On 5th December, the British Chamber’s Green Power Group organised a breakfast conference on Clean Energy Certificates in Mexico.
The breakfast began with a detailed and comprehensive presentation from Norma Alvarez Girard of the Energy Regulatory Commission (CRE, for its acronym in Spanish). She began by discussing the environmental goals behind these Clean Energy Certificates (CECs). By 2024, 35% of total electricity generation must come from renewable sources with this number increasing to 50% by 2050. In addition, by 2020, 7.4% of electricity consumed by larger “qualified” consumers must come from renewable sources – for 2018, this obligation is set at 5%. A CEC is set at 1 kilowatt hour of clean electric energy and so users will have to calculate their CEC requirement depending on how much of their energy consumption is covered by renewable sources. Those who do not acquire the correct number of CECs within set timeframes will be given fines varying from 6 to 50 minimum wages per Mwhr of discrepancy. There will, however, be the opportunity to defer CEC purchases at a 5% interest rate.
This way, CECs should establish a legal framework that obliges users to comply with Mexico’s set path towards cleaner energy sources and a reduced carbon footprint. Users will be incentivised to invest in clean energy directly or through CECs.
During the debate, there were some concerns that the CRE would not be “interfering” with prices of CECs in any way. Ignacio Lopez of EWT explained that, without a price floor for CECs, their prices tend to decrease substantially as the market adjusts and renewable energy becomes cheaper – as we have seen from over the last three power auctions and in Europe. Companies investing in renewable energy may need greater longer-term certainty to continue committing to the sector in Mexico. Sergio Alcalde of Fortius, who have two 8 Mw solar farms and are currently building a third farm with 130Mw, concurred that they faced such uncertainty while waiting for announcements on CECs that they eventually made their investments without even factoring them in. Both Sergio and Juan Manuel Avila of Top Energy – specialised in distributed generation - felt that the prices of renewables and the longer-term price certainty (as opposed to fossil fuels) are enough to persuade consumers to invest in these technologies. As Juan Manuel said, CECs may just be “the cherry on top” when suppliers are able to negotiate good prices for their CECs with a distributor. Norma explained that the business opportunity from CECs will come from longer-term bilateral contracts that can extend to up to 20 years, especially as the requirement for consumption from renewable energies increases year on year.
While renewable energies have clear advantages, for energy-intensive industries such as steel and cement, renewables alone may not be enough. For a reliable base load, gas is a solution. Maricarmen Medrano from Shell explained that Shell are moving their focus next year towards natural gas and CECs. In their experience, which covers both the US and the UK, there is a definite element of trial and error. In other CEC markets, the various models have been changed and adapted from their beginnings. This was a common theme, and one reiterated by Marco Nieto from Baker McKenzie who moderated the panel. Maricarmen also added that this is a learning curve and responsibility is shared between the private and public sector – hence regular communication between both will be crucial.
The Chamber would like to thank all our panellists, the Chamber’s Green Power Group and the breakfast attendees for making this such an interesting event and fantastic networking opportunity.
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