Eduardo Reyes
Partner Power and Utilities of Strategy&
PwC
/
View from the Top

Working to Secure Market Success

Wed, 02/21/2018 - 18:34

Q: How is PwC adapting its consulting know-how to the renewable energy market?

A: Keeping in close contact with the Ministry of Energy in particular and the public sector in general as new rules and regulations are published is key. We always integrate worldwide best practices from more mature markets in the sector as the MEM's design is a mix of US and European electricity markets. For instance, in Europe, we are involved in blockchain initiatives.

In the last 18 months, we have been almost fully dedicated to the design of auction participation strategies covering price, product, understanding regulations and maximizing opportunities. In the first auction, we advised six of the 10 winners and nine of the 16 winners for the second auction. This ratio has positioned PwC as a differentiating factor in the market. We are also assisting investors in their financing of renewable energy projects through energyprice projections. More recently, we have been developing business plans for some qualified suppliers and equipment suppliers.

Q: What effect will the Clearing House have on future auctions?

A: Mexico’s renewable energy scene is seeing an increased number of private energy traders and suppliers but the aggregate volume they can purchase in the market at the moment is not significant enough for the Clearing House to have an impact. We are anticipating that the energy percentage that other suppliers, outside of basic supply, will purchase through the chamber will be relatively low for the rest of 2017, although it will keep growing over time. In the long term, as the energy volume increases, the impact will be consequential and will be reflected in the final consumer price through increased volume and number of private suppliers offering energy. 

Q: How can renewable energy projects be made more attractive for financing?

A: The contracts used for renewable energy projects are new so it is a matter of letting financial entities absorb the inherent mechanisms of these contracts. We are working with three banks to finance auction projects. As renewable energy projects multiply, it will become easier for them to consider all the variables involved, particularly the recordlow prices for renewable energy projects, the technologies involved and the design of the contract.

Q: What alternatives can be fostered to increase market participation besides the auctions?

A: The auctions will continue to be the fundamental axis around which the renewable energy wheel in Mexico will keep spinning in the short to midterm. The auctions send a signal to the rest of the market so developers can design a development plan to integrate all technical requirements necessary to compete. We can measure this by the extent of Mexican companies added to the mix, both in the auctions and in market participation throughout the value chain.

Q: How prepared is Mexico to cover the talent requirements of an evolving energy sector?

A: It is probably the major challenge Mexico will face in the coming years. In our case, hiring consultants that are seasoned professionals in the sector is complicated. When we formed our team, we were all Mexican nationals who had spent 10 years abroad. CFE certainly has experienced professionals and technicians but that does not provide for the private sphere. Working closely with academia to mitigate the risk of a slowdown in the development of certain segments, particularly in business development and engineering, can solve this problem.

Q: Looking ahead, what key issues will Mexico’s energy sector face?

A: We are anticipating the new elements and challenges the market will bring as the undergoing projects reach operational phase: improving efficiency and developing operational models for the companies that are emerging from the reform.