The New House Rules: Grid Code 2.0

Building on acquired experience and acknowledged shortfalls, Mexico’s Energy Regulatory Commission (CRE) recently drafted and published the Grid 2.0 Code. The code is an important tool to safeguard the desired efficiency, quality, reliability, continuity, safety and stability of the National Electric System (SEN). While the verbose and complex document may present challenges for market players, satisfying new compliance standards will help bring greater stability to the country’s grid even as it faces an accelerated energy transition.

“It is not about moving against or in favor of certain groups, but rather about thinking in a more social mindset that considers all end-users,” said Hector Beltran, Hector Beltran, Member of the Board of Directors of the International Council, CIGRE Mexico.

When the entire energy market was controlled by CFE, there was no need for an exceedingly complex national energy grid. The introduction of the 2014 Energy Reform changed everything- Within two years, CFE had constructed access to the grid for a wide variety of companies. The reform’s purpose was to provide an equal playfield in which market participants could participate and avoid overcharges, disruptions and blackouts. As problems arose over time, it became clear that the previously guiding framework and compliance standards needed to be adapted in order to bring better stability to the grid.

“Mexico’s energy grid has learned from various best international practices and applied them domestically,” said Alejandro Reynoso, Director, Diram. This knowledge comes partially from the commitments outlined in the 2015 Paris Agreements. This has not been a simple process but it has been worthwhile, explained Reynoso.

Challenges to Implement Ahead

The Grid Code 2.0 brings along various challenges with its aim to address discrepancies at interconnections and load centers. This a previously unmonitored environment, said Monica Samudio, Country Managing Director, Circutor. Those that need to comply face a time crunch in which they are expected to prepare and meet new compliance standards. One of the biggest changes comes for companies in medium voltage with a load center demand of above 1MW. Before, these players were formally only required to balance current. Now, they need to mind the power factor and quality too.

Energy users must come up with an approach informed by a detailed grid study that indicates where their shortfalls are so that they can address them swiftly. As to how much it would cost to comply, Samudio suggests to get close to companies with experience in the matter first to establish an adequate, cost-effective plan first, before worrying about the price. A greater energy efficiency because of this plan’s implementation would be a major added benefit. “In any case, compliance will be cheaper than paying fines,” Samudio said.

The new Grid Code is an expansive document, detailing many specific functions and responsibilities for each market player, which includes CFE and grid operator CENACE. Consequently, the principal challenge for many will be accessing the right technical-regulatory expertise. This requires close study to understand the code’s implications and strict implementation of remedies, all while dealing with several gray areas, said Hector Beltran, Member of the Board of Directors of the International Council, CIGRE Mexico. A failure to refer to experts will likely lead to erroneous works plans, involving costly mistakes ranging from missing compliance standards to unnecessarily following compliance standards required for other functions.

Load centers are becoming more efficient, yielding a greater holding capacity. This leads to greater a vulnerability for the grid, as the bigger size comes with a matching capacity to cause disturbances. Good connection standards for load centers are therefore of the essence. Adequate planning, operation and coordination will be important as the system faces continued challenges regarding intermittency and other disruptions while efficiently transporting energy from source to end users.

The experts agreed that CRE’s formation of a knowledgeable consulting committee had been a wise move, as it allowed experts from both public and private sectors to combine their knowledge. Relying on a single institution to create regulation would be suboptimal, argued the experts. Therefore, CRE should continue to open its doors for industry participants and specialists to refine the Grid Code further. Ultimately, the Grid Code 2.0 dictates how players should act within the system, aiming to protect the SEN from disruptions. It therefore stands outside of the regulatory noise within the Wholesale Electricity Market (WEM), as the document does not mention anything regarding tariffs, power purchase agreements (PPAs) or energy costs. “The Grid Code’s use will not change, which is a strength,” concluded Beltran.