News Article

Migrating to a New Market Dynamic: Pros and Cons

By Paloma Duran | Wed, 03/10/2021 - 16:48

You can watch the video of this panel here.

Experts participating in the panel “Guiding Off-Takers to Success With PPAs and Distributed Power Generation” at Mexico Energy Forum 2021 on Wednesday, Mar. 10, agreed that the current situation in the Mexican energy sector is pushing companies toward a new energy market dynamic, something that in their opinion has to be seen not as a challenge but as an opportunity. “Despite the new reforms and uncertainty, companies want to move forward with PPA contracts. We can help them to meet their needs,” said Edmond Grieger, Partner and Head of Von Wobeser & Sierra's Energy and Environment Practice. Diego Blumenkron, Sales Director at Northland Power Energía, explained the importance of understanding the current needs and trends in the Mexican energy sector. For him, in 2016, the energy sector was marginalized but today it is a highly competitive sector.

Blumenkron also explained that since Northland is a buy-side and sell-side company, it wants to have a strong, competitive and stable internal matrix and the right tools to solve its customers’ problems. “Consumers want new supplies and products that promote ESG practices, such as clean energy,” he added. He shared that the company is offering a very attractive system for the energy market that includes natural gas, distributed generation, coal, clean energy, among other alternatives, which allows the customer to stop relying on a single resource. “We are combining the best of each offering and taking advantage of the resources we have in the market to offer a better proposition to our customers,” he said.

Pablo Rivero, Country Manager for Mexico at ForeFront Power, explained the main differences between distributed energy and centralized generation. According to his presentation, the former needs fewer customers to cover market risk, while the latter is more suitable for larger projects and more vulnerable to market prices. Rivero added that there are two reasons for companies to finance distributed generation: lack of capital, which increased due to the pandemic, and high maintenance costs. He also agreed that uncertainty caused by recent laws and the pandemic have pushed many companies to switch markets. “Buyers have been concerned about the impact this new regulatory framework could have on their contracts. They are hoping contract migrations to this new market will be possible,” he said.

“The new market to which companies are migrating includes more than 4,000 companies. This represents a new opportunity for the market to provide more certainty, better contracts and more tailored solutions,” said Ruth Guevara, CEO and Founding Partner of Zumma Energy Consulting. Guevara added that Mexico has grown in clean energy, especially solar, as it has been the most accepted by customers and the easiest to implement. The main motivation for this shift has been environmental objectives, as customers are increasingly looking for cleaner energy. “This is a dynamic market that will continue to grow. With the COVID-19 pandemic, we have learned that our offer has to be more flexible,” said Guevara, who concluded that uncertainty in the sector has always been present. However, companies are protected by contracts, which he believes allows both sides to understand each other better.

Blumenkron discussed the opportunities opening up this year for the energy sector in areas such as storage and batteries, which can serve as an option to offload distribution lines. “We need to identify the new trends that are coming and what customers need to offer more flexible solutions to help them in this new energy migration,” he concluded.

Paloma Duran Paloma Duran Journalist and Industry Analyst