Amid historic energy industry and market liberalization, Mexico’s federal electricity agency, Centro Nacional de Control de Energia (CENACE), held its second clean energy auction this week.
CENACE highlights that participants’ offers to generate solar energy were surprisingly low in Mexico’s first clean energy auction, which was conducted in March—an average of $45.15 per MWh. Offers were even lower for the second auction, coming in at an average of $33.47/MWh.
Mexico Minister of Energy Pedro Joaquin Coldwell reported that 57 companies participated in the auction. Twenty-six were awarded contracts for 56 clean energy projects, representing an investment of $4 billion and the addition of 2.87 gigawatts (GW) of electrical power generation capacity over the next three years.
Navigating Mexico’s New Clean Energy Market
Exploring uncharted territory, Mexico’s energy agency is modifying clean energy auction rules as the process progresses.
Mexico’s state-owned electric utility, Comision Federal de Electricidad (CFE), increased the bid price for long-term power purchase agreements (PPAs) to provide gbidders with greater incentives. Another incentive was expandingthe range of energy generation sources that could qualify for clean energy certificates (CELs) CENACE highlights that this prompted various project developers to participate, including those proposing to build combined-cycle gas power plants.
PV solar energy projects still won the most PPAs and the highest shares of CELs. PV solar projects accounted for 54 percent of electricity and 53 percent of CELs. Wind energy again followed – 43 percent of 15-year sales of electricity and 41 percent of 20-year sales of CELs – but a geothermal energy project was awarded a PPA and CELs for the first time, while hydroelectric projects accounted for four percent of CELs awarded. CCGT projects were awarded the lion’s share of 15-year PPA sales – 72 percent.
CCGT projects dominated in capacity; however, they accounted for 85MW-year of the total 1,187MW-year awarded this year. PV solar ran second and wind power a close third.
High Participation Globally
The auction participation rate was high, as foreign and domestic groups submitted offers. Overall, PPAs covered 80 percent of CFE’s electricity needs, making it the only entity permitted to sell and distribute retail electricity.
In addition to being the sole transmission and retail distributor of electricity in Mexico, state-owned, vertically integrated CFE participated for the first time in the clean energy auction as a supplier. CFE won a 25MW-year generation contract for the second phase of the Los Azufres III geothermal power plant and a PPA for its Agua Prieta II CCGT power plant in Sonora.
In sum, the first two auctions are expected to result in an estimated $6.6 billion in investment in clean energy projects that will add more than 5GWs of generation capacity in Mexico. Additionally, thirty-four new power generation companies have been created.
Furthermore, new power plants will be built in at least 15 Mexican states, creating substantial “green” jobs, Undersecretary of Energy César Hernández pointed out.
Following is CENACE’s list of second auction award winners:
*Image credits: CENACE
