News Article

Can Distributed Generation Change Mexico’s Electricity Landscape?

Wed, 02/21/2018 - 11:39

Distributed Generation (DG) has a solid future in Mexico because the regulations are not only focused on the present but also on the future, said José Zambrano, Co-Founder and CEO of Galt Energy, at the Mexico Energy Forum 2018 in Mexico City on Wednesday. “In Mexico, the regulation does not only plan for the future integration of DG but has clear milestones for review. The first will come when 5 percent of the country’s generation is performed via DG. After that, a new revision and plan for the future will be conducted.”

Zambrano was speaking during a panel presentation titled, “Can Distributed Generation Change Mexico’s Electricity Landscape?” at the Hotel Sheraton Maria Isabel. Other panelists included moderator Jorge Sandoval, Senior Associate at Goodrich, Riquelme y Asociados; Mikael Kaivola, Managing Director of CITRUS; Juan Ávila, Director General of Top Energy; and Andre Von Frantzius, Commercial Director of Grupo DESMEX.

The first issue addressed was the capacity of the already existing transmission and distribution (T&D) infrastructure to include distributed generation (DG). According to Zambrano, in Mexico there is nothing to worry about given the planning that is underway.

DG companies must face final consumers directly, which makes the sales process more challenging, but Ávila suggested that users have become more aware of the benefits of DG. “End users have evolved,” he said. “While they used to ask whether the technology worked, and even whether CFE allowed the use of DG, now they ask about prices, quality, guaranties and even the possibility of getting into interconnection schemes.” According to Kaivola, the benefits of DG in the residential sector are clear: “In 2017, the Ministry of Energy published a study of 680,000 households regarding the impact of DG in Mexico. The results showed that the use of DG could save the government MX$1.5 billion annually, avoid 1.3 million tons of CO2 emissions and decrease energy consumption per household by 75 percent.”

Von Frantzius added that for residential users the installation of DG is a no-brainer due to the decreasing costs of DG and the increase in tariffs, but there is still much to do to properly tackle the industrial segment. “Having a proper framework of T&D costs, including nodal prices, is a must to offer industrial consumers security on their DG investments.” Zambrano supported Von Frantzius, stating that most companies that include DG in their facilities are international conglomerates and that they are not doing so entirely because of financial viability but due to their sustainability commitments as global companies.

Regarding the different roles renewable technologies may have in DG, Ávila suggested the country has the perfect mix to place the crown on solar as the preferred technology. “While in other countries consumption patterns for house heating make it hard for solar to serve peaks, in Mexico we have peaks during summer when the sun shines. Considering solar technologies’ low CAPEX and ease of installation their position as a vital DG enabler is easy to see.”

Storage technologies are among the main missing links hindering the presence of DG. These technologies could create a safer and more resilient network, not only in the Mexican energy mix but on a global level, explained Zambrano. “In Australia and Hawaii, we have already witnessed how batteries are providing tremendous benefits. The importance of storage is not only reflected in the fact that it allows for an energy purchase-sale scheme, but it also provides auxiliary services such as power peak-consumption reductions that destabilize the grid.” When it comes to disruptive technologies, Von Frantzius mentioned the importance that electric vehicles will have on DG as energy storage enablers.

The panel concluded by stating the great potential Mexico has not only as an implementer of DG, but as a manufacturer of the equipment needed. “Mexico has over 44 free-trade agreements, and it should take advantage of that not only to boost the manufacturing industry but also to further decrease the costs of DG.”