Eduardo Meraz Ateca
Director General
View from the Top

Priorities and Duties of the Wholesale Market's New Operator

Wed, 02/24/2016 - 09:54

Q: Which are the new roles of CENACE, and how will these affect the regulator’s relationship with the Ministry of Energy, CRE, and CFE?

A: CENACE’s main priority is to ensure the proper functioning of the National Electricity System. Secondly, we have to guarantee the quality of the electricity supply; that is, we have to avoid variations in voltage and electrical frequency. Finally, we have to ensure that the grid has enough capacity so that all the generators can deliver their electricity at competitive prices.

We have a good relationship with CFE at the moment, from which we have received valuable support. It is worth noting that CFE has understood CENACE’s new role. For CENACE, the operative control of the system entails giving out safe and well-planned instructions, such as the opening and closing of transmission lines, which will be followed by CFE’s operative personnel. Not a single component in the system should be operated without CENACE’s instructions. CRE, as the regulator, is in charge of making the rules and approving changes to these. CENACE, on its part, will be in charge of overseeing compliance with those rules under equal conditions for all the participants in the market and will play the role of an arbitrator. All these entities are preparing the materials needed so that CENACE can efficiently do its part.

Q: What have been the advancements in the transfer of resources from CFE to CENACE?

A: The transfer of these resources has been successful and is now at advanced stages. Since the secondary laws were published back in August 2014, the Ministry of Energy, the coordinator of the Energy Reform, and CFE have supported CENACE in its endeavor to become the operator of Mexico’s wholesale electricity market. The transfer has consisted of 12 control centers, including buildings, equipment, and systems that CFE originally used to operate the former National Center of Energy Control Subdirectorate. The personnel that worked in this area were kept, enabling the continuous operation of the National Electricity System. At the moment, we are working on administrative processes so that these people can officially become part of CENACE.

Q: How will transmission change once the wholesale market takes off?

A: Transmission modalities as we know them will change in the electricity market. There will no longer be a price and reserved transmission rights for wheeling, since all players will have equal access to the grid. This means all players will compete for the right to use the transmission lines, with priority given to the most affordable forms electricity. Since energy will be dispatched according to the variable cost of generation, renewables will be the first to access transmission lines. Renewables use natural resources like the wind or solar irradiation that have low variable costs, and cost-based dispatch will prioritize energy generation methods that do not have to pay for fossil fuels. The challenge will be to provide enough transmission infrastructure so that generators do not have to fight over the grid in order to reach consumption points. Congestion will be minimized through proper plans to expand the grid. If there is enough transmission infrastructure for everyone, then we can avoid regional market powers.

Q: How is CENACE prepared to launch the wholesale market?

A: Back in the year 2000, there was a possibility for a reform of the electricity sector. The people heading CFE back then thought it was necessary to carry out several tests and exercises on a virtual market, so CFE, CENACE, and the Institute of Electricity Research (IIE) started developing the model and the required software tools. CENACE started running this virtual market, and the model began evolving from a single-node market to a multi-nodal one. Using dispatch rules, marginal costs were determined in 1,500 nodes in this virtual market.

When the 2013 Energy Reform was approved, CENACE was advanced in this regard, particularly because its virtual market was similar to the spot market the Ministry of Energy has planned for Mexico. Putting a market in place in one year is a difficult task, but if we use this platform as a point of departure, making the necessary adjustments and modifications needed to adapt to Ministry’s plans, it will be possible to have a functioning market in a short time.