Stop Being Complacent If You Want to Achieve Energy SavingsBy Cas Biekmann | Tue, 01/04/2022 - 16:03
Q: How did Energy Intelligence Consulting (EIC) drive its business in its first years of operation?
A: EIC was established due to my 15-year experience as a buyer of energy for industrial companies, via natural gas, energy equipment and purchasing power portfolios, including significant amounts through the self-supply scheme. I was also involved in signing the first power purchase agreement (PPA) between a generator and a market participant, as well as being part of a long negotiation process on what is considered the largest contract in terms of value PPA between a qualified supplier (QS) and user (QU), on a 250MW firm capacity basis. In 2019, I provided my expertise for third parties under the EIC banner. The consultancy had the fortune to hit the ground running but the pandemic complicated the situation. Activity is picking up, but the government’s electricity reform proposal is again putting a damper on the sector.
Q: What sets EIC’s approach toward energy consulting apart from other consultancies?
A: Transparency is a key value for our consultancy. We are not like energy brokers and cannot afford to be biased in any of our recommendations, so we are only consultants. Our experience as energy buyers adds further value. Many consultants come from the sales world, which means they know a great deal about the business, but selling is very different from purchasing, since you can put yourself in the client’s shoes. Understanding this concept allows us to champion flexibility and risk management. Once we set a strategy, we proceed to ask our clients many questions. If contracts are rigid, they cannot deal with changes in market trends, demand and technological developments, which are near-impossible to predict. Nonetheless, consultants need to be cognizant that these changes will occur and risks will arise. For clients, getting hammered by the board about risks can be problematic but a great deal of flexibility and planning can mitigate any risk. We have the experience to build a watertight procurement strategy, with a variety of factors covered in the request for proposal (RFP) that we send to Qualified Suppliers. Since we know suppliers well, we can help make the process more transparent for clients. “No surprises” is the motto we aim to stand by.
Q: What are the main challenges faced by large-scale energy users looking for better options in the current environment?
A: One of the main challenges companies deal with is saving money. Nevertheless, there is a gap between this desire and the willingness to invest time and resources into understanding what needs to be done to achieve these savings. Once companies jump the hurdle of understanding, they can take the path of exploring energy options. Still, less than 5 percent of C&I energy users are participating in the wholesale electricity market (WEM) as QUs. This number stood at around 1 percent in 2018. Another challenge is a lack of supply, which could occur in the future, since project development has slowed down.
Q: How could isolated supply help clients that are looking for more energy security?
A: For the most part, companies are hesitant to adopt distributed generation (DG). Yet, building projects that are completely disconnected from the grid work very well for many offtakers. This is somewhat different from DG because you can build projects larger than 0.5MW in so-called island mode. For instance, we recently consulted on the development of a 2MW off-grid motor-based project. We checked with CFE about disconnecting from the grid, CFE saw no issues and said the company could reconnect fully whenever they wanted. If an outage occurs, a transfer system switches in milliseconds back to the grid. This means that the main supply might be unconnected but the company retains the grid as a backup, although it cannot inject energy into the grid. Because our client’s grid supply came from an overly saturated 250Kv transmission line, they suffered from many small outages and energy inefficiency. Isolated supply was the ideal solution in this case and it could be a great solution for many other companies that spend a great deal of money on energy.
Q: With international natural gas prices rising, what trends can Mexican companies looking to source pipeline gas or liquefied natural gas (LNG) expect?
A: To expect prices to return to normal, three factors come into play: how fast LNG capacity rises, how cold the North American winter will be and in what fashion the investment plans of US gas producers materialize. It is all about the rig count, which has seen an all-time low this year.
Q: What do you predict is the future of green hydrogen?
A: Hydrogen must be top of mind for every policymaker. It is a major tool for the energy transition because certain industries can simply not be decarbonized any other way. Fuel cells could decarbonize certain kinds of transportation, but when you switch to air and sea transport, hydrogen is the logical solution. It will be developed rapidly for these reasons. This year, the EU spent huge amounts of money on hydrogen development. If they can deploy it quickly enough, the levelized cost of green hydrogen will drop to US$0.5/kg, according to McKinsey. This would be around the same cost of natural gas, making green hydrogen a real game changer.
Q: How would you assess the long-term effects of the government’s proposal to once again reform the energy sector?
A: If the proposal does not pass, there will be a degree of chaos in the sector, something that most decision-makers in the industry are aware of or are beginning to understand. There will be a loss of competitiveness in Mexico’s industry due to energy insecurity. If the proposal does pass, we would have bigger problems to worry about. If I am an industrial player or shareholder and I see the reform is on the verge of passing, I would begin packing my bags and figure out how to move my operations elsewhere. If the reform passes, this will give the government the momentum to win the next election. This would give them the power to fulfill some of the biggest fears of Mexico’s private industry. Nevertheless, I do not expect the proposal to pass.
Energy Intelligence Consulting assesses the energy use of players in the commercial and industrial environment and consults on the best possible power option to reduce costs.