Mexico electricity hub Veracruz looks to strengthen other energy areas

Angeles Rodriguez

08-Apr-2021

  • Federal policies not expected to impact investor interest: state agency
  • State is seeking to promote natural gas use among industrials
  • Geographical location gives state competitive advantage

MEXICO CITY (ICIS)– Veracruz state authorities do not expect to see any negative effects from the implementation of the federal administration’s recent energy policies when it comes to investors’ appetite in the state.

Rather, the efforts to reshape the energy sector will “bring order” and create more transparency for private sector participation, said Romulo Sanchez, head of the state’s energy agency.

Veracruz is Mexico’s top electricity-producing state, generating around 12% of the total power produced in the country, based on data from the state’s agency. The state’s installed capacity totals more than 6.3GW.

While the state’s power generation is currently three times domestic consumption, the latter is expected to increase by 2.80% through 2032, according to agency’s estimates.

Around 31% of the state’s electricity production comes from clean energy sources, namely hydropower, biomass and nuclear power. The state is home to Mexico’s sole nuclear plant. Local authorities have identified a potential capacity of 2.2GW in small-scale solar power and 13.2GW in potential wind power capacity.

The state agency, also known as AEEV, is betting on distributed generation by promoting the construction of solar facilities with capacity of less than 500kw, which do not have to use the existing transmission and distribution networks, Sanchez said. “Around 2,000 small plants of this kind are already operating in the state.”

NATURAL GAS

The 2.6 billion cubic feet (bcf)/day Sur de Texas-Tuxpan pipeline is supplying power generation plants in Veracruz. The state’s natural gas potential is expected to be further boosted through the reconfiguration of the Cempoala compression station, the construction of the Tecolutla and Lerdo compression stations as well as the Jaltipan-Salina Cruz pipeline, Sanchez said.

The state will also be home to a 1.2GW combined cycle plant state-run power utility CFE is planning to build in the port city of Tuxpan where Sur de Texas-Tuxpan line lands. The tender for this project was originally expected to be issued between March and April, according to a CFE document reviewed by ICIS last month.

While Veracruz’s geographical location adds to the state’s competitiveness, it also presents an area of opportunity. The state has a population of 8m distributed in geographically-dispersed areas, which creates relatively small consumption centres compared to other states, Sanchez said.

Despite this, the state features some advantages few Mexican states can match, the official said. These include connectivity due to its three major ports, its proximity to the US market and trade routes that link it to Europe.

AGENCY

Created in 2019, the AEEV is one of the newest among its peers. Its 2019-2024 work programme is aligned to the state government’s development plan and the 2030 Agenda for Sustainable Development, Sanchez said.

Some of the agency’s work focuses on promoting local content through skills development as energy sector providers as well as on encouraging energy efficiency, said the official.

The AEEV is also working on a platform for potential energy investors to use, which would guide them on every step they need to take in terms of processes and paperwork needed to start operating in Veracruz.

There is an already-booming interest in using natural gas among industrial users, which the agency is also working on strengthening by reaching out to participants in key locations, according to the official.

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