Ground-Breaking Activities for Energy ProductionFri, 02/01/2019 - 17:47
Mexico’s long-term electricity auctions were designed to be technology agnostic. Nonetheless, they have been dominated by wind and solar technologies. Cost has been a contributing factor and other segments should understand this if they want to compete, according to Gerardo Hiriart, Director General of Grupo ENAL. In particular, he points to the geothermal industry. “Geothermal requires higher investments compared to solar and wind technologies,” he says. “It is critical for the development of the geothermal industry to bring down costs and become more competitive, which is why we are strongly investing in that area.”
The group is focusing heavily on bolstering the presence of geothermal in the energy mix. “Grupo ENAL has partnered with a major financing company to further develop its activities,” Hiriart says. “While we already were active in R&D and exploration of geothermal fields, this partnership provides us with further capabilities to increase our presence in project development and with the commercialization of our services.” Hiriart believes this is easily achievable considering Mexico’s geothermal potential. “Mexico has two regions that are rich in geothermal resources: the volcanic strip that stretches from Nayarit to Veracruz, and the Baja California peninsula.”
While those two regions have the highest potential for geothermal development, Hiriart acknowledges that risks related to developing projects in those areas must be considered. “The main inherent risk is due to thin-crust soils usually present in seismic and volcanic zones,” he says. “Developing geothermal projects close to volcanoes is a clear risk, and developers must be aware of the implications.” He gives the example of a geothermal plant in Iceland that was close to a volcano and was in danger of being destroyed by lava flows after an eruption. The company was able to build dikes to protect the plant.
With a clear mandate as a market leader in the geothermal arena, Hiriart says Grupo ENAL’s patent-pending portable geothermal plant will be a game-changer for the development of geothermal fields. “This product has already been awarded the PRODETES prize, as it can begin production at as low as 1MW,” he explains. “This means the
plant allows companies to start producing right after the well has been drilled, also providing important chemical and thermodynamic information related to the well, such as chlorides concentration and enthalpy gas content variations.” Hiriart adds that the government has been open to recommendations to include more reliable sources of energy in the energy mix. “The geothermal law in Mexico gave us and other players in the industry certainty in our activities as it stated the need for developing exploration activities in certain regions, creating positive relationships with educational institutions and CeMIEGeO and investing more in geothermal activities in Mexico,” he says. “The Ministry of Energy is now also targeting exploration of lowenthalpy areas, which have lower risks related to earthquakes and volcanoes.”
Although efforts are concentrated on opening opportunities for geothermal, Hiriart says the full potential of this resource is yet to be unleashed, limiting Grupo ENAL’s presence in the bilateral contracts scheme. “Due to the extremely low prices offered during the long-term electricity auctions, the lack of certainty in the execution of those projects and even the continuity of the auctions, we have decided to work mainly out of the wholesale electricity market by entering into bilateral contracts,” he explains. While the development of a specific auction for geothermal energy is possible, Hiriart is not hopeful a geothermal auction will materialize anytime soon. “Right now, the biggest market opportunity for geothermal technologies is with highenergy consumers that consider this technology’s costs less important compared to the reliability and security of the supplied energy,” he says.
As regulation now requires market participants to consume at least 5 percent of their energy requirements through CELs and geothermal is a fully clean technology, Hiriart says Grupo ENAL wants to enter into more bilateral contracts to help companies meet their CELs requirements. Another advantage of geothermal is that it does not rely on fuel. “The fact that companies stop being vulnerable to variable and rising fuel costs make their cost structures much more stable in the long term,” he says.