Sounding the Alarm on Transmission Infrastructure

Q: How would you characterize the state of Mexico’s transmission and distribution system?

A: This is a huge topic for Mexico, especially due to the recent blackouts that have demonstrated the degree to which the strengthening of our transmission and distribution system is urgently needed. There has been a serious lack of investment in the last five years. I believe this is the entire industry’s responsibility, including the public and the private sectors. For almost four months in 2020, key transmission ties in the SIN were used above 90 percent of their operation capacity. Moreover, one transmission tie in Yucatán operated above 90% of its operational capacity 50% of the time in 2020. These happened while summer demand was lower than previous years, obviously impacted by COVID-19, but also when demand began to recover in the last months of the year. This is a huge problem because this happened when the system was in a low demand season. What would have happened if we had normal demand behavior through the year and what will happen when demand starts increasing? This problem is also a direct consequence of unevenly distributed demand and supply. For example, Central Mexico is a high demand region, but most of our competitive generation comes from the North, Northwest and Northeastern regions. The journey that this implies puts a lot of stress on our transmission lines.

Q: How would you compare these characteristics against benchmarks seen in more reliable systems?

A: It is less about one-size-fits-all benchmarks and more about how these levels compare to the nature and size of a country’s infrastructure. That is where the problem resides: Mexico’s current infrastructure is simply insufficient for its current situation. National demand as it exists right now might be technically served by the system in its current state but data regarding future demand indicate that the system will be overwhelmed. Even as private players in the electricity market that try to stock up on its own capacity, our efforts can only take us so far without the necessary transmission infrastructure. Generation and storage capacity is great but without a reliable transmission and distribution system, it is pretty much just there for show.” 

Q: How is the lack of natural gas supply further straining the network?

A: Over 60 percent of our generation comes from natural gas, most of which continues to come from Texas due to its lower price. This recent weather event has demonstrated the vulnerabilities of our electrical system, particularly when it comes to the lack of diversification in its generation matrix. This should indicate to us as a country the degree to which we need to increase our investments in both NatGas and energy storage infrastructure. This opportunity will allow us to deal with not only weather-related or other kinds of emergencies, but also economic emergencies and conditions. Then there is diversification beyond natural gas. Renewable energy projects need to be accelerated so that our dependence on natural gas does not become a problem in the future. Generation also needs to be more localized and better distributed. A system that depends on a few power generation plants concentrated in one or two regions across the country is vulnerable and doomed by design. Most electricity markets around the world are built on a solid relationship between generation and storage capabilities. We do not have that foundation in Mexico, and we need it badly. Strong demand growth is going to come from different regions and our transmission lines and generation matrix need to be ready to take on that additional load.     

Q: How could relevant players in the industry collaborate to make the necessary infrastructure investment happen?     

A: To achieve this, we need a team effort between the public and private sectors. Despite the industry’s legal framework dictating that transmission and distribution are exclusively in the hands of the state, this does not mean that private parties are banned from contributing to these efforts. The public sector has many highly skilled technicians and electricity professionals in the country, but they still need extra hands. In the end, the private and public sectors in this industry share the same end users, and we owe this pending modernization to them. This is a shared responsibility, regardless of each individual company’s business model and connection/interconnection to the grid. We all are interested in making this market as efficient, reliable and competitive as possible. SENER has already approved the financial structures and schemes through which we could fund these types of investments, we just need to implement them. The truth is that there are many companies in the Mexican market that have extensive experience developing transmission infrastructure. To not allow their participation in these efforts would be a tremendous waste of resources. Interest in investment in Mexico remains, despite whatever social or political conditions might arise.

Northland Power Energía operates as a qualified supplier in Mexico’s electricity market. It is part of Northland Power, which develops, builds, owns and operates renewable energy infrastructure assets in North America and Europe, among other regions.