Energy management for Mexico’s power-hungry industriesMay 20, 2022
Maria José Treviño, Acclaim Energy’s country manager for Mexico, talks to The Energy Year about how companies can face challenges and mitigate risks in the power sector and how digital technology, automation and big data are contributing to energy efficiency. Acclaim Energy provides energy management consulting services in the USA, Mexico and LATAM markets.
What strategies should companies adopt to face challenges and mitigate risks in the power sector?
In Mexico, we’ve become used to navigating regulatory uncertainty. This is one of the major hurdles for sector players. Despite the proposed energy reform failing to pass, uncertainty will remain. Secondly, there’s a lack of power infrastructure in Mexico, which discourages companies from expanding operations in-country or establishing themselves in certain areas. Investment in power infrastructure is critical for upcoming connection of new generation projects that will help supply the rapid growth of power demand, currently 3% per annum. Despite these hurdles, companies and large energy consumers must focus on how to meet their sustainability plans, cost reduction goals and ESG schemes.
To effectively tackle this uncertain environment, companies can adopt technology and undertake sophisticated analysis to help them make informed decisions and mitigate risk. Sustainability in supply chains has become the main focus for financing, data centres and large industries that are engaging more and more in the energy transition.
To what extent are we witnessing an advance in the development of renewables in Mexico?
There is a growing tendency towards developing renewables, which is related to the principles of sustainability and ESG. Consumers are feeling the growing importance of compliance and respect in these matters. The demand for greener and cleaner energy is growing both on a global scale and in this country. In Mexico, we still see very attractive prices for adding renewable energy procurement into supply strategies. For example, there is a 10-25% cost-savings reduction thanks to advances in renewable energy technologies.
The proposed energy reform could have drastically diminished renewable energy generation, affecting new generation projects and their corresponding permits. That would have driven renewables prices up, as well as making the sector fairly unattractive for investors. Investment will be key moving forward, as it will enable the development of renewables projects and ultimately help the country meet its sustainability goals.
Lastly, mini-grid and off-grid schemes are a viable solution for disconnected areas with no power supply. These micro solutions and on-site solar alternatives can help electrify many parts of the country which are power-less. It also highlights the lack of infrastructure we have in Mexico. Our grid system needs to reach vast disconnected areas. More electrification is equal to socioeconomic development, which means it should be a priority. Here, renewable energy comes in as an important solution.
How are digital technology, automation and big data contributing to energy efficiency?
Incorporating technology is one of the most important choices that a company can make to achieve energy efficiency. Technologies are key in any process, as they allow a firm to collect and interpret data, be more efficient, make more informed decisions and manage large sums of processed information. A clear example is smart meters that measure consumer profiles, help show patterns and discrepancies, and make predictions, which allows the deployment of energy efficiency programmes and the detection of anomalies in machines and people that work in daily operations.
In Mexico, there is a certain type of compliance for large or medium-sized consumers who acquire meters that have been verified by the CFE [Federal Electricity Commission] laboratory LAPEM, and these have different requirements. They will install those meters, and that’s the only meter one can use to connect to their infrastructure. These will allow the consumer to have a good read on their consumption and supply.
When we think about energy supply, measuring equipment provides big data in an organised way so that suppliers can understand consumption trends on an hourly basis, or even in five-minute data intervals, so that they can give the best tailored supply offer. This technology automatically measures consumption trends and data with which companies such as Acclaim Energy audit bills every month to ensure contract compliance. With time, we have developed automated systems to support our analysis. This has helped make the processes more efficient and exact. Incorporating elements such as digital automation and big data creates efficiencies that not only reduce time, but can also generate cost optimisation practically everywhere.
As a firm, we have embraced technology by internally developing all of our platforms. We have made efforts in trying to incorporate big data into our models, and then, in real time, we adjust those models based on how market prices fluctuate, what the exposures are and what the risks are, and then we map out different scenarios. In addition to this, we incorporate the contract terms and conditions from our clients’ supply contracts and every single meter’s different profile.
What is Acclaim Energy’s footprint in Mexico and what energy management solutions does it offer?
Acclaim Energy was born in the US and came into Mexico with the start of its energy deregulation. The firm has vast experience in deregulated markets and we have recently expanded into other Latin American markets such as Chile, Panama, Peru, Colombia, Argentina, Brazil, Honduras and Guatemala.
In Mexico, we have made a concerted effort not only to understand the rules of the market, but also to establish a brand that provides the best technology and counsel to large energy consumers. We are now managing around 20% of those companies who have decided to move away from the CFE and embrace the benefits of deregulation by choosing to have us manage their energy portfolio and their needs – not only for today, but well into the future.
We have also supported about 50% of the companies in Mexico that have issued sustainability or green bonds to ensure they are in compliance with their energy procurement strategy in terms of sustainability. We are currently serving some of the largest multinationals in Mexico. Our holistic energy management approach has been the reason behind our rapid growth, and our energy expertise and commitment to collaboration has allowed us to guarantee lower costs and improved energy efficiency.
We live in a volatile energy market shaped by factors such as rising natural gas and electricity prices, new technologies, evolving regulations and new market participants. Consumers need an adviser that can help them mitigate risks and handle the increased pressure from key stakeholders to deliver effective ESG policies, strategies and reports.
Our repertoire of services includes continuous monitoring of the regulatory environment, the ability to purchase renewables, risk management, electricity and natural gas purchasing through RFPs, contract negotiations, emissions reporting, or sustainability planning and execution, among others. We can support our clients in multiple ways, ensuring that they continuously deploy the best strategic energy management practices.
Tell us about the tailored services and contractual management support you offer.
At Acclaim Energy, we focus on power-hungry industries in Mexico (mining, automotive, steel, chemicals, etc.). These go anywhere from 1 MW and MXN 1 million [USD 46,690] a month for electricity, up to 250 MW, which represents our largest client’s consumption. The profiles we cater services for are very different, and therefore energy management strategies have to be tailored to their consumption profile, corporate needs and risk profile. We manage energy with a holistic approach, from the start of the design of a supply strategy that meets corporate cost reduction and sustainability goals to the implementation of an RFP with more than 30 qualified suppliers of electricity and 15 distributed generation developers participating.
We adapt to the client’s needs by analysing the risks and the quantitative and qualitative aspects of offers. We provide contract revisions and negotiate with selected suppliers. All of this is based on the data from the smart meters. From there, we provide information for the board, corporate and internal teams to understand the alternatives, the risks, the type of product that they’re selecting, the price variation scenarios, backgrounds and suppliers. We then support their transition, assist with permit applications and co-ordinate with the CFE and equipment providers for site visits, meter changes and adjustments. After that, we ensure a facilitated transition to the new supplier.
One of the most important things is managing an actual energy contract. As a company, we carry out monthly bill audits to make sure our clients are properly billed, provide risk management support around volatile variables such as natural gas prices, and the calculate emissions reductions on a monthly basis.
Another important service we offer is to help companies navigate regulatory and political uncertainty, making sense of how changes may apply to current supply contracts, and support them in the decision-making process. Thus, our energy management approach combines technology with local market expertise, sophisticated analysis, and negotiation experience to ensure a continued performance of informed and practical decision making.
How important is ESG for Acclaim Energy and how should firms adopt this long-term paradigm?
ESG is one of the most important corporate strategies in today’s business world. It is a critical component of an independent effective business plan. This is because it includes a broad cross section of issues, from CO2 emissions to labour practices, compliance, reporting and investor rating. Much of it has to do with the link between ESG performance and financial performance or a company’s value creation.
For this reason, we recently developed a strategic alliance with Cornerstone, which is one of the most experienced ESG firms in the US. The combination of local market knowledge, existing relationships, talent and experience in providing ESG solutions gives us a competitive advantage that few have. This move has been key for us in a world where ESG will be more pronounced by governments, shareholders, consumers and employees as these will start to thoroughly assess how companies are managing their resources and the impact on their communities.
ESG is far from being simple and the assessment, peer analysis, materiality, strategy, roadmap and result disclosure can turn out to be a complex process. In fact, it is a long-term strategy for sustainable growth. It is a paradigm shift for some companies, but true market leaders are taking proactive measures to be ahead of the ESG trend because of the risks associated with their brand’s reputation and long-term viability.
Given the current scenario, how important is enhancing energy efficiency and reducing risk for companies?
Today’s energy market is an evolving one, currently hit with inflation, volatile prices and the shadow of possible regulatory reforms. The last couple of years have been a rollercoaster that organisations are still trying to navigate. Nevertheless, our outlook for 2022 is very optimistic. The more confusing the rules are and the market is, the more companies will seek our expertise to help them understand what steps they should be taking. In this environment, there are still opportunities to save money, to secure reliability, address ESG goals and to mitigate risks for years to come.
Indeed, it is an exciting time to be in the energy industry and thanks to technology, big energy consumers can manage their energy portfolios more efficiently, substantially reducing their costs. Today, around 80% of companies worldwide use outside advisers to manage their energy portfolios. The key for us is to attract and retain the best talent in order to best serve our clients, embrace new technologies and continue to build on our customer-oriented culture. Our focus is to continue delivering customised solutions that reduce costs, minimise risks and provide the value customers need to excel in their respective industries.