Hans Kohlsdorf
Managing Partner
E2M
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View from the Top

Clarity Over Market Liquidity and Operations

Mon, 02/25/2019 - 17:32

Q: What is E2M’s most significant contribution to Mexico’s wholesale electricity market (WEM)?
A: E2M made significant contributions on two fronts. First, assisting power producers and final users in better grasping and operating the market. Second, facilitating the financial sector’s transition from pre-reform financing models to today’s WEM. Before, financial entities were subject to extremely rigid PPAs. Now, they need to absorb the inner workings of the new market and its merchant risks, the differences of CENACE and CFE as purchasers, increase understanding and improve their risk analysis procedures. E2M helps its clients to capitalize on the new market’s bounties, parallel to an optimized operation and reduction in kWh requirements or capacity payments under the WEM’s framework. Controllable demand works better today than under the old tariff I-15 and its inherent benefits, for instance, are not well-known among qualified users.
Q: How does E2M provide the best solution to its clients wanting to transition to the new market?
A: The primary issue lies in understanding the intricacies of the new market. E2M is among the most successful companies in offering courses that provide not only theoretical but also empirical notions to best handle the market. Some institutions, universities or companies provide training courses but remain rather rigid. They do not carry the business spirit of the market or truly understand the hands-on operation. Our company has provided two 80-hour courses even to CFE executives. We can provide clarity on the market’s impact over our clients’ operation, core-business and the available opportunities. E2M makes life in the new market simple for its customers.
Q: Which of your business lines is driving E2M’s growth?
A: Our growth is evenly distributed among our three main types of clients,: electricity generators, qualified end users and end users with self-supply capacity. By law, our business is separated into two units. E2M Generación covers market representation services for power producer’s Electricity Plant Units (UCE), while E2M Suministro Calificado provides representation services for qualified users. Power producers, for instance, are interested in both selling their generation surpluses and purchasing their shortfalls in the market.
Q: How does E2M build up a reliable and diversified energy portfolio for its clients?
A: The primary focus of our energy portfolio is our clients’ energy consumption requirements. First and foremost, the operation of the qualified user needs to be optimized. E2M enjoys independence in building up its portfolio as it is not vertically integrated with power generation assets, compared to other qualified suppliers in the market. Bypassing a potential conflict of interest provides our energy portfolio with flexibility and ensures we can provide an optimal, tailor-made solution based on our clients’ specific operational and consumption profile. We always make a point of attaining a balance between energy purchased and energy sold, staying away from speculative practices and adhering to CENACE’s required warranties.
Q: What is your assessment of CELs’ first year of operation?
A: Supply and demand are not yet balanced as they lack a market price. Instead, price ranges depend on the time frame. Over the long term, CELs tend to be relatively cheap, whereas short-term CELs that span three or four years can be more expensive. This is because there is confidence that the country will meet its clean energy production goal ahead of time.
Q: What is your take on the published Basic Supply Tariff and its subsequent modifications?
A: As long as basic supply functions under tariffs that generate sustainable losses to CFE, the distortion in the market will remain because private players do not have the same absorption capacity using CFE’s tariff levels. This scenario is unsustainable in the long run, meaning the tariff’s structure needs to be adapted to provide nondiscriminatory conditions.

E2M is an energy broker and service provider operating in the Mexican electricity market. The company primarily targets power producers, qualified final users and self-supplied final users as its client base.