Mexico to add 66GW over 15 years

Friday, January 23, 2015

Mexico will add 66GW to its power grid over the next 15 years, with investments of US$90bn expected in renewables, said a high-ranking Mexican energy official.

César Hernández, the Sener energy ministry's electric power undersecretary, said during an Institute of the Americas webinar on Friday that private companies and state utility CFE will have the opportunity to provide more energy to the country.

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The energy reform will create a competitive market and encourage use of renewables by awarding clean energy certificates, Hernández said. The country will also see more investments in transmission to optimize connectivity, reducing CFE losses and risks to investors, he added.

The reform's aim is also to lower electricity costs by diversifying sources of generation and assuring a reliable service. Electricity prices for residential customers dropped 2% at the beginning of this year, and declined 16% for industrial users over the last 12 months.

The CFE has pledged further price cuts as a result of the reforms.

"We envision a process in which the modernization of the industry reduces the cost of services transmitted to all users," Hernández said. "This process has already begun with fuel oil-generated electricity being replaced by natural gas, while generation using renewables is also much cheaper."

Mexico has sufficient resources to exceed its goal of 30% of energy generation from non-fossil fuels by 2024; 40% by 2035 ,and 50% by 2050, according to Sener.

Suppliers will fulfill power requirements by buying clean energy certificates, while income from certificate sales will allow clean energy generators to cover their costs and be more competitive, Hernández said.

Regulated suppliers will pay a regulated price for surplus energy, while unregulated suppliers can buy electricity from all users at market prices, with minimal regulation of on-site sales. Distributed generation will earn a fair payment and specialized companies can market the electricity generated, he added.

Sener announced earlier this month that wind investments in Mexico will total US$14bn over the next four years, with a goal of 9,500MW installed capacity by 2018, compared with the current 2,551MW.

Lawmakers in November expressed concern that Mexico's renewable energy budget for 2015 had been reduced by more than 60% from 2014 levels. The approved federal budget for renewable energy investment for 2015 is 430mn pesos (US$31.5mn), down from 1.83bn pesos in 2014.