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Clear Guidelines Will See Market Take Off

Salvador Alarcón - Tradeon Energy
Founding Partner


Wed, 02/22/2017 - 17:49

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Q: What opportunities has Trade On identified in Mexico and what are the company’s goals in this market?

A: Like any new market, Mexico offers a wide range of possibilities for companies with experience in similar settings. Trade On spotted a window of opportunity to become a key player by contributing to the development, liquidity and transparency of the market. Our objectives are in line with those of the Energy Reform, positioning the end user as the ultimate beneficiary of our services. As has happened in other countries, Mexico’s electricity market has been developing slowly but we expect it to take off as soon as the legal guidelines are clarified. We are trading bilateral contracts and expect the number of transactions to increase significantly. Our tools and services are well designed for local conditions and our goal is to become a leading energy broker in the near future. Our setup borrows the best features from other international platforms but it is 100 percent Mexican designed.

Q: What challenges have you faced to position Trade On in Mexico?

A: The novelty of the regulations is a challenge for many market participants, including off-takers and generators who have many doubts about how the market will operate. Particularly, the role of the energy trader is surrounded by an aura of mystery, even though most companies have either an excess or lack of electricity they would like to trade in the market. For these reasons, we are working to contact and educate market players, becoming their first point of reference in the new playing field.

In the coming months, we expect the Mexican market to follow a natural evolution, starting with bilateral transactions to increment trust until the players feel confident enough to trade energy in a semi-standardized market. For this stage, we have established a legal division and a trading platform that will speed price discovery. Particularly, we expect our online trade platform to become a decisive tool as has happened in other markets. So far, we have identified a strong interest from private companies to take advantage of our services but a learning process will be needed to attract a larger number of participants.

Q: What kinds of companies are you targeting and how can your services increase their competitiveness?

A: As an energy broker, we are targeting all market players participating in the wholesale electricity market, particularly generators, suppliers, marketers and off- takers. Our role will be similar to that of the electricity marketer, being a middleman in all energy transactions. So far, our strategy is to expose Trade On to the market following a selective approach. Once the first contact is established, we analyze the clients’ individual situation to define what services are most suitable for them. We can offer legal and technical advice to prepare for CENACE’s electricity auctions, making use of internal tools that we have developed specifically for the Mexican landscape.

Companies using our electronic trading tool will benefit from having the market in a single platform, as well as a summarized visual version showing the best electricity prices in the market. Trading platforms save users the effort of having to recollect market data on their own, providing a user-friendly environment for performing transactions. Our job is to maintain constant contact with market participants to deliver top-quality services, getting first-hand information and adapting our focus to the changing market conditions.

Q: What are the key features of Trade On’s platform and what operations do you expect to be carried out on it?

A: Our trading tool is based on the electronic platform used in most European markets but it has been adapted to Mexican conditions, such as the country’s nodal scheme that makes the system more complex. To solve this issue, we designed a method to divide the market into tradable zones, facilitating the visualization of energy transactions. Our project has received strong support from Mexico’s regulatory entities because they consider energy brokers as crucial to boosting transparency and liquidity.

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