Growth in Mexico’s distributed generation

Mexico

Carlos Hernández González, CEO of Sujio, talks to The Energy Year about the growth of renewables in Mexico and the company’s work in developing the distributed generation energy market in the country. Sujio is a qualified service supplier that promotes, supports and develops renewable electricity generation and new exploration techologies.

What difficulties, needs and potential is there in the renewables space in Mexico?
There have been many regulatory changes affecting the renewables space: the reliability policy of Cenace [the National Centre of Energy Control], the policy of SENER [the Secretariat of Energy] and the rejected reform of the energy bill. From an investor’s point of view, these have led to a halt and a reduction of certainty in the power sector. All the interconnection procedures for new power plants are on hold at the moment. This has delayed the economic development and growth of the country.
According to SENER, the yearly growth of energy consumption stands at 2.7%, which means that, if we consume 324,000 GWh, we have to increase consumption by 8,000 GW per year to cover the annual increase in consumption. Simultaneously that increase has to be produced via clean energy, but considering the renewable energy plans of the CFE [Federal Electricity Commission], efforts here are clearly insufficient. Ultimately private investment is required more than ever.
Since 2015 the electricity sector experienced a liberalisation wave, and the market opened up. This allowed any private company to sell, supply or generate electricity. SMEs and large companies can also make their medium- and long-term plans to become environmentally sustainable. The private sphere has been the one investing in renewable energies and pulling the cart. The CRE [Energy Regulatory Commission] is the one that keeps pace with the market and investments. The situation has been complicated because the CRE has established strict means on private actors, hampering the development of projects. However, we must understand that we are running a marathon, and we have to keep on betting long term.
We also see a great opportunity in distributed generation, where projects are developed and interconnected. SENER estimates that, by 2030, we will have 10,000 MW of installed capacity in distributed generation.
In general, there is a great opportunity for companies and for the electricity market to begin creating an inclusive electricity market that generates development and economic growth for the country.

Given the current scenario, what opportunity does distributed generation represent?
We see a great opportunity in the interconnection of power plants with a capacity of less than 0.5 MW. This is called exempt distributed generation as it does not require a permit from the CRE. It is a way to have short-term small-scale generation in specific parts of Mexico. It also reduces investment risk on different fronts. We consequently see the potential for an investment boom in this specific sector.
What we did was develop all the instruments to operate these power plants, and we see the generators as our customers. We wanted to see what services we could provide them so they could sell energy and optimise energy through us, through our contracts, through contracts with third parties, etc. This year we are going to be the supplier with the most distributed generation in total sales in the country. In the pipeline we already have 6 MW of installed capacity, and we have another 3.5 MW coming in the next few months.

What are the key power-generation services Sujio provides?
We provide a specialised outsourcing service in the operation of power plants with CENACE and also provide load supply services for companies, so that they can be in the electricity market. In other words, we carry out energy management for generating assets with Sujio Generación
In this management role, we are in charge of the bidding, reconciliation, settlement and invoicing with CENACE on behalf of the client. We also do the generation forecasting, and we do all the market operations. We provide certainty in the management of the assets and guarantee the optimal operation of these plants. We don’t get into the ironworks so to speak, that is, operations or maintenance.
We have a lot of experience in this segment and are now focusing on solar generation. We also have experience with biogas, and we want to start with wind. Those are the technologies we are interested in representing. Additionally, we are also representing a biomass power plant. We focus exclusively on clean energies.

In what ways are you looking into waste-to-energy as a viable clean energy solution in Mexico?
We are now engaged in a project regarding a waste management plant that we represent. What they do is transform waste into biogas, and then they generate electricity with that biogas. It’s a plant with an installed capacity of 1.5 MW. We are also involved in a biomass project that works with cow and pig waste.
Both ventures have biodigesters, which are stomachs that process rubbish or animal waste and produce gas that generates about 300 kW. It’s interesting because this plant generates the same as approximately 1.5 MW solar with 300 kW. In other words, with less capacity and less space, you can generate a greater amount of energy.

In what ways will you be involved in the 150 mini solar projects promoted by Volta Capital?
Our role at Sujio is to represent the exempt/distributed generator. In other words, we would represent 150 daily sale offers in the mercado de día en adelanto [day-ahead market], which equals 150 different considerations, settlements and invoices with Cenace. We also have the challenge of placing that energy with our qualified users. We currently have about 21 MW signed to go into operation between solar and biomass. By 2030 our target is to have 10% of the market share, representing 1,000 MW of distributed generation.
There are both large and small investors involved in these mini solar projects. We aim to start getting small distributed generation projects where we will provide all services. Our services include generation forecasting, presentation of the plant, daily offers, the settlement, energy payments and management of the model. In other words, we do what it takes to commercialise energy or place it with someone. We support investors 100% in everything they need, in all procedures, from the signing of the contract until they interconnect the plant. We do all this free of charge and don’t start charging until the power plant starts, and we represent the plant.

How are you supporting the Clean Energy Certificates (CELs) accreditation as a means to democratise the renewables market?
CELs are an attractive way of promoting renewables. What is missing is the normalisation of a clean energy certificate market. Right now, we only have the obligation. That means that Sujio Generación, for instance, has to present all its clean energy certificates of consumption for the previous year to the CRE. The CRE obliges us to fulfil our obligations. Thus, the obligation is there, but the market is not yet there.
A net metering contract is made with a basic supplier and the CFE. Moreover, the CRE defines how the compensation can be made via a contract. If one puts a meter at the output of the inverter and communicates this with the CFE, CRE and Cenace, one can accredit CELs for that same meter.
You can sell CELs by a free agreement through a qualified service provider. We also see this as an opportunity, but now this opportunity is at a standstill. However, we have already managed to connect two customers who are accredited and certified for clean energy.
The situation poses a regulatory challenge, and we would like to collaborate with the authorities to make the process simpler because then we can include SMEs so that they can own their own CEL through the supplier. Through voluntary will and for a very small amount – MXN 20,000-25,000 – any company or even household can have their own S-CEL (Clean Energy Certificates System). It is a way of democratising the market and promoting inclusion.

What are the factors that have differentiated Sujio and Sujio Generación since the opening up of the market?
When we entered this market, we realised that transparency and honesty were needed. However, we had to gain customers’ confidence. Our current clients had been with the CFE for many years, so at first they were reluctant to work with private companies such as us. One has to make customers aware of your advantages.
Another differentiating factor is that we have opted for the democratisation of projects. In other words, we believe anyone should know how to connect their load to the grid, either with us or with someone else. In the end, this allows markets to grow. We take companies by the hand until they get their projects up and running. Ultimately it is in our interest to have a plethora of exempt generators in the market. And the same is true of CELs. By creating and democratising a market, more opportunities come our way.
We have also put a lot of emphasis on corporate social responsibility. We care a lot about the environment and reducing emissions.
Our goal in terms of social responsibility is to democratise the knowledge of the electricity market. In fact, we are promoting this through partnerships with civil society organisations, universities and other projects. This will give way to a more competitive, well-informed and competent market.

What main aspirations do you have in the power-generation scene in Mexico?
We are very interested in being the lead supplier in the Bajío area, including the states of Jalisco, Aguascalientes, San Luis Potosí, Zacatecas, Querétaro, the State of Mexico and Mexico City. This is the corridor we’re most interested in for driving growth, and we’re the number one supplier in medium voltage in the Bajío area. Our goal is to be the top supplier of exempt generation in the coming years.
Additionally, we are interested in being able to trigger the market for CELs. Although it may not generate much value for us, it is an issue of environmental responsibility. We are also interested in supporting companies so they can meet their emissions targets. At the end of the day, we need to involve SMEs in the energy transition and make it an opportunity. This opportunity can come through waste-to-energy, solar or wind energy. We are trying to promote a “half a MW” electricity market. We need to foster a more competitive market, and we are determined to do it.

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