Mexico power market participants recommend playing long game

Energy infrastructure planning remains delayed

Power grid planning appears disjointed

Market participants still see long-term opportunities

HOUSTON AND MEXICO CITY (ICIS)–Power market participants can expect higher levels of regulatory uncertainty in the Mexican market in the short term as well as opportunities for those who play a long game through the administration’s chaotic energy planning.

The administration recently delayed to February an energy infrastructure plan that would allow private sector participation after allegedly attempting to sell the idea of a centralised Marshall Plan for all national infrastructure to the Mexican private sector, according to a participant at the Energy Mexico Congress on 28 January in Mexico City.

The energy chapter of this larger plan released in December was drafted in collaboration with the private sector. The chapter was pulled at the last minute because of stark differences between the vision of private sector groups and that of state-run utility CFE, state producer Pemex and energy ministry SENER.

Private sector participants were promised a January and then February energy infrastructure plan that would be open for their participation. Private sector groups had identified during the drafting process nearly 140 project ideas that were turned over to SENER. These are allegedly the projects being discussed for the February energy infrastructure plan that private sector participants are waiting for, according to the participant.

The delay was unsurprising to many market observers given previous energy planning delays, disjointed plans, announcements and delayed plant tenders from CFE. As of 28 January it had tendered for three of seven power plants it has planned and appears to be behind schedule tendering for major plants it has planned for Merida and Lerdo.

A document obtained by ICIS shows representatives from the utility and other market participants asking what two power market consultants deemed “basic” grid and transmission planning questions at a January internal meeting with power market operator CENACE.

“CFE is asking itself the right questions but they should have done this a year ago,” one consultant said. CFE and CENACE did not immediately respond for comment on their grid planning activities.  

He said if the document is representative of the level of sophistication in grid planning, it is unlikely that any immediate decisions will be made to construct key transmission lines.

“They might decide to tender for smaller transmission projects in areas advantageous for CFE’s generation but nothing that could help evacuate power being generated by private players,” he said.

Another source recommended the administration propose a process to plan and prioritise power infrastructure projects but said leadership is lacking.

“SENER is empty on the electricity side and CENACE is not leading because CFE will cut their heads off,” the source said.

long-term plans

Other sources said the lack of planning was part of a strategy the new administration has been implementing to push out smaller participants.

In addition to reorganising CFE in a way that can give it market dominance in certain geographic areas, the administration made drastic changes to renewables regulations that jeopardise the viability of some projects awarded during the first three long-term auctions. The changes are currently suspended and being evaluated in Mexico’s court system.

“The current strategy of the administration will blow up,” one source said, which would create the need for a course correction likely before the end of the administration’s term in 2024. He said at that inflection point he foresaw a boom in generation, transmission and distribution investment for those able to stay in Mexico, study the market and be well positioned to take advantage of the future opportunities.  

The Energy Mexico Congress participant also recommended perseverance.  

“Keep defending yourselves. Take the legal action necessary. The president understands and says he will comply with what the judiciary says…I still see an area of incredible opportunity [in energy],” he said.