Juan Vargas
Manager of Energy, Resources and Industrials
Deloitte Consulting
View from the Top

Visualizing a Mexican Zero-Carbon Economy

Mon, 02/25/2019 - 12:53

Q: What is Deloitte’s most important contribution to Mexico’s energy transition?
A: Deloitte’s first significant contribution is related to the industry’s human talent. In 2015, we developed a human capital development strategy for the Ministry of Energy to best prepare the industry’s transformation. Our research reached three fundamental conclusions. First, an open market by definition calls for new and highly specialized occupations. Second, by gauging the demand side for these critical specialized professions, we were able to calculate the available offer and the talent projection for the following years. Third, by pinpointing the supply and demand equilibrium, we detected the technical and qualitative gaps that needed to be filled. We were able to describe the technical capabilities required as well as highlighting the soft characteristics or skills the industry’s professionals must display. With this information, the Ministry of Energy created a Talent Observatory to monitor the industry’s development of human talent. In 2017, through joint efforts with other associates, we designed the operational guide for the long-term electricity auction’s Clearing House for CENACE, featured in the third auction. We are aiming to participate in the bidding process to be selected to craft the operating guide to build CENACE’s Clearing House for midterm electricity contracts.
The process of unlocking an entire industry is comparable to a corporation’s life cycle. In its initial stage, the priority is to fully absorb the regulatory framework. Deloitte provides regulatory compliance and legal advisory services to enhance companies’ regulatory grasp and facilitate decision-making processes. Once the investment decision is made, we can assist them in the execution of their capital projects and provide project feasibility services. In parallel, we provide value-added services when these companies want to participate in tenders, such as the oil and gas licensing rounds or the long-term electricity auctions. Should a project proposal be successful, we can help our clients optimize the management capacity of each stage of the project.
Q: What are Deloitte’s expectations for the fourth long-term electricity auction?
A: The industry’s regulators and policymakers are developing certainty-generating capacities. This enables further consolidation of an open energy market with clear rules, systems and methods for the private sector to actively participate. There is a solid coordination mechanism between the Ministry of Energy, CENACE and CRE. As the energy industry’s regulator, CRE can complement and strengthen market confidence, the foundations of which were laid by the Independent System Operator, CENACE.
Q: What clean energy technologies are set to share the limelight with solar and wind?
A: While solar and wind technologies provide tremendous clean generation potential, some power-producing technologies suffer from a development backlog in Mexico, chief among them, geothermal energy. Mexico is among the Top 5 countries worldwide for geothermal resources. They are assigned to CFE’s generation portfolio, and for a number of reasons the parastatal decided not to prioritize the development of this power-producing technology. It should be noted that the development timeframe for a geothermal project is longer than other clean energy technologies, shortened only by a clear knowledge of a particular location’s prospective geothermal resources. CFE preferred to invest in its power plant gasification strategy to move away from fuel oil, focusing on developing the necessary gas transportation infrastructure. CFE’s emphasis on natural gas does not prevent the market from demonstrating the competitiveness of other clean energy generation technologies, as shown by recent resource allocations in geothermal plants by the private sphere. Properly harnessing the country’s clean power generation resources calls for a coordinated effort between government agencies and the private sector in producing an exhaustive information system with reliable data for proven, probable and possible resources.