Self-supply is the Name of the Game for Grupo MexicoBy Cas Biekmann | Tue, 10/27/2020 - 11:29
Q: How did Grupo México become involved in the country’s energy sector?
A: Grupo México got involved for the very first time in the energy sector with the construction of a combined cycle power plant in Sonora. The mining sector, where the company is deeply involved, is highly energy intensive. Before the enactment of the Energy Reform in 2013, electricity prices were high, which prompted, the company to analyze the feasibility of generating its own energy. This was further made possible by a new regulation enabling the so-called “self-supply.” The company began to generate its own energy with a 255MW power plant. During the construction of the first plant Grupo Mexico decided to construct a second plant next to it. Today, we have a combined cycle plant with a total of 500MW. A natural gas pipeline was built to bring the gas in directly from the US to the plant. Fortunately, the project is located close to the border, meaning that a relatively short pipeline of 110km would be enough. This was the company’s first venture in the energy sector: a successful combined cycle power plant under the self-supply scheme.
Q: How did the company get involved in renewable energy?
A: While we were building this power plant, the company goal was to innovate and get involved in renewable energy generation. Clean energy is the future and we wanted to reduce our carbon emissions by supporting our Oaxacan projects with a wind farm. This resulted in the construction of a 74MW wind farm. We also built a small solar system to provide energy to our corporate offices in Hermosillo. It has a capacity of 80KW and it is the first solar system to include heliotrope technology. This means the system follows the sun in two directions. It was an extremely innovative solution at the time, around seven years ago. Soon after, the company donated photovoltaic systems to public schools in Sonora and some other places.
We are now building a second wind farm in Fenicias, which is located in Nuevo Leon. The farm represents an investment of US$250 million and will have 144MW capacity that will be used for our own supply. Because our combined cycle power plant has excess capacity, we have presence in the Wholesale Electricity Market (WEM) in Sonora’s node, despite knowing this is practically the most congested node in the country due to the lack of infrastructure and transmission lines, which makes participation somewhat less attractive.
Q: How does the company form alliances with other players to make its projects a success?
A: In the beginning, we did not have much experience in the development of energy projects. We started by looking for renowned, experienced and internationally-oriented developers operating in Mexico. In the case of our first wind farm, the company that provided the turbines, Gamesa, also took care of the operation and maintenance of the project. This contract lasted for five years and we have recently decided to renew it.
Q: Where does the company see the best opportunities to generate its own energy?
A: I consider that with the changes we have been seeing in the energy regulation and the current uncertainty, identifying opportunities is somewhat limited. Grupo México Energía is still growing but we are focusing on the idea of self-supply. Entering the WEM to sell energy did save us money at the end. However, we would like to see this area more regulated. Currently, our operations continue but they are all under amparos and legal actions. Unfortunately, due to the situation brought on by the pandemic and the regulatory changes, we still have pending matters with CENACE and CRE, whose operations have been affected for several months now. With all the surprises we have faced, such as the hike in transmission costs, uncertainty has taken root in the sector.
Q: How has the company been adapting its strategy to the challenging times in the sector?
A: We are under the self-supply scheme and, therefore, we mainly consume our energy ourselves. We intend to keep that position. We are not considering to switch to the WEM (Wholesale Electricity Market). We know that other companies in the sector have had success there. Nonetheless, our goal is to be our own energy generator and provider under our own terms. However, if there were to be projects in collaboration with CFE, that would allow for some greater clarity regarding investment and we would be inclined to participate. This could be a significantly interesting opportunity in the area of transmission, which requires both new infrastructure and substantial reinforcement.
Q: How does the company assure safety regarding the operation of its power plants?
A: From the very beginning, we have taken a series of measures and have enforced strict protocols focused on taking the temperature of employees, wearing face masks and providing antibacterial gel. In workspaces, such as our control center, we continuously sanitize working areas. Since we provide transportation for our employees, we had to almost triple it in some cases in order to maintain a safe distance inside the vehicles. Working schedules also were adapted to avoid any congestion in working areas. Furthermore, talking to our employees has been important. Although they are protected at work, they could find risk elsewhere. Regardless, our entire team has taken the pandemic seriously. This has yielded very good results: all our power plants have continued to function business as usual.
Q: How does Grupo México Energía define its social approach regarding communities and has this changed during the pandemic?
A: We have definitely not abandoned our community approach during the pandemic. We continue to carry out our social programs. We communicate with our communities throughout digital channels such as Facebook live events, because we are not hosting any events at the moment. If we do, we ensure social distancing at all times.
We have also put the company’s volunteers to work manufacturing face masks. The company then buys the face masks and donates them to the communities. For the most vulnerable people, we have arranged handouts. Grupo México donated protection equipment, ventilators and even an entire functional hospital which is being used to treat COVID-19 patients.
Grupo México is a national leader in copper production, rail transportation and infrastructure. It is also active in the energy sector and will soon have 700MW in its portfolio, mostly used to power its own operations.