Energy Compliance Better Than The Alternative

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As global economies ramp up their energy transition efforts, grid code compliance will play a critical role in reducing energy costs through increased operational efficiency and longer asset life. “As the new grid code is implemented, benefits in cost reduction and operational improvement will be accessible,” says Mónica Samudio, Country Managing Director Mexico and Central America at Circutor.

Energy and economic development have become closely related since the establishment of the Tokyo and Paris climate agreements, as well as the UN Sustainable Development Goals. Such initiatives have put pressure on different groups, industries and governments to embrace the energy transition and ESG strategies to make operations cleaner and more energy efficient, says Samudio.

In Mexico, however, the transition is still in its early stages, especially considering the targets set in the Paris Agreement. Mexico’s renewable energy generation stands at 20 percent of total energy consumption, which is just above half of what is needed to reach the 35 percent set for 2024 and below half the goal of 43 percent for 2030. Although energy generation still depends mostly on natural gas, the energy sector and the regulatory environment surrounding it have changed drastically since Mexico joined the agreement, with new energy generation players that must comply with regulations established to ensure the stability of the grid.

The grid code established by CRE on April 6, 2016, as part of the Electricity Law (LIE), features all the administrative guidelines for the efficiency, quality, reliability, continuity, safety and sustainability of the National Electric System (NES). All load centers wanting to connect or that are already connected to the NES in medium and high-tension levels must comply with the grid code, regardless of their energy supply scheme, according to CRE.

“Compliance is essential to the economy as a whole,” says Samudio. Although standards are strict, they were established to avoid energy disruptions like that observed in December 2020, when the national grid operator was forced to shut down at 2:27 p.m. — peak energy consumption hours — in 12 states, representing an unknown loss of economic productivity. According to the government, the San Carlos wind farm in Tamaulipas contributed to the disruption after its connection to the grid without the necessary testing to ensure the grid’s stability.

 Beyond stability, the grid code brings many advantages to the sector as it includes all stakeholders involved in the sector, from energy generators to final users. “Regulations democratize the responsibility for generation and consumption of energy, which means that generators must follow all requisites to connect to the grid, while users must consider every step of the generation process and not focus only on paying for their consumption,” says Samudio.

In terms of benefits, grid code compliance means that generators can see both a reduction in energy costs and savings stemming from greater energy efficiency. “Penalizations are not as important as they could be worse,” says Samudio. Instead, companies should focus on the short ROI related to the needed investment in equipment to meet all standards, the increased operability of their equipment and the ability to plan production according to sales and demand forecasts, without worrying about potential grid failures.

Samudio also highlights the safety component, as 25 percent of all industrial fatalities are caused by electricity-related accidents, according to the International Electrical Safety & Reliability Consultants. “Because of this, grid code compliance should be at the top of the list for maintenance managers,” she says.

To help companies on the road to compliance, Samudio outlines the following steps established by Circutor:

1. Establishing an action plan together with an expert
2. Identifying the regulation specifics that the company must comply with
3. Performing a technical and operational evaluation of the load centers through simulations and readings
4. Determining the technical results, including specifications required for compliance
5. Proposing solutions or technical specifications, including a budget that considers different operational scenarios and an investment plan
6. Approving, installing and executing the plan
7. Constant monitoring

“The challenges of implementing the ‘Grid Code' include mainly implementation deadlines, standards and technical and financial expertise,” says Samudio. To address this, Circutor works with clients to establish an action plan built around consumer needs. This expert analysis not only looks at technological gaps, but at financial optimization so the investment in compliance standards pays for itself in the long term, thus adding value to the client. Moreover, before even starting, Circutor works with FIDE to assess the feasibility of any given project so clients are completely convinced that their investment will pay dividends.

Beyond company walls, Samudio sees challenges in terms of equipment availability given the logistics and supply challenges derived from the pandemic. “However, Circutor is building enough stock to meet clients’ demands and reduce logistics time frames,” she says. Uncertainty is also a lingering issue as inspection and audit time frames have not been clearly established by authorities. The situation is expected to improve as CRE has already declared itself in charge of monitoring companies as they move toward compliance.

While companies must engage in added investment, compliance is a small price to pay to strengthen the backbone of the energy sector relative to system failures and their crucial implications to the country’s economic competitiveness, adds Samudio. “The Grid Code is a stepping stone for economic recovery. Circutor is preparing for this new stage, building our equipment offering and implementing actions that support the current and future development of the sector,” she says.