. The storage capacity and flexibility of batteries further increase the potential of solar energy,” said Pérez. With challenges also come opportunities. Among them is the migration of consumers in the selfsupply scheme to a new market dynamic, the elimination of tariffs that could reduce costs by 15 percent, the improvement in energy storage, the increase in demand for energy that will open space to new participants and the increase of renewable energies that reduce the country’s carbon footprint, according to Pérez. He concluded that Mexico must continue on its path toward an energy transformation, which can be achieved through cooperation between the public and private sectors. “The future of the sector depends on the actions and decisions we take today. Cooperation between sectors would increase certainty and boost the growth of the sector.”
LOWERING LCOE: ULTIMATE GOAL FOR SOLAR TECHNOLOGY There are few industries where technology is growing as steadily as in solar energy. The panel, “Innovation is Key: Progress and Opportunity in Solar Technology,” featured key leaders from some of the sector’s most important companies, including HUAWEI, NEXTracker and Jinko Solar. Moderated by RER Energy’s Country Manager Carla Ortiz, the panelists expressed their views, agreeing that bringing down costs for operations remains the most important aspect in the industry. In Mexico, the solar sector is going through significant changes. With governmental policy changes dominating the environment, the trend of developing large utility-scale projects is fading away. Nevertheless, distributed generation (DG) does not suffer as much from regulatory changes because below the 0.5MW threshold, no permits are needed. Taking into account this developing trend, Ortiz posed asked panelists what this shift toward DG meant for solar technology in the country. Alberto Cuter, General Manager LATAM & Italy of Jinko Solar, explained that photovoltaic
technology trends have already changed. Now, bifacial panels dominate the utility-scale environment but they are unlikely to be applied in C&I-focused DG projects. “Because of spatial limitations, optimizing panels on a slightly smaller scale makes more sense in this area.” Cuter said that mono perc panels with P-type or N-type cells would likely become the most popular. In general, efficiency of photovoltaic panels is increasing sharply. “It is now normal to see panels with above 21 percent of efficiency,” said Cuter. Inverters are the core business of HUAWEI, said Kevin Gutiérrez, Sales Vice President of the company’s Inverter Business. One of the main developments the Chinese technology giant has been focusing on for the past few years is AI. “We have implemented AI in all
“The interaction of the components of a project is key to its efficiency.” Carla Ortiz
RER Energy’s Country Manager
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H ighlights our products for a few years now,” Gutiérrez explained. Through AI, operations and maintenance (O&M) become much easier and safer to boot. Especially in smaller, scattered C&I installations, this provides advantages. “Here, we often see many small installations. Therefore, monitoring becomes crucial toward efficient operations,” he said, highlighting that AI can detect faults, which in turn reduces costs and improves overall efficiency.
Due to the key role LCOE plays, participants pointed out that their respective R&D efforts are aimed at lowering these costs even further. Cuter highlighter how far solar costs have dropped in recent years. “This has been a benefit for the world´s solar industry, but there is still work to be done,” he continued, adding that a race to the bottom for solar panel prices does make operations for OEMs in that area somewhat unstable.
For Alejo López, Vice President Latin America of NEXTracker, the trend to move away from the utility scale poses a challenge for the company’s solar trackers. “Our product is designed for larger scale projects,” he acknowledges, “although smaller projects have also found its characteristics attractive and beneficial.” NEXTracker focuses more on adapting its solution to the higher output that bifacial modules offer. Achieving optimal safety during challenging wind and climate conditions is another core element to address. “Improving software is also crucial,” said López, as it facilitates maintenance. Vertical panels are also quickly gaining ground in the market. Nevertheless, López points out, with the current situation this is not developing as fast in Mexico.
“A project’s success indeed depends on how low its LCOE can go,” López agrees. Therefore, other stages in the project, such as O&M play, an important role, too. To deal with difficult climate conditions, remote and real-time diagnostics are important to enhance uptime and reduce downtime for solar plants. “Getting the tracker to move modules in the most secure position as fast as possible is therefore important,” he concluded.
Cuter concurs that Mexico’s solar utility-scale landscape is facing challenges. “Mexico used to be the most important market but now it is slowing down.” Regardless, bifacial modules will remain a staple for the fewer large projects being developed. Bifacial panels are a little bit more costly than monofacial panels but offer a much higher efficiency. High demand created a bit of a shortage in the glass needed to manufacture the product. But whatever technology is used, Cuter said that at the end of the day, it needs to work optimally to reduce the levelized cost of electricity (LCOE). In this regard, all panelists agreed, pointing out that all factors in a power plant need to work together to lower LCOE as much as possible: “The interaction of the components of a project is key to its efficiency,” Ortiz said. “It is of the highest importance,” concurred Gutiérrez. This is why HUAWEI focuses only on string invertors, which can control the voltage panels transmit efficiently, among other benefits: “We can now send energy at higher voltages with fewer cables and equipment. This reduces project CAPEX without affecting the quality of the technology,” he said.
Despite disruptions in technology, not every shift occurs via intense changes. A lot of solar technology is applied because it resembles the “low-hanging fruit.” Cuter and Gutiérrez both see storage as a great opportunity due to the possibilities to inject power into the grid for stability and save costs during peak demand. Gutiérrez considers battery storage beneficial, whereas Cuter points out that green hydrogen or hydropower can be used to enhance the penetration of solar, as well. López agreed but pointed out that solar companies had a great opportunity to add value by making their products compatible with others. “This is difficult because the offer in the market is large. Nonetheless, this can prove a major benefit for clients,” said López.
H ighlights WIND ENERGY NOW REACHING FULL GROWTH
Wind energy is beginning to adopt the charac teristic s of a resilient and well established industry at a global scale. This assertive notion became a recurring theme during the panel titled “Opportunities Across the Wind Industry Project Lifecycle,” during Mexico Energy Forum 2021 on Thursday, Mar. 11. The panel was moderated by Veronica Zapata Oviedo, Kino Asset Manager at Enel Green Power. Zapata Oviedo said wind energy technology was at the tail end of a long process of maturation. Now, the industry was working with top-of-the-line components that were uniquely adapted to their own scenarios. “Technology has allowed us to constantly improve wind power. Today, we have a better acquisition portfolio and fewer interruptions in this alternative energy.” Zapata Oviedo began the discussion by asking panelists about their experiences regarding remaining obstacles to wind energy development.
more about technological implementation rather than culture. Martínez argued that upcoming onshore turbine projects in Mexico still need to adopt the latest characteristics in terms of size, which could reach up to 200m of rotor diameter and challenge the usual limit of 164m. This could also mean higher levels of generation capacity and energy efficiency. Martínez believes that technology that is classified as “modern” is perhaps not innovative or disruptive enough, so more up to date technologies need to be implemented to embrace advantages like integrated data management in wind energy assets that can optimize decision-making, making weather predictions and coordinating wind turbine arrays through digital platforms and IoT systems together with storage solutions. “Storage systems are not the future but the present. As a result, Envision Energy is promoting modern systems throughout Mexico.”
Zapata Oviedo agreed with the nature of this particular problem. While panelist David Martínez, Director de SPV’s Mexico at Envision Energy, also agreed to an extent, he was also quick to contextualize this cultural resistance by explaining that wind energy is still very new to Mexico when compared to Europe, with the first wind turbine being installed in 1994, over a century after the first wind turbine was installed in Scotland. For Martínez, the prevailing challenges in the industry are
Turbine dimension was an important issue for panelist Albert Sunyer Folch, Mexico Country Manager of Nordex & Acciona Windpower,
“We have launched rotors for areas that are favorable for wind power and also for areas that are not so favorable...” Veronica Zapata Oviedo
Kino Asset Manager at Enel Green Power
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who added to what Martínez said by making clear that new turbine sizes and technological capabilities had to be adopted. This included not just larger towers and rotor diameters but also hybrid turbines. He also explained that turbines needed to be designed to take advantage of a variety of wind conditions. “We have launched rotors for areas that are favorable for wind power and also for areas that are not so favorable. We have managed to optimize resources despite their limitations.” Zapata Oviedo agreed with both panelists when she expressed her marvel at the scales and capabilities of generation that the newest turbines were now able to reach when compared to technology from 10 years ago. Industry best practices came up through panelist Enric Català Roig, Senior Sales Director for Latin America at Vestas, who said safety came first. Moreover, Catalá said those practices could be divided into traditional best practices and the more recently developed ones that depended entirely on technology, such as remote monitoring and asset integrity management. “We believe that in recent years, there has been an important revolution in the sector. With new technology, we have been able to optimize operations and
“Storage systems are not the future but the present. As a result, Envision Energy is promoting modern systems throughout Mexico.” David Martínez
Director de SPV’s Mexico at Envision Energy
maintenance of our equipment,” said Català. He also noted the enormous growth in the industry’s maintenance workforce, in part aided by new workshops and academic plans focused on component design, fabrication and manufacturing. Zapata Oviedo agreed, noting that none of these degrees specialized in wind energy existed when the industry was beginning. All of this leads to the development of technologies and tools that can be more reliably used in different conditions. Other industry obstacles were also discussed in relation to offshore wind energy development. Sunyer Folch said that Mexico’s abundant onshore opportunities outweighed offshore development. He also said that Mexico had to solve many issues in states where wind potential exists, including Tamaulipas, Coahuila, Nuevo Leon and Oaxaca. Transmission bottlenecks must be resolved through the development of more infrastructure. “I do not see the need for offshore projects, since Mexico has a very high onshore potential that has not been fully exploited,” agreed Català Roig. However, he did consider offshore wind development in the long term, giving Mexico time to begin building a regulatory framework so projects can at least enter the planning phases of their development cycle, which can sometimes take up to a decade. Martínez also agreed, saying that in Mexico it is more common to develop onshore projects. “However, we bet on offshore projects, as well. We are developing a flexible turbine that adapts to both proposals.”
H ighlights FLEXIBLE POWER GENERATORS ARE THE FUTURE lexible power generators are considered the future of the sector. Meanwhile, inflexible energies such as nuclear, coal and gas combined cycles will disappear, as they cannot meet the new demands of the energy sector, said Raúl Carral, Business Development Mexico, Central America and the Caribbean at Wärtsilä during Mexico Energy Forum 2021 on Thursday, March 11. Wärtsilä promotes innovative flexible generation solutions and is considered a leader in the sector, after delivering more than 5,000 plants, 12,000 generators and 74GW in 180 countries for electricity, industrial and oil companies. In addition, the company has more than 70 storage projects in its pipeline. Carral shared some of the projects the company currently has in Mexico. The first was Huinalá in Nuevo Leon, where the company has implemented a Flexicycle, which is a highly efficient combined cycle that allows it to operate with resources like coal or with a flexible generator that complements renewable energy. Carral explained that flexible generation systems change according to customer needs and that the combined cycle allows gas recovery to generate additional steam-based electricity. The company highlighted the positive results of its project at the Wind Park of Eólica Coromuel in Baja California Sur, where the company’s energy storage system allows the park to meet the requirements of the local grid. Carral explained that Wärtsilä is helping to regulate the intermittency of renewables through a GEMS smart energy management system that monitors energy production applications and controls its frequency. Carral explained that energy can be obtained through flexible systems when it cannot be produced from renewable energies. During these intermittency times, it is important to have a flexible base that can go from 0 to 100 in less than 3 minutes. Coal, nuclear power plants and combined cycle gas turbines are not very flexible. It can take hours or even days before they produce energy. These energies are unable to face the current challenges of the sector and, therefore, can no longer be part of the new future of electricity generation. In a recent interview with MBN, Carral explained that renewables in Mexico are currently seen as
a bit of a problem, as their intermittent nature makes it more complicated to integrate them into the grid, which was not been planned for renewable integration. “If you look at energy transition and renewable integration from a planning perspective, you can make energy affordable for everyone and strengthen CFE at the same time.” Carral said that in the energy market there is a change in generation technologies, where coal, gas and nuclear are disappearing, while flexible and renewable energies are increasing. “Natural gas will play an important role in the future. However, it will not be as it was planned, since it will also be replaced by alternative energies.” According to Mexico’s energy generation goals, in 2021, 30 percent of energy must be generated from renewable energies, increasing to 35 percent in 2024, 45 percent in 2026 and 60 percent in 2050. “I believe that Mexico will
“I believe that Mexico will achieve its goals this year. There are some challenges but renewable energies are being used more.” Raúl Carral
Business Development Mexico, Central America and the Caribbean at Wärtsil
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H ighlights achieve its goals this year. There are some challenges but renewable energies are being used more.” Carral added that Mexico currently has 68 solar plants in commercial operation and that the company expects continuous growth due to its environmental and financial benefits. “We see that in the future more and more renewable and intermittent generation will be integrated iton the power grids, globally. This responds to the increasing competitiveness of wind and solar power generation. Costs are decreasing significantly, breaking world records constantly,” Carral told MBN, adding that renewable assets will help meet the Paris Agreement’s goals and protect the future of the environment. Carral concluded that the world’s path to renewable energy includes alternative sources, energy storage and flexible generation. The company predicts inflexible power generation technologies will be discontinued. Coal, nuclear power plants and gas turbine combined cycles will diminish significantly. Meanwhile, renewables will become the favorite option as they are the cheapest power generators in the world.
SUITABLE RECOGNITION TO UNLOCK STORAGE , GRID SOLUTION POTENTIAL In a country like Mexico, where an aging transmission and distribution system faces deeper integration of new technologies and non-conventional resources, the reliability and stability of the grid will sooner or later dominate the discussion. Building further transmission lines is a logical but costly solution. However, storage solutions can help to provide further stability and support to end-users if a blackout occurs, among other benefits. In the panel, “Preparing for the Future: Storage Solutions and Grid Stability”, moderated by independent energy analyst Rosanety Barrios, experts discussed what technology can do for Mexico’s transmission and distribution system and energy users in general during Mexico Energy Forum on Thursday, Mar. 11.
“When you are generating more and consuming less, this creates an unbalance.” Ivette Castillo
Commercial Director North America of GE Grid Solution
After a short update presented by Barrios on a suspension against the government’s energy bill, a ‘counter-reform’ of sorts received with strong criticism by the private sector, attention turned back to why the instability of the grid is such a strongly debated topic in the Mexican energy sector. Ivette Castillo, Commercial Director North America of GE Grid Solutions, acknowledged that increased renewable capacity is stimulating this debate. “The penetration of renewable energy might contribute to instability but it is certainly not the only hindering factor,” she said, referring to the aging grid system and a change in the fuels used in the energy mix. Furthermore, the way demand is spread throughout the day provides a further hurdle. “When you are generating more and consuming less, this creates an unbalance,” she said. If this is not delt with correctly, the system eventually blacks out. But Castillo points out that Mexico is far from being the only country dealing with these issues.
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One technology, Castillo pointed out, is that of flexible AC transmission systems, a flexible ACbased transmission system that can enhance the controllability of the grid and increase its capability to transfer power. These large systems work as compensators for the grid and can be constructed parallel to existing substations. If transmission is adequately monetized within the Mexican context, Castillo argues that returns on investment can be achieved easily enough. Another option is flexible power, coming through storage, batteries or flexible generators. “All of these solutions together can bring balance to a grid, working as an auxiliary service that kicks in when intermittence becomes an issue,” she said. However, such auxiliary services need to be incentivized before they become attractive to the market. In Australia, where auctions for storage projects were already held, a successful precedent already exists, said Castillo. Gianni Moreno, International Sales & Marketing Director of Hitachi ABB Power Grids, gave another example of a success story that could be of interest to Mexico. “Jamaica has had a national strategy to get 30 percent of renewables by 2030 since the year 2010,” he explained. At that time, it committed to two wind farms, totaling 38MW of capacity. With such strong government support, investors were confident and PPAs were soon signed. However, when the wind farms were ready to go online, Jamaica’s grid operator raised a red flag and signaled that wind energy was too intermittent for the power system to handle.
“Intermittency is always a core part of any grid, even without renewables, I should add,” said Moreno. Limiting renewable participation in that grid was an option but the Jamaican government decided to work together with the private and academic sectors to come up with a solution, coming in the form of storage. The success of this approach convinced Jamaica to increase its 30 percent goal up to 50 percent by 2030. After all,” storage projects fixed instability in the first place,” said Moreno. In Mexico, storage and grid solutions are already a strong topic of discussion as well. Nevertheless, the actual adoption of such technology is still somewhat limited. One company pushing the envelope is Wärtsilä. Raul Carral, Business Development Mexico, Central America & Caribbean at Wärtsilä, explained that the company has already constructed over 500MW of generator capacity in Mexico, much of which can operate flexibly. This means that they can go from 0 to 100 percent capacity in a matter of minutes. Carral notes that the company also developed an isolated-supply project for an automotive player. Even though the benefits of
“Jamaica has had a national strategy to get 30 percent of renewables by 2030 since the year 2010,” Gianni Moreno
International Sales & Marketing Director of Hitachi ABB Power Grids
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H ighlights isolated systems for the main grid are not directly obvious, taking away some demand that would otherwise have been problematic during peak hours can greatly help stability. Nevertheless, the company’s new storage for a wind project in La Paz is of particular interest. “This is a 10MW battery that supports the Eolica Coromuel wind project’s energy when intermittency becomes an issue,” Carral explained. The project is only the second storage solution integrated in a large-scale renewable project in Mexico. For Alejandro Fajer, Co-Founder & CEO of Quartux Mexico, this trend is gaining ground. “Storage is already a viable reality and a great option for small, medium and large-scale energy users,” he outlined. “Energy storage costs have decreased around 89 percent in 10 years and investors are noticing that these systems are being adopted more widely as a result.” The fact that China and the US are quickly turning toward storage is a further sign of its capabilities. Smaller-scale systems focused on consumption for end-users are an important niche for the technology as well. “Ninety percent of Mexico’s
“Ninety percent of Mexico’s 45 million electricity users are domestic users, after all.” Alejandro Fajer
Co-Founder & CEO of Quartux Mexico
45 million electricity users are domestic users, after all,” said Fajer. Nevertheless, industrial users still represent 50 percent of the nation’s electricity supply. For these companies, storage can help provide electricity when demand, and thus price, of energy is at its highest during the day. “Intelligent storage systems playing toward user consumption profiles will generate many benefits, also in the case of blackouts,” Fajer added. Guillermo García, Professor at ITAM and former President Commissioner at CRE, underwrote these benefits. “Storage is like a Swiss army knife; it can perform its stated function but also play a role in measurement, regulation, management and public policy,” he said. Peak-shaving is one major benefit, but storage’s ability to inject power makes it valuable for the national grid as well. “A lot of investment is needed when it comes to the transmission and distribution system,” he said. The lack of recognition for auxiliary services, already addressed in countries such as Australia, provides a hurdle. “At one point, CRE had the idea to recognize auxiliary services, although the plan was not fully exhaustive,” explains García. Since this has not happened yet, he argues that Mexico should define and publish regulations and subsequently issue auctions for projects providing auxiliary services. Regulation, García emphasized, is crucial to enable these developments. “We need an open dialogue in this planning to improve the stability of the system that we are all part of,” concluded Barrios.
BEING CLEAR ABOUT THE PATH FORWARD Mexico Energy Forum’s last presentation on Thursday, Mar. 11, was delivered by Congressman Enrique Ochoa Reza, Deputy for Michoacan and Secretary of the Energy Commission in the Chamber of Deputies. His presentation, titled “Back to the Future,” was meant to reference the need for Mexico’s energy sector to return to a previous state of development and future opportunities which he argued were being hampered by the most recent legislative actions and controversies surrounding the sector. Ochoa began his closing remarks by mentioning the latest industry development of today: a judge has ordered a temporary suspension in general terms to the recently passed energy bill, which Ochoa Reza saw as an opportunity to rethink the priorities of this initiative and how they can be
translated into a more cohesive understanding of the sector’s future. Ochoa explained that the founding element of these new laws was that CFE needed to be strengthened, which was based on the erroneous misconception that CFE was suffering as badly as the “other productive enterprise of the state” (PEMEX). Ochoa’s figures showed instead that, while PEMEX has been closing its annual balance sheets with losses since 2016, CFE has actually stayed in black during those same years, only experiencing losses in 2020. He also mentioned that, while PEMEX’s credit ratings have been lowered below investment grade, CFE remains above investment grade, according to the three major credit rating
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agencies. According to Ochoa, one of the things that made CFE strong is that it operated in an open and competitive market with clear rules. “One of the elements that strengthened CFE and its energy supply is fair competition in the market. If this is removed, it could have negative impacts on the electricity system. Mexico will only provide benefits to its electricity consumers if there is openness and fair competition; this is the future we need.” Ochoa said that despite the law being rushed, it still cannot evade revision should it be deemed unconstitutional. Ochoa said the new law’s unconstitutional nature had been either intentionally or unintentionally ignored by legislators who pushed it through both chambers regardless. Mexico’s energy sector has to learn from the three most recent models it has embraced so far, he said: the model that was present from 1992 to 2013, the model that was implemented in 2014 after the Energy Reform and the model that legislators are attempting to implement now. “These three visions are coexisting: they have each generated distinct international commitments backed up by international treaties. They must coexist. When we talk about reforms, people always wonder what will happen to the contracts that were agreed before. Mexico
has a non-retroactive principle that says that we must respect those contracts,” he said. Ochoa preferred not to speculate as to what the future could hold after the upcoming midterm elections. “Politics have taught me to be a historian and not a prophet when it comes to electoral matters.” However, he did make it clear that some of the proposals that he had heard so far to strengthen CFE in a way that also promoted renewable energy confused him. “For example, the revamping of hydroelectric plants is a lot more complicated than these plans would suggest. Hydroelectric plants exist through complicated and volatile agreements with surrounding communities, whose access to vital water resources have a direct connection to the plant’s operation.” Ocha Reza concluded his presentation highlighting that the sector must maintain its future ambitions in the face of all of these challenges. “Moving into the future means generating more reliable and economical electricity, taking care of the environment and favoring public health. CFE will be the most important company in Mexico and does not need laws to achieve this but in order to promote the best international practices and technologies, dialog will be the key to its success,” Ochoa said.
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