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Analysis

Future of Mexico's Clean Baseload Power Sources

Wed, 02/24/2016 - 17:56

Mexico is moving towards a greener energy mix by phasing out of coal and fuel oil-fired power plants in favor of natural gas and renewables, which will alter the county’s balance between base load and intermittent energy sources in the country’s energy mix. Base load power plants using nonrenewable fuels include coal-fired and nuclear power plants, while renewable energy sources such as geothermal, and hydroelectric power plants can also provide base load power. Nuclear power plants are notoriously expensive and time consuming to build and do not offer flexibility to match fluctuations in energy demand, however, they offer a low energy cost per Kwh generated, which is alluring for emerging economies like Mexico that need access to affordable energy to fuel their economic growth.

Geothermal power is gaining favor in markets around the world as global capacity equates to 10.7GW, and the US leads the way with 3.1GW online. Mexico is the fourth largest producer of geothermal energy and up to 2015, the installed capacity reached 830MW. The gross power generation between January and July 2015 was 3,094GWh. As a result, geothermal represents 1.3% of effective capacity in the country. The presence of nuclear in the country is deeply rooted in the need to reduce its reliance on dirty energy sources. Given that in the coming few years Mexico will increasingly rely on natural gas, it is expected that nuclear may recede into the background. So far, natural gas contributes 2.2% to the energy mix and its capacity has increased from 1,400MW in 2014 to 1,500MW up to July 2015, its future capacity and role in the energy matrix lies in the hands of the government and whether it will opt to develop its nuclear capacity even further.

Hydropower is the crowning glory of baseload power sources, and compared to the other two, represents a more active investment from the private sector. In 2014, there was an installed capacity of 12,268MW in operation distributed across 17 states, including mini hydro projects of 30MW or less. The gross energy generation has steadily increased.

In 2014 it reached 38,144GWh and 2015 promises similar  results given that the effective capacity has increased to 12,293MW and up to July, generation had already reached 17,582GWh. Enrique Ochoa Reza, Director General of CFE, explains the pivotal role hydropower plays in production of high rainfall, and as a result, the level of hydroelectricity production was high, which in turn led to efficient electricity production and lower prices for consumers.” The giant of hydropower, CFE, plans on developing a brand new facility located in Chiapas called Chicoasen II and revamping an existing power plant in Temascal, Oaxaca. These will add 254MW of installed capacity and increase CFE’S hydroelectricity capacity by 2%. Of the three baseloads, geothermal and hydropower will continue to hold sway in costs and electricity prices for consumers. “2014 was a year Mexico’s evolving energy matrix, while nuclear is expected to remain on the bench for the coming years.

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