Energy Reform's Possibilities for Mining

In the mining industry, energy consumption represents around 35 percent of total cost. Having extensive experience working in the energy sector in Mexico in companies such as Luz y Fuerza del Centro and PEMEX, the founders of ANAF Energy saw an opportunity to act as a solution provider for efficient energy consumption. “We believe the Mexican market will become one of the most significant energy buyers," comments Alfonso Caso, ANAF Energy’s Director General. "From our perspective, all new projects regarding energy generation and energy self-supply should consider this new business opportunity due to the competition the market will create,”

ANAF has experience in creating, developing, and executing projects regarding energy savings and efficient use of energy for petrochemical companies and steel manufacturers. Additionally, it has been implementing natural gas cogeneration projects for private companies. “At the governmental level we have developed projects for Mexico’s City sewage system (SACM) regarding the improvement and repair of its electric generation equipment, its functionality, and its operation,” Caso comments. For the Mexico City Metro, ANAF prepared several energy consumption analyses. PEMEX also recruited the firm to design and operate a natural gas gathering system in Tamaulipas. “Moreover, we have been providing technical diagnosis for the operation of fuel supply and distribution terminals (TARs),” he declares. “After the execution of our projects, our clients have been able to reduce their energy-related expenses by between 5-30 percent.”

He believes the Energy Reform has created certain opportunities in the mining industry. “The new market model allowed large mining companies to be registered as qualified users to acquire power supply in the wholesale electricity market or through suppliers,” he explains. “Additionally, small and medium mining companies can create purchase structures or establish strategic alliances to buy energy through a non-regulated energy supplier for long term basis power purchase agreement (PPA) contracts, or alternatively obtain part of their supply in the spot market.” CFE and other suppliers can offer favorable rates to large users that are not regulated by new pricing schemes. “The natural gas network will provide the possibility of constructing new power combined cycle plants,” he indicates. Geothermal power generation and the extraction of coal bed gas will both become interesting areas for investment in order to ensure compliance with the mandatory consumption of clean energy due to the new Energy Transition Law, according to Caso

He believes the first wave of suppliers will consist of energy retailers for qualified users. Most consumption could be acquired via a Power Purchase Agreement (PPA), and around 30 to 40 percent could be then quoted on the open market, as a way to benchmark prices. An operator could ask a supplier for a quote on cost per Kw and negotiate the conditions. The supplier could then create a package for various cycles as well as managing the Clean Energy Certificates the purchaser needs. The supplier can also analyze the overall energy consumption in order to create spot offers. The suppliers can also analyze the overall energy consumption in order to create spot offers. “Companies will be able to create innovative combinations that will be attractive to consumers, regardless of the traditional energy consumption structure,” Cano explains. “For mining companies, the possibility to create purchasing power structures will become a new business area.”

According to Caso, the mining industry may face hurdles when generating its own power supply because the new legal framework needs to be . and properly analyzed to comply with the government’s regulations and administrative procedures. “International experience dictates that the adjustment will take two or three years, but this first stage of the market also offers the most interesting investment possibilities,” he clarifies. “We see opportunities more than hurdles for the mining industry, with a wider scope for power generation due to the construction of gas and renewable power generation infrastructure.”