State of the Industry & Energy Policy
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If 2018 was characterized by the uncertainty wrought by the presidential electoral result, 2019 will be the year in which industry stakeholders adapt to the new landscape, while seeking further opportunities. President López Obrador has made his energy priorities clear, saying that the energy model developed by the Peña Nieto administration favored private companies while dismantling CFE. Nevertheless, as electricity demand rises, the new administration must ensure an efficient and continuous electricity supply while complying with the country’s clean

CFE
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CFE is and will remain Mexico’s leading electricity supplier. Together with PEMEX, the state-owned company will be strongly reinforced during President López Obrador’s sexennial. The National Electricity Plan, headed by Manuel Bartlett, Director General of CFE, prioritizes self-sufficiency. Revamping existent power facilities and a policy of zero shutdowns is the strategy that will drive generation. As more power plants come online, transmission and distribution infrastructure needs to be reinforced and expanded, posing a significant challenge for the

Off-takers
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According to the Ministry of Energy, between January and September 2017, the industrial segment enjoyed 3.5 percent growth. Combined with higher electricity bills for large industrial users, energy consumption and its management is not only an environmental discussion, but an economic requirement. The Electricity Industry Law stipulates 5 percent if consumption must come from clean energy sources via the purchase of CELs. A variety of industry heavyweights in their respective core businesses are showcasing aggressive clean energy targets

Energy Efficiency
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From electricity generation, to its transportation and final consumption, achieving an efficient energy model is becoming a priority for every user. As many industrial processes involve power and heat, technologies are constantly evolving to maximize results and use energy in its various forms. Large commercial and residential buildings are also in the spotlight, given the consumption generated by lighting, HVAC systems and water heating. In addition, disruptive technologies such as digitalization, IoT, blockchain and material science will soon play an

Power Producers & Energy Supply
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Apart from CFE, private power producers hold an important share of Mexico’s electricity market. Derived from the previous auctions, renewable capacity has been deployed by big industry players such as Enel Green Power, Iberdrola and Acciona. After dealing with financing structures and developing record-breaking power plants, the next challenge is to set a foothold in the PPA segment and fortify O&M departments. On the energy trading side, qualified suppliers will need to identify these opportunities and connect them with potential off-takers.

Project Finance
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Mexico’s energy industry has blazed a path that has been hailed internationally for its rapidity and transparency. Yet, despite the progress, financing remains an area of significant concern when developing energy project in the country. As multilateral financing institutions carry the load, private businesses want the commercial banking segment to increase its participation. This year poses an uncertain path for investors given the country’s political transition but Mexico’s renewable resources are fixed targets for national and international companies

Social & Environmental Responsibility
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Most developers and investors understand that environmental and social responsibility are crucial aspects for project success. Nevertheless, these areas often do not receive appropriate attention, particularly in Mexico, a uniquely biodiverse country with a large indigenous community. While the Ministry of Energy oversees social impact issues for the whole energy industry, SEMARNAT and CRE manage the environmental impact of clean energy projects. In 2019, SEMARNAT will launch its carbon market pilot program that will become mandatory in 2021,

Solar Project Development
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In the last year, the installed capacity of solar PV grew 1,800 percent to 3,075MW, with 39 centrals located in 11 states. The distributed generation segment also enjoyed robust growth with 85,000 solar rooftops contracted. Several new projects are under development and will be interconnected to the grid in the coming years. This opportunity sets the perfect stage for O&M companies wanting to advance their footprint in Mexico. In addition, its attractiveness as an alternative energy resource combined with rising power demand and high electricity

Solar Supply Chain
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Chinese companies are gaining ground among solar panel and inverter manufacturers due to their low prices, while trackers and mounting systems rely on expertise from Europe and the US. Many local companies are taking advantage of the solar boom and are becoming technology providers. As the solar supply chain evolves and more projects enter development, both international and national companies will raise the bar for competition to the benefit of the industry and consumers.

Wind Project Development
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The estimated potential of wind resources in the country is close to 15,000MW. A few years ago, the only attractive region for this resource was the Isthmus of Tehuantepec. Today, this technology is operating in 10 states, with the strongest growth taking place in Tamaulipas, Coahuila, Yucatan, Puebla and Nuevo Leon. As several auction projects come online in the next five years, buttressing the wind segment Mexico will find itself in the need of specialized O&M companies to address the demands of the segment.

Wind Supply Chain
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In the short-term, Mexico could become the Latin American hub for wind energy project development. Unlike solar, the local wind manufacturing industry is thriving because, instead of importing goods, many international companies are setting up shop and producing turbine blades and other necessary components in the country. These projects are catalyzing regional growth, through job opportunities and the deployment of a national manufacturing industry. In this context, logistic companies as well as instrumentation and monitoring systems will have a

Natural Gas Generation
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As the cleanest fossil fuel, natural gas plays a fundamental role in the country’s energy transition. The electricity sector is mostly powered by this fuel, with a participation of 67.8 percent in the country’s mix. In the last decade, natural gas demand has grown 46 percent, driven by CFE’s bet on combined cycle plants, which totaled 83 facilities at the end of 2017. Given the push to clean energy generation, cogeneration is becoming an attractive option due to its efficiency and profitability. As the baseload element in the grid, this energy source will

Natural Gas Midstream
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As natural gas is the main energy source powering the electricity industry in Mexico, it is necessary to connect production points to the generating plant where the gas is converted. As a result of the Energy Reform, a pipeline network was developed by both CFE and private companies to serve the country’s most important manufacturing regions. Created in 2014, CENAGAS is in charge of managing SISTRANGAS as well as planning the expansion of this system through a Five-Year Expansion Plan that is revised every year. To date, there are seven strategic projects

Electricity Infrastructure
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Transmission and distribution infrastructure are the building blocks of any electricity system. Mexico has over 100,000km of transmission lines, of which 50 percent are over 20 years old and only 8 percent has been constructed in the last five years. Energy storage is set to leverage electricity transportation and renewables competitivity. In addition, grid code requirements will become mandatory for every user of the National Electricity System. As the regulatory framework is fixed and implemented, 2019 could see unprecedented advances in electricity

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Mexico underwent a presidential transition in 2018 that rippled across the energy industry, with uncertainty now enveloping the sector. President Andrés Manuel López Obrador’s administration was loud and clear from the beginning about its mandate to boost Mexico’s electricity generation and cope with the country’s increasing energy demand. His ambitious National Electricity Program, executed by Manuel Bartlett, the newly instated Director General of CFE, set a course to revamp the country’s existent power facilities and boost geothermal and hydroelectric renewable capacity.

 

One key aspect of López Obrador’s plan that remains unclear is whether or not the new energy model, led by Rocío Nahle, Minister of Energy, will continue using the tools employed by the previous administration to achieve not only the goal of supplying the country’s energy demand but also aligning the country’s energy production to its international commitment of increasing the participation of renewable energy to 35 percent of the total mix by 2024.

 

With over 225 interviews, Mexico Energy Review 2020 will paint the picture of a radically transformed power market, bringing relevant players, old and new, together in one book.

HOW WE DO IT:

  • Cutting-edge information based on more than 180 interviews with the most influential business leaders in the Mexican energy industry, the country’s political leaders and key policymakers

  • Dedicated editorial team with experience covering Mexico’s energy industry and in-depth understanding of global trends, technological advances and international best practices

  • Uniquely customized readership that ensures unprecedented reach among key decision-makers in Mexico and around the world

What’s Next?

With a cumulated pipeline of 58 clean energy projects totaling 8GW of installed capacity and US$8 billion in investments, Mexico’s long-term electricity auctions consolidated their status as the success story of the country’s energy transition. Whether López Obrador strengthens CFE or keeps the door open for future editions of the long-term electricity auctions, 2018 showed that Mexico is already experiencing an open market in which new and better technologies are being deployed throughout the country.

 

The next challenge will to be to integrate this additional capacity to the national grid. Electricity demand is rising and the need to modernize transmission and distribution infrastructure will become a critical issue. As several auction projects come online, O&M services also are required. Despite the uncertainty clouding the landscape, industry stakeholders must begin strategizing and evolving their business models to compete in this reformed energy market.

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