More state power generation could hit reliability, emissions in Mexico – study

HOUSTON (ICIS)–Shifting Mexico’s power generation mix to rely more on state-owned power plants could negatively affect system reliability, increase natural gas and other fuel consumption as well as emissions, according to new analysis from the US-based National Renewable Energy Laboratory NREL, which is part of the Department of Energy.

The technical impact analysis published in the first half of January 2022 concludes that prioritising state-owned power plants would increase electricity production costs by 31% to 53% depending on the scenario, amid renewables curtailment, higher production costs and decreased private generation participation.

The release of the study came between the 22 December and upcoming meetings between the US energy minister Jennifer Granholm and Rocio Nahle, her Mexican counterpart. Mexican president Andres Manuel Lopez Obrador (AMLO) said on 17 January that Granholm would be in Mexico this week to talk about several issues with a number of ministers. The US Department of Energy announced on 19 January that Secretary Granholm would visit on 20 and 21 January.

NATURAL GAS, FUEL CONSUMPTION

Natural gas consumption would increase over the reference scenario by 6% to 29%, depending on the scenario, while the consumption of fuel oil would jump several-fold in all scenarios. Coal consumption would increase over the reference scenario by 47% to potentially more than double.

The analysis modelled scenarios that simulate increased participation of state-owned power plants in Mexico’s generation mix. Each scenario represented different levels of priority of generation from state-owned power plants. The analysis compared these scenarios against a reference scenario that is supposed to represent current practices in Mexico using data for the year ending 31 August 2021. The increase in the share of annual electricity generation by publicly-owned generators increased in the scenarios from 40% to 74%, displacing private generation.

SYSTEM RELIABILITY

The analysis concluded a shift in the generation mix could hit grid reliability because of higher forced outage rates of older plants owned by state-run utility CFE and state producer Pemex. It used data from a 2019 Mexico government audit, indicating the average age of CFE power plants was between nearly 34 years and 42 years, while the average age of private power plants holding independent power producer (PIE) contracts with CFE is about 12 years.

EMISSIONS

Prioritising state-owned generation would up annual CO2 emissions by 26%, or 29.4m tonnes, in the first scenario to 65%, or 73.5m tonnes, in the third scenario while SO2 emissions would more than double or triple.

The increased emissions would result from the potential increased use of fuel oil and coal generation and curtailment of wind and solar. Curtailment of these two types of generation was estimated at 0.32TWh, or 0.8% of available wind and solar under the reference scenario. The figure remains the same under NREL’s first scenario but wind and solar curtailment more than doubled in the second scenario. Nearly 91% of generation was curtailed in scenario three.

NREL is a national laboratory of the US Department of Energy. The institution said its analysis report is part of the 21st Century Power Partnership program in Mexico. The program is supposed to support Mexico’s power system transformation by accelerating the transition to a “reliable, financially robust and low-carbon system.”

NREL said its analysis is not a forecast of the potential effects of the administration’s energy initiative currently being debated in Mexico’s congress.