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The Mexican Electricity Sector: Regulatory Update and Challenges. Association of Power Exchanges APEx 2007 Paris, October 14-16. Carlota Cagigas Energy Regulatory Commission. Index. Current Situation Electricity Infrastructure and Trade Energy Regulatory Challenges Final Remarks. 2. - PowerPoint PPT Presentation
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The Mexican Electricity Sector:
Regulatory Update and Challenges
Carlota CagigasEnergy Regulatory Commission
Association of Power Exchanges APEx 2007Paris, October 14-16
2
Index
I. Current Situation
II. Electricity Infrastructure and Trade
III. Energy Regulatory Challenges
IV. Final Remarks
3
I. Current Infrastructure Situation
4
Index 2006
Population 104.9 million /1
GDP usd 791 billion /2
GDP per capita based on PPP usd 8,530/2
Federal Budget USD 144,400 million /5
Total exports 123 billion USD /4
Total imports 124 billion USD /4
Foreign investment (sep 06-07) USD 32.5 billion /year /
Inflation 3.79% /4
Foreign debt / GDP 13.9% /5
Country risk 167 pts /6
Mexico has a strong and stable economy
Mexican Economy
Source:/1, CONAPO, (2007 estimated); /2, FMI, 2nd Quarter (2007); /3 Banxico, Inegi, Secretariat of Economy, Dic. 2007; /4 Banco de México, Sep 2007 ; /5 Secretariat of Finance and Public Credit; /6 JPMorgan, Dic. 2006
5
Mexican Energy Sector
Mexico is a rich energy country. The energy sector contributes with 5% of GDP
Proven reserves(2006)
North America %
Production (jun 2007)
North America %
Natural gas 14.54 bcf 5.27% 6.19 bcfd 4.8%
Oil 12.35 mmb 20.55%(5.6%*)
3.2 mbd 31.75%
Source: Secretariat of Energy, Pemex and BP.
Mexico has de-petrolized its exports, but not its economy
Oil exports represent around 14.9% of total exports7
Oil revenues contributes with one third of the Federal Budget
Source:/7 INEGI, Dic, 2006
6
2. 2007 power generation 220 TWh
3. National Transmission Grid 759,552 km(>115kV)
4. Strong presence of state-owned vertically integrated
monopolies
2007 Highlights of the Mexican Electricity Industry
Thermal IPP Otros
68%22%46%
Nuclear 3%
Hydro 22% Geothermal 2%
Coal 5%
1. Installed capacity 51,033 MW
CFE LFC Other*
Generation 69.3% 1.7% 28.0%
Transmission 98% 2% 0%
Distribution 79% 21% 0%
System operator is part of CFE
* IPP, self-supply, Cogen
Source: Electricity Prospective, Secretariat of Energy, 2006-2015
7
Mexican Energy Sector
Source: www.cfe.gob.mx
57,600 miles
Distribution
CFE
84.7%
Own Capital: 69.3%
IPP: 15.4%
1.7%
LFC
3.7%PEMEX
9.9%
Self-supply & Cogen
98%
2%
79%
21%
Service provided through CFE and LFC transmission lines
Generation Transmission Final users
-
98%
29 million373,600 miles
The system operator CENACE (National Energy Control Center) is part of CFE
8
2007 National Installed Capacity
Source: Secretariat of Energy; 20071/ Includes all IPP capacity
By the end of July 2007, Mexico had an installed generation capacity of 51,033 MW.
11,333 11,457
1,365 960 85
11,457
23,233
51,033
0
10,000
20,000
30,000
40,000
50,000
60,000
MW
Hydro Thermal Coal Nuclear Geothermal Wind T o t a l IPPs 1_/
9
Electricty Generation by Source
Source: CFE, september 2007
año móvil Hidroeléctrica % Nuclear % Geotérmica % Eólica % Fósil % Total
Nov 00 - Oct 01 27,276 14.58% 9,292 4.97% 5,467 2.92% 6 0.00% 145,013 77.52% 187,054
Ene 01 - Dic 01 28,022 14.94% 8,360 4.46% 5,313 2.83% 6 0.00% 145,817 77.76% 187,518Ene 02 - Dic 02 24,502 12.72% 9,353 4.86% 5,201 2.70% 6 0.00% 153,492 79.71% 192,554Ene 03 - Dic 03 19,469 10.06% 10,016 5.17% 5,670 2.93% 5 0.00% 158,403 81.84% 193,563Ene 04 - Dic 04 24,766 12.46% 8,732 4.39% 6,269 3.15% 6 0.00% 159,004 79.99% 198,777Ene 05 - Dic 05 27,284 13.07% 10,318 4.94% 6,956 3.33% 5 0.00% 164,132 78.65% 208,695Ene 06 - Dic 06 29,970 13.90% 10,400 4.83% 6,371 2.96% 5 0.00% 168,796 78.31% 215,542
Feb 06 - Ene 07 29,916 13.83% 10,350 4.78% 6,379 2.95% 19 0.01% 169,719 78.43% 216,383Mar 06 - Feb 07 30,032 13.86% 10,363 4.78% 6,358 2.93% 38 0.02% 169,847 78.40% 216,638Abr 06 - Mar 07 29,824 13.72% 9,986 4.59% 6,349 2.92% 64 0.03% 171,102 78.73% 217,325May 06 - Abr 07 29,563 13.63% 10,102 4.66% 6,378 2.94% 85 0.04% 170,729 78.73% 216,857Jun 06 - May 07 28,621 13.16% 10,394 4.78% 6,466 2.97% 105 0.05% 171,887 79.04% 217,473Jul 06 - Jun 07 27,891 12.80% 10,367 4.76% 6,681 3.07% 117 0.05% 172,871 79.33% 217,927Ago 06 - Jul 07 27,596 12.63% 10,392 4.76% 6,911 3.16% 126 0.06% 173,433 79.39% 218,458Sep 06 - Ago 07 27,300 12.41% 10,380 4.72% 7,006 3.19% 142 0.06% 175,108 79.62% 219,936
2%
4%
6%
8%
10%
12%
14%
16%
Nov
00
- Oct
01
Ene
01 -
Dic
01
Mar
01
- Feb
02
May
01
- Abr
02
Jul 0
1 - J
un 0
2
Sep
01 -
Ago
02
Nov
01
- Oct
02
Ene
02 -
Dic
02
Mar
02
- Feb
03
May
02
- Abr
03
Jul 0
2 - J
un 0
3
Sep
02 -
Ago
03
Nov
02
- Oct
03
Ene
03 -
Dic
03
Mar
03
- Feb
04
May
03
- Abr
04
Jul 0
3 - J
un 0
4
Sep
03 -
Ago
04
Nov
03
- Oct
04
Ene
04 -
Dic
04
Mar
04
- Feb
05
May
04
- Abr
05
Jul 0
4 - J
un 0
5
Sep
04 -
Ago
05
Nov
04
- Oct
06
Ene
05 -
Dic
05
Mar
05
- Feb
06
May
05
- Abr
06
Jul 0
5 - J
un 0
6
Sep
05 -
Ago
06
Nov
05
- Oct
06
Ene
06 -
Dic
06
Mar
06
- Feb
07
May
06
- Abr
07
Jul 0
6 - J
un 0
7
Sep
06 -
Ago
07
72%
74%
76%
78%
80%
82%
84%
86%
Fósil
Hidroeléctrica
Nuclear
Geotérmica
10
The Mexican Electricity Sector
Combined cycle
Thermal (fuel oil )
Thermal (fuel oil – nat. gas)
Therma l (natural gas)
Thermal (coal )
Thermal (dual coal-fuel oil)
Internal combustion
Nuclear
Hydraoelectric
Geothermal
Wind
By August of 2007 CFE and LFC had a total combined capacity of 51,033 MW
11
The Mexican Electricity Sector
Hermes
Electricité de France
There are 22 permits for natural gas fired combined cycle plants under the IPP scheme.
Of these, 21 permits, with 11,457 MW capacity, are in operation
12
The Mexican Electricity Sector
400 kV
230 kV
115 kV
161 kV, 138 kV, 69 kV, 34.5 kV y 13.8 kV
400 kV
230 kV
115 kV
161 kV, 138 kV, 69 kV, 34.5 kV y 13.8 kV
There are and 431,205 miles of transmission & distribution infrastructure, ( 57,600 miles of transmision lines > 115 kV )
13
The Mexican Electricity Sector
Scheme No. of PermitsAuthorized
Capacity (GW)
IPP 22 12.6
Self-supply & Cogeneration
5408.23
+0.6*
Export 6 2.2
Import 32 0.243
Total 600 23.5
* Old PermitsSource: Energy Regulatory Commission; Aug.2007
19
II. Electricity Infrastructure and Trade
20
Commercial Cross-border coordination issues
National and
International Markets
(Nodal prices, FTR’s)
UA
EL
Guatemala
Costa Rica
El Salvador
Honduras
Panama
Nicaragua
Strong Integration
National and
International Markets
(Nodal prices, FTR’s)
Regional Energy Markets
SMD -Initiative
Regional Energy Markets
FEA -
Strong Integration
WSCCWECC
WSCCERCOT
Vertical Integration or Moderated
Openness
Reform Process
Vertical Integration or Moderated
Openness
Reform ProcessWSCCCENACE
Regulatory
Differences
CFE exports and imports electricity for public service
Private generators are allowed to export and consumers are allowed to import electricity for self consumption. Both activities require a permit issued by the CRE
Future interconnections between Mexico and the United States (WECC and ERCOT) and between Mexico and Central America (SIEPAC), will allow greater interchanges
However, the development of a Regional Market may be an important challenge due to regulatory differences
CFE can not sign long term contracts except for IPP
Electricity Trade in North America
North America Energy Trade(GWh, 2000)
87
1,037
37,940
14,637
Net Importer
Net Exporter
Net Exporter
Source: EIA, Annual Energy Outlook 2006, DOE/EIA-0383 (2006) (Washington, DC, December 2001). Secretariat of Energy of Mexico; Electricity Prospective 2007-2015
Belice253
Guatemala1.0
Net ImporterSelf Sufficient
21
Total Exports 1,291 GWh
Total imports:
87 GWh
22
Mexican Energy Sector
Generation, transmission, distribution and supply for public service is reserved to the State. Private generation is allowed under the following categories: cogeneration, self-supply, IPP, small scale production, and generation for export. Imports are also allowed.
US and Canada
Mexico
The demands on the grid have grown significantly by the increased electricity trade that followed the restructuring
of the industry in recent years
The electricity sector in US and Canada is in the process of evolving from a heavily regulated industry, dominated by vertically integrated and locally (or regionally) based utilities, into one with many more companies that produce and market electricity at both the wholesale and retail level
Electricity markets in many parts of North America are evolving from geographically limited markets to broader regional markets through an increasingly interconnected system
23
North America Electricity Interconnection Infrastructure
Electric systems in US and Canada are highly interconnected
Close to 100 interconnections points
On the US-Mexico border, interconnections are weak (they were intended to satisfy stand-alone customers, and not regional electric demand)
There are only 19 high voltage interconnections (> 115kV)
Source: Secretariat of Energy; Electricity Prospective 2005-2014
Interconexiones eléctricas Canadá - Estados Unidos
24
North America Electricity Interconnection Infrastructure
Source: Secretariat of Energy; Electricity Prospective 2006-2015
Interconnections 5 Permanent interconnections in
Baja California WECC 4 x230kV, 1 x115 kV
5 Non-Permant lines connected with WECC 4 x 230kV, 1 x115 kV
5 Permanent back to back interconnections with ERCOT (138 kV)
2 Non-permanent lines connected to ERCOT (138 kV)
1 Permanent line to Belize (115 kV)
1 Permanent back to back interconnection to SIEPAC by Guatemala (in construction) (400 kV)
Total Interconnection capacity: 1,336 MW
25
SIEPAC Market Guatemala
Capacidad (23%)2,015.7MWHidro = 34%Geo = 1%Term= 65%
Generación (21%)7,009.3 GWhHidro= 36%Geo= 3%Term= 61%
El Salvador
Capacidad (13%)1,197.90 MWHidro = 37%Geo = 13%Term= 50%
Generación (14%)4,689.6 GWhHidro= 31%Geo= 20%Term= 49%
Honduras
Capacidad (16%) 1,386.9 MWHidro = 34%Term= 66%
Generación (15%)4,907.9 GWhHidro= 29%Term= 71%
Nicaragua
Capacidad (8%)742.2 MWHidro =14 %Geo= 10%Term=75%
Generación (8%)2,647.4 GWhHidro= 12%Geo= 9%Term= 80%
Costa Rica
Capacidad (22%) 1,961.2 MWHidro =67%Geo = 8%Term= 21%Eol= 3%
Generación (24%)8,061.8 GWhHidro= 81%Geo= 15%Term= 1%Eol= 3%
Panamá
Capacidad (18%)1,634.7 MWHidro= 53%Term= 47%
Generación (18%)5,912 GWhHidro= 65%Term= 35%
EP= 31%, Pri= 69%
EP= 36%, Pri= 64%
EP= 31%, Pri= 69%
EP= 88%, Pri= 12%EP= 11%, Pri= 89%
EP= 36%, Pri= 64%
EP=Public Utilities Installed CapacityPri= Private Utilites installed Capacity
Total Istmo
Capacidad 8,938.6 MWHidro =43 %Geo= 5%Term=51%Eol= 1%
Generación33,076.4 GWhHidro= 48%Geo= 8%Term= 43%Eol= 1%
26
SIEPAC vs CFE
Index SIEPAC
Installed Capacity (MW) 8,939 46,552
-Pulblic 3,680 39,287
-Private 5,206 7,265 2/
Max Demand (MW) 5,688 29,301 3/
Total Generation (GWh) 33,076 208,634 4/
Sales (GWh) 27,286 163,509 5/
-Regulated 24,962 NA
-Not regulated 2,306 NA
Users (thousand) Including LFC 6,592 28,003
Losses (TyD) % 17.1 16.8
Load Factor % 66 72
Fuente: CEPAL 2004 – Istmo Centroamericano: Estadísticas del sub-sector eléctrico. 2004
1 Public Service does not include self-supply generators2 IPP projects3 National Interconnection Grid4 Gross Generation5 Not considering exports
CFE1/
27
CFE and SIEPAC Interconnection
TAPACHULA POTENCIA - LOS BRILLANTES.
( ACSR ) ( ACSR )
CHICOASEN
ANGOSTURA
TAPACHULA POTENCIA
ZONA TAPACHULA GUATEMALA
LOS BRILLANTES
NIVELES DE TENSION
400 KV
230 KV115 KV
30 KM 70 KM 193 K
M
28
Central America Interconnection
Panamá
Managua
San José
Cd. Guatemala
Tegucigalpa
San Salvador
Los Brillantes
Chixoy
San Pedro Sula
El Cajón
15 de Sep.
Pavana
León
Pta. Nicaragua
Arenal-Carobicí
Fortuna
Bayano
Solo 115 kV.Red. Nal.
Under Construction
Interconexión México – Belice
(115 KV)
Belmopan
Mollejón Planta Hidro
29
SIEPAC Interconnection
REFERENCIA
Central Hidroeléctrica
Central Térmica
Subestaciones
Línea Doble
Capitales
Panamá
Managua
San José
Cd. Guatemala Tegucigalpa
San Salvador
Los Brillantes
San Pedro Sula
El Cajón
León
Arenal-Carobicí
Fortuna Bayano
Belmopan
Mollejón Planta Hidro
Tapachula
Interconexión GU-MX
AngosturaChicoasenMalpaso
Nuclear Laguna Verde
A Ciudad de México
Cancún
Mérida
Línea SIEPAC
Línea de Interconexión
Interconexión GU-BL
14
III. Energy Regulatory Challenges
Source: Natural Gas Prospective, Secretariat of Energy, 2006-2015 15
In 1995, Congress enacted the CRE Act, to:
Establish CRE as an independent authority responsible for natural gas and electricity regulation
Provide technical and operational autonomy to render the regulatory framework operative
Enhance its jurisdiction and legal standing
Concentrate regulatory instruments previously scattered among several agencies
EnergyPolicy andOperationFunctions
CRE
RegulatoryFunctions
Pemex,CFE
and LFC
StateOperators
Government
Ministryof
Energy
PrivateOperators
Domesticand ForeignInvestors
EnergyPolicy andOperationFunctions
CRE
RegulatoryFunctions
Pemex,CFE
and LFC
StateOperators
Government
Ministryof
Energy
PrivateOperators
Domesticand ForeignInvestors
CRE regulates state entities and private
participants
CRE Act
16Competencia CRE
Regulatory Framework
Reserved activities
Open to private participation CRE’s
mandate
Generation Transmission Distribution
CFE & LFCNational
Transmission Grid
Third Parties Others
Imports
Private Parties Others
Imp / Exp
ElectricityNational
Transmission Grid
Natural Gas Explora-tion
Trading
Produc-
tion
Process-ing
First Hand Sales
Trans-missio
n
Storage
Distri-bution
17
Regulated Activity Authority
Generation
Transmission
Distribution
Private Generation Requires a CRE permit
LFC & CFE Public Service generation
Expansions require approval from SENER, SHCP, SEMARNAT,and CNA
Public Service Grid (National Transmission System)
Expansions require approval from SENER, SHCP, SEMARNAT and CNA
CRE regulates the interconnection contract between generator and CFE (backup, wheeling & surplus energy sale)
Public Service Distribution network
Expansions require approval from SENER, SHCP, SEMARNAT and CNA
State reserved activity
Regulated activities require authorization from different Government Agencies:
Regulatory Framework
18
Regulated activities require authorization from different Government Agencies:
Private entities Requires a CRE permit
LFC & CFE: for Public Service use
Requires authorization by CRE
Includes private interties (Connected or not to the National Transmission Grid)
Regulated Activity Authority
Imports
Exports
Tariffs Final user tariffs are set by the Ministry of Finance (SHCP)
Tariffs are bundled and include generation, transmission, distribution and supply costs
Private Generation Requires a CRE permitIncludes private interties (Connected or not to the National Transmission Grid)
Regulatory Framework
30
IV. Final remarks
31
Despite being an energy rich country, Mexico imports large amounts of natural gas on which 42% of the electricity generation is based
After several years it has become necessary to improve:
Quality: Provide energy supply services with competitive cost indicators, power quality and service continuity standards
Transparency: provide the public electricity sector information such as plant costs, dispatch costs and plants, etc
Equity: Review present rules for electricity dispatch
Competitivity: Establish Regulatory Accounts in electricity tariffs
Final Remarks
CRE will play an important role in the definition and supervision of these competitive actions
32
Several bills aimed at strengthening CRE have been submitted to Congress and last November of 2006. Although they vary in scope and depth, most of them concur in granting CRE the following additional mandates:
• Electricity Tariff Determination
• Aprove Terms & Conditions for electricity transmission, distribution and supply services
• Publish rules for the system operation and dispatch
• Surveillance of the System Operation
Final Remarks
www.cre.gob.mxwww.cre.gob.mx