Expanding an Energy Generation PortfolioWed, 02/22/2017 - 13:45
Q: How does IGSA deal with uncertainty in both electricity and natural gas prices?
A: Uncertainty has made clients wary of long-term commitments with a single energy supplier, which has made PPAs more difficult to negotiate. Before, it was possible to close contracts by offering electricity costs below CFE’s tariffs but now it is difficult to compete on electricity prices. Natural gas is the highest cost for cogeneration power plants, which is a particular issue because natural gas prices are out of the company’s control. Fortunately, we can manage this uncertainty through hedges, futures and other mechanisms for settling costs and defining a sales price.
To start a new project we usually look for anchor clients and offer them a reduction in its energy-related costs based on volumetric consumption. Our process can reduce a company’s consumption, for example, from 10 to 8 trillion BTU. An anchor client is the main company for which we build a cogeneration plant. Anchor clients consume all the plant’s thermal energy and most of its electricity while nonanchor clients consume the remaining power. Since thermal energy needs to be immediately consumed, we design our cogeneration plants right next to the anchor client. Non-anchor clients have to pay for the transportation and logistics costs related to the amount of power consumed.
The process to sell surplus electricity will change with the new legislation so our upcoming projects will be developed accordingly. We will sell our surplus production through the Wholesale Electricity Market (MEM) where all bilateral contracts will be regulated by CENACE and all the transmission rights will be covered by us.
Q: How does IGSA’s energy division collaborate with other companies to ensure a project’s success?
A: IGSA’s energy division focuses on gas-based generation projects but is now starting to develop solar energy projects, already with prospective clients in the pipeline. Our energy division will provide everything from the installation of solar parks to operation. We plan to establish partnerships with solar panel providers and to take charge of the project’s installation and operation.
IGSA has a special division dedicated to backup power to guarantee 100 percent available energy supply to our clients. Our critical support division seeks to safeguard servers that cannot tolerate electricity shortages at any time. We have a diversified portfolio of projects and services, supporting the development of our renewables and cogeneration power plants but we still lack an energyefficiency area to complement our offer.
Q: How will IGSA participate in the MEM?
A: We are participating in the spot market as generators. Our goal is to become qualified suppliers and to sell energy in the power market, either from our power plants or as representatives of other generators. We are in an advantageous position because we are seen as clean energy producers and this is the first type of energy to get dispatched in the market. In this way we can guarantee a steady power supply to our clients. There are other types of producing technologies that may be forced to shut down at certain times to make room for clean energies, which have marginal variable costs.
We are already selling energy in the market through bilateral contracts and we have a number of companies willing to buy our surplus electricity. However, we cannot cover the demand with our current capacity so being a qualified supplier could help us meet this demand while we develop more power plants.
Q: Which areas do you expect will grow the fastest within IGSA’s energy division and why?
A: Our focus will be on cogeneration and renewable energy. At the moment, we are betting strongly on solar energy because it requires less investment and has fewer concerns regarding social responsibility than other technologies, such as wind farms. For 2017 we expect to acquire three contract to build cogeneration plants in 2017.