Electricity Market Walks but Now It Must Run

You can watch the video of this panel here.

The Mexican wholesale electricity market is still incipient despite the many opportunities that exist to accelerate its growth. This was the general principle that was discussed and agreed upon during the fifth panel of Mexico Energy Forum 2021 on Wednesday, Mar. 10: “Unlocking the Electricity Market Via Assets, Supply and End-Users.”

The panel was moderated by Angie Soto, Managing Director of Nexus Energía MX, who offered the panelists a space in which they could contribute not only their experiences but also their own theories and explanations as to why, as she said, “are there still not millions of qualified users in the Mexican wholesale electricity market.” 

“Even though the growth of qualified users seems slow, you have to compare it to previous years. In reality, the growth rate has increased a lot if you compare the small growth from 2016 to 2017 with the much faster growth seen after 2018. This is a process of change and restructuring that has taken up to a decade in other countries, so this transition in Mexico has been much faster,” Panelist Lilian Alves, Director of Strategic Planning at Mitsui & Co. Power Americas, noted. Alves also evaluated her company’s experience in the market as positive. “As the second largest operator of power plants in Mexico, our sales in the wholesale electricity market have been significant. Our portfolio of services includes the representation of customers who are entering the wholesale electricity market. These representation services will be increasingly necessary as government changes are likely to grow the need for commercial and industrial customers to find comprehensive energy solutions for their operations. We want to be much closer to what would be the downstream segment of the market. Since last year, we have been developing our distribution capabilities and this amounts to a vote of confidence in the future of the Mexican wholesale electricity market.”

Alves’ statements were echoed by Hans Kohlsdorf, Founding Partner of Energy to Market. “We have to explain to customers how they can incorporate solutions regarding their energy supply while taking advantage of energy efficiency and demand control technologies. We have failed to convey how relatively easy it is to become a qualified user. It is a fairly easy and uncomplicated process,” Kohlsdorf said. He also made it clear that on-site generation is a global trend that will not stop. Moreover, trends like that make it imperative for more customers to seek their place in the wholesale electricity market. “This is the time to buy power. The more people get scared, the more opportunities arise. All we have to do is talk to our customers about the changes they would have to implement,” Kohlsdorf said.

Panelist Víctor Ureta, Director of Operations and Risk at Acclaim Energy, agreed on the existence of an information problem. “There is still a great lack of knowledge at the end-user level. We need to make a big effort to reduce this problem.” Ureta pointed out that the market exploded between 2019 and 2020 but a large number of questions remained unanswered among qualified suppliers. He also stressed the need to promote investment to ensure energy supply and its quality. “Securing energy supply is a risk management effort, especially if customers opt for experienced qualified suppliers and consultants. Scary stories about the nature of the wholesale electricity market need to be dispelled.”

Alves pointed out that “there are several options available to qualified users in the electricity market. The number of possibilities can be a bit dizzying, so we have to work to advise on the most optimal solution. For some customers, service interruption can mean long delays if their operations and assembly lines take a day or more to get back online, so uninterrupted service is their top priority. Other customers may have very tight budget policies, so price predictability will be their top priority. The pandemic has caused companies to define their needs and objectives much more clearly, so we can help them translate this into better contracting conditions. While it is true that the new energy laws complicate our offerings, our faith in the future development of Mexico's wholesale electricity market has not been shaken.” 

Panelist Sean McCoy, Director of Energy Services for Mexico at Edison Energy, concurred, albeit with some reservations, with the panel’s conclusions. “Access to reliable and immediate information should be a fundamental part of the electricity market. It is what has made other markets so successful. However, this will not fix the fact that if CRE does not release more permits, we will experience a shortage in the supply of renewable energy in a few years.”