CCGT operators wait for clarity on Mexico energy auctions

Mexico's government is finalizing an assessment of how much power capacity the Federal Electricity Commission (CFE) will need to acquire through energy auctions, a senior official said at the Combined Cycle Gas Turbine Plants Mexico Summit last week.

The Mexican government is about to release more information on the next energy auction (Image credit: Wikimedia Commons)

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Once completed, the assessment should give combined-cycle gas turbine (CCGT) plants the confidence to participate in long-term tenders, Oliver Flores, director of power generation and transmission in the country’s energy ministry (Sener), told the Mexico City conference.

The government will publish a call for proposals for the next energy auction in April, with final bids expected to be presented by the end of the year, Flores said. Mexico has introduced various reforms to open the electricity sector to private investment since August 2014, slowly ending CFE's monopoly on power generation.

CFE will keep some efficient power plants to guarantee power capacity to supply residential and small commercial consumers, with Sener still deciding which plants will qualify, according to Flores. Until this is decided, the state electricity company will not be able to accurately predict how much firm power capacity it will need to buy in the long-term energy auctions.

For as long as the power-capacity issue remains uncertain, CCGT plants will be discouraged from participating in the auctions, Flores acknowledged.

Waiting for information

Although CCGT plant operators have known about the reforms for almost two years, the government will need to provide more information before their doubts can be lifted, Malaquias Encarnacion, Mexico business director for US-based power-generation firm AES Corporation, told the conference.

“Many of us don't have much information about the system, how it works, and where the congestions are,” said Encarnacion.

“There is an [unevenness] in the access to information in comparison with the official power generator [CFE], which already knows the system completely,” he added.

Sener is “working at top speed” to create the conditions for all types of generation technologies to be able to sell power capacity in the long-term auctions, Flores said. Rules and conditions for the first long-term energy auction, for which final bids will be due March 31, favor renewable energy sources. One of the goals of the energy reform is to increase clean power generation in Mexico's matrix.

CCGT is the predominant power-generation technology in Mexico, with 55 power plants totaling 23.309 gigawatts (GW), equivalent to 35.6% of the country’s total installed electricity capacity, according to Sener’s National Electricity System Development Plan 2015-2029.

The plan forecasts that CCGT will add an additional 26.443 GW of installed capacity by 2029, of which 12.573 GW will come from new projects. The rest will be added by projects already planned or under construction, and by upgrading old thermal-power plants.

Government urged to take feedback

CFE will be broken up into at least four smaller companies as part of the government’s energy-market reforms. These companies will be prohibited from sharing information among themselves, under a new rule that aims to guarantee equal opportunities for participation to all the market participants.

Encarnacion argued in favor of further reforms, including: granting electricity generators complete access to the natural-gas pipeline grid; defining clear rules on access to the electricity-transmission grid; and creating greater transparency around the setting of energy prices in the market.

The government must also help generators overcome the current difficulties in obtaining permits from landowners for installation of new projects, Encarnacion argued. And he urged the government to consider regulatory models from countries that have already gone through similar reforms.

“We've seen what has and hasn't worked in other markets,” he said. “There is no need to reinvent the wheel in terms of implementation, legislation and regulation.”

Encarnacion further demanded the government listen to suggestions from market participants, and consider feedback to improve the sector.

Flores said the government plans to deliver all rules for the new electricity sector by the end of this year, and it is also working on improving regulations that have already been announced.

By Anna Flávia Rochas