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1. 855-275-3483
www.EnergyBy5.com
4545 Fuller Dr Suite 412
Irving, TX 75062
Electricidad en Mexico
Published 04/05/2016
Written by Stephen Kass
Many businesses have moved their operations to Mexico because of less expensive labor costs. And while
lower labor costs are good, higher energy prices are not. Approximately 20% of Mexico’s electricity is
generated by older plants that burn fuel oil that is not very efficient and not as clean as more modern
natural gas fired plants. Excluding subsidies, this makes the cost of electricity for some industrial
customers as much as 75% higher than in the United States. Lower energy prices north of the border are
largely due to the proliferation of cleaner and less expensive shale gas in the United States. However,
there are changes underway in the Mexican electricity market that will alter this situation.
The Mexican electricity system has an installed
generation capacity of 68 GW, producing
approximately 313 TWh annually over 35,000 miles
of transmission lines. This is an electricity market that
is similar in size to the state of Texas. The Mexican
electricity, gas and oil markets are going through a
process of deregulation that will open up all of these
commodity markets to competition. Currently, the
electricity market is strongly influenced by CFE
(Comisión Federal de Electricidad), which is the state
owned and run electric utility in Mexico. Over the last
two years, laws and regulations have been adopted
to allow private investment and competition in the
energy industry. Mexican President Enrique Peña Nieto has made the overhaul of the Mexican energy
complex a top priority of his administration. These efforts are intended to lure foreign investment,
modernize the energy infrastructure and improve the world’s 15th largest economy by lowering energy
prices through competition.
A fully functioning deregulated electricity market is not in place yet, but big strides have been taken. Last
month, CENACE, the equivalent of an Independent System
Operator (e.g.: ERCOT or PJM) in the US, operated its first Day-
Ahead electricity market. While CFE was the sole market
participant in this first stage, many foreign Independent Power
Producers are carefully watching these market prices as they
evaluate their participation in subsequent stages. In the coming
months, additional auctions and markets will be launched as the country moves toward a fully operational
retail electricity market. The recent and successful launch of this Day-Ahead market is an important
milestone in Mexico’s deregulation plan.
Opportunities for end-use clients to enter into electricity supply agreement are, for the most part, limited
to bi-lateral agreements where a client has entered into a Power Purchase Agreement directly with an
Independent Power Producer. However, this market is changing rapidly and we continue to have
conversations with clients and suppliers that are looking to capitalize on current and future opportunities.
Developments in this market will be very important to understand if your business has operations in
Mexico. If you have questions about what is happening with the Mexican energy market, please contact
Jose Arellano, toll free at 855-275-3483 or by email at Jose.Arellano@energyby5.com.