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Analysis

The Best Transition is a Smart Transition

Wed, 02/21/2018 - 12:03

Both Mexico’s regulatory authorities and private sector agree that in the coming years, the country’s electricity consumption is set to increase. The Ministry of Energy estimates Mexico will boost its electricity consumption from 304.7TWh in 2017 to 476TWh by 2030.

 

The country is deploying an integral strategy that includes notions such as energy efficiency, controllable demand and the Internet of Things (IoT). The goal is to revamp the nation’s electricity system and provide a long-awaited electricity supply that reflects the reality of the country’s industrial, commercial and residential needs, anchored in competitive tariffs, technological applications and a sturdy and reliable system. The challenge is sizable: during the presentation of the Smart Electricity Grid Program on Aug. 22, 2017, Pedro Joaquín Coldwell, Minister of Energy, estimated that Mexico will require nearly US$650 million in investments for the next eight years to install a full-fledged, national smart grid.

Some industries have already reaped the benefits of efficiency, automation and IoT to reach heights never attained before. “We could not be talking about an automotive plant manufacturing 250,000 vehicles per year without automation and IoT,” says Ernesto López, Vice President of Partner Projects and Ecobuilding at Schneider Electric Mexico. The country’s electricity industry has yet to attain the level of integration of such innovations that these industries enjoy but it has made the first decisive steps to converge toward this assimilation. Imagine a system where electricity production, distribution, transmission and consumption can become transparent, with usable data for all final users to clearly visualize their electricity consumption, in scales ranging from seconds to years, as easily and seamlessly as they check currency exchange rates on their smartphones. Smart grid applications enable an exchange of electricity and data mining between power producers and consumers. Through an extended network of communications, integrated computers, IoT, automation and top-tier software solutions, providers are able to offer a more efficient, secure and reliable electricity service, where different renewable-powered energy generation can coexist on the grid, opening the door to the industry’s newest and most promising developments, such as battery-based energy storage solutions and electric vehicles.

“The rising awareness of IoT coupled with a new regulatory framework is fostering a turning point in how Mexico measures and provides electricity. CRE’s most recent norm, NOM-EM-007-CRE-2017, published in February 2017, attests to this shift. The norm stipulates that public and private generators, users and companies related to transmission and distribution are obligated to measure the electric power factor they respectively produce, consume, transmit or distribute,” says Michel Yehuda, Industrial Director of Fluke Dominion Mexico. Pertaining to the country’s Smart Electric Grid Program, César Hernández, former Deputy Minister of Electricity at the Ministry of Energy, says the major implications of the program are conferring the system greater measuring, managing and telecommunications capacities. “Specific programs both for independent system operators and distributors, relating to specific projects regarding costbenefit analysis and other viability-measuring tools for a smart grid, were made available.”

The private sector is also poised to support the government's efforts. “We agreed with CFE on the assessment of new technologies to modernize and digitalize Mexico’s electricity system. The purpose in using these technologies is to reduce costs by mitigating technical and nontechnical losses and to increase the reliability of the network by conferring it modern and top-tier components,” says Alejandro Preinfalk, Vice President of Energy Management for Siemens in Mexico. Between 2019 and 2024, the integration of smart grid applications in the country’s National Electricity System is expected to make the latter ready and able to absorb intermittent sources of energy — the inherent trait of renewables — so that before 2030 the system obtains a perfect balance between flexibility and robustness against intermittent generation and load vulnerability. This could create an effective system that paves the way for smart cities, sustainable construction, electric vehicle fleets and even smart homes.

Under market conditions where both electricity prices and electricity production costs fluctuate as a result of a wide array of variables, such as the local marginal prices of each node at a particular point in time, taking control of consumption can be the key to unlocking sizable electricity savings. Now, the industrial, commercial and residential sectors must watch out for peak hours in electricity costs and navigate the variation slopes skillfully to avoid incurring increased energy consumption. Energy-intensive industries and companies, for the most part, have specialized departments to monitor and further optimize their energy consumption. Smaller companies, however, will require third-party assistance to attain the benefits of controllable demand and programmable consumption. “When a large electricity consumer has access to IoT, it needs specialized partners to provide servicing. An electric meter manufacturer cannot handle the increasing demand for this technology on its own. What some years ago was exclusively for the use of utility companies is now also within residential reach,” says López.

OPTIMAL EFFICIENCY

Energy loss has long been the thorn in CFE’s side. Prior to the reform, Mexico’s average energy loss between production and final consumption was well above OECD levels. “In 2012, these losses amounted to 16 percent on average nationwide, versus OECD’s average of 6 percent. Our latest data from October 2017 suggests our energy losses are below 12 percent. For 2018, we are setting a 10-11 percent objective. We are confident we can reach this milestone and will continue working to bring this indicator closer to international standards,” says Jaime Hernández, Director General of CFE. While Hernández stresses the increased complications in attaining each percentage point, the objective is at CFE’s doorstep as some states are already below OECD’s 6 percent mark, making the country’s central region the biggest challenge. “Pertaining to an average time of electric energy interruption per user, PROFECO’s registry of complaints went down by 25 percent between 2015 and 2016. In 2010, the average time was 130 minutes, while our latest numbers suggest it is below 30 minutes on average per year,” he added. While reducing technical and nontechnical losses addresses energy transmission and distribution, energy efficiency practices on the energy consumption side can contribute considerably to the grid’s stability and reliability as it mitigates grid saturation while also implying less resource use in a still fossil fuel-dominated energy mix.

Mexico’s authorities want to lead by example through the Energy Efficiency Program at the Federal Public Administration. The program’s objective is to establish energy efficiency measures and attract investments for their implementation through a coordinated effort between the Ministry of Energy and CONUEE, according to an Environmental and Social Analysis Report drafted July 17, 2017 and addressed to the Inter-American Development Bank (IDB). The report stated that a Public Administration building spends between 62 and 92 percent of its electric consumption in lighting and air conditioning. Generalizing LED-lighting technology could save up to 119.34kWh/year and add seven years to the lighting’s operational life before requiring replacement. Generalizing high-efficiency air conditioning could represent savings of up to 1267.43kWh/ year. In CONUEE’s latest report, the coordinated policies implemented in over 1,591 federal properties, representing 51 percent of the total registered, 5.23GWh of energy savings were attained. While these results are encouraging, several hurdles remain. “A project to make a building more efficient could cost MX$1 million, while the management of the transaction and financing could bump that to MX$2 million. We need to allow for the creation of a market and procedures that facilitate the development of energy efficiency, by setting lower transaction costs and to lower the risks involved,” says Odón de Buen, Director General of CONUEE.

On the private sector’s side, energy efficiency is perceived as a particularly effective entry-door for renewables. “If a renewable energy project is installed into an electricity system without installing energy efficiency measures first, then the renewables project is sized for non-efficient energy consumption, meaning that the whole project will be oversized and more expensive than it should be,” says Pedro Cruz, Director General of AMEEIER. Qualified suppliers are among the industry’s new players that are showing increased interest in giving the industry a good name and also forging a competitive edge. “We look beyond energy efficiency, introducing Industry 4.0 principles involving data mining, IoT and smart production processes to our customers,” says Paul Sánchez, Director General of Brío Suministro. As a key complement in addressing the variability of both electricity and conventional fuel prices, energy efficiency talks could dominate energy-related discussions in 2018.