Plant Developer Pins Future On Natural GasWed, 02/24/2016 - 12:41
InterGen is characterized by an entrepreneurial spirit that has pushed the company to enter emerging markets for 20 years now. David Fatzinger, Vice President and General Manager Latin America of InterGen, stresses that this same entrepreneurial spirit drove the company to Mexico, where it won some CFE bids in the aftermath of the 2008 Energy Reform. The company built several plants and acquired others as a foundation for its secondary group of customers, which are industrial players. The firm’s principal approach consists of developing power plants as single asset solutions for governments. For Fatzinger, the first challenge when entering a market is to implement a single asset energy solution, which is normally a response to a utility bid for a new power plant. Then, once the project is running, the company must understand the market and its constraints. Today, 80% of the company’s business lies with CFE, while the remaining 20% is made up of industrial clients.
Fatzinger says his company tends to implement similar systems and practices across all of its plants as a company policy, but InterGen also strives to maintain a level of competitiveness in each of the markets in which it works, forcing the company to strike a balance. “This is a fascinating era in the energy industry and we see the consolidation of technologies like solar and wind. We are also seeing new trends arising such distributed generation, smart metering, and Internet of Things,” says Fatzinger. Keeping up with all these changes poses a challenge to many when drafting a product for a customer and measuring the idea’s viability. InterGen focuses on proven and bankable technologies and integrates them under one solution.
The La Rosita power plant in Baja California provides an example of InterGen’s integrated use of technology and international best practices. Considered one of the cleanest power generation plants in Latin America, SEMARNAT and PROFEPA awarded La Rosita the Clean Industry Certificate. The combined cycle plant has a 1,100MW capacity and is equipped with a water treatment facility that cleans sewage water to later cool the plant. Fatzinger claims La Rosita presents a unique case because it is close to two markets, Mexico and the US, and it had to conform to the expectations of both. Another peculiarity is the fact that the plant has three commercial solutions. It supplies to CFE, industrial clients in Mexico, and industrial clients in Southern California. “Baja California alone is an interesting case since it is an independent market that implies closer ties with the market of Southern California than Mexico’s national grid,” comments Fatzinger.
InterGen spotted an opportunity to import gas from the US and supply fuel for La Rosita. A 126-mile pipeline runs from Ehrenberg, Arizona, to the combined cycle plant. Fatzinger comments that bidding for a PPA in a CFE tender is one of the most complex processes InterGen has undergone worldwide. “The bids are incredibly detailed and require a significant upfront investment in order to attain that level of specificity.” He also points out the immense competition, although he mentions that many players do not understand the peculiarities of the market they are entering.
Given the drop in oil prices, a lot of attention is being drawn to the electricity market. As natural gas becomes a conventional product for energy solutions, Fatzinger expects his company to become involved in the development of national natural gas. He believes supply options in Mexico will become more dynamic as the market expands. In the short and medium term, the shale gas being imported from the US will be an important economic driver and will provide a downward pressure on the price of the fuel and electricity. However, the importation of shale gas from the US will wane over the long term.
This presents a chance to develop Mexico’s gas resources, leading to a second wave of competitive pricing. InterGen sees opportunities in pipeline development, since the company can branch out from electricity to downstream and upstream in the gas sector. “The interesting part of the Mexican market is the change it is undergoing. InterGen has diverse expertise and skills, which will enable it to take advantage of opportunities as they materialize,” Fatzinger shares. “We entered a partnership in Baja California for a wind park with IEnova that is entering its commercial stage. In addition, we bought a commercial compression station in Tampico, Tamaulipas, and in July 2015, we will bring another combined cycle plant online,” he says.