Mexico’s Power Producers Ready to Support Energy Transition

You can watch the video of this panel here.

The paradigm shift in the Mexican energy sector was the main topic of discussion during the fourth panel of Mexico Business Forum 2021 on Wednesday, Mar. 10, entitled “Power Producers’ Priorities.” Experts agreed on several topics including the legal framework, protecting investments, transmission and distribution, the energy transition and new technologies to help drive the sector forward. Moderated by Patricia Tatto, Vice President America of ATA Renewables, the conversation furthermore included Fernando Tovar, CEO and Country Manager of Engie México; Ramón Moreno, CEO of Mitsui & Co. Power Americas; Gerardo Pérez, Vice President and Country Manager of EDF Renewables México and Bruno Riga, Country Manager of Enel Green Power Mexico.

Tovar, spearheading the French energy multinational, acknowledged that there is “tremendous uncertainty” in the sector as a result of numerous regulatory changes and measures in recent years. “This poses a risk for existing investments but also for potential new investment,” he said. Because of this, Engie is could make use of the instruments provided by law to protect its investments. “It is even more important to look forward, however,” Tovar said. “Engie is a multinational company that respects the rules of the country where it operates. If the government wants to change those rules, we will adapt to the new situation and look for new opportunities.” In this regard, natural gas storage offer interesting prospects. Both cogeneration and new thermal power generation CFE plants are among the main opportunities, but it is also necessary to strengthen the electricity system. Tovar sees a possibility in a sector where CFE and private players complement each other. “The environment seems to be us or them; CFE against the private sector. I do not subscribe to this way of thinking because there is space for both. There is no conflict between strengthening CFE and having private participation in the market, after all.”

“CFE is a crucial player in the energy market and will continue to be so. Private companies need to operate in the space that is granted to them,” agreed Moreno. “We will always try to grow further here and position ourselves where possible,” he said, noting that combined cycle and other large-scale power plants are key to Mexico’s future. Mitsui would also protect its investment through the tools provided by law. The area of power generation and commercialization would remain as important as ever for the Japanese energy giant’s Mexican arm, as distributed energy generation, lower gas prices and digitalization offer interesting new opportunities for the company.

“We maintain our commitment to Mexico’s energy transition. This includes public and private consumers, as well as communities throughout the countries. Our projects should benefit Mexican families first and foremost,” said Pérez. He noted that EDF Renewables adapts quickly to changes in the sector but that it has also learned to be patient. “Of course, rules can change but they should not be applied retro-actively,” he pointed out. Furthermore, he noted that the company’s experts could help solve Mexico’s challenges regarding its transmission network.

Enel’s newly appointed Country Manager Bruno Riga started his speech by acknowledging Mexico’s great renewable potential. “It is a country in which we want to continue to invest,” he asserted. Despite momentary challenges, Riga concurred that a long-term perspective is crucial for Enel. “We are all lucky to work for companies that have a long-term vision. Problems can always arise in the short term but we need a clear vision of where we want to go.” After all, the advancement of renewable energy can no longer be halted. “Renewable energy is not just the future; they are already very much present,” Riga added, pointing out the growing demand for electromobility.

One of the biggest challenges that needs to be addressed is the aging distribution network in Mexico. Because of its fragility, intermittent renewable energy integration has become a particular focal point for the government. “The discussion about renewable energy’s reliability and stability is a valid discussion,” Moreno pointed out. But after the last gas shortage in Texas, Mexico faced problems due to its high reliance on gas imports. “We need to invest in the transmission network. It is the key to reliability, to decarbonization and even energy independence,” he said. Flexible power plants that can start up fast when needed, as well as battery storage, can help foster the system’s reliability. But auxiliary services, providing storage and stability, are currently not adequately incentivized or rewarded. Tovar, whose company already owns and operates a solar power plant featuring battery storage, agreed with this notion. Other than battery storage, hydro capacity and even hydrogen could be used to store energy. “This is the future,” Tovar said about green hydrogen.

“We already have hybrid power plants, with integrated wind and solar developments," Riga said, adding that these technologies could help to improve the energy system. “Hydrogen will be incredibly important for decarbonization,” said Riga, although a golden business model has not yet been established in this area, he highlighted. Other trends mentioned by Riga were distributed generation, smart grids and electric vehicles. “We have to change the paradigm of how we see the market. We need to generate new models that enable the transition to green energy,” Riga pointed out.

Pérez agreed that storage could offer many benefits, even to end-users. “Storage represents a great potential for solving the main difficulties faced by transmission and distribution networks,” he said. Clients are key and companies should listen to their demands, the panelists concluded.