Power to be delivered from 1 April over the next year to Mexico City is expected to transact around Mexican Pesos (Ps) 974 (US$51.38) per MWh, according to ICIS’ first survey of market expectations for Mexican power pricing.
Other key demand areas were slightly cheaper. Survey results showed lower bids and offers at the Monterrey load in recognition of the lower transmission costs in the region and the greater access to lower cost natural gas imports from the US that generators in the region enjoy. Bids and offers for the Queretaro node meanwhile fell between those of the Monterrey and Valle de Mexico Norte nodes.
Survey participants were asked to submit bids and offers for the purchase or supply of 5MW of power to one of the three nodes on Mexico’s SIN power grid identified in the attached table for a one-year period beginning 1 April 2017. Responses represent the full local marginal price, inclusive of the costs of energy, congestion and losses.
Given that Mexican power trading is at an early stage with relatively few qualified participants, ICIS chose to represent the results of the first power market survey as midpoints for bids and offers received, based on a mathematical average of the responses for each node, rounded up to the nearest whole value in Ps/MWh.
Using these midpoints, ICIS then calculated a midpoint between each value to give an idea of where the market might transact at each node, if both buyers and sellers made equal concessions.
Outlying bids 50% lower than the next lowest bid or highest offer were excluded from consideration in this survey as evidence that counterparties were unwilling to transact, and therefore excluded so the average was not affected.
The results of the survey show that respondents were more closely aligned on offers than on bids. The highest bid range of Ps 90/MWh was seen at the Monterrey node; whereas the highest offer range of Ps 48/MW was produced at the Queretaro node.
The largest spread between the mid-point bids and offers was seen at the Valle de Mexico Norte node, which is one of three serving the country’s capital Mexico City. The spreads between bids and offers for all three of the nodes were around 24-25% of the midpoint – a wide spread, but to be expected at this stage of market development.
A rough comparison with recent forward curve models produced for ICIS by Mexico-based consultancies Concentric Energy Advisors and Seguro Energy Partners (see MER 1 March 2017), the survey midpoints between bids and offers at each node are higher than the average prices predicted in the forecasts during the periods where they overlap.
For the Monterrey node, the Ps 893/MWh translates to $47.33/MWh, just less than $5.00/MWh below the $42.37/MWh average forecast for the node over the 1 July 2017 – 31 March 2018 period in the forward curves.
The difference in the survey midpoint (Ps 961/MWh or $50.94/MWh) and forward curve price ($43.72/MWh) was over $7.00 greater at the Queretaro node. The difference in the time periods in question should be noted for both of these comparisons.
ICIS intends to repeat the survey on a regular basis, and feedback is welcome. Details on forthcoming surveys will be included in coming reports. firstname.lastname@example.org