Breathe
By Casiopea Ramírez Melgar
The extreme temperatures we are experiencing in the country have caused the highest energy demands in the history of our electric system, which merits a review of what is happening so that we can all understand whether we are facing a risk of shortage or not.
Let's start by explaining the situation: in just 1 year, our peak energy demand grew by 10%, but our production capacity grew by only 1%. This huge difference is due to, on the one hand, something we cannot control, and that is an extreme heat wave that is making all of Mexico consume more energy, and on the other hand, something we were able to foresee and manage, which is the investment in new generation plants and transmission infrastructure.
The equation is simple: each year of economic growth is equal to a year of growth in electricity demand, so each year we require more infrastructure to meet that growth and maintain a minimum reserve margin that allows us to manage eventualities And then what happened?
Last year we added a third of the minimum new generation capacity needed to meet demand growth (1,500 MW in 2021 vs ~4,500 MW in the last 3 years). Let's take these 4,500 MW as our lower limit, as they do not include contingency reserves or replacement of obsolete plants that we would already have to retire, let alone increased consumption due to more sophisticated situations such as nearshoring or electromobility.
These conditions of underinvestment are the result of the country's energy policy, since during this six-year term the CFE has sought to strengthen the CFE at almost any cost. CFE plans to add part of the minimum annual generation capacity needed, but until 2025, by which time we will have an accumulated deficit of more than 12,000 MW for not having made the required generation investments in each year. In the meantime, there are more than 4,000 MW requesting new generation permits (mostly with private investment), waiting even since 2019 in the Energy Regulatory Commission' s tray , with no upcoming resolution date.
On the other hand, there are the networks that we use to transport energy from where it is produced to where it is consumed, whose investment has been in the freezer for almost 10 years, and therefore, have only grown 0.1% per year, i.e., well below the average demand growth of recent years and even that expected for the next 5 years (~3% per year).
Network investment is even more complicated. CFE is the only company authorized to build and operate transmission lines in the country. This is its constitutional mandate. But it turns out that of the 192 network expansion and modernization projects that the Ministry of Energy has instructed CFE to date, only 9 projects have been completed, and with an average delay of 4 years. The worrying aspect of this performance is the consequences for the system and therefore for the country's energy supply: last year alone, 86% of the system's emergency alerts were caused by failures in the transmission and distribution networks, and the two largest blackouts in recent years were caused by failures in the network.
In addition, CFE has found a way to transfer its investment obligations in the grid to consumers and generators, making them develop the new infrastructure needed to access the grid, and then transfer it free of charge to CFE, without receiving any benefit in return, since they will also have to pay for using what they built, every time they consume or inject energy. With this mechanism, the costs of access to the network have multiplied by 12 in the last 10 years, making access and use of electricity more expensive throughout the country.The relevance of the electricity sector exceeds political affiliations, preferences on productive models or any witticism to discuss over coffee. The performance of the electricity sector conditions our development as a country, our security as citizens and even our right to a decent life. Therefore, more than a public policy that conditions who, how and with what resources we generate energy in the country, we must prioritize that the electricity sector provides the conditions to ensure the necessary investments focused on meeting our current and future needs, regardless of whether it is CFE, private initiative or both. As citizens and consumers, we want sufficient, affordable energy that does not contribute to the extreme weather that is becoming more frequent every day.
* Regulatory and market analysis expert with 18 years of experience in the development and implementation of energy transition projects. Throughout her professional career, she has collaborated with multinational energy companies such as Naturgy and Enel Green Power, as well as consulting firms dedicated to climate change mitigation and adaptation projects in Mexico, Central America and Southeast Asia.
She is currently a partner at Fresh Energy Consulting, where she leads regulatory impact analysis, market intelligence studies and marketing strategy design, in addition to participating as an expert witness in legal processes in the electricity sector at an international level.
Casiopea is an Internationalist and holds a Master's Degree in Geopolitics, as well as a specialization in Utilities Regulation from the Public Utility Research Center of the University of Florida, and is a Founding Advisor of Voz Experta.
The opinions expressed are the responsibility of the authors and are absolutely independent of the position and editorial line of Opinion 51.
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