Making Sense of Mexico’s Vast Energy OptionsBy Cas Biekmann | Thu, 07/15/2021 - 10:52
Q: How does Enerlogix assess opportunity for its clients in terms of energy choices?
MM: The opportunities that exist since the enactment of the 2014 Energy Reform has allowed them to take control of their energy portfolio because they no longer are subjected to a monopolistic energy sector in Mexico. For many large industrial players, natural gas and electricity costs are considered among their Top 5 expenses. It is a vital piece of their daily operations, so customizing energy strategies to mitigate cost risk and foster budget certainty by designing corporate energy plans makes good sense. This meets their own needs but also that of their clients that require sustainability programs in their value chains as part of their own decarbonization goals. Uncertainty exists around the current administration’s policies, which are averse to the Energy Reform. Ultimately, we believe customers know what is best for their energy needs as opposed to a monopoly. Choice is what the Energy Reform offers. This opportunity will continue to exist in the near future, despite uncertainties. Building internal expertise might not be the best option for a company, which is where Enerlogix steps in, making it a simple decision for the client.
LM: We recently spoke to a large-scale industrial energy user, with 35 plants in their Mexican portfolio. For three years, they were interested in joining the Wholesale Electricity Market (WEM) but did not do so because of political uncertainty. As time passed, they could see that the changes were perhaps not as drastic and that the market still exists. They decided to reach out once again because they recognized that now is the time to be proactive and take control of their considerable energy expenses. This is where Enerlogix can bring value: providing information to large industrial players, often with an international profile, to help them fully understand what is happening in Mexico.
Q: How does the company’s international experience help to better explain the situation the WEM finds itself in?
MM: I worked for a US retail power company for many years and gained a great deal of experience that led me to understand Mexico’s relatively new WEM. The law might have passed in 2014 but the market did not really become transactional until 2018. There is a great deal of doubt when the market switches away from a national electrical utility for energy users, especially regarding stability and reliability. Plant managers do not like to take unnecessary risks that could jeopardize production goals. Taking experience from markets in the US, especially in Texas, I can say that Mexico’s market rules were very well established, with strong similarities to the US’ PJM market. SENER and Jeff Pavlovic should be praised for designing that model, which we knew would be successful if given the chance to be implemented because the PJM market is one of the best markets in the US. Many US and European companies that operate in Mexico are familiar with this model design. Many players have already transitioned to the WEM and are seeing the benefits of lower costs, budget certainty and the ability to design specific corporate energy programs to meet their needs. In the end, this is what it is all about. Being an early adopter in other markets has helped us support these moves through our experience. Many of the early adopters in the Mexican energy market are US, European or Asian companies familiar with the market’s setup, which has been a huge help in developing the market. Uncertainty is slowing down the decision-making process, but many international players are still moving forward.
LM: Having this experience in deregulated markets and how its solutions are constructed, Enerlogix can help design the most appropriate product to meet a customer’s needs with the help of qualified suppliers. With our understanding of the market, we can customize this product to a tee.
Q: How does Enerlogix help convince clients that are interested but reluctant to transition to the WEM?
LM: I would stress that the regulatory framework of the WEM is functioning well. It has been protected and reinforced by Mexico’s judiciary. After all, the rule of law is still the rule. As long as this is enforced, offtakers have certainty whenever they sign a bilateral agreement that this will be backed up. The political situation has made some big players reluctant to take the final step but eventually they recognized that the market remains as it is. When you add up all the lost potential savings for such players over the last three years, you see that they left a huge amount of money on the table by not transitioning earlier. Part of Enerlogix’s role is to ensure that the nature of an agreement is truly aligned with a commercial offer, so that there are no surprises when the energy bill arrives. Certainty is, therefore, very much defined by how the agreement is written and negotiated.
Q: How does Enerlogix work to inform clients regarding all available options?
MM: Our only commitment is to the client. We help them understand how to navigate a new market structure. Like any new market, Mexico’s players face uncertainty because they have not amassed experience in signing contracts and operating in the market. Many of these companies have corporate energy or sustainability programs originating from their head offices. Our goal is to help these companies where they are currently at, what the possibilities are and how the market operates. In addition, we help companies understand how they use their energy, then we sit down and develop an energy program for them, often aligned with their corporate energy plan. The client decides what is most important to them: for some, costs are crucial, but for others it is all about compliance with renewable energy sourcing. We then go to the market to locate and procure energy from a qualified supplier that aligns fully with their goals.
Q: Where is Enerlogix looking to develop further in 2021?
LM: Enerlogix is a pioneer in the Mexican market, bringing along its competitive advantage for the past five years. As time passes, we must make sure that our services still go above and beyond what the customer is looking for. Our core business is to inform our customers about their options and to provide them with advisory and thought leadership regarding their energy management. We wrap this inside a more international framework, but we aim to be comprehensive above all to help clients reach their sustainability. To this end, we look toward the WEM but other options like distributed generation exist as well. As neutral and independent advisers, we must make sure that we broaden our spectrum to include all these possibilities.
Enerlogix Solutions provides energy solutions for its clients in the industrial and commercial segment. The company focuses on consulting in energy management and efficiency, as well as wider sustainability goals.