Ian Cooper from Ener-G, Head of the Green Power Group at The British Chamber of Commerce in Mexico.
On the 21st April 2016, the British Chamber of Commerce hosted a breakfast conference to discuss the Energy Reform after the first quarter of operation and to establish an open dialogue about its implications, impact and future challenges.
The seminar started with a welcome from Mr Ian Cooper, President of the Chamber’s Green Power Group (GPG) and Country Manager of ENER-G. He welcomed the attendees, panellists, and special guests such as Congresswoman María Isabel Ortíz Mantilla, Advisor for the Climate Change Commission of the Chamber of Deputies, Congresswoman María de los Ángeles Rodríguez, President of the Climate Change Commission and Richard Shackleton from the British Embassy, First Secretary of Climate Change and Energy.
The Panel was made up of Eng. Nemorio Gonzalez Medina - Director of Planning and System Operations for CENACE, Eng. Marcos Valenzuela Ortíz - Director of Market Administration at CENACE, Rodrigo Bernal - Commercial Director at Fisterra Energy, Fernando Campos - Deputy Director Sustainability & Energy at Walmart, Patricio Gamboa - Director of Energy at DeAcero, Dario Martin Febre - Business and Strategy Development Director at Engie, and Cecilia Alvarado Villarreal- Senior Associate at Goodrich Riquelme. Marco Nieto Vazquez from Baker & McKenzie acted as moderator.
When welcoming panellists to the stage Ian Cooper mentioned that, although better than before, it is one of the GPG’s objectives to improving female participation not only in the group, but in the sector in general.
One of the most interesting things about the panel was that it managed to bring together not only private and public institutions, but it also incorporated the entire supply chain that the sector involves (developers, traders, governmental regulatory entities, final users). The discussion covered various advances and issues including a full and honest evaluation of the first quarter as well as announcements for infrastructure to better connect the country.
Mexico’s International Competitiveness
While most countries who have opened up their public-monopoly electricity markets have taken years to make this transformation, Mexico managed to implement change within just months. For the first long-term electricity auction, CENACE received 468 prequalification offers that equated to 16 new generation projects. This diversification of the market is expected to increase efficiency, which for CENACE means providing as much as possible at the lowest possible cost.
These greater returns are necessary to satisfy a growing national demand of 3.7 % and a growing annual consumption of 3.4% pa.
Mexico also has ambitious goals for cleaner energy and the recent auction reflected this (where the successful companies were made up of a mix of solar and wind power.) In the longer term, the Mexican government is committed to generating 35% of its energy through clean sources. The panel also acknowledged that the new energy industry must involve green power, and added that this must be added to the mix in a way that is competitive and viable for the future of the market.
The fact that there have been strong ties between the regulator and operating and public/political entities has created a multidisciplinary environment that competes effectively at an international scale.
Attendees enjoyed the panel at The Presidente Intercontinental
A Steep Learning Curve
The panel agreed the regulation is good and efficient, and the foundations are well established. However, the complexity of the transition means that all participants are still in the process of learning.
The Mexican energy market has a high complexity level due to its numerous price schemes, and is basically made up of a series of auctions, both in the short and the long term.
There were many questions surrounding how prices will be generated in the market. Mexico has hundreds of nodes compared to countries such as Spain. CENACE accepted billing still needs to be perfected and explained that tariffs will be determined by CRE. Costs will also vary according to the different types of users for distribution.
CENACE is forming the critical mass of buyers and suppliers needed for the market to function. The feeling amongst the panel was that the government now needs to establish agreements and contracts that offer security to participants. Power Purchase Agreements (PPA) and self-supply contracts still need to be signed.
There was also a general agreement that the final purchasers should be the main ones to benefit from the reform and clearer pricing will be needed to give these end users security.
Panellists accepted that the first few months have been a good time to experiment and test the reform, however it would be useful to establish some “locks” that give more certainty to the prices.
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