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Renewables Oversupply is Mexico’s ‘Gravest Energy Problem’

The country’s electricity system operator Cenace proposes returning to a pre-reform planning model

Electricidad
January 05, 2022 | 12:06 pm

Mexico City — The most serious issue for Mexico’s energy sector is the oversupply of solar and wind energy projects that were built without sufficient planning, according to the country’s National Energy Control Center (Cenace).

Over the past three years the country’s renewable energy portfolio has mushroomed by 300%, and that is the most serious issue, Cenace’s director general Ricardo Mota Palomino said in an interview with Bloomberg Línea.

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Mexico currently has an installed renewables capacity of 9GW, but the country has a “small-scale plant factor”, which are only available during 30% of the day, and if renewables were the market’s sole energy provider they would be unsustainable, Mota Palomino, who is an electrical engineer graduated from the country’s National Polytechnic (IPN), said.

“The gravest problem we have is the oversupply of intermittent generation,” he warned.

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In September, President Andrés Manuel López Obrador sent a proposed constitutional reform to Congress to hand over control of the electricity sector to state utility CFE, cancel all the contracts with private generation firms, eliminate the sector’s regulatory bodies and place Cenace within the CFE, following the failure of administrative agreements and secondary legislation.

In addition to operating Mexico’s wholesale power market, Cenace also controls the national grid and guarantees impartial access to the nation’s transmission and distribution networks.

Mota Palomino cited the power outage of December 28, 2021 that left 10 million customers without power after the San Carlos wind farm, owned by Spanish company Acciona, certified the presence of protection equipment that had not been installed at the wind farm, and which was considered by the government to be an indication of corrupt practices.

“How can a company say that it had equipment that it had not installed?” the Cenace head asked.

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Transmission Expansion Needed

The government has criticized solar and wind power technology for their expense, and the risks caused by their intermittency of supply to the grid, although work started on the largest solar facility in Latin America last year in Sonora state, in the country’s northwest, which will have 1GW generation capacity and include a battery storage facility.

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The first thing Mexico needs to do is adapt its transmission networks to receive renewable energy, but that is costly, and during the government of former President Enrique Peña Nieto the connection of small-scale generation plants to the transmission network was authorized, but which was not designed for that, Mota Palomino said.

He proposes returning to the open-season model, a system that was used under the government of former President Felipe Calderón (2006-12), prior to the 2013 energy reform, under which private companies registered their interest in reserving electricity transmission capacity, and which provided a solution to all players involved in the sector.

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“They were very successful. The system was developed in the Tehuantepec isthmus. Sophisticated technologies were employed, and all the permit holders in the region participated in the purchase of control equipment that had to be installed, but things became disorderly during the previous six-year administration [of Peña Nieto],” he said.

The country’s Energy Regulatory Commission (CRE) states that the beneficiaries of the first season in Oaxaca brought in additional investment of $5 billion over four years.

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The government of Peña Nieto proposed the construction of two transmission lines, from the country’s southeast to the central region, and from the northwestern states of Sonora and Sinaloa to the Baja California peninsula, across the Sea of Cortés, but both projects were cancelled by the current government.

“They are very expensive projects,” Mota Palomino said.

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He added that the CFE can no longer freely carry out projects or recover its costs because of the regulations it is subject to.

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The country’s high-tension transmission network belongs to the CFE, which is headed by Manuel Bartlett Díaz, who was appointed by López Obrador. But it is the CRE that authorizes transmission tariffs, and for several years now the tariffs are lower than that required by the network.

“So what happens? There have to be subsidies from the Treasury to keep the electricity system working. That is why the government said ‘that’s enough’. The model needs to be analyzed in-depth because we cannot continue to have private businesses being subsidized by the government,” Mota Palomino said.

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