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Mexico's CFE may retake lead on power projects



By Argus

Petroleumworld 02 07 2019

Mexico's approach to power generation and distribution may shift back to a more government-led process, although private companies will still have a role, one official with a state power company subsidiary said today.

"I believe the government's fundamental power targets have not really changed but the 'how' to reach them with what mechanisms is changing," said Alejandro de Keijser, power management coordinator at state-owned commercialization subsidiary CFE Calificados said.

President Andres Manuel Lopez Obrador has signaled repeatedly since he took office on 1 December that the federal government will have more of a hand in power generation and distribution, other panelists said yesterday at an event ahead of the Mirec Week renewables conference.

"There is a socio-political motivation instead of a cost approach" for power projects, said Gonzalo Monroy, director at energy consultancy GMEC. Mexico's power needs "are now based on CFE's needs and not the market's."

Yet de Keijser argued that economics will continue to be a key factor in decision making, as it has been since Mexico's massive 2014 energy sector opened the sector to the possibility of outside investment.

"CFE also needs to recover the budgetary deficit of Ps60bn ($3.14bn) from government power subsidies," he said, referring to 2019 subsidies for residential and agricultural power. "CFE also has the ability to jointly invest with private companies post-reform."

CFE still controls 56,000 MW of the country's 80,000 MW of installed capacity despite the 2014 energy reform.

Panelists coincided that CFE may take a bigger role in new power projects to meet energy demand that the energy ministry (Sener) forecasts will grow at an annual rate of 3.2pc for the next 15 years.

The panelists said this will be hard to meet, based on the recent cancellation of a major transmission line to connect wind power from Oaxaca the largest wind producer nationwide to the national grid, as well as a fourth long-term power auction meant to boost renewable generation.

Wind and solar capacity still accounts for much less than one percent of domestic power generation. Panelists suggested that CFE would not likely venture further into renewables, but rather stick with hydroelectric power, following Lopez Obrador's plans.

Beyond Oaxaca's transmission bottleneck, there are 44GW of capacity from wind and solar plants pending interconnection to the national grid.

Yet the new administration reduced CFE's budget for new transmission and distribution infrastructure despite this being "precisely what is needed to reduce rates," said the head of Tecnologico de Monterrey university's energy initiative, Luis Alberto Serra.

CFE's budget for planning and investment on power infrastructure in 2019 was cut by 30pc to Ps2.22bn from Ps3.17bn in 2018.



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