VIEW FROM THE TOP
A NEW MARKET IS BORN EDUARDO MERAZ Director of CENACE
Q: What expectations do you have for the Mexican energy
than three years. For Mexico, our Clearing House has to
market in 2018?
cover risks for 15-20 years. All of the international firms
A: 2018 is the year where the energy market will consolidate.
that we hired to advise our activities showed their surprise,
It all started with the first long-term electricity auction
but at the same time their interest. Although CENACE
in November 2015. followed by the short-term market,
has the ability to manage the Clearing House per the law,
launched in January 2016. CENACE has been working
we chose to hire a specialized third party because it is a
from the outset toward a variety of milestones set for
purely financial activity that does not fit with our core. Of
2018, including the execution of the first midterm electricity
course, we retain responsibility for its functionality. If at
auction, contract signing for the assigned projects during
any moment we do not see it working as it should, we have
the third long-term electricity auction, implementing all
the capacity to intervene and call for a new tender so that
the aspects surrounding the short-term market and finally,
a new third party takes charge of the operation while we
executing the first auction regarding financial transmission
manage the interim phase. Some international experts who
rights. The latter should happen during 4Q18 due to the
offered their advice also think that applying this model to
complexity it represents. Achieving all these landmarks will
finance projects for longer terms is interesting, as it would
mean all mechanisms contemplated in the reform for the
offer more certainty to the projects under development.
market will be ready to properly work. Q: What is hindering the development of more Q: What was the biggest challenge for the implementation
transmission projects?
of the Mexican energy market?
A: The transmission grid requires expensive mega projects
A: The biggest challenge we had to overcome was timing.
that are not easy to manage, or even to auction. The Oaxaca
In less than a year and a half, Mexico had to create a
transmission line auction has gone through delays not because
completely new market, which on a global average usually
CFE or the Ministry of Energy are putting up barriers, but
takes four to seven years. The creation of the software that
because it involves extremely high costs and a great deal of
runs the market was a continuous improvement process
legal struggles. But Congress has overcome the issues and the
that needed a deadline and constant communication
auction is about to begin. Future projects to auction will be
between regulators and developers. Working with INEEL
worked out in other ways, meaning that they will materialize
was an important part of this process. CENACE was also
faster. This is important for interconnection. Many people
in charge of the creation of the auctions’ core software.
state that interconnections are being managed in a very
Having an in-house development of this kind has been
slow and inefficient way, but the truth is that the problem is
extremely useful and speaks volumes about Mexico's
more technical than that. The grid is not capable of handling
capabilities in the development of technology. Talking
all the capacity to be interconnected. Considering that there
about Mexican talent, we are also working with IPN,
are certain regions where projects are stockpiling and more
which acts as a third party that verifies the results of the
permits are being requested, the grid is becoming saturated.
auction. For that, IPN developed another piece of software
Fortunately, as in every process, we are becoming more agile
to check our results. As is well-known, the results were
and knowledgeable, and with stronger transmission and
positive and the projects were correctly awarded.
generation projects Mexico will become more competitive.
Q: How was the creation of the Clearing House handled by CENACE?
CENACE is a decentralized public entity that was founded in
A: The model of the Clearing House created for the auctions
2014 to act as Mexico’s independent grid operator. It sprouted
is completely new on a global level. Clearing Houses all
from CFE's former intelligence unit and now acts as manager
over the world are used to mitigate risks in terms no longer
of Mexico's National Electricity System
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