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Victor Ramirez is one of Mexicos most experienced energy sector consultants. His analyses are followed online by tens of thousands of people. pv magazine spoke with him to predict what may happen in the market in the face of the new administration of Claudia Sheinbaum. Forms of government, the election of members of the Court and democracy, the new energy plan - these are some of the topics of a long interview.
With a new administration in charge of the country, there are new questions about what paths will open up regarding similarities and differences with the previous administration. One of the points that attracts the most attention is the energy sector. A couple of weeks ago, for example, the so-called National Strategy for the Electric Sector was presented . To take into account what this proposal means, and other aspects of the sector, pv magazine wants to know the opinion of energy consultant Victor Ramirez, partner of the consulting firm Perceptia21.
At the beginning of the talk, the current political situation of the country arises, with the beginning of the presidency by Claudia Sheinbaum. "I want to be descriptive - Ramírez begins -: it is becoming a government of a single person, so practically whatever the executive branch says will be obeyed by the legislative branch and the judicial branch is about to disappear de facto."
The above reference is related to the reform promoted by the Government that proposes that starting next year all Mexican judges, including those of the Supreme Court of Justice, be elected by popular vote. "It is a path that they call democratic, although we remember that the legitimacy of the judges is not in the vote but in compliance with the legal order," he says, and introduces an explanation of why we have reached this point: One of the problems that caused the hatred of former President Andrés López Obrador against the Court was that they rejected a legal reform that was contrary to the constitution and that sought to impose the Federal Electricity Commission (CFE) as a new preponderant actor in the energy sector.
"What will happen then?" Ramírez continues. "There will be a series of judges appointed by the party in the Government who, if you go and complain about a violation of human rights, will surely end up ruling in favor of the State and not the citizen, nor the law, nor the constitution, with everyone losing."
And here we reach a point where the issue turns to the energy sector. "It is a matter of lack of legal certainty, and I know that it has already scared away investments in many projects, especially renewable ones, in Mexico," he says.
It is then that he is asked if he can mention which companies are making the decision to withdraw investments, to which Ramírez prefers not to give details. “No, I can’t for confidentiality reasons, some of them are my clients. I know that they are selling projects, that they are looking for a partner to reduce the risk, but I do know of several companies that have decided to at least wait until they know the final rules, what will happen in 6 months to know if they will continue in Mexico, if they continue with what they already have, if they will invest more or if they will simply seek to get rid of their portfolio of projects and leave the country. It is a possibility, it is not a fact.”
He does not agree with the proposed renationalization of Pemex and CFE. "Neither Pemex nor CFE are being renationalized because both never stopped being state-owned," he says. "The issue is that in the reform 11 years ago they were forced to generate economic value, to seek to be more efficient, to have the best international practices. With what is happening now, that obligation is removed and it can become a company that develops any project even if it does not make any kind of economic or technical sense."
Regarding the latter, he brings up the Puerto Peñasco project , of 1 GW, presented as the largest solar park in America. “Yes, it is 1 GW, but 1 GW installed in the desert - he ironically says - that is, hundreds of kilometers from the load centers, in an area with an excess of generation capacity, which has generated an impressive extra cost in the need for transmission. People who were involved in the project have told me that it has a return on investment of approximately 45 years. And if you take into account that the average useful life of the panels is 25 years, I say, this is a problem, isn’t it?”
One of the aspects raised by the aforementioned Strategy is the promotion of energy storage, an aspect that Ramírez sees as positive: «I think there are many people interested. There is a problem in the country, and it is that the lack of investment in both generation and transmission, and in some areas in distribution, has caused the electrical system to practically come to a standstill; we have gone 2 years without adding new generation capacity.»
And he continues: “There are many companies that are starting to install batteries to withstand blackouts and not cause them damage, a spark, a blink, as they call it, is worth millions, and yes, there are several projects that seek to have batteries and that will probably end up being developed with this. Mind you, the storage rules were already presented, studied and approved a couple of months and a half ago, and they are just waiting for them to be published in the official journal of the Federation.”
This is when the timeliness of the storage move is highlighted. “The Energy Regulatory Commission (CRE) has already issued the bases, and it is likely that many private companies will try to have renewable parks with storage, which will also give several advantages to the generator. This will not only be able to offer energy but will also be able to offer power, and if we take into account that the lack of power has made it more expensive in the last 2 or 3 years, being able to do it with batteries, without replacing some thermal power plants, for example, will be something interesting and valuable for many companies.”
Finally, when it comes to judging the electrical plan of Claudia Sheinbaums government, Víctor Ramírez highlights, as he likes to point out, the Good, the Bad, the Beautiful, the Ugly and the Doubts:
The Good
Unlike the previous six-year term, when any excuse was used to stop private investment, now there is a tacit acceptance of the need for private money, and attempts are being made to generate mechanisms that allow for greater investment.
The electricity market will be maintained, and the model similar to that of independent energy producers will be resumed, hopefully through auctions.
The amount that can be installed without a generation permit will be increased to less than 700 kilowatts, in addition to the fact that they have promised during their campaign to give generation permits for supply, which would allow many companies, from medium to large, to have clean energy.
At least one transmission project of those that were cancelled last six-year term will be recovered, in addition to the fact that now they will invest in networks.
Bad
The government says that our new generation capacity is not enough to achieve the percentage of clean energy that the country needs to meet its objectives. Although they will give permits for isolated supply, they put a limit of 20 MW, which did not exist before.
Limits are placed on private investment in power plants to inject energy into the grid, which at the end of the day means slowing the growth of the electrical system.
The model of strengthening the CFE will end up forcing Mexicans to consume and pay for the companys model, which is not characterized by economic efficiency, at least in generation. This will force us to pay for expensive energy and its consequences, directly or indirectly.
Investments in transmission and distribution will occur, but they seem insufficient.
The Ugly
The diagnosis that was presented repeats several half-truths and complete lies from the previous six-year term, and with those cobwebs in mind it is difficult to understand the previous design and take advantage of the advantages to build something better.
The previous model clearly had defects and things to correct, but those defects are not found in the diagnosis presented, because they go against, for example, self-sufficiency, which is not something of the previous model.
There is talk of contributions from the previous six-year term, when many of those power plants have not yet entered into operation, and it will still take years for them to do so.
It must be said that many of the problems of the electrical system come from decisions of the previous six-year term, the diagnosis made does not recognize this and this does not allow us to recognize the real problems and focuses on other unreal ones.
The Beautiful
The discourse on sovereignty has changed a bit and the definition is closer to security, although they continue to use the name.
It no longer sounds like self-sufficiency and that is a great advantage.
There is talk of a greater social contribution from generating companies, which although the industry already does, it sounds good that it is reinforced there.
The solar panel programs in the north, clean kitchens, the electrification of those isolated from the grid also sound good, although much of that is already contemplated in the current law.
Finally, The Doubts
What will happen with the stalled projects?
How will public-private partnership projects be chosen?
Will it be possible to operate as promised with a reunified CFE?
What will be done with what remains of self-sufficiency?
How will confidence be generated in the face of judicial reform, which by the way is of great concern to many companies?
What will happen with the disappearance of the CRE? |
