national electric system development program (prodesen) 2016
TRANSCRIPT
Energy Alert - National Electric System Development Program (PRODESEN) 2016 - 2030
Page 2 June, 2016 PRODESEN
Table of Contents
Power Generation2 9
What you will find in this EY Energy Alert:
Investment Resume 2016 - 20301 5
Expansion and Modernization Program for the National Transmission Network3 13
Expansion and Modernization Program for the General Distribution Networks4 19
Energy Uptake and Demand5 20
Locational Marginal Prices (LMPs)6 26
Other EY Insights and Conclusions7 29
EY Professionals8 31
Page 3 June, 2016 PRODESEN
Executive Summary
► The SENER published a program named PRODESEN containing planning and importantelements of the national electricity system. PRODESEN details the investment that must bemade to develop and modernize the network of the national electricity system, includingbudgets and consumption statistics for the years 2016 through 2032.
► The program contains details about the capacity of power generation and the types of technologies or energy used to produce and satisfy demand for energy at the national level for the years 2016 through 2032.
► According PRODESEN, during 2015 CFE provided electric service to 39.6 million customers,of which about 90% are classified as residential and commercial, while 58% of total sales areconcentrated in the industrial sector.
Page 4 June, 2016 PRODESEN
Abbreviation English Spanish
PRODESEN National Electric System Development Program Programa de Desarrollo del Sistema Eléctrico Nacional
RGD General Distribution Network Red General de Distribución
RNT National Transmission Network Red Nacional Transmisión
CFE Federal Electricity Commission Comisión Federal de Electricidad
SENER Secretary of Energy Secretaria de Energía
SEN National Electric System Servicio Eléctrico Nacional
SIN National Interconnected System Sistema Interconectado Nacional
FIRCO Shared Risk Trust Fideicomiso de Riesgo Compartido
LIE Electric Industry Law Ley de la Industria Eléctrica
CRE Energy Regulatory Commission Comisión Reguladora de Energía
CENACE National Energy Control Center Centro Nacional de Control de Energía
PIIRCE Indicative Program for the installation and retirement of ElectricGeneration Facilities Programa Indicativo para la Instalación y Retiro de Centrales Eléctricas
PIB Gross Domestic Product Producto Interno Bruto
CENEGAS National Control Center for Natural Gas Centro Nacional de Control de Gas Natural
PEF Expenditure Budget of the Federation Presupuesto de Egresos de la Federación
LMP Locational Marginal Price Precio Marginal Local
Abbreviations
Page 5
PRODESEN estimates 120 million USD investment over the next 15 years for power related infrastructure projects
► 75% corresponds to generation projects, 12% totransmission projects, and 13% to distributionprojects.
June, 2016
*Considering 18.8 MxN as the FX rate
Generation
Transmission
Distribution
Estimated Investment For Electric Sector
119,431 million USD
Transmission13,851
Generation89,552
Distribution16,028
Source: PRODESEN
PRODESEN
Page 6 June, 2016 PRODESEN
Generation• PRODESEN estimates around 42 billion USD for the installation of new generation plants within the first 5 years• 79% of the investment in PIIRCE projects is aimed towards clean energy projects
Transmission• 71% of the estimated investment is aimed towards projects that expand the transmission network and increase voltage and
compensation support, while the remaining investment is aimed at modernizing the RNT• The RNT investment will be spread across 54% for transmission lines, 42% in transformation works and 4% in
compensation projects• 54% of the RNT investment is directed towards transmission lines; with the remaining 46% directed forwards voltage and
compensation support
Distribution• 82% of the estimated investment is aimed at projects that will expand in modernize the distribution network• 16% is aimed towards public works projects• The remaining 2% is aimed towards investments in operating equipment
Most of the investments across the value chain are aimed at developing, extending or modernizing the entire electricity network
*Considering 18.8 MxN as the FX rate
Page 7
Estimated Investment Evolution By Concept 2016-2030 in Million USD
June, 2016 PRODESEN
ESTIMATED INVESTMENT BY CATEGORY 2016-2030(Million USD)
Concept 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 TOTAL2016-2030
Generation 8,294 6,895 9,211 10,137 7,435 2,343 2,379 3,166 4,425 5,453 4,841 4,681 6,900 6,526 6,865 89,553Transmission1/ 917 1,804 1,219 933 1,308 636 723 1,215 913 910 859 701 536 499 679 13,851 Distribution 1,630 1,870 1,565 1,087 853 746 865 1,002 956 888 757 873 1,027 986 924 16,028
Total 10,841 10,569 11,994 12,157 9,595 3,724 3,968 5,383 6,294 7,250 6,458 6,255 8,464 8,011 8,467 119,4311/Includes Expansion and Modernization
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300
50,000
100,000
150,000
200,000
250,000
Distribution
Transmission
Generation
Source: Elaborated by EY with PRODESEN information.
Mill
ion
US
D
*Considering 18.8 MxN as the FX rate
Page 8
In 2015, CFE generated 309,553 GWh = 2.7% more vs 201479.7% conventional technologies20.3% clean technologies
Electricity generation from conventional technologiesincreased by 4.4% in 2015 compared to 2014, due to a 3.8%increase in energy output from combined cycle plants, and a5.4% increase in output from conventional power plants
The generation of electricity from clean sources recorded areduction of 3.7%. This was mainly due to a 20.6% decrease inhydroelectric output in 2015 (as compared to 2014).
June, 2016 PRODESEN
Power Generation by modality55.2% CFEs’ power plants
28.8% Independent Production
16.0% Others
FactConsidering the generation and total electricity sales by state in 2015, it is observed thatthe power demand in the central region of the country is greater than the energyproduced in the same area.
Power Generation - Facts
Source: PRODESEN
50%
13%
11%
4%2%
10%
4%
3%2%
1%
Electric Power Generation by type of Technology for 2015
Combined Cycle
Conventional Thermal
Coal & Oil
TurboGas
Internal Combustion
Hydroelectric
Nuclear
Wind Power
Geothermal
Bioenergy & Cogeneration
Page 9 June, 2016 PRODESEN
Tamaulipas, Veracruz, Coahuila, Guerrero and Baja California
43.4%
Aguascalientes, Morelos, Quintana
Roo, Zacatecas and Tlaxcala
0.3%
Others
56.4%
Northeast, East and West Control regions
67.6%
North, Central, Northwest and
Peninsular regions
25.1%
Baja California, Baja California Sur and
Mulegé
7.3%
Regions
States
Electric Energy Balance by State 2015
Energy Balance Mapping in 2015
0.00
0.18
0.16
0.13
1.75
0.67
1.231.44
2.53
-0.20
1.71
-0.20
4.82
5.69
1.97
1.68
2.28
-0.24
0.40
-0.95-0.47-0.80
-0.99
-0.67-0.46
-0.47
-0.40-0.98-0.92
-1.0
-0.26
-1.0
As per the PRODESEN analysis, in the year 2015 it was shown that the Northeast, East and West Control regions produced more than 60% of the total generation of electricity in Mexico. Also, the main states in production of energy are Tamaulipas, Veracruz, Coahuila, Guerrero and Baja California. The remaining regions (Baja California, Baja California Sur and Mulegé ) as well as the States of Aguascalientes, Morelos, Quintana Roo, Zacatecas and Tlaxcala produced less than the 10% of the Energy production.
Source: PRODESEN
Page 10
78.3%
79.7%
21.7%
20.3%
0.0% 50.0% 100.0%
2014
2015
Clean Conventional
GROSS GENERATION BY SOURCE 2015(Gigawatt-hour)
Modality Total Generation1/(GWh)
Participation(%)
Sources according to LSPEE2/
CFE 316 0.1Independent production 89,157 28.8
Self-supply 23,983 7.8Small production 153 0.0
Cogeneration 15,920 5.1Export 7,157 2.3
Continuous own uses 1,036 0.3Sources according to LIE3/
CFE - Generator 170,662 55.1Generator4/ 1,006 0.3
OtherFIRCO and GD5/ 161 0.1
Total 6/ 309,553 1001/ Capacity interconnection contract with CENACE. 2 / Electricity Act Public Service Electric Power. 3 / ElectricityIndustry Act. 4 / Includes plants in operation with permits granted or pending in 2016. 5 / Shared Risk Trust(FIRCO) and Distributed Generation (DG). 6 / Totals may not add due to rounding. Preliminary information at theend of 2015.
Source: Developed by SENER with data from CFE, CRE and Undersecretary of Planning and Energy Transition.
POWER GENERATION BREAKDOWN
June, 2016 PRODESEN
Gross Generation
Page 11
• LSPEE (Law Of The Public Service Electric Power)• Self-supply permit
Applicable legislation
Obligations
• Postage stamp (MXN/kWh) (if renewable energy is used);Transmission costs
• LIE (Law of Electricity Industry)• Generator permit
• Consumption and demand reported on a monthly basis• Warranties for Market participation, for FTR and over the
Aggregate Estimated Responsibility (the limited maximum of exposure-consumption under the wholesale market rules)
• FTR (Financial Transmission Rights) – depending on which nodes the energy is produced and received
• Regulated Tariffs for T&D
Self-supply Bilateral Contracts
• The final users are shareholders of the generator permit holder entity; there is a cost for the share.
Shareholding
• The Offtaker may only be part of the generator permit holder entity if the modification of the permit is granted by the CRE; this also applies if more capacity is needed.
• The PPA will be limited by the term of the permit depending on the year the permit was granted (may have indefinite term or be subject to the interconnection agreement term)
Stakeholders
• Not necessary
• UCPM (Market participant qualified user) with a threshold of 20 GWh of annual consumption and 5 MW of demand
Sources: http://www.cre.gob.mx/documento/1913.pdf; Law of the Electric Industry (LIE); Law Of The Public Service Electric Power (LSPEE); Electricity Market Rules; LAERFTE
• Self-supply capacity • Energy bank (if renewable energy is used)• Net metering
Instruments / products
• Capacity Balancing Market - obligation• CELs trade - benefit• Ancillary Services - obligation
• Only applies to permits filed before August 2014;• Contractual warranty (ex. bond or corporate warranty)
June, 2016
EY analysis on the main differences between Self-supply and Bilateral Contracts in Mexico
PRODESEN
Page 12 June, 2016 PRODESEN
Contracting structures Description Advantages Disadvantages Market examples
1) Bilateral PPA
► Client contracts to purchase power from generator
► Either through back-to-back PPAs or through a CfD contract
► Potential for price security and long-term cost reductions
► No upfront capex required► Supplier responsible for balancing supply► Retain ‘green’ attributes of specific asset(s)
► Suitable when power demand is required for continuous operations
► No participation in equity returns on investment
► Tarmac► M&S► Sainsburys► Weipa solar PV
2) Equity investmentwith PPA
► Client invests in offsite renewable electricity asset and also retains some or all of the power offtake.
► Equity investment may be minority, majority, or 100% influencing the degree of control over PPA terms
► Increasingly used by large corporates
► Suitable when power demand is required for continuous operations
► IKEA► Google
3) Equity investment without PPA
► Client invests in a renewable asset. PPA contracting is between the project and a 3rd party
► Price Security achieved via ‘natural hedge’ between power price and equity dividends
► Flexible to determine extent of involvement in development process
► Equity returns determined by ability to secure competitive PPA pricing (or take merchant risk)
► VW/Audi► Colruyt► Google
4) DBFO (considerequity)
► Enter into agreement with a developer to build generation capacity on or near site
► Developer remains responsible for design, build, financing and operation of facility, or client could retain control or establish JV
► This option outsources key risks to parties with core competence
► Flexible to determine extent of involvement in development process
► Client undertakes project facilitation work, and transfers risk to contractors where it does not want to retain that risk
► Client takes on more project development, construction and operations risk, but can adjust to meet the desired risk profile
► Ineos Chlor► Tulus Russel► RWE Cogen
5) PPA competitiveprocurement
► Client runs a competitive process to procure multiple projects, setting a price cap for the PPA
► Developers bid back the power price and are awarded the PPA based on this price and financial / technical deliverability
► Developers provide the site and remain responsible for design, build, financing and operation of facility
► Facilitates large scale capacity procurement, but multitude of regulatory environments would necessitate multiple procurements
► Suitable when power demand is required for continuous operations
► No participation in equity returns on investment
► US Army Corps of Engineers
► South Africa► ACT
Government
The Wholesale Electricity Market permits multiple approaches structuring bilateral contracts
Page 13
The Expansion and Modernization Program of the RNT aims for minimizing the costs of providing electric service,reducing costs of congestion, encouraging efficient expansion of generation, and promoting, reliability, continuity andnetwork security. According to the above, the Extension and Modernization Program of the RNT has three primary designobjectives.
What is intended?
Interconnect the National
Interconnected System (SIN) with isolated systems of
the Peninsula of Baja California
1 Interconnect the RNT with North
America and Central America
2Satisfy the nations
growing demand for electricity
3OBJECTIVES
June, 2016 PRODESEN
Transmission Lines
Page 14
Classification of Projects
• Projects that are fully evaluated and identified in the planning process, which are ready for construction. New requirements for bidding and construction stage are also included.
Scheduled Projects
• Projects and works that are identified in the planning process, which are under evaluation and study. Such projects must be deemed to have a net benefit to the SEN in order to be included in later editions of PRODESEN.
Projects under Study
• Project proposals will be subject to evaluation and planning studies in order to identify the benefits for SEN and the work necessary for execution. Projects will have to meet the net benefits test desirable above.
Projects under consideration
June, 2016 PRODESEN
Transmission Lines
Page 15 June, 2016 PRODESEN
Objective 1: Interconnect the National Interconnected System (SIN) with isolated systems of the Peninsula of Baja California
• Interconnection of Baja California to the National Interconnected System (SIN)Scheduled Projects
• Interconnection of Baja California Sur and Mulegé to the SINProjects Under Study
Objective 2: Interconnect the RNT with North America and Central America
• Back to Back asynchronous link 150 MW in Nogales, Sonora - Arizona, USA• HVDC Transmission between Isthmus of Tehuantepec and Mexico ValleyScheduled Projects
Transmission Lines - Projects per Objective
Page 16 June, 2016 PRODESEN
Objective 3: Addressing the needs of supply and demand of electricity.
• Interconnection of Baja California to the National Interconnected System (SIN)
• Transmission Network for the Development of Wind Energy Resources in Tamaulipas
• Chichi Suarez Bank 1• Potrerillos Bank 4• Industrial Guadalajara• La Laguna area• Lake substation• Complementary Works 2016-2030
Scheduled Projects
• Dos Bocas Bank 7• Battery bank to integrate additional 10 MW in order to increase the capacity
to generate renewable energy in Baja California Sur 90 MWProjects Under Study
Transmission Lines - Projects per Objective
Page 17
Projects under Analysis
June, 2016 PRODESEN
Increase voltage on transmission line Nacozari
– Moctezuma
Review of transmission interconnections between Mexico – North America
and Mexico-Central America and to strengthen transmission infrastructure
to foster integration of electricity markets and
increased reliability
Analysis to continue or increase power grid
applications
Design of the transmission network to provide
integration of renewable generation in high potential
areas
Transmission network Chihuahua City to La
Laguna
Increase voltage of facilities serving the city of
Tijuana
Design of transmission and distribution network of
major cities with high load density and tourism areas
HVDC transmission line on northern border to interconnect the
transmission between countries and deepen the integration of trade with
America
Transmission Lines - Projects per Objective
Page 18
Transmission and distribution are considered strategic areas and are reserved for the Mexican Government. The RNT is grouped by 53 transmissionregions, of which 45 of them are interconnected between a total of 62 individual connections in SIN. The 8 remaining transmission regions belong toisolated programs of Peninsula de Baja California, of which 7 are interconnected with a total of 6 individual connections.
53 Transmission
Regions
45Interconnected between them
62Connections in
SIN
8Isolated
Programs
7Interconnected between them
June, 2016 PRODESEN
Transmission Lines - Projects per Objective
Source: PRODESEN
Page 19
Objectives
General ObjectiveSupply power to every end-user, with quality and at competitive prices, and promote greater efficiency of electric service with a high degree of safety andreliability.
•Project•Formalizing power supply in settlements• Install connections and acquire new meters• Interconnect Holbox Island to SEN
Action Line 1:Expand coverage
•Project•Strengthening actions aimed at reducing energy losses
•Ensure the reliability of the RGD•Modernizing measurement systems, billing and collection
Action Line 2: Extendthe RGD
•Project• Install smart meters (AMI) and replace obsolete equipment
•Strengthen actions to reduce technical losses at the distribution level
Action Line 3:Reduce power losses
in distribution
Incorporate Vanguard Technology Systems3
Meet the existing supply and demand for electricity distribution1
Extend distribution service2• Projects
• Feasibility study to assess solar Urban Farms• Promote rural electrification
Action Line 1: Foster Distributed Generation
• Projects• Integrate small grids • Integrating Advanced Metering Infrastructure
(AMI)• Install SCADA technology and equipment.• Install switching and protection equipment
(EPROSEC per its acronym in Spanish)
Action Line 1: Implement systems with technology
that contribute to the development of smart grids
(REI)
Expansion and Modernization Program RGD
June, 2016 PRODESEN
Page 20 June, 2016 PRODESEN
In 2015 the electric energy consumption was288,232 GWh, 2.9% higher than the previousyear.
94.6% of Mexico’s consumption isconcentrated within the SIN, with 75%occurring in 4 control areas (Western,Central, Northeast and East).
The power consumption exhibits seasonaltrends. Between April and September 54% ofannual consumption is recorded, with theremaining 46% occurring in winter.
Source: PRODESEN
All projects contemplate steady growth in the demand for electric energy
Page 21
Current trends on consumption and demand for electric energy by control zone
June, 2016 PRODESEN
Control Zones for the electrical energy Consumption (Gigawatt per hour)
Control Zones Consumption 2014 Consumption 2015 AGR (%)1 Maximum Demand
Central 53,228 53,649 0.8 6,932
Oriental 44,901 46,587 3.8 7,985
Western 63,540 65,220 2.6 4,144
Northwest 21,089 21,642 2.6 3,936
North 23,150 23,734 2.5 9,151
Northeast 48,559 50,114 3.2 6,082
Peninsular 10,635 11,617 9.2 1,611
SIN - Total 265,102 272,564 2.8 39,840
Baja California 12,598 13,122 4.2 2,374
Baja California Sur 2,460 2,546 3.5 435
SEN - Total 280,160 288,232 2.9 42,6491 Annual Growth Rate
Source: EY with CENACE data
Page 22 June, 2016 PRODESEN
Source: EY with CENACE data
Demand
Demand On January 1, 2015 at 9:00 pm, the minimum level of demand was observed in the SIN at a level of 18,341 MWh/h.Instead, the August 14, 2015, at 17:00 hours, with a recorded level of 39,840 MWh/h.
Maximum Coincident Demand
In 2015, the maximum coincident demand SIN recorded was on August 14th, at 17:00 at a level of 39,840 MWh/h. Ifwe include the highest demand of Baja California and Baja California Sur at the same time and day of the year,coincident peak demand was 42,649 MWh/h.
Maximum Integrated Demand
In the summer, the highest levels of demand are recorded in nine regions mainly during high temperatures, when theuse of air conditioners is maximized.
In the Central region reaches its peak demand during the winter season primarily driven by increase use of lightingsystems.
Maximum Immediate Demand from SIN
In August 2015, the maximum instantaneous demand stood at 40,710 MW. In planning studies carried out by theCENACE, the maximum immediate demand, which is the power that must be supplied in an instant moment; a higherpower to meet high demand conditions integrated by the SIN.
Current trends on consumption and the demand of electric energy
Page 23 June, 2016 PRODESEN
AVERAGE ANNUAL GROWTH OF THE MAXIMUM INTEGRATED DEMAND BY CONTROL ZONE
► Based on planning scenarios, electricity consumption from the SEN projects is estimated to grow by anaverage of 3.4% between 2016 and 2030.
► Based in the estimates from planning scenarios, the maximum demand of SIN is expected to increase anaverage by of 3.7% between 2016 and 2030.
NORESTE
4.2%
BCS
5.3%
BC
3.6%
OCCIDENTAL
3.7%CENTRAL
3.1%
ORIENTAL
3.6%
PENINSULAR
4.1%
NORTE
3.3%
NOROESTE
4.7%
Forecast of uptake and power demand
Source: PRODESEN
Page 24
► The CENACE analyzes the effects on seasons and diversity of the power demand at different operational points. Thenetwork study will define the RNT planning associated with infrastructure upgrades and network reinforcement tofacilitate stronger interconnections between the central power stations and the load centrals.
June, 2016 PRODESEN
CENACE projects the following scenarios
based on the historical behavior registered of the
power demand and the operations in the
Control Regions.
The highest demand in the
year is registered in the regions of Northeast, North, Baja Califorina, Baja CaliforinaSur y Mulgé.
The highest nocturnal
demand occurs during June and
August in the Northwest, North
and Northeast regions.
The highest demand of the
year is registered in the Central Control
Region.
There is a slowdown
registered in the demand of the northern
regions.
SIN registers the minimum
demand of the year.
Highest demand in Summer (17:00 hrs.)
Highest Nocturnal demand in Summer (22:00 hrs.)
Minimum demand in Winter (04:00 hrs.)
Medium demand in Winter (15:00 hrs.)
Highest demand during winter (20:00 hrs.)
Growth Expectations: Peak Demand by Seasons
Page 25 June, 2016 PRODESEN
PEAK DEMAND FORECAST FORMED OF SIN BY SCENARIOS
(Megawatt-hour/hour)Year Low AGR1/ 2 Medium TCA1/ High AGR1/
2014 39,000 --- 39,000 --- 39,000 ---2015 39,840 2.2 39,840 2.2 39,840 2.2 2016 41,318 3.7 41,420 4.0 41,739 4.8 2017 42,730 3.4 43,017 3.9 43,638 4.5 2018 44,005 3.0 44,629 3.7 45,587 4.5 2019 45,295 2.9 46,315 3.8 47,634 4.5 2020 46,637 3.0 48,037 3.7 49,745 4.4 2021 48,084 3.1 49,780 3.6 51,949 4.4 2022 49,531 3.0 51,569 3.6 54,212 4.4 2023 51,023 3.0 53,432 3.6 56,583 4.4 2024 52,540 3.0 55,348 3.6 59,025 4.3 2025 54,179 3.1 57,409 3.7 61,655 4.5 2026 55,844 3.1 59,527 3.7 64,376 4.4 2027 57,570 3.1 61,725 3.7 67,203 4.4 2028 59,299 3.0 63,961 3.6 70,127 4.4 2029 61,147 3.1 66,340 3.7 73,251 4.5 2030 63,041 3.1 68,792 3.7 76,522 4.5
AAGR2/
2016-2030 3.1 3.7 4.4 1/ AGR: Annual Growth Rate 2 / AAGR: Average Annual Growth Rate (relative to 2015).Source: Developed by SENER with CENACE data.
Growth Expectations: Peak Demand by Seasons
Page 26
MEC : Marginal Energy Component
► Represents optimal dispatch► Same price for every node, calculated both in day ahead and real
time ► In a competitive market, all dispatched power plants will receive the
clearing price of power ignoring congestion and losses
MCC : Marginal Congestion Component► Represents price of congestion for binding constraints► Will be zero if no constraints► Will vary by location if system is constrained
MLC : Marginal Loss Component► Represents price of marginal losses
• Calculated using penalty factors• Will vary by location
► Calculated both in day-ahead and real-time
Sensitivity analysis for the MEC► Sensitivities can be taken to the key variables of:
► Demand► Natural gas prices► Renewable energy uptake
LMP = MEC + MCC + MLCMEC : Marginal EnergyEnergy ComponentComponent
Represents optimal dispatch
Approach to forecasting Locational Marginal Prices (LMPs) in Mexico
June, 2016 PRODESEN
Page 27Source: EY with CENACE data
June, 2016 PRODESEN
Annual Average LMPs 2016-2030 vs 2015-2029
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
PMLs Annual Average2016-2030
57.14 54.01 49.90 43.78 44.31 45.45 48.51 49.20 47.72 50.59 51.14 49.70 49.81 50.34 50.25 50.03 50.11
PMLs Annual Average2015-2020
50.72 52.17 49.84 47.48 40.03 40.25
0
10
20
30
40
50
60
70
US
D p
er
MW
h
Page 28 June, 2016 PRODESEN
Average LMPs by RegionU
SD
per
MW
h
Source: EY with CENACE data
35
45
55
65
75
85
Average by Region
Page 29
Main features of CELs
% of obligation SENER establishes annual requirements to use a percentage of clean energy in the load centers (which doesn´t consider the clean energy generated from the Legacy Interconnection Contracts): • In 2018, the obligation is 5% • In 2019 , the obligation is 5.8%
Potential price An estimate: $ 10 - 22 USD
Sanctions / fines Penalty of six to fifty minimal salaries; a sanction equivalent to twice will be applied to persistent offenders. The sanctions do not release Final User of the obligation of paying the electric energy consumed improperly.
Energy Transition Law Establishes the goals for the percentage of clean energy out of the total electricity consumption; for 2018 the rate is 25%, which increases to 30% in 2021, and 35% in 2024.
Sources:
Law of the Electric Industry; Energy Transition Law
Under LSPEE – Self-supply:
Stamp portage2010 20161 Unit
High voltage 1.80 2.22 USD/MWh
Medium voltage 1.80 2.22 USD/MWh
Low voltage 3.61 4.44 USD/MWh
1Banxico, period: Jun 2010 – April 2016;
Sources :http://www.cre.gob.mx/documento/1913.pdf
FX rate: Banxico, May 19th, 2016
Under LIE – Bilateral contract: 2016 Unit
Transmission tariff regulated by CRE, until 2018
Voltage >= 220 kV 3.37 USD/MWh
Voltage < 220 kV 7.68 USD/MWh
CENACE market operation tariffs, until 2018
Load Serving Entity 0.32 USD/MWh
Insights on CEL obligations and T&D tariffs
June, 2016 PRODESEN
Page 30
Conclusion
► EY has analyzed the extensive information contained in the Ministry of Energy’s recently released PRODESEN, whichis a comprehensive planning document that contains the blueprint for investment in Mexico’s energy sector over thenext 15 years (2016 – 2030).
► The PRODESEN represents an important component of Mexico’s historic reforms in the energy sector. It documentsthe Mexican government’s intention to open the industry to global companies that possess the financial and technicalcapabilities to invest in energy infrastructure. According to EY’s analysis, investment opportunities in the generation,transmission and distribution sectors could exceed $120 million USD.
► The planning documents show that the majority of investment will be in the generation sector, since 75% of the budgetis directed towards that sector. The need for new generation is driven by historically strong growth in demand. Forinstance, demand in 2015 was 2.9 percent higher than the previous year. Going forward, strong demand is predictedover the next 15 years, with electricity consumption expected to average 3.4 percent annually. Moreover, our analysisshows an imbalance between supply and demand in several regions of Mexico, which will require investments ingeneration and/or transmission facilities.
► Overall, the PRODESEN reveals that the Mexico energy sector is in a dynamic period of transformation that willprovide significant investment opportunities for energy sector entities around the globe.
June, 2016 PRODESEN
Page 31
EY Professionals
June, 2016 PRODESEN
Rafael AguirrePartner – Transaction Advisory ServicesEY Mexico
Tel: +52 55 5283 8650Email: [email protected]
Loic LeGallExecutive Director - Power & UtilitiesEY Mexico
Tel: +52 (55) 4094 6488E-mail: [email protected]
Alfredo ÁlvarezPartner – Energy Segment LeaderEY Mexico
Tel: +52 (55) 5283 1179Email: [email protected]
Rodrigo FernándezPartner - Transaction TaxEY Mexico
Tel: +52 (55) 5283 8666E-mail: [email protected]
Jimena González de CossioPartner - LegalEY Mexico
Tel: +52 (55) 1101 7294Email: [email protected]
Paul RobertiExecutive Director - Power & UtilitiesEY Mexico
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