Gonzalo López
former Business Development Director

Many Sectors Can Provide Cogeneration Off-Takers

Wed, 02/19/2014 - 15:16

The North American boom in shale gas, and the resulting low natural gas prices, made Mexico a very attractive region to invest in for companies such as Sampol, a firm that specializes in cogeneration. “The price of natural gas is expected to remain stable for the next 10 or 15 years, increasing the profitability of our natural gas fueled projects and considerably reducing the amortization time,” says Gonzalo López, former Business Development Director of Sampol. Mexico represents 30% of the company’s total sales and projects have been developed from Playa del Carmen with Mexican engineers that travel to the Dominican Republic, Costa Rica and Jamaica. Cogeneration companies are benefiting from the needs of industries that cannot afford to lose their power supply but are at risk of experiencing downtime, and suffering the resulting economic losses, when CFE is not able to provide them with electricity. “Today, any malfunction or damage caused by a company to its customers can have a strong negative impact since information travels very fast. It is very hard to build a reputation, but it is even harder to make up for the failure to deliver on promises,” comments López. Cogeneration systems minimize power failure risks since the generating equipment is located at the point of consumption, avoiding the need to transmit electricity over long distances. “But one of the main disadvantages of cogeneration is that thermal energy cannot be transported over long distances,” says López. “This type of energy can be transported 2km away at most. This is the main difference with electric energy, which can be transported nationwide by using CFE’s grid and paying wheeling costs.”

Sampol has bet on a diverse portfolio of cogeneration products and technologies. “We work with different engine companies, such as Cummins, Rolls Royce and Caterpillar among many others, in order to provide the most suitable solution for the needs of the client,” comments López. “We have developed the capability to integrate the best solutions with different technologies and coordinate them to easily replace equipment by reconfiguring the system. On the other hand, international companies such as Siemens and Schneider design a whole system, manufactured with their own components. At Sampol, we integrate the systems with the best fit of components based on their purpose, not their brand. Nevertheless, the final decision will always fall to the party acquiring the system.”

A diversification of the energy mix is recommended and Mexico has different areas in which cogeneration projects could prove successful. “We have developed both greenfield and brownfield projects for hotels, airports and railways,” says López. This echoes the fact that many different sectors of the Mexican economy can become off-takers for cogeneration projects. The development of Mexico’s electric railway system has been included in the National Development Plan, offering big opportunities for cogeneration. “The railway sector is a priority and we want to apply the experience we have gained in Europe on any projects using electricity to drive engines,” López explains. For the moment, the vast majority of Mexican locomotives run on diesel but electric trains are being explored as an option. The transportation sector as a whole could prove to be a key business opportunity for cogeneration systems as airports are another important potential client. “We want to be near industries that want to increase their energy efficiency through cogeneration or PV. We are aware that projects of all sizes will be developed in the future,” concludes López.Another way for Sampol to diversify has been to offer EPC, operation and maintenance services to its customers. “We can be in charge of everything related to the project and sell electricity and heat at the moment of consumption, if we have a guaranteed consumption rate,” states López. Before signing up for cogeneration solutions, companies must also decide whether they prefer to produce their own energy or engage in PPAs to fulfill their energy needs. For a project to provide the optimal solution on a client-by-client basis, it has to be analyzed economically by both the provider and the consumer. However, industries that cannot afford to have power failures at any time may not mind paying more as long as they can be sure they will receive a guaranteed, uninterrupted source of power. “Our clients need only be concerned about their core business as we will handle all issues related to power generation. This implies higher costs, but Sampol commits to its services in a contract. If anything goes wrong, we will assume the penalties,” says López.