SENER official expects half of Mexico's power to come from clean energy by 2034

Houston (Platts)--30 Apr 2018 347 am EDT/747 GMT

Mexico could reach its goal of generating half of its power from clean energy 16 years sooner than expected, according to Leonardo Beltran, Mexico's deputy secretary for energy transition at Mexico's Energy Secretariat (SENER).

Based on the current growth rate, and the effectiveness of the market mechanism implemented by the country's energy reforms, Mexico could achieve its goal of generating half its electricity using clean energy sources by 2034, Beltran told S&P Global Platts on the sidelines of the Mexico Energy Series on April 20.

"We have great confidence we can achieve this forecast," Beltran said.

The country has a policy in place under its energy transition law to achieve the goal by 2050, supported by clean energy certificate (CEL) requirements and long-term electricity auctions.

Under this law, Mexico also must generate 37.7% of its electricity using clean generation by 2030. The deputy secretary said Mexico will likely achieve that 2030 goal by 2024.

He said these more aggressive projections are based on current trends in place and the continuation of current policies and market mechanisms.

Analysts agree these more aggressive goals are technically feasible, but several also said that other policy changes would likely be needed.

"Mexico has the renewable resources and could implement the enabling technologies to integrate large amounts of intermittent renewables and retain a reliable grid," said Jim Heidell, director for utilities with PA Consulting in Denver.

Analysts from Genscape and IPD Latin America also told S&P Global Platts that the more aggressive projections are possible if Mexico includes cogeneration and nuclear power in the "clean energy" bucket.

The PA executive noted SENER's policy goal is in line with goals set by some US states, such as California and New York, which aim to generate half their power using clean sources by 2030.

Challenges to overcome

However, Heidell said there are several important challenges Mexico must overcome. Long-term auctions need to be improved to help support development of additional clean generation sources, including hydropower, geothermal, cogeneration and nuclear power.

In addition, new retail suppliers entering Mexico's market also "have less of an appetite" to sign the long-term contracts required by developers to obtain financing to build low-cost clean generation, Heidell noted.

As more solar capacity is installed, Mexico also will "get the duck curve, which would dramatically depress the daytime prices while keeping the pressure on the current high evening-time prices," Heidell said. This will result in lower capacity factor for thermal resources, increasing capacity costs. "Suppliers need to factor in the cost of following load in all hours," Heidell said.

As a result, Mexico needs policy changes to compensate for this dynamic and provide grid stability, including mechanisms to support storage and fast response thermal units, he added.

"California and New York are pursuing and evaluating those types of policies, and I believe Mexico would have to as well," Heidell said.

--Rocco Canonica,

--Daniel Rodriguez,

Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.