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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
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
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
Chief Economist at BBVA México
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. 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.
Associate Director of NERA Economic Consulting
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.
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
Senior Associate at Clifford Chance
