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Energy Alert - National Electric System Development Program (PRODESEN) 2017 - 2031

Page 2 PRODESEN 2017-2031

Power Market Analysis - 20162 9

What you will find in this EY Energy Alert:

National Electric System Investments (2017-2031)1 5

Transmission System Assessment3 29

EY Conclusions4 39

EY Professionals5 40

Table of Contents


Executive Summary

► On June 1, 2017, the Mexico’s Ministry of Energy released PRODESEN, the fifteen year infrastructure development Program for the National Electric System (SEN).

► PRODESEN is a centralized planning program addressing important elements of the national electricity system, including all generation, transmission and distribution requirements.

► The program details the investment that must be made to develop and modernize the network of the national electricity system, including budgets and consumption statistics for the years 2017 through 2031.

► 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 2017 through 2031.

► PRODESEN also contains vital statistics for the 2016 calendar year, including energy demand, consumption, regional analysis, fuel mix, installed capacity and pricing data and trends.

► According PRODESEN, during 2016 CFE provided electric service to 40.8 million customers, of which about 90% are classified as residential and commercial, while 58% of total sales are concentrated in the industrial sector.


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

CEC Clean Energy Certificates Certificados de Energía Limpia

Abbreviations

National Electric System Investments (2017-2031)


PRODESEN estimates 110 billion USD investment over the next 15 years for power related infrastructure projects

► 81% corresponds to generation projects, 11% totransmission projects, and 8% to distributionprojects.

► Total investment is 9% less than 2016 PRODESENprojection

*FX rate = 18.5 MXN

Generation

Transmission

Distribution

Estimated Investment For Electric Sector

110,265 billion USD

Transmission11,863

Generation89,472

Distribution8,931

Source: EY with data of PRODESEN


Generation• PRODESEN estimates around 29.5 billion USD for the installation of new generation plants within the first 5 years• 74% of the investment in PIIRCE projects is aimed towards clean energy projects

Transmission• 97% 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• 47% of RNT investment will be directed to transmission lines, while 48% is for transformation and 6% is for compensation

projects on the RNT

Distribution• 83% of the estimated investment is aimed at projects that will expand and modernize the distribution network• 13% is directed to Smart Grid projects• Compared with PRODESEN 2016, projected investment in distribution sector drops by approximately 30%

*FX rate = 18.5 MXN Source: EY with data of PRODESEN

Most of the investments across the value chain are aimed at developing, extending or modernizing the entire electricity network


Bill

ion

US

D

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Distribution

Transmission1/

Generation

Estimated Investment by Category 2017-2031($ Billion USD)

Concept 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 TOTAL 2017-2031

Generation 3,749 9,860 7,835 5,545 2,849 1,901 5,893 5,379 4,695 5,226 3,769 6,698 9,977 7,468 8,626 89,472Transmission1/ 1,338 1,474 2,384 2,412 1,939 1,037 336 169 212 202 149 87 54 38 32 11,863Distribution 729 876 809 835 764 702 636 561 407 414 420 432 442 449 456 8,931Total 5,816 12,210 11,028 8,792 5,553 3,639 6,865 6,109 5,314 5,842 4,338 7,217 10,472 7,955 9,114 110,2651/Includes Expansion and Modernization

*FX rate 18.5 MXN


Estimated Investment Evolution By Concept 2017-2031

Power Market Analysis – 2016


In 2016, total generation was 319,364 GWh, or 3.2% more than2015, maintaining the same proportion of conventional (79.7%)and clean technologies (20.3%)

Electricity generation from conventional technologiesincreased by 3.2% in 2016 as compared to 2015, primarilydriven by increased energy output from internal combustion(18.5%) and turbogas (8.2%) units

Compared to 2015, generation of electricity from clean sourcesincreased 3%. This was mainly due to a 20% increase in wind anda 33% increase co-generation units

Power Generation by CFE

2015 2016 Category

55.2% 54.7% CFEs’ power plants

28.8% 27.8% Independent Production

16.0% 17.5% Others

Dependency on natural gas grows50% of Mexico’s power demand was satisfied with natural gas combined-cycle units


50%

13%

11%

4%

10%

3%9%

Electric Power Generation by type of Technology for 2016

Combined Cylce

Conventional Thermal

Coal

Turbogas

Hydropower

Eolic

Others

Power Generation Statistics for 2016


2016 Installed Capacity AnalysisGeneration Fleet expands 7.2% to 73,510 MW

► Fossil fuel units comprised 71% of the generation fleet

► Natural Gas combined cycle units grew by 13.4 % and now represent 37% of installed capacity

► Wind adds 930 MW (a 33% increase)

► Solar doubles, with utility scale increasing from 56 MW to 145 MW, and distributed solar increasing 114% (from 114 MW to 244MW)

► Hydroelectric equals 12,589 MW, a slight increase over 2015 (0.9%)

► Efficient co-generation more than doubles (from 583 MW to 1,036 MW)

► Reliance on internal combustion units increases by 22.5% (from 1186 MW to 1,453 MW)

► Nuclear capacity at the Mexico’s sole Laguna station expands 6.5% to 1,608 MW

Key Observations:

Combined Cylce38%

Conventional Thermoelectric

17%

Coal7%

Turbogas7%

Internal Combustion

2%

Hydropower17%

Wind5%

Nuclear2%

Geothermal, Solar, FIRCO, GD

and FR2%

Bioenergy and Efficient

Cogeneration 2%



GROSS GENERATION BY SOURCE 2016

Modality Total Generation(GWh)

Participation(%)

Sources according to LSPEE1/

CFE 490 0.2Independent production 88,675 27.8

Self-supply 29,650 9.3Small production 115 0.0

Cogeneration 17,489 5.5Export 6,312 2.0

Continuous own use 1,049 0.3Sources according to LIE2/

CFE - Generator 174,228 54.6Generator 1,262 0.4

OtherFIRCO and GD3/ 93 0.0

Total 4/ 319,364 100.0

1/ Electricity Act Public Service Electric Power. 2/ Electricity Industry Act. 3/ Shared Risk Trust (FIRCO) andDistributed Generation (DG). 4/ Totals may not add due to rounding. Preliminary 2016 information.

Source: Developed by SENER with data from CFE, CRE and Undersecretary of Planning and Energy Transition.

POWER GENERATION BREAKDOWN(GWh)

78.3%

79.7%

79.7%

21.7%

20.3%

20.3%

2014

2015

2016

Conventional Clean

301,463

309,553

319,364


Gross Generation


Electric Energy Balance by State 2016

PRODESEN analysis indicates that in 2016 the Northeast, South and Central Control regions produced more than 65% of the total generation of electricity in Mexico. More than half of Mexico´s electricity was generated in only seven states: Tamaulipas, Veracruz, Coahuila, Guerrero, Nuevo Leone, Chihuahua and Baja CA. In contrast, the seven smallest producing states (Aguascalientes, Morelos, Quintana Roo, Zacatecas, Tlaxcala, Queretaro and CDMX) produced only 3% of Mexico’s electricity.

Tamaulipas, Veracruz, Coahuila, Guerrero, and Baja California

43.1%

Aguascalientes, Morelos, Quintana Roo, Zacatecas and Tlaxcala

0.3%

Others56.6%

Northeast, South and Central Control

regions62.3%

North, Western, Northwestern and Peninsular regions

30.7%

Baja California, Baja CA Sur and Mulegé

7.0%

Production by Regions

Production by States


► Coefficient = (Generation minus consumption) divided by consumption

Energy Balance Mapping in 2016 –State by State Analysis


► Central and Northwest control zones exhibit strongest growth, with consumption increasing 10.2% and 8.1%, respectively

► Consumption in Southern Baja CA zone grew approximately 6%

► Only one zone experienced decreased consumption (Western, at -2.8%)

► All other zones exhibit moderate growth ranging from 2.5% to 4.5%

Control Zones for the electrical energy Consumption (Gigawatt per hour)

Control Zones Consumption 2015

Consumption 2016 AGR (%)1 Maximum Demand

Central 53,649 59,103 10.2 8,567

Oriental (South) 46,587 47,642 2.3 7,128

Western 65,220 63,407 -2.8 9,351

Northwest 21,642 23,389 8.1 4,350

North 23,734 24,696 4.1 4,258

Northeast 50,114 52,297 4.4 8,710

Peninsular 11,610 12,129 4.5 1,893

SIN – Total 272,557 282,662 3.7 40,893

Baja California 13,122 13,438 2.4 2,621

Baja California Sur 2,400 2,541 5.9 442

Mulegé 146 151 3.4 28SEN – Total 288,225 298,792 3.7 43,984

1 Annual Growth Rate


Current trends on consumption and demand for electric energy by control zone


Source: EY with CENACE data

Demand2016 2015

Demand On January 1, 2016 at 9:00 pm, the minimum level of

demand was observed in the SIN at a level of 18,723MWh/h.

In 2015, the minimum level of demand in the SINoccurred on August 14th at 9:00 pm, at a level of 18,341MWh/h.

Maximum Coincident Demand

In 2016, the maximum coincident demand recorded in theSIN occurred on July 8, at 17:00 with a level of 40,893MWh/h. This was an increase of 2.6% over 2015. If weinclude the power demands from the Baja Californiasystems recorded on the same hour, the peak coincidentdemand for all of Mexico was 43,448 MWh/h, which is 2%greater than 2015.

In 2015, the maximum coincident demand recorded inthe SIN was on August 14th, at 17:00 at a level of39,840 MWh/h. Adding the highest demands recordedon the Baja California systems on the same hour of theyear, the peak coincident demand for all of Mexico42,649 MWh/h.

Maximum Integrated Demand

In the summer, the highest levels of demand are recorded in nine regions mainly during high temperatures, when the useof air conditioners is maximized.

In the Central region, the peak demand occurs during the winter season primarily driven by increased use of lightingsystems.

Maximum Immediate Demand from SIN

In July 2016, the maximum instantaneous demand andintegrated demand for SIN was registered a month earlierthan the registered peak in 2015. The maximuminstantaneous demand reached 41,899 MW, a 2.9%increase over 2015. The second highest value occurred inJune, at 41,872 MW.

In 2015, the maximum instantaneous demand wasrecorded in August, when the when the maximuminstantaneous demand on the system peaked at 40,710MW.


Analysis shows steady growth of electric demand across entire system (both coincident and instantaneous peaks)


► The National Center for Energy Control (CENACE) analyzes the effects of seasonal demand variations and diverseoperating conditions to project future power demands at different points across the system. The network study willdefine the RNT planning associated with infrastructure upgrades and the prioritization of network reinforcements.

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.)


Peak Demand Analysis by Season


ANNUAL AVERAGE GROWTH OF THE MAXIMUM INTEGRATED DEMAND BY CONTROL ZONE

► Based on CENACE’s planning scenarios, power consumption from the SEN is projected to grow by an average of2.9% each year between 2017 and 2031. This represents a slight decrease compared to last year´s projection of 3.4%.

► The maximum demand of the SIN is expected to increase on average by 3.0% each year between 2017 and 2031.This represents a reduction from last year´s projection of 3.7%.

► Between 2016 and 2022, the system peak within SIN is expected to increase 20% and reach 49,000 MW.

► Expected growth rates of demand and consumption in Baja California systems range from 3.7% to 4%.

NORESTE

3.1%

MLG

3.7%

BC

2.8%

OCCIDENTAL

3.3% CENTRAL

2.0%ORIENTAL

2.8%

PENINSULAR

3.8%

NORTE

3.0%

NOROESTE

3.3%

BCS

3.9%

SIN: 3.0%

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%

2016-2030 2017-2031


Forecasts of power demand and consumption


PEAK DEMAND FORECAST FORMED OF SIN BY SCENARIOS

(Megawatt-hour/hour)Year Low AGR1/ 2 Medium TCA1/ High AGR1/

2016 40,893 2.6% 40,893 2.6% 40,893 2.6%2017 41,966 2.6% 42,243 3.3% 42,599 4.2%2018 42,990 2.4% 43,499 3.0% 44,168 3.7%2019 44,082 2.5% 44,816 3.0% 45,876 3.9%2020 45,190 2.5% 46.165 3.0% 47,618 3.8%2021 46,345 2.6% 47,573 3.0% 49,500 4.0%2022 47,490 2.5% 49,000 3.0% 51,387 3.8%2023 48,663 2.5% 50,464 3.0% 53,285 3.7%2024 49,870 2.5% 51,944 2.9% 55,181 3.6%2025 51,127 2.5% 53,500 3.0% 57,151 3.6%2026 52,400 2.5% 55,056 2.9% 59,157 3.5%2027 53,670 2.4% 56,643 2.9% 61,217 3.5%2028 54,928 2.3% 58,225 2.8% 63,316 3.4%2029 56,294 2.5% 59,923 2.9% 65,570 3.6%2030 57,648 2.4% 61,603 2.8% 67,848 3.5%2031 59,057 2.4% 63,318 2.8% 70,208 3.5%

AAGR2/

2016-2030 2.5% 3.0% 3.7%1/ AGR: Annual Growth Rate, 2 / AAGR: Average Annual Growth Rate (relative to 2016).Source: Developed by SENER with CENACE data.


Annual growth rate for peak demand ranges from 3.4% to 4.2% - highest growth rate forecasted for 2017


PIIRCE represents a strategic program for retiring inefficient generation

► Between 2017 and 2031, SENER projects retirements totaling 15,814 MW

► 137 generation units are slated for retirement

► Approximately 70% of retirements are conventional thermal units

► Greatest number of retirements occur between 2018 and 2020 (approximately 5,500 MW)

► 1,400 MW of coal units slated to retire in the 2028-29 timeframe

► PIIRCE retirements are coordinated with expected generation additions from Mexico´s long term power auctions



Generation Fleet Transformation between now and 2031

► By 2031, installed capacity is projected to reach 113,269 GW, including the 73,510 GW that exist today.

► For the next 15 years, 16 GW of capacity are expected to be retired, while 56 GW of capacity will be added.

+73Today

-16

+56by 2031

-

20

40

60

80

100

120

Existente Retiros Adiciones

55% Net Growth vs 61% of PRODESEN 2016-2030

113 GWGW


Existent Retirements Additions


Breakdown of generation additions between 2017 and 2031

► To satisfy projected demand, an additional 55,840 MW will need to be added to the system

► 37% of additions are projected to use conventional technologies, while 63% will qualify as clean energy

► 92% of conventional generation additions will be combined cycle gas units (18,950 MW)

► Wind and solar account for 38% of additions

► Nuclear expected to increase by 4,000 MW

► 50% of generation additions will be concentrated in 6 States: Tamaulipas, Veracruz, Nuevo Leon, Oaxaca, Coahuila and Chihuahua

Combined Cylce34%

TC, IC, TG, Coal3%

Wind24%

Efficient Cogeneration

10%

Solar and Thermosolar

14%

Hydropower3%

Nuclear7%

Geothermal and Bioenergy

5%

Additional Capacity per Technology (2017-2031)



System Reserves in the SIN System Reserves in Baja Systems

31.1%27.2%

23.9%27%

23%

55.8% 54.8%51.3%

46%

39%43.40%

SIBCSIBCS

34% 35%37%

31%

27%

24% 23% 23% 22% 23% 22%24% 25% 24% 23%


Mexico’s reserve margins in SIN remain robust throughout the 15 year PRODESEN period, while somewhat lower in the Baja Californian Systems


► 7 pipeline projects awarded with in-service dates 2017 and 2018

► 2 more projects out to bid► 3 additional projects still under

consideration► Total additional pipeline length: 5,216

kilometers► Total projected investment: $8.1 billion

(USD)► Multiple projects interconnect to US gas

pipeline systems

Source: PRODESEN 2017 & SENER’s 5-year Strategic Plan

Natural Gas Infrastructure Expands with Growing Dependence on Gas in the Power Sector


Snapshot of Mexico’s Generation Profile in 2031

► In 2031, total installed capacity projected at 113,269 MW, representing a 55% increase over fleet capacity as of 12/31/16

► In 2031, the fleet is expected to have a capacity of 456,683 MW, of which 54% will be conventional and 46% clean energy

► Projection assumes 8% growth rate for clean energy capacity

► Energy derived from wind is projected to grow at an average annual rate of 12%

► Solar is expected to increase at an average annual rate of 29%

► Reliance on combined cycle gas units remains constant over the 15 year period (approximately 40%)


Combined Cycle45%

TC, CI, TG, Carboeléctrica 1/

9%

Hydropower9% Wind

15% Efficient Cogeneration

5%

Solar and Thermosolar

3%Nuclear

8%

Geothermal and Bioenergy

6%

Total Capacity per Technology by 2031


Clean Energy Goals

► Mexico has very ambitious renewable energy targets.

► The goal for 2024 is to reach 35% of power generation through clean energy.

► In 2050, 50% of Mexico’s electricity will come from clean energy resources.

► The goal will be reached through the clean power auctions and the obligation to purchase clean energy certificates.

► In 2018 and 2019, CECs must equal at least 5% and 5.8% of consumption, respectively.

22.7%25.0%

27%28.3%

30.0%32%

33.3%35.0% 36% 35.9% 36.4% 36.8% 37.3% 37.7% 38.2%

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031



► Latest auction produces some of the lowest clean energy prices in the world

► Projects are expected to deliver 14.7 million clean energy certificates (CECs)

► Projects will cover 39% and 56% of CEC obligations in 2018 and 2019, respectively

Long-Term Power Auctions in 2016 will boost clean energy production

Observations:


Assignment of assets and contracts for generationProductive enterprises and subsidiaries of the CFE

43 allocated power plants Represents 11% of the

installed capacity in SEN by the end of 2016

Thermoelectric and hydropower predominate

CFE Generation I


33 allocated power plants 30 are operating 3 are in project

Represents 12% of the installed capacity in SEN

CFE Generation II

34 allocated power plants, mobile units and emergency units

Represents 12% of the installed capacity in SEN

Thermoelectric predominate

CFE Generation III


Assignment of assets and contracts for generationProductive enterprises and subsidiaries of the CFE


15 allocated power plants Represents 10% of the

installed capacity in SEN by the end of 2016

Plus 4 new generation units and other repowering

CFE Generation IV

This company administers contracts with independent generators for combined cycle units and wind projects under construction or in operation

CFE Generation V

56 allocated power plants (operating) and is developing 7 power generation projects

CFE Generation VI

Transmission and Distribution Assessment


National Transmission System

2016 Statistics► 72,450 = Total capacity of interconnections (SIN),

representing a 4% increase over 2015

► 74,208 = Total capacity of interconnections (SEN)

► 102,891 kilometers = Total length of transmission circuits within SIN

► 104,133 kilometers = Total length of transmission circuits within SEN

► 197,435 MVA = Total capacity of substations (SEN)

► Transmission voltages: 69kV, 85kV, 116kV, 230kV, 138kV & 400kV



Transmission System Regions in Mexico

Transmission and distribution are considered strategic areas and are reserved for the Mexican Government. The transmission grid (RNT) is comprised of53 regions. 45 of those regions are interconnected by a total of 63 individual connections within the National Interconnected System (SIN). The 8remaining regions are located on the Baja California Peninsula, which is isolated from the SIN. 7 out of 8 are interconnected with a total of 6 individualconnections, leaving the Mulege region in the middle section of Baja California as the sole region without any interconnections.

53 Transmission

Regions

45Regions

Interconnected(SIN)

62Connections in

SIN

8Isolated non-SIN

Regions

7Non-SIN

Interconnections

Source: PRODESEN



Transmission Interconnections to North and Central AmericaMexico’s Interconnection Commission (SIEPAC) continues planning and collaboration with authorities inthe United States and Central America to evaluate feasibility of additional interconnections, expandedcoordination and alignment of energy markets

Interconnections to 6 different Systems

► Total Interconnections = 13

► California ISO (CAISO) = 2

► Southwest Power Pool (SPP) = 3

► Texas (ERCOT) = 6

► Belize = 1

► Guatemala = 1

► 5 of 13 are emergency interconnections along US border



The Expansion and Modernization Program of the RNT aims at increasing the efficiency and reliability of transmissionsystem by reducing congestion, encouraging efficient expansion of generation, and promoting, reliability, continuity andnetwork security. According to the program, the Extension and Modernization Program of the RNT has four primaryobjectives.

OBJECTIVES


Interconnect the National Interconnected System

(SIN) with isolated systems on the Baja California peninsula

1

Facilitate additional interconnections with the United States and Central

America

2

Meet the growing domestic demand for

electricity

Facilitate the development of large scale renewable

resources located far away from load centers

43

National Transmission Development Policy



Transmission LinesClassification of Projects

Scheduled Projects

Projects that are fully evaluated and identified in the planning process, which are ready for execution. New requirements for bidding and construction stage are also included.

Projects under Study

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 Consideration

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.



1

Objectives Scheduled Projects Projects under AnalysisInterconnect the National Interconnected System (SIN) with isolated systems of the Peninsula of Baja California

Interconnection of Baja California Sur to the National Interconnected System (SIN)

Interconnect the RNT with North America and Central America

Interconnection of Baja California and Imperial Irrigation District

Review of the infrastructure of the interactions between Mexico -North America and Mexico - Central America to deepen the integration of the electric markets and competitively increase the exchange of electric energy among the participating electric systems, among which are:

- Asynchronous Link Back to Back Ciudad Juarez, Mexico - El Paso, Texas

- Asynchronous Link Back to Back Mexico - Guatemala- Asynchronous Link Back to Back in Reynosa, Tamaulipas

Addressing the needs of supply and demand of electricity

- Southeast-Peninsular Interconnection- The Arracal Banco 1- Supply Oaxaca and Huatulco- Increase of Transmission Capacity between the regions Puebla, Temascal, Coatzacoalcos, Grijalva and Tabasco- Other transmission, conversion and compensation projects

- Transmission corridor along the border with the United States of America- Change of tension in the supply network of the City of Tijuana- Applications of the Intelligent Electrical Networks in the Program of Expansion and Modernization

3

2

410 projects representing 23,772.5 km-c

Transmission

New RNT and RGD Expansion Projects

Expected Physical Targets

256 projects representing 58,099 MVA

Transformation

259 projects representing 11,930.7 MVAr

Compensation

Transmission System Expansion and Upgrades


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 and reliability. •Project

•Formalizing power supply in settlements• Install connections and acquire new meters• Interconnect Holbox Island to SEN

Action Item 1:Expand coverage

•Project•Strengthening actions aimed at reducing energy losses

•Ensure the reliability of the RGD•Modernizing measurement systems, billing and collection

Action Item 2: Extendthe RGD

•Project• Install smart meters (AMI) and replace obsolete equipment

•Strengthen actions to reduce technical losses at the distribution level

Action Item 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)

Distribution Sector: Expansion and Modernization Program


RNT and RDG Modernization

WEM’s measuring system implementation project Smart Grid project Storage facility with 20MW

battery bank in BCS

Reason

Coverage

Installation

Investment

Benefit/Cost relation

The tax measuring system must have billing quality and include responsibilities regarding installation, verification and maintenance

The Smart Grid will allow CFE to comply with the Energy Transition Law, in order to maintain a reliable and secure infrastructure that meets the power demand, economically, efficiently and sustainably

Facilitate the incorporation of new technologies that reduce costs in the electric sector

The BCS electrical system operates in isolation from the SIN. Generation of electric power has been dependent on importation of fuels, with higher production costs and negative environmental impacts

Storage facility will increase operational flexibility and permit integration of renewable sources

31 states 32 states Baja California Sur

150 USD millions* during 2017-2019 265 USD millions* during 2018-2021 16.4 USD millions

Smart Grid equipment to be installed during: 13 EMS/SCADA systems 1,615 modernized substations 28,974 km of optical fiber in 434 links

Measuring equipment to be installed during 2017-2019

2.52 1.52 Scenario 1: 3.54 Scenario 2: 4.78

*FX rate = 18.5 MXN Source: EY with data of PRODESEN


Technical and Non-Technical Line Losses Continue to Improve

► Total loss rate for 2016 = 14.7%

► Total energy lost = 18,539 GWh

► Technical losses drop to 6.3%

► Non-technical losses drop to 8.4%

► 9 point strategy being undertaken to achieve further reduction in losses

► 9.7 million advanced meters will be deployed ($100M investment)

► Meter replacement program will take 4 years (2017-2021)

Line Loss Analysis

18.0%

7.2%

10.8%

17.0%

6.8%

10.2%

16.0%

6.6%

9.4%

14.7%

6.3%

8.4%

Total of Losses Technicals Non-Technicals

Power Losses Evolution2013 2014 2015 2016

Source: PRODESEN 2017


Closing Observations

► The PRODESEN represents an important component of Mexico’s historic reforms in the energy sector. It documents the Mexican government’s centralized planning of the national power system.

► Much of the $110 billion of investment in generation, transmission and distribution sectors represent potential investment opportunities for global companies that possess the requisite financial and technical capabilities to construct energy infrastructure.

► The planning documents show that the majority of investment will be in the generation sector, since more than 80% of the budget is directed towards that sector. The need for new generation is driven by steady growth in power demand, along with Mexico’s ambitious transition to clean energy resources.

► By 2031, 38.2% of Mexico’s power generation is expected to come from clean energy resources.

► While projected demand decreased slightly between 2016 and 2017, electricity consumption is still expected to average 3 percent annually over the next 15 years.

► EY’s analysis shows an imbalance between supply and demand in several regions of Mexico, which will increase dependence on transmission connectivity or installment of new generation closer load centers.

► Overall, the PRODESEN reveals that the Mexico energy sector remains in a dynamic period of transformation that will provide significant investment opportunities.

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José SalasPartner - AdvisoryEY México

Tel: +52 (55) 1101 7329Email: [email protected]

Rafael AguirrePartner - Transaction Advisory ServicesEY México


Alfredo ÁlvarezPartner- Energy Segment LeaderEY North LATAM


Paul RobertiExecutive Director - Power & UtilitiesEY México

Tel: +52 (55) 5283 8666E-mail: [email protected]

Loic LeGallExecutive Director - Power & UtilitiesEY México

Tel: +52 (55) 4094 6488E-mail: [email protected]

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Documents

National Electric System Development Program (PRODESEN ... · PDF fileEnergy Alert -National Electric System Development Program (PRODESEN) 2017 -2031. ... PRODESEN National Electric