Jorge Gutiérrez
Director General
Energía Eléctrica Bal
/
Insight

US-Mexico Partners to Chase Gas-Based Tech

Wed, 02/22/2017 - 17:52

Mexico’s push for a cleaner, more renewable energy matrix and the growing power needs of several industries in the country has created opportunities where two heads are better than one. Mexican industrial and retail conglomerate Grupo Bal saw such an opportunity in the wake of the sweeping Energy Reform and partnered with the local unit of US generation giant AES to create EnerAB. Jorge Gutiérrez, Director General of Energía Eléctrica Bal, AES’ partner in EnerAB, says the venture with the Arlington-based company, sealed in early 2016, has been exploring opportunities in gas-based technologies such as cogeneration for various sectors, including the oil and gas and paper industries, that have high energy and steam requirements.

EnerAB, he says, will be an equal-investment venture between the two companies. “The Energy Reform was the main driver behind Grupo Bal’s decision to open Energía Eléctrica Bal, a company focused on power generation activities,” Gutiérrez says. “We have been analyzing the possibilities of establishing projects with CFE and other private players, as well as participating in the next electricity tenders, tendering a proposal involving wind and solar power in combination with energy-storage technologies, an area where AES Mexico holds great expertise.”

Energy storage is seen as the solution to the main problem for both solar PV and wind power: intermittency. Since both technologies depend on variable input from the sun or wind, they do not produce a constant flow of energy, which has been an argument for the development of gas-based generation technologies, especially given the low prices of imported gas from the US in the last few years. AES, Gutiérrez says, is one of the leading companies working on storage technologies to solve the intermittency problem. “All our renewable energy-generation projects will be backed by our energy-storage solutions, which are necessary to mitigate intermittency. Energy storage is one of the strongest assets of AES, a world leader in these solutions, which was one of the factors driving us to establish an alliance with them.”

Mexico plans to produce 35 percent of its energy from clean sources by 2024 and both solar and wind will become increasingly important in the industry, particularly after 2016’s long-term electricity auctions showed a competitive landscape where solar PV plants averaged prices of US$31/MWh and wind reached US$48/MWh, rates competitive with the US$45/MWh offered by even the most efficient combined-cycle plants, Gutiérrez adds. “These prices brought down the arguments of those who opposed the Energy Transition Law by claiming that increasing the share of renewables would increase manufacturing prices.”

EnerAB will invest up to US$2.5 billion in the country in the next five years. Most of the resources, Gutiérrez says, will be allocated to combined-cycle and cogeneration plants, some of which the company is already proposing to PEMEX’s cogeneration unit and to CFE’s generation unit. Around US$500 million would be devoted to renewable energy, including storage solutions, while a smaller portion of the funds will go toward projects like liquefied natural gas stations to reduce diesel consumption from mining trucks, one of Grupo Bal’s main areas of expertise. The company owns mining giants Peñoles and Fresnillo, as well as seawater desalination projects designed to alleviate the frequent droughts and water demands in Mexico’s northern region.

The company is no stranger to the energy-generation business. Peñoles owns an 80MW wind farm in Oaxaca, Fuerza Eólica del Istmo, which provides power to several of Grupo Bal’s units. It also owns a 500MW petroleum coke-fired thermoelectric plant in San Luis Potosi, Termoeléctrica del Golfo, which provides 50 percent of its energy production to Peñoles and Fresnillo. Another potential avenue of business is to become CFE’s client for natural gas, taking advantage of the state- owned company’s push to increase the size and reach of its distribution and storage infrastructure. “We are aware of CFE’s great interest in investing in natural gas transportation infrastructure, which was initially motivated by environmental concerns,” Gutiérrez says.