Balancing Reliability and Emissions in Mexico’s Power Sector

Q: How has Valia Energía adapted its offering to the changing needs of the Mexican market?

A: Valia Energía was founded through the initial acquisition of power plants totaling approximately 2,200MW, all operating under the grandfathered regime of independent power producers serving the public electricity system. Some of these assets are nearly 25 years old. Around six months after Valia was established, nearly two years ago, we acquired two additional power plants in central Mexico: the Energía Valle de México facilities. With these additions, our portfolio grew to seven power plants with a total installed capacity of 3,200MW.

Last year alone, we generated over 20 million MWh, representing about 6% of the country’s electricity demand. Integrating a portfolio that came from different regulatory regimes, former owners, and varied operational practices has certainly been a multifaceted challenge. The oldest plant dates back to the early 2000s, while the newest is only four years old. We are managing a diverse array of geographical, cultural, and technological conditions.

From the beginning, Valia’s path has involved more than asset acquisition; it has been about building a company from the ground up, stabilizing and optimizing power plants, and forging a corporate culture with a new way of doing things. Unlike companies that acquire assets merely to sell them later, we have consolidated ourselves as a long-term power generator with clear growth ambitions.

Today, Valia has a complete corporate structure. Unlike some of our competitors, we do not rely on a foreign parent company. All our operations are based in Mexico, with our corporate office located in Mexico City and highly qualified personnel operating each plant. We have been working to develop a shared organizational culture and the different teams, including finance, operations, commercial, health, safety, and environment, and my own, public affairs, are all aligned toward a common goal: contributing to the affordable, competitive, and lower-emissions energy that Mexico needs.

Q: How do Valia’s power plants operate, and what is your view on the role of natural gas in Mexico’s energy mix?

A: Six of our power plants are combined-cycle facilities and one is an open-cycle plant. All of them rely on natural gas, although three are dual-fuel and can also operate on diesel, which we store on-site specifically for emergency situations in the electricity system or natural gas supply interruptions. In Mexico, gas supply interruptions are typically related to maintenance on pipelines on either side of the border, rather than disruptions in gas flow.

Mexico’s great advantage is access to the world’s cheapest natural gas. Over the past 25 years, natural gas has become increasingly central to power generation. Today, around 60% of the country’s electricity is produced using natural gas. What is notable is that while electricity generation has more than doubled in that time, per capita emissions have gone down and overall emissions from the power sector have held almost flat. This is largely due to the replacement of more polluting fuels with cleaner natural gas.

From a market perspective, the US natural gas market is highly liquid, and since Mexico imports about 70% of its natural gas from the United States, we essentially follow their market dynamics. However, the Mexican electricity market operates on a cost-based system, and its timing does not always align with the gas market. This mismatch creates operational challenges for generators. It is not so much an issue of volatility or supply shortage, but rather the challenge of managing two interrelated, yet differently structured markets. This is a shared concern across the generation industry, not just for Valia.

Q:  How does Valia Energía approach sustainability in its operations?

A: Sustainability has been a core value for Valia since our founding. It is not just a slogan; it is integral to how we operate. Our approach begins with what we can control. In combined-cycle plants, water plays a crucial role for the steam turbine, increasing the generation efficiency, which in turn reduces emissions. That is why we have concentrated significant efforts on reusing water and minimizing our overall water footprint, and we have seen very positive results.

Each of our plants has unique conditions and configurations, so every site has its own water management strategy tailored to local needs.

Regarding power generation, we align with the Mexican government’s commitment to lowering emissions. Natural gas will remain vital through at least the 2030s. Even as renewable capacity grows, natural gas is expected to continue powering around 60% of the country’s electricity needs by 2030. Rather than phasing out gas plants, we see them increasingly replacing more polluting fuels, thus lowering emissions intensity.

The flexibility of some of our plants is a major advantage. Facilities like Energía Valle de México I, a fast-start open cycle power plant with three gas turbines, that do not use water, can ramp up quickly, providing essential ancillary services. This operational agility supports the integration of variable renewable energy like wind and solar.

For us, the energy transition must also ensure reliability. Energy needs to be not only cleaner but dependable. Mexico requires more energy to meet growing electricity demand, and we want that energy to be low-emissions. However, sustainability goes beyond just adding renewables. Our plants also contribute to the other two pillars of the energy trilemma: affordability and reliability. Ignoring these dimensions risks destabilizing the system. That is where we believe Valia continues to make a meaningful impact.

Q: How does Valia approach investment opportunities in Mexico’s evolving regulatory environment?

A: One critical aspect of the new electricity sector law is that it retains many elements that were already functioning effectively. The wholesale electricity market continues to operate under the same principles that were introduced in the previous reform, and it has played an important role in supporting energy sufficiency.

Of course, some elements will change and we still do not know exactly how. But like any electricity market design, the system must evolve. What should follow is a collaborative process, one in which existing market participants and industry stakeholders can help shape the future.

Much of the current legislation is aimed at encouraging new investment. However, we must also emphasize the urgency of adding new capacity to the system. We are still waiting for details on how new participation mechanisms will be implemented. Mexico urgently needs investment, not just in generation, but also in transmission and energy storage. Storage is one of the major new elements introduced in the legislation, and we expect it will be addressed in the upcoming regulations.

There is also a need to improve an existing energy storage regulation published earlier this year. While it offers some foundational elements, it requires refinement to ensure we as an industry can deliver the sufficient, reliable, and competitive energy Mexico demands.

Q: What is Valia’s vision for decarbonization and future growth?

A: Valia is undoubtedly on a path of energy transition. One of our current priorities is defining our decarbonization roadmap and identifying the right mix of technologies. Solar and battery energy storage stand out, due to their relatively short development timelines.

One short-term challenge for the natural gas segment is the limited availability of new capacity to meet rising demand. In the United States, many new gas turbines are being installed, but Mexico may face some hurdles in this area. Therefore, pairing solar energy with battery energy storage systems appears to be a particularly attractive path forward.

The paradigm has shifted. It is no longer enough to have the cheapest megawatt-hour; it must be available when needed, especially during peak demand. In Mexico, this typically occurs during summer evenings. That is the opportunity we see, and we believe Valia has a role to play in addressing it.

Our goal is to remain a significant player. In the short term, this means continuing our decarbonization journey, a process we have been analyzing for the past two years. Our next natural step involves investing in renewable energy and battery energy storage systems. That is part of the reason I joined Valia, to help define a strategy that aligns with national priorities and the government’s new system planning mechanisms.

Just as we have previously acquired operational thermal power plants, we now aim to participate in expanding Mexico’s generation capacity. Variable sources like solar and wind make sense in many regions, though wind is more geographically concentrated and comes with significant transmission challenges and in both energy storage will play a role. Addressing Mexico’s growing demand will require investments and we are actively looking for the right opportunities.

Valia Energía is a Mexican independent power producer operating 3.2GW of natural gas plants. The company focuses on delivering reliable, affordable energy nationwide.