/
Analysis

PPA Debuts, Creates Buzz

Wed, 02/22/2017 - 14:39

By the end of 2015, Mexico had over 100,000km of transmission lines and almost 800,000km of distribution lines, serving over 39 million users. All these kilometers were constructed using public resources. That changed with the government’s guidelines for the first Public Private Partnership (PPP) in the electricity transmission sector, released in the last quarter of 2016.

The US$1.2 billion project will connect Oaxaca’s outstanding wind energy resources with the Valley of Mexico, a region having one of the highest levels of electricity demand in the country. It will also use High Voltage Direct Current (HVDC) technology, a first for Mexico. Pedro Joaquín Coldwell, Minister of Energy, says this technology will allow the movement of more power over long distances, easing the transmission of power from renewable sources while decreasing transmission and capacity losses. The minister also says the project is expected to promote the installation of more power generation in Mexico’s southeast region.

Although the tendering process will take place in 2017, the relevance of the project created a buzz across the industry at the end of the year. This was not only related to the line in Oaxaca but also to two other similar projects that are among the government’s plans to connect Baja California’s isolated network to the National Interconnected System.

In addition to new transmission and distribution assets, Mexico is also modernizing the existing infrastructure to provide higher power quality and to optimize the network. This included the publication of a new and stricter grid code that will apply to all companies willing to connect their facilities to the Mexican grid. The revision and update of the grid code were included in the Electricity Industry Law as a way to ensure all technical and operational requirements were in place to lead the development of the National Electricity System in the most efficient and economical way. Companies must now get used to the new rules and adapt their electrical equipment to fit the new requirements.

CODE COMPLIANCE

Complying with the new grid code will be among the challenges the power auction’s winners will face as they develop their new projects, particularly considering that most are solar and wind power facilities. But challenges also bring new opportunities and electrical equipment suppliers with specialized technologies to control voltage fluctuations and reactive power will likely see demand for their products broadening in the market.

CFE also continues investing in smart meters and other equipment to optimize its collection methods and avoid technical and nontechnical losses during power transmission and distribution. The productive enterprise of the state has already reached significant results through the introduction of these technologies but it plans to continue working to reach international standards. “CFE expects nontechnical losses to drop to 10 or 11 percent in 2017, from 16 percent in 2012, thanks to smart meters. Nontechnical losses cost CFE nearly MX$27.5 billion in 2015,” says Armando de la Torre from ho1a.

According to Oscar Miranda, co-founder of Smart Grid México, the next big opportunity in this area will be Advanced Metering Infrastructure (AMI), an integrated system of technologies that permit two-way communication between smart meters and the utility company. The real-time data provided by AMI allow utilities to better plan power production while giving users information to make decisions about energy usage, such as performing high energy-consumption activities in periods with low prices. Given that the market liberalization has introduced hourly prices and fluctuation, the timing is right for AMI technologies to spread through Mexico, especially for qualified users.

With the projects already tendered and those in the pipeline for 2030 – defined in the last available PRODESEN – Mexico has made clear it plans to continue expanding and modernizing its grid. This need for stronger and smarter infrastructure to support Mexico’s growing capacity has awakened the interest of private companies to get further involved in the development of the country’s power network. In the past two years, many companies have diversified their business portfolio beyond CFE because the Energy Reform had reduced the number of available opportunities with the state company. It now appears, however, that prospects for collaboration with the productive enterprise of the state are on the horizon, creating new opportunities for the private sector.