Flexible Energy Strategies for Mexico’s Industry: Luxem

Q: How has Luxem evolved in recent years in response to regulatory and market changes in Mexico’s energy sector?

A: Since 2023, Luxem has experienced significant growth. We have entered industrial sectors we had not previously served and are now working more closely with clients in the automotive and food industries. Currently, we are operating more than 50MW of capacity in qualified supply.

A turning point for Luxem has been the need to respond to constant regulatory changes and market challenges, particularly the lack of generation in the system. This led us to explore other sectors, primarily natural gas.

Luxem holds a permit to commercialize natural gas to industrial and commercial clients. We have focused on offering solutions that provide price certainty. Through financial gas operations, we aim to shield clients from the volatility of key gas indexes by securing fixed prices. Additionally, we have begun to represent power plants. This shift has helped us to get closer to generators and better understand the challenges they face in the electricity market.

Q: Why did Luxem decide to enter the natural gas commercialization space, and how are you addressing client concerns around price volatility and sustainability?

A: Natural gas is the fuel of the energy transition, so we recognized the need to focus on it, not just as part of the electricity supply, but to address the entire value chain. Gas consumption in Mexico is also on the rise, making it an area worth promoting.

Gas prices in Mexico are tied to US indexes, since most natural gas here is imported from US basins. That is why we have focused on how to give price certainty, not only to direct natural gas consumers, but also to electricity consumers whose supply contracts are tied to gas prices. Both gas and electricity bills can fluctuate depending on those US indexes. While that volatility cannot be controlled, it can be mitigated. This drove our natural gas commercialization business with end clients, as well as financial hedging solutions. Gas remains essential for industrial processes, and it is crucial to provide clients with tools to manage that volatility.

We have not abandoned sustainability, however. We are still actively working in the electricity market, seeking clean generation sources such as solar, wind, and even small hydros, and connecting with generators who can provide clean energy to our clients. We also offer certificates, beyond the mandatory Clean Energy Certificates (CELs), that help companies demonstrate that their energy consumption comes from clean sources.

Q: What are the key sustainability concerns of Luxem’s industrial and commercial clients, and how are you addressing them through technologies like distributed generation and storage?

A: The biggest concern is how to incorporate sustainability into their operations. Electricity generation is a major input in that context. To help them address this, we offer two main solutions: first, energy certificates that verify their energy comes from clean sources, and second, distributed generation, which aligns with public policy trends and increasing client demand.

We have partnered with other companies to deliver what our clients need. For example, we have installed solar panels for clients under qualified supply schemes to partially meet their energy demand. For clients where we do not supply 100% of their energy demand due to size, regulatory constraints, or other reasons, we have collaborated with strategic allies to implement distributed generation systems. Energy storage is also becoming a major focus. Clients are asking for it, and regulation is beginning to accommodate it. Recent administrative provisions around storage are showing us the direction the sector is heading. These systems will be crucial for improving grid reliability.

Q: How do you see recent regulatory developments impacting investment, generation projects, and the role of storage in Mexico’s energy transition?

A: Regulation had been somewhat stagnant, and there was a clear need to update it, both to lay new foundations and provide greater certainty to market players, clients, and end users. The recent publication of the Electricity Sector Law began to address this. However, more changes are needed, especially through secondary regulations and administrative provisions. I believe we may also see revisions to the market rules, which have not been updated in nearly a decade. It makes sense to rethink them now.

These new rules bring some clarity, particularly for investment. While the specifics on how new opportunities will take shape are not yet clear, we are already seeing movement in the development pipeline for new generation projects. This benefits us as suppliers, because it creates procurement opportunities to meet our clients’ demand, especially for clean energy. Clean generation projects such as solar and wind had slowed due to regulatory uncertainty. Now, storage is emerging as a stabilizing factor. Authorities are recognizing that batteries can make the transition viable by complementing intermittent sources such as solar, wind, and hydro.

Batteries are also now being acknowledged as providers of capacity and ancillary services, which we can procure to meet clients’ needs. Since clients consume electricity throughout the day, and not just when renewables generate, batteries help to ensure supply and price stability. I believe we are on the right path, one that encourages investment in generation and supports broader industrial growth in Mexico.

Q: How is Luxem using digital tools and AI to deliver personalized solutions and optimize energy use for its clients?

A: Our goal is to offer integrated, customized solutions that help clients optimize their energy costs. Beyond securing competitive pricing through our generation portfolio, we are also working with the data we collect as market representatives to enhance consumption efficiency. We have developed various tools over time, including AI, to extract the most value from our clients’ energy usage data. In some cases, we advise on reducing or shifting consumption when it is operationally feasible to do so. We also help clients improve their infrastructure to ensure better quality power.

Not all clients face the same issues, so our solutions vary. Some need help improving power quality, while others have corporate sustainability mandates, so we support them through clean energy solutions and relevant certifications. We are also offering broader sustainability consulting that goes beyond certificates. This includes operational improvements within client facilities. On the tech side, we have been investing heavily to stay current with rapidly evolving trends such as AI, aiming to improve both our internal processes and our clients’ energy efficiency.

Q: What are Luxem’s strategic priorities for growth in generation, sustainability, gas, and cross-border operations?

A: Our plans are closely aligned with current regulatory developments. We are continuing to secure PPAs from power plants and are working toward a balanced generation portfolio, renewables as well as reliable baseload through combined cycles. Luxem has grown significantly. We recently received a credit rating from Moody’s, which has strengthened our position and enabled us to secure more PPAs. Generators want financially strong offtakers, and Luxem’s track record, together with our partners, has helped anchor new projects.

In sustainability, we are planning to launch a dedicated consulting division next year, going beyond certificate intermediation to provide tailored support for clients aiming to meet their sustainability goals. We are also expanding cross-border operations. While we already import and export energy, we are in talks with US counterparts to grow these activities. In natural gas, we will continue developing our commercialization strategy. On the infrastructure side, we see major opportunities in self-consumption and storage as solutions to the grid’s congestion issues. These tools can benefit not only our industrial clients, but also the entire energy system.

Luxem is a Mexican company dedicated to supplying electricity and natural gas to companies. It offers representation services to renewable energy producers in the Wholesale Electricity Market, relying on its knowledge of the Mexican market, combined with the international experience of its strategic partners.