The Electricity Path from 2018 to 2030

Mexico's energy mix is becoming more diverse, but will remain more oil-dependent in 2040 than the US or Canada are today, as outlined by the International Energy Agency’s 2017 Report on Mexico. A series of documents have been published by the federal government containing information about the changes already achieved in the Mexican Constitution and the plans for the future operation of the industry, which was determined by modifying the Secondary Laws and its procedures. 

A quick look at the past reminds us that the electricity industry in Mexico has been state-owned for over 50 years, where CFE has been in charge of the day-to-day running of generation, transmission and distribution businesses as well as the planning of the electricity industry. In 1992, the Independent Power Producer Cogeneration and Self Supply Scheme models were developed to promote the participation of private industry in the electricity sector in Mexico. The first scheme was established for private generators to build, operate and maintain power plants for CFE through long-term PPAs, while the other figures were meant to allow private companies to build their own power plants for self-supply. However, this presented the opportunity for private generators to build power plants to supply private industry as well. The productive enterprise of the state retained control over which projects could be built and could apply restrictions on plant operation, which created uncertainty and risk for private investors. This resulted in lower investments in the electricity industry, which led to high tariffs and inadequate infrastructure. Now, we have a different view of the energy sector in Mexico. The country seeks to modernize the current electricity market, without privatizing the main public energy companies CFE and PEMEX. Reducing power prices by enhancing competition and attracting investment is also the order of the day. Compared to the US, Mexico’s power prices have been recorded to be between 25-75 percent higher. Catching up to international standards in energy efficiency and mitigating power losses — a priority outlined by CFE — is also a key link of the energy sector’s value chain. All these objectives run parallel to sustainable development, taking care of environmental issues and clean energy generation technologies, especially solar and wind.

According to the Ministry of Energy’ latest numbers, in the last quarter of 2016, 98.5 percent of the population had electric power service, electricity sales increased 2.8 percent (equivalent to 5,871GWh), compared to the previous year, with the industrial sector accounting for 57 percent of total sales recorded in the year. To supply the growing demand for electricity, the installed capacity of the electric sector grew at an annual rate of 2.9 percent in the last decade, from 56,317MW in 2006, to 73,510MW in 2016, which meant an increase of 17,194MW. Of what was reported in 2016, 71.2 percent of the total generation capacity corresponds to conventional technology power plants and the remaining 28.8 percent to clean technology power plants. 

At the end of 2016, electricity generation was at 319,363.5GWh and had a greater share of clean technologies, making up 20.3 percent of the total generation matrix. Hydroelectric generation stands out as the main clean energy generating 30,909GWh. Inside the participation of conventional technologies, combined cycle represented 50.2 percent of electricity generation, equivalent to 160,378GWh. Between 2018 and 2031, it is expected that 55,840MW of electricity generation capacity will be added, of which 37.4 percent corresponds to conventional technologies (20,876MW) and 62.2 percent to clean technologies (34,964MW). The two technologies with the greatest contribution to the system are combined cycle power plants with 33.9 percent and wind power plants with 24.2 percent. For the end of the prospective period, a total generation capacity withdrawal of 15,814MW is estimated, associated with the withdrawal of 137 units using conventional technologies.

By 2031, generation is expected to increase 43 percent to 456,683GWh, of which 54.1 percent will be generation with conventional technologies and 45.9 percent with clean technologies. In this way, 2018 is expected to be a dynamic year in which several projects will be carried out. It is clear that the path to 2030 will have difficulties and successes and the only way to achieve the 2030 energy challenge — sustainable, clean and affordable energy — will be through the creation of a successful synergy between government, academia, society and industry.