Energy Sourcing: Opportunity to Create Competitive Advantages
You can watch the video of this panel here.
The promotion and use of renewable energies in companies' supply chains have picked up steam in recent years. With President Joe Biden's appointment, the US made its environmental agenda a priority and as its main trading partner, Mexico faces a challenging outlook if it is to maintain and increase its attractiveness for foreign investment. During Mexico Business Forum 2021 Virtual Edition held on May 26, experts of the energy industry met in the panel “Energy Sourcing: Opportunity to Create Competitive Advantage” to discuss the electric reform, climate change and clean energy sourcing.
Energy sourcing on 2021 is resting on hybrid schemes, which are a proactive way to begin the transition to clean energies, explained moderator Edmond Grieger, Partner, Head of Energy & Environmental Practice at Von Wobeser. This is the case especially during an uncertain scenario, such as the one Mexico finds itself in. Ricardo Whaley, Head of Energy Management & Commercial Office at ENEL Green Power, highlighted that demand for clean energies is indeed increasing, “renewable energies are the most cost-effective globally and in Mexico. They offer prices optimization coupled with an added value in cleaner energy consumption, which is a growing in preference among users.” However, Whaly explained that for companies to fully transition into green energies, price plays a large role as it remains among a company’s key motivations.
At a macrolevel, there is another factor influencing companies’ decision to transition: the recently proposed electric reform. Federico Muciño, Founder of EPSCON, explained that “consumers are affected by feelings of uncertainty, goaded by regulatory changes in the energy sector. There was rampant speculation about a return to the pre-2014 Energy Reform landscape, where CFE had a monopoly on energy supply. Companies reacted by delaying investments and, instead, focused on cost-saving.” Ramon Moreno, CEO of Mitsui & Co. Power America, said this reform has been a risk for contracts and for sustainability in Mexico. However, “Mexico’s electric market is not being threatened by that; we can still get advantages with the new reforms,” said Moreno. Media’s speculation enhanced the worry of the final consumer but Mexico’s electric market remains strong and sufficient, he added. “The countries’ clean energies offer the right option for positive transitions that fight climate change,” said Moreno.
Once companies have decided on clean energies, there different points to consider depending on their specific needs. “The consumer always wants quality and continuity, with low costs that will not rise,” explains Moreno, “this is a trilemma because it seems like every aspect goes its own different way and they are hard to tie together, however, technology is key to all these aspects.” Technology can help companies match regulations and consumer’s needs to create a suited solution. “Digitalization rises competitiveness and lowers costs because automation has replaced people at some job positions.”
“Every solution depends on the costumer,” said Muciño, “some need solar panels for their home, others need the efficacy brought by thermal plants; projects vary and so does the energy source.” According to Muciño, for on-site generation processes sites need to be studied from a multidisciplinary point of view, checking facilities, gas supplies, boilers, steam and water pressure.
Hans Kohlsdorf, Founding Partner at E2M Energy to Market, mentioned that there are good opportunities for the private sector to enter renewable energy. He highlighted that this the time for qualified users to decide if they want to participate in the energy market as the current environment “allows for multiple generators willing to put together solutions for industrial customers.”
To promote customers incorporating energy sustainable sources, people need to part from the belief that “they depend on CFE for energy. In the electricity market, it does not matter who bills, the energy network continues to flow.” Kohlsdorf also explained that the quality of energy received does not depend the seller but on the facilitator who optimizes it. Mexico's power quality is not good, said Kohlsdorf, so the private sector assumes that it will require power plants and other regulators to ensure efficiency.
To reduce uncertainty for consumers who want safe energy, Whaley explained that a key aspect is the “geographic diversification of the energy sources used to supply. Some areas have shortcomings, while efficient ones can reduce costs.” As the country moves towards cleaner energy sources, the sector has to strengthen its transmission networks to make consumption more efficient, added Whaley.
Moreno urged listers to set aside concerns about regulatory changes, “they do have an effect but we need to think about the short- and medium-term problems such as climate change.” Climate chance is more worrisome than the reform and much timelier to address, explained Moreno. “It is a challenge but it is not impossible; we must diversify energy sources, make more efficient use of it and act better to fight climate change,” said Moreno. To end these excessive concerns, Muciño urged for more education and “understanding of the regulation and commercial practices.” Prices are also important.
Kohlsdorf also asked listeners to let go of their extreme fear of the electric reform, which “also brought good things like the increase of capacities of industrial zones, in which internal problems are fixed locally and not directly by CFE.” Kohlsdorf added that to reduce uncertainty, companies can contract on-site energy, diversify their sources and digitalize their intake. “Companies that speculated during the first months on the reform got bad contracts and brought themselves severe problems.” The private sector of the energy industry is working to get power generation get closer to the user, added Kohlsdorf. This way there will no longer be remote plants, as new ones will only be present in areas where it makes sense to put power generators. “We can also help the government make sensible regulatory changes that foment savings and optimize consumption.”