Gerardo Pérez Guerra
Vice President & Country Manager
EDF Energies Nouvelles
View from the Top

Jumping Into the Fray Despite Market Uncertainty

Wed, 02/24/2016 - 13:22

Q: EDF is a noted giant in the European market. How will you use this position to seize new opportunities in the flourishing Mexican energy market?

A: When EDF began operations in Mexico some 15 years ago, we saw the country as an ideal platform from which to launch business ventures across the North American market. While EDF already had operations in the US, we saw Mexico as a market brimming with potential. Our strategy is two-fold. Firstly, we are reinforcing our position in the renewable energy industry and secondly, we are broadening our participation in other sectors. At the moment we have 400MW of installed capacity in the wind sector and we have three 30MW solar farms in early stages of development. The group is planning to develop an additional 300MW wind project which will nearly double our installed capacity. The restructuring of the market has enabled EDF to seize opportunities in other sectors, such as hydropower, and the company is monitoring the option of developing projects in those technologies.

Q: What criteria does EDF follow in order to wisely select new business opportunities in the wind sector?

A: The criteria implemented in the wind sector vary from player to player, but a company like EDF must be extremely selective since, when a project is chosen, EDF remains involved for the long-term. The criteria begin with the site selection, addressing important points like social conflict and security. Many companies follow strict security protocols during the construction phase of a project, but do not follow through during the operation stage. Since EDF operates in areas for 15-year periods, we ensure adherence to maximum security protocols. We have regional representatives native to the area where we will operate that understand the cultural nuances. Factors like resources, logistics, interconnection points and environmental assessments are also included in the criteria.

Q: How is EDF attracting new off-takers, especially those that are not familiar with wind power or renewable energy as such?

A: We continue to be interested in large AAA companies as off-takers, but we are looking to diversify our client mix. The ideal situation would be to partner 50% with large companies and the other 50% with a mixture of smaller players. Chain stores are particularly attractive. For example, a coffee chain store may have 300 points of sale, so collectively it becomes a viable off-taker. The drawback is that many metering systems must be implemented in order to maintain control. With 200-300 shops, 400 metering systems would be required. On the one hand, higher revenues and competition are generated with AAA companies, and on the other, volume is more substantial with these smaller off-takers.

Q: How will the project of 2018 consolidate the presence of EDF in the wind sector, and how does this reflect its commitment to the sector?

A: The project originated with the possibility of a second Open Season. We wrote a proposal and we have the largest project so far. We have letters of interest and intent from several potential off-takers; however, this will be decided when the rules of the market are fully established. This project is located in Oaxaca and is close to our existing projects. This is beneficial since Oaxaca is an established region for us and most of our maintenance and operation teams are located there. In the US alone, we have 4.3GW of developed projects, and we wish to replicate this position in the Mexican market. We are placing our trust in the commercialization of electricity, and we are looking to integrate ourselves with a partner that can make this a reality.

Q: What position does the company hold in regards to the newly created market rules, and what are its initial observations?

A: EDF conducted an analysis of the market rules the moment they were presented in COFEMER. The market rules adopted many elements of the US model, which is not a criticism, but we believe that the rules must be adapted to the Mexican market due to its inherent differences. It is important that the voices of large players are heard because they have unique experiences in a wide range of markets that can serve as a guiding force in this transition. Incentives such as the energy bank, green wheeling, and recognition of capacity have been deleted in this new market, and as a result, the projects in our pipeline fall into the legacy scheme. At this stage, we are faced with the decreasing costs of natural gas and we are racing against time. With these conditions, it is difficult to foresee the current bankability of a wind farm.