Mexico’s Energy Future: Innovation, Biomass, and Heat Pumps

Q: How has Electriz prepared for upcoming opportunities in the energy sector, especially with new regulations on distributed generation and self-consumption?
A: Having gone through the previous administration, we never stopped making efforts to build our team and manage talent within the company. I can tell you that today we are fully prepared for what lies ahead. Are we optimistic? Yes, we are quite optimistic due to the major course correction taking place in the energy industry. We welcomed the new Electricity Sector Law. I believe that the on-site generation sector, including distributed generation, now called self-consumption, whether connected to or disconnected from the grid, will prosper and will make business goals much more achievable. So, we are completely ready for this.

Q: What trends and client motivations is Electriz observing in the Mexican energy market, and how is the company positioned to respond?
A: We have noticed that the main motivation of clients in calls we have been receiving over the past four or five months is the lack of sufficient energy in the country. People are eager to invest because the business environment, especially regarding tariffs and duties, is positive for those exporting some products to the United States, and energy is insufficient. Between 20% and 30% of our prospective clients simply do not have enough energy for their expansion plans and need to generate it on-site. Additionally, there is a general trend and philosophy of emissions reduction, and in that regard, Electriz is well-prepared. We have four areas: natural gas generation, biogas, biomass, and heat pumps. Over the past six years, we have been preparing for this, and today we have a portfolio of products and services far broader than what we had six years ago. Clients motivated by emissions reduction see in Electriz a reliable partner and provider for these types of solutions.

Q: How can biomass and biogas contribute to Mexico’s energy independence, and what business potential exists in these areas?
A: Whenever energy is discussed, it is primarily electricity. In the energy sector, we tend to overlook thermal energy. In Mexico, sufficient biomass is generated to turn the energy sovereignty index from negative to positive. There is enough biomass to nearly eliminate natural gas imports, or at least to achieve independence in this area. Unfortunately, the natural gas price makes this very difficult. It is not favorable that natural gas is so cheap in Mexico because it is hard to compete with this fuel. However, I can tell you that anyone with residual biomass has the potential to build a thermal energy generation business. If they have enough volume, they can even generate electricity and create an interesting business from what would otherwise be waste. Industries with residual biomass include agriculture, livestock, the furniture sector, the wood industry, and the sugar industry. All of these produce residual biomass, which can even cost money to dispose of. If they can give value to it through thermal energy, they can convert a current cost into a future business. 

Regarding biogas, the only way I see biogas having sufficient value is by producing biomethane, injecting it into the natural gas distribution network, and selling both the molecule and its attributes. Successfully commercializing biogas as biomethane could be a major business opportunity.

Q: What considerations are essential for biomass energy projects in Mexico, and what lessons can be drawn from international experience?
A: As with any energy project, you must secure the supply source. It would be inconceivable to start a biomass project without assured biomass. The low price of natural gas makes it very difficult to develop biomass energy projects by buying biomass. So, we seek people who have residual biomass that currently costs them money to dispose of. For example, a furniture factory that processes wood will generate sawdust and wood chips. Today, that factory probably pays for the disposal of this sawdust. However, that same factory may need to dry wood in kilns, a process typically using LP gas or natural gas. They could replace it with biomass boilers. We represent two European firms in Mexico, one Italian and one Austrian, to generate thermal energy from residual biomass, choosing the brand depending on the project. 

Q: How do heat pumps work in hotels and industrial applications, and what benefits do they offer in terms of energy efficiency and emissions reduction?
A: A heat pump is a device that takes thermal energy from a low-temperature water or air circuit and delivers it a higher temperature in another circuit, usually water. Imagine a hotel with air conditioning and showers in every room. Air conditioning delivers cold water through pipes circulating throughout the hotel. Water at 7°C returns to 10°C. Traditionally, an electric chiller lowers it back to seven for recirculation, providing water at the right temperature to the fan and coils in the rooms. Additionally, hotels often have LP gas boilers to heat water for showers, cooking, and laundry. A heat pump takes the thermal energy from the cold water circuit and uses it (after a compression cycle) for a higher temperature circuit.  This way the hotel saves a great amount of money by not using chillers for cold water generation nor LPG water heater for hot water. Furthermore,  if the hotel purchases renewable energy from the wholesale electricity market, emissions due to the hot water generation are effectively reduced to zero. This substantially lowers operating costs and emissions. In industrial processes, many steps require hot water or steam. While electrical resistance can generate steam, it is very expensive. Heat pumps can generate steam efficiently, reduce costs, and cut emissions.

Q: How does Electriz tailor energy solutions to different client needs across industries, including cost and emissions reduction?
A: Depending on the industry and available fuels, we offer a tailored portfolio of solutions. For example, a paper mill buying electricity from the wholesale market may prioritize emissions but still seek cost reduction. Industrial heat pumps could be the solution. A food factory with fruit residues could generate biogas in a digester, producing electricity or thermal energy. We have a product and service portfolio to address almost any case involving cost reduction or emissions reduction. Very recently, we added solar energy to our portfolio, not as a trend, but out of necessity.

Q: How is Electriz expanding its technological offerings and integrating multidisciplinary expertise to meet market demands?
A: Any solution that reduces costs and emissions is something we will study and offer. We work closely with leading European companies that trust us. Our office team includes 20 engineers specialized in mechanics, thermal systems, controls, power, and energy. We have a multidisciplinary engineering team that has developed products and solutions. I see the company integrating more technologies over time, becoming a comprehensive Mexican energy firm and offering solutions at the best cost. We have a significant product range, which we will continue expanding.

Biomass, biogas, and heat pumps, however, require a great deal of engineering. You need the ability to communicate with clients. If communication fails, clients may not understand the solution and cancel a project. I am proud to say we were the first energy company in Mexico to receive the “Made in Mexico” seal. Still, people are hesitant to buy a Mexican product, even though we have the best quality worldwide. Communication and having a Mexican product are the main barriers. Additional barriers depend on the technology. For example, with heat pumps, if natural gas is available, there is no need for alternative solutions, but if there is LP gas, biomass boilers or heat pumps become relevant.

Q: What is Electriz’s outlook on distributed generation and self-consumption in Mexico, and what regulatory issues remain?
A: Regarding on-site generation, particularly distributed generation and self-consumption, good times are coming. In natural gas generation, there is sufficient supply, though distribution networks must expand faster. That is another barrier for generation. Overall, I foresee at least five good years ahead, but I am concerned that a year has passed and even thought the regulation of the new Electricity Sector Law was published on october 3rd administrative provisions are still pending. This process will take at least another 5 to 6 months.

Electriz is a leading Mexican company that focuses on the design, construction, operation, and maintenance of on-site power and cogeneration plants using natural gas, biogas or biomass under the regulatory frameworks of distributed generation, isolated supply, and local generation. They also develop thermal energy generation projects with heatpumps and biomass boilers.