Opportunities: Mexico’s Electricity Future

Q: How has your strategy evolved over the past three years?

A: Over these years, we have maintained a strong focus on the electricity market, which continues to offer significant opportunities. This has been our core area of focus and has yielded considerable success. The market still lacks sufficient new generation projects, and I believe there is a substantial opportunity ahead and authorities are willing to authorize additional reasonable generation projects. We have experienced very positive results, sustaining our triple A rating and remaining a highly liquid company. Our outlook for the coming years remains very optimistic.

The two sectors where we are the strongest are the automotive and the food and beverage industries. Over the past three years, we have successfully secured formal on-site generation permits larger than 1MW, not merely exempt generation.. This has helped convince stakeholders that the government is genuinely endorsing on-site generation, not just allowing temporary measures.

Many of our clients have benefited from these permits whether through solar generation or cogeneration to support their industrial processes. I anticipate this trend will continue, especially given the new law that promotes on-site generation with surplus energy fed back into the grid, which presents a promising opportunity. We have also expanded into electrical storage solutions including battery systems at scales that are highly competitive and advantageous for industrial clients.

Q: How would you evaluate the current state of public-private relations now that there are clearer rules?

A: The Business Coordinating Council (CCE) and its leading companies have maintained close communication with the government, also during the previous administration. This continues today, but with more focus on the requirements of the industrial and commercial sectors.

The Ministry of Economy has made a significant effort to broaden business engagement. The government is actively promoting “Made in Mexico” initiatives which I believe will benefit our industrial base.

Beyond this, we leverage Mexico’s strategic position in North America as well as in Central and South America to enhance competitiveness and cost advantages supporting the entire ecosystem of Mexican-made products. This also encompasses sectors such as software, data centers, and agro-industry.

Q: How can the private sector help realize the government’s strategy to promote more national participation while ensuring projects are robust?

A: It is not so much about the private sector supporting a government initiative per se. When market opportunities exist, the private sector will naturally invest, which aligns with government objectives to attract private capital. The key is to cooperate with the government while conducting business among private entities.

To borrow a phrase, companies that expect handouts from the government are not adopting the right approach. The private sector must embrace available opportunities and serve customers effectively. No additional incentives are necessary. The wholesale electricity market is already an improvement over what existed previously. The reforms passed in 2013 and 2014 and the new laws and regulations published in March constitute a very good framework. What is required is better awareness so that stakeholders can fully leverage the market’s benefits.

We have always supported CFE. Its role remains appropriate under both the old Law of the Electricity Industry and the current Electricity Industry Law. CFE has always been the main buyer for private entities. Last year they tendered 6 CC Generation projects. Under the current legislation, power plants may be privately owned, but the buyer is CFE. This structure effectively finances public works with guaranteed energy delivery.

We see a clear improvement and  return to collaboration between authorities, industrial consumers, relevant on-site generation companies and generators.

Q: What is the middle ground in this context?

A: The middle ground involves locating generation facilities in optimal locations. Generation should be situated closer to demand centers to maximize efficiency and avoid excessive investments in the grid. Combining renewables, storage and cogeneration will significantly reduce pressure on our grid.

Q: What challenges have your potential clients brought to you this past year?

A: The industrial sector has become more sophisticated and now demands integrated energy services. It is no longer a matter of a simple Excel comparison for a half-megawatt solar installation against an electricity bill. Clients expect comprehensive solutions that genuinely optimize their energy operations. We have focused on understanding these evolving needs and I believe consultants are also moving in this direction.

Q: Two years from now, what are the biggest trends you see continuing to impact the sector?

A: On-site solar generation with storage and cogeneration are the two trends that will have the greatest impact. When packaged as part of an operational optimization project, they can provide real operational benefits and production efficiency improvements for companies. Generation must continue, especially when the grid is facing a disturbance or brown out. Low-cost projects that do not deliver energy when you need it most are still forcing companies to invest in no break solutions and emergency generators.

The market understands this, but the government has yet to grasp the need to allow surplus energy to be delivered back to the grid, not only for cogeneration projects. This is a missing piece in many parts of the country. Last year, during the electricity supply crisis in May and June when we experienced widespread blackouts, CRE, SENACE, and CFE asked all on site generators  to deliver the maximum possible energy to the grid. Many companies offered support during those critical moments, and together we realized that it is best for companies to be interconnected to the grid, enabling an exchange that optimizes both the national electricity system and the companies’ generation, cogeneration, and energy storage operations.

Q: How is energy storage developing, and what future do you see for it?

A: Storage is the foundation for the industry to develop generation further, especially renewable generation like solar. New regulations, although not yet fully defined, will allow us to reduce the negative impact of a solar plant on the grid.

Companies and industries are recognizing the advantages of storage. First, because it improves energy quality by avoiding outages caused by frequency and voltage variations. Also, it reduces the need to buy emergency diesel generators and uninterruptible power systems, leading to cost savings.

The cost of storage has dropped significantly and it is now the most competitive solution in the market. Today, the motivation to install storage is much more sophisticated; it is no longer just about reducing the CFE bill.

Made in Mexico has a promising future and if we create a market for storage solutions, we will also see manufacturing investment in first battery assembly and later on full local production.

E2M Energy is a qualified supplier and service provider for the Mexican electricity market. The company targets energy generators, qualified users and qualified suppliers with generation capacity.