INTERVIEW: SENER’s new policy hurts the entire power market

• Policy strengthens role of CFE, affecting private generators
• Uncertainty remains on how SENER will prioritise grid interconnections
• Intermittency of solar, wind power not a valid argument – sources

MEXICO CITY (ICIS)–Stakeholders throughout the Mexican power market’s value chain would be impacted by energy ministry SENER’s new power sector policy, according to consultants at Mexico City-based firm Zumma Energy Consulting.

The impacts will range from hurting financing prospects for new projects to affecting end users, the consultants said.

The policy, made official through its 15 May publication in the federal official gazette, introduces a new set of regulations, including stricter rules for generation permits and additional restrictions for new and existing wind and solar plants.

According to the consultants, the policy hampers competition and particularly affects private power generators, as it gives a greater role to state-run power utility CFE in the planning of the national power grid.

“[The new policy] gives a predominant role to a market competitor, CFE, and opens the door to make the state company be less regulated,” said Ruth Guevara, one of Zumma’s founding partners.

SENER will have the final word on the projects that will be prioritised for interconnection to the grid, which can become an obstacle for private generators. The current expectation is that CFE’s plants could be favoured over private projects if there is not enough transparency on interconnection decisions, the consultants said.

Energy minister Rocio Nahle publicly cited grid stability problems related to the intermittency of solar and wind power as part of the reasoning behind some of the new measures. As such, these types of generators would likely be the market participants most affected by the regulation. There would be uncertainty on their future returns on investments and lack of clarity regarding the amount of power they will be allowed to dispatch.

“Previous criticism from government officials towards private investments in renewable energy along with the opaque way in which the document was published, raises suspicion that the decision was also politically motivated rather than being solely a technical one,” said Zumma Energy consultant Jorge Portilla.

Uncertainty
Besides the actual contents of the new policy, the way in which SENER decided to introduce the measures was far from ideal and adds to investor uncertainty, not only in the energy sector but in all areas of the Mexican economy, the consultants said.

Given that the policy’s publication in the official gazette, commonly known as DOF, appeared fast-tracked and lacked a thorough process of participatory impact assessment via regulatory reform agency CONAMER weakens the country’s institutions, according to the experts. In addition, the lack of opportunities for feedback along with authorities’ refusal to listen to the concerns of the private sectors only creates distrust of the regulation, they said.

The policy fails to provide clarity regarding how some of the measures will be implemented in real life as it lacks detail, for example, on which will be the transparency mechanisms for curtailment decisions. “The interpretation of some of the regulations is currently based on discretionality. The real impacts of the regulations will be seen until they are put in practice. However, what we have right now sends a concerning message to the market,” said Valerie Rodriguez, another one of the firm’s consultants.

Angeles Rodriguez