Antonio Martínez
PWC's Strategy and Operations Group

Smooth Transition Toward Mixed Power Generation

Wed, 02/19/2014 - 17:09

PricewaterhouseCoopers (PwC) has a network of clients that allow the company to be tapped into the power sector around the world. With over a century of advising companies in the power industry, PwC is able to harness its global experience and knowledge to provide the best solutions for the Mexican reality. Antonio Martínez Dalmau, Partner in PwC’s Strategy and Operations Group, explains how the professional services firm has divided its power team to address the needs of the oil and gas, power and utilities, and mining sectors. This is a formula that has worked across 158 countries, and this global structure has been closely replicated in Mexico. “We cater to foreign companies and domestic companies working in Mexico. As a global firm, we move people with technical skills to where they might be needed. For renewable energy, Spain has a strong track record and a mature market, so we help out Mexican companies from there,” explains Martínez Dalmau.

This global approach to tackling local problems is particularly relevant at the moment. As a consulting firm, PwC is poised to help deal with the fallout from the structural changes expected as a result of the Energy Reform. Martínez Dalmau expects the reform to force all energy companies in Mexico to revise their development strategies. PwC is gearing up to help the public sector tackle challenges coming from the implementation of mixed generation techniques, train CFE system operators and advise on which policies would best attract investment. For PwC, there is no doubt that the Fiscal and Energy Reforms will be a shot in the arm for Mexico’s growth. Industrial improvement in the US and pending requests for bids on Mexican infrastructure projects will contribute to that synergy, according to Martínez Dalmau. The energy sector will be an important part of this growth, as long as it is able to meet key challenges head-on. Martínez Dalmau adds that much of Mexico’s current capacity is obsolete and will soon have to exit the generation infrastructure mix. This means the country will not only have to add a significant amount of power generation capacity but also replace its existing infrastructure. PwC estimates that this transition will require the installment of 40GW in the next 12 years, or 60% of Mexico’s current installed capacity. Such a large-scale undertaking creates ample opportunities for companies working across all energy sources. To capitalize on these opportunities, PwC has been working with Mexico’s key stakeholders, including SENER, to tap up renewable energy sources for two years. SENER commissioned a project on which PwC had to fully determine the competitive potential of each renewable energy technology, from wind, PV and biomass to efficient cogeneration, mini-electrohydraulic plants, and geothermal energy. The value PwC brought to the table became evident when SENER published the firm’s conclusions and included them in the National Energy Strategy 2013-2027. Once the main obstacles had been identified, PwC’s work with the authorities was largely concentrated on drafting agreements and building consensus between the public and private sectors to ensure mixed power generation develops in an optimal manner.

Work with SENER, CFE and other industry leaders continues apace to ensure renewable energy is backed up by a framework that addresses every detail. For PwC, the financial sector, which is so deeply involved in the renewable energy industry, is crucial. With the same application used for its private clients, both globally and locally, PwC presents international practice proposals and then works with institutions on how to adapt these practices to Mexico. This collaboration has looked at precise challenges, such as how best to incorporate intermittent power generation into the system. As CFE has to measure the impact of introducing new energy sources to the mix, PwC is helping to guide the utility through the process, including the introduction of guidelines operators should follow.

PwC is planning a workshop with CFE, along with international experts and operators, to go through the entire process of integrating renewable energy into a power grid. This will set up a channel through which to share information with Mexican operators, which can be used to learn from countries that have walked this path before. These efforts are part of PwC’s broader strategy to ensure a smooth passage over troubled waters, with the best way to include renewable energies still under debate.

What has left Martínez Dalmau surprised along this journey is just how quickly the cost of renewable energy sources has dropped over time, leading to a continuous improvement in their competitive advantages over fossil fuels. “Sustainability is now a good investment offering high returns for businesses, not just because of competitive renewable energy sources but also because of the benefits it brings for branding,” he explains. “But Mexico still needs to develop knowledge in the public and private spheres to fully push the sector forward. The plan is for PwC to be of great help in this transition.”