Rubén López
CEO
Orca Energy
/
Insight

Bridging Gaps Between Power Producers, Qualified Suppliers

Mon, 02/25/2019 - 17:29

With the need to establish agreements between power producers and qualified suppliers ever more evident, their often-conflicting interests have been highlighted by the lack of clarity over the long-term price evolution of electricity tariffs and CELs, according to Rubén López, CEO of Orca Energy. “Qualified suppliers, such as Orca Energy, want to purchase power in a volume that is diverse and robust enough to consolidate an attractive portfolio with validity dates ranging from six to 36 months. Power producers seek longer-term contracts,” he says.
López finds the action of wholesale electricity market participants encouraging, and he acknowledges they often work with CENACE, CRE and the Ministry of Energy to stay up-to-date with available offers and products. But he adds that the continuation of these collaborative efforts between the industry and the regulator is the key to creating a truly competitive and transparent market. “To allow qualified users to present a competitive offer so they can obtain the required coverage, greater understanding of the complexities inherent to Mexico’s energy trading market is required.” He adds that power producers have also raised doubts about the state-owned utility. “CFE’s segmentation into six different generation companies creates uncertainty as its most efficient generation portfolio is reserved for basic supply,” he says. “The rest is to be distributed between direct market placement and through qualified suppliers.”
Orca Energy became a full-fledged qualified supplier in July 2017, one of the first with an active portfolio of clients, coverage contracts and ongoing operations in the wholesale electricity market. Its expertise in Mexico’s regulatory framework, implementation, metering and physical communication mechanisms enables the company to provide solutions with different types of tariffs, whether variable, fixed or metering. It performs thorough analyses and projections to map out the generation plants closest to the available nodes and their congestion points.
But López stresses that, even though the company’s expertise means it can work across a range of projects, it chooses to focus on those where it can truly add value. “We are highly selective about the types and number of loads we want to manage,” he says. “Our competitive advantage is our ability to compare our clients’ core businesses with their inherent consumption pattern so they can spend less time worrying about their electricity bill and more time focused on growing their companies.”
One factor that may be causing concern, and that Orca Energy cannot control, is the delay in the publication of tariffs. “Basic supply’s transitory tariffs published by CRE in November 2017 are much lower than those being used in the wholesale electricity market, generating distortion for those players that want to switch to qualified supply and complicating this decision for qualified users,” López says. “There needs to be an adjustment period when definitive tariffs are finally published to mitigate uncertainty.”
He suggests that another sticking point for the evolution of the industry may be the difficulty encountered by clean energy producers in pricing their CELs. “Today, there are many different CELs prices in the market, with considerable variations,” he says. “There is also uncertainty over future prices and point of stability, especially on a long-term purchase basis as CELs largely depend on the pace at which Mexico’s operational clean generation share in the energy mix grows.”
For the wholesale electricity market to stay on course toward maturity and competitiveness, López considers effective communication between power producers and qualified suppliers to be of the utmost importance. “We must capitalize on the lessons learned in each edition of the country’s long-term electricity auctions, taking into account that qualified suppliers’ expected participation so far is lacking,” he says.
Without an optimal match between power producers and qualified suppliers, López argues that the opportunity is missed to tailor their respective portfolios to best benefit qualified users’ consumption requirements. Communication between all stakeholders then becomes key. “Fostering communication platforms among market participants would build up a truly competitive market,” he says.