Mexico publishes draft terms for first transmission line tender

Calgary (Platts)--7 Dec 2017 523 pm EST/2223 GMT

Mexico will hold its first tender for a transmission line, interconnecting for the first time Baja California with the rest of the country, its Energy Secretariat, SENER, said Thursday.

The new high-voltage, direct-current line will strength Mexico's electricity trade with the US state of California, Fernando Zendejas Reyes, Mexico's electricity deputy secretary, said at a webcast event Thursday.

The project will also allow the construction of more renewable generation and gas-fired capacity in Mexico's northwestern region, Zendejas added.

The $1.1 billion (Peso 20.87 billion), 1,400-km (870-mile) circuit line will span between Mexicali, Baja California, and Hermosillo, Sonora, and is expected to begin operating in first-quarter 2021.

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The 500-kV, 1,500-MW transmission line will be able to move 37% of the peak demand Baja California had this summer, Zendejas said.

The new line would allow power generated by 2,000 MW of combined-cycle gas generation capacity under construction by state power utility CFE and its partners in Sonora and Sinaloa to flow to Baja California and potentially the US.

Over 2017-2031, Baja California is expected to install 700 MW of wind capacity and Sonora close to 1,000 MW of solar capacity, according to data from SENER.

The secretariat also expects over 6,200 MW of combined-cycle generation to be installed across Sonora, Sinaloa and Baja California.

The government published Thursday the draft for the terms of the tendering procedure. The final terms will be published in January, Zendejas said.

Companies will be allowed to make joint proposals and CFE is permitted to submit a bid for the project.

This will be the first time after close to 80 years of state monopoly that a private company will be allowed to build and operate a transmission line in Mexico. Companies will submit proposals in July, and SENER will announce the winning bid in September.

Mexico National Energy Control Centre, or CENACE, will pay the awarded company directly to decrease the financial uncertainty of the project.

The transmission tariff of the project will be set by the Mexico Energy Regulatory Commission, or CRE, based on the price achieved in the auction.

Mexico's transmission network is under pressure due to the rapid expansion of the country's generation fleet. Since 2000, the country's generation capacity has doubled to over 73,000 MW, according to SENER.

"The increase in the number of clean energy plants added to the growing current electricity demand requires a transmission extension of the electric grid," Pedro Joaquin Coldwell, Mexico's Energy Secretary, said at the same event.

Mexico is expected to add 7 GW of new generation worth $8.6 billion as a result of its first three long-term electricity auctions, Coldwell said.

Guillermo Garcia Alcocer, CRE president commissioner, said at the event that Mexico would install an additional 55.8 GW of generation capacity worth $97 billion by 2031. Of this, 63% of the new capacity will be renewable generation.

According to CRE, Mexico's northeastern, northern, northwestern and southeastern transmission systems are the most vulnerable to become saturated.

Solving these bottlenecks will decrease long-term uncertainties for the development of new generation projects in these regions, Alcocer said.

--Daniel Rodriguez,

--Edited by Jason Lindquist,

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