Balance Bridges Gap Among Users, Developers, InvestorsMon, 02/25/2019 - 09:24
Q: What is CEMEX Energía’s major contribution to the Mexican energy industry?
FC: CEMEX Energía is both a multinational intensive energy user and an experienced project developer in Mexico. The company can bring a particularly balanced perspective to the power industry, helping to bridge the gap between users, developers and investors. For instance, we were an active participant in the consultation process for the establishment of the Clearing House for the long-term electricity auctions. We also engage with authorities and other industry participants through several bodies on subjects as varied as the network code, energy rates, promotion of renewable energy sources and wholesale market trading, among others. We had a view of promoting an open, efficient and flexible power sector for the benefit of final users and industry participants alike.
Q: What is CEMEX’s current energy mix and why did it decide to begin developing sustainable energy projects?
CC: CEMEX’s global power mix is composed by approximately 75 percent thermal energy and 25 percent renewable energy. In the next two years we aim to boost the participation of renewables by 10 percent, to 35 percent. CEMEX is a producer of heavy building materials such as concrete, cement and aggregates. Because of this, our production processes demand large amounts of energy. Therefore, to meet our customer’s expectations, we aim to have low and stable production costs, reducing emissions whenever possible. In 2006, CEMEX started to develop the 250MW Eurus wind project in Oaxaca to increase our share of self-supply power and to lower our energy costs through the introduction of what, at the time, was a novel technology in Mexico. Then in 2012 we started the development of the 252MW Ventika wind farm, and something very good that comes from these types of projects is that renewable assets provide long-term price certainty.
Q: What are CEMEX Energía’s main projects in Mexico and what new projects would it like to develop?
CC: CEMEX Energía began developing projects in 1998 with two thermal power plants that started operations in 2004. In 2015 we announced a JV with Pattern Energy Group to start developing projects together. Three of these projects will start operations in 2019 and another couple are in advanced development stage. Since the number of buyers in the wholesale market, besides the highly competitive CFE long-term auctions, remains relatively small, the pace has been a little slower than what we would like. So far, we have closed some deals to bring forward our projects.
Q: How has the Energy Reform impacted CEMEX Energía operations and what areas of opportunity has the company spotted?
FC: The introduction of the clean energy obligations and the wholesale power market as part of the Energy Reform brought many opportunities to CEMEX and other industry participants. More capital became available at a lower cost, while competitive pressure, experience gains and increased scale, all contributed to achieve a substantial reduction in the cost of renewables since 2015. This new panorama opens up opportunities to optimize our power costs by including new generation assets in our supply portfolio. We also expect that the upcoming introduction of the dispatchable demand resources will let us benefit from the value that our production process flexibility can bring to the wholesale market.
CC: We have a qualified supplier through which we purchased a small amount of energy in the last auction. With the projects we are currently developing, there will be some new duties for the supplier. One of the conditions that we must work with is that we have legacy self-supply contracts; if we want to migrate further into the market, we must first transition from the portfolio we currently have. Another challenge is the liquidity within the market. We have operations all over the country, and the price of energy ranges as well. This makes it so that one project does not really add value to one plant as it does to another.