Global Expertise Tackles Local IndustryWed, 02/22/2017 - 14:06
A common theme across the many segments of the Mexican energy industry is the continued lack of clarity regarding the sector’s regulatory framework. That is hampering investment as potential players hold back, waiting for the air to clear, say Jorge Machuca and Salvador Diliz, commercial directors at Cummins Power Generation.
In the energy sector the biggest challenge we all face is regulation,” says Machuca, Commercial Director of Power Generation Hispanic America. “It was an advance for the market that companies can produce their own energy and commercialize it. The disadvantage is that the regulatory framework is not clear yet. There are many gaps and the secondary laws that should come from institutions like CENACE and CRE are not yet ready.”
For Cummins Power, these processes are taking too long and the uncertainty in the regulation has resulted in low energy prices that might not reflect the reality of the production and commercialization costs for some companies. Says Machuca: “Energy should have a real cost. If gas prices rise, the energy price should too and it does not happen this way. While the laws remain unclear, investment will not flow in. Many investors want to enter the market but they are wary about how the rules are changing.”
Cummins Power Generation, a unit of global engine maker Cummins Inc., has a history that spans over 75 years in Mexico. The company, currently in the business of designing, manufacturing and selling diesel and alternative fuel power units, says that even if power generation is not always an easy task, it has all the ingredients necessary to ensure success in the changed landscape of the Mexican energy industry, including the experience it brings from a presence in over 190 countries. The company entered the Mexican market through a joint venture with the government called Dina Cummins. It started working independently in 1987.
Cummins’ global reach brings with it another advantage: compliance with international standards. The company’s solutions comply with several international certifications like the US Environmental Protection Agency (EPA), the California Air Resources Board (CARB), American UL and European EUR. “Only a global manufacturer can invest in these types of certifications,” says Machuca. “There is an attempt by some local manufacturers to try and stop the environmental changes and reforms in Mexico because it is not in their best interest but we do not worry about it because we already comply with the highest standards and regulations.”
Regardless of the challenges ahead, the executives remain confident in Cummins’ position as one of the main players in the Mexican energy market. “In the future, if there are 100 opportunities in the market we expect to approach 95 percent of them and from those we hope to take over a large percentage,” Machuca says. “Our wish is to have a market share above 50 percent as we do in the automotive market.”
The company’s decades of experience in power generation come in handy as it enters a new sector, Machuca says. “We have a lot of experience in the natural gas and renewable energy market. In Europe, we have more than 50 years working in co-generation and in the US, 25 years working with natural gas and renewable energies." In Mexico, Machuca adds, Cummins is new since only after the Energy Reform were private companies allowed to generate energy for selfconsumption. "Cummins Power has always been interested in both markets. First diesel because it has always been there and it is trustworthy. Then gas because it has a smaller carbon footprint and offers better balance between benefits and prices. Natural gas is a new trend in Mexico. Some years ago, the country did not have pipeline infrastructure to reach the industrial areas,” he says.