Mexico enjoys considerable fuel diversity for powering its generating plants, and its goal is to become even more diversified.
Mexico relies on combined-cycle plants, primarily running on gas, to supply its base load. As Figure 1 shows, natural gas is the most prominent energy source. The Comisión Federal de Electricidad (CFE) has invested considerable capital in converting its existing combined-cycle plants from running on fuel oil to running on natural gas.
1. Energy sources for Mexico’s electricity generation. Source: LVHS
This conversion to natural gas has encouraged investments in liquefied natural gas (LNG), resulting in the CFE becoming the largest shipper and consumer of LNG in Mexico.
To date there are three major LNG projects: in the cities of Ensenada, Altamira, and Manzanillo. The U.S. company Sempra Energy is operating a $975 million LNG receipt terminal that has the capacity to process up to 1 billion cubic feet of natural gas per day. The LNG is designed to supply the needs of Baja California, with the excess being sold to the international market. Regional Vice President, External Affairs of Sempra Mexico, Tania Ortiz Mena, argues that Sempra’s role has been crucial in the regasification of Baja California: "California Baja has gone from being a gas importer to a gas exporter. We believe our inward investment, of around $2,000,000,000 just in infrastructure plays a major role in this."
Mexico is home to a 1,365-MW nuclear plant, Laguna Verde, which is currently being upgraded to increase its capacity by 20% (Figure 2). Enrique González, president and general director of Schneider Electric Mexico, is an advocate of this source: "Every year the technology gets better. It has significant benefits over fossils fuels. I believe the country needs nuclear energy."
2. Laguna Verde. Located in Alto Lucero, Veracruz, this 1,365-MW nuclear generating plant is being upgraded to increase its capacity by 20%. Courtesy: CFE
However, critics of nuclear expansion argue that there are still lingering doubts over safety and that the long lag time and the high upfront costs make it more difficult to justify on a financial basis. Andrés Flores Vargas, commercial director of General Cable Mexico, which supplied certain cable components to the CFE for the Laguna Verde plant, predicts further investment in nuclear generation in Mexico: "We supplied products for Laguna Verde, and one of the reasons we have massively expanded operations in Mexico is that we believe that there are growth opportunities here and not just in the nuclear area."
Unlike the U.S., Mexico neither has an abundance of coal reserves nor a large number of plants that run on coal. Coal therefore accounts for just 6% of all generation. Shigeru Watanabe, vice president of Hitachi Mexico, claims that the CFE intends to tender two 700-MW coal-fired plants in the future. He argues that after a long period of building combined-cycle plants there is a need for diversification in the type of power plants being built.
On the renewables front, large-scale hydro provides about 20% of all generation, but nonconventional renewables amount for a very small percentage — around 2.2%.
The Government’s Role in Generation Development
The Comisión Federal de Electricidad is a special case. On one hand it considers itself a world-class organization and claims to work as if it were private. However, at the same time it has to fight off criticisms that it doesn’t do enough to fulfill its social responsibilities. Local manufacturers demand more assistance, and approximately 6 million Mexicans lack access to reliable electricity.
Most market participants agree that CFE Director General Alfredo Elías Ayub’s tenure has improved the CFE by increasing efficiencies and winning more independence for the state-owned company from the federal government. One of the changes that Ayub has introduced was opening up the bidding process for new generating plants to independent power producers (IPPs) in order to attract the participation of top international companies, although this move has arguably hurt local companies.
Ing. René Lechevalier, director general of Sepac, an industrial automation company serving both the CFE and Petróleos Mexicanos (PEMEX), says: "In the past, CFE used to show more preference for domestic companies. However, in the last 10 to 15 years it has been partially open to other participants. True, there has been some degree of patronage towards national manufacture, but we have seen the disappearance of a lot of companies in the industry."
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