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Participation of the Private Investment in the Mexican Power Sector. Cintia Angulo November, 2008. Origin of the Mexican Electric Sector. First activities in 1879 – Self supply in León, Guanajuato 1881 – Introduction to Mexico City of electric power

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Participation of the Private Investment in the Mexican Power Sector


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    1. Participation of the Private Investment in the Mexican Power Sector Cintia Angulo November, 2008

    2. Origin of the Mexican Electric Sector • First activities in 1879 – Self supply in León, Guanajuato • 1881 – Introduction to Mexico City of electric power • First years of XX Century - Many companies act as electric suppliers and distributors but electric power was reserved to “profitable customers” • CFE founded in 1937 – Make electricity available to all the country and all the people • Electric Industry nationalized in 1960 - CFE and LyF remain as exclusive suppliers of Public Service of Electric Power

    3. The new Law from 1992 • New Law for Public Service of Electric Power approved by the Congress in 1992. Public Service still reserved for the Mexican State but considers out of this definition to: • Cogeneration • Self-consumption • Independent Power Production that has the objective of selling its production to CFE • Small production < 20 MW • Generation for emergencies • Exports resulting from these activities • Imports for self consumption

    4. The new Law from 1992 • With the new 1992 law, the foundation of the Energy Regulatory Comission (CRE) in 1993 and the Regulatory frame published in 1994, the electric sector has experienced significative changes: • System not suffering anymore of supply restrictions • Generation park has been mostly updated • Fuel matrix diversified, and fuel supply secured • Cogen projects already developed • Opportunity fuels (i.e. Petcoke) used for generation in self-supply projects

    5. The IPP program from CFE – Operating Plants • CFE has signed 21 PPA’s with IPP’s Combined Cycle Plants Source: CFE

    6. The IPP program from CFE – Effect on the Operating Reserve Margin In 1997 and 2000 CFE bought under emergency large gas turbines for facing very low reserve margins After IPP’s came in line the Operating Reserve Margin strongly increased and actually must be reduced today due to a lower than expected growth of the GDP Source: SENER

    7. The IPP program from CFE – A competitive source of generation IPP’s generation has become the main source of CFE new available capacity The economy of these plants has displaced in the dispatch to older, more expensive plants Source: CFE

    8. The IPP program from CFE – Effect on the CFE fuel matrix Energy cost Fuel oil Natural gas 2008 - 50 GW 2000 - 36.7 GW Source: CFE

    9. The IPP program from CFE – Summary • Both CFE and the Producers have benefits from the External Producers Program • CFE is not exposed to the technical risks of the EPC and O&M neither to the increase in price of the equipment or replacement parts • PPA has disuasive methods for maintaining a very reliable service from the IPP owned power plants • The Producer is not taking the exposure of the electric market • CFE has been able to invest in modernization of its existing fleet (RM’s program), transmission and distribution networks • New infrastructure has been created for the supply of fuel like the large LNG terminals and new public and open access private pipelines

    10. Self-supply, cogeneration and small production • Some important investments developed with new 3 GW during the last decade totalling 6.3 GW today • Important projects under development • AHMSA – 450 MW – Self-consumption low grade coal • Grupo Mexico – 600 MW – Self consumption imported coal • Nuevo Pemex – Cogen 300 MW natural gas • Small hydro developed taking advantage of CDM’s • Fuel efficiency and use of opportunity fuels are characteristic of these projects • Wind is today under strong development under self-supply scheme, but additional support for renewables still required for full development if this resource

    11. Wind projects perspective

    12. Summary • With proper regulation and control of the Mexican State, private investment has proven to be useful for solving many issues in the Mexican Electric Industry like: • Sufficient and reliable supply • Renovation of the generation park for modern, more economic plants with reduced emissions • Reduced exposure of public companies to technical issues linked to the production of energy • Use of non-traditional, opportunity fuels • In general terms, a better electric public service

    13. Total presence of the private investment in the Mexican Electric Industry The private investment represents today 27% of the national electric installed capacity, participating with 37% of the total generation.