Working with Generation and SupplyMon, 02/25/2019 - 17:28
Q: What sparked ATCO’s interest in becoming a Qualified Services Supplier (QSS) in the Mexican Wholesale Electricity Market (WEM)?
A: ATCO entered Mexico purely as a developer, since its DNA is utility-oriented. We came to develop monolithic projects such as cogeneration and natural gas infrastructure. As a result of the Energy Reform, the electricity market changed radically. No plant has a perfect match of generation and demand, leading to energy deficits and surpluses, which is why the need for commercialization was clear. It was evident that ATCO’s generation could not be optimized without a trading arm, so we started with a QSS arm. In the new market, trading entities do not yet exist. The synergy between a generator and a QSS maximizes profit margins, which is what companies like CFE, Iberdrola or Enel Green Power are doing. The vision was then to create two companies: one called ATCO Servicios y Energía focused on generation and another, ATCO Energía, as a QSS.
Q: How does ATCO Energía’s portfolio look now, and what would the perfect portfolio for the company look like?
A: We have more than 40 years of experience operating power generation plants. Initially, ATCO Energía was created to give ATCO Servicios y Energía’s projects a way to sell energy with more certainty. However, we want to start trading processes with third parties as well. The strategy is to develop activities to the extent that the law allows. This means not being tied to ATCO Servicios y Energía’s generation and instead looking for PPA schemes. Trading is all about having diverse and strong energy generation portfolios. We need portfolios with technological, geographical and price diversity, as well as in contract terms and conditions. We can own our generation assets, work with third parties to sell their generation or even establish import/export arrangements. The point is to create a strong generation portfolio to offer much more diversity to our clients. At the moment, we have identified a number of clients that satisfy these characteristics.
Q: What key differentiators make ATCO Energía’s services as a recent QSS unique?
A: ATCO’s great advantage is that as a QSS, we are supported by our own generation arm, ATCO Servicios y Energía. We can approach a client as ATCO Energía and offer electricity services but if we notice that the client has strong thermal capabilities then we can tell ATCO Servicios y Energía to propose a cogeneration installment that will provide electricity and steam to the client and possibly an energy surplus that can be sold in the market.
Clients in the new electricity market not only require energy as a commodity. They need reliability factors, transparency and strong customer support. We not only look forward to signing contracts but also to establishing long-term relationships. Clients need to know with which company they are entering the market, as a QSS is a figure that reduces risk for both the generator and the consumer. We are responsible for managing our client’s and the generator’s risks. Our division works under that principle.
Q: What lessons has ATCO Energía learned from its activities in terms of CELs trading?
A: At the end of the day, trading is not something that can be learned from books. It involves expertise and market knowledge that can only be learned by doing. In this particular case, CELs had a strong presence during the long-term auctions but many projects have not yet started. Also, projects resulting from the long-term electricity auctions will enter into a regulated market and QSS are not related to those, meaning that we cannot trade those CELs. As of now, CELs serve as an instrument that show CFE’s generation of clean energy and the market response to it. But as the market is still dominated by CFE’s generation, we are facing a lack of liquidity. At the moment, we consider the development of these mechanisms quite immature.