David Fatzinger
Vice President and General Manager Latin America
View from the Top

Adapting to an Evolving Market

Wed, 02/22/2017 - 14:37

Q: How is InterGen adapting its business to the evolving market?

A: We have experienced two major changes this year: the implementation of the Energy Reform and the opening of the Wholesale Electricity Market. We were prepared for the market’s evolution so it did not take us by surprise. For instance, we included some of the wholesale electricity market products into our strategy. For many years, InterGen has developed power solutions, mostly under the self-supply scheme, for industrial clients. Now we are moving into the qualified supplier scheme, adapting our old strategy to the new energy sector.

Most of the projects we developed in the past were awarded to us through CFE’s bidding processes. Those projects were designed with overcapacity so we could sell the additional energy to private industrial clients. The new power plant we constructed in Guanajuato was our first project developed under the new regulatory framework and was built as a dedicated solution to meet only industrial needs. In that case we established a bilateral contract directly with the plant’s main user but we also built it so we could sell energy to other industrial customers through the wholesale electricity market. In the future, we expect to migrate most of our bilateral and self-supply contracts to the qualified supplier scheme, using it as our main supply channel.

In 2018, CELs will be a mandatory requirement, so we have adapted our solutions to meet the new clean-energy guidelines. We are employing clean-energy technologies so we can offer CELs to clients that need them. Energy solutions will become more sophisticated over time, driving project developers to use a mix of technologies instead of relying on only one. Renewable energies and distributed generation are two trends that we expect to grow in Mexico.

Q: Will the company partner with suppliers or energy brokers for the wholesale electricity market?

A: Yes. InterGen looks for partnerships where both parties bring additional value to the table. In the case of electricity trading, we can develop solutions and market our own energy production. One of InterGen’s competitive advantages is that we are comfortable operating in the wholesale market, developing supply solutions and trading energy products in the commercial and industrial sectors. Generally, we do not collaborate with external energy brokers or retailers but we will consider it if a company proposes a mutually beneficial alliance.

Q: What potential do you see for developing cross-border energy projects between the US and Mexico?

A: Energía Sierra Juárez, a wind farm developed by InterGen, was the first cross-border renewable energy project developed between the US and Mexico. InterGen has experience in other cross-border energy projects, including La Rosita, a gas-fired power plant we built in Mexicali, Baja California, 17 years ago. La Rosita supplies energy to customers in Mexico and Southern California. It was our first project to be regulated under two jurisdictions and built on Mexican land. Handling the regulatory framework of two countries is not as challenging for us because of this prior experience. The complexity is similar to building projects across two states, something InterGen has done for more than 20 years. We expect to see more cross-border projects. At the moment US gas-based power plants exporting energy to Mexico are the most common but we do not discount cross-border renewable plants in the future.

Q: Which of the lessons learned from your experience in the US could be applied to Mexico’s liberalized market?

A: One of the biggest lessons we learned is the need for transparency on the brokerage side of the market. Industrial clients need to trust their energy suppliers to feel comfortable participating in the market. We fully understand the need to create strong and trusting relationships with our customers so we are opening new communication channels and sharing our market knowledge with them. Another important lesson we learned is the need to diversify. Industrial energy needs change over time so we have to be ready to offer the proper solution based on our clients’ requirements.