6 Questions About Mexico’s Energy Landscape

March 30, 2020

Contributed By:

Kseniya Pfeiffer, Regional Manager, Mexico

Ana Luisa Echartea, Sourcing Analyst, Mexico

Ignacio Puga Calderón, Regulatory Expert, Mexico

President Andrés Manuel López Obrador’s administration proposed key changes to the Mexican Energy Reform that may affect several important areas of the energy markets. Three of Schneider Electric’s specialists on procurement and regulation in Mexico — Kseniya Pfeiffer, Ana Luisa Echartea and Ignacio Puga Calderón — led a webinar to separate fact from fiction and outlined significant opportunities for savings.

The live webinar generated more than 80 questions. In this article, our experts addresses 6 of the most common.


Has there been an increase/decrease in third-party production/supply to the main network in Mexico in the last year?

Despite recent changes in the market and unfavorable rhetoric towards renewable energy, we see no reduction in available capacity or decrease in production. In fact, we still see new projects being developed. This is a good sign because it is evidence of investors’ confidence in the Mexico market at this moment.

What’s the difference between old qualified supply contracts signed when the energy reform was just introduced vs. the ones signed today?

It really depends on each individual contract. However, in general, we have seen improvements both in pricing and in commercial conditions that help mitigate market risks such as congestion, monthly off-take obligation, tolerance band, payment terms, etc. We expect to continue seeing new projects in the future, each one of them with its own conditions and overall improvement in price products and options. Currently, suppliers are aware of this situation and they are typically open to renew or renegotiate old contracts that are up for expiration.

What’s congestion?

Mexico spot market prices are set at individual nodes across the country. Therefore, each node and region in the country has a different hourly price. Suppliers sell the energy to the grid at a certain price that depends on their location. On the other hand, the load point that receives the energy pays for the energy at a different price according to its location. The difference, which can be either positive or negative, is called congestion. This element can be extremely volatile, and not fixing congestion may lead to substantial month over month price swings. Currently, some suppliers are offering to fix congestion to mitigate this risk, and we expect it to become a market standard for more suppliers in the short-term future.

Is the compliance with “Código de Red” mandatory to migrate to the MEM (Mercado Eléctrico Mayorista)?

Part of the requirements of becoming a market participant involve metering and communication upgrades that are also part of the “Código de Red”. However, not all requirements in “Código de Red” are requirements to become a qualified user and sign a contract with a qualified supplier.

 

Can I claim 100% renewable energy by acquiring only CELs?

CELs (clean energy certificates) are granted for a variety of generation sources, including some not internationally considered renewable, such as nuclear, hydro and clean natural gas generation. It is important to state in your contract what source is supplying CELs to your facilities. It is common to buy additional certificates to be able to claim 100% renewable consumption. When a client is interested in becoming renewable, alternative options to CELs may be available depending on individual goals and solutions provided by suppliers.

When will there be an open season for natural gas?

At the moment, CENAGAS has nothing published or announced. However, private pipelines can announce open season at any given time. Monitoring such opportunities is very important to determine the right solution based on an individual location.


For more insights into the changes occurring in Mexico’s energy market, we invite you to watch the full recording of our recent webinar, Mexico’s Energy Landscape: Maximizing Cost Savings & Minimizing Risk.

Click here to access the recording in English.

Click here to access to recording in Spanish.

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