Mexico Takes a Step Toward Grid Stability,100 Percent Renewables

Mexico’s electricity sector had to wait until the last day of 2021 to receive the best news of the year. On Dec. 31, the Official Gazette of the Federation officially posted the second version of the National Electricity Grid Code, which establishes the criteria for better efficiency, reliability, continuity, security and sustainability of the SEN (National Electricity Grid). Whether it was the date or a general disinterest from the public, not a lot of attention was addressed to a publication that might just be the only concrete countrywide action taken toward a more reliable electricity grid and an important step on the path to renewable generation. 

Originally published in 2016, this new version holds key differences that indicate a stricter surveillance with clearer obligations but with the same fierce repercussions (fines of 2-10 percent of net income or minimum salaries of MX$50,000-MX$200,000 (US$2,400-US$9,700)). The document now specifies exactly who are the obligated, to what extent they are obligated, and the compliance requirements. It even officially includes the document template that needs to be submitted for conformity with the code. From my perspective, this version is no longer in the experimental phase (which might have been the case with the original) but has learned from its first implementation and is now actively establishing timelines and clear binary requirements, with guidelines and documents necessary for its completion. It is the authority’s invitation to comply by saying: here are the instruments, the formats, the steps and everything necessary so that you can satisfy all requirements in the given timeline. For me, the composition of the document points to a stronger surveillance and stricter monitoring of the code that will only result in a higher policy adoption rate and thus a more reliable grid.

This is great news, considering that the obligations apply to ALL players in the industry: generation, final users, intermediaries (CFE Transmission and Distribution) and even regulatory entities, such as CENACE, CRE and SENER. In my opinion, it is the first recent, unbiased document that prioritizes the reliability of the electricity system rather than following the interests of specific players. A clear example is the modification in the merit order of dispatch where renewables are being lowered and hydroelectric and nuclear generation are given priority. Although it is not the optimal economic dispatch order, it is important to consider that it is not an economical matter but rather one of reliability of the system as a whole, regardless of individual benefits. It is this “raison d`être” that is being respected throughout the whole document and which I find appropriate given Mexico’s current energy situation.

Reliability of the grid has been the main catalyst of the long-term dispute between the public and private sectors and, ultimately, a hindrance for accelerated renewable generation entry. On the one hand, private companies are eager to take advantage of Mexico’s potential for renewable generation (as seen in the 2017 auctions), as it makes a strong business case and the demand is more than available. On the other hand, public authorities have in their hands an oversaturated national grid (mainly because of a 40% increase in consumption since 2010 and the little investment made in grid infrastructure) that becomes only more fragile with intermittent generation. Documents and policies such as this one that directly attack the reliability problem head-on, and with no beneficiary but the grid itself, is just what the country needs to settle this long-term dispute. 

In a previous article, I noted that, “my advice for Mexican policymakers in the short term would be to direct efforts to generate incentives that target high-impact solutions through a regulatory approach such as drafting regulations that require use of storage, for example Código de Red.” With the regulation now drafted, I believe it is now the role of energy solution providers, such as Quartux, to inform and offer the appropriate solutions for the established requirements of obligated players. One clear example is smart energy storage implemented for final users that need to comply with the new code’s energy quality requirements. This solution helps increase power factor, regulate frequency and voltage while simultaneously providing savings in the electricity bill. Additionally, with smart software and monitoring, such as Quartux Control, the user also complies with the digitalization and data transmission requirements set by the law.

Smart policies will accelerate the deployment of smart solutions. These in turn will solve the problem the policies set out to tackle. In this case, solving the problem of grid stability is necessary for a country with a potential to generate more than 100 percent of its energy through renewable (but intermittent) energy sources. Policies such as this one, paired with innovative solutions (i.e. smart energy storage) will drive Mexico’s electricity sector in the path towards net zero.