By Tom Kleckner
MEXICO CITY — A top official with Mexico’s wholesale electricity market accepted praise last week for the outcome of the country’s latest capacity auction, but he said he is still intent on increasing participation in the effort.
“There are barriers to true efficiency in the market,” Marcos Valenzuela, director of the National Energy Control Center’s (CENACE) wholesale market, said during a Gulf Coast Power Association breakfast Nov. 30. “I think we need to incorporate more participants, more qualified suppliers, to give more offers to the end users.”
Valenzuela, one of three top directors for CENACE, made his comment after telling his audience that competition had helped narrow offer spreads and drive down prices during Mexico’s third long-term auction in November. Only 16 offers were completed, though in larger packages than in the first two auctions.
According to Mexican energy consulting firm Zumma rg+c, the auction resulted in a world-record low price for wind energy, at $17.76/MWh. But the company said solar energy still accounted for 55% of the energy and clean energy certificates in the auction, with a price of $18.93/MWh.
Only three load-serving entities participated on the buyer-side: the state-owned Federal Electricity Commission (CFE); Spanish multinational Iberdola; and Mekent, an electricity retail division of CEMEX Energia, the second-largest construction materials company in the world. Together they bought a combined 593 MW/year of capacity in the national interconnected system, 5.49 TWh/year of energy and 5.95 million clean energy certificates per year.
Valenzuela said he has focused on increasing the number of private buyers by aggregating qualified buyers. CENACE hopes to attract more participants by establishing a clearinghouse like those used by U.S. RTOs, he said. The clearinghouse is designed to allow buyers other than CFE to participate in the auction process.
Valenzuela said implementing Mexico’s market reforms has been a “big challenge” but pointed to the speed with which the market has ramped up operations. Market reform was written into the country’s constitution just three years ago, and CENACE was able to implement a short-term market in less than a year and a half and run its first long-term auction within five months, he said.
Roll-out of Mexico’s spot market has been postponed to give market participants more time to develop market-rate — rather than cost-based — bids.
“The [timing] is very tight. Not just for us, but even for the participants, because they need to understand … the process,” he said.
Valenzuela’s comments came during the second of what Mexican representatives hope will be a recurring breakfast. Jonathan Pinzon, a partner with Zumma, said he and fellow consultant, Que Advisors’ Peter Nance, hope to schedule eight to 10 meetings in 2018, focusing on intimate gatherings that avoid “death by PowerPoint.”
“We bring together different actors from across the industry,” Pinzon said. “We’ve always thought that small-group partnerships help develop further relationships in the market. It also brings out some good questions not reflected in PowerPoint.”
Pinzon credited GCPA Executive Director Tom Foreman for helping the new effort, recognizing that Mexico is also part of the Gulf Coast. The GCPA has scheduled its next conference on the Mexican power market for May 16 in Mexico City.
