José Arosa
President And Ceo
AES Mexico
View from the Top

Hybrid Solutions Provide Different Technology Generation Profiles

Mon, 02/25/2019 - 16:31

Q: What is AES’ primary contribution to Mexico’s energy transition?
A: AES has a long-standing relationship with Mexico. In 1997, AES participated in the recently created CFE IPP program and was awarded the 505MW Merida III combined cycle plant. The energy generated by Merida III is sold exclusively to CFE through a 25-year PPA. The plant became operational in 2000. In 2007, AES acquired Termoeléctrica del Golfo and Termoeléctrica Peñoles. It launched a restructuring process as both assets had technical issues. In 2015, AES closed a JV agreement with Grupo BAL called EnerAB. EnerAB will drive AES’ growth and we have recently closed our 306MW Mesa La Paz wind project in Tamaulipas. As AES has pledged not to develop coal-based plants, EnerAB will exclusively focus on clean energy projects.
Q: What other initiatives comparable to EnerAB and Fluence do you have in the pipeline?
A: As an early bet, AES created an energy storage division in 2007, which turned into Fluence in 2018, a JV between AES and Siemens to provide energy storage solutions. Fluence had already developed energy storage projects in Chile, the Dominican Republic, Philippines, the US and the UK. Energy storage has vast potential in Mexico but the regulatory framework to include it in power generation projects has to be more defined.
AES also created a technological incubator called AES Next. We are an IPP at our core but we are also interested in other sectors. For instance, we closed a deal with a Washington DC-based drone company called Measure, which generates value for AES in terms of O&M services. It was able to substantially reduce AES’ maintenance times at our power generation assets by using drones for inspection work. We also have acquired a Denver-based company called Simple Energy, which is specialized in data analytics, and we are also active in desalinization projects.
Q: What recent project best showcases AES’ added value in Mexico?
A: The Mesa La Paz 306MW wind farm located in Tamaulipas demonstrates our abilities well. It operates under a long-term PPA signed with a mining company. It is the first project in Mexico to be financed by private US-based institutional investors with a green bond facility that closed on May 21, 2018. It is under construction and we expect it to be operational in October 2019. AES is consistent in its expansion strategy, rooted in a clear focus on long-term bilateral PPAs. It has become an increasingly complex task given the increased competition and interest in bilateral PPAs from private off-takers, which request greater sophistication levels in contract design.
Q: What are the comparative advantages of AES’ PPA approach?
A: AES’ goal is to invest a total of $2.5 billion in clean energy projects by 2023. Renewable energy’s cost structure makes it extremely attractive for meeting energy consumption needs. The primary advantage lies in renewable energy’s total autonomy from commodity price variations. Variation in renewable energy generation can be minimize by mixing with other technologies, even though resource studies is one of the most critical parts of renewable energy development. To cater directly to private off-takers, EnerAB is registered with CENACE as a qualified supplier. We are able to provide different technology generation profiles to our clients using hybrid solutions.
Q: How are you cementing the foothold of your energy storage venture?
A: Mexico still has to provide the regulatory framework for energy storage assets to become part of the country’s power generation landscape. We are working closely with CRE and the Secretary of Energy to explore the possibilities for creating this solution and capitalizing on the vast potential of energy storage in Mexico. Baja California has taken significant steps forward and energy storage could provide viable solutions to the Yucatan peninsula’s regular power struggles.