By Adina Moloman
Sources: PWC, Tijuana EDC
The private sector’s participation in the power industry in Mexico started a little more than 20 years ago with legal reforms that allowed private entities to participate in the generation of power, but the electricity was sold only to CFE. The transmission, sale and distribution of power were services exclusively provided by the Comisión Federal de Electricidad or (CFE). There are four ways to generate electricity in Mexico: CFE’s own plants, independent and small producers that deliver their power to the CFE, and self-supply, cogeneration and exportation.
The recent Mexican Energy Reform has lead to a larger share of private investment in electric power generation, through the potential opening of the market. There is another possibility and that is to establish bilateral contracts with consumers. The new Energy reform mentions the participation of private electricity generators, regardless of the state’s control over the National Electric System. This has a direct implication on the financial benefits of the end user companies with their nearshoring operations.
Right now we are talking about the diversification of generating sources and an open competition. For instance, before the energy reform in Baja California there existed only two private electricity producers for the local market and also for the neighbor state California.
Baja California adopted at the end of 2014 the Electricity Self-Supply Industry Program, where was possible negotiations with the electricity producing plants a scheme to achieve energy cogeneration in order to obtain low rates for the local industry.
According to this program it was generating energy savings of up to 50% of the service cost on peak-hours for the companies located within the state.
Recently was concluded the pilot phase where a private company Intergen and Mexico’s Federal Energy Commission (CFE) did supply low-cost energy to 16 companies operating in the state. Intergen, a multinational company had reduced electricity fees by 45 to 50% during peak hours. CFE at the same time allowed use of its electricity network infrastructure by Intergen in order to provide the service directly to end-users.
The challenge starting this year is to implement this program to a larger scale to the Mexico Manufacturing Sector and for the foreign investors choosing to manufacture in Mexico and to allow the development of bigger projects by private entities, under different schemes, from sources such as wind, solar, hydro and geothermal, of which Mexico has an abundant supply.