Mexico Energy Review 2021/22 by Mexico Business Publishing

ENERGY REVIEW

2021/22

Introduction Like many other economic sectors, Mexico’s energy industry is in a difficult position halfway through 2021. The effects of the pandemic have placed a heavy burden on many commercial and industrial activities for numerous business segments. In addition, the governmental redirection of the energy sector seems to stand diagonally opposed to the tenets established with the previous administration’s reforms, causing widespread regulatory uncertainty for private players. In reality, industry insiders stress that the outlook is not actually that gloomy. By nature, energy projects are planned with a long-term perspective, so democratically supported changes in the environment are to be expected. New renewable energy developments might have been paused but projects in later stages continue to forge ahead. Mexico has expressed its commitment to achieve its climate goals despite some delays in the shorter term, which means the country will need a great deal of new solar, wind and hydroelectric capacity, among other sources. Newer technologies help to diversify the Mexican energy mix and help developers tackle inefficiencies. The country can expect to see spectacular growth in distributed power generation. Here, solar leads the developments but technologies such as cogeneration are expected to also make good on its promise. Within the wholesale electricity market, prospects remain attractive as an increasing number of large-scale energy users look to save costs and address their sustainability. Natural gas continues to grow in importance, offering opportunities to those involved in their marketing, transport, infrastructure and gas-based power production. In an effort to strengthen Mexico’s transmission and distribution system, industry analysts agree it will most likely require both reinforcement and expansion. Mexico Energy Review 2021 looks back at what has already been achieved and, through upcoming developments, offers a glimpse into the future. By presenting a mixture of views from the top, highlights and analysis, MER2021 presents an accurate picture of the energy industry in Mexico today.

Table of Contents

Introduction

State of the Industry

Project Development & Finance

Electricity Market & PPAs

Transmission, Storage & Hydrogen

Renewable Development

Gas Infrastructure

104

State of the Industry Halfway through President Andrés Manuel López Obrador’s administration, the Mexican energy sector is still coming to terms with a new political vision that has pushed the industry into uncharted territory. For many companies involved in developing energy projects, the focus has moved from greenfield development to a more cautionary approach that includes measures aimed at protecting existing investments. Despite a general sense that business is slowing down compared to the boom that occurred five years ago, industry insiders emphasize that there is still a great deal of opportunity to be found in Mexico’s markets, as the clean energy transition continues to resonate for many stakeholders. Growing energy demand, a greater need for decarbonization and an increasing effort to cut costs within a post-lockdown economic reactivation continue to drive the energy sector’s considerable prospects. In this chapter, industry experts provide an inside look at Mexico’s energy industry, how its regulation is developing and where opportunities can be found.

State of the Industry

Analysis Energy Battle to Determine Sector’s Course

Conference Highlights Electricity Generation: Last Chance to Prevent a Climate Crisis

Conference Highlights Much Left to Do for Mexico’s Sustainability Goals

View From the Top David Fatzinger | Vice President and Country Manager Mexico of Invenergy

View From the Top Enrique Alba | CEO Mexico of Iberdrola

Analysis Mexico’s Clean Energy Transition Stuck in Limbo

Infographic Mexico’s Current Installed Capacity and Expected Growth

Conference Highlights Energy Regulation: Opportunities in Collaboration

View From the Top Valeria Vázquez | Partner at Deloitte

Roundtable How Will the Energy Reform Develop Further From a Legal Perspective?

Conference Highlights Green Hydrogen Potential for Project Development

View From the Top Albeiro Guayara | Country Manager Mexico of OCA Global Rafael Sanchez | Division Manager of OCA Global

Content Links

State of the Industry | 7

Energy Battle to Determine Sector’s Course The Mexican energy industry continues to adapt to an uncertain landscape ushered in by a fundamentally different government vision that favors state institutions over the private sector. Yet, despite a slew of governmental measures, the regulatory framework remains much the same, resulting in a stalemate whose end could determine which way the battle goes. The government’s campaign to reformulate the energy sector began with President López Obrador canceling the fourth energy auction after having it postponed at the end of 2018. Some of the more notable recent decisions include a policy agreement from SENER, increased wheeling charges and changes to the electricity industry law (LIE), along with a proposed constitutional change. While these decisions and initiatives were made with the country’s energy sovereignty in mind, experts believe that the results have not been optimal. “Although the strategy to reestablish state control over the energy sector has been useful in strengthening Lopez Obrador’s relationship with the political bases that underpin his government, the actions taken within the framework of a new energy policy have not necessarily contributed to the proper functioning of this sector. On the contrary, it seems they have carried it toward a standstill,” wrote Arturo Carranza, an Energy Adviser and Consultant, for MBN. Carranza highlights the reasoning behind the government’s actions, which are aligned to a wider goal of keeping the increase in energy prices in line with annual inflation and to produce and distribute power equitably and fairly. President López Obrador often points to the “corrupting” influence of the international industry, arguing that the Energy Reform was steeped in dishonesty. For López Obrador, the fair way forward is through the public sector, all subject to the president’s anti-corruption program. That approach, many insiders say, appears wrong-footed. “I understand that the government is protecting CFE but I think that by allowing CFE to compete, they could strengthen it even more,” Ramón Basanta, CEO of ATCO Energía, told MBN. Despite the government’s efforts to backtrack it, the status quo established after 2014’s Energy Reform has so far been protected by courts. By invoking injunctions, or amparos, companies have been able to challenge the constitutionality of decrees and proposed regulatory changes, resulting in a blanket protection for all investors affected by these measures. The most recent wave of amparos came after the president introduced a bill with changes to the LIE. Many claimants were successful, thus spreading the legal basis for these amparos to become applicable to everyone. Amparos are subject to appeal, however. Even though some were later revoked, law experts within the industry point out that this is merely because of technicalities. With the LIE reform suspended, the final decision regarding its future lies with Mexico’s Supreme Court. Because these changes were part of a legislative bill, lawyers know that it will take more time for the Court to review the issue. Constitutional or not, the bill was voted through by a democratically elected Congress. Experts

State of the Industry | 8

warn that nothing can be said for sure until the Supreme Court issues its ruling but they are optimistic that the ruling will favor the status quo beneficial to the private industry, especially considering previous rulings that deemed initiatives unconstitutional. “If the Court rules the amendments to the LIE to be constitutional, this would be a surprise to most of Mexico’s energy lawyers,” says José Estandia, Energy Partner at Jones Day. July’s mid-term elections, which saw the ruling coalition keep their majority but lose votes in its goal to reach a supermajority, are likely going to play a role in the final decision. A Constitutional Change Ahead? If the Supreme Court does rule that the changes to the LIE are to be upheld, further governmental efforts to change the law would not be necessary, said Estandia. But this scenario is not what is expected. “The government will likely prepare a constitutional change soon enough. Pushing this plan might take the rest of what is left of this administration’s term,” he said. For Carranza, the articles most likely to be altered are 25 and 28, which would allow the government to argue that the grid’s stability takes precedence over competition and free participation. Juan Carlos Machorro, Partner at Santamarina y Steta, argues that there are more provisions in the Constitution that would harm the government’s chances to prioritize its own power production, at times more polluting than that of private companies. The size of the changes aside, the president remains unlikely to be able to push through with sweeping constitutional alterations after the elections. “Any future initiative intended to reform the Constitution will require the consensus of not only one party and its allies but most parties, plus the approval of the majority of the 32 state legislatures,” says Edmond Grieger, Partner at Von Wobeser y Sierra. These numbers do not paint the whole picture, however. “During the past three years, even when López Obrador did not rely on a two-thirds majority, he was able to gain the necessary consensus to reform the Constitution in relation to very important topics, such as social welfare for vulnerable groups,” Carranza says. “The most relevant question is not whether a constitutional reform to strengthen CFE will be approved or not but whether the president is willing to tone down his narrative and bridge the gaps between his government and the private sector to get past the standstill that the sector currently faces.” The stability of the legal system, the government’s respect for the Supreme Court and the somewhat unlikely outcome of a constitutional change to the Energy Reform are generally good news for Mexico’s private players. But much has already changed either way. “Even though the courts have generally ruled against the government’s measures, a great deal of harm has already been done. For instance, CRE has stopped granting all permits, even though it is mandated to deliver them within a certain period. It is a pity that we will need to wait for the Supreme Court’s resolution to restart investments,” says Estandia. “We recently saw reports that CRE has not issued permits in about eight months. Previously, if you applied and complied with requirements you automatically received the necessary permits. This is no longer happening.” Zooming out on the legal battle between the public and private sectors, the standoff lingers. “I think we will still see a struggle Read the complete article More about this topic

between two very opposite ideological views. I do not see many of the core issues being resolved, so growth perspectives may be challenged,” says Salomon Amkie, Director at Citibanamex.

Conference

Highlights State of the Industry | 9

limate change has pushed companies from all sectors to accelerate the green energy transition. However, time is running out and the chances of stopping a climate crisis are dwindling. “We are all involved in this issue: civil society, the public sector

and private companies in the electricity sector. We take it as our own commitment in which we must not fail,” says Ramón Moreno, President of the Mexican Energy Association (AME). Although the Mexican economy has not yet overcome the effects of the pandemic, according to estimates by the International Monetary Fund (IMF), economic growth this year is expected to reach 6.3 percent, particularly due to the rebound from a very low base in 2020. Globally, growth is expected to reach 6 percent in 2021 and 4.9 percent in 2022. “Mexico’s growth has been uneven compared to other countries, such as the US and China, where GDP is already higher than they were before the pandemic,” says Moreno. This uneven growth has not only been seen among countries but among industries. While sectors such as tourism, aerospace and entertainment are still struggling to recover, others such as technology have not fared as poorly. In Mexico alone, exports of technology goods to the US fell by

Electricity Generation: Last Chance to Prevent a Climate Crisis Ramón Moreno President of the Mexican Energy Association (AME)

only 2 percent in 2020, while all other exports fell by almost 11 percent. The transition to renewable energy has been one of the pacesetting trends for organizations in recent years. Between 2000 and 2020, the installation of renewables worldwide went from 750GW to 2,800GW, while costs fell drastically, by almost 85 percent during that same period, says Moreno. Among renewable energies, he adds, solar has been crowned king and will be one of the most produced by 2025 compared to coal, according to the International Energy Agency (IEA). The pandemic also demonstrated to suppliers that electricity systems could absorb more renewable energy production than originally thought, as lockdowns drove up energy demand among consumers. Thus, the pace of renewable power installation has continued unabated, with record-breaking installations in 2020. The pace is expected to continue and gradually increase. However, Moreno warns, the clock is ticking and the rate needs to be accelerated to keep the global temperature rise at an acceptable level. “We are already seeing the effects of climate change through events that have happened around the world this year,” Moreno says. “The consumer is becoming more and more aware that they are looking for renewable and clean energy in the services and products they use.” The Mexican Energy Association, present in 22 states in Mexico, seeks to coordinate power generation companies to strengthen their operations in the country and encourage investment and project development. “These are companies that invest for the long term and, therefore, want the country and the national electricity system to do well above all else,” Moreno says. Members of the association, which include companies such as Naturgy, Fisterra Energy, Iberdrola Mexico, IEnova and Mitsui Power Americas, are all committed to global and local emissions reduction and climate change mitigation goals, says Moreno.

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Companies are not only dedicated to investing in renewable energy but are also trying to explore new options “focused on digitalization toward reducing emissions,” says Moreno.

Conference

Highlights State of the Industry | 10

limate change has already forced many countries to act but to complete the clean energy transition, much work remains to be done. For developing economies like Mexico, the challenge is even greater. “We find ourselves in a decisive year, at the start of a decisive

decade, when it comes down to really kickstarting the energy transition,” says Arturo Carranza, Independent Advisor at CFE. Countries have signed up to reach net zero emissions by 2050 to prevent the world’s temperature from increasing too much. Higher temperatures have already worsened the frequency and effects of natural disasters, such as hurricanes, floods and droughts. A common, shared responsibility is crucial, says Carranza: “We are all responsible for reaching the same global sustainability goals in the end.” This transformation requires investment, infrastructure and technology, all working at optimal levels. “It requires talent and insight from decision-makers to build the instruments we need to make the green energy transition happen,” he says. Reducing emissions means that energy use should become more efficient too. “By changing consumption habits drastically, 55 percent of global emissions can be avoided.” People should not only think about how they produce energy but how they use it.

Much Left to Do for Mexico’s Sustainability Goals Arturo Carranza Independent Advisor at CFE

The transition is already well underway, says Carranza. “Renewables were the only energy sources that did not suffer during the worst of the pandemic lockdowns.” But the same pandemic has caused many problems: “The economic recession has deepened in several countries and their ability to drive a sustainable recovery is limited,” he warns. The different speed at which countries embrace sustainability also deeply impacts the global energy transition. “Developing economies represent two-thirds of the global population but only one-fifth of the clean energy investment. These countries have access to 10 percent of the world’s financial capabilities,” says Carranza. If the energy transition does not accelerate in these countries, the goals that need to be achieved remain forever out of sight. Low costs of wind and solar energy can turn the tables for developing economies, Carranza believes. “Finding and establishing the right conditions for these grand investments and installing renewable energy rapidly is one of the biggest challenges of our time,” he says. So, what is the status of Mexico’ developing economy within this transition? Carranza says that Mexico has committed to reducing greenhouse gas emissions by 22 percent and carbon emissions by 51 percent by 2030, against numbers from 2013. The country’s growing share of clean energy helps in this regard: the share of clean energy in the power production matrix has grown by 12.2 percent from 2020 to April 2021. This increase is driven mainly by wind and solar projects that were undergoing operational tests when the last PRODESEN concluded, giving clean energy a boost from 25,594MW to 28,714MW. Nevertheless, industry insiders warn that renewable energy development is not going as fast as it should in an uncertain environment. Carranza agrees that more renewable capacity is needed. The role of the government is paramount: “The government has the opportunity to develop and implement credible plans to meet reasonable targets that foster investor, industry and citizen confidence,” stresses Carranza. Through concrete action, the

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integration of sustainable financing and the construction of the energy transition under a long-term vision can ensure Mexico becomes a sustainable economy.

VIEW TOP State of the Industry | 11

from the

Q: How is Invenergy positioned in the Mexican market? A: Invenergy has been in Mexico since 2014 and I joined the company in late 2020. We have two operating assets: a cogeneration facility and the country’s largest and most efficient peaker power plant. The peaker was part of the 2017 energy auction. Although not a renewable power plant, as it is powered by natural gas, it does support the integration of further wind and solar energy into the grid as a very flexible asset that can quickly respond to changes in supply and demand or grid conditions. Markets like Baja California and Yucatan will likely need more capacity in this regard in the future. We also have two projects under construction, a wind project and a hybrid storage and solar project. We expect these to enter into operation in 2021. Furthermore, Invenergy has a pipeline of projects focused on cogeneration with industrial clients, an area where the company wants to continue moving forward. Heat-intensive industries such as paper production, for instance, can benefit. Q: How does the company decide which projects are viable? A: It is a mix of viability and what Invenergy wants to drive. We predominantly see ourselves as a clean energy company, which allows us to venture into cogeneration as well. We have been looking into LNG for Central America, for instance. Mexico’s current regulatory environment is making us reevaluate the approach we

David Fatzinger

have used successfully in other markets like the US. There, we have been successful in developing wholesale renewable projects and contracting those through virtual PPAs to industrial clients. It is a model that has worked well for both the C&I sector and renewable

Vice President and Country Manager Mexico of Invenergy

developers in the US. With the renewables restrictions we are seeing in Mexico, we have to somewhat rethink this model. Building wholesale renewables projects will likely not be possible in the short term. Therefore, we still want to address industrial clients, focusing on more direct solutions such as cogeneration. We will

Problem-Solving at the Heart of Energy Projects

consider delivering solutions related to renewables as well. Q: What are the characteristics of Invenergy’s solar and storage project in Baja California Sur? A: The La Toba Energy Center, a storage and solar project, is an impressive showcase power plant, it represents an interesting entry of battery storage in the Mexican market. It is more than just a solar park paired up with batteries. solar tech functions to charge the battery and have a more reliable resource for CENACE to support the grid. The intermittency issue and its effect on the grid has gained more attention recently in Mexico, so we want to contribute to solutions rather than generate more problems for the grid. La Toba, therefore, allows us to provide more than just renewable energy by generating a predictable output for the grid. We are hoping to see the project become a key resource for CENACE. Invenergy has also been developing what we call transmission and distribution deferral-type storage projects in the US. With a battery, you can help the grid by postponing transmission or substituting it. Through a battery and an inverter, many possibilities can be found. In many parts of the world, including Mexico, we

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believe this has beneficial applications. Invenergy is not only a renewable company, it wants to drive clean energy development and infrastructure as a whole, also through infrastructure needed to facilitate clean energy like transmission lines. We would be open to supporting CFE in this regard as well.

VIEW TOP State of the Industry | 12

from the

Q: How has Iberdrola adapted its operation in Mexico as a result of the pandemic? A: At Iberdrola México, our main priority is guaranteeing our employees’ and suppliers’ health and safety. This is why we have increased our security measures in all of our plants and offices to maximize the prevention of possible infections in our facilities. Some of these measures include, to name a few, celebrating weekly meetings with our health committee and installing sanitary filters with temperature-measuring stations at every entrance of our plants. These safety measures are also extended to our contractors and to any other visitor. Also, we have urged most of our collaborators, especially those considered to be population at risk, to work from home. Employees who, by the nature of their duties, must attend to one of our offices or power plants are being constantly tested for COVID-19 and are always required to wear face masks and antibacterial gel. We have also set up a special telephone line to provide 24/7 attention to employees or their relatives diagnosed or suspected of having COVID-19. All these actions are being reinforced through our internal

Enrique Alba

communication channels so that our collaborators can have all the information they need about prevention of infections and what to do in case of testing positive to COVID-19.

CEO Mexico of Iberdrola

Q: In what sense has the company adapted its social approach to best meet Mexico’s needs, such as with its support against COVID-19 and the ‘Lights of Hope’ program? A: As a socially responsible company, we know that a very close

Spanish Utility Giant Shows Commitment to Mexico

collaboration with the public health authorities is needed to better face the pandemic. Therefore, we started an ambitious program of donations of medical supplies all over the country, in which we invested MX$60 million. In 2020, we donated two million units of medical materials, such as surgical masks, antibacterial gel, ventilators, and face screens, to hospitals and public institutions in 19 states. We also donated 15,000 care packages with food and hygiene items to some of the most vulnerable families in rural communities in 11 states in Mexico. Another of our most important social programs right now is ‘Lights of Hope’, which consists on installing solar panels in households, schools, and health centers in rural areas that do not have access to electricity. For this project, we have destined an investment of more than MX$60 million to bring electricity to over 6,000 people. The project started in 2019 with the first stage at the Huasteca Potosina, in San Luis Potosi, where we installed solar panels on 48 households and three community centers. The implementation of the second stage of the program in this area will begin this year in March. ‘Lights of Hope’ was so well-received in San Luis Potosi that last year we decided to extend the program to Oaxaca, in the

South-Southeast of the country. There we installed 95 panels in benefit of 400 inhabitants. The second stage of this project in Oaxaca will also take place later this year. Q: How is Iberdrola fostering Mexico’s sustainable development by providing the necessary energy behind it? A: Iberdrola is fully aligned with the Paris Agreement, with the commitment to reduce the intensity of CO2 emissions by 50 percent by 2030 and be carbon neutral by 2050. Currently, our photovoltaic and wind farms have 1,163MW of installed capacity, which represents 11 percent of the company’s total capacity and places us among the leaders in the generation of renewable energy in the country. With the same objective and seeking to satisfy the needs of the industry in Mexico, we developed Smart Solar, an intelligent solution, which aims to help companies have the benefits that photovoltaic systems bring within their facilities, without the need to make heavy investments required for this type of projects. With this solution, Iberdrola México, with its own resources, designs, builds and installs the photovoltaic system on the property of the companies, and the energy generated will be used for self-consumption. In this way, companies ensure the consumption of renewable energy, avoiding the technological and financial risk associated with the implementation of this type of projects, allowing them to continue focused on their business Q: What sets Iberdrola apart for clients in the C&I sector looking for their energy supply, either through PPAs or with the Smart Solar solution? A: Iberdrola Mexico has been supplying electricity to the Mexican industry for more than 20 years. During this time, we have always been focused on offering competitive and environmentally friendly energy solutions, custom designed so that our clients can save on electricity and achieve their sustainability goals. In Mexico, we have an installed capacity of more than 10,500 GW with 26 power plants located in 13 states. We supply energy to more than 3,500 clients in different industries all over the country, always offering personalized attention to adapt our services to our clients’ specific needs.

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State of the Industry | 14

Mexico’s Clean Energy Transition Stuck in Limbo Discussions regarding the clean energy transition have never been sharper, taking place in an environment where growing climate change awareness clashes with a seemingly incompatible government policy push to rescue CFE. So, how is Mexico truly doing with its climate goals? PRODESEN 2021-2035 reveals that Mexico has 89,479MW of power-producing capacity installed. Renewable energy in the country includes hydroelectricity, wind, solar, geothermal and bio-based power, all good for 28,714MW. Not all clean energy is necessarily renewable, however: efficient cogeneration and nuclear power add a further 3,917MW to Mexico’s clean energy transition. As of Dec. 31, 2020, Mexico has had a clean energy share of 36.47 percent. Notably, the share of clean energy in Mexico’s power matrix grew by 12.19 percent from the end of 2020 to April 2021. This increase is driven mainly by wind and solar projects that were undergoing operational tests when the last PRODESEN concluded, giving clean energy a boost from 25,594MW to 28,714MW. The recent growth spurt belies a more somber outlook, the result of regulatory uncertainty introduced to the sector following President López Obrador’s actions to strengthen state-owned CFE to the detriment of private companies, which are the main drivers of Mexico’s clean energy development. “In 2021, we are still benefiting from the wave of new capacity planned years ago,” Federico Muciño told MBN. “At the same time, fewer projects were developed. Greenfield projects stopped pretty much entirely.” This puts Mexico in a difficult spot for the coming years. “Since power plants are not being developed, this will of course mean that in two or three years, we can expect a period where very few options will be available until development picks up again.” Mexico still has its fair share of “dirty” energy, with 5,633MW of coal-fired power in operation. By far, the largest contributor to conventional power generation is the combined cycle, an efficient natural gas-based power producing technology. Already, 35,060MW have been installed and CFE is planning to add thousands of MWs through various tenders. As a stable source of energy, combined cycles introduce none of the intermittency issues that the government finds challenging in wind and solar power. Moreover, natural gas burns much cleaner than most of Mexico’s traditional capacity, save for the completely renewable hydroelectricity. There is, nevertheless, a key reason why combined cycle power is not considered clean. “If production has a quantity of greenhouse gas emission greater than 100kg of CO2 per megawatt-hour, then it is not a clean energy. For Mexico’s combined cycle generation, the average is 400kg, meaning we are way past this line,” said Yolanda Villegas, Head of Legal Affairs at EON Energy. Uncertain Additions Cause Concern In PRODESEN, SENER estimates that Mexico will add 21.3GW of new power-producing capacity before the end of 2024. A major driver toward this goal will be CFE’s planned combined cycle power plants, including six projects tendered; 45.5 percent of the MWs added will rely on this technology. Utility scale solar is

State of the Industry | 15

predicted to contribute 24.8 percent, whereas solar based on distributed generation (DG) will add just about 11 percent of the total. Other technologies will contribute as well, with wind energy delivering a further 13.4 percent. This means that about half of Mexico’s growing energy mix should be renewable. Industry experts worry that these calculations do not match the current regulatory environment, in which the stability needed to foster utility-scale wind and solar development is already fading. In many ways, much of the harm has already been done. PRODESEN’s figures show that renewable energy transmitted remained at around 28 percent in 2020. This is lower than the 31 percent the country needs to reach its climate goals. Facing this reality, SENER has already acknowledged it will not reach its Paris Agreement goals between 2023 and 2025. The ministry does expect to reach its goal for 2026, either, set at 36 percent. From that point onward, SENER aims to be ahead of schedule. By 2035, Mexico should be breaching the 40 percent line. “How we will reach the energy transition’s goals within these conditions is a common question. Private investment has been halted because of the prevalent uncertainty and a critical slowdown in permitting,” said Valeria Vázquez, Partner at Deloitte, during an MBN interview, although she does not see private companies sitting idly by, knowing that the global energy transition is already a reality and cannot be stopped. “One of the positive developments … is that the industry is finally providing a unified front, saying that it wants legal certainty, assured investment and the possibility to develop projects to help the energy transition move forward. Private companies will drive the transition and push the government to retain the status quo in the sector,” she said. For now, however, many clean energy drivers have put their plans on hold, suspended until more favorable conditions arise. New Alternatives Still, there is more to the energy market than private utility-scale renewable development. Players involved in these initiatives can also play an important role in the development of behindthe-meter energy. “Regulation in this segment has remained untouched, so it is fertile soil for developing projects. We are seeing many large-scale operators moving into this area of opportunity because its economics are attractive,” says Hector Olea, President and CEO of Gauss Energía, a solar energy developer that started out focusing on large-scale developments. PRODESEN seems to acknowledge the growing potential of behind-the-meter energy solutions: capacity will increase from 1GW to almost 3GW by 2024. Whereas solar energy is the main component, SENER sees small hydroelectric facilities, battery storage and biomass as smaller drivers for DG’s growth. On the utility-scale front, state-backed clean energy could become a major factor in Mexico’s energy mix. PRODESEN notably shows that CFE would develop 8,080MW in renewable energy by 2024. Hydropower and solar energy are already on the table, although López Obrador has hinted at nuclear and wind energy before. With an investment of US$1 billion, CFE reported it will modernize turbines, generators and transformers at 14 hydroelectric facilities that have lost some power over the years. This will increase its annual generation by 1,860GWh and strengthen CFE’s renewable Read the complete article More about this topic

capacity with around 800MW of nameplate capacity. Based on these upgrades, CFE hopes that the power plants will be able to run for another 50 years.

Infographic State of the Industry | 16

Mexico’s Current Installed Capacity and Expected Growth CFE

51,779MW

CFE-PIE

16,686MW

5 10

Private

28,035MW

PEMEX

920MW 3 Source: SENER

8 1

INSTALLED CAPACITY IN MW PER GCR (MW)

13,234 14,811

6,931 8,266 7,329 8,580 6,780 6,780

25,000

Fossil Capacity 2021 Clean Capacity 2021

5,000

10,000

15,000

Fossil Capacity 2024 Clean Capacity 2024

20,000

total energy capacity

Source: SENER

Carboelectric

Turbogas

734

2,309

3,781

734

11,809

89,479MW

Internal combustion

Conventional thermal

97 10 Mulege System 105 11 11

Combined cycle

892 1,043 78 206

9 B.C.Sur

Efficient Cogeneration

5,000

308 1,000

1,608

2,205 3,596

8 Peninsular

Nuclear power

10,000

408

676 682

15,000

2,577 4,127

Bioenergy

6,287

20,000

7,026

17,697 18,197 17,697

6 Northeast

7 Baja California

Energy Capacity

30,000

5,402 5,790

Photovoltaic

1,950 2,705

Sum of Conventional

7,691

5 North

Sum of Clean Energy Capacity

Wind power

2,286 2,818

35,000

976

4 Northwest

40,000

Geothermal

3 Occidental

CFE AND PRIVATE PERMIT-HOLDERS INSTALLED CAPACITY AS OF DEC. 31, 2020 (MW)

35,060

6,000 7,038

2 Oriental

12,614

1,996 1,999

Hydroelectric

1 Central

8,286 8,299

Conference

State of the Industry | 17

Highlights

Energy Regulation: Opportunities in Collaboration Yolanda Villegas Founder & Partner at Oleum Servicios

Claudio Rodríguez-Galán Partner International Energy Practice at Holland & Knight

Edmond Grieger Partner and Head of Energy and Environmental Practice at Von Wobeser y Sierra

Valeria Vázquez Partner at Deloitte

Sofía Tamayo Regulatory Affairs at AES México

he changes proposed by the López Obrador administration to Mexico’s energy reality have marred investor decisions but industry experts assure that there are still plentiful opportunities in the sector and underline the necessity of public-private collaboration

to ensure Mexico’s successful energy transition. “We need to understand regulations, their implications and how they could affect the sector,” said Valeria Vázquez, Partner at Deloitte. Readiness and understanding are key to pivoting with the regulatory changes, should they come to fruition. For this, however, as Claudio Rodriguez-Galán, Partner at Thompson and Knight, points out, companies must first make a clear distinction of what is legally binding and what is dogmatic. Doing so will help companies make strategic decisions based on legal certainty instead of fear and speculation. This thought process puts into perspective how preemptive risk-adverse decisions may be premature, considering how the LIE bill has been continuously stunted since its introduction to Congress. Only 24 hours after its promulgation, the bill had been suspended definitively due to violations to the right to free market competition as underlined in Article 25. As the battered sector looks toward an inevitable global energy transition, experts emphasize the need for public-private dialogue and combined efforts to not only meet growing energy demand but to ensure Mexico’s successful energy transition. “We want to be a regulated sector and organized sector. Regulation allows that,” says Vázquez. “If you think compliance is expensive, try noncompliance,” adds Yolanda Villegas, Founder and Partner at Oleum Servicios. Energy producers do not see regulation but uncertainty as the real obstacle for the industry. Without clear and defined guidelines, actors and investors do not know what to expect, which makes decision-making difficult. Moreover, despite challenging conditions plaguing 2020 and 2021, demand remains unbridled among direct consumers and other industry sectors that are also racing against the clock to reduce their carbon footprint, according to Edmond Grieger, Partner at Von Wobeser y Sierra. As the sector moves forward, energy producers must work within their current limitations to offer creative ESG solutions if they wish to remain competitive. Although CFE has reduced the number of market competitors, it has established tenders for companies to offer services, a possible opening for future cooperation. This is an opportunity for the private sector to fill. There are limitations but

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even within that narrow space, there are still business opportunities that can be exploited “through creativity and a proper regulatory strategy,” says Sofía Tamayo, Regulatory Affairs at AES México.

VIEW TOP State of the Industry | 18

from the

Q: How do you assess the success of private companies achieving amparos against regulatory changes? A: Several procedures have been started against the changes to the Electrical Industry Law (LIE). Recently, a court revoked a definitive suspension against the changes to the LIE. But this was just one resolution; several other amparos are still holding the general suspension in force. The path to a legal resolution is a long one. Until the Supreme Court, or a competent court in its place, t issues its final ruling or the final resolution nothing is written in stone. For companies involved, we recommend they have a legal case built on valid grounds so that they can challenge measures or regulatory changes. The most important issue here, however, is what the sector was calling for: the opening of a real discussion about energy regulation in Mexico. The private industry is used to seeing regulation change when it comes to electricity, oil and gas. Every government has the ability to change the rules of the game and if it does not affect current investment. In the end, we want to see strong private investment but we also want to have a strong state-owned company supporting Mexico’s transmission and distribution network, which is CFE’s exclusive responsibility. These matters do not have a black and white answer. Not all

Valeria Vázquez

rulings will move the same way. The issues will be interpreted differently by various courts. However, I do not believe that the energy sector’s model will be changed through these decisions. The current electricity industry setup will persist

Partner at Deloitte

for a while. The government will try to amend the Constitution and the current energy model. Q: How will the reorientation of the energy sector affect the efforts of C&I companies to

Helping Clients Navigate a New Political, Financial Landscape

decarbonize and meet net-zero goals? A: How we will reach the energy transition’s goals within these conditions is a common question. Private investment has been halted because of the prevalent uncertainty and a critical slowdown in permitting. However, Mexico is not an isolated country. It is part of a bigger world. The global energy transition cannot be stopped; it is already a global reality. Many companies in Mexico understand this and even have international and internal energy transition commitments to adhere to. These companies want to achieve their goals, despite an unfavorable regulatory environment. Mexico is rich in wind and solar resources. I do not believe companies will sit with their arms crossed, waiting for something to happen four years from now. The most important effort in terms of the transition will come from the private sector. One of the positive developments that occurred in the last month marked by regulatory changes is that the industry is finally providing a unified front, saying that it wants legal certainty, assured investment and the possibility to develop projects to help the energy transition

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move forward. Private companies will drive the transition and push the government to retain the status quo in the sector. The next few years will be difficult but energy projects are long term. In the coming years, we will see the results of these efforts.

State of the Industry | 19

How Will the Energy Reform Develop Further From a Legal Perspective?

When the López Obrador administration took office, it immediately became clear that its state-centric vision was not compatible with the liberalization goals of the preceding government. Three years later, an entirely new reform is afoot. So far, López Obrador has seen measures and a congressional bill blocked by the courts. Should the latter initiative be halted by the Supreme Court, a constitutional change is the next step. What is next for the government’s reform?

Soon, the Supreme Court will address the reforms to the LIE. This will be a crucial decision. If eight of the 11 Justices of the Court say the law is unconstitutional, it will have no legal effect. But if a minor majority agrees, it will only be applied to those that presented an amparo. If the Court rules the amendments to the LIE to be constitutional, this would be a surprise to most of Mexico’s energy lawyers. A constitutional change would then not be necessary but it is an unlikely scenario so the government will likely prepare a constitutional change soon enough. Pushing this plan might take the rest of what is left of this administration’s term.

José Estandia Energy Partner at Jones Day

What is happening in the sector is a trend, which will eventually end. International players are used to these political swings and know that this is temporary. As their Mexican legal counsel, we are obligated to convey this message to our clients, as well as the assurance that the rule of law is to prevail. The legal framework cannot be destroyed. A constitutional change to the previously established reform will be difficult to achieve. After all, a right to health and a clean environment are anchored in the Constitution, too.

Juan Carlos Machorro Partner at Santamarina + Steta

Historic elections were held on June 6, which we can view as a very positive signal for both foreign and national investors in the energy industry. In general terms, election day went by without any major incidents and government officials both federal and local have refrained from discrediting the outcome. This is good news for the rule of law and shows that we have solid institutions in place that support Mexico’s democracy. Congress will have a balanced mix of perspectives in the House of Representatives since it will not be dominated by only one party. Hence, any future attempt to pass a constitutional energy counter-reform will require the consensus of the majority of the parties in

Edmond Grieger Partner at Von Wobeser y Sierra

the house, plus the approval of the majority of the 32 state legislatures.

Conference

State of the Industry | 20

Highlights

Green Hydrogen Potential for Project Development Veronica Zapata Member of the Association of Women in Renewable Energy Mexico (MERM)

Fernando Tovar CEO and Country Manager of ENGIE Mexico

Jeroen Visser Global Director Hydrogen at Northland Power

Israel Hurtado President of the Mexican Hydrogen Association

eyond reducing its carbon footprint, Mexico can attract investment and foster economic growth in neglected regions through the production and use of green hydrogen. However, there is still a long way to go before this resource is

recognized as a viable alternative by society and businesses in the country. “Today, more than ever, it is clear that a country with energy availability is a country that will experience economic growth,” says Fernando Tovar, CEO and Country Manager of ENGIE Mexico. This has boosted hydrogen’s potential as an alternative energy source. The trend toward green energy, driven by new consumer demands, has also boosted the recognition of this energy resource. “It is no longer a choice that a company or a country makes but a matter of consumer demand for products with a lower carbon footprint. This includes not only the materials from which a product is made but also the energy used to manufacture it. Producers, faced with demand, have been looking for green energy alternatives,” says Tovar. Green hydrogen is generated from renewable energies through a process called water electrolysis, in which oxygen is separated from hydrogen. Unlike grey or blue hydrogen, this process is considered clean and an essential piece in the energy transition puzzle, explains Veronica Zapata Oviedo, Member of the Association of Women in Renewable Energy Mexico (MERM). The electrification trend has permeated several industrial and consumer activities, although electricity generation still considers fossil fuels. Hydrogen can also participate in this transformation and there are specific niches where this green fuel can be an ideal alternative. “For industries like steel, chemicals or oil and gas that need a gaseous energy source and currently rely on natural gas, hydrogen provides an answer,” says Tovar. In February this year, severe winter storms caused power outages in Texas. Record-low temperatures caused the state’s electric grid operator to lose control of the power supply, leaving millions without access to power, water and food for days. Without a resource to warm themselves, the total death toll rose to more than 210, according to the New York Times. Further investigation later revealed that one of the causes was inadequately winterized natural gas equipment.

According to Jeroen Visser, Global Director for Hydrogen at Northland Power, 30 percent of economic activities can be electrified. This percentage represents 45 percent of global CO2 emissions. “Hydrogen provides access to clean and affordable energy. This resource makes clean energy global and democratized. Global trade is the gamechanger for me,” he says. Global efforts toward energy transition and decarbonization established in the 2030 Agenda approved in 2015 and the Paris Agreement signed in 2016 have also paved the way for green hydrogen, says Israel Hurtado, President of the Mexican Hydrogen Association. This new fuel, however, has several milestones ahead, including a reduction in its cost, which is projected to start falling in 2025 following its widespread use. “This already happened with solar energy eight years ago. It used to cost around US$3.5 million to install a megawatt of solar power and now it is around US$600,000,” Hurtado says. Today, there are already diverse uses and applications of hydrogen in industries like automotive, maritime and aerospace. Just in August, the 24 Hours of Le Mans, the oldest active endurance event in the racing industry, announced that hydrogen cars would be allowed to compete in 2025. “I do not see any other solution in the short term to reduce and stop global warming,” Hurtado says. “Efforts so far have failed.” China is among the countries that have been cranking up hydrogen investments, Tovar adds. Mexico could follow a similar road by taking advantage of its potential to become a major exporter. “We have the natural resources and a geographical position that allows us to compete with the US and Asia,” he says. “Hydrogen gives us the chance to become a world power in generation and international distribution.” For Visser, however, Mexico’s export potential is only half the story. “Can Mexico actually benefit from just exporting hydrogen?” he asks. “Domestically, Mexico should build infrastructure for the industrial use of hydrogen, not only focusing on producing it and shipping it over to Europe or Asia.” To achieve optimal development of hydrogen both domestically and for exports, regulators in the country need to craft a national hydrogen strategy that includes more specific regulations and that leads to official standards for storage and transportation, Hurtado says. “This would allow Mexico to become a regional hydrogen hub,” he says.

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VIEW TOP State of the Industry | 22

from the

Q: How does OCA Global apply its international experience to help clients reach a higher level of efficiency? RS: OCA Global has supported over 1,000 renewable energy projects across the world, totaling 25GW. This has allowed us to gain experience from different countries, technologies and regulatory frameworks, which we have distilled into global best practices. One of our success stories is Abengoa Solar, the renewable energy project that pioneered the development of global energy. Our work with companies in this area ensures we have excellent experience in the field and can add value to disruptive projects, including unconventional technologies, such as floating solar, recently completed in Afghanistan. We also have

Albeiro Guayara

experience supporting governmental policies and in the creation of regulation. An important example of this is our work with the Argentinian government to make its energy sector greener, resulting in a National Energy Efficiency Action Plan.

Country Manager Mexico of OCA Global Q: What are your most requested services? AG: OCA Global is working to obtain various accreditations to perform inspections and laboratory testing and analysis. We are executing a large contract through vendor inspections, where we inspect manufactured equipment for quality assurance. This is an important step that helps companies to ensure that the equipment they buy is up to the requested standard technically and in terms of quality. This type of inspection is often required in the energy sector and for on-site laboratory services that can solve mechanical and electrical issues encountered in project development. Q: How is OCA Global adapting these solutions to the demand created by the uncertainty in Mexico’s energy industry?

Rafael Sanchez

RS: Private players in the energy sector acknowledge that the situation has changed for them. The environment has become difficult, and they are facing tumultuous times. However, a smooth

Division Manager of OCA Global

sea never made a skilled sailor. We believe these challenges are driving the energy industry to look for improvements, with companies focused on deeper specialization and looking for viable alternatives to ensure that assets perform optimally. From

Technical Advisory, Inspection: Foundations of Fruitful ROI

this perspective, the challenges the sector must face ensure it specializes even further. In the short term, we believe that Mexico can export the knowledge it has already gained in this area and will continue with its leading status in the renewable energy industry. Q: What are some of the main issues the company identifies in its inspection of renewable energy projects? RS: Without a proper assessment, power plants can suffer significant energy losses due to cumulative error. This failure is frequent but it can be prevented (or corrected) with quality control inspections and supervision. For example, solar modules can suffer different failures, like micro cracks, hot spots and PID (degradation). If operators do not control these from the beginning, they will eventually have a big impact on how much

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energy the power plant will produce. Adequate vendor inspection, due diligence, yield assessment, technical inspection, project acceptance, among other processes, are essential to guarantee the expected ROI. We know how equipment is manufactured, built and operated, which has allowed us to anticipate some of the drawbacks that could occur.

Consolidation as ‘Green Enabler’ Comes Into View Bruno Riga Country Manager Mexico & Central America of Enel Green Power

The ‘Ramírez de la O’ Factor Arturo Carranza Energy Adviser and Consultant

Energy as a Competitive Advantage Claudio Rodríguez Partner at Holland & Knight

CFE to Move on Hydroelectric Updates, Solar and Pipelines 07/16/2021

1GW Solar Plant Part of Sonora’s Grand Energy Transition Plans Rafael Cabanilla Energy Representative of the Transition Team of Sonora’s Newly Elected Government

Safeguarding Investor Rights Julio Valle Deputy Director at AMDEE

Investment, Dialog Lead New President’s Agenda José García President of AMGN

Riding Coattails of Our Strengths Into Larger Markets Jonah Greenberger CEO of Bright

Russian Experience and Skill Can Benefit CFE and Mexico Ivan Dybov President of Rosatom America Latina

IEA: A Pathway Toward Net-Zero 07/03/21

Sophistication Determines Who Thrives in Electricity Market Ramón Basanta CEO of ATCO Energía

Project Development & Finance After the 2014 Energy Reform established a new status quo, investments in Mexican energy projects were mostly framed within government-backed tenders and long-term power purchase agreements, boosted by record-low energy costs. Although this situation has changed drastically as investors have taken a precautionary stance, a global drive toward a green energy transition and its associated green financing still provides a strong perspective for the Mexican market, although projects are expected to be on a smaller scale. New technologies and Mexico’s growing gas demand have opened new avenues for investment. Though the political environment in the country may be more unfavorable toward attracting private investment, commercial and industrial demand continues to grow. Mexico’s energy finance and its influence on the development of new energy projects are at the core of this chapter as top financial consultants thoroughly outline their views.

Project Development & Finance

Analysis Companies Bide Time on Renewable Projects Amid Uncertainty

Conference Highlights The Future of Hybridization in Mexico

View From the Top Aaron Muniz | CEO of Proterra Capital

View From the Top Adolfo Borja | Director of Energy and Cogeneration at IGSA

View From the Top Ken Tsutsumi | Board Member and Solutions Sales and Marketing Director at Panasonic

Analysis New Possibilities Pique Investor Interest in Financing Shift

View From the Top Mariuz Calvet | Director of Sustainability and Responsible Investment at Grupo Financiero Banorte

View From the Top Humberto Bustamante | Country Manager Mexico and Latam of Vector Renewables

Roundtable Which Developments Are Driving Sustainable Investments?

Expert Contributor Alejandro Méndez | Founder and CEO of Royal Eagle Capital

View From the Top Enrique González | Executive VP of Investor Relations and Communications at Cox Energy America

Spotlight X-Elio Closes Financing for Perote II Solar Project

Content Links

Project Development & Finance | 27

Companies Bide Time on Renewable Projects Amid Uncertainty Three years into the López Obrador administration, private clean energy developers are used to the “new reality” in which renewables are no longer the go-to option for the government. This does not mean that the sector has stopped moving, however. Industry insiders say that by focusing on social and environmental benefits as well as new technologies, companies can build a stronger case for the adoption and development of renewable projects. “We believe that the social aspect of a project is crucial to its viability, with only the financial picture being more important. This is not only for permitting reasons. It allows the company to share the benefits of the project with the communities around it. We would never choose to develop a project that does not leave a positive impact on the surrounding land, climate or society,” says Sofia Perez, Vice President of Strategic Relations at Pardgen. The uncertainty flowing from López Obrador’s efforts to dismantle the status quo and vest more power into nationally owned companies PEMEX and CFE have greatly impacted private energy developers in the country. “Our power generation is being curtailed and the government is attempting to change the LIE or even the constitution if this fails. More than anything, this introduces uncertainty in regard to what might come,” says Gerardo Pérez, Vice President and Country Manager Mexico at EDF Renewables. Policy changes backed by a democratically elected government are understandable, should be respected and even expected, say industry insiders. But such changes cannot be at the expense of existing contracts, Juan Carlos Machorro, Partner at Santamarina y Steta, says. While legal protection through amparos has been a solid tool to protect existing investments against the government’s measures so far, new project development has slowed down to a glacial pace. Developers stress that the certainty needed for large, long-term investments simply is not there. In such an environment, companies say they mostly work to keep their prospects alive but not much more. “In light of the regulatory situation in Mexico’s energy sector, our development has gone into slow motion. We are doing the minimum amount of work necessary to ensure that we do not lose the progress that we have already achieved,” Pérez says. Change in Perspective Greenfield project development might have come to a standstill but many utility-scale projects already further down the pipeline continue to move ahead. Spanish solar developer X-Elio has obtained the financing required for its Mexico-based 119MW Perote II project, for example. The company’s Xoxocotla solar project is another project further along in its construction changes. Other examples include BAS Corporation’s Mesa de Morenos wind farm and Mitsui and Trina Solar’s Calera power plant. Read the complete article More about this topic

Developers are choosing to leverage the social benefits associated with their projects to highlight the advantage of renewables

Project Development & Finance | 28

against decarbonization alternatives. Pushing for permits is complicated enough as it is, so developers would do well to ensure they have social backing at the local level and to leave a net-positive environmental footprint if they are to succeed, María Cristina Hernández Calzada, Partner at Vera & Asociados, told MBN. “When developers are not involved in important social and environmental matters, complying with the many prerequisites

EXPECTED CAPACITY BY TYPE OF TECHNOLOGY AS OF DEC. 31, 2024 (percentage)

becomes something of a surprise to them. They need to prepare much more than simply the construction.” Mexico’s social landscape is notoriously difficult to navigate. Various genetically and culturally differing indigenous communities live across its territory, with their rights to decide over their own territories anchored in the Constitution. The concept of ejidos, areas of communal land that represent about

45.38% Combined cycle 24.78% PV Solar 13.38% Wind 12.47% PV DG 1.75% Turbogas 1.30% Hydroelectric

0.36% Internal combustion 0.12% Battery bank .08% Efficient cogeneration .05% Bioenergy .03% Kinetic energy

50 percent of Mexico’s territory, is also crucially important for project developers. Many patches of communal land can overlap within an area eyed for renewable energy development, making negotiations a complicated hurdle to overcome with ejido owners, especially if individuals within these communities disagree on the benefits of such a project. Acclaim Energy’s Country Manager María José Treviño highlights

Source: SENER

that by allowing communities to share in the benefits of power production, many individuals can be won over. “There is a misconception regarding ejido communities being taken advantage of. Usually, these territories are far away from developed areas; therefore, they are made up of low-income communities and live in very poor conditions. The majority of these projects have made them micro-entrepreneurs who profit out of the solar or wind generation located on these parcels of land,” says Treviño. By supporting communities outside of the energy sphere, for instance through healthcare and education, developers have built a sustainable platform on which to produce renewable energy. “We also set in motion a social action plan to benefit the inhabitants of the area with activities such as the reconstruction and maintenance of roads, the construction and repairing of public spaces and the impartation of workshops to help boost the work skills and education of the population,” says Enrique Alba, CEO Mexico of Iberdrola.

SEN GROSS CONSUMPTION AND REGIONAL FORECAST 2021-2035 (GWh) 500,000

460,000

420,000

380,000

340,000

300,000

30,000 28,383 27,481 26,618 452,012 25,820 439,689 25,030 24,333 427,701 23,609 23,152 416,197 22,945 22,290 22,232 404,726 21,497 21,582 20,989 394,468 20,685 20,358 18,530 19,900 19,981 19,225 17,842 19,043 17,224 384,201 18,338 16,651 16,095 374,092 — Baja California Peninsula 15,542 364,288 14,590 — Yucatan (Interconnected) 354,854 14,086 13,485 345,372 336,930 — SEN 327,755 319,430 309,875

2021

Source: SENER

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

26,000

22,000

18,000

14,000

10,000

Conference

Project Development & Finance | 29

Highlights

The Future of Hybridization in Mexico Mirjam Schipper Energy Industry Lead at Mexico Business

Raúl Carral Business Development Latin America North at Wärtsilä

David Fatzinger Vice President and Country Manager Mexico at Invenergy

Bruno Riga Country Manager Mexico at Enel Green Power

ybrid projects – the integration of renewable energy generation with other systems, traditional or modern – are growing in popularity across the world. Industry experts agree that affordability, reliability and sustainability make these systems an ideal alternative

for Mexico. “With hybridization and battery storage, you basically store excess energy generated with renewable power in batteries or, potentially, in other types of fuels in the future,” says Raúl Carral, Business Development, Latin America North at Wärtsilä. Hybrid systems can combine renewables and fossil fuels efficiently and in the most economical way. Mexico’s need for hybridization has to do with the market’s commitment to support renewables and to boost transmission systems’ capacities. “When there is less capability in the transmission system or a lack of commitment to the introduction of renewables, we start leaning toward solutions that are closer to load points. The closer we get to the load, the more reason we have to move toward hybrid solutions that could better fit the demand profile,” says David Fatzinger, Vice President and Country Manager Mexico at Invenergy. Hybridization in the Mexican Market In general, the big discussion in Mexico is the future of renewables. “We look for a balanced energy dispatch that allows greater renewables participation,” says Bruno Riga, Country Manager Mexico at Enel Green Power. While there is a great deal of potential in the Mexican market, a clear regulatory framework and requirement standardization is needed for hybridization to consolidate in the country. Wind and solar, in particular, are mature enough to cover the technical, commercial needs in the industry when working together with storage technologies. “Hybridization of power plants promises to increase the load factor thanks to complementarity, improving the stability of the electricity supply and speeding up connection times,” says Riga. Enel Green Power is already exploring the possibilities of building these kinds of flexible power plants in other countries, according to Riga: “We are leaders in hybrid renewable energy storage projects, with five plants under construction in Texas, which are part of a big business plan in the US. We are also exploring new opportunities in other countries, such as Chile, where we operate a photovoltaic solar park coupled with a wind farm.” Positive as this may be, companies like Invenergy, Wärtsilä and Enel also have the responsibility to bring those kinds of examples to Mexico to

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help the country move forward, according to Fatzinger. “This is especially true when introducing technologies that still are not well defined in the country.”

VIEW TOP Project Development & Finance | 30

from the

Q: How would you characterize confidence in the regulatory environment and its impact on your business? A: Unsurprisingly, there is not much confidence in Mexico’s current regulatory environment. This hurts our ability to maximize value for our offtakers. Nevertheless, we are certain that in the coming years there will be more flexibility and we anticipate a focus on improving the energy matrix with the participation of private generation. Furthermore, as centralized assets become the market’s focus, this will allow us to successfully compete with bigger power producers. Our company is thriving in our energy market niche but we look forward to a more competitive market with more players so we can offer our clients even more attractive solutions. Q: Why do big companies choose to work with Proterra Capital to resolve their energy issues? A: Our ability to attract large clients is a reflection of our work to generate the best possible solution. We work closely with our clients, earnestly trying to understand their concerns so that we can deliver a flexible solution that is sensitive to their needs, instead of applying a standard model for every client. This meticulous process and continuous effort have helped solidify our position in the market. In addition, our technologies portfolio allows us to work with different industries that source their energy supply from the wholesale electrical market and find solutions

Aaron Muniz

for them as well. Overall, the main takeaways are preparation and authenticity. These two factors have guided our work, allowing us to engage large clients and become a formidable competitor.

CEO of Proterra Capital

Q: As a qualified supplier, what are the advantages of getting a project on-site in comparison to an off-site clean energy generation contract in the form of a PPA? A: We foresee distributed generation becoming a standard part of

Deep Market Knowledge Bolsters Value for Clients

the intelligent energy grid, capable of managing not only on-site generation but its interaction with the smart grid. Fundamental to that is energy storage. Globally, after its actualization, we anticipate a large percentage of energy consumers to become “prosumers,” representing a mix of energy generation and storage interacting with the smart grid. Our tendency to gravitate toward on-site projects is tied directly to the known benefits, including stable and predictable generation, evading possible intermittency disruptions, minimizing accidents and bypassing transmission fees. Given these remunerative benefits, we expect distributed generation and on-site storage will become the global standard. Q: What are the prospects to grow the cogeneration market in the short term, given its clear benefits? A: Cogeneration is not an option for everyone given the volatile prices of commodities like natural gas. Renewable technologies will often be a better option, considering the associated marginal cost is close to zero; however, there are exceptions, such as those companies that can benefit from the superfluous heat that is produced. Furthermore, the viability and implementation of this technology is also contingent on how strict the offtakers’ policies

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are and how quickly they want to reach net zero emissions. That being said, we understand that natural gas will be used as a transition fuel to a green economy, helping companies produce cleaner and stable energy under the 0.5MW limit established by the regulatory framework.

VIEW TOP Project Development & Finance | 31

from the

Q: How does IGSA view its own internal decarbonization efforts in both its operations and processes? A: For starters, both of our cogeneration plants have 80 percent efficiency rates, which means that we produce carbon emissions well under CFE’s energy network standards. At our Lerma plant installations, we have also assembled solar panels to further reduce our carbon footprint and cut production costs. Overall, this has allowed us to generate energy that is substantially more efficient and cleaner for the environment in comparison to other market producers. Q: How does the company’s paquetizado (packaged) solution evolve the benefits of cogeneration? A: The cornerstone of all our operations is efficiency, which can look entirely different from company to company and even from within if you consider the scale of a facility. Our functional packages look to deliver integrated energy solutions to ultimately make our client’s production easy and efficient. For this reason, Siemens Energy has chosen us to work on 5 to 15MW turbine facilities in Mexico and throughout Latin America. We are working on the development of three more packages and see plentiful opportunities in this area. We are looking forward to expanding this venture in both Mexico and Latin America.

Adolfo Borja

Q: How could IGSA grow further in the renewable development of biomass, biogas and biofuel within Mexico?

Director of Energy and Cogeneration at IGSA

A: Given the various applications, biomass has niches into which IGSA is interested in expanding. For example, biomass technology applications make the most sense in isolated areas where access to natural gas is lacking or nonexistent, such as islands or remote locations. This is an active topic for us. In

The Energy Transition Solution: Cogeneration

fact, we are already considering project sights in Mexico and throughout Latin America. Q: How does IGSA plan to expand its international presence in Latin America? A: The company already has teams distributed throughout Latin America that have been slowly but surely seeding the company’s reputation and legitimacy through commercialization services. Now that we completed this initial phase, we are looking to expand our commercialization services but with turbine package systems to address specific client needs and project development services encompassing engineering and construction oversight for companies that lack know-how. Q: What opportunities do you see in maintenance of brownfield projects? The main opportunity for cogeneration in brownfield projects is the reoptimization of units with obsolete technologies. Often, replacing such technologies is normally the first step needed to

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make unit processes more efficient. Aside from this, we also offer direct operation and maintenance services, which help refine the process overall as reflected in analysis reports that are shared with the client on demand.

VIEW TOP Project Development & Finance | 32

from the

Q: How does Panasonic’s local presence in the Mexican market contribute to the company’s success and that of its clients? A: Panasonic is 103 years old and has a prominent presence across the world. Even though the pandemic forced us to work online, we know that customers appreciate one-on-one interactions. Many businesses can be done remotely but a photovoltaic solar project, for example, needs boots on the ground to be completed successfully. In this regard, all countries are important to Panasonic. Panasonic has an office for the US and Canada and another one for Latin America, located in Brazil. Mexico is the second-largest market for the company in Latin America, so being present in the county is vital to the company’s success. Q: How does Panasonic offer added value through its energy solutions and EPC service? A: Panasonic provides photovoltaic solar for its commercial and industrial clients through its EPC service and also integrates battery storage. Batteries have long been a staple of the company because they were necessary for our cellphone and laptop production, for instance. More recently,

Ken Tsutsumi

Panasonic has been developing lithium-ion batteries for the automotive OEM Tesla. Panasonic is a global leader in cylindrical lithium-ion battery production. We already offered batteries to Mexico’s telecom industry but we are now looking

Board Member and Solutions Sales and Marketing Director at Panasonic

to integrate battery storage with solar solutions. Green hydrogen is another storage-related technology the company is planning to develop. Unfortunately, Mexico’s grid is prone to blackouts, so adding

Key Value Adds in EPC Experience and Staunch Client Support

storage adds a great deal of value for manufacturers because it prevents losses due to stoppages. Furthermore, there is no need to attach our storage solutions to a solar solution. In addition, Panasonic offers an analytical energy consumption eco-POWER meter. Panasonic provides added value with these solutions through its 40-year presence in the Mexican market, offering support and experienced engineering. Panasonic will be in Mexico to support its customers regardless of how the energy sector develops. When it comes to EPC, companies tend to arrive and then suddenly leave a country. This will not happen with Panasonic. Even if we were to drop a product from our portfolio, our customer support would remain as strong as ever. Panasonic offers the entire EPC service as a turnkey solution, using Panasonic or third-party solar panels, depending on what the client prefers. We focus mostly on midsized projects, not as large as utility-scale but larger than small distributed generation installations. O&M is an important factor: solar systems are meant to function up to 20 years. For this to happen, the hardware must be maintained well. Since Panasonic plans for the long term, we are happy to support and look after our clients across the entire life cycle of the project. The company focuses especially on industrial clients in the Bajio area. We have an office in Queretaro, from which we have direct contact with end users.

Q: How do you see solar and storage technology impacting energy use in the C&I segment? A: On the one hand, we see more companies switching to clean energy to meet sustainability goals. On the other, solar plus storage’s potential to save costs is attractive. This means that two factors are driving the adoption of clean energy solutions. Mexico has great solar radiation, which helps to spark interest in the technology. Outside of utility-scale applications, such as Aura Solar III, behind-the-meter installations below 0.5MW are growing in popularity and will be in greater use in the years to come. Regarding storage potential, we see two main opportunities. Using lithium-ion as a form of regular energy backup in case of blackouts is a logical application. Lithium-ion batteries address the pollution, cost, replacement and weight concerns associated with lead acid batteries. Although solar energy has many benefits, battery storage can also function by itself to protect companies from power outages. Storing energy when electricity rates are cheap and discharging them during peak hours adds further value. Q: How is Panasonic working to foster its own sustainability with its Environment Vision 2050 strategy? A: The company has a strategic vision based on six main objectives it aims to address. First of all, our own energy use in the manufacturing process should be lower than the energy we generate. Secondly, Panasonic has a plan to reduce its CO2 emissions; for instance, by developing technologies for our air-conditioning units that lower the intensity when sensors detect that no one is nearby. Thirdly, Panasonic is looking to recycle all its materials. Careful water use is another important area, focusing on recovery and re-use. Panasonic relies on chemical substances for its products but we work with them as responsibly as possible, recycling the substances where possible. Finally, we work to save and preserve biodiversity wherever we build our offices or factories. Q: What are Panasonic’s goals for the short term in Mexico? A: Panasonic has several businesses in Mexico other than energy solutions, such as consumer products, standard batteries and electric equipment for the C&I sector. We also manufacture welding machines for the automotive industry and other industrial devices. Panasonic’s goal is to improve its profits by 10 percent.

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Project Development & Finance | 34

New Possibilities Pique Investor Interest in Financing Shift Already rattled by the government’s push away from the Energy Reform, the continuously shifting Mexican energy sector has also been faced with a transformation in project financing. MBN experts see utility-scale project financing taking the backseat but highlight that Mexico’s massive potential, the global energy transition and emerging niches are drawing the attention of investors. “The counter-reform moves ahead. We will experience changes in trends and businesses but the sector will continue onward, regardless,” says Alan Sakar, Senior Associate at Clifford Chance. An investment in an energy project is one for the long term. Even smaller installations often require millions of dollars of financing but the benefits are clear once a project is finalized. More importantly, investors continue to reap the rewards for periods of 15 years or more. Yet, to minimize risks over such long periods of time, absolute legal certainty is essential no matter Mexico’s potential. In the country’s largest midterm election in history, President López Obrador’s party, MORENA, won several important governorships but saw its power in Congress reduced. Consequently, the ruling coalition does not have the two-thirds supermajority it needs to push constitutional reforms, meaning it is not likely to amend the 2014 Energy Reform, the next step in López Obrador’s series of measures and congressional bills. Perhaps more importantly, the Supreme Court has not yet issued a final ruling on the government’s changes to the electrical industry law. Constitutional change or not, many industry insiders argue that much of the damage has already been done regarding investor confidence. In an environment where permits for energy projects have come to a complete standstill, few appear willing to invest in long-term perspectives. “In any case, the most relevant question is not whether a constitutional reform to strengthen CFE will be approved or not. The most important question is whether the president is willing to tone down his narrative and bridge the gaps between his government and the private sector to get past the standstill that the sector currently faces,” wrote Energy Adviser and Consultant Arturo Carranza on MBN. If, and how, this bridge building process will happen is mere speculation. Recent headlines are somewhat contradictory. On the one hand, López Obrador has said that he would not mind private participation in the energy sector at all, as long as CFE keeps its majority stake in the industry with a 56 percent share. On the other hand, CFE has asked regulator CRE to suspend any power plants that harm the national electrical system. In an uncertain environment, investors have perhaps been more concerned about protecting their previous assets rather than looking toward greenfield projects. Edmond Grieger, Partner at Von Wobeser y Sierra, believes that Mexico’s rule of law is a reliable cornerstone for concerned investors. “The judicial branch has shown no bias in favor of the executive branch’s energy

Project Development & Finance | 35

policies and has acted stoically to preserve the rule of law,” he wrote on MBN. Particularly for projects already in later stages, this knowledge might be sufficient to trigger a positive investment decision, such as in the case of X-Elio’s 119MW power plant. Different Shades of Green Mexico does not exist in a vacuum. As part of a heavily globalized world, the country is strongly influenced by the wider green energy transition. For Grieger, this influence translates into new investment opportunities, too. “There is a steady, growing demand for clean and renewable energy in Mexico and worldwide. Many important industrial and commercial offtakers in Mexico have engaged in admirable and ambitious environmental, social and governance (ESG) and net zero emission goals. There will be no turning back this global effort aimed at mitigating the adverse effects of climate change and engaging in sustainable and inclusive business strategies that strive for a better future for generations to come.” The push toward stronger sustainable practices has gained ground in Mexico over the last few years as an ESG-ecosystem was constructed, says Mariuz Calvet, Director of Sustainability and Responsible Investment at Grupo Financiero Banorte. A growing awareness of the importance of sustainability, driven by investors and end users, is already transforming the market, he says. “More green and sustainable bonds are released every day, even from the Ministry of Finance. An emissions trading system is being piloted. Companies that emit 70 percent of the country’s CO2 are already a part of this program. It is a good time for sustainability efforts to become more robust.” All of this logically has a strong effect on the energy industry, which needs to provide offtakers with clean energy so that they can effectively lower their emission levels. “If there is an increasing demand for renewable and clean energy being generated by private companies in the country, then the lenders, sponsors, developers, generators, suppliers and consultants should come up with creative business and legal strategies to address that demand and offer the most adequate energy supply solutions,” says Grieger. Many of these new investment avenues are thus focused on tailoring energy solutions to offtakers. On-site energy projects, including distributed generation or isolated supply are promising options, as are stable, long-term power purchase agreements (PPAs) and other options in Mexico’s wholesale electricity market (WEM). Which option fits best depends on the offtaker but for investors looking to diversify their Mexican portfolios, the breadth of options available is a major benefit. “We have been seeing an upswing in these built-to-suit energy and sustainable solutions and we are sure we will continue experiencing a wave of opportunities for both investors and offtakers in the Mexican energy market,” adds Grieger. Even if companies plan to operate outside the Mexican market, the country can serve as an ideal headquarters for markets further south, evidenced by COX Energy’s strategy to raise capital in Mexico by listing on BIVA. Nascent technologies, such as battery storage and green hydrogen, also offer a new hope for investors. A report by Read the complete article More about this topic

McKinsey, for instance, shows that Mexico’s hydrogen costs would be 64 percent lower than in most other countries, reaching US$1.40/kg in 2030 compared to US$2.30/kg elsewhere.

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from the

Q: How would you assess the push for decarbonization among companies in Mexico? A: It has been a great task for Mexico to pursue a more sustainable society and capital markets, while addressing the significant challenges the region faces. Mexico and Latin America have a strong inequality and are more exposed to the effects of climate change and air pollution. Rapid urbanization, a lack of clean water, deforestation and resource scarcity are other issues we need to deal with. We should motivate individuals and the public and private sectors to push for a stronger commitment and deeper understanding of sustainability. This push has become stronger in the last few years in Mexico as an ESG-ecosystem was constructed. We want corporations to be more transparent about their goals and to devise more plans and targets specific to decarbonization. Each year, more companies are reporting their progress, which leads to better performance. Furthermore, the regulator created a Green Finance Counsel that works in subgroups to generate the tools Mexico requires to ensure a more robust and sustainable capital market. The private sector and NGOs have started their own advisory counsel as well. I believe that the market is aligning toward a sustainable mindset. More green and sustainable bonds are released every day, even from the Ministry of Finance. An emissions trading system is being piloted. Companies that

Mariuz Calvet

emit 70 percent of the country’s CO2 are already a part of this program. It is a good time for sustainability efforts to become more robust.

Director of Sustainability and Responsible Investment at Grupo Financiero Banorte

Q: What criteria does Banorte use to decide what is a sustainable investment in its efforts to prevent greenwashing? A: For credit, we created an environmental and social risk management unit in 2012. We use the equator principles and IFC

Banorte Sees Greater Focus on Sustainability in Mexico

standards to determine which sectors are the most sensitive and can pollute or impact the world negatively otherwise. As a result, we work closely with clients to promote a better performance for the projects that we finance, reducing its negative spillovers. We want to focus on projects that are positive for the environment and mitigate any possibility of harm. We apply a similar methodology on the investment side. Q: How has the pandemic shaped the growth of green financial instruments? A: The pandemic has created a strong connection between people and what matters most to them. This includes a higher awareness of social and environmental issues. This immediate shift in global priorities brought on by COVID-19 has taken sustainability issues to a higher level. People also understand that the pandemic has taken a heavy toll on the economy but that they need to generate a different mindset about how they consume or purchase products. Various tools, such as green credit, are already benefiting this dynamic. Today, more ESGfriendly bonds are being issued than in all of 2020, which easily beat 2019. Therefore, we are seeing a huge increase in green,

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social and sustainable bond issuance. This demonstrates how priorities have changed globally. It is risky for companies not to consider sustainability initiatives. Additionally, stock exchanges are adapting to meet these new demands from some of the world’s most prominent investors.

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from the

Q: What distinguishes the company in regard to asset management? A: Our global coverage and portfolio experience are two key differentiators. We take advantage of the fact that we are a global corporation and that we are part of the renowned Italian Falck Renewables. Furthermore, Vector is releasing its own effective asset-management platform this year, called NUO. We already use internally but can be provided as a separete service for third parties if they are interested. The platform is made by asset managers for asset managers. Q: Why is it important for renewable power plants to switch to a more digitalized approach for monitoring assets? A: The advantage is clear. First, you begin with calculations and manual supervision of O&M in the plant. If you only have one or two assets and understand the procedures, this approach can detect issues and ensure proper functionality. However, the larger the portfolio grows and power plants increase in size and equipment, the more automated processes will be necessary. It becomes unfeasible to have multiple people doing the same calculations and going through the same motions. A platform can easily incorporate standard procedures and allow users to efficiently monitor every key parameter essential to the operation.

Humberto Bustamante

Q: How has demand for engineering support of battery storage development grown in recent years?

Country Manager Mexico and Latam of Vector Renewables

A: We have working for two years to incorporate storage design in our services. Today, it is becoming especially clear that the market is ready for storage capacity technology. At Vector, we design related projects and support them. Storage is becoming part of the standard design for a power plant,

Global Presence, Digital Transformation for Asset Management

particularly for photovoltaic solar. It is merely a matter of time before clients begin requesting this as a must have option, depending on the country and the needs of the project. While we are already implementing it in other markets, unfortunately there is not much renewable development happening in Mexico. Q: How has M&A activity shifted since the López Obrador administration took office? A: Through our financial advisory service, we help clients sort out the technical elements of due diligence and review power purchase agreements (PPAs). Although I cannot go into specifics, I do know about several plans currently being evaluated for purchasing and selling of power assets. Some interested companies from abroad are planning intelligent purchases at this moment. However, other companies are trying to exit the market or reduce their risks because of the uncertainty that exists in Mexico’s energy sector. Some companies are more comfortable with risk than others. Those that want to avoid risks are trying to get out of the

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market, whereas those that have an appetite for opportunities and are comfortable with the associated risk are interested in entering. For this reason, we are seeing negotiations take place, although not as many as we saw two years ago when the auctions still existed and the market was more open.

Project Development & Finance | 38

Which Developments Are Driving Sustainable Investments?

Sustainable finance includes all types of structured financial activities aimed at sustainable assets that consider environmental, social and governance factors as important as returns on investment. Industry experts have seen green financial instruments grow in popularity in the past year and predict even further growth toward 2021 and beyond. What are the factors driving this shift in investment strategies?

The pandemic has created a strong connection between people and what matters most to them. This led to higher awareness of social and environmental issues. People also understand that the pandemic has taken a heavy toll on the economy but that they need to generate a different mindset about how they consume or purchase products. Today, more ESG-friendly bonds are being issued than in all of 2020, which easily beat 2019. This demonstrates how priorities have changed globally. Consumers are also aware of what real sustainability means, making greenwashing an empty marketing strategy and a difficult

Mariuz Calvet

route to maintain. It is risky for companies not to consider sustainability initiatives.

Director of Sustainability and Responsible Investment at Grupo Financiero Banorte

Four external drivers are accelerating the shift to decarbonization, decentralization and digitalization. And there is no going back. Driver one is the customer. Customers are focused on green and sustainable outcomes. Regulation and policymaking is driving take-up of solutions that incentivize and support green recovery. In pursuit of compliance with global carbon emission-reduction policies, utilities are forced to retire legacy and polluting assets and transition to alternative business models. Investors take their cue from governments and consumers and are distancing themselves from carbon-intensive industries. As time runs out on current high

Gavin Rennie

carbon intensive utility business models, they are putting their money behind greener and renewable energy alternatives.

Global Energy Emerging Markets Leader at EY Mexico

Technological advances in renewable energy have made an energy transition that is profitable for investors and offtakers alike. One example is the current capacity of solar modules, where we have jumped from a 440W module in December 2020 to a 540W module in 1Q21. We have also witnessed technological innovations that augment the capacity factor of wind turbines and we have seen storage systems for utilities become operational, with great results. And let us not forget the current green hydrogen trends, which Japanese car manufacturers have invested heavily in for the past decade, bringing us closer to an achievable green mobility.

Juan Ávila CEO and Co-Founder of Top Energy

s a source of energy, green power can be produced from renewable energy technologies, such as solar energy, wind power, geothermal energy, biomass, and hydroelectric power. Each of these technologies works in different ways, whether it is

taking power from the sun using solar panels or using large wind turbines or the flow of water to generate energy. In recent decades, the cost of wind and solar power generation has dropped dramatically. Hydropower technologies also allow the consistent production of green electricity. These are some of the reasons that the US Department of Energy projects that renewable energy will be the fastest-growing US energy source through 2050. To be successful in providing financing to mitigate climate change, strengthen resilience and enhance abilities to adapt to climate change, most of the efforts should be targeted to support SMEs

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in their respective countries and operations. To understand

When Being Green Is Not Enough To Fight Climate Change Alejandro Méndez Founder and CEO of Royal Eagle Capital

the importance of SMEs in the global economy and why it is so important to find financial mechanisms to support the use of green power sources to support their efforts to achieve their climate change goals, global leaders and financial institutions, should consider the following: + SMEs account for most businesses worldwide and are important contributors to job creation and global economic development. They represent about 90 percent of businesses and more than 50 percent of employment worldwide. + Formal SMEs contribute up to 40 percent of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included. + The World Bank estimates that 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world. + In emerging markets, most formal jobs are generated by SMEs, which create seven out of 10 jobs. + Regarding funding, SMEs in more advanced economies benefited from an influx of alternative investment funding, nontraditional lenders and innovative funding strategies like crowdfunding, to fill the gap. The financing gap for SMEs in developing economies widened even further. What we see at Royal Eagle is an imbalance in the resources, technology and financing available to produce green power for SMEs in developed markets versus the options found in undeveloped and emerging markets. Think for a moment: Let’s say that policymakers, financial institutions and SMEs from different economies and markets are having dinner at the same table and discussing climate change but they notice that the ground on one side of the table is uneven. At a certain point, the guests on that side of the table will need to fix the imbalance. Climate change is considered a global emergency. It is an issue that goes beyond national borders. It requires international cooperation and coordinated solutions at all levels, in developed, undeveloped and emerging markets. At the end of 2019, we decided to form our first Green Energy Income Fund to acquire and finance renewable energy projects in Texas and emerging markets like Mexico, Costa Rica, Panama, Colombia, and Brazil. Despite the pandemic, which has been devastating to so many industries, companies, individuals, and families, we decided to keep going.

In July 2021, Cicero Shades of Green AS, the leading global provider of second opinions on green bonds based in Norway, announced that our US Capital Royal Eagle Green Energy Income Fund was awarded a Dark Green rating, which is their highest rating. Cicero Shades of Green provides independent, research-based evaluations of green bond investment frameworks to determine their environmental robustness. Its ratings are Dark Green, Medium Green and Light Green, to offer investors better insight into the environmental quality of green bonds. They also offer assessments of companies, sustainabilitylinked bonds, and impact reports. The Royal Eagle Green Income Fund is the first fund rated by Cicero. When we first approached Cicero’s Team with our Renewable Energy Portfolio and the Green Fund Investment Framework, we were very confident of getting a good rating. But after the initial stages of the process, we realized that developing green renewable projects was not enough to be considered a Green Sustainable Company, so the overall rating of the fund was questionable. We learned that the projects we have in the portfolio are considered green but as a company, we were not. Additional efforts were needed to comply with the international standards investors and independent third-party companies like Cicero are looking for to invest or issue third-party opinions. Based on that experience, we developed the Royal Eagle Capital Partners Sustainability Mandate. The mandate refers to the focus on a portfolio of holdings that will not only deliver strong returns to investors but also support local communities and a global shift to clean energy. It has allowed the fund to identify unique opportunities to invest in SMEs in the markets where we operate. This Royal Eagle Capital Partners Sustainability Mandate will serve as a set of specific guiding principles that will further the fund’s commitment to ESG standards and quantify the criteria to be considered a “green” investment. These criteria have been designed in conjunction with 3R Sustainability, a third-party organization with a commitment to advising and measuring the sustainability of projects, companies and global investments. Working with a credible third-party such as 3R has allowed Royal Eagle to objectively quantify the principles that have driven the investment process. The Royal Eagle Capital Sustainability Mandate is an important step in the continued relationship between Royal Eagle, investors and stakeholders. Not only has Royal Eagle furthered its commitment to develop green and fair projects but the fund has now quantified the requirements and outlined a plan to maintain this commitment over the lifetime of each project.

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from the

Q: Why did Cox Energy decide to venture into Latin America and why is Mexico the company’s ideal starting point? A: Cox Energy was founded in Spain in 2014 to address the needs of the renewable energy boom that was taking place in Europe. Today, in Latin America, we are seeing the same phenomenon that occurred four or five years ago in Europe. The industry is on the right track. There are governments, like Chile’s, that are much more advanced than Mexico’s in terms of policies and regulatory processes related to renewable industry. Given the boom in the industry in 2017 and 2018, many companies went public in Europe, especially in Spain. We went through that process with Cox Energy America in Mexico and last year, despite the pandemic, we were the only equity IPO on the BIVA stock exchange. We listed 15 percent of the company, which was a breakthrough for us and sets the stage for exponential growth. For us, going public, in addition to opening new capital financing alternatives, has been vital to accelerate our entire institutionalization process. The IPO was a wise decision for Cox Energy America. We are paving the way for what we believe is going to be a great future. We know that there is no turning back and that renewable energies are here to stay. In addition to initiating the transition to renewable energy and improving environmental

Enrique González

conditions in Latin America, this change will be necessary because the current energy network will not be able to meet the demand expected in the coming years. Today, 50 percent of all renewable energy generation worldwide is photovoltaic

Executive VP of Investor Relations and Communications at Cox Energy America

solar, which is the main reason why we decided to specialize in this field. Q: What sets the company’s community development and environmental protection strategy apart?

Paving the Way for Latin America’s Renewables Boom

A: As a renewable energy company, we have met the main requirements in environmental, social and corporate governance matters. Our approach is to create an ESG philosophy and strategy through our Mexico 2021-2025 plan. At Cox Energy, we have three clear commitments that we want to start fulfilling. The first is our commitment to the environment. Through the pursuit of new technologies, we seek to reduce the environmental impact of our solar power plants. Although we are a green company per se, we seek new ways to contribute to improving the environment. Our second commitment is the social approach. We seek innovative solutions that allow us to improve the quality of life in the communities where we operate. When you have a photovoltaic solar park, you generate a positive social impact by creating jobs; we go beyond that. Therefore, it is important that we define internal policies and regulations to consciously increase our impact. Corporate governance is our third objective. If you have good corporate governance, in addition to ensuring long-term sustainability, good corporate governance helps to generate

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and maintain a disciplined approach to environmental and social issues. Two years ago, it was very rare to receive questions about ESG issues in meetings with investors. Today, in every meeting we have with national or international investors, 25 to 30 percent of the meeting time is focused on ESG issues.

SPOTLIGHT

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X-Elio Closes Financing for Perote II Solar Project Spanish solar developer X-Elio has obtained the financing for its Mexico-based Perote II project. The 119MW photovoltaic solar power plant needed an investment of US$44.1 million to ensure a successful construction, operation and management. Located in Veracruz, it is expected to produce 248.370 MWh/year, enough to supply energy for 72.916 households. X-Elio furthermore calculates that the project will save 161.436 CO2/ year of emissions over a timespan of around 35 years. The financing agreement was signed with the International Finance Corporation (IFC) and Banco Sabadell. In a 2020 interview with MBN, X-Elio’s Mexican Country Manager Armando Gomez said the Perote II project was X-Elio’s only solar project not stemming from the three long-term energy auctions. The fact that the company was able to close its financing despite the current regulatory uncertainty in the market can be considered a substantial win. President López Obrador’s work to undo the liberalizations of his predecessor and bring back the state-owned companies to their former glory has been a problem for renewable energy developers. But X-Elio, which has several projects still under development, does not want to have a negative outlook. “We need to find the right opportunities for the company and avoid falling into the mainstream of negativity regarding prospects due to the government’s shifting attitude toward the sector. We do not want to be among those who are looking to Read the complete article More about this topic

exit Mexico swiftly because the sector is in distress. On the contrary, we want to find opportunities to increase our investors’ returns,” said Gomez.

Energy Financing: With Balancing Strong Fundamentals with Uncertainty Salomon Amkie Director of Banking, Capital Markets and Advisory at Citi

Clarity Needed to Invest in Energy Sector Jaime Perez de Laborda Managing Director of Balam Fund

Investment Fund Brings Energy to Remote Areas 08/19/2021

Independent Financing for a Capital-Starved Market José Luis Pérez-Arenas Managing Partner at Qenergy

US Energy Giant Begins Trading on Mexican Stock Exchange 06/02/2021

Finding Innovative Alternatives to Finance DG Ian de la Garza CEO of Finsolar

New Finance Minister Readies PublicPrivate Energy Prospects 08/06/2021

Private, Public Sectors Should Realize Win-Win Scenario Víctor Luque Partner at ATIK Capital

AMLO is Planning on Sending New Energy Reform to Congress 09/06/2021

US and Canada Raise Investment Concerns 05/21/2021

Electricity Market & PPAs Despite the fact that Mexico’s much-lauded electricity market has confronted several governmental and regulatory changes in recent years, it continues to operate as it did before under the protection of amparos. With capacity available for marketing, meaning that prices remain low, many potential offtakers are looking to make that transition. Long-term PPAs remain a cornerstone of the business because their benefits outweigh the risks but other options remain viable as well for more adventurous energy users. As the energy demand set by commercial and industrial users increases over time, so will the market need to meet demand with innovative solutions tailored to specific requirements. Power producers, qualified suppliers, energy consultants and offtakers featured in this chapter explain today’s reality and future opportunities in Mexico’s wholesale electricity market.

Electricity Market & PPAs

Analysis Uncertain Outlook, Opportunities in the Electricity Market

Conference Highlights Making Sense of Energy Management and Its Clear Benefits

View From the Top Ramón Basanta | CEO of ATCO Energía

View From the Top Juan Guichard | CEO of Ammper

Conference Highlights Energy Compliance Better Than the Alternative

Analysis Strength in Power Purchase Agreements in the Face of Uncertainty

Expert Contributor Jeroen Visser | Global Director Hydrogen at Northland Power

View From the Top Santiago Villagómez | Co-Founder and CEO of Energía Real

Roundtable How Are Qualified Suppliers Tailoring Their Solutions to Offtakers?

View From the Top Ricardo Zúñiga | Country Manager of Capwatt Mexico

View From the Top Guillermo Bilbao | Director of Minsait

Content Links

Electricity Market & PPAs | 47

Uncertain Outlook, Opportunities in the Electricity Market The Wholesale Electricity Market (WEM) was created as part of the 2014 Energy Reform with a clear objective: to create an efficient, competitive and cost-effective wholesale market. It was positioned at the center of Mexico’s modernizing energy sector to attract investment and cut energy prices to favor the country’s development. But backed by popular support, President López Obrador has tried to implement a different vision, focusing on public power over private participation. MBN experts outline their views on the state of the electricity market, what its future could look like and what is necessary for further development. What is the WEM? Participants fall into various categories. Generators are companies that produce power. Meanwhile, qualified users are off-takers, the end users of the energy that need to report a demand of at least 1MW. Instead of receiving their electricity directly from power producers, sourcing goes through qualified suppliers to facilitate easier dealings, although a direct route is a possibility. These are companies that buy electricity from the WEM and then sell it to qualified users. Another key player in the WEM is the basic service supplier that provides electricity to small-scale users, such as residential users. In Mexico, state utility CFE competes as a service supplier against just one minor player. Finally, there are exempt generators that produce energy through small power plants below the 0.5MW threshold, which are part of the distributed generation (DG) scheme. All the energy generated in the market is managed and dispatched by SENER’s grid operator CENACE, which uses CFE’s wholly-owned transmission and distribution network, although private power producers construct and operate interconnection points with the state-owned network. Every participant in the WEM needs to either register or receive permits from CRE if they go beyond the DG threshold. CENACE’s figures from July 2021 show two basic suppliers, 53 qualified suppliers, 109 generators, 22 non-supplying commercializing entities, such as natural gas suppliers and CFE, as the only socalled intermediation generators. Deacero is the only qualified user to also actively participate in the market, with a minimum demand of 5MW and annual consumption of at least 20GWh, giving it the right to participate without having to go through a qualified supplier.“There are several options available for qualified users in the electricity market. The possibilities can be a bit dizzying, so we have to advise on the optimal solution,” says Lilian Alves, Director of Strategic Planning at Mitsui & Co. Power Americas. The previous legal framework, referred to as legacy contracts under the Electricity Industry Law (LIE), already allowed for energy self-supply, renewable or otherwise. Permits and contracts under this scheme continue to exist. Under the LIE’s WEM, two main options present themselves: power purchase agreements (PPAs) and the electricity spot market. Even though the spot market can offer attractive prices, purchasing and selling energy at the last moment on a continuous basis might prove challenging. Therefore, commitments in the form of PPAs going from a few years up to over a decade can offer the win-win situation generators, suppliers and off-takers are looking for.

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Changes to the WEM Analysts are often point out that the break from the previous policy that the López Obrador administration represented is neither surprising nor unique. Nevertheless, the reorientation from favoring as much private participation as possible back to a central role for the public sector in the energy sector appears more impactful when zooming in past the macro level. Efforts to prioritize CFE power plants over private facilities, even if they deliver costlier and dirtier energy, have shocked the competition-driven mindset of private players in the WEM. Head of CFE Manuel Bartlett and President López Obrador often pointed toward the issue of the reliability of the grid, weakened by thousands of MWs of renewable energy for which they lamented that no backup was provided. “Add this to a shift in energy policy, reduced demand due to the pandemic and a lack of investment in the transmission system and you have the perfect cocktail to alter your dispatch drastically toward favoring reliability over economic dispatch, for instance,” says Casiopea Ramírez, Partner at Fresh Energy Consulting. According to PRODESEN, CFE and other permit holders have installed 89,479MW, 32,632MW of which comes from clean sources, including wind, solar and cogeneration, among others. From the total, 28,035MW comes from private power producers. The last long-term energy auction, where private players developed clean energy to be contracted by CFE, ended years ago. A potential fourth auction was canceled soon after López Obrador took power. Nevertheless, capacity stemming from the auctions is still entering into operation today. This creates a dynamic of oversupply in the electricity market, says Diego Blumenkron, Director of Sales, Northland Power Energía. “The market is telling us it does not need more capacity additions right now, which is among the reasons we have low prices today. We will see this situation prevail for at least the next three years. Demand is not growing that fast, after all,” he adds, noting that the pandemic slowed down the growth of energy demand significantly. Low prices mean that generators are especially inclined to keep their operating costs down as much as possible. For qualified suppliers, a lack of demand is similarly challenging. But for off-takers, low prices present an opportunity for at least the near future. Outlook “Our hopes and expectations for the Mexican WEM are few in terms of its evolution,” acknowledges Angie Soto, Director General at Nexus Energía. Nonetheless, by improving the current environment, the market might just hit new heights. Migrating more offtakers to the qualified user scheme could increase the interest in and the power of the WEM. If off-takers can be convinced to enter the WEM, low energy prices could even climb higher because of a lack of renewable supply, says María Jose Trevino, Director General of Acclaim Energy. “Interest to migrate to the WEM continues to grow based on a need to control budgets and reduce carbon emissions by contracting renewable supply. We are also supporting off-takers in self-supply contracts to migrate to the WEM due to regulatory uncertainty and opportunity costs. The more self-supply off-takers migrate, the less supply in the WEM,” she says. For the market to grow, utility-scale projects are not the only option, says Kohlsdorf. “The future of the electricity market will see a very vibrant and active interaction between smaller distributed Read the complete article More about this topic

generation plants, surplus electricity generated by on-site renewable or cogeneration plants and consumers that require a flexible and adaptable energy supply.”

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Highlights

Making Sense of Energy Management and Its Clear Benefits Guillermo Bilbao Director of Energy Business Mexico at Minsait

Carla Ortiz Country Manager Mexico at RER Energy Group

Sean McCoy-Cador Director of Energy Supply at Edison Energy

Santiago Villagomez

or commercial and industrial players in Mexico, there are plenty of options available to gain cheaper electricity prices and boost sustainability rates. So many, in fact, that the possibility is almost dizzying. Industry experts shine a light on how companies can make the best

decisions with the options available. “We now live in a world of options,” said Carla Ortiz, Country Manager Mexico at solar energy developer RER Energy Group. “This has not always been a reality for Mexico, where the market was covered by a single entity, stateowned utility CFE, until the Energy Reform was instigated in 2014. Today, there is an option to address your own energy supply,” pointed out Katya Somohano, Energy Director at globally leading steel and wire producer Deacero. Cutting energy costs, often a Top 3 expense for companies, and addressing sustainability are among the main reasons why

CEO of Energía Real

companies would switch to the electricity market or build an

Katya Somohano

on-site energy project. “Being able to meet ESG goals and have

Energy Director at Deacero

visibility on energy costs while achieving savings is essential,” said Santiago Villagomez, CEO of solar developer Energía Real. Villagomez said that his clients often used to be “frustrated,” not only with the lack of options available to them but because they did not understand their untransparent energy bills. This is a crucial issue for energy users, said Guillermo Bilbao, Director of Energy Business Mexico at Minsait. “Visibility and transparency give power to the energy user,” he said. Yet many companies are a little fearful of entering a new environment like the energy market. Sean McCoy-Cador, Director of Energy Supply at Edison Energy, believes that it is better to make the switch sooner rather than later. “If you wait too long, your decision will never be the optimal decision. It is all about entering the market to unlock the benefits in the longer term even if it does not pay off right away,” he said. The motivations to move to Mexico’s wholesale electricity market (WEM) are therefore clear. Even though it is still a young market, it already shows vibrant activity. One of the main options available is the ever-popular power purchase agreement (PPA). This is a contract signed between an offtaker, a qualified user in this case as they have a demand of more than 1MW and are signed up to the market, and a qualified supplier that facilitates the access of the user to the WEM. Somohano highlighted some of the benefits of these PPAs. “Energy users can directly decide which energy technology they want to use, so 100 percent renewable energy is a possibility, often at a low cost.” Through creative solutions, a

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tailor-made energy supply can even hedge risks. But the biggest advantage of singing a PPA is cost. “The long term gives you the big advantage of a low price,” said McCoy.

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from the

Q: How is the global corporate mission toward decarbonization affecting demand for solutions within the electricity market? A: The issue is that without broad investments like those pushed by the long-term energy auctions, CFE’s prices will remain high compared to other options. Customers can see that there is a good possibility to save money. These potential savings, combined with the need for renewable energy and the social pressure to combat climate change, have created opportunities for qualified suppliers (QS) to help address these matters. However, we are only seeing the tip of the iceberg here because of the issues the energy sector faces. Nevertheless, the market persists and so do opportunities within it. Q: ATCO has stated it aims to develop green hydrogen elsewhere in the world. What role could hydrogen play for qualified suppliers? A: In all honesty, I do not foresee much opportunity for green hydrogen in Mexico for the next few years. Looking at the numbers on a global basis, green hydrogen is still more expensive than other fuels. It will be the future, though: green hydrogen is a great solution. The overall process to produce it wins out on batteries, since these require lithium, which requires extensive mining operations. Battery storage is still somewhat expensive and does not yet have an adequate regulatory

Ramón Basanta

framework but I do see it becoming a part of the market sooner than hydrogen. Because of its comparative advantage, hydrogen will certainly

CEO of ATCO Energía

be a part of the future energy mix but I do not see it taking off in Mexico yet, despite the many companies exploring the technology. The economics are not there and Mexico lacks the infrastructure.

Sophistication Determines Who Thrives in Electricity Market

Q: What will be the role of technology and automation in driving efficiency and reliability for ATCO’s operations in the WEM? A: Since ATCO’s early days in Mexico, one of the key pillars of how we view the market and its future has been technology. The electricity market is highly rooted in digitalization. We had a big emphasis on technology, algorithms and big data analysis and incorporated this into our systems from the very beginning. This was essential during the pandemic, allowing us to trust our systems in difficult times. Through technology, we created an entire network that we coded ourselves, spending a lot of time improving our systems, models and forecasting, as well as how we interact with CENACE. The framework helped us address all the problems we saw in the market. We even coded ahead for future stages in the electricity market that have not been done so far because of the government’s policy, such as Financial Transmission Rights (FTR) that would allow market participants to hedge risks between nodes. Whether the market reaches these stages will depend on the political will of the government in power. I do believe the

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market forces will eventually drive the WEM forward. If it remains operational, it will eventually tell us where to move toward independently of the government’s vision because the government will not have enough resources to tend to the demand alone.

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from the

Q: How has Ammper tailored its energy solutions to the needs of medium and large energy users in Mexico? A: In the last three years, Ammper has increased its offering of services since we are striving to become a one-stop provider for electricity-based solutions. We are developing our services as a fully operational qualified supplier and offering a variety of other solutions, such as our distributed generation (DG) division which primarily installs photovoltaic solar-based on-site power generation plants through various financing schemes. Moreover, we have launched our physical operations control desk, which monitors our clients’ substations 24/7 through a SCADA system and enables their compliance with all the critical grid code requirements. Ammper is considering launching a gas marketing division as well. Ammper continuously seeks the best for our clients. For this reason we have added an energy services division to our operation, to help clients maintain their substations and employ energy efficiency schemes. This goes hand in hand with the growing importance of environmental, social, and governance (ESG) criteria for businesses everywhere. We are moving towards automation and digitalization by developing our soon-to-be launched business intelligence software powered by artificial intelligence to analyze the electricity market, our portfolio, and the interaction between them. Q: How does Ammper finance DG-based projects for its clients?

Juan Guichard

A: Our new DG branch, named Ammper DG, caters to clients that prefer to reap the benefits of DG but do not want to invest the necessary CAPEX for such systems. Ammper can finance

CEO of Ammper

the construction of an on-site solar power plant through a power purchase agreement (PPA) scheme. We charge the client on a per MWh basis. This product is starting to gain traction with our clients. It is an easy and foolproof way for companies to show their commitment to a renewable energy supply.

A Diverse OneStop Shop for Power Solutions

Q: How does Ammper help customers switch to fully renewable energy supplies in their bid to make good on stringent ESG criteria? A: We see a great deal of demand for these types of solutions, so we have developed various alternatives for our customers to take advantage of. These programs aim to achieve the same goal for a renewable supply of energy but the rules within them may vary. Ammper tailors its solutions based on what a user might need for proof: guarantees of origin, clean energy certificates (CELs) and I-RECs are among the most common demands. Some companies just want to see the average of CO2 emissions coming from Ammper’s portfolio. Since our portfolio in Mexico generally has very low emissions, companies can easily comply with complex environmental requirements. Not all clients want to go for renewable energy though. Some feel comfortable with natural gas, for example. In any case, Ammper is flexible regarding these demands but we do see the industry transitioning toward a more sustainable footprint. Both Mexican and international companies want to transition, the main difference is that international companies, for the most part, have a clearer idea of how to go

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about this transition because of their experience in other countries. There are many solutions out there to achieve a more sustainable footprint, so we add value by guiding them through this process. We will be actively following the developments of the market to see how we can support our clients in the best possible manner.

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Highlights Electricity Market & PPAs | 52

s global economies ramp up their energy transition efforts, grid code compliance will play a critical role in reducing energy costs through increased operational efficiency and longer asset life. “As the new grid code is implemented, benefits in cost

reduction and operational improvement will be accessible,” says Mónica Samudio, Country Managing Director Mexico and Central America at Circutor. Energy and economic development have become closely related since the establishment of the Tokyo and Paris climate agreements, as well as the UN Sustainable Development Goals. Such initiatives have put pressure on different groups, industries and governments to embrace the energy transition and ESG strategies to make operations cleaner and more energy efficient, says Samudio. In Mexico, however, the transition is still in its early stages, especially considering the targets set in the Paris Agreement. Mexico’s renewable energy generation stands at 20 percent of total energy consumption, which is just above half of what is needed to reach the 35 percent set for 2024 and below half the goal of 43 percent for 2030. Although energy generation still depends mostly

Energy Compliance Better Than the Alternative Mónica Samudio Country Managing Director Mexico and Central America at Circutor

on natural gas, the energy sector and the regulatory environment surrounding it have changed drastically since Mexico joined the agreement, with new energy generation players that must comply with regulations established to ensure the stability of the grid. The grid code established by CRE on April 6, 2016, as part of the Electricity Law (LIE), features all the administrative guidelines for the efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System (SEN). All load centers wanting to connect or that are already connected to the SEN in medium and high-tension levels must comply with the grid code, regardless of their energy supply scheme, according to CRE. “Compliance is essential to the economy as a whole,” says Samudio. Although standards are strict, they were established to avoid energy disruptions like those observed in December 2020, when the national grid operator was forced to shut down at 2:27 p.m. — peak energy consumption hours — in 12 states, representing an unknown loss of economic productivity. According to the government, the San Carlos wind farm in Tamaulipas contributed to the disruption after its connection to the grid without the necessary testing to ensure the grid’s stability. Beyond stability, the grid code brings many advantages to the sector as it includes all stakeholders involved in the sector, from energy generators to final users. “Regulations democratize the responsibility for generation and consumption of energy, which means that generators must follow all requisites to connect to the grid, while users must consider every step of the generation process and not focus only on paying for their consumption,” says Samudio. In terms of benefits, grid code compliance means that generators can see both a reduction in energy costs and savings stemming from greater energy efficiency. “Penalizations are not as important as they could be worse,” says Samudio. Instead, companies should focus on the short ROI related to the needed investment in equipment to meet all standards, the increased operability of their equipment and the ability to plan production according to sales and demand forecasts, without worrying about potential grid failures.

Samudio also highlights the safety component, as 25 percent of all industrial fatalities are caused by electricityrelated accidents, according to the International Electrical Safety & Reliability Consultants. “Because of this, grid code compliance should be at the top of the list for maintenance managers,” she says. 1. To help companies on the road to compliance, Samudio outlines the following steps established by Circutor: 2. Establishing an action plan together with an expert 3. Identifying the regulation specifics that the company must comply with 4. Performing a technical and operational evaluation of the load centers through simulations and readings 5. Determining the technical results, including specifications required for compliance 6. Proposing solutions or technical specifications, including a budget that considers different operational scenarios and an investment plan 7. Approving, installing and executing the plan 8. Constant monitoring

“The challenges of implementing the ‘Grid Code’ include mainly implementation deadlines, standards and technical and financial expertise,” says Samudio. To address this, Circutor works with clients to establish an action plan built around consumer needs. This expert analysis not only looks at technological gaps, but at financial optimization so the investment in compliance standards pays for itself in the long term, thus adding value to the client. Moreover, before even starting, Circutor works with FIDE to assess the feasibility of any given project so clients are completely convinced that their investment will pay dividends. Beyond company walls, Samudio sees challenges in terms of equipment availability given the logistics and supply challenges derived from the pandemic. “However, Circutor is building enough stock to meet clients’ demands and reduce logistics time frames,” she says. Uncertainty is also a lingering issue as inspection and audit time frames have not been clearly established by authorities. The situation is expected to improve as CRE has already declared itself in charge of monitoring companies as they move toward compliance. While companies must engage in added investment, compliance is a small price to pay to strengthen the backbone of the energy sector relative to system failures and their crucial implications to the country’s economic competitiveness, adds Samudio. “The Grid Code is a stepping stone for economic recovery. Circutor is preparing for this new stage, building our equipment offering and implementing actions that support the current and future development of the sector,” she says.

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Electricity Market & PPAs | 54

Strength in Power Purchase Agreements in the Face of Uncertainty Although Mexico’s electricity market is among the youngest, it has gone from unhindered opportunity to wavering uncertainty. But for offtakers and power producers, stability and certainty are crucial for long-term commitments. Power purchase agreements (PPAs) could prove pivotal, experts say. After Mexico formally liberated its energy market, private companies could suddenly take control of their energy portfolio. With the previous monopoly moved off the table, state-owned utility CFE was no longer the only option for those who had never opted for an investment-heavy but lucrative self-supply scheme. Any entity with a demand over 1MW and willing to register as a qualified user (QU) through CRE could suddenly choose from a myriad of clean and cost-effective energy options in the newly founded electricity market. Because electricity costs often rank high in companies’ expenses, the lower prices and cleaner energy supply found in the electricity market became immediately attractive. But the options available to offtakers can be somewhat overwhelming. “Companies are often unsure whether they should approach a qualified supplier, install their own power plant or stay in their current scheme,” says Valeria Vázquez, Partner at Deloitte. Long-term PPAs, a standard in the US market on which Mexico’s wholesale electricity market (WEM) was modeled, offer a concise answer to those not sure how to decide. These contracts often involve long periods of around 15 years, which can be intimidating to offtakers but their clear benefits can kick anxieties to the curb. By locking in energy prices for the long term at a discount, offtakers are protected from future fluctuations. Meanwhile, by going for clean energy, companies can tout their lower CO2 emissions without needing to face the complicated operations related to on-site power generation. Renewable energy might be intermittent but its costs are easy to predict compared to natural gas-fueled projects that are tied to the costs of the raw material, providing another boost for PPAs. For project developers, obtaining the necessary financing for power plants can be nearly impossible without signing PPAs beforehand, meaning that they are also keen on signing these contracts. Urgency to Decarbonize Grows Mexico’s liberated market model has been marred by the López Obrador administration’s efforts to backtrack the Energy Reform. Private market participants live in regulatory limbo, unsure what the future of the market will look like. “Many consumers are interested in the potential savings but at the same time there is still a great deal of fear,” explains Federico Muciño, Founder and Consulting Partner at Epscon. Outside the Mexican environment, the world does not stand still, however. “Mexico is not an isolated country. It is part of a bigger world. The global energy transition cannot be stopped; it is already a worldwide reality,” says Vázquez. Because of the importance of decarbonization, companies often have corporate sustainability programs that they need to adhere to. An increasing number of leading companies demand that their

Electricity Market & PPAs | 55

suppliers implement similar measures. For this reason, Vázquez thinks private companies will continue their efforts to ensure their own clean energy supply: “I do not believe companies will sit with their arms crossed, waiting for something to happen four years from now. The most important effort in this transition will come from the private sector.” Fortunately for these companies, experts agree that there is no reason to see the WEM as a besieged castle. There is no doubt that the government is doing what it can to bolster CFE, no matter if these measures are unpopular to private industry participants. However, the legal foundation of the market is anchored in Mexico’s Constitution. Following the 2021 midterm elections, López Obrador failed to reach the qualified majority in Congress needed to change these laws. What is more, judges have thus far ruled to suspend governmental measures affecting the WEM, such as recent changes to the Electricity Industry Law (LIE), although the final say from the Supreme Court is pending. “Until the Supreme Court or other competent courts issue their final ruling or resolution, nothing is written in stone,” Vázquez says. Based on previous suspensions, several legal experts in the energy sector are cautiously optimistic. Both President López Obrador and Minister of Energy Roció Nahle have demonstrated their willingness to respect Mexico’s highest judiciary, in word and deed. “I would stress that the regulatory framework of the WEM is functioning well. It has been protected and reinforced by Mexico’s judiciary. After all, the rule of law is still the rule,” says Laurent Meulemans, Sales Director at Enerlogix Solutions. Meulemans argues that companies should transition to become a QU sooner rather than later. “When you add up all the lost potential savings for such players over the last three years, you see that they left a huge amount of money on the table by not transitioning earlier,” he says. PPAs Adapt to New Reality Convincing offtakers under the current regulatory uncertainty will take some extra effort from power producers and qualified suppliers. “Certainty is very much defined by how the agreement is written and negotiated,” says Meulemans. In general, these negotiations are changing the nature of such agreements, although every situation is unique. “Terms of contracts vary a great deal between companies. Some look to regulatory developments or general uncertainties regarding business and decide that they have no clue as to what might happen next year. As a consequence, they are unwilling to commit for the long term. The uncertainty regarding their own operations drives them toward shorterterm contracts,” says Muciño. While shorter contract terms are often proposed, Muciño does not see many companies settling somewhere in the middle. “In terms of demand, there is little middle ground. Companies either want to go short term or arrange it so that they can see the benefits of longer contracts that range from five to 10 years.” Looking forward, industry insiders believe the market’s dynamics are unlikely to shift much within the current government term. But with a growing need for decarbonization, PPAs are unlikely to fade into the background. Growing electricity costs might convince more companies to address their energy supply. “Recently, Read the complete article More about this topic

electricity rates have increased substantially. It appears that no matter how the sector develops, rates will continue to increase,” says Ricardo Zúñiga, Country Manager of Capwatt Mexico.

ow is the time to act, the time to change. The decarbonization of human activity starts today. Evidence suggests that the effects of climate change are already impacting Mexico. On Aug. 11, 2021, CONAGUA said in the Federal Official Gazette that

a severe drought was affecting almost 87 percent of the Mexican territory, with some states having seen their worst drought in 30 years. The effects of climate change are particularly important for Mexico, where the average temperature increase is one of the steepest around the globe. This will have consequences not only on the climate itself but on economic activities as well. The decarbonization effort, as with all industrial revolutions, must be driven by the private sector. Governments and environmental policies are not enough to change the global economy at the pace needed to reach Net Zero by 2050. A combined effort is needed, as well as a mix of different technologies, to decarbonize all human activities as fast as possible, not only within the power generation

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sector. The only way to cope with decarbonization in hard-to-abate

Is Hydrogen the Backbone of the Decarbonization Revolution? Jeroen Visser Global Director Hydrogen at Northland Power

sectors is a mix of green hydrogen, its derivatives and renewable electricity. More and more companies are initiating and following new and stronger ESG trends that demand structural changes from industries. In the next few years, the use of green hydrogen will play a major role in effectively strengthening the sustainability and financial performance, as well as the profile of every public company and operation. As mentioned, hydrogen is a complement to an energy mix that includes electricity based on wind and solar power, and, until the transition is complete, natural gas. A successful energy strategy and management of this mix is critical to achieving sustainability goals with confidence and maintaining competitiveness in the sector itself. Northland Power Inc. (NPI) recognizes this global reality, along with the specific constraints and challenges that companies face. In Mexico, one of the challenges is to guarantee that 100 percent renewable energy is used to power hydrogen production, due to the regulation that rules the electricity market, which has both capacity and energy as its main products. A greater challenge is guaranteeing compliance with the regulatory framework while guaranteeing a firm power supply and keeping power prices competitive. NPI has overcome the power supply challenge through the deployment of a comprehensive strategy that takes advantage of NPI’s company deployment in Mexico. Having companies along the power production value chain, NPI is able to deliver an integral solution. Moreover, NPI’s experience in Mexico allows us to offer creative and innovative power supply solutions and share the savings that these strategies can create with our commercial partners while implementing solutions to meet their decarbonization objectives. NPI is committed to Mexico. Through its strategic choice to incorporate green hydrogen in the renewable energy mix, and together with companies active across the Mexican industrial value chains, it is tackling the decarbonization challenge. NPI has launched an ambitious initiative to realize the local and on-site

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production of green hydrogen for the benefit of those companies that are already starting the journey toward decarbonization of their operations. NPI intends to establish an integrated green hydrogen value system in Mexico, from production and logistics to use applications.

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from the

Q: How will Energía Real’s new partnership with Riverstone Holdings help to consolidate the company’s position in the market? A: This partnership helps to consolidate our energy expertise. Riverstone has developed all types of energy platforms around the world, so this gives us a close partner to rely on. It ensures we are innovating in Mexico’s energy sector. All the equity and capital that we are raising with them should solidify our position as the main financing option for DG in Mexico. We want to be the go-to power purchase agreement (PPA), leasing and financing option in the market and I believe there is a huge market out there, full of C&I clients that need a partner to provide them with financing. Companies favor liquidity more than anything else, especially in these times. What is more, Riverstone is an agile and pragmatic partner, meaning we can grow responsibly to our target of 500MW. Our goal is to achieve this within three to four years. This will require around 4 million square meters of rooftops. Q: How do you approach the need for flexibility in PPAs? A: Energía Real provides flexible PPA terms. We try to understand the needs of our customers to determine if they require a longer-term contract with a lower rate or if they are

Santiago Villagómez

interested in the asset itself. If this is the case, we offer a shorterterm PPA and at the end of the term, they can keep the asset. Tailoring the solution based on these needs is a core focus. Our PPAs and terms are overall rather cut and dried but we do have

Co-Founder and CEO of Energía Real

flexibility once we understand what our client truly needs. Today, offtakers are much more aware of energy and PPAs than they were four years ago, which is great. This makes the educational part of a sale much easier and faster because it allows us to speak plainly and avoid any confusion.

Experience, Riverstone Partnership Drive Push for Growth

Q: How does Energía Real interpret the potential effects on the growth of DG in Mexico now that prices for solar panels have increased? A: The company is used to volatile prices and exchange rates; this is part of the business. We try to help our installers and EPCs to lock down prices but the reality is that we are not worried at all. It is merely the sector’s dynamics and we see it as short-term flux. The PPAs that the company is signing at this moment will not be affected by the situation. Customers are very pro-DG now and understand that the utility-scale model has been successfully challenged in the past few years. They are eager to get deals done as a part of their broader focus on sustainability and are reasonable when a short-term price increase occurs. They know it is not unusual. I think DG will hit its predicted 5 percent of installed energy capacity sooner than expected by the government. Mexico’s conditions are perfectly aligned with this and investors like Riverstone entering the market will help this kind of energy take off even faster. Our own projected growth speaks volumes about

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where C&I-based DG is going. Additionally, the government’s policy appears to favor DG, even though items on the wish list, such as increasing DG’s unregulated cap size or community solar regulation, are still pending. Even if we do not see any of these items realized, DG will still be successful.

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How Are Qualified Suppliers Tailoring Their Solutions to Offtakers?

Mexico’s Wholesale Electricity Market is still in its development stages but it has an excellent offering and demand is growing. Offtakers are following their mission to lower operating costs and cut down emissions, often in a bid to become net-zero efficient in the future. Because the market’s qualified suppliers are becoming increasingly sophisticated, offtakers have a variety of tools at their hands to reach their goal. But how are qualified suppliers crafting these tailor-made solutions?

Companies consuming anywhere from 3-20MW typically combine supply schemes by incorporating distributed generation into each facility in addition to a qualified supply contract. Currently, many qualified suppliers are offering this diversified structure to optimize consumer benefits. Hospitals, retailers and hotel chains are using this model and more easily replicating a great portion of the project to many of their locations, thus multiplying their benefit. As a C&I consumer, the trick lies in the details of how exposure to the MEM is managed, how excess generation is distributed commercially and how terms and conditions are negotiated.

María José Treviño Country Manager of Acclaim Energy

We are negotiating some interesting contracts with big offtakers, with discussions regarding what they need or do not need. The company provides a simple quotation and the client then chooses which option they prefer. Our strategy is not to be aggressive but to grow moderately while maintaining the company’s ideal financial stability. We have seen that in the short history of the electricity market, aggressive companies without extensive financial backup risk going out of business within the span of a couple of months.

José Robledo Senior Commercial Manager at Tuto Power

We see a great deal of demand for fully renewable solutions, so we have developed various alternatives for our customers to take advantage of. Not all clients want to go for renewable energy though. Some feel comfortable with natural gas, for example. In any case, we are flexible regarding these demands but we do see the industry transitioning toward a more sustainable footprint. Both Mexican and international companies want to transition; the main difference is that international companies, for the most part, have a clearer idea of how to go about this transition because of their experience in other countries.

Juan Guichard CEO of Ammper

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from the

Q: Why should potential clients in the C&I segment choose Capwatt based on its value proposal? A: One of the main benefits Capwatt brings to the table is experience, especially in cogeneration and solar technologies, which are our strategically strongest cards in Mexico. We have over 30 years of experience in operating power plants in Portugal and we brought this know-how to Mexico. Cogeneration technology has not taken off in the country, despite it being a higher efficiency producing technology, and there are several reasons for this. While large cogeneration projects have been executed by big companies, medium or smaller power plants have been at a disadvantage because financing such projects has been almost impossible due to the lack of interest from financial entities. Nevertheless, Mexico has great potential for such cogeneration projects because it has a great deal of industry and experiences optimal conditions when it comes natural gas supply, as well as high regular electricity rates. One of Capwatt’s other strong suits is that we take on projects from start to finish going from design, development, finance and construction, to operations and maintenance. We design projects to be optimally efficient for our clients, rather than a one-size-fitsall solution. We manage to raise all the necessary funds to develop the projects, while being flexible to adjust ourselves to the needs of our clients, allowing us to get projects done. Capwatt signed its first contract earlier in 2020 and expects to sign a few more this

Ricardo Zúñiga

year. COVID-19 has made it harder to sign contracts but we were still able to obtain results because of our value proposition. Q: How does Capwatt finance cogeneration

Country Manager of Capwatt Mexico

solutions for its clients? A: We generally offer our solution through a long-term power purchase agreement (PPA) of about 15 years. The contract offers stellar protection but it is still simple enough for any company to

Helping Clients Produce On-Site Power With No Financing Burden

truly understand it. Capwatt takes care of the financing, whether it goes through development or commercial banks or using our own funds. We do not want the client to worry about any financing issues, which has the added advantage that we do not lose any time with the project’s development. Financing can take many months but because the process only depends on ourselves, it gets fast-tracked. Q: How can Capwatt help clients feel secure in addressing their energy supply through a cogeneration project? A: It is always challenging to convince clients to sign a 15-year contract, no matter what you sell. It is simply a huge commitment. In our case, we demonstrate the statistical reality of our country. Recently, electricity rates have increased substantially. It appears that no matter how the sector develops, rates will continue to increase. In a long-term contract, you can illustrate what happened in the past decade and a half and how much money they would have saved by taking care of their energy supply. We also discuss the current situation in Mexico. The regulatory reforms that are on the table will have a major impact if they move forward, likely increasing energy rates. The best strategy for any industry is to be well informed about what could happen and take matters into their own hands. For instance, we can offer fixed rates for solar projects. This provides certainty on costs. For cogeneration, we link our offer to gas prices. However, gas

prices are not what they were 10 years ago. We can offer hedging to provide further certainty in this regard. Showing clients how the electricity market unfolds is challenging but when predictions come true, you can show clients what their real benefits could have been. Q: What are the main advantages of Capwatt’s digital asset management solution? A: This is a developing solution within the company. We had started with the usual control rooms monitoring power plants 24/7, as well as local teams that can address further issues. The platform, however, is accessible to everyone. Using a cellphone, users can see how much energy is produced on-site and what the conditions are. Our different profiles can select various amounts of information. It is an easy solution for clients to use and does away with the need to call control rooms for information. It is a perfect fit for the digitalized world. Q: Where do you see possibilities emerging in bioenergy across the Mexican market? A: Capwatt recently purchased a company called ENC Power, which is active in Spain, Portugal and Mexico. It is now our bioenergy arm. This arm has a few projects running in Portugal and Spain. Furthermore, it has signed a couple of projects in Mexico. Developing bioenergy plants will allow Capwatt to play an important role in the circularity economy. We see a great deal of potential in the Mexican market with garbage disposal, which usually has several operational issues, releasing methane gas into the atmosphere as a result. Garbage pollutes merely by existing, which makes you question if something better can be done. Implementing solutions to turn this garbage into biogas would be very beneficial for the Mexican market. Most disposals are operated by municipal governments, which lack funding and knowledge regarding other solutions. Working through local governments and private companies, we want to implement bioenergy solutions. Q: What are Capwatt’s main opportunities for the short term in the Mexican market? A: Capwatt is looking at solar and storage projects in Mexico. Storage is interesting but it is not yet the best moment for it economically. However, this will change soon enough. Capwatt will mainly focus on cogeneration and solar at first, since these are the two technologies with the most potential. In fact, if all industries that could use cogeneration would decide to begin implementing the solution, Mexico’s cogeneration providers could simply not meet the demand. Our company is also analyzing some inorganic growth opportunities through M&As, acquiring useful assets for our balance sheet.

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from the

Q: How does the company’s international experience allow it to provide a better solution to the Mexican market? A: We have an international focus specialized in the digital transformation. This experience informs the ongoing ID transformation business that is specific to Mexico and allows us to analyze any point of the value chain where a customer wants us to focus. As a result, we can be flexible to meet the varied needs of our customers and customize strategic solutions for them. For some, that includes a selection or combination of digital transformation consulting, selection, implementation and execution and/or operation and maintenance. Overall, our goal is to provide large companies with specific and customized technology solutions, so that they see Minsait as a partner. Q: Why do industry heavyweights like Enel, Iberdrola and Naturgy choose Minsait to handle their digitalization efforts? A: Our customers choose us because of our holistic approach to problem solving. Minsait combines technological understanding with consulting and, if desired, applicability. In other words, the company goes beyond analysis and presenting solutions, offering to follow through with selection, implementation and execution — sometimes even operations — if needed. This distinguishes Minsait from other consulting and technology companies and ensures large customers are interested in us.

Guillermo Bilbao

Additionally, with two operations centers, we have the economic scale in Mexico to ensure the efficiency of our communication with customers, which helps us address their concerns at a faster rate.

Director of Minsait

Q: How would you assess Mexico’s digital maturity in the energy sector? A: Energy is a globalized market, so it would be useful to

Minsait Strives to Be Ideal Digitalization Partner

make sectoral distinctions between oil and gas, electricity and hydroelectric. The use of technology by any oil and gas tier 1 company tends to be the same, irrespective of the country, whether it is the US, Nigeria or Mexico. Tier 2 and local companies normally have many opportunities to apply new technologies to improve efficiency. Regulators, which are relatively new in Mexico, have the most room for improvement in both digital and technological applications. In the energy sector, Tier 1 generation companies use the same corporate contracts globally, which Mexico benefits from. Local companies can find valuable opportunities in technological applications. We have successfully helped companies find efficient technological solutions to problems that have emerged. Finally, the way the hydroelectric sector is structured in Mexico has resulted in many small localized companies that have a hard time competing with tier 1 companies. Q: What are some major issues energy companies are facing that can easily be mitigated, if not solved, with technology?

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A: The best maintenance is not corrective but preventive. Machine learning technology and artificial intelligence help predict potential problems by analyzing asset behavior, which helps identify failures, resource consumption and even asset health to help gage investment viability.

Providing Know-How and Experience at the Negotiation Table Federico Muciño Founder and Consulting Partner at Epscon

Energy Audits Are the Pathway to Efficiency Jesus Villarreal Engineering Manager at Veolu

Qualified Supply-Term Ability Contributes to Long-Term Growth Diego Blumenkron Director of Sales at Northland Power Energía

Energy, Waste Management Leads to Sustainability Juan Carlos García de la Cadena Founder and CEO of Beetmann

Know-How Informs Advice on Reliable, Competitive Energy Prices Sean McCoy Director of Energy Services Mexico at Edison Energy

Isolated Supply Scheme Offers Opportunity Casiopea Ramírez Partner at Fresh Energy Consulting

Introducing More Liquidity to the Electricity Market Alejandro Blanco-Moreno Co-Founder of TradeOn Energy

International Experience in Mexico’s Young Electricity Market Angie Soto Director General of Nexus Energía

COVID-19: An Opportunity for Mexico’s Energy Users Hans Kohlsdorf Managing Partner of E2M

Anticipate Before It Happens Benjamín Torres Barró Partner at Baker McKenzie

Transmission, Storage & Hydrogen Mexico’s transmission and distribution system is considered one of the main areas that requires significant improvements if the country is to successfully achieve its clean energy transition. The federal government aims to ensure a reliable and stable energy supply for all citizens but Mexico’s interconnected and isolated systems require direct attention and high levels of investment. Fortunately, technology’s advancements have played an important role in both the public and private sectors and, as a result, they can rely on modern solutions to overcome pressing issues. Battery storage, smart monitoring and distributed resources all work parallel to the grid, while adding value on their own. In this chapter, Mexico’s grid and the technology that could support it take center stage. Experienced insiders sketch the panorama and emphasize where technical solutions can be found and how to make the most of them.

Transmission, Storage & Hydrogen

Analysis Transmission, Distribution: Herculean Task Ahead

Infographic Mexico’s Transmission Line Infrastructure

Conference Highlights Transmission, Distribution the Challenges of the Future

View From the Top Gianni Moreno | International Sales and Marketing Director of Hitachi ABB Power Grids

View From the Top Tania Cerda | VP of Marketing and Sales for Mexico and Central America at Schneider Electric

View From the Top Norma Almanza | Commercial Director Latam at Generac

Analysis Missing Puzzle Pieces Keep Storage From Taking Off

View From the Top Antonio Morales | Utility Sales Director Mexico and Central America at Chint

View From the Top David Sánchez | Director of Engineering Services Latin America at SEL

Roundtable How Is Mexico Realizing the Promise of Storage Projects?

View From the Top Manuel Arredondo | Country Manager Mexico of ZNShine

View From the Top David Fernandes | Country Manager Mexico of ON Energy Storage

Content Links

TENSION LEVEL IN LENGTH (KM) FROM 2018 TO 2020

55,933 53,090

ensure reliable energy across the country, many would underline 55,865 53,930

50,000

If there was a need to point out just one major weak point in Mexico’s clean energy transition and the government’s vow to

60,000 55,089 52,930

Transmission, Storage & Hydrogen | 66

Transmission, Distribution: Herculean Task Ahead

40,000

the aging transmission and distribution infrastructure. An improvement-driven approach could drastically change this outlook, experts say. Although the specifics of transmission and distribution can be quite complex, their basic goal is straightforward: integrating

30,000

a country’s power production into a network and diffusing the resulting electricity across the territory. Mexico’s national system, managed by grid operator CENACE and owned entirely by state

20,000

utility CFE, is the backbone of the energy sector. Constant, reliable, efficient and cost-effective access to energy is also

10,000

crucial for a country’s economic competitiveness. A blackout can have severe consequences on social and economic levels.

Rebooting a faltering manufacturing line, for instance, can cost 2018

2019

2020

millions. Stability and reliability, terms that have become a mantra for Mexico’s public sector, are as essential as they sound. “From

Transmission 161 to 400KV Transmission 69 to 138KV

my perspective, for Mexico to take advantage of its position in the

Source: SENER

necessary,” says Gianni Moreno, International Sales and Marketing

world, a robust, resilient, efficient and sustainable power grid is Director at Hitachi ABB Power Grids, in an interview with MBN. Even though investment is often framed around constructing new capacity to meet energy demand, the grid is at least as important. “Generation and storage capacity is great but without a reliable transmission and distribution system, it is pretty much just there for show,” stresses Francisco Zurita, Director of Business Intelligence at Northland Power Energía. The legal framework of the Energy Reform established that transmission and distribution remained fully in the hands of CFE, whereas private participation in other areas became possible for the first time in the country’s history. Like every electrical system, CFE’s transmission network involves lines that conduct current at 69kV or more, carrying energy from power producers to substations. From there, the distribution system transports low-voltage electricity to consumers. Every year, SENER evaluates the status of the National Electricity System (SEN) using information from CENACE. PRODESEN 2021–2035 shows that between 2015 and 2021, SENER instructed CFE’s transmission and distribution arm to construct 144 projects. Recently, CFE announced a tender for 47 projects to strengthen the country’s transmission and distribution network. The total investment required is approximately US$2.35 billion, to be allocated between 2021 and 2025. But despite the constant flow of projects being completed, experts still see the aging system as a weak link in Mexico’s chain due to a lack of investment. Ramshackle System Analysts critique Mexico’s transmission and distribution system for not stretching across its territory. Baja California Sur, for example, remains entirely disconnected from the SEN. Meanwhile, only one heavily saturated transmission line reaches the Yucatan peninsula, with the state of Yucatan itself, therefore, also isolated

Transmission, Storage & Hydrogen | 67

from the bulk of Mexico’s power production capacity. “For almost four months in 2020, key transmission ties in the SIN were used above 90 percent of their operational capacity. Moreover, one transmission tie in Yucatan operated above 90 percent of its operational capacity 50 percent of the time in 2020. These happened while summer demand was lower than previous years, obviously impacted by COVID-19, but also when demand began to recover in the last months of the year,” Zurita says. One major incident was a blackout in December 2020, which left millions of Mexicans without power. Authorities cited a fire and an unusually high share of intermittent renewable energy generation as the causes but Zurita thinks that a lack of transmission investment is perhaps even more relevant. “Recent blackouts have demonstrated the degree to which the strengthening of our transmission and distribution system is urgently needed.” The fact that this occurred amid a pandemic, marked by a much lower energy demand is even more problematic. “What would have happened if we had normal demand behavior throughout the year and what will happen when demand starts increasing? … National demand as it exists right now might be technically served by the system in its current state but data regarding future demand indicates that the system will be overwhelmed,” adds Zurita. A major issue regarding the SEN is the greatly unevenly distributed demand and supply. “Central Mexico is a high demand region but most of our competitive generation comes from the north, northwest and northeastern regions. The journey that this implies puts a lot of stress on our transmission lines,” Zurita says. Solvable Problem Even though the problems posed here are solvable, massive investments will be needed to carry Mexico’s transmission and distribution infrastructure into a new era where it will be fit to support a taxing energy transition. Generating more data regarding how the infrastructure functions and applying what has been learned will already enable better operating strategies for CENACE. Moreno believes that adding storage, including Mexico’s existing hydropower capacity, to this framework will bring a wealth of benefits. “In line with the government’s plans in the energy sector, hydroelectric dams offer a great option for energy storage. In talking about the growing trend of battery storage, however, we see it as a new tool for the industry. The more it is used, the better we understand it and can apply it to other situations. Increased renewable integration and dynamic demand can create instability but storage can help remedy this.” Regardless of whether solutions will be built parallel to the grid or as entirely new transmission lines developed, significantly higher investment will be necessary. The grid remains in the hands of the state. The policy direction chosen by the López Obrador administration discourages further private participation in the energy sector and strong public-private cooperation appears somewhat unlikely in this environment. Nevertheless, Zurita believes that this will be Mexico’s best bet to ensure the reliability and stability of SEN toward the future. “To achieve this, we need a team effort between the public and private sectors. Despite the industry’s legal framework dictating that transmission and Read the complete article More about this topic

distribution are exclusively in the hands of the state, this does not mean that private parties are banned from contributing to these efforts,” he says.

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Infographic Mexico’s Transmission Line Infrastructure 32,583GWh

Power losses in the distribution network in 2020 71

60 40 20

Source: CFE

61.66% Non-technical losses 28.34% Technical losses

— Transmission link that

3 4

17 16

Source: PRODESEN 2021-2035

Mexico City metropolitan area

24 31

26 27 45 61

18 15

maintained capacity in 2019

49 48

Villa Constitucion

60 54

69 70

55 59

76 58

56 57 83 84

Gulf of Tehuantepec

Yucatan Peninsula

Los Cabos

La Paz

81 82 86 80 79

87 88

Conference

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Highlights

Transmission, Distribution the Challenges of the Future Monica Samudio Country Managing Director Mexico and Central America at Circutor

Santiago Barcón Director General of PQ Barcon

Fidelmar Molina Government Affairs and Power Generation Business Development at Hitachi ABB Power Grids

Ivette Castillo North LATAM Commercial Executive at GE Grid Solutions

hile the grid is mature and no expansion plans are in the works, it does need modernization to help the country realize a brighter future, according to industry experts. “There are 20-, 25- and 30-year-

old equipment and analog tools still migrating to digital. Given Mexico’s geography, this grid is exposed to natural disasters, earthquakes and now also to new challenges due to climate change,” says Ivette Castillo, North Latin America Commercial Executive at GE Grid Solutions. Today, the national grid has 45 million clients, with 1 million joining every year, providing electricity to 99 percent of the population. Mexico’s transmission and distribution lines have a generation capacity of over 80,000MW, according to CFE, but increasing demand, climate change and the “electrification of everything” will end up exceeding the Mexican grid capacity. Investment and modernization will be required, according to Ramón Basanta, CEO of ATCO Energía, as private and public companies collaborate to fight this issue: “It is a time to innovate, develop new models and find new, efficient ways to move forward. This complicated situation will exist for the near future but, eventually, demand will knock on Mexico’s door,” says Basanta. Given that it is exposed, the grid could suffer all manner of damages, which is forcing operators to use budgets for operational and repair purposes rather than modernization. The grid is also “exposed to demand and changing consumer behavior caused by the pandemic,” says Castillo. These changes are making it impossible to ignore the issues the grid faces. It is urgent that Mexico take action with investments, says Santiago Barcón, Director General of PQ Barcon. “When the auctions opened, modern transmission lines that enable the use of renewables should have been constructed and not the other way around. Now, we do have renewables but cannot dispatch them,” says Barcón. Given the difficulties of operating the Mexican grid, CFE’s staff has to be ready for new challenges every day, adds Fidelmar Molina, Government Affairs and Power Generation Business Development at Hitachi ABB Power Grids. Under these circumstances, Molina calls the job of CFE engineers

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and managers a “titanic” feat: “Mexico has the best electrical engineers taking care of the grid, with a lot of experience at the managerial level.”

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from the

Q: Analysts often point to the aging national grid as a stumbling block in Mexico’s clean energy transition. How can the company add value in this area? A: I am a firm believer in the energy industry’s ability to bring prosperity to a country and Mexico is no exception. From my perspective, for Mexico to take advantage of its position in the world, a robust, resilient, efficient and sustainable power grid is necessary. Even though hydropower has become a focal point recently, photovoltaic solar and wind will be major components in the country’s new energy matrix. For this to be a success, good planning is a must. This is where we come in, providing advisory services related to making hydropower more efficient and how to combine and integrate all of the country’s other assets to get the most out of them. If a competitive grid to make the country itself competitive is wanted, the company can help with advice and the integration of such technologies into the grid. Data will play a huge role; everyone has been talking about the buzzword “smart” in recent years, but what do we actually do with this data? Understanding how we turn this into actual insights and use this toward innovation is what we are looking to do in Mexico. Regarding technology, both new solutions, integration into the existing grid and parallel support are among the possibilities we can provide. An appropriate national strategy followed by an integrated resource planning stage are crucial in this regard.

Gianni Moreno

Some assets will likely be replaced with newer technology, but we help our customers to make well-informed decisions based on the strategy they follow. Execution is equally crucial because the right engineering and engineering resources ensure the

International Sales and Marketing Director of Hitachi ABB Power Grids

process goes smoothly. Q: What energy storage efforts have you noted in the Mexican market and where have you identified untapped opportunity?

Social Innovation, Smart Tech More Than Just Buzzwords

A: In line with the government’s plans in the energy sector, hydroelectric dams offer a great option for energy storage. In talking about the growing trend of battery storage, however, we see it as a new tool for the industry. The more it is used, the better we understand it and can apply it to other situations. Increased renewable integration and dynamic demand can create instability, but storage can help remedy this. While this is a challenge, it also offers an opportunity in regard to energy efficiency. Hitachi ABB Power Grids has data-focused forecasting technology and can help operators manage the grid efficiently. Q: What sets apart Hitachi ABB Power Grids’ approach to R&D? A: Innovation has always been and will always be a strong pillar for the company, only more enhanced by the JV. We continue to invest heavily in R&D. Hitachi brings the concept of “Social Innovation” to the table as well, which will take our innovation to a different level. Hitachi ABB Power Grids believes that true Social Innovation cannot be done alone. Companies need to partner up and co-create. That is what we are doing. For example, we signed a landmark agreement with General Electric recently in which the two companies will combine forces through a non-exclusive,

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cross-licensing agreement to further develop a new gas-insulation technology as an alternative to SF6. The alternative solution has a significantly reduced impact on the environment compared to SF6. Our approach to R&D is rooted in how to advance society in general and that is a key differentiator.

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from the

Q: How is Schneider Electric interpreting the current moment in the market? A: We are interpreting this moment as one of constant transformation. As our CEO said to us 10 years ago, it is not just about change being a constant but about the rate and speed of change. The rhythm at which you adapt to change in the market must be appropriate. Our investments in technology, development and innovation remain considerable. Our spectrum of clients and markets also continues to be quite broad, running the gamut from residential to infrastructural applications. The value we offer to each one of these segments must be uniquely adapted to their needs. We must continue many of the practices that were in effect before 2020, while also continuing to migrate to digital mediums and modalities. This digital transformation began before the pandemic and its main objectives have always been to increase client and customer satisfaction, not just to adapt to the needs dictated by safety measures related to COVID-19. This transformation has also been implemented into our marketing strategies and the internal practices of our sales departments. Q: How are you balancing your sales and marketing portfolio between emerging industries and those where you have an established presence? A: We try to maintain a fair balance between all categories in our

Tania Cerda

portfolio. This is necessary to maintain a local infrastructure with which we can serve clients on a much more frequent basis. This also applies to our production and distribution networks. Despite our efforts to keep a symmetrically balanced portfolio, we do

VP of Marketing and Sales for Mexico and Central America at Schneider Electric

need to adapt to the nature of the market. In 2020, we had to adapt to the contraction of the office space development sector as it suffered the consequences of the pandemic and economic crisis, while data storage and management facilities became big targets of large investments. The adoption of digitalization

Helping Industries Adapt to Imminent Transformation

technologies was a constant driver for the market before 2020, but the pandemic greatly accelerated that trend. Companies that were previously hesitant to try our automation and digitalization technologies were suddenly motivated to sample them and adopt them. This is just one of the many trends that have greatly influenced the balance of our portfolio. Q: What role has Mexico’s energy industry played in your portfolio? A: It has played a considerable role because the needs of our clients in this sector have remained constant. Their No. 1 concern is security, both in the sense of the physical security of their assets, as well as the secure supply of energy and the reliability of their power generation capabilities. We want our solutions to satisfy these needs through a higher degree of technological sophistication. 2020 made it clear that supply continuity is an essential asset that major players in the energy and power generation sector need to worry about. Another important point is the efficiency of processes and also how consumption is impacted by how reliable and constant supply is. For instance, if we can reliably automate our solutions to our clients’ supply issues, then

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we can effectively address their efficiency and power potency issues. We want to guide our clients through the process of tracing and monitoring how these improvements and optimizations influence each other. An important part of this will be our cloud storage and management products, technologies and services.

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from the

Q: How has demand for Generac’s power solutions evolved during the pandemic? A: Flexibility and power backup are prominent topics in Mexico and across the world. The pandemic has posed new challenges and this has proved to be an opportunity for Generac since many people had not thought about backup energy for their home environment. It was necessary at a hospital, but not at home. The shift to home office changed this thinking. Today, many professionals require reliable and continuous electricity supply. In addition, crucial medical equipment also is now being used at home after many hospitals have found themselves saturated as a result of the pandemic. Here, too, continuous energy is essential. This situation has resulted in an increase in domestic demand for Generac’s equipment outside of the commercial and industrial (C&I) segment. Our 1Q21 was successful because the Mexican market required generators powered by gas and diesel and used for various applications. The gas shortage in February that led to blackouts in northern Mexico further fostered this sense of urgency. Q: What are Generac’s options for flexible

Norma Almanza

power and what are the benefits? A: Generac has two main product lines in the area of backup power generation. The first is based on diesel, which is the

Commercial Director Latam at Generac

most widely used in the Mexican market. However, our other products that run on natural gas or liquefied petroleum gas (LP) are steadily growing in terms of demand. Each of these fuels has unique advantages and disadvantages. For instance, demand for gas products is growing because of their

New Factory to Meet Greater Need for Flexible Power

lower carbon emissions. On the other hand, diesel-based backup generation is not suitable for round-the-clock power production. In this case, gas is much more viable. February’s blackouts demonstrated that the country requires more flexible options, like diesel, in terms of power production. Q: Generac offers renewable solar with storage solutions for domestic users in the US. How has this solution developed? A: Generac, began offering this solar-based solution to domestic users in the US in 2019. This business has been very successful, surpassing all expectations in terms of sales. In fact, the high US demand for the solution has delayed its rollout for the Mexican market. Nevertheless, we are ready to launch the product in Mexico this year. In parts of the US, such as California, solar plus storage is already well-developed in both the C&I and domestic areas. In Mexico, the only backup for solar energy is electricity from the grid. If the grid fails and the sun does not shine, there is no source of electricity. As a result, we expect a great deal of demand in Mexico for Generac’s storage solution in the residential segment. Q: What are the strategic benefits of the new MX$600 million Hidalgo manufacturing plant?

A: Our state-of-the-art manufacturing facility, located at the PLATAH industrial park in Hidalgo, boasts 35,000m2. We moved the production from three factories in Mexico City to Platah, then we now focus our operations on this new plant instead. This will allow for better efficiency and higher manufacturing capabilities. The plant will mostly provide products for the Mexican market, but we are also starting to export. At the Hidalgo plant, we are also developing specialized solutions for the global telecoms industry. The competitive advantages in Hidalgo will benefit our logistics, allowing for fast connections with Mexico City, as well as the Bajio and the southern part of Mexico. In addition to the state of Hidalgo’s help in installing our operations at the growing PLATAH industrial park, the state boasts a young, professional, diverse and specialized workforce. Q: How is Generac looking to focus its R&D efforts? A: Our engineering department at PLATAH is always developing new solutions or adapting our traditional diesel solutions to new standards, which help to make products more flexible and competitive. To enhance our R&D center, we entered a partnership with the Tecnologico de Monterrey University. Mexico has great engineers with vast technical knowledge, which has been a key attraction for many companies. Q: What goals are you hoping to obtain by the end of 2021? A: Due to the high demand in Mexico, we are growing our manufacturing capabilities and delivering our diesel-based solutions as efficiently as we can. Given the supply and delivery challenges brought on by the pandemic, we are growing our operations to minimize the impact on our clients. The company is also planning to introduce new technologies into the market. Generac is the world’s largest supplier of gas-based generators for residential users. In Mexico, our goal is to improve the adoption of these solutions. Moreover, we are working to expand our clean energy portfolio. Mexico is ready for energy solutions that have greater technical specifications, as well as higher flexibility and performance. Generac also offers portable solutions, which we will expand in Mexico as well. The local market has a growing need for energy and its industry is expanding constantly. Generac is completely in tune with the country’s main actors, offering flexible technological options to meet their needs. We believe deeply in Mexico’s development.

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Transmission, Storage & Hydrogen | 74

Missing Puzzle Pieces Keep Storage From Taking Off Storage is perhaps one of the most common terms floating around the international energy environment. Governments, companies and experts see it as a major building block for a future decarbonized and energy-efficient society. As renewable energy begins to grab a larger share of the global energy mix, the great need for diversification and flexibility makes storage developments somewhat less surprising. However, in the Mexican context, both renewables and storage are lagging compared to other areas. With pretty much all major economies in the world committing to ambitious climate goals, renewable energy assets are no longer considered “nice to have,” but a dire necessity to help stave off potentially catastrophic climate change in the ever-closer future. Wind and solar are key renewable resources in this regard. The economics are already there: sources like NREL state prices for solar and wind energy are dropping drastically, beating fossil fuelbased energy on more than their carbon footprint. But solar and wind do suffer from one issue: intermittency. The sun goes down and is obscured by clouds, while wind does not blow continuously, which means renewable energy can simply not be produced around the clock. It is also difficult to ramp up or bring down output based on variations in energy demand, something natural gas and coal-based fossil fuel plants can do. Hydroelectricity does have this potential but can hardly be called flexible due to the large amount of space and water resources a hydropower facility takes up. “(Hydropower) is also affected by climate change and the impacts of weather phenomena, making it less predictable and more difficult to control. Therefore, thermal power generation must come into the picture,” says Raúl Carral, Wärtsilä’s Business Development Executive for Mexico, Central America and the Caribbean, in an MBN interview. Keeping coal in the mix or betting on natural gas-based power generation is not the answer for Carral, even though the latter is already an integral part of Mexico’s energy strategy because of the country’s ability to import very cheap dry natural gas from the US. Carral marks coal, combined-cycle and even nuclear power as inflexible. This means that their output takes over 7 minutes or even entire days to go from 0 to 100 in terms of output. Instead, Carral suggests a focus on new investments in futureproof technology, which should ideally be flexible and go from 0 to 100 within a few minutes. Despite the current policy direction to move away from private, and thus renewable, developments in the country to favor the country’s public utility, CFE will stand to gain much from looking into flexible generation itself. Examples of such flexible power are Reciprocating Internal Combustion Engines (RICE), which can run partly on green hydrogen, and Battery Energy Storage Systems (BESS) that are easily integrated into wind and solar projects. “It makes sense to invest in cheap, renewable power together with flexible power generation and make plans based on a vision that will lead to more profitability, sustainability and reliability of CFE’s power generation and the Mexican power grid. This will make CFE stronger and more competitive,” Carral says.

Transmission, Storage & Hydrogen | 75

Dealing With Intermittency Capturing the excess power production in the hours that renewable resources such as wind and solar produce energy is crucial to supporting the grid in times of higher demand with lower production. At smaller scales, energy-intensive companies can use the resource to assure greater reliability in their energy supply or to save costs during expensive peak demand hours. Enter the concept of storage, for which several common options already exist in the market. “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,” says Guillermo García, Professor at ITAM and former President Commissioner at CRE. Hydroelectric dams can be utilized to store energy and hydrogen technically functions as storage as well. Utilizing renewable resources, hydrogen can be turned fully green. A major benefit this form of storage brings is the fact that it is compatible with infrastructure that would otherwise run using natural gas, an area that continues to grow in Mexico. Companies such as Siemens and Wärtsilä are already providing flexible and non-flexible engines that can burn hydrogen as a power source, either entirely or in part. However, experts often refer specifically to batteries when discussing storage. Lithium-ion batteries are rapidly becoming the industry standard, even though other options in the market exist. IRENA predicts that up to 2025, battery storage will grow by 40 percent year-on-year in emerging markets. This increased demand, further pushed by electric vehicle developments, is doing wonders for the economies of scale needed to drop prices. As a result, lithium-ion battery costs are falling sharply, while increasing in capacity, according to BloombergNEF. What Is Missing? In Mexico, the 32MW Aura Solar III project was the first utility-scale project to incorporate a BESS. Wärstilä recently added a 10MW storage system to Eolica Coromuel. Invenergy’s La Toba Energy Center combines solar with batteries but flips the status quo by having the solar panels function to charge the batteries instead of using it solely as backup. All these projects are found in Baja California Sur, where storage makes even more sense because the local grid is completely isolated from Mexico’s nationally interconnected system. Nevertheless, Camilo Serrano, General Manager Mexico of Atlas Renewable Energy explains why he and other experts agree that storage will likely not yet take off in the country: “From an economic perspective, we are getting to the point where storage is becoming viable. In Mexico, the technology is already affordable but the regulation is not clear yet. A better regulatory framework is needed for battery storage to work. In the short term, storage will be more viable and available in other jurisdictions.” Beyond the issue of an insufficient regulatory framework is the economic factor. To properly incentivize the development of storage in any open market, the so-called ancillary services it provides would need to be properly valued. Even though CRE examined the possibility, such recognition exists. “Most electricity markets around the world are built on a solid relationship between generation and storage capabilities. Read the complete article More about this topic

We do not have that foundation in Mexico and we need it badly,” says Francisco Zurita, Director of Business Intelligence, Northland Power Energía.

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from the

Q: How was Chint Power Systems able to deliver growth and strong Q1 results despite the pandemic and little utility-energy scale project development in Mexico? A: It is to Chint’s advantage to work in different areas, such as in distributed generation (DG). This has helped us consolidate our position because DG has grown a great deal in Mexico, Central America and the Caribbean. Considering Chint’s large variety of products, we can set out to achieve our corporate goals in practically any country no matter the state of the sectors. In regard to how the company has optimized its offer for the Mexican and Latin American markets to meet this new demand, we believe that markets look for competitive prices. Warranties are also a crucial factor. Other companies often work with rather complicated warranty clauses. Chint sets itself apart with a simple, client-focused approach. If there are any issues, we can replace products within hours due to the stock we have in Mexico and in other countries. Another important factor to highlight is our strong local support, which is tailored to the Mexican market. Chint is considering manufacturing in Mexico due to the opportunities the USMCA can bring to the region, but the pandemic has put these plans on hold for the time being. Nevertheless, the idea remains on the table.

Antonio Morales

Q: How does Chint’s portfolio lead to greater market share in DG for the C&I sector? A: Chint’s portfolio allows it to provide its own products and

Utility Sales Director Mexico and Central America at Chint

solutions such as the Astronergy Tier 1 solar panels as well as CPS inverters and Storage solutions, for both DG and utility scale. Having the ability to provide most of the products needed, as well as intricate knowledge regarding implementation and operation benefits the solar power plant. It also makes knowing

Globally Known C&I Quality, Localized Eye for Client Attention

what is going on in the facility much easier, so O&M becomes simpler. These are interesting benefits for clients. Q: How does Chint use smart technology to push its manufacturing process in new directions? A: Our factories are considered advanced in regard to intelligence, especially because of our use of internet of things (IoT). Every process is automated, and clients can follow the manufacturing process online through a simple web browser in real time. They can also see in what stage of the production chain their products are at any moment. This all functions so that we can provide the best quality in the market, based on our expectation to build a long term relationship with each customer. Q: How is the company working to address sustainability within its own supply chain? A: Sustainability begins at the manufacturing stage. Our smart factories are green factories as well, meeting the highest demand for global certifications and reports. The company also belongs to several green-minded associations. To be considered

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sustainable, Chint addresses its post-sales services as well, examining its entire value chain to achieve more sustainable results. All our new patents and products are considered with a green mindset from the start, sourcing greener raw materials in the process.

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from the

Q: In your opinion, how are microgrid and smart grid applications growing in the Mexican context and what can be done to spread their benefits? A: I think that smart grids and microgrids in general represent a big opportunity in Mexico. However, they have not taken off yet. SEL has a great area of expertise that comes from the experience in the US, where we have worked with industry, universities and smart cities. In Mexico, greater demand is still required from these areas. SEL believes there are four factors needed to ensure that success. First of all, you need an engineering group that is technically capable of understanding the needs of the customer and the system. Second, you need experts who are able to analyze and understand how the system performs. An understanding of closed-loop testing is also crucial. Third simulating the network digitally can make testing much easier. Finally, sharing knowledge is of the essence. In Mexico, sharing knowledge and methodologies will be necessary so that microgrids can develop further. Q: How is SEL helping engineer a more reliable and secure Mexican transmission network? A: SEL has a solution called POWERMAX, which is a power management solution that works on three levels: microgrids,

David Sánchez

industrial players with on-site power production facilities and remedial action schemes (RAS) for high-voltage transmission lines. Here, we apply the same four factors we do in microgrids to guarantee stability and prevent blackouts.

Director of Engineering Services Latin America at SEL

This technology can, therefore, be used in Mexico’s national electrical system to facilitate monitoring, control and integration of utility-scale energy projects. I know that CFE has a high technical level when it comes

POWERMAX Boosts Transmission from Micro to National Grids

to engineering, on par with the best utilities in the world. It has good protection schemes in its grid. However, our transmission network has not grown at the speed that we needed to. To reach the desired stability, solutions like POWERMAX and remedial action schemes can help. CFE has plenty of experience in applying these schemes but they cannot be done in a decentralized manner. SSEL has the experience to design these systems using last generation technology that make possible to develop systems that can adapt better to Power systems condition schemes to prevent blackouts and foster reliability. This allows decisions to be made that benefit the whole system. SEL has experience with this in Uruguay and Panama Power Systems. The systems of these countries are small but, at the same time, they are interconnected with the much larger systems of its neighboring countries. We, therefore, must respond to external factors to secure the system on a much larger level, mimicking the various situations encountered in different areas in Mexico. If building more transmission capacity is not possible, the country should do what it can to optimize the existing grid and make the right decisions while facing the emergencies and failures the system creates. SEL can help remedy any issues that arise through direct support and close communication with CFE. Additionally, SEL has the fastest

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digital protective relay T-401Lthat help to keep stability responding within milliseconds, additionally this technology is more secure during system oscillations.

Transmission, Storage & Hydrogen | 78

How Is Mexico Realizing the Promise of Storage Projects?

The battery storage market has been no more than a longstanding promise in the energy sector given that projects have never quite materialized due to a wanting regulatory framework and difficult economic conditions. Regardless, the benefits of storage have begun to outweigh its cost, which have also come down, leading to promising developments that can serve the grid or function behind the meter.

The La Toba Energy Center, a storage and solar project, is an impressive showcase power plant. It represents an interesting entry of battery storage in the Mexican market. It is more than just a solar park paired up with batteries: the solar part predominantly functions to charge the battery and have a more reliable resource for CENACE to support the grid. The intermittency issue and its effect on the grid has gained more attention recently in Mexico, so we want to contribute to solutions rather than generate more problems for the grid. La Toba, therefore, allows us to provide more than just renewable energy by generating a predictable output for the grid. We are

David Fatzinger

hoping to see the project become a key resource for CENACE.

VP and Country Manager Mexico of Invenergy

Aura Solar’s storage project in Baja California Sur was the first utility-scale solar plus storage project operating in Mexico. Gauss was at the frontier of developing new solutions within the Mexican market. This project has a very specific objective: supporting ancillary services for the grid. Baja California Sur’s grid is a weak, somewhat small and insular transmission system. Aura Solar’s storage allows it to add frequency and voltage regulation to the mix, as well as functioning as power ramp-rate control. Adding storage into the mix allows CENACE to cushion such shocks to the system. We use it to support the system rather than for load shifting. I believe this combination of solar

Héctor Olea

plus storage is the way to move forward for weaker systems, like that in Yucatan, as well.

President and CEO of Gauss Energía

We completely financed and will install a storage system for a hospitality player in Yucatan that will pay a monthly fee for our service. This is revolutionary because we can offer our solution to solvent clients without any upfront investment. The project will be operational by the end of July 2021. We are also designing peak shaving solutions with UPS Inverters. These inverters are aligned with the grid, so all client electricity consumption comes through inverters. They will use battery energy during peak hours and have an optimally filtered power quality. This type of value stacking of battery storage, serving as backup and power factor correction, adds many benefits. David

David Fernandes Country Manager Mexico of ON Energy Storage

Fernandes, Country Manager Mexico of ON Energy Storage.

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from the

Q: What is the main challenge that ZNShine Solar solves in the Mexican photovoltaic market? A: There are two facts that pose a problem for general society but which also have a specific impact on solar that needs to be addressed. Mexico is in the midst of a water crisis. It is also a very dusty country. In fact, it has one of the most significant soiling factors globally. It is No. 1 in water scarcity in Latin America and the most at risk for a water crisis on the continent, according to the World Resources Institute (WRI). These are relevant issues for PV solar because water is needed to clean dust from the panels. By not regularly cleaning solar panels, which is a problem for distributed generation (DG) more than in utility-scale systems, power output is lost and long-term damage occurs due to soiling. ZNShine’s value proposition is based on double-glass graphene modules. Our target is the DG market that requires cleaning options that use less water. If you imagine a choice between having drinking water or cleaning a solar array, the decision is rather simple. Knowing that around 5 liters are needed to clean one panel, Mexico’s solar projects have no other option than to reduce water consumption in the decades to come. A 0.5MW system will consume 1.4 million liters during a 25-year life span. Soiling also remains a big issue that requires attention because Mexico has one of the strongest dust intensities in Latin America,

Manuel Arredondo

similar to countries like China and India. Academic studies show that soiling decreases output between 2 and 50 percent. A joint preliminary study with Alejandro Jiménez at Solar Fotovoltaica México identified that Mexico’s DG sector is indeed at high

Country Manager Mexico of ZNShine

risk of output losses because soiling is affecting shading. Utility-scale installers are aware of the importance of cleaning installations monthly or bi-monthly but DG installations are often only cleaned every six months 28 percent of the time. In 24 percent of cases, they are not cleaned at all as owners rely on

More Output, Less Maintenance to Temper Water Crises

rainfall to do the cleaning. This is risky due to the high variability of rainfall, which has dramatically decreased in recent months. It is time for the industry to understand the negative impact of soiling. Apart from better cleaning practices, one way to reduce the soiling factor is through the use of appropriate technology. Q: How does the company’s technology help solve these issues? A: ZNShine designs modules that decrease the soiling factor, saving large amounts of water, a solution specifically tailored to the DG sector’s problems. Most studies focus on soiling as an uncontrollable variable but the panel’s surface has great potential to reduce soiling losses in and of itself. ZNShine specializes in industry-leading modules that avoid soiling output power losses and decrease risk over the life span of the module: our patented graphene-layer glass. Graphene is a carbon nano-compound with excellent dustrepellent and light transmittance properties. We integrate graphene into the outer layer of the glass panel, decreasing the soiling factor of our modules in two ways. Firstly, by creating micro valleys that harbor air and expel dust particles using simple mechanical pressure. Secondly, the graphene layer creates a hydrophilic surface that generates flat droplets above the glass, a unique property for solar panels. The droplets become so flat that they scoop away dust particles, significantly

enhancing the mechanical cleaning action that rain can provide. Since the Mexican DG sector relies so much on rainfall, this is a crucial benefit. But the panel’s properties to expel and prevent the sticking of dust particles might be even more important. Conventional modules hold 14 gr/m2 of dust. In contrast, ZNShine’s modules only gather half, about 6 gr/m2. In this regard, ZNShine offers unique modules that help solve both water scarcity by decreasing the water needed for cleaning by 40 percent and preventing issues stemming from Mexico’s unusually high soiling factor, all while greatly increasing the module’s power output over the years. So-called soft and hard shading become much less of an issue and the installation’s life span can increase to at least 30 years. The improved load performance is of great value for coastal regions in Mexico and the Caribbean suffering from hurricane risks. Moreover, graphene coating also improves performance against environments with salt and mist-based issues. The combination of double glass with graphene coating makes the ZNShine module more robust and perfect for Mexican weather conditions while remaining low cost. Thin double-glass technology also decreases the weight of a panel up to 12 percent, an important factor for DG installations. Q: With this value proposition in mind, what are ZNShine Solar’s near-term objectives? A: As one of the leading producers of double-glass modules globally, our strategy for 2021 is to offer double glass at the same cost as single-glass modules. In India, a country with a similar high-dust and high-water scarcity context, ZNShine is a leading provider for the DG and utility-scale sectors. As a Tier 1 and PVEL Top Performer, our goal is to achieve similar results in Mexico. The Mexican DG market is expected to grow from 1.02GW in 2019 to 12.44GW in 12 years, according to PRODESEN 2020. Imagine that from this new DG-based future power, 5 percent is wasted due to the soiling factor related to bad cleaning. 517MW would be wasted. ZNShine can save 457MW of this loss. To achieve our goals, ZNShine will focus on exposure and sales. Next to the work in cultivating a solid base of distributors and then focusing on individual sales, the company has had a surprisingly good first response to its offer from the Solar Leasing sector. Traditionally, this is a somewhat difficult segment to enter. For companies that lease their system to clients, a stronger guarantee in the functioning of the panels and significantly lower maintenance costs already have proven attractive.

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from the

Q: How does your software set the company’s value proposition apart from the other players in the industry? A: Some of the world’s biggest players in battery storage are concerned with constructing large projects, and with good reason because that is where the volume can be attained. However, every market will have unique software based on the local tariff structures and regulations in those markets. We have created a platform that can be adjusted and tailored to other markets. People often look toward the most established names in the industry, but they fundamentally misunderstand that storage is not the components, it is the software. Component costs have a range of prices. Perhaps Fluence or Tesla can achieve economies of scale that provide a price advantage of around 10 to 15 percent. For larger applications, our software would not add much value creation differential in generating revenue, so choosing them would make sense. Behind-the-meter or with value stacking applications, the difference in costs is very low, but the difference that software can make in generating revenue is substantial. Q: Where does a behind-the-meter storage solution make the most sense? A: Mexico does not have a regulation that boosts storage development, even though a proposal was created. This has created a longer time frame for battery storage to take off in

David Fernandes

Mexico’s market. However, the possibility to construct solutions behind-the-meter does exist because there is no regulation to stop this from happening. Because no energy flows into the grid, you do not need a connection permit. This also insulates these solutions

Country Manager Mexico of ON Energy Storage

from potential regulatory changes. As to where battery storage behind-the-meter aimed at peak shaving makes sense, we have mapped the entire Western Hemisphere and presented it in a study. It is a function of capacity

Why Behind-TheMeter Battery Storage Equals Opportunity

price and the number of hours one would need to shave effectively. There are two markets where the solution makes sense: Mexico and Peru. Here, capacity prices are high and the number of hours where you need to discharge are limited, between two to four hours a month depending on tariffs and the season in Mexico. Talking to industry insiders, distributed generation (DG) is the future. People will migrate increasingly to a system where energy is generated at the point of consumption. Other leading executives in the battery storage industry also see software as the core of the solution: the commodity might make up the bulk of the cost but the opportunity is in its revenues. Q: How could battery storage benefit CFE’s efforts to make the national grid more efficient? A: Transmission deferral is one of the main grid-level applications for battery storage. A transmission line delivering hydropower from Tabasco to Yucatan is very saturated in the peak summer season, so in this area battery storage would already be viable. Natural gas reaching Yucatan is already somewhat polluted with nitrogen and there are only a few combined cycle power plants in operation.

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This is not enough in terms of capacity, so the peninsula ends up dispatching fuel oil during these peak hours in the summer, which makes little sense both economically and environmentally. The problem is that due to the efforts to turn back the Energy Reform, CFE does not seem to be aligned with an optimal long-term vision.

Sounding the Alarm on Transmission Infrastructure Francisco Zurita Director of Business Intelligence at Northland Power Energía

Energy Storage: Conciliating CFE and the Private Sector Alejandro Fajer CEO and Co-Founder of Quartux Mexico

Technology Giant’s Energy Spinoff Stays on Top of Transition José Aparicio President and CEO Mexico, Central America and the Caribbean of Siemens Energy

State-Backed Solar Power Plant Announced in Sonora 06/23/2021

The Transformational Impact of Digital on Energy Gavin Rennie Global Energy Emerging Markets Leader at EY Mexico

CFE Accuses Acciona Energy for Faulty Interconnection 07/09/2021

National Electric Grid Key to Faster Economic Recovery Leonardo Beltrán Board Member of SEforALL and Non-Resident Fellow at Institute of the Americas

Electrical Safety, Essential for Hospitals and Industry Alike Sergio Julian Head of Latin America of Bender

Could Iron-Air Batteries Become the Ideal Storage Tech? 08/03/2021

Technology Solves Issues Before They Take Root Michel Yehuda Industrial Business Unit Director at DOMINION

Renewable Development The renewable energy capacity that pertains to Mexico’s energy mix continues to grow as projects stemming from the government’s long-term energy auctions develop. Yet, the growing number of megawatts belies an uncertain outlook where greenfield developments are all but absent. Nevertheless, the energy transition does not rely on utility-scale developments alone, which increases the focus on often solarbased distributed generation developments in the Mexican market. After years of undertaking, green hydrogen appears to be getting ready for its early development stages, providing yet another direction where Mexico can develop renewable energy to its fullest extent and achieve optimal social benefits. Leaders in Mexico’s renewable energy sector showcase their opinion on developments in the country, highlighting how to detect opportunities in a continuously shifting environment.

Renewable Development

Analysis Behind-the-Meter Solar Is Ready to Thrive

Infographic DG Installed Capacity in Mexico

View From the Top Héctor Olea | President and CEO of Gauss Energía

View From the Top Juan Carlos García de la Cadena | Founder and CEO of Beetmann

View From the Top Jesús Serrano | Team Lead at TÜV Rheinland

View From the Top Gerardo Pérez | Vice President and Country Manager Mexico of EDF Renewables México

Analysis What Lies Ahead for Mexico’s Utility-Scale Wind Development?

View From the Top Enrique Papadimitriou | Technical and Sales Representative at GEOTER Renovables de Mexico

View From the Top Salvador Portillo | General Manager Mexico of Tecnatom

Conference Highlights Emphasis on Social Impact Key to Mexico’s Energy Transition

Roundtable What Is Mexico’s Green Hydrogen Potential?

100 View From the Top Israel Hurtado | President of the Mexican Hydrogen Association

102 View From the Top Sofia Pérez | Vice President of Strategic Relations at Pardgen

103 Content Links

Renewable Development | 86

Behind-the-Meter Solar Is Ready to Thrive Not that long ago, solar installations were more of a curiosity and an unconventional way to generate energy for those who wanted to help the planet no matter the cost. But photovoltaic solar technology has developed at a supersonic speed ever since. Now, renewable solutions for commercial and industrial (C&I) players are helping to decrease CO2 emissions, becoming a key tool to drive down costs and ensure reliability to boot. The current installed DG capacity of around 1GW will soon be increased sharply, experts say. It is not secret that decarbonization is a big topic among businesses around the world. With major players pushing for net zero goals, entire supply chains must ramp up their efforts as well. Renewable energy allows companies to meet sustainability goals and save costs on the energy bill, says Ricardo Whaley, Head of Energy Management and Commercial Office at ENEL Green Power. “Renewable energies are the most cost-effective globally. They offer price optimization coupled with an added value in cleaner energy consumption, which is a growing preference among users.” Whaley, like other experts, highlights the importance of cost as a key motivator to switch to green energy and behind-the-meter solar installations, sometimes complemented with battery storage, which are hard to beat when it comes to cost-effectiveness. There are other key reasons that could motivate companies to look at such an installation. Quality of energy can be problematic in certain areas that the grid cannot reach. If the sun shines, then solar can provide optimal energy quality because it generates energy where it is consumed. Incentives can be attractive as well. “Companies that invest in renewable energy generation have a tax incentive that allows them to deduct 30 percent of their investment in their first year,” says Hans Kohlsdorf, Founding Partner at E2M. Behind-the-meter installations also fall within the DG threshold, which stands at 0.5MW. Hector Olea, President and CEO of Gauss Energía, sees this as a key benefit. “First, regulation has not changed and the government is sending clear signals that this will remain the case. Second, technological advancements have decreased the costs of photovoltaic and storage equipment, making it very competitive. Furthermore, power tariffs for the C&I segment might very well increase in the medium term, providing another clear incentive to develop solutions for this sector.” Solar association ASOLMEX and various members of Mexico’s Lower House have been seeking to increase the DG limit to 1MW. Whether this initiative will gain traction is unclear but for smaller installations, 0.5MW might already be more than enough. “Even if a DG installation is 0.5MW by law, there might not be a big enough roof space available to fit it,” says Olea. Adaptation Needed To successfully design an optimal behind-the-meter system, the best technology is crucial. Utility-scale developments long worked as the basis on which photovoltaic solar technology broke new ground. Solar panel capacity is now growing rapidly. “The regular power trend for a monocrystalline module two years ago did not change more than 10 or 20 percent a year. Now, we have jumped from a 440W module in December 2020 to a 540W module in

Renewable Development | 87

1Q21,” highlights Juan Ávila, CEO and Co-Founder of Top Energy. Nevertheless, DG installations face very different challenges than large-scale power plants. As such, leading companies are adapting their product portfolios to meet these needs. Referring to the larger modules seen in utility-scale projects, Iván Reyes, Latin America Utility Director at Tier 1 solar panel manufacturer LONGi Green Energy Technology, saw that adaptations were needed for the product to be successful in DG. “The main problem is that these modules increase in size and weight but not necessarily in efficiency. This is not a problem for utility scale but the DG market often uses rooftops, such as at industrial parks, which might not support such a hefty installation.” What is more, the high output manufacturers can flaunt turns into a disadvantage against a smaller installation. “A bigger size provides a high amount of current. Inverters designed for DG projects are sometimes not suited for this. It can be a problem for C&I developers to procure inverters that are compatible with such sizes. Efficient, smaller modules that comply with all the technical market conditions are much easier to work with,” Reyes says. Companies, such as Huawei and FIMER, that are focused on inverters are rapidly bringing their portfolio up to speed to offer optimal solutions in the C&I sector as well. Battery storage also helps to further improve the viability of solar, whether in a micro grid or not. Many would associate storage with large, +10MW installations focused on load shifting for a large power plant. Load shifting would indeed be an attractive option but batteries are still expensive, says said David Fernandes, Country Manager Mexico of ON Energy Storage. But the nature of energy bills in Mexico allows for smaller installations. “The primary driver for behind-the-meter storage solutions is a reduction of capacity charges, which make up 25-30 percent of the energy bill for C&I users. These charges are established in a way that makes so-called peak shaving possible, which is calculated based on peak hours of the month,” Fernandes says. Room for Improvement Overall, DG solar is optimally positioned for explosive growth in Mexico even though supply chain prices could slow down development for the short term. Even last year, the market was glimpsing the first glimmers of a solar boom. “DG experienced growth of 30-50 percent over the year despite uncertainty brought on by COVID-19 and the state of the economy,” says Ricardo Cardiel, CEO and General Manager of Latin American Rainmakers. To make this growth spurt a success and thus solidify the position of DG in the Mexican energy mix, certain aspects could still be improved upon. “We see installation as an issue that stands out in the Mexican market. There are many installers working on DG projects and with some of them, it is difficult to tell if they are well-prepared and qualified to do the work. Therefore, we evaluate and certify photovoltaic DG installers once they fulfill our requirements,” says Jesus Serrano, Team Lead at TÜV Rheinland. To grow renewable energy in the country, developers have long sought to develop projects at the biggest scale possible. However, it is the smallest companies that could benefit from behind-themeter solar, Cardiel says. “The big off-takers are not the key but, rather, SMEs. These companies are really suffering from high Read the complete article More about this topic

energy prices. They suffer most from intermittency issues because they are connected to low-voltage outlets but they are unwilling to switch to higher CFE rates,” he says.

Infographic Renewable Development | 88

DG Installed Capacity in Mexico

99.5

99.426

99.0

INTEGRATED CAPACITY OF DG POWER PLANTS PER STATE

0.001

0.002

0.006

0.031

0.074

0.097

100.0

0.361

100.5

ACCUMULATED DG INSTALLED CAPACITY BY TYPE OF TECHNOLOGY AS OF 2020 (percentage)

98.5

Sources: SENER

Hydroelectric

Diesel-Hydro

Diesel

Fuel oil

Gas

Wind

Cogeneration

Biomass

Biogas

Photovoltaic

98.0

<- 60 MW 60-90 MW 90-120 MW >120 MW Sources: CFE Distribution

ESTIMATED DG CAPACITY EVOLUTION 2016 - 2035 16,000

13,869

14,000 12,000

— Most likely scenario

— Most postive scenario

— Current capacity 10,905

Sources: SENER

10,000

9,179

8,000 6,000

5,941

4,325

4,000 2,000

1,945

4,218

1,718 0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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from the

Q: How has Gauss adapted its strategy to the current energy environment? A: The lack of regulatory stability and certainty to develop utility-scale projects is precisely the problem in Mexico’s energy sector. I would say that in general not only Gauss but the entire industry finds itself in a stage where investments have been stopped and projects put on hold. Companies have taken a wait-and-see attitude on what will happen with the regulatory framework. Our main objective in Mexico is to maintain and defend the projects that are already in operation and preserve the status quo as much as possible. In regard to future largescale investments, we prefer to wait on a more stable business environment. This does not mean we are idle, however. We are simply moving our focus from utility-scale projects toward behind-the-meter distributed generation (DG) projects. In Mexico, regulation in this segment has remained untouched, so it is fertile soil for developing projects. We are seeing many largescale operators moving into this area of opportunity because the economics of it are attractive. Q: What technologies does Gauss bring to the table to make it competitive in C&I solar? A: Every company has its own solutions and secrets for optimizing their installations. Adapting Gauss’ experience from

24ch Interviewee Héctor Named Olea

utility-scale projects to DG makes little sense because the situation is entirely different, meaning you would need to get more creative. The available space is usually much more limited. Even if a DG installation is 0.5MW by law, there might not be a

Position 79ch Max - lksd dunturem andio President and CEO of Gauss Energía plaborias auda dolorehentd kjhdsa kjsad

big enough roof space available to fit it. Companies like Gauss need to be innovative in how they use equipment in this regard, tailoring it to fit the situation. Adding storage increases the price quite a bit, so good arguments are needed to rationalize the use of such infrastructure.

Moving to C&I Solar Without Forsaking UtilityScale Renown

Having said that, providing tailor-made solutions every time is too expensive. Therefore, you must consider where to add more cookie-cutter solutions while being competitive. It is a delicate balance to achieve. Q: Battery storage functions rather differently for utilityscale projects. How does Aura Solar III’s trailblazing 10.5MW storage system add value to the solar park? A: Aura Solar’s storage project in Baja California Sur is still the only utility-scale solar plus storage project operating in Mexico, but this will change in the months to come when other projects of the same nature enter in commercial operation. Gauss was at the frontier of developing new solutions within the Mexican market. This project has a very specific objective: supporting ancillary services for the grid. Baja California Sur’s grid is a weak, somewhat small and insular transmission system. Aura Solar’s storage allows it to add frequency and voltage regulation to the mix, as well as its most important function of power ramprate control. When a cloud passes over the project, a big drop in power generation occurs. This introduces instability in the

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struggling local system. Adding storage into the mix allows CENACE to cushion such shocks to the system. We use it to support the system rather than for load shifting. I believe this combination of solar plus storage is the way to move forward for weaker systems, like that in Yucatan, as well.

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Q: As companies adopt carbon neutrality goals, how does Beetmann help them optimize their energy use? A: Beetmann offers two main services in this regard. One is distributed generation-based solar with battery storage. The second is energy optimization — and we can even provide energy as a qualified supplier. It is clear that more companies are adopting sustainability goals. Helping them achieve these goals is one of our core focuses. Firstly, we help them better understand their electricity consumption. This is important because companies in Mexico were used to seeing electricity as a cheap, static input as a result of the government’s prior 70-year monopoly in the sector. Companies received a CFE bill once a month and paying it was the only option available. The resulting inertia made it difficult for companies to move to a system that provided higher visibility regarding how energy is consumed. Once companies see how, when and why they consume, their eyes are opened in terms of how their industry functions. Secondly, whatever is not measured cannot be optimized. To this end, we provide an affordable platform based on advanced technology that provides our clients with real-time visibility on how they are consuming energy. The platform uses algorithms, alerts and reports to analyze this. Clients can also have as much granularity as they need. For example, they might only want to monitor the main consumption sites or they may prefer to dig deeper into each production line. Clients can

Juan Carlos García de la Cadena

then make informed decisions regarding their energy efficiency. Companies need to measure how much energy is used in each process to be able to make the right investments and to know where to best optimize their energy. This approach aligns well with

Founder and CEO of Beetmann

the need to comply with the grid code. As consumers, we have to take responsibility for improving our inner grids, which translates to a more reliable grid for everyone. Q: How does Beetmann provide value

Energy, Waste Management Leads to Sustainability

beyond the optimization stage? A: We provide services as a qualified supplier, transforming the service to become an electricity ally for our client. We do not just send a bill every month; we provide clients with a much deeper understanding of their usage. We provide weekly reports on energy use, which completely changes the relationship between user and supplier. If a user saves energy, it does not mean we lose money. Furthermore, if we procure cheaper energy, that translates into value for the client instead of the supplier, an approach often seen in electricity markets. We want to avoid the “black box” approach by being fully transparent in this regard. Beetmann involves itself in the entire value chain, using as much renewable energy as possible while maintaining a competitive price. Q: How does Beetmann’s ecological pillar further contribute to Mexico’s sustainability? A: We work with organic residue and transform it into an organic fertilizer. There is a great opportunity in Mexico’s agribusiness segment to transform organic waste into something that benefits the soil. It is about closing the circle, bringing back what has been

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taken from the soil in a proper way to avoid damaging it. Our efforts in this area have moved from agriculture to the municipal environment as well. We also plan to move toward waste-toenergy, either through biomass or biogas. However, we are not there yet because the economic model is not yet self-sustainable.

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Q: Considering TÜV’s focus on solar energy, how does it add value in this area? A: We offer various services, which take place along the entire solar project value chain. This makes TÜV a one-stopshop when it comes to testing and certifications for solar development. This process starts with feasibility studies and technical requirements. We can accompany the client during the procurement and construction stages as well. TÜV has laboratories in China and the US that can analyze products such as photovoltaic solar systems. We also do factory audits and assessments by examining their manufacturing processes. This mainly takes place in China where almost all solar panels are made. We can support clients when these products arrive in Mexico, inspecting them and then auditing their installation. We later support the commissioning of power plants onsite and analyze PV IV curves to measure the output of the power plant. Finally, the company provides inspections using drones equipped with thermal imaging cameras. Technical documents are then reviewed before the power plant enters into commercial operation. When this happens, we support our clients when warranty dates expire and they need to understand where failures originated. Power optimization is yet another type of service the company has available.

24ch Interviewee Jesús Serrano Named

Q: Why should smaller-scale solar installations in the C&I area look to regular testing and forms of certification?

Position 79ch Max - lksd dunturem andio Team Lead at TÜV Rheinland plaborias auda dolorehentd kjhdsa kjsad

A: We consider Distributed Generation (DG) to be an important market and we offer support there as well. Even for small PV systems we can perform drone inspections, IV curve measurements and electroluminescence tests are worth considering. Owners should be aware of potential fire hazards.

Boost Efficiency, Reduce Risk in Renewables

We have around 1 GW of DG installed in Mexico, so it is an important and fast-growing market already. In the area of certification, we see installation as an issue that stands out in the Mexican market. There are many installers working on DG projects and for some of these, it is difficult to tell if they are well-prepared and qualified to do the work. Therefore, we evaluate and certify photovoltaic DG installers once they fulfill our requirements. These requirements come from the high standards TÜV applies in Germany. Q: How should renewable energy companies plan to add battery storage to their installations? A: Battery storage is already quite an important component of the energy transition around the world. Nevertheless, in Mexico there is not yet enough normative certainty for it to really take off. When local regulation is lacking or unclear, we always recommend taking into account top international standards and regulations instead. TÜV assesses installations based on such standards. Our expert teams in Germany and China have good experience in storage systems, so we can

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evaluate new Mexican systems and ensure reliability. As soon as Mexico begins to require more battery storage, we can be there to help the government develop regulations and private companies to implement them. For now, we believe it is still early for mass deployment.

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Q: How did EDF Renewables establish itself in the Mexican market? A: The company started out with six non-renewable combined cycle projects before 2000. These projects are now in the hands of a Japanese energy company. Soon after, the company began to take note of the potential of the renewable energy market in Mexico. The company purchased a small Mexican project developer and continued to work with its partners. After 2004, the company began operating under the name EDF Renewables in Mexico, although every project exists under its own name, as is the case with our first project, Electrica del Valle de México (EVM), which began construction in 2007. In 2010 and 2011, EDF built two other major wind farms together with Siemens in Oaxaca totaling 400 MW. In 2014, I joined the company and we began developing the 300 MW Oaxaca wind farm at the Isthmus of Tehuantepec. In an agreement with the previous administration, we migrated these projects to the new Electric Industry Law (LIE) from the previous self-supply scheme. In 2016 EDF Renewables México competed and won in the second long-term auction for energy and clean energy certificates supply and purchase contracts with the Federal Electricity Commission (CFE) with a 120 MWp solar project called Bluemex and a 252 MW Gunaa Sicarú wind project located in the Isthmus of Tehuantepec region in Oaxaca. Before the pandemic, SENER reinitiated the public consultation process

Gerardo Pérez

in two Oaxacan municipalities. Before launching the second phase, the pandemic forced a halt to this process and it has not yet restarted. We hope to see the process restart in June 2021. In any case, EDF Renewables remains committed to the Mexican market.

Vice President and Country Manager Mexico of EDF Renewables México

Q: What other projects are featured in the company’s development pipeline? A: We have close to 3,000 MW of projects, but in light of the

O&M, DG Complement Renowned Renewable Development

regulatory situation in Mexico’s energy sector, our development has gone into slow motion. We are doing the minimum amount of work necessary to ensure that we do not lose the progress that we have already achieved. For example, we have solar projects with some progress in Coahuila, Yucatan and the center of the country totaling 1,000 MW. We have established agreements with landowners and developers, among other steps. However, doing more work than the minimum efforts we have accomplished is not viable. First, we need to see how the rules in the energy sector pan out. For example, our power generation is being curtailed and the government is attempting to change the LIE, or even the constitution if this fails. More than anything, this introduces uncertainty in regard to what might come. Nevertheless, our investors are not leaving the Mexican market or reducing operations. Q: What is different about the company’s approach to power purchase agreements (PPAs) compared to its competitors? A: There are two key points that distinguish our approach in this regard. First of all, EDF’s name is an international reference point when it comes to power generation in general, outside of the renewables area. This fosters confidence among investors and industrial players. Second, the company is one of the frontrunners in renewable development, both worldwide and in Mexico. Furthermore, for more than 20 years, EDF has operated successfully in socially difficult areas, such as Oaxaca. These

factors, along with the certainty that a company of this stature provides, means that we still work with some of the world’s largest companies in the area of PPAs. Q: How can EDF help boost the national network’s stability? A: EDF owns the national grid in France together with the country’s equivalent of CENACE, which is RTE. Three years ago, our French grid-specialized arm signed a collaboration with CENACE because we have ample experience in this area. We can be a reference for them, but also help out when it comes to joint investments with grid owner CFE, such as with the transmission line project in Oaxaca that was planned at one point. Our team was ready to participate in the tender. Unfortunately, the tender was canceled. Still, EDF has the expertise, technical skill and resources to help out on such projects. We can adapt to any rules or conditions from the government or CFE. Another area where EDF has experience is hydroelectricity, which is rapidly gaining in relevance due to CFE’s plans to overhaul its old installations. We can also support efforts surrounding nuclear energy, although I think those plans are a bit further down the horizon. Whatever knowledge EDF has can be transferred to Mexico. Q: How is EDF addressing and improving its own sustainability? A: Renewable energies, in this case solar and wind, are often related to the concept of intermittency. We are working to address this issue through the use of technology, such as green hydrogen and storage, as well as combining this with green energy. Hydrogen needs to be created with an electrolyzer, which can be powered by renewable energy, for instance. Other than that, EDF has a plan to decrease our emissions by switching all our employee vehicles to electric by 2030, among other goals. Q: What are EDF’s objectives in the Mexican market for 2021? A: 2021 is quite complicated. We hope that clarity emerges in the Mexican market, although this does not depend on us. Nevertheless, we are expanding our operations and maintenance (O&M) for third-party power producers. We have already had a great deal of success and we want to increase overall MWs in our portfolio. Furthermore, we want to position ourselves within the distributed generation niche, especially in metered energy and solutions for the residential and C&I segments.

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What Lies Ahead for Mexico’s Utility-Scale Wind Development? Wind energy has long been at the forefront of Mexico’s clean energy transition. Among the earliest clean technologies boosted by the pre-2014 Energy Reform self-supply schemes, the reform only strengthened wind energy’s position in the mix. But with a new government, a different direction emerged, bringing new wind energy development to a grinding halt. Yet, despite the short-term challenges, industry experts believe wind energy’s long-term potential remains attractive. Data from the Mexican Wind Energy Association (AMDEE) show that Mexico has over 68 wind parks in operation, providing 7,691MW of capacity, according to SENER. This means that around 8.6 percent of Mexico’s energy mix is generated through wind turbines. Fourteen states already benefit from this resource. AMDEE reported the state of Oaxaca has the country’s largest installed wind capacity by far, at 2,749MW. Tamaulipas is second with 1,715MW, followed by Nuevo Leon’s 793MW. With US$13 billion in investment, Mexico’s wind projects represent a sizable chunk of both national and foreign direct investment. AMDEE data also show that as of March 2021, 300MW of wind energy were in the pre-operational testing stages and 400MW were in various stages of construction. In April, Italian renewable energy developer Enel Green Power reported that its 274MW Dolores wind farm, located in Nuevo Leon’s China municipality, officially entered commercial operation on April 26. The US$290 million renewable energy project had been won during Mexico’s long-term energy auctions, establishing a 20year PPA with grid operator CENACE. EDF Renewables’ 252MW Gunaa Sicarú wind farm, also originating at the auctions, is another project under construction, although it has faced injunctions in court. “Before the pandemic, the Ministry of Energy (SENER) reinitiated the public consultation process in two Oaxacan municipalities. Before launching the second phase, the pandemic forced a halt to this process and it has not yet restarted. We hope to see the process restart in June 2021,” says Gerardo Pérez, Vice President and Country Manager Mexico of EDF Renewables. Auctions are not the only driver for wind energy development. Mexican mining giant Grupo Mexico invested US$250 million in the Fenicias Energy Center to add 168MW of renewable capacity to the company’s growing clean energy portfolio. “The objective is to bring the wind farm into operation this year. We believe this goal is achievable even within the current environment marked by slowdowns,” says David Fatzinger, Vice President and Country Manager Mexico of Invenergy. Pipelines Run Dry – For Now After this wave of projects, however, industry insiders warn that there is a lack of new development. “Greenfield projects pretty much stopped. In 2021, we are still benefiting from the wave of new capacity planned years ago,” says Federico Muciño, Founder and Consulting Partner at Epscon.

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At the heart of this stoppage in development lies the break with previous policy brought by the López Obrador administration. After López Obrador entered office in 2018, he vowed to rescue CFE, choosing to work to again place the state utility at the forefront of the energy sector. Following years of liberation driven by private companies attracted to the market, investment began to decline. Without the rock-solid confidence needed to construct multimillion-dollar projects for a long-term operation, renewable energy companies found themselves in a difficult position. Estimations from AMDEE show that investment in the energy sector will drop by 61 percent in 2021. In 2020, the wind sector expected US$1.3 billion dollars in investments but in 2021, investment is expected to reach a mere US$500 million. SENER’s energy sector development plan PRODEN shows that by 2024, 14.8 percent of newly installed energy capacity should be wind energy. Out of the 13,677MW of total new capacity, wind energy’s share would amount to around 2,024MW. But if no new greenfield developments are uninitiated, wind energy development might come to a standstill after the current projects become operational. After all, if investment opportunities open again, it will take several years before such projects enter operation. For solar developers, distributed generation offers an interesting avenue worth exploring, despite smaller margins and more specialized applications. But behind-the-meter wind solutions are unfortunately not viable in the current environment. Therefore, companies in the wind sector often choose to slow down their developments as much as possible, knowing that in the future, wind energy might experience a boom once again. “We have close to 3,000MW of projects but in light of the regulatory situation in Mexico’s energy sector, our development has gone into slow motion. We are doing the minimum amount of work necessary to ensure that we do not lose the progress that we have already achieved,” says Pérez about EDF’s renewables developments. For now, companies are waiting to see how the situation develops, according to Pérez. “First, we need to see how the rules in the energy sector pan out. For example, our power generation is being curtailed and the government is attempting to change the LIE or even the constitution if this fails. More than anything, this introduces uncertainty regarding what might come. Nevertheless, our investors are not leaving the Mexican market or reducing operations.” New Technologies, New Perspectives Once the outlook shifts, companies looking to develop new wind energy will have new tools at the ready to further push down the levelized cost of energy (LCOE), to deal with intermittency and to boost the sustainability of a power plant’s life cycle. Battery storage could be an important addition toward load shifting for wind energy projects, helping it to produce energy in a stable manner if the wind drops, for instance. In general, wind energy technology has greatly improved in the past decade, dropping costs while increasing efficiency. “We believe that in recent years, there has been an important revolution Read the complete article More about this topic

in the sector. With new technology, we have been able to optimize operations and maintenance of our equipment,” says Enric Català, Senior Sales Director for Latin America at Vestas.

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Q: How would you assess opportunity within the tourism industry for GEOTER? A: The tourism industry relies on many of the benchmarks that sports clubs use. For instance, they need to heat large amounts of water and provide cooling for other spaces. However, we have not been that close to the tourism industry because the sector is not located in the geographic designation we usually operate. In Aguascalientes, energy demand is primarily centered in industrial and other commercial sectors. Agriculture, for example, is a major source of income for the state. The pandemic has not allowed us to travel as much as we would like to. Nonetheless, tourism presents a major opportunity for the company. The industry has been hit heavily by COVID-19, so for players that are restructuring their finances and want to lower operational costs, renewable energy can add a great deal of value. Our portfolio includes an analysis that includes topics like financial benefits and energy efficiency, so that we can demonstrate to our potential clients exactly how we can provide them with a successful business case. Q: How is the company driving heat pumps and PV solar panels as a hybrid solution? A: Heat pumps and solar energy on a slightly larger scale is an

Enrique Papadimitriou

opportunity we are already marketing around the Riviera Maya, in places such as Tulum. These areas have swimming pools and larger-scale water heating as well. Potential clients see these investments as significant but also realize that the benefits they

Technical and Sales Representative at GEOTER Renovables de Mexico

get make the returns that can be achieved rather attractive. The larger the amount of water, the more sense it makes to contract our portfolio. For an Olympic-size pool, owners could easily pay between US$15,000 and US$18,000 per month for heating. This cost can be cut by more than 60 percent,

Geothermal Plus Solar Demand to Offset Pandemic Slump

representing energy savings of up to 80 percent. Knowing this, clients are realizing how much they can save. Regarding the tourism segment, pools might be slightly smaller but the value proposition is clear. Especially now that the sector is reactivating and costs need to be cut, GEOTER can capitalize on this opportunity, all to the benefit of the end user. Q: How would you assess Mexico’s possibilities to develop geothermal energy on a utility scale? A: Mexico was a Top 4 country when it came to geothermal energy production This is no longer the case: among other factors, one of the largest geothermal power plants stopped operating. Still, the potential exists because Mexico has many locations where it could tap into geothermal resources. Geothermal energy provides very cheap electricity. It might not be the cheapest to develop, however. For example, utilityscale solar is more attractive in Mexico’s current environment. Regardless, geothermal energy is not intermittent and the energy mix needs to be diversified even further. If you have the resource, then you would ideally make use of it. In the current political environment, it is hard to tell what will happen with

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renewable energy projects in the short term. Long-term energy auctions have been canceled by the government, for instance. On the other hand, CFE has stated that it wants to develop new projects and the government is still committed to the country’s clean energy transition. Only time will tell.

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Q: Where does Tecnatom see the biggest opportunities in the Mexican market? A: In the Mexican market, we mainly identify opportunities in our oldest sector: nuclear energy. Work on CFE’s Laguna Verde power plant remains part of our core business. CFE will most likely construct a couple of small nuclear power plants but this will depend on how the government prioritizes the reorientation of the energy sector. Even without an increase in nuclear production, this technology will remain a key business for us. If CFE decides to stop nuclear production entirely, it will need to shut down Laguna Verde, which would take at least 10 years. During this period, the power plant would need to be decommissioned in various steps. This is also an interesting business opportunity for us, since two nuclear plants are undergoing this process in Spain. Secondly, we see opportunities with private power producers such as Mitsui and Iberdrola. Tecnatom believes it has a solution that can provide value by optimizing their assets or via virtual training using state-of-the-art 3D and VR technology. This allows users to see intricate components in all their detail. We are releasing a solution called SOUL, Smart Open Universe of Learning. It is more than simple e-learning. It includes training courses and videos but also 3D resources and simulators geared toward operations, finance and even leadership. Furthermore, we promote our solutions to CFE’s power generation arm outside of

Salvador Portillo

the nuclear energy area. In terms of production and maintenance, the state utility regularly has many issues to solve. Q: Why should the Mexican government consider smaller nuclear

General Manager Mexico of Tecnatom

power capacity and how could it be implemented successfully? A: Tracking the nuclear sector worldwide, the canceled Horizon Nuclear Power program in Gloucester, UK, stands out. An issue of finite resources was one of the main reasons for the cancellation.

Waste Strategy, Political Will Can Make New Nuclear Power Thrive

It would have been a massive power plant but it was abandoned because of its costs. This demonstrates that in the current environment, huge power plants like that are not viable. Nuclear energy is moving toward the development of small, modular reactors, which allow you to add more reactors depending on the power needed and the budget available. A government project in Baja California might materialize based on this technology. I believe it would prove beneficial to begin with a small reactor and possibly expand from there as much as they need to. To make this a success, the government needs to be convinced that this is a solid technology that can produce energy. People around the world tend to be afraid of nuclear energy because of past events like those in Fukushima and Chernobyl. However, the nuclear energy environment has not been sitting still and has created better procedures and regulations. It is also key to address radioactive waste. For instance, Laguna Verde relies on technology stemming from the 1970s. All the waste produced over time is still located there. However, solar and wind power plants produce waste as well. Completely clean energy, therefore, simply does not exist. In the end, there will be waste and how you deal with it matters. Mexico is concerned

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about its radioactive waste because the country is not as prepared as Spain or the US to handle such waste. In short, to make this potential project a success, nuclear energy needs to be firmly considered on the political agenda and an adequate local waste management strategy is crucial.

Conference

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significant part of Mexico’s population is indigenous, living on land valuable to renewable energy developers and, therefore, to the energy transition. Setting the highest social impact standards for energy companies is essential to ensure that these

projects are fair and sustainable, but regulation remains undefined. Data from the Mexican government shows that Mexico counts about 16.9 million indigenous citizens, representing around 13 percent of the entire population. This already suggests that infrastructure projects are likely to intersect with indigenous communities but the reality of Mexico’s geography ensures that this becomes even more likely. “The state of Oaxaca is a prime example. Here, both a high number of indigenous peoples and excellent renewable potential for wind energy, for example, are found,” says Héctor Sánchez López, Independent Member of the Board of Directors at Mexico’s state-owned utility CFE. To guide energy developers in their interactions with communities, Mexico has established an indigenous consultation process that is carried out prior to any development to assess its social impact and aims to be “free, informed and in good faith.” The consultation

Emphasis on Social Impact Key to Mexico’s Energy Transition Héctor Sánchez López Independent Member of the Board of Directors at the Federal Electricity Commission (CFE)

process is evaluated by the sector’s regulatory commission, CRE. Sánchez highlights that renewable energy projects often have a profound impact on the local economy and on the way of life of these communities, making a social evaluation essential to the success of the project and the well-being of the community involved. This consultation is not the only process developers need to keep in mind. They also need to complete an environmental impact assessment, which is judged by SEMARNAT. “The environmental impact assessment does not only aim to protect the environment; it works to preserve and restore the land and its flora and fauna as best as possible,” Sánchez says. Foreign investment laws protect developers against the loss of previous investment if social engagement does not go as well as planned, adds Sánchez. He explains that social issues can strand projects indefinitely, which makes a good ending for either the community or the company a much less likely outcome. While this protection exists, it is simply not the preferred outcome for lengthy project development processes. Companies, therefore, have every motivation to engage communities appropriately from the beginning. But this is no simple task: “There is no set of laws that explains exactly how the consultation process should be done or that really show us the right way,” Sánchez says. While laws state that indigenous communities have the right to determine their own development and that they should share in the benefits of infrastructure constructed on their land, the way this pans out is not outlined. At times, these rights can even clash. For Sánchez, this issue needs to be addressed. “We need to solve these issues so the clean energy transition can develop further and benefits from clean energy projects can be shared in a fair manner,” he said. The global energy transition is not standing still and indigenous communities themselves could greatly benefit from having access to renewable energy on their land, so they can replace harmful fossil fuels. Expanding on the legal framework

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will ensure that companies have better guidelines available. “Secondary laws can help to clarify what really needs to be done,” he says.

Green hydrogen has been identified as the “next big thing”

What Is Mexico’s Green Hydrogen Potential?

in renewable energy for quite some time now. Its advertised benefits as an entirely renewable replacement for fossil fuels are drawing nearer as several pilot projects become a reality. Although the Mexican sector is not developing as rapidly as in other countries, its potential resources and location show promise in this energy segment. What role might the country

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play in this budding market?

A McKinsey report financed by the EU Hydrogen Council found that Mexico would be able to produce green hydrogen at 65 percent of the cost, roughly US$1.4/kg compared to US$2.3/ kg in other countries, a rather stark difference. This is attributed to two main factors. First, Mexico’s geographic location and assets. We have access to the Pacific and Atlantic oceans and their long coast lines, which is not only beneficial for production but for exports to Europe and Asia. In addition, our free trade agreement under USMCA makes us the only intermediary with access to some of the biggest markets in the world. Second is the country’s growing renewable energy potential.

Israel Hurtado President of The Mexican Hydrogen Association

I do not foresee much opportunity for green hydrogen in Mexico for the next few years. Looking at the numbers on a global basis, green hydrogen is still more expensive than other fuels. It will be the future, though: green hydrogen is a great solution. The overall process to produce it wins out on batteries, since these require lithium, which demands extensive mining operations. Battery storage is still somewhat expensive and does not yet have an adequate regulatory framework but I do see it becoming part of the market sooner than hydrogen. Because of its comparative advantage, hydrogen will certainly be a part of the future energy mix but I do not see it taking off in Mexico

Ramón Basanta

yet, despite many companies exploring the technology. The economics are not there and Mexico lacks the infrastructure.

CEO of ATCO Energía

Today, green hydrogen’s adoption does not look to be too far away. Mexico is in a privileged position after all. We can develop a local industry to export to the US, for instance. This would not only target hydrogen itself but also electrolyzers that can be manufactured here. Hardware will be required worldwide very soon. In this regard, I consider Mexico to be one of the Top 10 countries to develop a green hydrogen industry. Enagás is in an interesting position in this regard, with the knowledge and expertise in the matter that it acquired in Europe. I believe we will be an important player in this industry in the near future.

Alberto Escofet Country Manager Mexico of Enagás

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Q: How do the association’s members work together toward shared objectives? A: The majority of our associates are foreign companies that participate throughout the hydrogen value chain. For example, Siemens Energy is involved in technology development. Between Mitsubishi, Hitachi ABB and Cummins, you have manufacturers and hydrogen technology developers. In conjunction, they all have something to contribute to the overall conversation of development projects in Mexico. These are companies that are already carrying out hydrogen development projects throughout the world. Ultimately, the aim for Mexico is to import such projects here. Siemens and Alstom have hydrogen-fueled trains in different parts of the world, particularly in Germany where they have three in service. More recently, there are now hydrogen-fueled cars. Hydrogen producers are also among our members. Linde, Air Liquide and Infra, for example, produce grey hydrogen. We also have members like Enagás, Engie and Fermaca that have natural gas infrastructure and see green hydrogen investment and development as their next evolutionary step. All of these members contribute extensively to development technology and consumption. Our membership also includes Kins Tecpetrol and Grupo México, which can use clean hydrogen in their decarbonization efforts in conjunction with energy management in places where energy or natural gas infrastructure is lacking. All

Israel Hurtado

members, in effect, complement each other and are working in various, specialized committees to provide information regarding regulation, since the segment is not regulated in Mexico.

President of the Mexican Hydrogen Association

Q: Is regulation an issue or an opportunity regarding hydrogen? A: We see it as both. It is not regulated and this gives us an opportunity to regulate it efficiently and to the highest international standards. Nevertheless, when something is not regulated, the

Mexico Needs a Strategic Development Plan for Green Hydrogen

government tends to want to overregulate, which can become a problem. At the end of the day, regulation will help drive the green hydrogen industry forward instead of obstructing or hindering its development in Mexico. Above all, we do not want the conversation around green hydrogen to devolve similarly to the disputes related to the various visions and perspectives around electricity, energy generation and renewables. Regulation is an opportunity but we don’t want it to become a problem. Q: Why is green hydrogen a piece in the clean energy transition? A: As a member of the Paris Climate Agreement, Mexico is committed to generating 35 percent of its electricity from clean energy sources by 2024. Fortunately, many companies, such as Cemex, are very committed to decarbonization, green projects and the energy transition. However, not all companies are on the same page; not because they are not interested but because green inputs are still inaccessible to them. Green hydrogen could contribute substantially to these companies’ decarbonization efforts, thereby helping Mexico meet, if not surpass, its pledged goals. For Mexico to produce green hydrogen in the future, it will need a robust renewable energy production capacity, a requirement Mexico has met. However, it needs to install electrolyzers at renewable plants with the continued development and application of these technologies. Consequently, sustained, private sector commitment plus renewable energy development combined with green hydrogen can help Mexico reach its goals by 2024.

Q: How much interest in green hydrogen has the public sector exhibited? A: CFE has included hydrogen in PRODESEN, the National Electricity Sector Development Program, as part of its strategic development plan for the next 14 years. It foresees the use of green hydrogen in substitution of natural gas in turbines and plants alike. While symbolic, we are happy that it is now on the table and on CFE and SENER’s radar. In the future, they will have to either produce their own green hydrogen using their own plants or buy it. Although PEMEX already produces hydrogen, both PEMEX and CFE would need to make the move toward green hydrogen for their own decarbonization efforts. In fact, Shell and PP already use green hydrogen in their refineries in Europe. Like Cemex, PEMEX will need to get on board, produce it or at least use it in its industrial processes to meet its decarbonization efforts. Q: What could help make green hydrogen a more competitive option? A: Green hydrogen is not as competitive as other energy sources. Ninety to 95 percent of hydrogen consumed globally is grey hydrogen. One kilogram of grey hydrogen costs about US$1.5, while green hydrogen costs between US$5 and US$7. The McKinsey study reported that in the next five to six years, the production cost of green hydrogen will fall to that of grey hydrogen’s current rate of US$1.5/kg. Initially, most companies will make an effort to purchase blue hydrogen, which is an intermediate point between grey and green hydrogen. While the price jump from grey to green may be too much, within the next few years, blue hydrogen could serve as a stepping stone. Q: How advanced are green hydrogen projects in terms of development? A: There are several projects in different stages of development, including brownfield, greenfield and some ready-to-build in Baja California, Chihuahua, Guanajuato and Durango. In the latter two, there are projects that are very close to getting off the ground. These are set to begin this year. For instance, foreign capital is funding the construction of a project in Durango that will produce green hydrogen and green ammonia. The project in Guanajuato is set to produce green hydrogen specifically for an industrial park or business nearby. These two projects are very close to getting started. Some are green- or brownfield projects that are working to secure permits, while others are still in their early stages. As you can see, we have various projects at different stages of development. I hope that once regulations catch up and there is more visibility on the development of hydrogen projects, more investment will start trickling in so that more projects can be developed.

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from the

Q: How does Pardgen translate its international experience to its project development approach in Mexico? A: Our partners from around the world and the international projects in Pardgen’s portfolio are our strongest assets. These projects give us knowledge regarding project development and teach us how to solve the problems arising from the changes in the law. They allow us to identify new approaches and ways to make our projects viable. We are developing five projects in different areas in Mexico, with a focus on signing long-term power purchase agreements (PPAs). We hope to have three of these operating in 2021. Our mission is to develop projects in areas of Mexico that need the energy the most, due to the blackouts they suffer. Pardgen’s projects in the Bajio and the southern area of Mexico not only help the local market by providing extra capacity, they function as support for CFE and CENACE in balancing the grid. What is more, the projects provide benefits to the surrounding communities as well. Our projects have a great impact on society, with a particular focus on the emancipation of women, an issue that is close to my heart. We support local society beyond energy, with health and communications infrastructure. Q: How important is this social focus for

Sofia Pérez

Pardgen’s project development? A: We believe that the social aspect of a project is crucial to its viability, with only the financial picture being more

Vice President of Strategic Relations at Pardgen

important. This is not only for permitting reasons. It allows the company to share the benefits of the project with the communities around it. We want to involve these people in the development as much as possible, beyond providing work.

Strong Social Mindset Sets Energy Developer Apart

We would never choose to develop a project that does not leave a positive impact on the surrounding land, climate or society. Pardgen actively looks for states and municipalities that could benefit from a project and often moves its potential sites to accommodate the people living there. Q: How have PPAs evolved? A: A sense of fear in the uncertain energy market has changed how clients approach these contracts. We have been analyzing the potential future of the sector to establish contracts that allow clients to have more trust in our projects. Five years ago, it was simple enough to sign a 20-plus year PPA. Now, we need to alter our contracts to ensure the terms remain solid no matter the changes in the sector by building in more provisions that support legal certainty. However, foreign companies entering Mexico have already committed to sustainability goals and will therefore look for a clean energy supply regardless of whether Mexico is boosting renewables or not. Additionally, more potential off-takers are interested in

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owning their own energy projects. This is not something Pardgen does because it owns all its assets. We rely on signing PPAs and sell a maximum of 10 percent of the energy on the spot market. C&I companies wanting to own and fully control their energy supply are affecting the concept of PPAs.

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Large Projects Hibernate While Small PPA Projects Gain Traction Alejandra Domínguez Managing Director of SOWITEC

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Construction Experience Enhances Renewable Project Engineering Óscar Fernandez López CEO of Revergy

Key Value Adds in EPC Experience and Staunch Client Support Ken Tsutsumi Board Member & Solutions Sales and Marketing at Panasonic

US Renewable Demand and O&M Expansion Grant Certainty Albert Sunyer Country Manager Mexico of The Nordex Group

Acciona Receives US$10.4 Billion Valuation for Energy Unit 07/01/2021

Gas Infrastructure Natural gas is considered a crucial segment for Mexico’s energy industry, although this valuable fossil fuel segment has also faced the uncertainty rippling across the energy industry and the impact from the global pandemic. Natural gas is growing in significance in the overall market. For instance, record levels of US imports, an expanding combined cycle-based power production platform to fuel the energy mix and rising demand from various industries all mean that natural gas will remain an essential resource for the foreseeable future. A winter storm earlier in the year called attention to the system’s vulnerabilities, as parts of the country do not have adequate access to natural gas. The event provided the government and the private sector with the opportunity to address these issues and kickstart the next phase of the energy transition. Natural gas is the main topic for this chapter, with a particular focus on its distribution infrastructure, the need for storage and its use for power producers, fueling combined cycles and cogeneration alike. Top companies underline the importance of natural gas and highlight where progress can be made.

Gas Infrastructure

107 Analysis Mission to Gasify Mexico Calls for Infrastructure

109 Infographic Mexico’s Natural Gas Pipeline Network

110 Conference Highlights Natural Gas’ Ongoing Revolution

111 Conference Highlights Mexico Is Ready to Be a Natural Gas Production Giant: Jaguar E&P

112 View From the Top Caio Zapata | Director General of Énestas

113 View From the Top Alberto Escofet | Country Manager of Enagás

115 Analysis Natural Gas Storage Remains on the To-Do List

117 Conference Highlights Natural Gas Access an Engine for Economic Development

118 View From the Top Gustavo Nunez | Managing Director of the Mexico and Central America Sector at ROSEN Group

119 Roundtable How Do Developers Facilitate Cogeneration for C&I Clients?

120 View From the Top Geoff Street | Director of Natural Gas Origination at Tenaska Marketing Ventures

122 View From the Top Jorge Flores | Commercial Director at Vopak

123 Content Links

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Mission to Gasify Mexico Calls for Infrastructure To say that natural gas has become important to Mexico would be an understatement but significant expansions to the internal infrastructure network are needed if more regions are to benefit from this cleaner fossil fuel. How can the public and private sectors work together to extend the reach of this vital infrastructure? In the global context, natural gas is often touted as the ideal “transition fuel,” referring to the final goal of the global energy transition to power the world with 100 percent renewable energy. As a fossil fuel, gas does not burn completely clean but it does burn much cleaner than coal and fuel oil, the latter of which is still an important component of Mexico’s energy mix. The benefits do not stop there. Natural gas is incredibly cost-effective for countries close to its supply. Burning natural gas also provides firm power, as opposed to the potentially problematic intermittency of wind and solar energy. Because of this stability, it can function as a baseload for the energy matrix. Modern combined-cycle power plants can even be cycled up and down to meet fluctuating demand. So-called peaker power plants are ideal candidates to turn natural gas into a stabilizer for the grid, as well. “Although not a renewable power plant, as it is powered by natural gas, peaker power plants do support the integration of further wind and solar energy into the grid as a very flexible asset that can quickly respond to changes in supply and demand or grid conditions,” says David Fatzinger, Vice President and Country Manager Mexico of Invenergy, about one of the company’s landmark projects. Since natural gas is mostly methane, a powerful greenhouse gas harmful to the environment, energy transition experts point out that, eventually, even natural gas will have to be phased out of the global energy mix. For the decades to come, however, the cleaner footprint this hydrocarbon provides will remain an important benchmark. PRODESEN shows that over 40 percent of Mexico’s total power generation relies on natural gas. Moreover, given President López Obrador’s vow to rescue state-owned utility CFE and with private renewable energy developments slowing to a halt, the government’s faith in natural gas will likely increase this percentage even further. CFE announced in March 2021 that it will tender the construction of six combined-cycle plants with the aim of increasing its power producing capacity by 4,233MW. Compared to the industrialized north of Mexico, the south trails behind in terms of commercial and industrial development. Providing stable and cheap energy through natural gas can help level the playing field, which is already on the government’s radar. Specific attention toward states like Oaxaca and Veracruz are, therefore, warranted. Virtual pipelines, which can bring compressed or liquefied natural gas much further than conventional modes of transport will be crucial in gasifying Mexico, as well. Yet, dry pipeline gas still represents the cheapest and paramount form of transport. Most of the supply needed to quench Mexico’s thirst for gas will come from the US. “14 Bcf/d of pipeline interconnectivity is operational between the US and Mexico, with a supply and demand imbalance in which Mexico imports 70 to 80 percent of the natural gas not used by PEMEX. This situation is unlikely to

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change due to the nature of exploration and production cycles in hydrocarbons,” says Geoff Street, Director of Natural Gas Origination at Tenaska Marketing Ventures. Projects and Expansions According to Street, much of this international connectivity is found in Texas. The 14 Bcf/d already developed does not need significant expansions. “The challenges at this point are entirely within Mexico, related to interconnectivity between pipelines. This includes large interstate pipelines or last-mile pipelines that connect with local distribution companies or individual projects,” he adds. Currently, Mexico’s internal SISTRANGAS network features 10,068km of pipeline infrastructure. Recent additions have helped the network along, such as the southernmost segment of the Wahalajara system called the Villa de Reyes-AguascalientesGuadalajara (VAG) pipeline, which began operating in 2020. In 2021, TC Energy hopes to complete its 886 MMcf/d Tula-Villa de Reyes pipeline, located in the center of the country. This will grant the heart of Mexico access to pipeline gas, which is cheaper than having to rely on liquefied natural gas (LNG). Developers felt the effects of the COVID-19 pandemic as it translated to delays in their projects but they now see potential to complete their expansions in 2021. CENAGAS has recognized that advances to gasify the center of Mexico are progressing rapidly and, therefore, has shifted its attention to states such as Oaxaca, Chiapas, Yucatan, Tabasco and Quintana Roo. Several projects to create new gas hubs in these areas are in the pipeline, costing hundreds of billions of dollars, which means significant private participation through either contracting or even full ownership of these expansions is required, according to the latest 2020-2024 plans from SENER. Hurdles Ahead There are several obstacles that need to be considered within the wider mission to gasify the country. A recent decree from the Mexican government effectively revised the 2014 Hydrocarbons Law by granting the government greater power in issuing and revoking permits. Fitch Ratings, for instance, highlighted that the new reform could leave pipeline projects susceptible to suspensions or terminations, although a force majeure clause would still protect the project to a large degree, given the state would be the offtaker. A federal judge suspended the decree, which is in line to be reviewed by the Supreme Court. Social and environmental issues also require consideration. Thousands of kilometers of pipeline construction mean that intersections and interactions with various ejidos and indigenous communities are inevitable. “Land-owner rights and ejidos have played a large role in the completion of pipeline projects within the country,” highlights Street. Environmental regulation has only become more stringent, as well, such as a change in the forestry law impacting any project that needs to remove forestation. Clear communication about environmental safety measures can help prevent misunderstandings, experts agree. Furthermore, companies should simply take the time to review their environmental impact plan to set up the right approach from the get-go. “Clients are generally happy when they are not required to take further measures because the strategy was done Read the complete article More about this topic

correctly the first time around. This approach provides a great deal of certainty,” says María Cristina Hernández Calzada, Partner at Vera & Asociados.

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Infographic Mexico’s Natural Gas Pipeline Network NATURAL GAS PIPELINE SEGMENTS

In the Mexican context, access to natural gas has become a synonym for higher development levels.

Number

System

Operator

Length (km)

National Gas Pipeline System (SNG)

CENAGAS

8,990

Tamaulipas gas pipelines (GdT)

IEnova

Imported pipeline gas represents perhaps the cheapest and most efficient option in the current market, with LNG and CNG reaching beyond the limits of physical infrastructure. Nevertheless, large swathes of the country are still pending to be ‘gasified’. Mexico’s pipeline systems expect

114

further expansions as both government and private industry work to spread the benefits of natural gas.

Bajío Gas Pipeline (GdB)

Engie

204

Zacatecas Gas Pipeline (Gas Natural del Noroeste, GNN)

SIMSA

173

Los Ramones, Phase I (Gasoductos del Noreste, GdN)

IEnova

116

Los Ramones, Phase II - North (TAG Pipelines North, TPN)

IEnova

447

Los Ramones, Phase II - South (TAG Pipelines Sur, TPS)

Engie

292

LNG STORAGE AND REGASIFICATION TERMINALS Name

Operator

User

Altamira LNG Terminal (TLA)

Enagás

Coast gas (for CFE)

KMS Terminal

KOGAS

CFE

Energía Costa Azul (ECA)

Ienova

Ienova (for CFE)

Source: SENER

KEY CROSS-BORDER NATURAL GAS PIPELINES FROM THE UNITED STATES TO MEXICO

Waha

North Region

Northeast Region

Agua Dulce

76% June 2021

— SNG — GdT — GdB — GNN — GdN — TPN — TPS — Valley Crossing Pipeline (US) — Trans-Pecos Pipelines (US) South Region

40% June 2015 Center Region

PIPELINE IMPORTS AS A PERCENTAGE OF TOTAL NATURAL GAS CONSUMPTION

Conference

Gas Infrastructure | 110

Highlights

Natural Gas’ Ongoing Revolution Jorge Sandoval Director General of the Mexican Natural Gas Association (AMGN)

Ramon Moreno CEO of Mitsui & Co. Power Americas

Marco Vera Director General Mexico of GE Gas Power

ntil the battery storage capacity needed to battle renewable energy intermittency becomes more accessible, natural gas will continue to hold an essential role in the global energy transition, experts say. “Mexican geography and access to this resource

make it the best solution for energy demand in the country,” says Marco Vera, Managing Director at GE Power Mexico. As Mexico’s energy demands continue to grow in tandem with a swelling population, there is an understandable urgency to address the pitfalls that Mexico faces related to natural gas, including climate change, expanding distribution infrastructure, storage and increasing domestic production capacity. Addressing demand means expanding natural gas infrastructure to regions with energy deficits, namely the underdeveloped southeast, which would enjoy an economic ripple effect as a result. “States with natural gas enjoy greater development. This resource generates industry, new companies and employment,” says Jorge Sandoval, Director General of the Mexican Natural Gas Association (AMGN). Deficiencies in the natural gas pipeline are present across Mexico. Even states with existing and functional infrastructure lack proper interconnectivity between pipelines. “This includes large interstate pipelines or last-mile pipelines that connect with local distribution companies or individual projects,” Geoff Street, Director of Natural Gas Origination at Tenaska Marketing Ventures, told MBN. Before this infrastructure gets built, however, Mexico needs to consider how it is going to feed the system the natural gas volume it needs. The country depends heavily on imports from Texas, which has been struggling with climate disruptions of its own. As natural weather events become more frequent and extreme, climate change has become the central concern of international governments. With such salient implications it has become an unmistakable priority to reinforce and expand existing infrastructure to protect economic activity and growth. There are plenty of international producers to choose from, including Mexico’s USMCA trading partner Canada or sanctioned Russia. Another possible avenue, as pointed out by CNH Commissioner Héctor Moreira, is to start developing the country’s natural gas production capabilities, especially if the country intends to meet its growing demand and reach energy sovereignty. Mexico has vast untapped natural gas resources it could it exploit, as well, but the country lacks production capacity. Until Mexico reaches this point,

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it could also look at storage capacity to prevent disruption. “It is important to push storage policies to prevent situations like these from happening,” says José García, President of AMGN.

Conference

Highlights Gas Infrastructure | 111

lthough renewable energy is gaining ground, in a country like Mexico, limited by the constraints of an aging transmission grid, the energy mix could be more conventional and diversified. The equally cost-efficient and effective use of natural gas is an

attractive prospect. “It is a tragedy that we are using high-sulfur bunker oil to produce electricity today. The reason is simply that many power producers do not have access to natural gas,” says Warren Levy, CEO of Jaguar Exploration & Production, a private producer of oil and gas found on land. Just like most experts in the Mexican energy sector, Levy knows that natural gas use has risen significantly over the past decades and will likely only increase in the decades to come as Mexico trades in fuel oil and coal for cheaper and cleaner natural gas sources without exchanging the stability that conventional power generation is known for. In more remote areas where neither pipelines nor compressed gas are accessible, people are forced to burn even more primitive and polluting fuels to generate energy. In the north of the country, economic development has moved ahead much faster than in other parts because it has the easiest access to natural gas. Spreading the benefits of the fossil fuel to the south

Mexico Is Ready to Be a Natural Gas Production Giant: Jaguar E&P Warren Levy CEO of Jaguar Exploration & Production

can lead to significant economic benefits. “By switching to natural gas, Mexico can fundamentally change its carbon footprint toward the future and boost its development at the same time,” says Levy. Most natural gas in Mexico is produced as a byproduct of oil production, which represents harmful emissions released into the air through ineffective flaring. Gas production is not at all a priority for Mexico’s NOC, PEMEX, which uses almost all the natural gas it does produce for its own business processes. Consequently, Mexico needs to import its natural gas from the US, more specifically from Texas. Gas prices coming from Texas’ famous Burgos Basin are low, so Levy emphasizes that cost-effectiveness is not the issue at all. “But it is a risk in terms of self-sufficiency, as we could see in February of this year when 40 million Mexicans were left without electricity because extreme weather conditions in Texas led to a temporary halt in exports,” he says. Through these imports, Mexico leaves a lot of money on the table that could be otherwise gained by producing the resource. Using government data regarding natural gas sales, Levy estimates Mexico loses out on US$6.7 billion dollars of value per year. “The real problem is not just the billions of dollars, it is the trickle-down effect that the local supply chain could take advantage of, which would effectively multiply this value,” explains Levy. Mexico used to be a net exporter of natural gas. In fact, most of the infrastructure that is now used for imports was originally constructed to feed gas into the US instead. Levy says domestic production dropped off steeply after 2008, when PEMEX actively decided to focus its investments elsewhere and make use of cheap pipeline gas coming from the US to reach higher profits. Levy, however, does not agree with this approach. “Some people believe producing in Mexico is not a profitable business. We wholeheartedly disagree.” Levy highlights that much of the geography that makes Texas such a great location for natural gas production stretches right across the border. Across the Mexican side of the Gulf of Mexico, more opportunity for exploration exists

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in states like Veracruz and Tampico. Even offshore production would be viable, although oil platforms would need to be adapted to make this possible, he said.

VIEW TOP Gas Infrastructure | 112

from the

Q: Given the unusual natural gas shortage Mexico has experienced, how can Énestas help clients circumvent such a direct cut-off in supply? A: Our LNG customers did not actually suffer from impact of the winter storm in February. This is because our business model provides five to six days of LNG storage at the customer’s location, meaning they experienced this crisis without issues. What is important for companies, even those with access to pipeline gas, is to consider LNG as insurance. Having a supplementary station with LNG that can be used at the same time as their pipeline gas supply acts as a safety net. Having your entire factory stop for three days just because of a lack of natural gas for whatever reason is a huge blow for companies. We call the shortage unusual but it occurs once every 14 years or so. If there is any disruption of any kind, such as maintenance, we can offer economical solutions to clients that will allow them to operate normally during these force majeure occasions. Q: How do you envision LNG’s broader role in helping solve Mexico’s ailing storage infrastructure? A: You can store natural gas in dried up caves or old oil wells, but also as LNG. When February’s freeze occurred, the

Caio Zapata

Manzanillo and Altamira LNG terminals were able to supply the natural gas they had stored. It is already a key part of the infrastructure. One of LNG’s important advantages is that it can be placed wherever you want to place it. It is not tied

Director General of Énestas

to caves or wells. It allows for a more desirable distribution layout, with better control over the security of supply. Q: How can Mexico further take advantage of LNG’s benefits?

Creating Competitive Access to Raw Materials, Fuels

A: What Mexico needs first is regulatory support. Many permits are required to distribute LNG and operate stations. This does not only include CRE but also environmental permits. Help from the government in the form of reduced bureaucratic burdens related to processes and permits is required to broaden the distribution of natural gas distribution. It can take up to six months to gain a distribution permit but customers need an immediate solution. Secondly, customer education is an important factor. Many companies are unaware that this type of solution even exists. We need to knock on doors and spread the word, and explain to potential customers that our technology and solutions are proven, safe, reliable and cleaner than other fossil fuels. Importantly, it is also less expensive than these other options. By reducing regulation and educating customers, a higher adoption rate can be achieved. Heavy-vehicle demand could take a part in this, since using LNG engines makes a great deal of sense for these vehicles, both economically and environmentally. In regard to identifying gaps inside LNG’s own value chain, we have a lack of liquefaction facilities in Mexico. This is crucial to creating the operational radius necessary to make

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the fuel competitive. However, this will come naturally when more customers start using LNG. Importing and liquefying small amounts of gas makes little economic sense. It becomes somewhat of a chicken and egg situation, but this can be overcome if customer demand drives the value chain.

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from the

Q: How has the company consolidated its position in the Mexican market over the past year? A: Enagás is always in search of new opportunities in the energy sector. Mexico needs new infrastructure to achieve its natural gas development program. We have been involved in developments in the southeast of Mexico, taking advantage of our strategic position with our TLA terminal in Altamira to bring natural gas to areas that lack supply, particularly on the Pacific coast and the Yucatan peninsula. Enagás is working closely with the Energy Authorities to help deliver natural gas to Mexican residents, industry and power generation. Our Morelos pipeline is a further strategic asset for the economic development of Puebla, Tlaxcala and Morelos and help gasify the state of Guerrero and move south toward Oaxaca, close to where the Energy Ministry and CENAGAS are looking to expand and contribute to the wellness of the region. Compressed natural gas, through the establishment of virtual pipelines, can accelerate the delivery of natural gas in regions where the infrastructure is not yet available and contribute to reducing emissions. The construction of gas storage infrastructure has become a national security issue, especially after February’s events and taking new combined cycle power plant tenders into account. The government, with its focus on energy security, supports this in its

Alberto Escofet

planning by aiming to develop natural gas storage and optimize the utilization of the regasification plants like TLA in Altamira. Q: How can Enagás play a role in overcoming issues such as

Country Manager of Enagás

the delay in crucial supply of natural gas coming from the US? A: Mexico is becoming increasingly dependent on US natural gas. When Texas suffered the cold snap that halted its energy production in February, natural gas prices skyrocketed and

Gas Storage, Green Hydrogen No Longer Pipeline Dreams

electricity prices soared. Over 5 million households suffered electricity cuts. The large amount of Mexico’s gas-based power generation had to be taken up by other sources, as the government negotiated the purchase of several LNG vessels. CFE calculated that natural gas became 5,000 percent more expensive. Mexico’s northern manufacturing hub suffered greatly, announcing losses as great as US$2.7 billion due to supply cuts. This had grave consequences for exports and formal employment. However, there were also some lessons that Mexico learned from this. Owing to the availability of storage infrastructure in Manzanillo and Altamira, CFE was able to guarantee the stability and security of supply to the SISTRANGAS network, as well as for CFE’s power production. The event highlighted the importance of LNG infrastructure and the flexibility that it can add to the energy mix. Enagás can provide added value here due to its expertise in managing regasification terminals, and in bringing flexibility and security of supply to the market. LNG tanks are a key storage asset, especially when the energy system comes under duress. Q: What role do you expect natural gas to play in Mexico’s energy transition? A: Due to the country’s dependence on US gas, the government’s policy is to bet on energy sovereignty. This will reinforce the

intentions to promote production of indigenous gas optimizing the position fuel oil has in the energy mix and allowing CFE to produce power cheaply thanks to PEMEX’s production. Switching this fuel oil to natural gas will make a significant difference in the energy mix, powering the country’s base load. Mexico recognizes the country’s international commitments under the Paris Agreement, focusing on reducing greenhouse gas emissions. This represent a major opportunity for Mexico get on track to reach its climate goals, stemming from the Paris Agreement. Q: How is the company strategizing to boost hydrogen technology in the Mexican context? A: The Mexican Hydrogen Association (AMH) was founded only a few months ago and is in its early stages. It has received a great deal of interest from many important multinational companies, Enagás among them. Mexico can become an important player in the green hydrogen industry. The country has the right ingredients needed to launch it, beginning with its abundant renewable resources, such as wind, solar, geothermal, hydropower and biogas. It also has important infrastructure, such as pipelines and the possibility for storage in salt caverns. Furthermore, Mexico has a large industrial and manufacturing platform. Other off-takers for green hydrogen, such as the petrochemical industry, e-mobility, long-distance freight and public transport, are also already present. Mexico could launch a green hydrogen project for any of these sectors that already use grey hydrogen. This can be turned green using Mexico’s many renewable resources. Today, green hydrogen’s adoption does not look to be too far away. Mexico is in a privileged position after all. We can develop a local industry to export to the US, for instance. This would not only target hydrogen itself but also electrolyzers that can be manufactured here. Hardware will be required worldwide very soon. In this regard, I consider Mexico to be one of the Top 10 countries to develop a green hydrogen industry. Enagás is in an interesting position in this regard, with the knowledge and expertise in the matter that it acquired in Europe. I believe we will be an important player in this industry in the near future. The AMH is a platform that gathers these players and focuses on specific power objectives, allowing companies to make projects happen sooner. The role of researchers, laboratories and universities should not be understated. They have been working on this technology and its applications for many years already and will play an important role in Mexico’s path toward becoming a major green hydrogen player. I have no doubts about the country’s potential.

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Gas Infrastructure | 115

Natural Gas Storage Remains on the To-Do List Mexico’s lack of hydrocarbons storage has long been identified as a pain point in the country. Although a resolution to the problem has proven difficult, the public and private sectors continue to examine possibilities to fill the gap, knowing that trouble could otherwise be waiting just around the corner. The consequences of not having adequate natural gas storage infrastructure were never clearer than in February 2021 when a surprising winter storm hit Texas. Mexico sources most of its natural gas from the US; state oil company PEMEX does produce its fair share but consumes it all further down the line. Luckily, imports are more than viable, with industry insiders often pointing out that Mexico has direct access to some of the cheapest dry natural gas in the world through its connection to Texas. But when the US state froze, Mexico was deprived of the one fuel that powers the national grid when pipeline capacity and liquefied natural gas (LNG) stored in terminals runs out. “If Texas sneezes, Mexico gets pneumonia; 58 percent of all electricity in Mexico is generated through the constant flow of Texas’ natural gas,” says Héctor Moreira, Commissioner at the National Hydrocarbons Commission (CNH). But moving away from natural gas is not really an option, says José García, President of AMGN. “It is important to point out that the shortage that occurred in Mexico in early 2021 was an extraordinary event for North America. It was the first shortage in over 100 years. Natural gas has positioned itself in Mexico as a lever for development for industries, small businesses and a growing number of homes.” Instead, Garcia sees storage as the ideal solution for such an issue when national production cannot keep up. “It is important to push storage policies to prevent situations like these from happening,” he says. Storage has more benefits than a strategic emergency supply. It can be used to balance pipeline flows and reduce price volatility. Furthermore, storage can be key to meeting regulatory demands. The recently suspended change to the Hydrocarbons Law, for instance, featured a clause requiring market participants to have a minimum storage capacity to be able to keep their permits. Mexico’s public sector is looking into storage as well. “CFE will include storage in its commercial and operating strategy as a strategic short-term action to minimize the negative impacts of abrupt price fluctuations and drastic variations in requested volumes,” CFE noted in February. Available Options In terms of large-scale natural gas storage, the most common option are depleted gas reservoirs. After commercial production is no longer viable, these reservoirs can be used to hold natural gas for storage. Underground salt formations and underground aquifer reservoirs also have good potential. Storage can be distributed more widely, as well. By expanding the pipeline infrastructure, whatever gas is already in the pipeline can be transported to wherever it needs to go, no matter if no further gas can be sourced from the origin at that moment. LNG facilities

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in the country can also store LNG in storage tanks, an option that could be developed further at existing terminals. In general, storage should be close to the market and existing infrastructure should be sufficiently well-established so new infrastructure can inject and recover natural gas easily. Challenges Ahead One country to look up to when it comes to natural gas storage is the US. “(Its) strategic petroleum reserve is a great example for Mexico. The reserve is located right across the border with Mexico and has functioned well for a long time,” said Geoff Street, Director of Natural Gas Origination at Tenaska Marketing Ventures. According to the US Energy Information Administration (EIA), working gas in storage reached 2,776 Bcf as of August 2021. Storage in the US will grow in the coming months because of the cycle it follows. During summer months, when gas prices are cheap, storage capacity is added. In winter, when demand is higher and prices climb, storage capacity is released. Street believes that the absence of such a strategy in the Mexican market prevents commercial opportunities from taking off. “Mexico’s natural gas market does not really have the price signals necessary to properly incentivize private development of natural gas storage. One issue is the absence of seasonality of demand, which exists in Europe and the US where there is high demand in winter and considerably lower demand in summer. This creates a natural imbalance in which storage plays an obvious role,” Street says. Price signals leading to commercial opportunity are one way to develop storage but the government can play an important role by creating the right incentives or by investing in strategic storage. The Peña Nieto administration investigated opportunities to develop storage, which included a floating regasification facility and underground gas storage. When the López Obrador administration entered, however, these projects were scrapped. Nevertheless, the government is still looking into possibilities, even if the outcome of this research is unclear. “The Mexican government’s policy regarding storage has changed quite a bit from previous administrations. It is still not fully clear what the strategy is, although the government does believe it should include storage for its national energy security,” says Street. For private participants, developing such storage projects is an interesting opportunity. Tania Ortiz, Director General of IEnova, recently alluded to the possibilities of Mexican storage in a call with investors. “It is wonderful to have access to low-priced gas but to have a reliable supply, it is critical to have long-term storage in Mexico,” Ortiz says. “I believe this is certainly an investment opportunity for IEnova. I think it would be important for Mexico to consider it, as far as its energy security planning is concerned,” she continued. US-based Mirage Energy discussed its 786Bcf storage project with MBN last year. With a capacity as large as this, the project would immediately become the largest single natural gas storage facility in North America. “We are not developing this only as a strategic reserve but as a commercial operation of which Read the complete article More about this topic

industrial players can benefit,” said CEO Michael Ward. Funding for the project has been secured. All that is needed now is for Mexico’s government to give it the green light.

Conference

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Highlights

Natural Gas Access an Engine for Economic Development Malvin Delgado International Energy Business Director at Picarro

Gustavo Nunez Managing Director Sector Mexico & Central America at ROSEN

Alvaro Corona COO of Gas Transportation and Distribution at ENGIE Mexico

Areli Covarrubias

he efficiency of natural gas for both domestic and industrial use has positioned this greenest of fossil fuels as a transition source toward decarbonization. However, the challenge of increasing access to this fuel and the lack of awareness of its benefits continue to be

stumbling blocks to realizing its full potential. In Mexico, natural gas consumption has increased considerably in recent years. According to SENER, it is estimated that by 2031 the country’s demand for natural gas will increase by 30 percent compared to 2016. While Mexico has significant natural gas reserves in its territorial waters and in states like Tabasco, Tamaulipas, Veracruz and Nuevo Leon, it is also a reality that the US has positioned itself as the largest producer of this resource worldwide with a production close to 25 percent of what the world consumes. “This makes it clear that natural gas is the most abundant, reliable and secure energy source available to leverage Mexico’s development,” says Malvin Delgado, International Energy Business Director of Picarro.

Commercial Director at IEnova

Areli Covarrubias, Commercial Director of IEnova, says the key to

Rafael Mercado

seizing the advantages of natural gas is to keep in mind its role as

Commercial Director at Naturgy Mexico

a driver of economic development. “Where natural gas is available, industry, jobs and indirect economic spillover arise naturally,” she says. “The greater the presence of natural gas, the lower the levels of poverty.” Targeting regions that do not yet have as much demand for natural gas as others is also an important step toward creating greater access and the subsequent economic benefits for more than just a few areas. “Unfortunately, there are still many places where families use wood or coal to generate energy,” says Rafael Mercado, Commercial Director at Naturgy Mexico, a multinational pioneer in natural gas distribution founded in 1990. Bringing this resource to every corner of the country and meeting the growing demand expected in the coming years poses major challenges. Non-standardized requirements for each municipality and region pose a challenge for companies in the natural gas sector, says Alvaro Corona, COO of Gas Transportation and Distribution at ENGIE Mexico. A common front is required among companies to raise awareness of what natural gas projects mean for communities and their development. Despite the challenges, companies in the sector continue to promote technological innovation to generate accurate and reliable information for the safe operation of their projects, says Gustavo Nunez, Managing

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Director Sector for Mexico and Central America of ROSEN. “There are already solutions that can identify faults and threats as small as 3mm up to very critical threats such as fissures,” he explains.

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from the

Q: How does ROSEN’s leading technological position worldwide translate to added value for clients in the Mexican market? A: Our global experience has helped us to get settled in the Mexican market. Focusing on best practices on a global level has paid off because we are well prepared to meet any challenge the market has to offer. Anything you can do to prevent an incident, such as a leak or a spill, ties into what data you have and the plan you implement to mitigate risks. ROSEN takes great pride in making this risk management happen and mitigating the possibility of any incidents occurring. Considering our expertise in the offshore environment, we hope to showcase our added value and participate in Mexico’s shallow and deepwater developments too. Q: PEMEX recently suffered an offshore pipeline fire. What does this say about the importance of pipeline asset integrity in Mexico? A: This reveals the crucial importance of preventative maintenance. This technical approach is a key part of the message we transmit to our clients through our different workshops and training. ROSEN is very much about having safety become a crucial component in pipeline operations. Our goal is to have access to as much information as possible

Gustavo Nunez

to prevent catastrophes and to be a key partner as well as a solution provider in asset integrity. ROSEN is well-equipped with the data-gathering tools needed to prevent or mitigate any kind of failure or incident.

Managing Director of the Mexico and Central America Sector at ROSEN Group

Q:How can ROSEN’s digitalized approach help sway clients toward modern technologies? A: In Mexico, we are still a little slower in adapting to newer

Above and Beyond Normative Pipeline Safety Requirements

technologies. This has to do with how the market identifies threats. Many approaches can be tried before an inline inspection is necessary. ROSEN can provide a great deal of support in terms of analyzing what type of threats a company could face. We can propose a better-fitting solution to these pipeline risks. However, we would like to see Mexico adopt new technologies that are part of ROSEN’s portfolio, such as Ultrasound CD or Electro-Magnetic Acoustic Transducer (EMAT) tests. There is still a great deal of opportunity to cover more ground through technology. Q: How does ROSEN help establish a specific risk model to deal with O&M, rather than just risk analysis? A: Risk-modeling is all about identifying what data the client has. ROSEN can analyze this data and expose gaps within it. From that point, we can begin building a database using relevant information to expose any risks that may exist in the vicinity of a pipeline. All this data combined with the identified gaps provide clients with a comprehensive view of the situation. The goal is to mitigate the most relevant threats instead of zooming in too much on minor issues. ROSEN has

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a software-based solution, as well as consultancy services from experts around the world, that can make this happen. Our goal is to partner with our clients and to provide a real solution so that together we can build a safe environment for operating pipelines.

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How Do Developers Facilitate Cogeneration for C&I Clients?

Distributed energy generation projects are expanding in the Mexican market, although much of this development is focused on solar energy. For energy users requiring greater heating or cooling capacity for their commercial and industrial processes, cogeneration is, nevertheless, an excellent option. Mexico’s access to a cheap supply of natural gas further seals the deal but to unlock cogeneration’s benefits, it needs to be optimally adapted to C&I needs.

We have designed a modular cogeneration system that works with two gas turbines of 1.5MW each and a heat recovery boiler that, with the temperature of the exhaust gases product of the combustion of the turbine, raises the temperature of the water to produce steam. It is a compact solution that does not require much more infrastructure to install because it is already in a container mounted on a trailer. This makes it an interesting solution that we provide through an energy-as-a-service business model. We have specialized personnel to carry out preventive and corrective maintenance, keeping stock of spare parts and equipment to replace them if necessary and thus

Kevin Piccolo

avoid downtime.

Director General of Seisa Energía

One of Capwatt’s strong suits is that we take on projects from start to finish going from design, development, finance and construction, to operations and maintenance. We design projects to be optimally efficient for our clients, rather than a one-size-fits-all solution. We manage to raise all the necessary funds to develop the projects, while being flexible to adjust ourselves to the needs of our clients, allowing us to get projects. We generally offer our solution through a long-term power purchase agreement (PPA) of about 15 years. The contract offers stellar protection but it is still simple enough for any company to truly understand it. Capwatt takes care of the financing. We

Ricardo Zúñiga Country Manager of Capwatt Mexico

do not want the client to worry about any financing issues, which has the added advantage of not losing any time with the project’s development.

In cogeneration, there are only a few main costs, such as natural gas as fuel. As a commodity, companies have little control over its price. On the contrary, after-sales services directly influence how operational the equipment remains, which can be controlled through good management. In this regard, it is better for clients to pay more on services than to face failures in their machinery, leading to costly stoppages that could last weeks or even months. AB distinguishes itself by offering its clients a full-service agreement with a protection plan that covers all preventive and corrective maintenance. When a machine does break down, we can resolve it swiftly.

Cesar Sánchez Sales Director Mexico of AB Energy

This is possible due to AB’s size, allowing most of our clients to have this kind of coverage and boosting equipment availability to above 98 percent.

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from the

Q: How does Tenaska Marketing Ventures’ experience factor into its position as a Top 5 natural gas marketer in the US? A: Tenaska is headquartered in Omaha, Nebraska, and is one of the leading independent energy companies in the US. It has a well-earned reputation regarding ethical standards and expertise in natural gas and electric power marketing, energy management, development and acquisition of energy assets and operation of generating facilities. Tenaska Marketing Ventures (TMV) is the company’s natural gas trading arm. Over 30 years, TMV has continued to grow its network of contracted pipeline and storage assets in the US and Canada. Our experts respond quickly to disruptions and to client demands, providing a reliable service. TMV has been a Top 5 marketer since 2013. We have also ranked first as a trader in terms of pipeline capacity release for the past 12 years and also top MASTIO’s customer value and loyalty ranking. Q: How would TMV characterize the importance of Mexico’s gas market? A: TMV views Mexico as part of the North American gas network along with the US and Canada. Over the last decade, the combination of increased demand for natural gas and a decrease in PEMEX’s supply as well as the doubling of the cross-border pipeline structure has made Mexico a pivotal component of the

Geoff Street

southwestern market, rivaled only by liquefied natural gas (LNG) development along the Gulf of Mexico. As far as our communication strategy is concerned, we approach

Director of Natural Gas Origination at Tenaska Marketing Ventures

our customers in Mexico in the exact same way we would approach customers in the US and Canada. We focus on producers and consumers, although in the case of Mexico, it is only consumers. We help them conduct their operations economically and without interruption. We typically do this by integrating the customer’s

Capable Sourcing of Natural Gas will Remain Key for Mexico

assets into our portfolio. Once we have their assets, we utilize them on the customer’s behalf when needed and for third parties to generate incremental value, which we then pass back to the customer. Q: Who are TMV’s main customers in the Mexican market? A: It should come as no surprise that our largest customers are Mexico’s state productive enterprises, CFE and PEMEX. They represent such a large percentage of the total volume that we interact with them on a regular basis. We also have power producers as customers in Mexico, as well as some other private companies. These types of enterprises are right in our wheelhouse in terms of how we do business and add value. After all, we look for customers that have assets that could be integrated into our portfolio, including firm pipeline transportation capacity, storage, consumption, and supply. Q: How do you assess Mexico’s policy-driven storage development incentives? A: Mexico’s natural gas market does not really have the price signals necessary to properly incentivize private development of natural gas storage. One issue is the absence of seasonality of demand, which exists in Europe and the US where there is high demand in winter and considerably lower demand in summer. This creates a natural imbalance in which storage plays an obvious role.

The Mexican government’s policy regarding storage has changed quite a bit from previous administrations. It is still not fully clear what the strategy is, although the government does believe it should include storage for its national energy security. The US strategic petroleum reserve is a great example for Mexico. The reserve is located right across the border and has functioned well for a long time. Q: Where do you see Mexico’s main challenges in regard to expanding the country’s gas pipeline infrastructure? A: Today, 14 Bcf/d of cross-border infrastructure capacity exists, with the vast majority in Texas. At this point, I do not know if there is a need for incremental cross-border infrastructure. The challenges at this point are entirely within Mexico, related to interconnectivity between pipelines. This includes large interstate pipelines or last-mile pipelines that connect with local distribution companies or individual projects. Land-owner rights and ejidos have played a large role in the completion of pipeline projects within the country as well. Q: What is Tenaska’s main strategic focus for 2021? A: If you combine Tenaska’s business model with the state of the Mexican market, the result is a situation where Tenaska will be interacting with Mexico at the border. However, sometimes necessity will force operations to enter Mexico, such as when one party does not have the required import authorization or commercialization permits. To this end, we have our Mexican team, Tenaska Gas de México, and are planning to continue to import and deliver gas to Mexico. Lately, there have been many changes in the legal and regulatory structure. Just in the last few months, there have been proposed changes to the Electricity Law and the Hydrocarbons Law, as well as a proposal to eliminate asymmetrical regulation on PEMEX. All these developments are concerning, so our approach is to try and be consistent with what the market will allow us to do and what the current regulatory direction is. This means we must listen to what the intention of the Mexican government is and fit into whatever role is appropriate for this market structure. 14 Bcf/d of pipeline interconnectivity is operational between the US and Mexico, with a supply and demand imbalance in which Mexico imports 70 to 80 percent for natural gas not used by PEMEX. This situation is unlikely to change due to the nature of exploration and production cycles in hydrocarbons. Having said this, Tenaska will sell natural gas to clients either in the US or Mexico. This gas will eventually end up in the Mexican market, so the who and the where of these transactions will simply adjust to fit the market model and move across the border however circumstances warrant.

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from the

Q: How do Vopak’s positive results in 1Q21 reflect the existing opportunities in Mexico? A: Vopak achieved great results and this is a clear indicator that manufacturing and consumption have grown. Vopak is a raw material storage company, meaning that if we see positive results, the market will also experience good results in general. Our goal is to be recognized as the market leader and preferred option for storing vital raw materials. In 1Q21, there was an uptick in the consumption of hydrocarbons. Due to the COVID-19 pandemic, there has been great demand for raw materials, such as ethanol, isopropanol, propanol and methanol. Some of these materials are used by Mexico’s industry to manufacture antibacterial hand gel, for instance. We have received many requests to store these materials in our three terminals, which are located in Veracruz, Coatzacoalcos and Altamira. During the peak of the pandemic, we stored around 20,000m3 of ethanol. Q: How has Vopak adapted its plans to expand its storage terminals portfolio as a result of the pandemic? A: This has become part of Vopak’s Mexican expansion strategy. We are building a 40,000m3 petrochemicals storage facility in Altamira and hope to finish by November 2021. The expansion is fully funded by Vopak but supported by three to five-year contracts with clients. We are constructing 16 tanks with a

Jorge Flores

2,500m3 capacity. The petrochemicals market is strong, with great demand for imports and storage capacity at marine ports. Q: How did February’s natural gas shortage resulting

Commercial Director at Vopak

from the storm in Texas drive demand for storage? A: The winter storm in Texas was a huge driver of demand. Many manufacturers and distributors realized that they needed to increase their Mexican storage capacity to avoid disruptions, which

Capacity Growth Helps Clients Meet Higher Storage Needs

can fully shut down their facilities. As a result, many manufacturers are asking for more storage capacity. This makes sense: a winter storm in Texas is somewhat unusual but every year, hurricanes and cyclones can cause similar disruptions. The event made clients recognize the need to store their essential raw materials. Q: What is holding Mexico back from constructing more storage capacity and how might the midterm elections influence this situation? A: There are several terminals already in place in the country, with some of them developing their final infrastructural requirements to become operational. Vopak recently finalized its second phase at the Veracruz terminal, where we store 1 million barrels of oil. Another terminal is being developed by other companies in Tuxpan but I still believe there is greater need for storage throughout the country. Nevertheless, with the Supreme Court set to review the Hydrocarbons Law reform, players in the sector are waiting to see how the situation develops. Investors are still somewhat nervous about how potential reforms will affect the country. With the midterm elections, more of a balance has been restored in Congress. However, in politics anything can happen and alliances

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could shift. For now, investors feel more confident and comfortable but the sector will likely wait at least until the new Congress becomes operational in September 2021 before making investment decisions. Over the next four months, companies looking to develop storage might take a conservative approach.

Know-how to Break Mexico’s Unfair Commodity Trade Balance Gerardo Serrato Managing Director Mexico of Hartree Partners

The UK: Case Study on the Road Toward Energy Transition Mauricio Riveros Manager of Carbon Trust México

Tuxpan-Tula: CFE and TC Energy Strike a Deal 08/03/2021

Clients Should Be Educated on Electricity Market’s Benefits Lilian Alves Director of Strategic Planning at Mitsui Power Americas

EIA Reports Increased Natural Gas Exports to Mexico 08/03/2021

Small LNG Plants, Virtual Pipelines Can Meet High Gas Demand Aldrich Richter Managing Director of MAN Energy Solutions

AMLO Looking to Build Gas Pipeline in the Isthmus 08/18/2021

Energy Tariffs Tailored to any Demand Yolanda Villegas Head of Legal Affairs at Eon Energy

New Fortress Energy Opens Baja California Sur LNG Terminal 07/22/2021

Gas a Natural Enabler for Mexico’s Development Alejandro Peón General Director of Naturgy Mexico

Acronyms 3PLs

Third Party Logistics

GEMS

Grid energy management system

Alternating current

GNV

Vehicular natural gas

AMDEE

Mexican wind energy association

Gigawatt

AMGN

Mexican natural gas association

IEA

International Energy Agency

ASOLMEX

Mexican solar energy association

IRENA

International renewable energy agency

C&I

Commercial and industrial

Joint venture

CAPEX

Capital expenditure

LCOE

Levelized cost of energy

CEL

Clean energy certificates

LIE

Electrical industry law

CENACE

National energy control center

LNG

Liquefied natural gas

CENAGAS

National gas control center

MBN

Mexico business news

CFE

Federal electricity commission

Megawatt

CNG

Compressed natural gas

O&M

Operations and maintenance

CRE

Energy regulatory commission

PEMEX

Petróleos Mexicanos

Direct current

PPA

Power purchase agreement

Distributed generation

PRODESEN

EIA

Energy Information Administration

National electricity system development program

EMAT

Electromagnetic acoustic transducer

Photovoltaics

Qualified Suppliers

EPC

Engineering, procurement and construction

R&D

Research and development

ESG

Environmental, social and corporate governance

SENER

Ministry of Energy

USMCA

ETRM

Energy trading risk management

United States-MexicoCanada agreement

GDP

Gross domestic product

WEM

Wholesale electricity market

WTG

Wind turbine generator

Advertising Index Enel Green Power 1

Hitachi ABB Power Grids 64

Mexico Business Events 5

GENERAC 73

Iberdrola 13

Wärtsilä 80

Mitsui 21

MexicoView 84

Royal Eagle 25

Northland Power 93

RER Energy Group 33

Grupo México 101

Energía Real 40

ROSEN 105

Circutor 45

Naturgy 114

Edison Energy 53

IEnova 121

Forefront Power 60

Index ABB Power Grids 70

Iberdrola 6, 9, 12-13, 28, 61, 97

AME 9

IGSA 31

AMH 100-101, 114

Invenergy 6, 11, 29, 75, 78, 94, 107

Ammper 46, 51, 58

Jaguar E&P 106, 111

ATCO Energía 7, 23, 46, 50, 69, 99

Minsait 46, 49, 61

Banorte 26, 35, 36, 38

Northland Power 20, 21, 46, 48, 56, 62, 66, 75, 82

Beetmann 62, 85, 90

OCA Global 6, 22

Capwatt 46, 55, 59-60, 119

ON Energy Storage 65, 78, 81, 87

CFE 7, 8, 10, 11, 14, 15, 16, 17, 18, 23, 27, 31, 34, 47, 48,

Panasonic 26, 32-33, 103

49, 50, 54, 55, 66, 68, 69, 74, 77, 81, 82, 87, 88, 90, 92, 93, 95, 96, 97, 98, 101, 102, 103, 107, 109, 113, 114, 115,

Pardgen 27, 85, 102

120, 123, 124 PEMEX 124 Chint Power Systems 76 Proterra Capital 26, 30 Circutor 52-53, 69 ROSEN 106, 117, 118 Cox Energy 26, 41 Royal Eagle 26, 39-40 Deloitte 6, 15, 17, 18, 54 Schneider Electric 65, 71 EDF Renewables 27, 85, 92-93 SEL 65, 77 Enagás 99, 100, 109, 113-114 Tecnatom 85, 97 Energía Real 46, 49, 57 Tenaska 106, 108, 110, 116, 120-121 Énestas 106, 112 TÜV Rheinland 85, 87, 91 Gauss 15, 78, 85, 86, 89 Vector Renewables 26, 37 Generac 65, 72-73 Vopak 106, 122 GEOTER 85, 96 X-Elio 26, 27, 35, 42 Hitachi ABB 65, 66, 69, 70, 100 ZNShine Solar 79-80 Hydrogen 3, 6, 20, 21, 46, 56, 63, 65, 85, 93, 99, 100, 113, 114

Photo Credits Cover Enel Green Power

44 Enel Green Power

4 Iberdrola

49 MEF Echo

9 Mitsui

50 ATCO Energia

10 Arturo Carranza

51 Ammper

11 Invenergy

52 Circutor

12 Iberdrola

56 Northland Power

17 MEF Echo

57 Energía Real

18 Deloitte (Energy)

58 Acclaim Energy

19 Jones Day

58 Grupo Alego

19 Santamarina +Steta

58 Ammper

19 Von Wobeser y Sierra

59 Capwatt

20 MEF Echo

61 Minsait México

22 OCA Global

62 Enel Green Power

22 OCA Global

63 Enel Green Power

23 Enel Green Power

69 MEF Echo

24 Iberdrola

70 Hitachi ABB

29 MEF Echo

71 Schneider Electric

30 Proterra Capital

72 Generac

31 GRUPO IGSA

76 Chint

32 Panasonic

77 Selinc

36 Banorte

78 Invenergy

37 Vector Renewables

78 Asolmex

38 Banorte

78 ON Energy

38 EY

79 ZNShine

38 Top Energy

81 ON Energy

39 Royal Eagle

82 CFE

41 Cox Energy

83 Enel Green Power

42 X-Elio

89 Gauss

42 X-Elio

90 Beetmann

42 X-Elio

91 TUV Rheinland

43 Enel Green Power

92 EDF Renewables

Photo Credits 96 GEOTER

112 Enestas

97 Tecnatom

113 Enagás

98 CFE

117 MEF Echo

99 AMDE Energy

118 Rosen

99 ATCO Energia

119 Seisa Energía

99 Enagás

119 Capwatt

100 AMDE Energy

119 Gruppo AB

102 Pardgen (Parques de Generación México)

120 Tenaska

103 Iberdrola

122 Vopak

104 CFE

123 CFE

110 MEF Echo

127 CFE

111 Jaguar E&P

Credits Journalist & Industry Analyst: Cas Biekmann Editor: José Escobedo Senior Editor: Mario Di Simine Managing Editor: Alejandro Salas Publication Coordinator: Mirjam Schipper Publication Coordinator: Constanza Blanco Content Partnership Coordinator: Alexa Villarruel Content Partnership Coordinator: Miguel García Graphic Designer: Tania Aguiñiga Graphic Designer: Marcela Muñoz Ledo Senior Graphic Designer: Mónica López Design Director: Marcos González Web Development: Omar Sánchez Collaborator: Cinthya Alaniz Collaborator: Andrea Villar Director General: Jeroen Posma

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Mexico Energy Review 2021/22

Articles inside

Introduction