State of the Industry

from Mexico Energy Review 2021

Introduction

1State of the Industry

Following three successful long-term electricity auctions, renewable energy seemed all but unstoppable in Mexico. In 2018, however, a new administration came to power, bringing a new vision and political change, and affecting energy industry stakeholders. Nevertheless, the first steps toward achieving Mexico´s climate goals have been taken, and renewable energy is expected to be part of the country’s energy mix for the long run. The largest portion of the renewable projects launched by the electricity auctions are up and running, while others are still in various stages of development. Outside these auctions, renewable energy use is growing in the C&I segment, with a particular focus on distributed generation. Natural gas remains crucial to Mexico’s energy mix, demanding greater strategy regarding its production, transportation and distribution.

Furthermore, the stability and reliability of the grid finds itself under close examination. Further investments in the area will be needed, and technological developments will be key to enhancing Mexico’s transmission and distribution network. State of the Industry presents the voices of key industry leaders, who are closely involved in Mexico’s energy development, and paints a clear picture of the current landscape and its opportunities.

1State of the Industry

7 Analysis

Resilience a Requirement for Energy Transition

8 Expert Contributor

Ramón Moreno | CEO of Mitsui & Co. Power Americas

9 Conference Highlights

10 View From the Top

Bruno Riga | Country Manager of Enel Mexico & Central America

11 Expert Contributor

Salomón Amkie | Director of Banking, Capital Markets and Advisory at Citi

12 Conference Highlights

13 View From the Top

Lilian Alves | Director of Strategic Planning at Mitsui & Co. Power Americas

15 Analysis

Off-Takers Have Potential to Shape Future of Mexico’s Renewables

16 Expert Contributor

Hans-Joachim Kohlsdorf | Managing Partner at Energy to Market (E2M)

17 Expert Contributor

Maria Jose Trevino | Country Manager of Acclaim Energy

18 Roundtable

What Will Make Mexico Truly Competitive in Energy Storage?

19 View From the Top

Raúl Carral | Business Development for Mexico, Central America and Caribbean of Wärtsilä

21 Spotlight

GridSolv Max Storage and Gems Energy Management Systems | Wärtsilä

22 Content Links

Resilience a Requirement for Energy Transition

From its first day in office, President Andrés Manuel López Obrador’s government has moved to alter the landscape in the energy sector, favoring national companies over the private sphere. The result is an uncertain environment for private companies eyeing investment in the Mexican industry. Those who stay the course, could benefit.

Among the first concrete indications that a shift was taking place happened in 2019, when the administration tried to expand clean energy certificates (CELs) to include legacy CFE hydropower plants. CENACE then restricted new renewable interconnections to Mexico’s grid and changed the dispatching of power plants. This was followed by a policy agreement from SENER that proposed altering the roles of CENACE, CRE and CFE. These actions were followed in June 2020 by CFE slapping an 800 percent increase on the wheeling rates for older energy projects operating on legacy contracts. In October 2020, CRE then published a regulation that prevented companies from modifying the end user of their legacy project. Furthermore, regulatory processes slowed down greatly, to the point that permitting became virtually non-existent. These measures were met with amparos that finally saw most of the moves invalidated by Supreme Court rulings. President López Obrador then turned his attention to pushing changes to the Electrical Industry Law (LIE) through Congress, which approved the bill in March 2021. The bill is aimed at strengthening CFE.

Previously, auction-based and even full merchant projects gave investors the confidence needed to support long-term power plant plans. Today, players in the energy sector need to reorient themselves in light of the government’s shift that favors CFE.

Despite the uncertainty, opportunities in renewables lie in specific areas, such as distributed generation. While the government has moved to strengthen CFE, it also aims to achieve its climate goals, which were reaffirmed in the recent National Electricity System Development Program (PRODESEN). “Mexico still needs 9.6GW to achieve the 2030 target it has set. Mexico currently has around 10GW of solar and wind generation in over 120 projects. To meet these goals, the Mexican government must set clear rules between the public and private sectors in order to drive investment and transmit confidence,” said María José Treviño, Country Manager of Acclaim Energy.

Other trends spurring the development of renewables come from outside the country, especially the US, said Salomón Amkie, Director of Banking, Capital Markets and Advisory at Citi. “An overarching question for Mexico is how much will the US attempt to influence its allies and neighbors on climate change? (After) just weeks in office, President Joe Biden signed executive orders that not only brought the US back into the Paris Agreement but created positions, task forces and processes that put climate at the center of US foreign policy and national security.”

Mexico’s Energy Transition: The Time is Now

Ramón Moreno

CEO of Mitsui & Co. Power Americas

“The task of stopping (and even reverting) climate change is monumental.”

Read the complete article

More about this person Klaus Schwab, founder and executive chairman of the World Economic Forum, grabbed headlines in 2016 when he wrote The Fourth Industrial Revolution. The title was overwhelmingly attractive. Being part of history and capturing our time as one of those inflection points for humanity is certainly impressive. But the essay also created fear due to its transcendental implications.

It described a future of nonstop, accelerated change; a long, vertiginous leap for humanity. The prediction that 60 percent of the kids entering primary school would work in jobs that were non-existent at that moment made everyone wonder what the future would be.

The power sector is not only part of this revolution but together with data and technology, it is considered one of its important pillars. The main reason is the medium-term threat of climate change, a motivation that is unique and revolutionary in itself: the unprecedented global, communitarian effort to save the planet.

The task of stopping (and even reverting) climate change is monumental. Predictions are a high-risk bet under this scenario of rapid change. Paths to decarbonization could change as technology evolves, and it is precisely the creative destruction process that makes economies and cultures evolve. Nevertheless, some of those trends are clear in the short and medium term. I would emphasize three, which happen to represent a great opportunity for Mexico:

+ Gas-fueled power generation will continue as the central block of the energy transition, as it has been for the last 20 years, substituting much dirtier coal and fuel-oil power plants. Utility-scale power plants will be needed as much as other small, on-site or off-site power generation blocks. Hybrid concepts will also become more common, such as microgrids where a conventional power generator is combined with solar or batteries. The difficulty to store electricity for long periods, and the possibility of retrofitting these power generation blocks to consume hydrogen or synthetic fuels will provide the long-term visibility that this capital-intensive infrastructure requires. Regulatory wise, capacity and ancillary services need to provide sufficient cash flow for dispatchable generators. + Solar is considered the king of the electricity sector, the

International Energy Agency said last year. With renewable energy meeting 80 percent of the growth in demand by 2030, solar has become the cheapest form of electricity production and its deployment will increase year after year in the next decade.

+ Digitalization will have an increasing impact on all sectors of the economy. Data and artificial intelligence will change the way we consume energy, enabling further installation of distributed energy resources, from accessible smart thermostats with demand response, to distributed solar panels working together as a virtual power plant. The efficiency gains from a digital economy will also play an important role in how power companies can offer optimized products by reducing their capital investment and operational costs.

Mexico cannot miss this train called the Fourth Industrial Revolution. In terms of the energy transition, now may be the right time to do it at an affordable cost.

Regardless of the regulatory framework and the discussion on who does what, or how private companies can help in this endeavor, the participation in an integrated economy for a country that relies on exports for 40 percent of its GDP makes the energy transition probably the most important challenge for Mexico’s success in the coming years.

Mexico’s Power Producers Ready to Support Energy Transition

Patricia Tatto

Vice President America at ATA Renewables

Fernando Tovar

CEO and Country Manager of Engie Mexico

Ramón Moreno

CEO of Mitsui & Co. Power Americas

Gerardo Pérez

Vice-President & Country Manager of EDF Renewables Mexico

Bruno Riga

Country Manager of Enel Green Power Mexico

The paradigm shift in the Mexican energy sector was the main topic of discussion during the “Power Producers’ Priorities” panel during Mexico Energy Forum 2021, which took place on March 10. Experts addressed several issues, including the legal framework, protecting investments, transmission and distribution, the energy transition and new technologies to help drive the sector forward.

Moderated by Patricia Tatto, Vice President America of ATA Renewables, the panel included Fernando Tovar, CEO and Country Manager of Engie México; Ramón Moreno, CEO of Mitsui & Co. Power Americas; Gerardo Pérez, Vice President and Country Manager of EDF Renewables Mexico and Bruno Riga, Country Manager of Enel Green Power Mexico.

Tovar, spearheading the French energy multinational, acknowledged that there is “tremendous uncertainty” in the sector as a result of numerous regulatory changes and measures that have taken place in recent years. “This poses a risk for existing investments but also for potential new investments,” he said.

“CFE is a crucial player in the energy market and will continue to be so. Private companies need to operate in the space that is granted to them,” agreed Moreno. “We will always try to grow further here and position ourselves where possible,” he said, noting that combined cycle and other large-scale power plants are key to Mexico’s future.

“We maintain our commitment to Mexico’s energy transition. This includes public and private consumers, as well as communities throughout the countries. Our projects should benefit Mexican families first and foremost,” said Pérez. He noted that EDF Renewables adapts quickly to changes in the sector but that it has also learned to be patient. “Of course, rules can change but they should not be applied retro-actively,” he pointed out.

Riga, Enel’s newly appointed Country Manager, acknowledged Mexico’s extensive renewable potential. “It is a country in which we want to continue to invest,” he asserted. Despite momentary challenges, Riga concurred that a long-term perspective is crucial for Enel. “We are all lucky to work for companies that have a long-term vision. Problems can always arise in the short term but we need a clear vision of where we want to go.”

Bruno Riga

Country Manager of Enel Mexico & Central America

Consolidation as ‘Green Enabler’ Comes into View

Read the complete article

More about this person Q: What has allowed the company to break world records in terms of levelized cost of energy?

A: When Enel first arrived in Mexico, the combination of its solar and wind potential, the liberalization of the electricity market, along with our business model based on sustainability, creating shared value and the circular economy, allowed us to offer costeffective energy and was key to our growth and investment in the region. The cost of renewable energy in Mexico is one of the most competitive in the world, but for it to directly benefit final consumers, regulation must favor its distribution. Electricity from renewable sources is available only to big companies with large consumption while electricity reaching Mexican households is a mix of other nonrenewable sources with other costs, of which the price is reflected in the consumer’s bill. As more renewable energies enter into this mix, electricity prices will improve for people at home.

Innovation is one of Enel’s core values, so we continually seek to develop disruptive technologies in accordance with present and future needs. Power Purchase Agreements (PPAs) enable the construction of new and bigger renewable plants where the energy is sold to different off-takers, reducing the final energy cost thanks to economies of scale.

Q: What are the characteristics of Enel’s Magdalena II and Villanueva solar plants, and what are their added benefits?

A: Magdalena II is located in the state of Tlaxcala, a territory with large solar resources. It is the first Enel Green Power plant built with bifacial solar panels, which allows it to take advantage of between 10 and 15 percent more solar radiation. It has an installed capacity of 220MW. Magdalena II is capable of producing 600GWh per year, which is equivalent to the energy consumption of more than 269,000 Mexican households, avoiding the emission of more than 330,000 tons of CO2 into the atmosphere each year.

Villanueva is located in the state of Coahuila. With 2.5 million solar panels, it is one of the five largest solar plants in the world and the largest in Latin America. Villanueva has an installed capacity of 828MW and avoids the emission of more than 950,000 tons of CO2 per year. It can produce more than 1,700GWh per year and is Enel’s largest photovoltaic plant in the world.

Q: Some of your stated goals are “to consolidate projects in operation and expand the commercial portfolio.” What concrete measures will you implement to achieve these objectives?

A: We see opportunities in new businesses such as green hydrogen, electric mobility, grids, and publiclighting. In the long term, once regulation is ready and allows it, we see potential in storage as well. We are also working on new solutions for our clients in terms of sustainability, actions incommunities, the circular economy, responsible consumption and communication campaigns.

Our goal is to consolidate ourselves as a green enabler for our current and future clients. We are focusing on our current projects and those that are about to start commercial operation.

A Decisive 2021 for the Mexican Energy Sector

Salomón Amkie

Director of Banking, Capital Markets and Advisory at Citi

“Capital should be available for well-rounded projects in a variety of manners.”

Read the complete article

More about this person It would be a massive understatement to say 2020 was simply a challenging year for the Mexican energy sector. The clash of external circumstances — a once in a century pandemic shocking markets globally and the potential shift in energy policies by our upstairs neighbor — meeting internal regulatory hurdles and an administration, seemingly, willing to end any previous framework for the private sector to work with created a terrible environment for growth and investment in the space.

In the context of the year just concluded, it seems like a reasonable quest to ponder 2021 and the challenges ahead.

Let us start with the Biden-Harris administration and the clear shift in energy policy for the US. While not a surprise to anyone, an overarching question for Mexico is, how much and how strongly will the US attempt to influence its allies and neighbors on climate change. With just weeks in office, President Joe Biden signed executive orders that not only brought the US back into the Paris Agreement but created positions, task forces, and processes that put climate at the center of US foreign policy and national security.

Encouraging as this may seem for the renewables space in Mexico in particular, the fact is the US is going through significant challenges itself. Coming off a jarring and divisive election and still working through challenges in healthcare and the economy, the prospects of the administration being able to focus and prioritize its energy policies in the short term seem unlikely. Monitoring the ability to fend off the pandemic and reinstate stability in the US will be critical for Mexico’s energy sector and a key aspect of how 2021 shakes out.

The second dynamic that could shape our sector this year is the increasing focus on global markets on ESG financing. As demonstrated in 2020 with green, social and sustainable bond issuances reaching new highs (US$42 billion in North America, more than 2016-2019 combined), and savings materializing in new issues for sponsors, there is no shortage of investor appetite in sight. For Mexico’s energy space, this means capital should be available for well-rounded projects in a variety of manners.

Last, but not least, the political landscape in Mexico for this year will, of course, play a role in the sector. With the large midterm election coming up in June and energy having played such a central role in AMLO’s policymaking and campaigning, the strategy and participation of AMLO in the election, and the response of the opposition, can have a material impact on the future.

With the US changing gears and leading the way, and markets indicating clear preferences for green, social and sustainable investments, where does Mexico stand? This year will be critical for the AMLO administration to show progress (at least internationally) as 2024 looms closer and closer, and the internal discourse does not seem to be pointing in the right direction.

With so much to offer in renewable sources, it would be a shame if Mexico misses the opportunity. With so much to come, it will be a challenge to capture it.

Certainty to Boost Energy Investment

Claudio Rodríguez

Partner of International Energy Practice at Thompson & Knight

Leonardo Beltrán

Non-Resident Fellow at the Institute of the Americas

Carlos Serrano

Chief Economist at BBVA Mexico

Alejandro Valerio

Associate Practice Leader at FrontierView

Veronica Irastorza

Associate Director at NERA Economic Consulting

Mexico needs to include renewable energy in its energy transition. This was one of the conclusions drawn during the panel, “Outlook: Impact of Economic Growth on Energy Demand.” “Mexico needs more transparent legislation regarding electricity to meet global energy goals,” said Claudio Rodríguez,

Partner of International Energy Practice at Thompson & Knight.

“There is a trend toward renewable energy due to its lower costs and good impact on the environment.”

“We have a great challenge in electricity. Recently, the blackouts caused by the cold wave in Texas demonstrated the vulnerability of our infrastructure and that we cannot depend other markets given their volatility,” explained Leonardo Beltrán Rodríguez, Non-Resident Fellow at the Institute of the Americas.

Carlos Serrano, Chief Economist of BBVA Mexico, explained that the country suffered a sharp drop in electricity demand in 2020 with figures not seen since 1930. However, he added that the international scenario will see an economic recovery at different speeds. “We expect the US to have a strong recovery and 7 percent GDP growth. Meanwhile, Mexico is expected to grow between 5 and 6 percent, although it will not be until 2022 when Mexico will return to its 2019 figures,” said Serrano. However, with the new Electricity Law, Mexico runs the risk of a decrease in investments not only in energy but also in other sectors.

“Mexico needs to lift the economy and promote energy policies that increase investment,” said Alejandro Valerio, Associate Practice Leader at FrontierView, adding that recent policies are not aligned with USMCA, which could lead to more discussions. In addition, he said that if investments are not promoted, Mexico will not reach its goal of generating 35 percent of its energy from renewable sources.

Veronica Irastorza, Associate Director of NERA Economic Consulting, explained that electricity demand has been growing steadily for the past 20 years. However, 2020 saw a significant drop due to the impact of the pandemic on industrial sectors. “Energy security and the use of renewable energy are critical today, as today’s decisions will have an impact on the future. We need to make sure we choose what is best for the country,” she said, adding that the Mexican energy sector has always been politicized and polarized. She also highlighted that the country is making important decisions to ensure greater energy security. The future of the Mexican energy sector will depend on the country’s economy and industrial sectors, she concluded.

Read the complete article

Lilian Alves

Director of Strategic Planning at Mitsui & Co. Power Americas

The Wholesale Market Holds Many Benefits for Electricity Customers and Power Generators

Q: How is Mitsui involved in the Mexican energy sector as a developer, power producer, O&M player and qualified supplier?

A: In 2020, Mitsui & Co. Power Americas celebrated its 10th anniversary. The company has been reinventing itself, adapting to the changing power market and the needs of its customers. It was first created to focus on the asset management of combined cycle assets. Understanding the market’s evolution, we have applied our knowledge and experience to new segments. We’ve diversified into the acquisition and development of renewable assets as part of our global strategy and now we are involved in the development of on-site thermal and cogeneration solutions to C&I customers.

Additionally, considering our experience in the management of more than 3GW of power assets, we are offering asset management and O&M services to other generators from thermal and renewable sources. Finally, qualified supply became part of our strategy to integrate all of our solutions and offer competitive electricity supply and reliable alternatives to customers.

Q: How is the company adapting its strategic plans based on the shifting regulatory environment in the energy sector?

A: As a global trend, we believe that it is increasingly important to be focused on the downstream market. In 2020, we started the activities of MPA Suministro Calificado to attend the needs of new qualified users and support the migration of existing basic supply and self-supply customers. We believe that through qualified supply, clients can obtain solutions with lower costs that are tailored to their operations. Additionally, we see on-site solutions as an interesting opportunity for energy customers to have more control over their energy costs and more efficient and reliable solutions for their facilities.

Q: Despite challenges, where does Mitsui identify the biggest opportunities within this environment?

A: We look to provide tailor-made solutions for clients, as a onestop shop. Within the volatile environment due to the COVID-19 pandemic, we see that more and more clients want to focus on their core business and Mitsui & Co. Power Americas wants to become a partner to help reduce and optimize our customers’ energy costs. We can do this through integrated solutions, which can be a combination of qualified supply, on-site generation and smart energy technologies.

Q: How would you evaluate your experiences with Mexico’s wholesale electricity market?

A: We see it from two perspectives – as a generator and as a qualified supplier. As the second-largest operator of power generation plants in Mexico, our interactions and sales in the wholesale electricity market have been significant. This has also been true lately as we finalize our solar plant in Zacatecas. We have also interacted with it as a service provider. Our portfolio of services in that regard includes representing clients who are entering that wholesale electricity market.

solutions for their operations. We want to be much closer to what would be the market’s downstream segment; since last year, we have been developing our distribution capabilities, and this amounts to a vote of confidence in the future of Mexico’s wholesale electricity market. We want to be a part of that future by helping companies see how their entry into this market and the migration of their contracts into its schemes can make their operations more efficient.

Particularly in the qualified supply market, we see an interesting evolution in regards to customer’s behavior. Even though some may think that the growth of qualified usaers seems slow, it has to be compared to previous years. The growth rate has increased greatly when you look at the first two years of the market (2016 and 2017), with a much more accelerated growth in each year after 2018. This is a process of change and restructuring that has taken up to 10 years in other countries, so in that sense this transition in Mexico has been much faster. Still, a lot of work remains to be done in terms of educating our clients regarding what Mexico’s wholesale electricity market can offer them.

There are various options available for qualified users in the electricity market. The number of possibilities can be a bit dizzying, so we need to work to advise on an optimal solution.

Q: How is the company developing a technological platform to facilitate its many activities in the Mexican market?

A: Mitsui & Co. Power Americas has been a leading company in the developing of new platforms that improve the efficiency of its activities and customers. For instance, our O&M team has been working on Digital Solutions for power plants, which can be applied to early anomaly detection to improve availability of plants and maintenance optimization. We partner with companies such as SparkCognition and Osisoft to develop new solutions for generators and help improve their overall performance.

Q: What are the company’s priorities for 2021?

A: In 2021, our goal is to understand the needs and attend to the requirements of the final customer – this translates into providing the optimal resources for generators to improve the performance of their assets and offering power solutions for C&I electricity customers that help reduce their power costs. In the face of shifting dynamics in the power market and the world, it is important that clients have reliable partners during volatile times.

Read the complete article

More about this person

Off-Takers Have Potential to Shape Future of Mexico’s Renewables

Whenever there is an opportunity to kill two birds with one stone, the smart investor acts. That scenario has developed for off-takers, prompting these large energy users to look more closely at their supply. “Interestingly, by meeting sustainability goals, consumers can save money too. Technology costs have decreased dramatically in the last decade and are predicted to drop much further,” says María José Treviño, Country Manager of Acclaim Energy, referring to the reduced levelized cost of energy (LCOE) associated with renewable technologies.

A BloombergNEF analysis demonstrated that wind and solar are the cheapest ways to build new energy capacities around the world. Also, a slowdown of the drop in LCOE is not even in sights. In fact, from 2H19 up to April 2020, the indicator fell 9 percent and 4 percent respectively for onshore wind and utility-scale solar.

Developments in the market, where CFE aims to favor the firm-energy based stability of its own plants over cheap but intermittent private renewables, might have an adverse effect on Mexico’s energy prices. Due to this rise in energy prices, off-takers will be encouraged to arrange their energy supply elsewhere, Gilberto García-Ruiz, Business Development Director at Edison Energy told MBN. “Specifically, due to these changes, clients are looking to safeguard their energy supply, knowing that at some point CFE will increase its rates. They are also looking for alternatives in terms of what they can install on-site to generate their own isolated supply.”

Despite the potential gains, there are several hurdles for new off-takers in securing cheaper, cleaner energy supply through the private sector. For starters, many are not yet aware of the opportunity. “There are many companies that have the amount needed to be off-takers, with more than 1MW, but many are not aware of this,” says Yolanda Villegas, Head of Legal Affairs at Eon Energy.

As a result of this lack of awareness, renewable energy developers are having a hard time finding off-takers. “Finding bankable off-takers to sign PPAs is another challenge. Apart from CFE, there are not many possibilities in the market,” affirms Fernando Salinas, Managing Director Mexico and Central America at Fotowatio Renewable Ventures (FRV). While developing a renewables project without previous off-takers arranged through a full-merchant scheme was a possibility not too long ago, PPAs are essential today more than ever, especially now that uncertainty has taken root in the sector.

Players in the distributed generation (DG) segment, especially in the area of solar, expect to see more business. After all, as long as a project stays below the 0.5MW threshold, extensive permitting processes will not be needed at all. “For anyone owning a large rooftop in Mexico, a solar system below 0.5MW should be a no-brainer,” says García-Ruiz.

Looking Forward to Electricity Sector Opportunities

Hans-Joachim Kohlsdorf

Managing Partner at Energy to Market (E2M)

“Modernization … will mark the future of our industry.”

Read the complete article

More about this person The past year was marked by the pandemic and some topics that hijacked the discussion. The significant media attention on these problems, however important, and the lack of positive news from market participants overshadowed the impressive boom in the private electric market and slowed development of additional market potential.

For many companies 2020 was a year of major tenders for energy purchase and modernization of electrical solutions. We also have great opportunities in 2021 and distributed generation technology is advancing strongly. We must redouble our efforts and propose innovative solutions. Modernization, more than discussions about how to interpret laws, will mark the future of our industry. We have many challenges but even more opportunities in 2021.

Energy Quality: Blackouts, voltage and frequency variations led entrepreneurs to invest in emergency diesel generators, voltage regulators and UPSs. At the least, compliance with the current network code must move forward without further delay and without arguing lack of awareness. Sadly, the only quick way to implement swiftly the current network code seems to be through fines. Additionally, we must discuss how to include advances like inverters, batteries and smart grids in the code.

Electricity Market: The Wholesale Electricity Market (WEM) advanced in 2020. The generation sector aligned its offer to consumer requirements to leverage new generation projects. Auction cancellations helped the development of the private market. Not having CFE as a big buyer incentivized generators to offer interesting options to the Commercial & Industrial segment. Distributed generation is progressing strongly, as are the companies designing and building these projects.

Fuels: Today, most our fossil fuels come from the US. PEMEX does produce a lot of fuel oil, with CFE the only relevant customer. Natural gas has a great impact on our power generation matrix as a cleaner and cheaper fuel. The start of operations of pipelines also boosted cogeneration and on-site generation. The availability of cheap natural gas presents great opportunities for the country’s competitiveness. The business sector still has to negotiate a reduction in gas costs, and replace more and more boilers with engines and turbines to supply the thermal energy they require.

How Do We Drive These New Opportunities? On-site solar generation is growing impressively, but this must not curb important innovation to ensure our network’s quality. Many support increasing the exemption threshold to 1.0MW from the current 0.5MW. However, the sector must drive innovation and accompany this with standards on inverter quality and battery integration to foster its continuous operation in case of blackouts. Mexico’s current interconnection standards for on-site solar place great stress on the grid and are completely outdated Cogeneration benefits diverse industries. We must also promote modernization by including batteries and integrating power plants into the WEM to generate maximum profit. Contractors still prefer repeating the pre-reform mistakes of generating only the equivalent of electricity consumption, not meeting the total thermal requirements and thus supplying excess electricity into the grid.

Mexican Businesses Want and Need Renewables. What are we doing about it?

Maria Jose Trevino

Country Manager of Acclaim Energy

“IRENA states that a third of the world’s energy comes from renewable sources, mainly hydro, wind and solar.”

Read the complete article

More about this person D ata mining can help identify important tendencies in areas like politics, human behavior, economics, science, energy and culture. It has also provided business and political leaders with an indication of real trends, such as the increase in and value of renewable energy.

Renewable energy is a popular topic online and for so many positive reasons. More and more people are interested in learning about how renewables impact the environment, support climate change, its impact on costs and how they can access them (solar, wind, hydro, etc.).

According to SEO Tribunal, experts in search engine optimization, Google supported 63,000 searches per second or 5.6 billion searches a day worldwide. As an energy-intensive user, the company joined the R100 group, together with over 250 companies that have set their renewable energy target at 100 percent by a particular date in the future.

These corporations, through their global leadership have demonstrated a real intent to lower their carbon footprint, take advantage of cost-efficiency solutions, and gain visibility, loyalty and interest from younger generations and investors that consider sustainability efforts crucial to the environment, people and the bottom line.

In Mexico, we are observing the increasing trend of corporate sustainability compliance, some due to supply chain commitments, where their largest clients are performing audits on Environmental, Social and Corporate Governance (ESG) performance.

According to the International Renewable Energy Agency (IRENA), in 2018, over 100 companies had reached an 85-100 percent renewable energy mix worldwide. IRENA states that a third of the world’s energy comes from renewable sources, mainly hydro, wind and solar.

The “Global Trends in Renewable Energy Investment 2020” report elaborated by the UN Environment Program and BloombergNEF mentions that there are already 87 governments around the world that have set renewable energy targets by 2030 in order to comply with international agreements. If we add government goals to corporate targets, these commitments will entail adding about 826GW of new capacity, which would translate to about $1 trillion of global investment during the next decade. The report states that although Mexico had 17 percent growth from 2018 to 2019 in renewable energy project development, Brazil increased 74 percent and Chile 302 percent within the same time period.

The world is rapidly evolving, incorporating energy storage technology, microgrids and AI into society, so that consumers can achieve greater benefits. The collaboration between the government and the private sector to achieve sustainability commitments has proven to be positive but not fast enough or sufficient to meet the growing demand and needs.

Mexico, are we preparing to join the growing global tendency or are we staying on the sidelines to watch investments and multinationals look for new countries to invest in?

What Will Make Mexico Truly Competitive in Energy Storage?

Mario Pani

Regional Manager Latin America at BayWa r.e.

Storage in its various forms is not a new topic for the global energy sector. In many countries, storage is already being widely implemented. In Mexico, however, there is a lack of a robust regulatory framework and little recognition of the auxiliary services that storage can provide. Yet, a few landmark examples of storage do exist. Small-scale technology is catching up fast as well. Mexico Energy Review asked industry experts where Mexico still needs to make progress in order for storage to break through in the market.

It is exciting for the company to start introducing battery backup systems to our projects in Mexico. One of the key components for batteries is the recognition for capacity, or capacity payments. This is something we do in the US, where it is a straightforward process.

In Mexico, battery systems are not yet included in the capacity recognition structure. We will work with CRE and other authorities to make sure that this will be included. The whole issue with renewable energy is that it is intermittent. That has been the main issue driving SENER’s reliability policy. But this issue can be resolved fairly easily. Therefore, we will be aggressively pursuing battery systems in Mexico for largescale solar.

Arturo Zarate

Global Business Development Energy Storage at Dynapower

There are two main factors. First, the learning curve on the customer side. They are becoming aware that such solutions exist and how their business could benefit from them. Second, the Mexican regulatory agency CRE has not defined the prices in Mexico’s spot energy market for ancillary services like frequency regulation. Once they define this, then you will have more companies wanting to add storage to their portfolio in order to participate in the market and increase their revenue streams.

I would expect the energy storage trend to increase for projects in Mexico. As prices come down on lithium-ion batteries because of the increased volume of their use in electric vehicles and energy storage projects, it will become more interesting to developers in Mexico as well.

Jack Weisz

We see potential in implementing hybrid solutions, including storage in Mexico, although it might be some time before we see a deployment of this type of solution in the country.

To develop storage solutions, more robust investment in transmission and distribution, along with a robust regulatory framework, are needed. Once this happens, the market can start implementing more complex solutions in the country.

Storage is becoming an increasingly viable business in the world. It will be a key enabler for the deployment and penetration of renewables in Mexico as well. Mexico already has some solar and wind projects that have incorporated battery storage technology.

Raúl Carral

Business Development for Mexico, Central America and Caribbean of Wärtsilä

Flexible Power Engines the Missing Piece in Renewables Puzzle

Q: What is the history of Wärtsilä in Mexico and what are some of its success stories?

A: The company’s successful journey in Mexico has lasted for over 27 years. In the past 5 years, we have tripled our installed base. There are many new projects with combined EPC and O&M contracts. Here, we deliver the power plant on an EPC basis and continue operating and maintaining it for the long term.

Some of our recent projects include a 140MW power plant with a combined cycle for Huinalá in Monterrey. We are recovering heat from exhaust gasses and placing it in a steam cycle, which then aids in additional electricity generation via a steam turbine. This type is called a reciprocating internal combustion engine and is one of the most efficient solutions any company could have. We also delivered the full EPC and O&M package with a 130MW power plant, supplying industrial power for Pemcorp in Monterrey. The innovative plant operates in “island mode,” together with a battery storage system. Another project is a 110MW project in Chihuahua, which is the first in Mexico solely operating for the city’s newly created spot market.

Mexico is an important market for our portfolio. The fundamentals of its market offer great potential. As with our power plants, we look forward to developing projects 20 to 30 years in the future. Therefore, it is important to assess the fundamentals of the country’s economy and not be led by shortterm economic trends. This applies to the impact of COVID-19 as well. While this negative impact might be significant in the short to medium term, it will be resolved by global scientific efforts at some point. In the longer term, the economy will revitalize worldwide. Mexico, like all economies, has its upward and downward cycles. We look at the longer perspective as part of our core business strategy.

Q: How will changes brought on by COVID-19 impact forms of energy generation in the future?

A: The company’s vision remains the same. We strongly believe in renewable power and in a 100 percent renewables future. The strategy to make this happen is rooted in futureproof technologies. The company is predicting the future via a timeline, in which inflexible power generation technologies will be discontinued. Coal power plants will diminish significantly.

Nuclear power plants are next in the phase, after which combined cycles with gas turbines will follow. The new baseload will become renewable power, which is the cheapest form of energy generation worldwide. Solar will take up the biggest part, followed by wind. Flexible power, such as battery storage and engine-based power make a big difference in how renewable power will be integrated in the near future. It can go from 0 to 100 within two minutes, which is indeed very flexible. In the future, there will be more surplus of cheap renewable power, allowing for the generation of synthetic fuels or hydrogen. We made a significant announcement recently that we can run our engines 100 percent on hydrogen.

Q: How can the government spur Mexico’s switch to renewables?

A: To make up for the energy that cannot come from renewables during certain moments, flexible systems are needed. After all, wind can stop and the sun sets at night or is blocked by clouds. During these times, it is important to come in with firm power on a flexible basis that can go from 0 to 100 in a couple of minutes. Nuclear and coal power plants and combined cycle gas turbines are not very flexible. To power them up, you need many hours or even entire days to get them running. Therefore, they are not part of the vision for the new future of power generation. There are high costs when stopping plants like these, and you have to let them rest for quite a while before turning them on again. Engines do not have these issues. Think of them like modern car engines, where the engine stops when you wait for a red light, but comes right back in when you accelerate again. Having access to this can really help a country to switch to renewable power. In Denton, Texas, we sold a 240MW power plant. Eighty percent of the power used there came from renewables, such as wind and solar. Our engine power plant complements this.

Electricity costs are incredibly low. We consider them the utilities of the future. Next to the environmental benefits, they generate a lot of money. It makes our clients very competitive in the market.

As to how the government can support this switch, it could happen in a smart, planned manner. Renewables in Mexico are currently seen as a bit of a problem, as its intermittent nature makes it more complicated to integrate into the grid, which has not been planned for renewable integration.

If you look at energy transition and renewable integration from a planning perspective, you can make energy affordable for everyone and strengthen CFE at the same time. CFE could be stronger and making a lot more money. CFE can be more competitive in terms of cost by having a plan on integrating more cheap renewable power together with flexible power. But there are other benefits as well, such as the positive environmental impact, which is considered crucial. We would all like to see a more carbon-free world. Leaving a cleaner planet for the future makes sense in all aspects. This is why I fully subscribe to a 100 percent renewables future.

“As to how the government can support this switch, it could happen in a smart, planned manner.”

Read the complete article

More about this person

GridSolv Max Storage and Gems Energy Management Systems

Renowned technology group Wärtsilä provides energy storage for the 50MW Eolica Coromuel wind farm located in La Paz, Baja California Sur. The system will deliver an output of 10MW and help the wind farm to meet strict grid code requirements, while being maintained and monitored remotely to ensure optimal performance at all times.

The storage system comprises the company’s GridSolv Max containerized solution for the core hardware assets of the energy system—batteries, a built-in safety system and air conditioning. The system is able to control the wind farm’s ramp rate, which enhances the site’s energy generation reliability and provides frequency control, as well as further capacity for the grid. The cost-effective GridSolv Max system significantly boosts energy density and enhances energy reliability. Due to its innovative architecture, it is easily installed and integrated for any size or type of storage application.

To boost the storage system’s capabilities, Wärtsilä applies its smart energy management system, GEMS, which connects energy assets to electricity markets and adjusts itself based on the market’s conditions through real-time optimization.

In addition, GEMS supports the management of fluctuations in energy outputs, which can be caused by the wind’s intermittent circumstances. By directly addressing the customer’s energy needs, energy storage technology ensures that energy assets are future-proof.