Intelligent use of energy: Renewable energy market.

1. National Commission for Energy Conservation Intelligent use of energy: Renewable energy market. Diego Arjona Hanmer Springs, New Zealand November 8th, 2004

2. Introduction: Energy: Balance between supply and demand. Opportunity areas: Not all energy spent is used. Systems and equipment with low efficiency. Growing environmental impacts. Low share of clean and renewable energy sources.

3. Challenges: • Mexico has a large potential to produce conventional energy, however there are many opportunities to use it efficiently and use renewable resources: intelligent use of energy. • Mexico needs to increase the production of energy, through clean and renewable sources • There is no right to produce energy with non renewable sources, that is not to be used.

4. Intelligent Use of Energy: • Avoid waste: Do not spend energy that is not used; reduce waste. • Increase efficiency: Same service with lower consumption; efficient equipment and generation. • Promotes the use of clean and renewable energy Mini-hydro, wind, biogas, solar, geo-thermal, etc.

5. Renewable sources in México

6. Actions: Supply increase: (Reforms and new legislation for both, renewable and no-renewable energy) Demand reduction: (Energy efficiency campaign)

7. National Campaign:

8. Objective of the campaign: To promote the Intelligent Use of Energy, through actions that: A) Avoid waste B) Increase efficiency C) Promote clean and renewable energy sources

9. Benefits: • Economic: • Lower costs. • Reduction of energy imports. • Investments deferment. • Jobs creation. • Increase Reserves Decrease the use of fossil fuels. • Environmental Protection • Reduction of local pollution and GHG emissions (CO2).

10. Indicators: • Energy Consumption Statistics In energy units 2. Renewable Energy Generation Growth in the share of renewable primary sources of energy

11. Restrictions: 1. Same service, lower consumption: The Intelligent Use of Energy shall not affect: • Safety • Well being and comfort • Economic growth • Environmental protection • Quality • Productivity 2. Disposal of inefficient equipment : Replaced equipment should be put out of service Disposal or recycling must be mandatory There should be financial support for the disposal effort

12. Main energy consumption agents: • Federal Government • States and Municipalities • Industries and Commerce • Homes and buildings • Transport

13. National Energy Consumption Matrix(% consumption; 2006 projection)

14. National Energy Consumption Matrix (Petajoules; 2006 projection)

15. Potential: • Several sources estimate that the national energy savings potential in Mexico is in the long term in the range of • 20%

16. National goal proposed 5% Saving of the overall energy consumption of the country by December 2006

17. National Goal 2006 Electricity: 10,918 GWh Total generation of six new power plants that started operation in August 2004 Generation of the Laguna Verde Nuclear Power Plant Natural Gas : 257 MMcfd Three times the total production of the Poza Rica Process Center 70% of Pemex Petrochemical’s consumption LPG : 18 Mbd 25% of the Cangrejera processing plant’s production 8% of total residential consumption Gasoline and Diesel: 46 Mbd 10% of the national supply and demand 22% of gasoline imports

18. Impact on imports of NG: Natural Gas : 20% imports reduction Electricity (NG imports): 30% imports reduction Total Impact in NG imports : 50% imports reduction

19. Direct Benefits:

20. Renewable energy impacts. • Possible driver of regional development • Wind: several regions, mainly in Oaxaca state • Minihydro: several regions, mainly in the south and southwest regions of Mexico • Could be a source of employment • Manufacture, design, installation and operation of systems • Mexico has ratified the Kyoto Protocol • Can participate in the Clean Development Mechanism • Because RE is distributed generation • The systems architecture of the future

21. National capacities. Ministry of Energy Ministry of Natural Resources Ministry of Agriculture Regulatory Energy Commission Renewable Energy Shared Risk Fund Federal Power Commission National Energy Conservation Commission Private Industry ANES Research Institutes Property owners National Water Commission

22. Barriers to RE in Mexico. • High initial cost of the technology. • Poor information about the resources. • Subsidies to end-users. • Mainly in residential and agricultural sectors • Lack of technical expertise. • For project development. • No incentives. • Large transaction costs. • Small projects are not economical.

23. Resolution 140. • Apply to intermittent renewable energy projects under the self-supply scheme. • Exchange electrical energy: energy is taken by the grid as it is produced and delivered as it is required. • Peak and base energy exchange rate: time-of-day value of electricity. • In operation since 2001. Other services. • Interconnection. • Back up. • Wheeling.

24. Current areas of renewableenergy application in Mexico • Energy sector Hydro and wind generation • Off-grid developments Rural areas Small remote equipment • Residential and commercial sectors Water-heating solar collectors

25. Projects: FIRCO Program • For productive projects in agriculture • Continuation of the FIRCO-Sandia collaboration (1994-1999) • 195 projects for 94 kW • A GEF project • 8.9 MMUS$ donation • 31.5 MMUS$ total • For market development • Develop mechanisms for integration of a large set of actors • More than 1100 systems up to 2003

26. Projects: Oaxaca wind corridor • Oaxaca´s state government is leading the effort • Legislation (draft) • Regional Commission (draft) • International meetings with wind power companies. • Intermediation with land owners. • Potential: • More than 32,000 MW • 3,000 MW according to grid planning. • Preliminary wind power map • NREL study, 2003 • Other states: • Zacatecas, Hidalgo, Quintana Roo, BC.

27. Flagship projects. • Biogas from landfill in Monterrey • Municipalities self supply • 7 MW capacity • GEF funds and private investment. • In operation since 2003 • Wind Farm • Capacity: 100 MW • La Ventosa, Oaxaca • CFE • Bidding: 2004

28. Ø 25 rivers Ø 6 regions Conae Veracruz & Puebla 400 MW Ríos San Pedro, Acaponeta , Baluarte y Presidio Ríos Armería, Marbasco , Ameca Ríos Toscano , Río Grijalva and Aguililla , Usumacinta . Coalcoman Ríos Copalita , Ríos Río Verde, Tehuantepec & Quetzalapa Papaloapan Minihydro Resources

29. Sun power • Photovoltaic energy • Widely used in rural electrification, pumping and communications systems • Solar heaters. • New voluntary standard NMX.

30. Advisory Council for Renewable Energy Promotion Created by CONAE to act as a consulting body to analyze and discuss policy proposals and renewable energy promotion. Integrated by representatives from private, public, financial, commercial and academic organizations.

31. Conclusions: • The generation of power in Mexico from renewable sources is still very low; additional efforts have to be made to overcome this problem. • Notwithstanding the fact that energy law reforms in Mexico are needed to increase our production, the potential to save energy in the country is very big; actions should be taken in the short time to avoid waste and increase efficiency.

32. Conclusions: • Markets not gadgets: • The problem is not technology but market development. • A clear and specific legal framework is important to promote investment. • Development of a mechanism to cover the differential costs. • Incentives should be based on performance. • Land rights and/or ownership is an important issue. • Regulatory instruments are in operation and have made some projects financially feasible.

33. Comments about the renewable energy law. • The law should integrate incentives that were specific to each technology and allowed its development. Incentives should change as technology does. • The law should eliminate the need for self supply associations and reduce the barrier for small projects. • A market for “green energy choice” should be established. Suppliers should be able to sell energy from a renewable source as a differentiated product.