Energy Tariffs Tailored to any DemandBy Cas Biekmann | Tue, 12/15/2020 - 09:09
Q: How has Eon Energy developed in the Mexican market and what does its energy portfolio look like?
A: We incorporated Eon in 2016, and its core business is buying large supplies of energy. Our main purpose is to be a facilitator between the main stakeholders in the energy market. The company is very focused on sustainability. Eon Energy offers five different products. We offer fixed tariffs, considered unique for qualified suppliers. With our base tariff, we provide between 15 and 20 percent discounts when compared to CFE. We also have a different fixed tariff, that is signed for a certain term, providing a 20 to 40 percent discount. We are committed to social responsibility and contribute to Mexico’s energy transition; therefore, we offer a renewables tariff. This guarantees to our clients that at least 80 percent of the supply comes from renewable energy, an important item for Mexico, supporting the country in its efforts to be able to reach the 35 percent renewable capacity installed by 2024 as stipulated in the Paris Agreement. Another option is our hybrid tariff, for consumers involved in the self-supply scheme. We provide them with additional constant energy supply. Finally, we have a trading tariff, where we act as a clearing house for investors that want to be represented on the energy market. The fixed tariffs are the most popular, but we now have many clients who demand renewable energy. Eon Energy is focused on activities related to trading and supply of energy in the Mexican Electric Market.
Q: Where has the company identified opportunities in 2020’s electricity market?
A: Eon attempts to purchase many power plants in Mexico because we think the Mexican market requires more competitiveness in order to offer better tariffs for its consumers. After the 2014 Energy Reform, Mexico never developed the second stage of the electricity market rules. We are looking forward to concluding some acquisitions in anticipation of this and I have confidence it will be a good market to operate for the next 10 years. Since many investors are withdrawing due to the current challenges, we see opportunities to invest in Mexican assets. However, I believe that this is just a phase. We need to invest right now because challenges bring opportunities, as long as you know how to adapt and understand what the country needs. For instance, PEMEX will not do any farmouts or bidding rounds but it will implement other projects and structures per the new public policies considered by the current Government. This is where opportunity can be found for the oil and gas business and the commodities related aspects. Petrochemical is a huge milestone for our country to look at. We are also in the process of securing permits before CRE and that is going well.
Q: How is Mexico doing when it comes to achieving its Paris Agreement goals of installing 35 percent of clean energy by 2024?
A: Mexico is in a transition period, therefore, in such a new market, the rules will be subjected to changes. We strongly believe that Mexico will achieve a mature market within the next 10 years and Eon Energy is committed to participate in this process and to invest in our country.
Public policy objectives do not consider the energy transition a priority in the short to medium term. Mexico is lacking a mature electricity market since we never developed the regulation for its second stage. Furthermore, no regulation has actually been modified since 2013. Nevertheless, the rules of the game in terms of guidelines and criteria have suffered some amendments which in turn have triggered more than 150 Amparos filed by the Market Participants, which is why these new directives have not entered into effect. We also lack an electric mobility policy, which is a key aspect. At this moment, the Mexican senate is preparing a law to tackle this. Another challenge I see is Mexico’s dependence on importing natural gas as a transitional fuel, while national reserves remain undeveloped. Sixty to 80 percent of the supply is imported from the US. Mexico’s electricity uses around 66 to 76 percent for its production. However, Mexico has several northern oil fields that could be exploited already. We also need to innovate regarding heavy and long-range transportation. Green hydrogen as fuel is a profiled target in this area. Moreover, Mexico has never invested more than 1 percent of its GDP into innovation. I believe that we need this for the energy market.
Regarding the Paris Agreement, the energy transition act excludes combustion generation, including natural gas, as a clean energy source for power production. If this production has a quantity of greenhouse gas emission greater than 100kg of CO2 per megawatt-hour, then it is not a clean energy. For Mexico’s combined cycle generation, the average is 400kg, meaning we are way past this line. For instance, nuclear power is also considered clean energy but Mexico is not investing in this area. There is a great deal of work to be done here. In 2020, we saw the highest generation of clean energy in the country, averaging 24 percent. This happened because of the results of the three long-term auctions, most of which entered into operation this year. This volume will not be generated again. Furthermore, hydropower saw a surge this year due to increased water resources and the effects of the pandemic. This means that we are far from the 35 percent clean energy Mexico committed to. We will have a deficit of around 50TW by 2024. An average annual growth of 3.25 percent of renewable capacity would be required, which we could achieve if Mexico implements a favorable regulatory framework and the long-term auctions.
Q: How do you assess the effects of Mexico’s increased reliance on imported natural gas?
A: In Mexico, the concept of sovereignty is often discussed, and plans like the Dos Bocas refinery supports this notion and policy goal. The fact that we import so much gas undermines this. The US only exports dry gas. It does not export ethanol and other beneficial liquids associated with gas production. Mexico’s main focus is on the petrochemical business, where these byproducts generate much added value, whereas dry gas does not.
The US also could ban fracking. There are many false myths regarding fracking. Nevertheless, a ban might still happen, especially now that the Democratic Party has shown a commitment to it. If this happens, Mexico might face uncertainty concerning our energy because we are not exploring our own resources. Eventually, Mexico might be forced to produce its own gas. Studies conclude that the country has promising potential for gas production in the northern part of the country. If an affiliate of PEMEX or CFE decided to start natural gas production, it would be a great boon for Mexico.
Q: What does Eon Energy want to accomplish in 2021?
A: We are looking to consolidate our portfolio. There are many companies that have the amount needed to be offtakers, with more than 1MW, but many are not aware of this. Therefore, our goal is to educate potential customers and provide them with various solutions with renewables at cheaper tariffs than what other competitors in the market are offering, thus empowering the customers through the provision of actual knowledge on its own electric consumption. Furthermore, we aim to consolidate our investments regarding infrastructure and financing.
Eon Energy is a trading and supply company involved in the Mexico’s Wholesale Electricity Market. It focuses on smart energy solutions for a wide variety of clients, offering different and innovative tariff structures.