Myths and Errors in the Electricity SectorBy Hans – Joachim Kohlsdorf | Tue, 12/08/2020 - 13:00
We are experiencing a special situation in the electricity sector. On the one hand, certain struggles, complaints and injunctions have filled the media and have given the impression to a large group of businessmen that nothing works at the moment. On the other hand, we have a vibrant electricity market, an excellent generation supply and many companies bidding and closing energy purchases on the private electricity market. 2020 has been an excellent year for a number of very active companies in the sector, such as Energy to Market (E2M) and their clients.
The reality is that we look at the sector from very different perspectives and interests. In the media, space have been devoted to a theme that has never been definitively clarified in the transition from pre-reform to post-reform energy. Today, six years later, we have not reached a conclusion on the "transitional articles." To the ordinary person, the transitional provisions were just that, transitional, and should not be applied six years later.
I would like to describe some of the challenges that we face as a sector and that we need to work on together. The solution can only be reached if we all have some good will and if the private sector promotes and implements concrete actions, without asking for permits or subsidies:
1) The quality of the transmission and distribution networks and therefore the quality of the power we receive is not good.
However, both generators and users are trying to maintain our facilities with the technological standards defined almost 10 years ago. If the quality of the energy that we deliver to the network or the impact that we as users have on the network is not good, investment in CFE networks will never be enough. Many companies are responding to the poor quality of energy they receive by investing in emergency power plants, UPSs and voltage regulators. The myth is that technological innovations such as batteries, modern inverters and soft starters are still not a competitive solution. The lack of technical knowledge and the lack of cost-benefit analysis are turning our market into a technologically obsolete market.
2) There is excess generation in certain areas of the country and lack of generation in other regions.
For various reasons, some valid, others not, generation plants have been built where they are not required. Surprisingly, even today, some companies and regions of the country are insisting on continuing to implement projects that, due to their location and obsolete technology, do not really help to solve the challenges facing our electrical network. The easiest, and therefore often wrong, answer is that CFE must build new transmission networks. Our approach in the private sector should be to cancel “bad” projects and update the technology for redeemable projects.
In many countries, including Mexico, building new transmission lines that run for hundreds of kilometers and cross municipalities and towns is not viable. Getting rights of way to build something that no community wants to see in its "backyard" seems almost impossible. Asking the government to build them, or giving sovereign guarantees to the private sector to build them, without facing risks, is utopian and does not take us in the direction of the technological modernization that our national electrical system requires.
3) There is a lack of a technological modernization plan linked to the existing generation, to new renewable generation projects and to the loads of large companies.
The current grid code was was discussed six years ago and published in 2016. However, the technological advances in these years have been impressive.
Today, all renewable generators should incorporate batteries and modernize their control systems. Due to the poor quality of electricity supply in many parts of the country, generation should help to stabilize electricity supply, especially on-site solar generation and cogeneration. The integration of batteries, modern inverters and control software can solve many of these challenges and improve the quality of power. But the myth remains: batteries and control software are not yet competitive. If I believe the myth and repeat it, why would I conduct an analysis? I'd rather keep buying emergency generators, UPSs and voltage regulators even though they represent a large investment. Such is the strength of the myth that it gets repeated among businesspeople who then do not assign someone from their team with sufficient technological knowledge to investigate the subject in depth.
Renewable energies, cogeneration and on-site generation are not for everyone. Investments in large-scale generation, both public and private, are stagnant. If economic growth recovers a little and electricity consumption increases, we will have blackouts again. This presents great opportunities for the private sector that could be generating new business without government intervention.
I would like to suggest some concrete actions:
Filling the media with "bad news" and repeating the myth that modern technology is not yet competitive creates confusion and hinders business opportunities among private sector companies. Major manufacturers of solar panels, inverters, natural gas engines and turbines, batteries and inverters must demand that their sales channels and integrators comply with modern quality standards and educate us all by making our marketing much more efficient.
Associations representing different generation technologies and those representing qualified suppliers and other market participants should focus their efforts on promoting new technologies and improving the quality of the grid. It is time for technical and commercial issues to return to the "center stage" and for lawyers and the government’s public relations departments to promote technological modernization and not just stop any changes to the rules established six years ago.
Industrial chambers should promote the use of new technologies among their members and work together with universities and technological institutes to train both the students and the staff of our companies.