Eduardo Meraz
Director General
National Center For Energy Control (CENACE)
View from the Top

Auctions Retain the Spotlight

Wed, 02/22/2017 - 12:14

Q: What were CENACE’s major contributions to the electricity industry in 2016?

A: Two years after its creation in 2014, CENACE significantly contributed to the accomplishment of key milestones in the implementation of the Energy Reform, such as the opening of the short-term market for Baja California, the National Interconnected System and Baja California Sur. The two long-term power auctions in 2016 were among the highlights of the year. In the first event carried out in March 2016, the unitary price per CEL and energy (MWh) reached US$41.8, 40 percent below CFE’s forecasts of over US$70. The expected investment inflow from this auction was estimated at US$2.6 billion. The second auction held in September allocated 80 percent of CFE’s capacity demand, 84 percent of energy and 87 percent of CELs, attracting investments of around US$4 billion. Other milestones included the preparation of the two last PRODESEN, a document whereby CENACE proposes the infrastructure needed for the correct development of the National Electricity System over the following 15 years. A project which stands out in PRODESEN 2016-2030 is the first HVDC line to be built in Mexico, connecting Oaxaca with the country’s central region, which will improve the transmission of outstanding wind resources to high-demand zones.

Q: How would you describe the process of conducting Mexico’s first two long-term power auctions?

A: The first power auction was a historic event in the development of Mexico’s electricity industry and the lessons learned helped us raise the performance bar for the second edition. We improved our IT systems and strengthened the review process for the offers received, which helped us achieve higher efficiency levels. We are also very proud of CENACE’s involvement in both auctions as they showed the ethics, experience and professionalism of our collaborators. These events also revealed the growing competitiveness of the new market emerging in Mexico.

Q: What can be expected from the long and mediumterm power auctions that will take place in 2017?

A: We are analyzing the possibility of including a bureau of contract administration so that other load-serving entities besides CFE Suministro Básico can participate in the upcoming long-term power auctions. We look forward to leveraging our previous experiences to ensure these auctions are successful. Regarding the mediumterm auctions, which will be held for the first time ever in 2017, we expect their guidelines to be ready during the first months of the year. The participants’ interest in these auctions will be mainly driven by the volumes required for capacity and energy, which will be established and published by CRE. We expect the first medium-term auction to take place in the last quarter of 2017.

Q: What role do human resources play in the center’s development and what challenges have you faced?

A: CENACE’s strategy leverages the talent, experience and professionalism of its collaborators, which have been crucial to the accomplishments of the past two years. In addition, as many young Mexican professionals have joined CENACE in recent years, we have strengthened our workforce to successfully accomplish our tasks. We support the federal government’s initiatives to develop young professionals with the capabilities demanded by the new energy industry.

Q: How do you envision the development of the electricity industry in the short and medium term?

A: The long-term power auctions will stay in the spotlight in 2017 because they provide certainty for new investments in the market. We will work on strengthening the power grid, preventing bottlenecks that preclude the participation of new market entities and promoting competitive cleanenergy technologies in those regions with the best development potential. We expect the short and mediumterm markets to optimize the use of energy infrastructure and to drive down electricity prices to competitive levels. The expansion of the interconnection capacity with the US is likely to be an interesting alternative to trade energy in larger volumes while making the most of renewable energy resources.