Incentives, Regulation to Improve Transmission Infrastructure
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Incentives, Regulation to Improve Transmission Infrastructure

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Sofía Garduño By Sofía Garduño | Journalist & Industry Analyst - Wed, 03/01/2023 - 17:11

Mexico has great potential to become one of the leading forces in the global energy transition. Yet no matter the resources the country may have, further regulation to guide an efficient path to net zero is necessary. What is more, Mexico faces another challenge of equal size: updating its transmission infrastructure to make the transition possible.

“Mexico is a challenging but manageable market and has much lower risks than other countries,” said Alexander Braune, Associate Partner, ERM. 

Transmission infrastructure refers to the systems and equipment used to transport electricity from power plants to end users. This infrastructure includes transmission lines, substations, transformers and other equipment.

Mexico’s transmission and distribution infrastructure has long since been identified as a weak point in its clean energy transition strategy. “There has been no major development in power transmission in the past 10 to 15 years,” said Carlos Corona, Business Development Director, Siemens Energy. To many industry analysts, this is no surprise: Mexico’s geographical, technological and financial constraints prove challenging. If Mexico is to improve its grid system, public-private cooperation will be key, argued experts.

While new technologies can be groundbreaking for energy, there is no one-size-fits-all solution. Experts concur energy planning implies considering the specific context of the area where new technologies ought to be implemented. Besides the benefits of an energy transition, the shift also comes with plenty of challenges. “The future strategy concerning the transmission network must be planned not only to improve its capacity but also considering energy intermittency and quality,” said Fidelmar Molina, Utilities Sales Manager, Hitachi Energy. 

The incorporation of new energy sources, often intermittent in nature, into the energy matrix has challenged the operation of grids around the world, forcing systems to evolve toward higher efficiency to achieve decarbonization. Intermittency can exacerbate existing challenges and weaken the grid's ability to absorb disturbances. “There are parameters that have to be dealt with, such as intermittence and mitigating inertia,” explained Molina. 

Mexico’s transmission infrastructure has faced much stress due to an increase in power demand and a lack of maintenance or expansion. The country needs to prioritize investment to meet the rising electricity demand and gain a grid capable of efficiently incorporating different energy sources, say analysts.

Nevertheless, transmission infrastructure is costly and therefore it involves heavy public investments, which puts pressure on the public budget. It is not possible to move forward with an energy transition without looking toward transmission infrastructure and technologies to modernize it.

Industry insiders believe that changing how incentives are applied could improve this scenario. “Incentives should not be aimed toward power production but instead at boosting how offtakers consume it,” said Eduardo Andrade, General Director, Burns & McDonnell. Tools such as the Grid Code, a tool meant to boost energy efficiency from end users to the benefit of the grid, already exist, as do technologies that may improve its functioning. Nevertheless, companies are unlikely to spend money to ensure Grid Code compliance or use beneficial technologies without proper incentives.

it is also essential to prioritize sustainability and decarbonization. “We are not seeing any technical business plan not aligned to a strategy that seeks both social and sustainable benefits,” added Braune

When talking about transmission, the effect of sulfur hexafluoride, a greenhouse gas used as a high-voltage dielectric, cannot be ignored. Technologies have been developed to replace this gas but Mexico has not yet implemented this solution, which would help it to reach sustainable objectives. “Hard work is done to generate the most optimal energy that is aligned with the decarbonization process. But to achieve this, we must work with CRE since clear and precise rules are needed,” added Corona.

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