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Analysis

Open Season: Key to Interconnection with Grid

Wed, 02/19/2014 - 14:32

CFE has a number of priorities on its to-do list, but transmission infrastructure has perhaps become its most pressing issue to ensure the smooth growth of Mexico’s energy demand. With the country’s major energy consumption centers often far away from generation sites, having adequate transmission lines and substations is of paramount importance. The existing network of lines is in need of real expansion and overhaul but the indebted CFE is not able to face this costly burden on its own. Hence the importance of the private sector.

Over the last decade, the private sector’s pressure on CFE to expand and upgrade the transmission network grew into an outspoken desire to participate, a fact that would prove essential to the development of self-supply projects. In 2006, SENER began working with CRE to develop the first Open Season in the Isthmus of Tehuantepec in Oaxaca. Under this scheme, elements of the private sector and CFE would collaborate on the design, construction and financing of the transmission infrastructure needed to unlock the region’s wind capacity.

The first Open Season in 2006 was crucial to the explosion of wind power projects in and around the Isthmus of Tehuantepec. It helped meet the needs of private parties interested in self-supply projects, and also served as an excellent testing ground for the mechanisms needed to promote private investment in renewable energies.

The Open Season for Oaxaca was divided in three stages based on the different types of transmission infrastructure needed. The first phase boosted the capacity of transmission lines around the parks of Parques Ecológicos de México and Eurus, two of Mexico’s first wind parks. The second phase targeted projects that would operate through 115kV transmission lines, covering four parks: Bii Nee Stipa, Eléctrica del Valle de México, Eoliatec del Istmo and Fuerza Eólica del Istmo. The last phase covered the bidding process for entirely new transmission lines serving six new sites and the second phases of two existing projects. At the same time, the scheme needed rock solid regulation for the private sector to be willing to make the required investments. The Law on the Use of Renewable Energies and the Financing of the Energy Transition and its Regulations (LAERFTE), published in 2008, handed new regulatory responsibilities to CRE. It could now oversee interconnection contracts and the methodology for setting prices for the transmission of electricity from renewable energy or cogeneration systems. These steps removed some major private sector concerns and the Open Season scheme pressed ahead.

August 2011 saw bids opened up for a new round of Open Season schemes in Oaxaca, Puebla, Tamaulipas, and Baja California. 128 applicants took part in a round covering a reserved capacity of 22GW, but this was later lowered to 4GW due to infrastructure costs, the location of the sites and the feasibility of the projects. Despite the Open Season concept being taken to other regions of Mexico, Oaxaca has still benefited the most from the scheme to date. Oaxaca was targeted first for Open Season due to its superlative wind potential and the many investors it could attract. By early 2017, it is expected that Oaxaca’s second Open Season will allow installed wind capacity for private projects of 1,130MW, as well as another 800MW coming from CFE plants. The current Open Season in Tamaulipas targets nine participants, all of them private, in the Reynosa-Tamaulipas corridor and has a capacity of 1,666.5MW. The Open Season underway in La Rumorosa in Baja California involves a reserved capacity of 740.5MW with seven private participants. But outside of wind energy, the Open Season has not had the same success. One scheme that sought to develop hydro resources at the border of Puebla and Veracruz ran into trouble. With only two participants declaring an interest in the bid, this scheme was declared closed in 2012, although the projects themselves went ahead by using existing substations or finding other solutions to their transmission needs.

By the end of 2013, CRE had authorized 49 licenses for wind projects, leading to the installation of 4,883MW of reserved capacity through the Open Season scheme. According to CRE Commissionner Guillermo Zuñiga Martínez, over 70% of the transmission infrastructure projects were developed by private parties in the last six years, most of them through the Open Season scheme, resulting in an additional investment of approximately US$5 billion since the first Open Season opened. Open Season alone will not solve all the problems facing transmission infrastructure in Mexico. But when used as a support tool for policies governing renewable resources, it is destined to prove vital to meeting national renewable energy generation targets.