Hans-Joachim Kohlsdorf
Founder
Energy to Market
/
Expert Contributor

Looking Forward to Electricity Sector Opportunities

By Hans – Joachim Kohlsdorf | Tue, 02/16/2021 - 14:02

The year 2020 was marked by the pandemic and a few topics that hijacked the discussion and the sector’s attention. These were all very important issues without a doubt, with a strong impact on companies and the stability of the electricity grid. However, the significant media attention on these problems and the lack of positive news from participants in the sector overshadowed the impressive boom in the electricity sector and slowed the development of the potential offered by the private market.

For many companies such as Energy to Market, E2M and a major group of industrial companies, 2020 was a year of major tenders for energy purchase and modernization of electrical solutions. We also have great opportunities in 2021 and technology is advancing strongly. We must redouble our efforts and propose innovative solutions. Modernization, more than discussions about how to interpret laws, will mark the future of our industry.

The Issue of Energy Quality

All market participants recognize the serious problems affecting our users and the high costs they must incur to fix them: blackouts, micro blackouts and voltage and frequency variations lead entrepreneurs to make significant investments in emergency diesel generators, voltage regulators and UPSs. At the very least, compliance with the current network code must already move forward without further delay and without arguing lack of knowledge on the part of consumers or generators. Sadly, the only quick way for this issue to be implemented seems to be the collection of fines by regulatory bodies. In addition, we must start a discussion on how to update the network code to include technological advances in topics such as inverters, batteries and smart grids.

The Issue of the Electric Market

During 2020, we experienced a strong boost to the Wholesale Electricity Market (MEM by its Spanish acronym). On the energy supply side, I want to highlight the excellent advances of the generating sector to ensure that its offer aligns with the requirements of consumers and not just financial requirements to leverage new generation projects. I would also like to mention the favorable impact of the cancellation of auctions for the development of the private market. Not having the government (CFE) as a big buyer sensitized lead generators to offer interesting options to their customers in the industrial and commercial sector. Distributed generation also made considerable progress and we already have a good number of excellent companies that design and build these plants, whether solar or  cogenerations. Also, for these solutions, companies discovered the advantages of flexibility when interconnecting with the MEM.

The Issue of Fuels

Critical news is also prevalent here. By way of summary, today, approximately 85 percent of our gasoline and diesel and an even higher percentage of natural gas come from the US. In the media, we still read a lot about coal, although there is no news of a single new coal plant being built. PEMEX, and therefore Mexico, do have a serious problem because of the amount of fuel oil that is being produced and for which there are no longer relevant customers other than CFE. Let us not lose sight of the significant impact of natural gas on our power generation matrix and its growing impact as a significantly cleaner and cheaper fuel for vehicles than traditional fuels, especially diesel. The start of operations of most natural gas pipelines also significantly boosted cogeneration and on-site generation. The availability of cheap natural gas presents great opportunities for the business sector and will have a positive impact on the country's competitiveness. The business sector still has to negotiate a reduction in the cost of gas, including the transport component with the distribution companies, and replace more and more boilers with engines and turbines to supply the thermal energy required by their processes.

How Do We Drive These New Opportunities?

On-site solar generation is growing impressively. We already have facilities equivalent to a thousand MW installed and we continue to grow. But this success must not curb important technological innovation to ensure the good quality of our network. Many of us support increasing the maximum size of the exempt generation from 0.5MW to 1.0MW. For ease of projects, however, the solar sector must drive innovation and accompany this new regulation with clear standards on inverter quality and battery integration. Environmental benefits and short-term savings should not lead us to neglect the technological modernization that would further strengthen our sector. As energy associations we have not supported companies that promote these modern technologies and we have not "educated" business chambers in leveraging them. I daresay that 90 percent of users do not know that, with the installation of a very simple and economical battery, their panels would continue to operate in case of increasingly common blackouts and help replace voltage stabilizers, regulators and UPSs. 

Cogeneration will benefit the most diverse industries, from greenhouses in the agro-industrial sector to modern data centers. Both industries are growing in Mexico at rates close to 20 percent per annum and we still are not taking full advantage of their potential. Cogeneration also supports industries such as food and beverage, paper, pharmaceutical and cold chains in the logistics sector. Here too we must promote technological modernization by including batteries in our solutions and integrating our power plants into the MEM in order to generate maximum profit. Similar to the solar sector, contractors still prefer selling solutions by repeating the pre-reform argument and thus, generating only the equivalent of electricity consumption and not meeting the total thermal requirements. Many companies that are installing cogenerations must still keep their old boilers in operation.

Cooperation Between Sector Partners, Business Chambers

The sector has received significant support from several chambers regarding lawsuits and legal certainty to protect investment. I suggest that we further initiate a constructive and innovative dialogue on great joint opportunities and shift the attention to the future, rather than looking only at past problems. As an energy industry we can only benefit if we are able to generate knowledge and confidence in the business sector. On the one hand, the business sector represents important opportunities if we see them as customers, but on the other hand, industry associations must take advantage of these opportunities to increase the manufacturing of equipment in the country, an issue that seems tailor-made for CANAME that includes among its members companies of great technological prestige and could be an excellent ally for the energy sector by increasing the content produced in Mexico. Another sector that is experiencing a major boom is software related to technological innovation in the electricity sector. CANISOFT, although it brings together a very important and innovative group of companies, does not yet include among its categories the electricity sector and does not offer related opportunities for the industries to which its customers belong.

As an electrical sector we can do a better job in conjunction with the business chambers and their energy areas. Here, I would like to highlight the efforts led  by Sergio Ampudia Melo  and  the group of entrepreneurs who are promoting the National Chamber of the Energy Industry. Energy to Market, E2M supports the creation of a chamber as part of CONCAMIN that brings together the countless sectoral associations and promotes the interests of the country's entrepreneurs.

As a sector, we must also get closer to the country's major universities to modernize their program content on issues related to electricity and its complementary processes.

We have many challenges but even more opportunities in 2021 to take advantage of these opportunities and generate even greater development of the national electricity sector.