Wind Power Opportunities in Mexico

Wind Power Opportunities in Mexico

Photo Credit: Walmart de Mexico renewable wind energy by Walmart

With recent developments in the region, the wind is certainly blowing in favour of wind power projects in Mexico. The country’s wind power market has seen remarkable growth; expanding from virtually nothing in 1994, Mexico is poised to cross 1,560 MW next year, which is around 3% of grid capacity. An increasing number of wind power opportunities are coming up on the Mexican horizon, attracting an eclectic group of stakeholders from within and outside the country.

The Mexican city of Oaxaca is one of the three major areas of good wind. In addition to having around 90% of Mexico’s installed capacity, Oaxaca has class 6 and class 7 winds. It will not be outlandish to predict excellent growth opportunities in the country. In 2010 Mexico had an average annual installed capacity of 300 MW. By the end of 2012, the country had a development pipeline of 2,500 MW.

65% of Mexico’s wind turbine market is held by Spanish companies Gamesa and Acciona. The US electricity giant General Electric is also planning to expand its operations in Mexico. GE presently has approximately 1% of the Mexican wind power market.

Mexico’s state-owned utility Comisión Federal de Electricidad (CFE) coordinates wind power projects. Due to national security concerns, the government does not provide a lot of grid information to companies and developers. This makes the initial site selection is a somewhat complicated process, which makes it harder to identify favorable connection points in Mexico as compared to in the US. Nonetheless the CFE, which inherits the substation interconnection points, is very much committed to facilitating project developers.

An alternative funding model known as “self-supply” has also emerged that enables energy developers to enter lucrative agreements with non-state companies, generally via consortiums comprised of independent power producers. These agreements can run anywhere between 15 and 20 years, much like the agreements made in the US.

Interested parties can identify opportunities in Mexico’s wind power market through CFE’s high tariffs running between $97 and $245 per MWh. The self-supply model had also attracted large companies such as Wal-Mart and Cemex which have chosen this funding model for wind power projects.

A wind energy company connected to San Diego has also entered a deal for supplying electricity to two Volkswagen auto plants in Mexico. This deal indicates the encouraging opportunities for renewable energy prospectors in the area. Headquartered in Baja California, Mexico Power Group signed an agreement in September to provide wind-generated electricity to Volkswagen’s assembly and manufacturing facilities in Puebla and Guanajuato state respectively.

The electricity will be generated on a new wind farm located hundreds of miles away in Zacatecas state. Back in 2010, Mexico had introduced generous transmission rates for renewable energy projects. This will hugely help the new wind-energy agreements.

Volkswagen’s utilisation of wind energy is in line with its ongoing efforts to reduce its carbon footprint. Since this is something an increasing number of companies are interested in, Mexico’s wind power opportunities will continue to get more attractive. The global wind energy industry is beginning to recognise Mexico’s potential to become a powerhouse in wind energy development.

Energy reform will be discussed at the House of Representatives during next days. This Reform is mainly focused on oil and gas. However, the liberalisation of the electricity market under this Reform could allow to reach full potential of Mexico in the wind power generation.

Mexican Senate approves liberalisation of energy market

Mexican Senate approves liberalisation of energy market

Credit: Oil tanker in South Portland by Justin Russell

Yesterday, Mexican Senate approved the Energy Reform over oil and electricity. Originally, the Bill presented by President Peña Nieto provided for a conservative opening of the market, as he had not enough support to pass it. However, with back up from left-centre PAN, the Senate approved a liberalisation of the market under these terms: 1. Private companies can participate into the market. Previously, there were a limited number of activities where private companies could do energy business. 2. Refining, basic petrochemicals, as well are open to private companies. Nevertheless, the State remains owner of the hydrocarbons. State will remain manager of electric grid, but private can openly enter as contractors. Nuclear will remain state-controlled. 3. There are four models approved for extraction business: Services, Profit or Production Shared Agreements and Licenses. Combined models are allowed. 4. PEMEX will compete with other players in the market. PEMEX will have right of first refusal for choosing projects, as long as it demonstrates capability. PEMEX can have partners and/or convert to an approved business model. 5. Energy market will be ruled by Comisión Reguladora de Energía and Comisión Nacional de Hidrocarburos. 6. A sovereign fund is formed for Banco de Mexico to manage profits on oil rents. Now, the Bill is passing to the House of Representatives for discussion. It is expected not to change substantially, but it has some many legal consequences that it would require a deeper review, specially on electrict generation. Do you expect more surprises?

TelecomMexico to put 15k miles of optic fiber on a PPP

TelecomMexico to put 15k miles of optic fiber on a PPP

Photo credit: Fiber Optic Ends by Barta IV

It took over 10 years to Comisión Federal de Electricidad (CFE), Government company of power distribution, to deploy 15,000 miles of optic fibre inside its infrastructure. On 2010, CFE granted under lease a minor portion of the backbone to a JV formed of Telefónica-Televisa-Megacable, through a public tender.

At the begining of the current Administration, it was announced that Telecommuncaciones de México (TelecomMexico), the state-owned company operating satellite services, money wires and telegraphy, will receive ownership of this backbone, as it was in the process of getting a telecom license.

However, this plan had a twist and Ministry of Communications just announed that CFE will pass to TelecomMexico to co-operate with private operator through a PPP, but only for wholesale.

As IFETEL, with current antitrust telecom authority, shall oversee the process, and decide who is elegible for participating into the tender. It appears to offer a clear window of opportunity for new entrants. Why? Because current players could have a severe scrutiny and/or assimetric regulation, based on their possible conflicts of interest while serving capacity to rivals. That is a clear cue for a pitch.

PEMEX debate focuses on foreign investment participation

PEMEX debate focuses on foreign investment participation

Photo credit: Puente by Eneas De Troya

Many experts believe that Pemex or Petróleos Mexicanos the state owned oil monopoly is the jewel of Mexico. For years it has funnelled billions into state treasury funds for schools, highways, ports and hospitals. Yet, even with Pemex being credited for building the Mexican nation, officials have acknowledged that the inefficient company is in financial trouble. Officials have been quoted as saying that if the company is not opened up to foreign and private investment Mexico will find itself a net energy importer within the next ten years. This is quite a shocking revelation given that Mexico is currently in the top ten of the world’s largest oil producers.

As Mexico’s new president begins to establish his administration, he is looking set to create plans which will overhaul Pemex and meet with great political opposition. The reason behind this is that many Mexicans believe that the removal of foreign oil companies in the 1930’s allowed Mexico a sense of true independence. Some believe that allowing foreign investment back into the Mexican oil sector will allow greater powers access with their troops.

Experts are anticipating landmark legislation for energy reform, which should include proposals and policies addressing Pemex. Industry experts and government officials believe that advancements in technical expertise which will come from outside investment and companies is the only way to retrieve reserves of gas and oil from shale rock and deep water formations. These sources are estimated to contain over half of Mexico’s reserves totaling over seven billion barrels.

However, Pemex is currently not allowed to choose their associations which would reduce risk levels of deep water exploration. Pemex executives believe that the company needs flexibility and budget autonomy to be able to form joint ventures. This would require significant changes to the constitution and will be a politically sensitive battle for the government to instigate. Even mention of parties agreeing to reform by President Peña Nieto sparked fierce debate and argument about Mexico’s ability to remain independent from foreign interference.

However, even opponents of reform cannot deny the legendary problems associated with Pemex. The company’s past history of poor management decisions, corruption, huge union demands and inefficient corporate structure, it provides a business model of how an oil company should not be run.

According to a study from 2011, Pemex revenues per employee is a fraction of the oil giant BP and approximately half of the part state owned Oil Company from Brazil Petrobras. Even Pemex executives acknowledge that Mexico is decades behind industry standards regarding deep water exploration. They haven’t had the pressure to pursue riskier searches since there was an abundance of inland and shallow water oil. This meant that the engineers have not kept up with the technological advancements which are commonplace with competitors.

Mexico has a wide array of sources of energy which is almost as diverse as the United States. However exploiting them is too overwhelming for one single company. There is much speculation as to how the Mexican constitution could be amended to allow production sharing agreements, or if secondary laws will allow other opportunities of cooperation, or whether taxation will be reduced to allow investment and make Pemex more efficient, but until the discussion is not focused on solving the problems of Pemex, the obstacles are too great.

Peña Nieto starts debate on Energy Reform in Mexico

Peña Nieto starts debate on Energy Reform in Mexico

Photo credit: Walmart de Mexico renewable wind energy by Walmart

Today, Mexican President Enrique Peña Nieto officially presented its proposal to reform energy sector (oil and electricity). Here is a quick preview of the hard debate to come:

  1. Constitutional reform will allow production sharing agreement with private companies.
  2. There will be a new tax regime of PEMEX. Currently PEMEX is taxed with 70% over profits.
  3. PEMEX will be compacted. It will go from 5 bodies to 2 Exploration and Production; and Industrial Transformation.
  4. There will be more transparency in PEMEX management.
  5. “National Content” rules will apply for suppliers and infrastructure constructors. Should Mexican subsidiaries from Foreign Companies are included? Are there caps?
  6.  Private companies can generate electricity under better business structures. Currently, generation is allowed but has limitations.
  7. State shall keep exclusivity over the National Electric System  (Grid) for transmission and distribution, and for guaranteeing access to producers.
  8. Comisión Federal de la Electricidad (CFE) gets more operational flexibility.
  9. Energy Regulator (CRE) gets more authority on planning and directing energy sector.
  10. Reform promotes clean energies.

Peña Nieto appears to have enough support to pass this reform on Congress. Let´s follow this Bill.

Follow

Get every new post delivered to your Inbox

Join other followers:

Pin It on Pinterest

%d bloggers like this: