3. Electricity Sector - gob.mx...Administrative Support: María de la Paz León Femat, Maricela de Guadalupe Novelo Manrique

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1. 2.

3. Electricity Sector 4. Outlook

5. 6. 2016-2030

7. 8. 9.

Mexico, 2016

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Secretariat of Energy Pedro Joaquín Coldwell Secretary of Energy Leonardo Beltrán Rodríguez Under Secretary of Planning and Energy Transition Cesar Emilio Hernández Ochoa Under Secretary of Electricity Aldo Flores Quiroga Under Secretary of Hydrocarbons Gloria Brasdefer Hernández Senior Officer Rafael Alexandri Rionda General Director of Planning and Energy Information Víctor Manuel Avilés Castro General Director of Social Communication

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Preparation and Revision: Rafael Alexandri Rionda General Director of Planning and Energy Information ([email protected]) Luis Gerardo Guerrero Gutiérrez Director for the Integration of the Sector Outlooks ([email protected]) Fabiola Rodríguez Bolaños Deputy Director for the Integration of Energy Policy ([email protected]) Alain de los Ángeles Ubaldo Higuera Deputy Director of Energy Consumption ([email protected]) Ana Lilia Ramos Bautista Head of Department of Energy Policy ([email protected]) Cover: Administrative Support: María de la Paz León Femat, Maricela de Guadalupe Novelo Manrique. 2016. Secretariat of Energy

mailto:[email protected]





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Acknowledgments

Centro Nacional de Control de Energía

Comisión Federal de Electricidad

Comisión Nacional para el Uso Eficiente de la Energía

Comisión Reguladora de Energía

Dirección Corporativa de Operaciones de PEMEX

PEMEX Corporativo

Secretaría de Hacienda y Crédito Público

Subsecretaría de Hidrocarburos, SENER

Subsecretaría de Electricidad, SENER

Dirección General de Energías Limpias, SENER

Instituto Mexicano del Petróleo

Instituto Nacional de Investigaciones Eléctricas y Energías Limpias

Instituto Nacional de Investigaciones Nucleares

Programa de Colaboración México-Dinamarca en Materia de Energía y Cambio Climático

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Index

Index .......................................................................................................................................................................................5

Index of Tables ...................................................................................................................................................................8

Index of Figures ............................................................................................................................................................... 10

Presentation ..................................................................................................................................................................... 13

Introduction ...................................................................................................................................................................... 14

Executive Summary ........................................................................................................................................................ 15

1. Regulatory and Policies Frame of the Electricity Sector ......................................................................... 18

1.1. Electricity Sector Regulatory Frame ................................................................................................................. 18

1.1.1. Political Constitution of the United Mexican States ............................................................................... 18

1.1.2. Electricity Industry Law ..................................................................................................................................... 19

1.1.3. Law of the Coordinated Regulatory Organs in Energy Matters ........................................................... 20

1.1.4. Energy Transition Law ....................................................................................................................................... 20

1.1.5. Organic Law of the Federal Public Administration (LOAPF, for its Spanish acronym) .................. 22

1.1.6. Planning Law ......................................................................................................................................................... 22

1.1.7. CFE Law .................................................................................................................................................................. 22

1.2. Regulatory Frame for the Devise of the Electricity Sector Outlook ....................................................... 25

1.3. Instruments to Foster Clean Energies in the Electricity Sector ................................................................ 25

1.3.1. Auctions of the Electricity Market ................................................................................................................ 26

1.3.2. Clean Energies Certificates .............................................................................................................................. 28

1.3.3. National Inventory of Clean Energies and Atlas of Zones with High Potential of Clean Energies .............................................................................................................................................................................................. 28

1.4. Research and Education Centers of the Energy Sector .............................................................................. 29

1.4.1. Mexican Centers for the Innovation in Renewable Energies ................................................................. 29

1.4.2. National Nuclear Research Institute (ININ) ............................................................................................... 30

1.4.3. National Institute of Electricity and Clean Energies (INEEL) ................................................................. 30

2. Diagnosis of the Electricity Sector 2005-2015 ........................................................................................ 32

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2.1. Mexican Economy Diagnosis .............................................................................................................................. 32

2.2. Users, sales, and median prices of Electricity ................................................................................................ 33

2.2.1. Electric Power Users........................................................................................................................................... 34

2.2.2. Electricity Sales .................................................................................................................................................... 36

2.2.3. Electricity Average Prices ................................................................................................................................. 39

2.3. Electricity Consumption and Demand.............................................................................................................. 41

2.3.2. Electricity Consumption .................................................................................................................................... 41

2.3.3. Electricity Losses ................................................................................................................................................. 43

2.3.4. Demand of the National Electricity System ............................................................................................... 45

2.4. Infrastructure of the National Electricity System ........................................................................................ 46

2.4.1. Installed Capacity of the SEN .......................................................................................................................... 46

2.4.2. Electricity Generation ........................................................................................................................................ 56

2.4.3. Electricity Transmission and Distribution ................................................................................................... 60

2.5. Foreign Trade ........................................................................................................................................................... 63

2. Electricity Sector Outlook ................................................................................................................................ 65

3.4. Assumptions of the Planning Scenario ............................................................................................................ 65

3.4.1. International Context ........................................................................................................................................ 65

3.4.2. Macroeconomic Forecasts ............................................................................................................................... 68

3.4.3. Fuels Prices Forecasts ........................................................................................................................................ 70

3.4.4. Participation of Clean and Potential Energies ............................................................................................ 72

3.5. Expected Behavior of the Electricity Demand ............................................................................................... 74

3.5.1. Maximum Demand ............................................................................................................................................. 74

2.4.1. Gross Consumption ...................................................................................................................................... 76

3.6. Expansion of the National Electricity System ............................................................................................... 80

3.6.1. Additional capacity to be installed ................................................................................................................ 80

3.6.2. Decommissioning of Electricity Generation ............................................................................................... 85

3.6.3. Expected electricity generation ..................................................................................................................... 89

3.6.4. Expansion of the Transmission and Distribution Grid of the SEN ....................................................... 95

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3. Sensitivity Exercises ....................................................................................................................................... 104

4.1. Energy Transition Scenario prepared by CONUEE .................................................................................... 104

4.1.1. Energy-Efficiency Measures in the Transportation Sector ............................................................. 105

4.1.2. Energy-Efficiency Measures in the Industrial Sector ............................................................................ 107

4.1.3. Energy-Efficiency Measures in Buildings ................................................................................................... 109

4.2. Electricity Consumption .................................................................................................................................... 110

Glossary .......................................................................................................................................................................... 112

Acronyms ....................................................................................................................................................................... 121

References...................................................................................................................................................................... 125

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Index of Tables

Table 2. 1. Main macroeconomic variables of Mexico, 2005-2015 .............................................................. 32

Table 2. 2. Electricity users by operational area, 2005-2015.......................................................................... 35

Table 2. 3. Electricity users by federal entity, 2005-2015 ............................................................................... 36

Table 2. 4. Sectoral behavior of the domestic electricity sales, 2005-2015 .............................................. 37

Table 2. 5. Average electricity price by operational area .................................................................................. 40

Table 2. 6. Behavior of electricity consumption by operational area, 2005-2015 ................................... 42

Table 2. 7. Remote self-supply electricity, 2005-2015 ..................................................................................... 43

Table 2. 8. Electricity losses by operational area, 2005-2015 ........................................................................ 43

Table 2. 9. Behavior of the gross maximum demand, 2005-2015 ................................................................ 46

Table 2. 10. Behavior of the SEN's installed capacity by modality, 2005-2015 ........................................ 49

Table 2. 11. Behavior of CFE's effective capacity by technology, 2005-2015 .......................................... 50

Table 2. 12. CFE's additions, modifications, and decommissioning capacity, 2015 .................................. 51

Table 2. 13. Behavior of the Permittees' capacity for electricity .................................................................... 52

Table 2. 14. CFE's energy gross generation by primary energy source, 2005-2015 ............................... 58

Table 2. 15. Transmission, sub-transmission, and low-tension lines, 2005-2015 .................................... 61

Table 2. 16. CFE's substations capacity, 2005-2015 ......................................................................................... 62

Table 2. 17. Electricity Sector trade balance, 2005-2015 ................................................................................ 63

Table 3. 1. Quinquennial Plan 2015-2019.............................................................................................................. 72

Table 3. 2. Clean energies potential ......................................................................................................................... 73

Table 3. 3. Forecasts for the maximum demand by control region, 2015-2030 ...................................... 75

Table 3. 4. Integrated and instant demands of the studied scenarios, 2016-2030 ................................. 76

Table 3. 5. Forecasts of gross consumption by control region, 2015-2030 ............................................... 77

Table 3. 6. Additional capacity by modality and technology, 2016-2030 .................................................. 82

Table 3. 7. Behavior of the capacity additions by federal entity, 2016-2030 ............................................ 85

Table 3. 8. Behavior of the installed capacity by type of technology, 2016-2030 ................................... 88

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Table 3. 9. Behavior of the electricity gross generation ..................................................................................... 91

Table 3. 10. Name of the transmission regions .................................................................................................... 95

Table 3. 11. Summary of the main works and indicators .................................................................................. 96

Table 3. 12. Physical goals for transmission works, 2016-2030 .................................................................... 97

Table 3. 13. Physical goals for transformation works, 2016-2030 ............................................................... 99

Table 3. 14. Baja California-SIN interconnection projects .............................................................................. 102

Table 3. 15. Interconnection projects Nogales, Sonora-Arizona, U.S. ........................................................ 102

Table 3. 16. Interconnection projects from Istmo de Tehuantepec-Valle de Mexico (Oaxaca) ........ 103

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Index of Figures

Figure 1. 1. Main provisions of the Electricity Industry Law .............................................................................. 19

Figure 1. 2. Provisions on the Wholesale Electricity Market ............................................................................. 20

Figure 1. 3. Main Objectives of the Energy Transition Law ............................................................................... 21

Figure 1. 4. Main provisions of the CFE Law ........................................................................................................... 23

Figure 1. 5. New structure of CFE, initial separation for generation ............................................................... 24

Figure 1. 6. Information Sources for the Devise of the Outlook ...................................................................... 25

Figure 1. 7. Planning Instruments to Promote Clean Energies .......................................................................... 26

Figure 1. 8. Medium and long-term auctions ......................................................................................................... 27

Figure 1. 9. Mexican Centers for the Innovation in Renewable Energies ....................................................... 30

Figure 1. 10. Main objectives of the INEEL .............................................................................................................. 31

Figure 2. 1. Mexico's main macroeconomic variables, 2005-2015 ................................................................ 33

Figure 2. 2. Annual behavior of customers by sector, 2007-2015 ................................................................. 34

Figure 2. 3. Users share by electricity operational area, 2015 ........................................................................ 34

Figure 2. 4. Composition of electricity sales by sector, 2015 .......................................................................... 37

Figure 2. 5. Sectoral behavior of the domestic electricity sales, 2005-2015 ............................................. 38

Figure 2. 6. Structure of the domestic sales by federal entity and statistic region, 2015 ...................... 39

Figure 2. 7. Precios medios de energía eléctrica por sector tarifario ............................................................. 40

Figure 2. 8. GDP and Electricity Consumption, 2005-2015 .............................................................................. 41

Figure 2. 9. Share in electricity consumption by operational area .................................................................. 42

Figure 2. 10. Electricity losses, 2005-2015 ........................................................................................................... 44

Figure 2. 11. SEN's monthly gross consumption, 2015 ...................................................................................... 44

Figure 2. 12. SEN's coincident maximum demand, 2015 ................................................................................... 45

Figure 2. 13. SEN's installed capacity, 2014-2015 .............................................................................................. 47

Figure 2. 14. Installed capacity by technology, 2015 ......................................................................................... 48

Figure 2. 15. SEN's installed capacity by modality, 2015 .................................................................................. 48

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Figure 2. 16. Behavior of the SEN's effective capacity, 2005-2015 .............................................................. 49

Figure 2. 17. Percentage distribution of authorized permits and authorized capacity by modality, 2015 ........................................................................................................................................................................................... 52

Figure 2. 18. Behavior of the permittees' capacity for electricity ................................................................... 53

Figure 2. 19. Installed capacity by federal entity and region, 2015 ............................................................... 54

Figure 2. 20. Behavior of the SIN's operational reserve margin, 2015 .......................................................... 55

Figure 2. 21. Gross generation by technology, 2014 y 2015 .......................................................................... 56

Figure 2. 22. Gross generation by type of technology, 2015 ........................................................................... 57

Figure 2. 23. Gross generation by modality 2015 ............................................................................................... 57

Figure 2. 24. Behavior of the electricity gross generation ................................................................................. 58

Figure 2. 25. SEN's gross generation by federal entity, 2015 .......................................................................... 60

Figure 2. 26. Transmission, sub-transmission, and low-tension lines, 2015 ................................................ 61

Figure 2. 27. Transmission capacity between SEN's Regions, 2015 .............................................................. 62

Figure 2. 28. Links and interconnections, 2015 .................................................................................................... 64

Figure 3. 1. Scenarios for the Henry Hub Natural Gas Spot Prices, 2015-2040 ........................................ 66

Figure 3. 2. Behavior of the electricity consumption and gross domestic product .................................... 69

Figure 3. 3. Mexican population forecasts, 2005-2030 ..................................................................................... 69

Figure 3. 4. Exchange-Rate forecasts ....................................................................................................................... 70

Figure 3. 5. Fuels prices forecasts, 2016-2030 .................................................................................................... 71

Figure 3. 6. Trajectory of the clean energies goals 2016-2030 ...................................................................... 73

Figure 3. 7. Expected annual growth of the SIN's maximum demand, 2016-2030 .................................. 74

Figure 3. 8. Average annual growth of the SIN's electricity maximum demand by region ..................... 75

Figure 3. 9. Expected annual growth of the SEN's gross consumption, ......................................................... 77

Figure 3. 10. Electricity gross consumption average annual growth by region........................................... 78

Figure 3. 11. Comparison of the share in the gross consumption between 2015 and 2030 of the different control areas .......................................................................................................................................................... 79

Figure 3. 12. Share in the additional capacity by type of technology, 2016-2030 ................................... 81

Figure 3. 13. Behavior of the capacity additions by technology, 2016-2030 ............................................. 81

Figure 3. 14. Additional capacity by modality, 2016-2030 .............................................................................. 82

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Figure 3. 15. Additional capacity by status of the project, 2016-2030 ....................................................... 83

Figure 3. 16. Capacity additions by control region, 2016-2030 ..................................................................... 84

Figure 3. 17. Capacity decommissioning by technology, 2016-2030 ........................................................... 86

Figure 3. 18. Installed capacity by type of technology, 2015 y 2030 ........................................................... 86

Figure 3. 19. Behavior of the installed capacity by type of technology, 2015 y 2030 ............................ 87

Figure 3. 20. Share of technologies for electricity generation, 2015 and 2030 ........................................ 90

Figure 3. 21 Share by modality in electricity generation, 2015 and 2030 .................................................. 92

Figure 3. 22. Behavior of electricity generation by control region .................................................................. 93

Figure 3. 23. Gross generation by region and federal entity, 2030 ................................................................ 94

Figure 3. 24. Main transmission works by control region of the SEN, 2016-2025 ................................... 98

Figure 3. 25. Main transformation works by control region of the SEN, 2016-2025 ........................... 100

Figure 3. 26. Main compensation works by control region of the SEN, 2016-2025.............................. 101

Figure 4. 1. Reduction potential of the final energy consumption in the industrial, transportation, and buildings sectors by 2050 ................................................................................................................................................. 105

Figure 4. 2. Energy consumption in the transportation sector, base scenario ........................................ 105

Figure 4. 3. Transportation Sector Electrification Rate in the Transition Scenario................................ 106

Figure 4. 4. Transportation Sector’s Electricity Consumption in the Transition Scenario ................... 107

Figure 4. 5. Industrial sector energy consumption in the base scenario ................................................... 108

Figure 4. 6. Industrial sector energy consumption in the Transition Scenario ........................................ 109

Figure 4. 7. Electricity consumption in the final-consumption sector for both scenarios .................... 110

Figure 4. 8. Electricity consumption in the transition scenario by sector ................................................. 111

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Presentation

One of the main commitments of the Energy Reform about electricity is to bring this service to every corner of the country, and to ensure its universal coverage. Nowadays, 98.5% of Mexico's population have this service, but there are still electrification works to be carried out in communities inhabited by almost two million Mexicans and who, currently, do not count with electricity service.

Electricity is essential to foster the economic and social development of the country; thus, affording an efficient, reliable, and high-quality service, are the main premises to modernize the Mexican Electricity System, favoring the use of clean technologies for reducing the level of polluting emissions and move into a sustainable system.

On the other hand, Electricity Auctions are the result of having implemented the deeper Energy Reform ever carried out in the country, and which has produced an unprecedented impulse towards clean energies. Jointly, with barely two auctions, 34 companies will settle in the country adding nearly 5,000 new megawatts to the current generating capacity, and which will trigger investments for 6,600 million dollars within the coming years.

The Energy Transition Law has become a strengthening mechanism by which the country seeks access to a low-carbon economy (LCE). To achieve it, three instruments will be used for defining the routes and goals to move into a LCE. The first instrument is the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, which sets the generating-participation goals based on clean energies: of 35% in 2024; 37.7% by 2030; and of 50% of the total electricity generation by 2050. It also establishes the basis for energy efficiency, with the goal of reducing by 1.9% the energy intensity for final consumption during 2016 to 2030, and 3.7% during 2031-2050, with an average of 2.9%.

The second mechanism is the National Program for the Sustainable Use of Energy, which establishes indexes for the following up of the energy-efficiency national goals for the period 2016-2018. Finally, the third mechanism is the Special Program for Energy Transition, which set four strategic goals which intend to: i) increase the installed capacity and the generation of clean energies; ii) expand and modernize the infrastructure, as well as increase distributed generation and storage; iii) foster the technological development, talent, and value chains; and iv) democratize the access to clean energies.

The Electricity Sector Outlook is a planning document which provides all the necessary information, and reflects the future needs for electricity in the country for a fifteen-year period. The document is made richer with the sensitivity exercises which respond to the changing landscape of fuels, and afford options to reduce risk exposure and achieve the least environmental impact.

The planning here presented, regarding expansion and modernization, is devised as independent and inclusive, taking into account what is presented in the Development Program of the National Electricity System (PRODESEN, for its Spanish acronym) 2016-2030.

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Introduction

Along with the strengthening of the Electricity Sector through the modernization of generating plants, as well as the transmission and distribution grids, not only will the access to electricity will be democratized, but the regional economic breaches will be reduced, achieving thus an efficient integration of the national territory which will reflect bigger economic, industrial, commercial, agricultural, and services dynamism.

The Electricity Sector Outlook 2016-2030 aims to become an instrument which provides reliable information about the status of the Electricity Market. Besides, it is a planning exercise on the expansion foreseen for our country during the next years, representing a vision of the possible scenarios of the Electricity Market, and being thus, a supporting point on the strategic decisions required by the country.

This Outlook is divided into four chapters. The first one considers the regulatory frame and the most relevant energy policies of the Energy Reform, its secondary legislation, and the new instruments for the energy transition. It includes the most relevant features and results of the Energy Reform, its secondary legislation, and the new instruments for the energy transition.

The second chapter displays a diagnosis of the Electricity Sector for the past ten years (2005-2015). It describes the main variables, such as the electricity domestic consumption, the demand's seasonal behavior, mean prices, and the current infrastructure for generating and transmitting electricity. This information is the main base for future planning, since it shows the trends, and reflects the main needs in electricity matter, of the country.

Chapter three describes the result of the planning exercise of the Developmental Program for the National Electricity Sector (PRODESEN, for its Spanish acronym) 2016-2030.

Finally, chapter four displays a sensitivity exercise which sheds light on the dynamics and trends of the Electricity Sector, and deeply explains the impact that the volatility of some participating variables has over the sector’s planning.

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Executive Summary

The Electricity Sector Outlook is an analytical tool for researchers, State Productive Enterprises, and private sector companies which require essential information that will enable the timely decision-making for their investment needs. It not only provides historic and prospective information, but it is also enriched with realistic sensitivity exercises which reflect the fuels' changing landscape.

Electricity Sector's Regulatory Frame and Policies

Mexico has been developing the necessary mechanisms to carry out a transition to a larger use of clean energies, issuing a series of mandates established, in the Electricity Industry Law (LIE, for its Spanish acronym), as well as in the Energy Transition Law (LTE, for its Spanish acronym), and which establish the legal bases required to increase the share and the regulation of clean energies for electricity generation.

The LTE is supported by strategies, programs, public measures and policies, which allow to increase the share of clean energies and achieve the goals set, in order to carry out the energy transition and to comply with the objective of gradually increasing the participation of clean energies within the electricity-generation matrix. Particularly, the Strategy works as an instrument for planning the national energy policy in matters of clean energies and energy efficiency, which will be subjected to a continual-improvement process that will include the assessment of partial results, identifying the barriers for achieving its objectives, identifying other improvement opportunities, and adopting corrective measures if any of the complying indexes do not reach the engaged results.

An important point to achieve an efficient energy transition is to foster projects which will generate an added value for the energy industry. Strengthening and promoting research and education institutes, affords the country the necessary tools to revitalize the sector through the development of the new technologies and human capital required to carry on such transition.

The publication of the PRODESEN on May 2016, presented the indicative planning for the next fifteen years. This program is originated from the Electricity Industry Law, which grants its devise to the Secretariat of Energy, since the planning of the Electricity Sector is a strategic area for the country.

Electricity Sector Diagnosis 2005-2015

This chapter displays a brief diagnosis of the Electricity Sector for a 10-year period, showing the effects of the main macroeconomic variables over the decisions to strengthen the Electricity National System, according to the growing demand of society.

Between 2005-2015, the gross domestic product (GDP) grew 2.7% annual average, while the consumption of electricity has grown at a 3.0% rate. In 2015, electricity sales increased 2.0%, (equivalent to 4,185.9 GWh) regarding the previous year, reaching 212,200.8 GWh. Medium-size enterprises had the largest growth, with a share of 38.3% of the total sales; 26.4% corresponded to the residential sector; 19.4% to big industry; 7.0% to commercial; 4.7% to agriculture; and 4.2% to public services.

By the end of 2015 the installed capacity of the Electricity Sector increased 4.0% regarding 2014, reaching 68,044.0 MW, equivalent to 2,519 MW of new capacity. During this period, clean technologies increased 6.9%, which is related to the fast growth of the wind and geothermal power.

Electricity generation reached 309,552.8 GWh, including the generation reported to the CRE by private generators, which represented an increase of 2.7% regarding the previous year and equivalent to 8,090.3

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GWh. Conventional technologies had an increase in their generation of 4.4%, in contrast with clean technologies, which decreased -3.7%, attributable to the reduction of the generation coming from hydroelectric plants. It is important to mention that wind power was the technology which increased the most between 2014 and 2015, with 36.1%, seconded by efficient cogeneration with 31.2%.

Finally, the transmission and distribution grid reached a length of 885,426.0 km, an increase of 5,734 km regarding 2014. This grid is constituted by 230-400 kV length, with 51,479.0 km (5.85 of the total); 6.4% corresponds to lines between 69 and 161 kV; 12.8% to lines between 23 and 34.5 kV; and, 39.9% to lines below 13.8 kV.

Electricity Sector Outlook 2016-2030

This chapter shows the results of the planning exercise of the SENER (PRODESEN 2016-2030) with a 15-year horizon, and which consider the Indicative Program for the Commissioning and Decommissioning of Power Stations (PIIRCE, for its Spanish acronym), the Program for the Expansion and Modernization of the National Transmission Grid, and the Program for the Expansion and Modernization of the General Distribution Grid. The planning exercise is based on the analysis of the historic information on electricity consumption, the current SEN's infrastructure, economy's behavior, forecasts on fuels prices, prices per sector of users, and the implementation of specific programs on savings, among other.

The forecasts on electricity consumption are obtained through adding variables which define that consumption. Between 2016 and 2030, within the planning scenario it is expected an annual growth of the SEN's gross consumption of 3.4%, to reach 476.0 TWh by the end of the period.

One of the reasons why the SEN's planning shall be of minimum 15 years, is to consider the estimated time for carrying out the projects, and their lifespan. This is due to the nature of the electricity sector, whose projects need long-maturity periods and, therefore, investment decisions on the SEN's expansion works are taken several years ahead.

Through optimization models, it is possible to estimate the type, size, location, and startup date of the power stations to be installed for meeting the expected demand. The results of those models show the combination of the power-station's portfolio which presents the minimum present value of the system's total costs, while it satisfies the defined restrictions, such as the share of clean energies.

It is expected that between 2016 and 2030, a capacity of 57,122 MW will be added, from which 37.8% will come from conventional technologies (21,590.3 MW) and 62.2% from clean technologies (32,532.0 MW). Combined-cycle technology will have a bigger increase of installed capacity, with a total of 20,453.7 MW.

As for capacity additions by control region, the Eastern region will have the largest concentration with 15,279.7 MW as a result of the increase of projects in states such as Veracruz (6,176.2 MW), Oaxaca (4,868.3 MW), and Chiapas (2,478.5 MW). It stands out that in this region energy sources like nuclear, wind, and hydraulic power predominate over conventional ones, achieving thus, to have the largest installed capacity with clean-energy sources.

On the other hand, it is expected a decommissioning capacity of 15,819.5 MW, related to 140 generating units, located in 22 entities of the country, and being, in their great majority, thermoelectric stations.

In 2015, gross electricity generation was of 309,552.9 GWh, from which 79.7% came from conventional technologies and 20.3% from clean technologies. In 2030, gross generation will increase to 443,606.1 GWh. From this generation, clean-energies share will grow 40.5%, while conventional energies will reduce their share to 59.5%.

By type of source energy, combined cycle is the only technology based on fossil fuels increasing its share, 8 percentage points in 2030 regarding 2015. On the contrary, conventional thermal will drop from 39,231.5 GWh in 2015 to 1.3 GWh by the end of the projection period. Likewise, coal power will have a sharp drop of

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-97.1% in the generation share, equivalent to 32,620.9 GWh. Internal-combustion technology will reduce its share from 0.9% to 0.0% by the end of the prospected period.

With the entry of several generation projects throughout the country, included in the Indicative Program, it will be necessary to develop transmission lines suitable for the programmed expansion, designed to operate under normal conditions and contingencies.

Between 2016 and 2025, 159 transmission works are considered throughout the national territory, with a total of 13,066.0 km-c; 121 transformation works, with a total of 41,952 MVA, and 117 compensation works (7,288 MVAr).

Sensitivity Exercises

Sensitivity exercises afford a better understanding of the impact of the multiple variables of the Electricity Sector. Their main objective is to show researching results which, based on the sector's official planning, may lead to explore other options for that indicative planning.

The excise here presented is the one from the Energy Transition scenario, which was developed during the works of the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, in order to comply with what is established in the Energy Transition Law. This scenario was developed beginning from a base scenario devised by SENER, that profiles a behavior without energy efficiency actions. Afterwards, the CONUEE designed the Energy Transition Scenario which includes energy efficiency actions which may be viable in different end-consumption sectors, and will jointly achieve the energy-efficiency goal established in the Strategy.

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1. Regulatory and Policies Frame of the Electricity Sector

The Energy Reform established the necessary incentives to introduce new agents into the energy market and thus, promote more competitiveness, through eliminating barriers in activities where only the State was allowed. The objective is to efficiently serve energy needs which, according to the demand of a growing and more environmental-committed society, are the basis to increase the country's economic development going toward an energy transition.

1.1. Electricity Sector Regulatory Frame

The structural energy reforms carried out in Mexico during the last years, afford the legal certainty for establishing a strong, reliable, sustainable, and economically competitive electricity sector. The main change after the Reforms, was the transformation of the two big monopolies, Petroleos Mexicanos (PEMEX) and the Electricity Federal Commission (CFE) into State Productive Enterprises which can participate in equal conditions within the different activities or their respective markets, and even, interact between themselves.

Also, it should be considered the COP 211 international agreements on climate change related to the transition of a system based on primary fuels which generate a great amount of greenhouse gases (GHG) into a more sustainable and diverse energy system, less vulnerable to the changes of fossil fuels prices.

Mexico has the necessary mechanisms to carry out a transition where more clean energies will be use; in that sense, a series of mandates established in the Electricity Industry Law (LIE, for its Spanish acronym) and in the Energy Transition Law (LTE, for its Spanish acronym) become the necessary legal basis to increase the share and regulation of clean energies2 for electricity generation.

1.1.1. Political Constitution of the United Mexican States

Mexico has a great potential of energy resources that can be used in the benefit of end users. The Energy Reform has eliminated the barriers which hindered the participation of new participants who, using more advanced technologies, now can participate in the energy markets.

This reinforcement of the Political Constitution of the United Mexican States, in articles 25 and 273, which confer the State, through the Secretariat of Energy (SENER), the planning of the Electricity National System (SEN, for its Spanish acronym), and amends the economic model of the electricity market.

The purpose of the Constitutional Reform is the improve the families' economy, broaden electricity coverage, ensure gas supply, increase investment and employment, reinforce the new state productive

1 Conference of the Parties of the United Nations Climate Change Conference. 2 Clean energies are those sources and generation processes defined as such in the LIE. 3 Article 25. [...] The public sector shall exclusively be in charge of those strategic areas established in Article 28, paragraph fourth of the Constitution. The Federal Government shall at all times keep ownership and control over agencies and public productive corporations that have been established. In the case of planning and control of the national power system, the public power transmission and distribution systems, as well as the exploration and exploitation of oil and other hydrocarbons, the Nation shall be empowered to carry on those activities pursuant to paragraphs sixth and seventh of Article 27 of this Constitution." Article 27. [...] The Nation shall exclusively carry out the planning and control over the national electric system, and over the power transmission and distribution utilities. No concession shall be granted in these activities, notwithstanding the power of the State to execute contracts with private parties in accordance with the laws, which shall determine the ways in which private parties may participate in all other activities related to the electric power industry.

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enterprises PEMEX and CFE, and strengthen the governance of the State as the proprietor of the energy resources.

1.1.2. Electricity Industry Law

The LIE is a regulation of the Political Constitution of the United Mexican States4, issued in the Official Journal of the Federation (DOF, for its Spanish acronym) on August 11, 2014. Its main purpose is to regulate the planning and control of the SEN, the Transmission and Distribution Public Service (T&D), and other activities of the electricity industry.

The enactment of this law strengthens the SENER's faculties in the planning process of the SEN5, and establishes the necessary instruments to foster electricity industry development, where the generation and trade of electricity are provided in a free-competition regime. From the LIE's main Provisions, the following stand out:

FIGURE 1. 1. MAIN PROVISIONS OF THE ELECTRICITY INDUSTRY LAW

Source: SENER.

The LIE also establishes the formation of a Wholesale Electricity Market (MEM, for its Spanish acronym), whose main objective is to afford transparency to every transaction between the electricity industry participants, as well as to warrant competitive prices between competitors and users, and other provisions described in the following figure:

4 Particularly of articles 25, fourth paragraph; 27, sixth paragraph; and 28, fourth paragraph. 5 Article 11. "The Secretariat of Energy is empowered to: [...] III. Lead the planning process and the devise of the Development Program of the National Electricity System." LIE. DOF.

About authorities

•The SENER is empowered to establish, lead, and coordinate the energy policyof the country in electricitymatter.•The CRE is empowered to grant the permits referred to in this Law and to resolve onits amendement, revocation, transfer, extension, ortermination.

•The SENER will developindicative programs for theinstallation and decommissioning of PowerStations, whose relevantaspects will be included in the Developmental Programfor the National ElectricitySystem.•The State will exerciseoperational control over theSEN through the CENACE.

About ElectricityGeneration

•Power Station with a capacity ≥ to 0.5 MW and Power Stations of any sizerepresented by a Generatorin the Wholesale ElectricityMarket require a permitgranted by the CRE to generate elecricity.•Those Generatorsrepresenting Power Stationsinterconnected to the SEN shall:•I. Sign the respectiveinterconnection contracts, issued by the CRE;•II. Operate their Power Stations comlying the instructions of the CENACE;•III. Subject the maintenance of their Power Stations to the coordination and intructions of the CENACE, and•IV. Notify the CENACE aboutthe programmeddecommissioning of theirPower Stations.

About Transmission and Distribution

•Transporters and Distributors are responsable of the National TransmissionGrid and the General Distribution grids and willopérate their grids accordingto the CENACE’sinstructions.•The State, through theSENER, Transporters, orDistributors may formpartnerships or signcontracts with privateparties to carry out, onbehalf of the Nation, amongother, the funding, instalation, maintenance, management, operation, and expansion of the necessaryinfrastructure to supply thePublic Service of T&D.

About Trading

• Trading comprises theprovision of ElectricitySupply to End Users; represent ExcemptedGenerators in the WholesaleElectricity Market; carry outthe transactions referred to in article 96 of the LIE, in theWholesale Electricity Market; sign the contracts referredto in article 97 of this Law, with the Generators, Traders, and Qualified UsersParticipating in the Market, purchase transmission and distribution services basedon Regulated Tariffs; purchase and alienate theRelated Services not includedin the Electricity Market, with the intermediation of theCENACE, and otherdefined by the CRE.

About the Planning and Control over the SEN

20

FIGURE 1. 2. PROVISIONS ON THE WHOLESALE ELECTRICITY MARKET

Source: SENER.

1.1.3. Law of the Coordinated Regulatory Organs in Energy Matters

The Law of the Coordinated Regulatory Organs in Energy Matters sets the basis for the organization and operation of the Coordinated Regulatory Organs, which are the Hydrocarbons National Commission (CNH, for its Spanish acronym) and the CRE. In order to foster a competitive and efficient energy sector, the State will exercise its powers to regulate, technically and economically, electricity and hydrocarbons through those entities.

1.1.4. Energy Transition Law

In 2015, fundamental changes happened in the Mexican electricity sector. In December, the Lower and Upper Houses approved the LTE6, the missing piece of the set of laws derived from the constitutional reform on energy, and a meaningful complement to the LIE on reducing pollutant emissions, the participation of clean energies, and the necessary mechanisms for energy efficiency.

The LTE restates the goal set in 2008 by the Law on the Use of Renewable Energies and Energy Transition Funding (LAERFTE, for its Spanish acronym) of achieving a 35.0% of electricity generation through clean energies by 2024. Besides, two intermediate goals were set: 25.0% for 2018, and 30.0% for 2021.

6 Issued on December 24, 2015 in the DOF, http://dof.gob.mx/nota_detalle.php?codigo=5421295&fecha=24/12/2015

Wholesale Electricity Market

About its Operation

The CENACE will operate the Wholesale Electricity Market complying with the LIE. In the Wholesale Electricity Market, Generators, Traders, and Qualified Users Participating in the Market may carry out the transactions referred to in article 96 of the LIE, according to the Market Regulations. Invariably, the prices of the transactions signed in the Wholesale Electricity Market will be calculated by the CENACE based on the offers it received, under the terms of the Market Regulations.

The CENACE may collect for the T&D services, Related Services not included in the Market and its own operational costs

according to the Regulated Tariffs.

The SENER will issue the Bases for the Electricity Market, the Regulations of the Market will lay out procedures which will help carrying out, at least, electricity sales and purchase transactions; Related Services included in the Wholesale Electricity Market; Power: Transmission Financial Duties; Clean Energies Certificates or, if the case, Pollutant Emissions Certificates.

Based on the criteria for Safety Dispatch and economic efficiency, the CENACE will define the allocation and dispatch of the Power Stations and the Controllable Demand. Such allocation and dispatch will be performed regardless of the ownership of the Power Stations and the Controllable Demand.

About the CENACE

The CENACE is a public organ decentralized from the Federal Public Administration, with legal personality and its own assets, in charge of the SEN's operational control, the operation of the Market and of the open access and not unduly discriminatory, to the National Transmission Grid and to the General Distribution Grids.

The CENACE is empowered to exercise control over the Operational Control of the SEN; operate the Wholesale Electricity Market under conditions that foster competition; define the allocation and dispatch of the Power Stations and the Controllable Demand; carry out auctions to sign Electricity Coverage Agreements between Governors and the representatives of the Loadcenters, among other.

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FIGURE 1. 3. MAIN OBJECTIVES OF THE ENERGY TRANSITION LAW

Source: SENER.

The LTE seeks to gradually incorporate the private sector's participation, relaxing the due dates for purchasing Clean Energy Certificates (CELs, for its Spanish acronym), and thus comply with the reduction of pollutants emitted, mainly, by industries with intensive use of electricity. It also allows to defer the settlement of certain amount of those CELs so suppliers and users would be able to diverse their options to purchase these certificates.

As for Energy Efficiency, the LTE strengthens the National Commission for the Efficient Use of Energy (CONUEE, for its Spanish acronym), conferring it the promotion of the optimal use of energy, from its exploitation up to its consumption, and to propose to SENER the Energy Efficiency Goals and the mechanisms for their compliance. Likewise, the CONUEE has the power to devise and propose to SENER the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels (the Strategy) and the National Program for the Sustainable Use of Energy (PRONASE, for its Spanish acronym).

Transition Strategy to Promote the Use of Cleaner Technologies and Fuels

To carry out the process of the transition strategy and comply with the objective mentioned above, the LTE is supported by strategies, programs, measures, and public policies which will enable the increase of clean energies and, thus, achieve the goals set. The Strategy is a planning instrument for the national energy policy on clean energies and energy efficiency, which is subjected to a continual improvement process that includes

Law for the Energy

Transition

Foresees the gradual increase of the share of Clean Energies in

the Electric Industry in order to achieve the goals established on

matter of clean-energies generation

and emissions reduction.

Facilitate the compliance with the

goals of Clean Energies and Energy Efficiency of this Law

in an economically feasible way.

Lay out promotion mechanisms for clean

energies and emissions reduction.

Reduce, under economically feasible

conditions, the generation of

pollutant emissions while generating

electricity.

Promote the sustainable use of energy during the final consumption

and the energy-transformation

processes.

22

the assessment of partial results7, identification of any barriers hindering the achievement of its goals, identification of improvement opportunities, and adoption of corrective measure in case some the compliance indexes do not achieve the promised results.

The Strategy shall establish the Goals to achieve an electricity consumption which can be met through an alternative portfolio that includes Energy Efficiency and a growing proportion of Clean Energies generation, under conditions of economic viability. Through the Clean Energy Goals and the Energy Efficiency Goals, the Secretariat fosters electricity generation from clean sources to achieve the levels set in the LGCC for the Electricity Industry.

The Strategy shall include a long-term component, for a 30-year period, which defines the proposed scenarios to achieve the Clean Energy Goals and the Energy Efficiency Goals. It shall also include a medium-term planning component for a 15-year period which should be updated every three years.

1.1.5. Organic Law of the Federal Public Administration (LOAPF, for its Spanish acronym)

The LOAPF, in its Article 33, points out that SENER is responsible for establishing, leading, and coordinating the country's energy policy. Thereby, the SENER shall give priority to energy safety and diversification, as well as to energy saving and environmental protection. This article, in its Section V, signals SENER is bestowed to carry on the medium and long-term energy planning, an activity which shall consider sovereignty and energy safety criteria, the gradual reduction of environmental impacts from energy generation and consumption, a larger participation of renewable energies, energy savings, and a better efficiency of its generation and use, among other.

1.1.6. Planning Law

This law establishes the basic regulations and principles to lead the National Development Planning, as well as the basis for the functioning of the National System of Democratic Planning which, according to article 4 of the Law, the Federal Executive is in charge of planning the national development.

1.1.7. CFE Law

The Electricity Federal Commission Law is regulatory of article 25, fourth paragraph, of the Constitution, and of the Twentieth Transitory of the Decree by which varied provisions of the Political Constitution of the United Mexican States are amended and added, in energy matters, published in the DOF8 on December 20, 2013; it is of public interest, and it is aimed to regulate the organization, administration, functioning, operation, control, assessment, and accountability of the State Productive Enterprise CFE.

In 2015, there was a major transformation of the CFE. On February 16, the DOF published the statement of the SENER which refers to the Transitory Fourteenth of the CFE Law about the entry into force of a special regime for the enterprise, foreseen in the Law, that regulates the subsidiary productive enterprises and affiliates on their revenues, acquisitions, leasing, works and services, responsibilities, state profit, budget, and debt.

The provisions for this Law are following described:

7 Article 26. The Strategy, the Program, and the PRONASE shall be revised annually, with the participation which

corresponds to the Secretariat, the CRE, the CENACE, and the CONUEE. 8 For further detail, see http://www.diputados.gob.mx/LeyesBiblio/pdf/LCFE_110814.pdf

23

FIGURE 1. 4. MAIN PROVISIONS OF THE CFE LAW

Source: SENER.

Article Tenth of the LIE establishes CFE will be in charge of the activities of generation, transmission, distribution, trade, basic supply, qualified supply, last-resort supply, provision of primary supplies for the electricity industry, as well as for its auxiliary and related activities, but in a strictly independent way among them. Thereby, CFE will set the accounting, functional, and structural separation required by each of its divisions, regions, subsidiary productive enterprises, and affiliates, according to the LIE and under terms of strict legal separation established by the Secretariat of Energy, the regulation on economic competence, and the regulation the CRE establishes for that purpose.

The Fourth Transitory of the LIE commands CFE to perform the accounting, operative, functional, and legal separation which corresponds to each of the activities of generation, transmission, distribution, and trade, and foresees that the SENER and the CRE -within the scope of their powers- will establish the terms under which the CFE will carry out such separation, which will be vertical among the different business lines, and horizontal among one same business line, according to the following:

I. The activities of generation, transmission, distribution, and trade within CFE will observe a strict vertical separation, which shall be legal;

II. Generation shall observe a legal separation, from a horizontal perspective, in a certain number of different business units, sufficient to foster the efficient operation and competitive atmosphere of the sector; and,

III. The distribution activity must have a horizontal separation by region, which may be in accounting, operation and functional or legal terms, in such a way that it fosters the efficient operation of the sector

It aims to develop entrepreneurial, economic, industrial, and trading activities in the terms of its objective, generating economic value and profitability for the Mexican State as its owner.

It aims to provide, under the terms of the applicable law, the public service for the transmission and distribution of electricity, on behalf and to the order of the Mexican State.

It may carry out the necessary activities, operations, and services for the compliance with its own objective; with the support of its subsidiary productive enterprises and affiliated enterprises, o through the signature of contracts, agreements, alliances, or partnerships, or any other law act, with legal entities or individuals from the public, private, or social sectors, national or international, everything under the terms pointed out in the Law and the other applicable law provisions.

It will have an Administrative Council and a General Director. Within the activities of generation, transmission, distribution, trading, and provisioning of basic supplies for the electric industry, the Commission shall subject to the strict legal separation established by the SENER to foster open access and the efficient operation of the electricity sector.

It will count with subsidiary and affiliated productive enterprises dedicated to:- Service provision of the public transmission and distribution of electricity;- Activities for the generation and trading of electricity;- Activities which are not performed as a complement, help, or support of the main activities purveyed by the CFE, or in order to create a vehicle to consolidate a specific business;- Nuclear generation; and- Other, if the case, pointed out in the Regulation of the CFE Law.

24

and provides information required for comparative analyses of performance and efficiency in operations9.

On January 11, 2016, the DOF published the structure and separation that CFE shall develop, which defines that, to foster the operational efficiency of the electricity sector, the CFE must create a certain number of generating companies, defined by the SENER in the agreements to allocate the corresponding assets, and which are described below:

FIGURE 1. 5. NEW STRUCTURE OF CFE, INITIAL SEPARATION FOR GENERATION

Source: SENER.

The portfolio of Power Plants and contracts for each of the Generating companies, will be chosen by the SENER to ensure that each of these enterprises may participate in the MEM without holding any market power at regional or national level, and having similar conditions of financial sustainability and profitability, considering a balance mixture of technologies, fuels, efficiencies, and remnant lifespan, considering their economies at their scale and at their reach.

In regard to CFE's separation on transmission and distribution, it is defined the provision of the Public Service of Electricity Transmission in charge of CFE, will be done through subsidiaries created for that sole purpose by CFE, and which can associate or sign contracts with subsidiaries, affiliates, and private parties to carry on, among other activities, the funding, installation, maintenance, management, operation, and expansion of the infrastructure need for providing the Public Service of Electricity Transmission in accordance with what is established in articles 57 and 63 of the CFE Law, and 30-31 of the LIE.

The Basic Supply activities will be performed through the subsidiary created for such purpose. The goods required for: invoicing, collection, and give support to the Users of the Basic Supply (and, if the case, Qualified Users when the service provided is Last-Resort Supply), will become part of that enterprise. Additionally, CFE may perform Trading activities other than Basic Supply (e.g. Supply to Qualified Users) through the number of enterprises it decides to.

9 For further detail, see http://dof.gob.mx/nota_detalle.php?codigo=5422390&fecha=11/01/2016

A subsidiary of affiliate being exclusively in charge of performing the Generating activities contemplated in the IEP's agreements, and to represent

them in the Wholesale Electricity Market.

An affiliate which will be the assignee of the Interconnection Legated

Contracts representing them in the Wholesale Electricity Market under the personality of Intermediate Generation.

At least four subsidiaries or affiliates in charge of performing the

remaining generating activities in charge of the CFE. They will be assignees of the

other owned stations.

http://dof.gob.mx/nota_detalle.php?codigo=5422390&fecha=11/01/2016

25

1.2. Regulatory Frame for the Devise of the Electricity Sector Outlook

The preparation of this Outlook complies with the mandate of the Internal Regulation of the Secretariat of Energy, stipulated in the section "Of the faculties of the General Directorate of Planning and Energy Information" in its Article 24, Section XIV:

Devise and submit for its approval by the hierarchical superior, the prospected projects in the medium and long term of the energy sector, including electricity, natural gas, liquefied natural gas, oil, and oil products, with a minimum planning horizon of fifteen years;

The information contained in the Electricity Sector and Renewable Energies Outlooks, is placed in two horizons: historic and prospective. Historic information is obtained from different sources like the Energy Information System (SIE, for its Spanish acronym), the CRE, the CFE, and information provided by the Under secretariat of Electricity.

Regarding the prospective information, a fundamental element for this planning document, it is based on the PRODESEN 2016-2030, issued by the SENER, and which is a planning industry of the SEN for the activities of generation, transmission, and distribution with a 15-year horizon.

FIGURE 1. 6. INFORMATION SOURCES FOR THE DEVISE OF THE OUTLOOK

Source: SENER.

1.3. Instruments to Foster Clean Energies in the Electricity Sector

Mexico has a high economic and competitive potential of renewable energies opposite to other energy sources, increasing the energy matrix diversification. To achieve the goals of energy generation of 35.0%, it

Electricity Sector Outlook

Historical

Energy Information System, SENER

- Federal ElectricityCommission

- Energy RegulatoryCommission

Prospective

Internal Modeling Exercises

Developmental Program forthe National Electric

System

(PRODESEN)

Indicative Program for theInstallation and

Decommissioning of PowerStations

(PIIRCE)

Programs for the Expansionand Upgrade of the

National Transmission Gridand of the General Distribution Grids

10 years 15 years

26

is necessary to have a package of actions, instruments, and mechanisms to increase the energy matrix diversification, and which is in favor of a deeper penetration of renewable energies into the SEN.

Likewise, the necessary basis shall occur to incentivize equitable competitiveness in the energy markets, considering all external effects, such as environmental impact, public health, and GHG emission. The latter, establishing the adequate financial mechanisms to promote the development of projects on clean energies, as the CELs, through auctions.

Among the main instruments, nowadays the following are being enacted:

FIGURE 1. 7. PLANNING INSTRUMENTS TO PROMOTE CLEAN ENERGIES

Source: SENER.

1.3.1. Auctions of the Electricity Market

Auctions arise from a commitment of transparency and the principle of free competition in the MEM, giving thus, certainty to new investments which, in the long-term, will ensure the demand for those winning companies establishing less-polluting generation stations, favoring clean energies.

Besides, they are a mechanism through which the load serving entities, are allowed to sign contracts in a competitive way, and under conditions of prudence in order to meet the needs of Power, Accumulative Electricity, and CELs. The Load Serving Entities (LSE) may participate in the Medium and Long-Term Auctions through the following figures:

Pla

nn

ing

In

stru

men

ts

National Strategy for Energy Transition and the Sustainable Use of Energy

Transition Strategy to Foster the Use of Cleaner Technology and Fuels

Energy Sectoral Program

Special Program for the Use of Renewable Energies

Developmental Program for the National Electric System

Strategic Program for the Formation of Human Resources in Energy Matter

27

a) Basic Services Supplier

b) Qualified Services Supplier

c) Last-Resort Supplier

d) Qualified User Participant in the Market

FIGURE 1. 8. MEDIUM AND LONG-TERM AUCTIONS

Source: SENER.

The validity period of the contracts resulting from the Medium-Term Auctions is of three years.

The validity period of the contracts resulting from the Long-Term Auctions will be:

a) 15 years for Accumulative Power and Electricity, and

b) 20 years for Clean Energies Certificate (CELs).

Results of the First Auction

The process of the first Long-Term Electricity Auction of the Wholesale Electricity that began in 2015, concluded on March 2016, according to the calendar of activities foreseen in the Call for Tender.

The long-term coverage contracts were allocated to 11 enterprises, which have submitted the 18 winning proposals. These proposals competed along with 69 participants that submitted a total of 226 proposals.

The winning enterprises were: Aldesa Energia Renovable, Consorcio Energia Limpia 2010, Enel Green Power, Energia Renovable Peninsula, Energia Renovable del Istmo II, Jinkosolar Investment, Photoemeris Sustentable, Recurrent Energy Mexico, Sol de Insurgentes, SunPower, and Vega Solar.

In the first auction, a total demand of 5 million 380 thousand 911 clean-energy certificates were met, which represents 84.9% of what was initially requested by CFE; as well as 5 million 402 thousand 880.5 MWh of power, which is 84.9% of the original demand.

Purpose of the Medium-Term Auctions

Purchase in advance of the power and electricity to be consumed by the Basic-Supply Users, to reduce or eliminate their exposure to these products' prices in the short term.

Objective of the Long-Term Auctions

Allow the Basic-Services Suppliers to sign Contracts in a competitive manner, and under financial prudence, to serve the needs of Power, Accumulative Electricity, and CELs that shall be met through long-term contracts according to the requirements established by the CRE for such purpose.

Allow the rest of the Entities Responsible for the Charge to participate in them at their own decision, and once the Compensation Chamber is established, in order to sign Contracts for amounts of Products in proportion to the portfolio of Power, Accumulative Electricity, ad CELs obtained for the Basic-Services Suppliers; and

Allow who is signing this Contracts, as Sellers, to count on a stable source of payments which will contribute to support the funding of the required efficient investments to develop new Power Stations or to repower the existing ones.

28

This auctioned power is equivalent to 1.9% of the current generation in Mexico, with projects going from 18 to 500 MW to be in Yucatan, Coahuila, Guanajuato, Tamaulipas, Jalisco, Aguascalientes, and Baja California Sur.

Results of the Second Auction

On September 28, 2016 were published the results of the second auction in which 57 bidders participated; from these, the 23 winners submitted 56 proposals for solar, wind, and other clean power sources.

These 23 companies came from 11 countries, Mexico included, and were allocated 2,871 MW of new installed capacity of clean energies and an investment of 4 billion dollars. It is worth to mention that there was a historic average price of clean energy of about 33.47 USD per MWh, a highly competitive price worldwide.

CFE submitted two of the winning proposals: Geothermal Stations Los Azufres III Phase II, located in Michoacán, and the combined-cycle station Agua Prieta II, in Sonora. Both stations will bring about 199,000 CELs and 199,000 MWh of energy, in addition to supplying 400 MW of power.

With the results of the two electricity auctions, 15 states of the Mexican Republic will be benefited through the development of wind, solar, hydraulic, and geothermal power projects.

1.3.2. Clean Energies Certificates

The Energy Reform led to a series of economic instruments which will promote investments on the generation of electricity through clean energies; these are the so-called CELs, which are described in the LIE as follows:

A title issued by the CRE which authorizes the production of a defined amount of electricity from Clean Energies, and which help to comply with the consumption requirements of Load Centers10.

The main purpose of the CELs is to contribute in achieving the policy goals on the share of clean energies for generating electricity, at a minimum cost and based on the market mechanisms, and achieve a 35.0% of electricity generated through clean sources by 2024. Thereby, the winners who do not meet the quota of MWh generated through clean technology may prevent fines by purchasing CELs, since a CEL is equivalent to 1 MWh of clean energy.

The CELs materialize into individual duties, the national goals of generating clean electricity, which are of 5.0% in 2018, and of 5.8% by 2019.

1.3.3. National Inventory of Clean Energies and Atlas of Zones with High Potential of Clean Energies

With the commitment of maximizing the use of renewable energies in Mexico, two key instruments arise to enable the decision making for new investments: the National Inventory of Clean Energies (INEL, for its Spanish acronym) and the Atlas of Zones with High Potential of Clean Energies (AZEL, for its Spanish acronym).

The INEL is a system of statistical and geographical services for public access which gathers information about the annual generation per renewable energy and the estimate potential of electricity generation for

10 Article 3, General Provisions of the Electricity Industry Law.

29

the different sources of renewable energy. The INEL (formerly, INERE), is a public access platform which displays information gathered through maps at national level11.

Nowadays, it shows the map for solar potential, the map for wind-power potential, the map for geothermal potential, the map for tidal energy, and the map for biomass energy, in addition to an inventory of the projects currently operating which use these renewable sources for generating power, and an inventory of the projects in construction phase.

The LTE establishes the annual publication of the AZEL, which shall display the country's zones with a high potential for Clean Energies; likewise, it is harmonized with the LIE, and will enable to localize, more precisely, those places for developing investments.

On September 30, 2016, the advances for the devise of the AZEL were presented. This Atlas is a very important tool for the institutions and for developers interested in investing on clean-energies projects. Its objectives are: become a supporting instrument for investors in the planning of projects on clean-energy generation, and be a source for the devise of the indicative plans for the expansion and modernization of the National Transmission Grid (RNT, for its Spanish acronym) and the General Distribution Grids.

1.4. Research and Education Centers of the Energy Sector

A key part to achieve an efficient energy transition, is fostering projects which generate aggregate value to the energy industry. Strengthening and promoting research centers and education afford the country with the necessary tools to reinforce the sector through the development of new technologies and the required human capital to carry on that transition.

Mexico has research and education centers committed with the development of the energy sector and which, currently, are preparing diverse projects foster clean energies.

1.4.1. Mexican Centers for the Innovation in Renewable Energies

The Mexican Centers for the Innovation in Renewable Energies (CEMIEs, for its Spanish acronym) arise from an initiative proposed by SENER and the National Council for Science and Technology (CONACYT, for its Spanish acronym), through the Sustainable Energy Fund (FSE, for its Spanish acronym), to fulfill the need to impulse research areas that will boost the use of renewable energies, such as: geothermal, solar, bioenergy, and tidal energies.

The CEMIEs are national, comprehensive, and including projects that comprise the formation of partnerships where the existing national capabilities are coordinated and aligned, and where higher-education institutions, research centers, enterprises, among other, participate. These Centers are aimed to take advantage of renewable energies, and to consolidate and bind together the existing scientific and technological capabilities on those subjects, to subsequently raise the specialized human resources which will strengthen the research infrastructure.

11 http://inere.energia.gob.mx/version4.5

30

FIGURE 1. 9. MEXICAN CENTERS FOR THE INNOVATION IN RENEWABLE ENERGIES

Source: SENER.

1.4.2. National Nuclear Research Institute (ININ)

The ININ is an institute which carries out research and development in nuclear science and technology. Since nuclear energy is a subject that concerns only to the State, this institute prepares sensitivity studies on the impact nuclear energy has over the electricity sector, and which are presented in this document.

1.4.3. National Institute of Electricity and Clean Energies (INEEL)

Previously called Electric Research Institute (IIE, for its Spanish acronym), this institute restructuration was a mandate from the LTE whereby the Institute is assigned with new tasks and responsibilities to afford technical and scientific support to SENER in the formulation, conduction, and evaluation of the national policy on electricity matter, in general, and on clean energies.

CEMIEs

Ocean

Solar

WindGeothermal

Bioenergy

31

FIGURE 1. 10. MAIN OBJECTIVES OF THE INEEL

Source: SENER.

Seek to foster applied research and technology development to comply with the goals on clean-energy and energy-

efficiency matter, as well as to prepare a route sheet to form technical capabilities,

of energy management, the devise and implementation of public policies on energy,

and other disciplines needed to meet the needs of human capital in the electric

industry.

Coordinate and carry out studies and projects on scientific or technological

research along with academic and research institutions, whether private or public, national or foreign, on energy, electric

power, clean energies, renewable energies, energy efficiency, pollutant emissions

generated in the electric industry, sustainability, systems for the transmission,

distribution, and storage of energy, and systems related to operation.

The institute will continue with its task of educating specialists and researchers within

specialties areas, as well as the implementation of courses of specialization

and updating of knowledges on science, technology, and management of the

electric industry, and similar industries.

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2. Diagnosis of the Electricity Sector 2005-2015

During the last decade, Mexico has significantly restructured its economic model to boost its economy based on Structural Reforms. The Energy Sector and its new reforms are key elements to foster the country's economic growth, since it will help to activate, safely and efficiently, every sector involved in the development of an economy undergoing expansion.

This chapter presents a brief diagnosis for the Electricity Sector for a 10-year period, displaying these effects of the main macroeconomic variables on the decisions to strengthen a National Electricity System, appropriate to the society's demands.

2.1. Mexican Economy Diagnosis

For the last decades, Mexico has been one of the most solid economies worldwide, despite the strong global economic slowdown. Regarding its population, since 2005, the country has had an annual growth rate of 1.3%, going from 107.2 million people, to 121.0. This moderate raise represents a meaningful impact on the demand for oil, its derivatives, and electricity.

On the other hand, the Consumers Index Pricing, has remained in 4.1% annual average, during the last 10 years, due to the current monetary policy of the country, which ensures a generalized stability on the prices level (see Table 2.1).

TABLE 2. 1. MAIN MACROECONOMIC VARIABLES OF MEXICO, 2005-2015 (Different units)

AAGR: Average Annual Growth Rate Source: SENER with information from INEGI.

The Gross Domestic Product (GDP) has displayed a growth of 2.7% throughout 2005-2015 and, given the 2009 economic slowdown, it is necessary to boost economy through the support of the structural reforms and achieve, at the medium term, a GPD12 growth of approximately 5.0%. The Energy Reform is strategic for the development of the Mexican economy, due to its importance for the functioning of every productive activity in the country, and to the impulse it can give them, e.g., the transportation of persons and merchandise, manufacturing, the performance of commercial establishments, services, factories, and households, and the electrification of teaching centers; in summary, the development of the Mexican energy reform is closely related to the social and economic growth of the country.

12 Figures published in the National Program for Developmental Funding 2018.

Macroeconomic variable

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Population (million people)

107.2 108.4 109.8 111.3 112.9 114.3 115.7 117.1 118.4 119.7 121.0 1.3%

Gross Domestic Product (Billion Pesos 2008)

11160.5 11718.7 12087.6 12256.9 11680.7 12277.7 12774.2 13287.5 13468.3 13770.7 14110.1 2.7%

Average Exchange Rate (Pesos per dollar)

10.9 10.9 10.9 11.1 13.5 12.6 12.4 13.2 12.8 13.3 15.8 3.5%

Retail price (Average Annual Percent Variation)

4.0 3.6 4.0 5.1 5.3 4.2 3.4 4.1 3.8 4.0 2.7 n.a.

33

The exchange rate regarding American dollars has had two strong variations throughout the analyzed period, specifically in 2009, with an annual variation of 21.4%, and in 2015, with a 19.2% variation13. These increases have an impact on Mexico's foreign trade, in its production, and in the currency market, or like oil's sales value, or the purchase of imported hydrocarbons (see Figure 2.1).

FIGURE 2. 1. MEXICO'S MAIN MACROECONOMIC VARIABLES, 2005-2015 (Annual variation)

Source: SENER with information from INEGI.

2.2. Users, sales, and median prices of Electricity

One of the commitments for this six-year term is to increase the percentage of population with access to electricity.

By the end of 2015, CFE reported 39.7 million users, an increase of 3.0% regarding 2014 (equivalent to 1.16 million of annual customers). During the last years, the residential service has had the highest supply level of electricity, 88.6% from CFE's total clients; 9.8% from the trade sector; and 1.6% from the industrial, services, and agricultural sectors. On the other hand, the annual average growth rate during the last ten years had grown by 5.8% (see Figure 2.2).

13 This upward trend in the exchange rate is the globalized effect of the main economies regarding American dollar.

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gross Domestic Product Population Average Exchange Rate Consumer Prices

34

FIGURE 2. 2. ANNUAL BEHAVIOR OF CUSTOMERS BY SECTOR, 2007-2015 (Percentage)

Source: SENER with information from CFE.

2.2.1. Electric Power Users

The SEN is organized in nine regions constituting the Interconnected National System and the isolated systems of Baja California, Baja California Sur, and small isolated systems. The operation of these nine regions is in charge of eight control centers located in the cities of Mexico, Puebla, Guadalajara, Hermosillo, Gomez Palacio, Monterrey, and Merida; the two regions of Baja California are managed from Mexicali.

From the 39.7 million users registered in 2015, the Eastern operational area has the largest share, 10.2 million users, equivalent to 25.8%; seconded by the Western are with 24.5% and 21.6% in the Central area, as displayed in the following figure:

FIGURE 2. 3. USERS SHARE BY ELECTRICITY OPERATIONAL AREA, 2015 (Percentage)


88.0

88.1

88.2

88.3

88.4

88.4

88.5

88.6

88.6

10.2

10.1

10.0

9.9

10.0

10.0

9.9

9.8

9.8

0.8

0.8

0.8

0.8

0.7

0.8

0.8

0.8

0.8

0.6

0.6

0.6

0.6

0.5

0.5

0.5

0.5

0.5

0.4

0.4

0.4

0.4

0.3

0.3

0.3

0.3

0.3

2007

2008

2009

2010

2011

2012

2013

2014

2015

Residential Trade Industrial Services Agriculture

Central21.6%

Eastern25.8%

Western24.5%

Northwest9.9%

North4.9%

Northeast5.2%

Peninsular4.2%

Baja California3.3%

Baja California Sur

0.7%

35

The Peninsular and Baja California Sur areas have had the highest average annual growth rate (AAGR), 4.8%, throughout 2005-2015. On the contrary, the Central and Western areas had the lowest AAGR during the last ten years, with 2.0% and 2.2%, respectively. This, due to the matureness of the electricity market and to the historic population concentration of these regions, which have not had significant variations, and are broadly covered.

Worldwide, the SEN recorded an AAGR of 2.7% from 2005 to 2015. Between 2014 and 2015, a total of 1.2 million users were added thanks to the regularization programs and to an expansion of the electricity coverage (see Table 2.2).

TABLE 2. 2. ELECTRICITY USERS BY OPERATIONAL AREA, 2005-2015 (Million users)

Baja California Sur includes Mulegé. Totals may not include due to rounding up. Preliminary information by the end of 2015. Source: SENER with information from CENACE.

By entities, the ones with the largest concentrations are: Estado de México with 11.2% of the domestic share; Mexico City, 7.7%; Jalisco, 7.0%; Veracruz, 6.7%; and Puebla with 5.0%. On the contrary, the states with the smallest share, and smallest number of users registered, were: Campeche, Colima, and Baja California, with a 0.7%, each (see Table 2.3).

Area/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Central 7.1 7.1 7.1 7.2 7.3 7.3 7.6 7.9 8.1 8.4 8.6 2.0%

Eastern 7.3 7.6 7.9 8.3 8.6 8.8 9.1 9.3 9.6 9.9 10.2 3.1%

Western 8.2 8.5 8.9 9.1 9.4 9.7 8.7 8.9 9.2 9.4 9.7 2.2%

Northwest 2.9 3.0 3.2 3.3 3.4 3.5 3.6 3.7 3.7 3.8 3.9 3.5%

North 1.5 1.5 1.6 1.7 1.7 1.8 1.8 1.8 1.9 1.9 2.0 3.2%

Northeast 1.7 1.8 1.8 1.9 1.9 1.9 1.9 1.9 2.0 2.0 2.1 2.3%

Peninsular 1.1 1.1 1.2 1.3 1.3 1.4 1.4 1.5 1.5 1.6 1.7 4.8%

Baja California 1.0 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.3 1.3 1.3 3.3%

Baja California Sur 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 4.8%

SIN 29.7 30.6 31.7 32.7 33.6 34.3 34.0 35.0 36.0 37.0 38.1 2.7%

SEN 30.9 31.9 33.0 34.1 35.0 35.7 35.5 36.5 37.5 38.5 39.7 2.7%

36

TABLE 2. 3. ELECTRICITY USERS BY FEDERAL ENTITY, 2005-2015 (Million users)

Totals may not coincide due to rounding up. Source: Energy Information System (SIE)

2.2.2. Electricity Sales

In 2015, the CFE reported a decrease of 9.6% on its income from electricity sales, due to the decrease on industrial, commercial, and domestic tariffs throughout the year14, related to a reduction in the prices of the fossil fuels used to generate electricity.

14 CFE Annual Report 2015.

Entity/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Domestic

Share

Estado de México 2.7 2.8 2.8 2.9 3.1 3.5 3.8 3.9 4.1 4.3 4.4 11.2%

Ciudad de México 2.7 2.8 2.9 3.0 3.0 2.8 2.8 2.9 2.9 3.0 3.0 7.7%

Jalisco 2.1 2.1 2.2 2.3 2.4 2.4 2.5 2.6 2.6 2.7 2.8 7.0%

Veracruz 2.0 2.1 2.2 2.2 2.3 2.3 2.4 2.5 2.5 2.6 2.7 6.7%

Puebla 1.4 1.4 1.5 1.6 1.7 1.7 1.8 1.8 1.9 1.9 2.0 5.0%

Guanajuato 1.4 1.5 1.5 1.6 1.6 1.7 1.7 1.8 1.8 1.9 1.9 4.8%

Nuevo León 1.3 1.3 1.4 1.4 1.5 1.6 1.6 1.7 1.7 1.7 1.8 4.5%

Michoacán 1.3 1.4 1.4 1.4 1.5 1.5 1.6 1.6 1.6 1.7 1.7 4.3%

Chiapas 1.0 1.1 1.1 1.2 1.2 1.3 1.3 1.4 1.4 1.5 1.5 3.8%

Oaxaca 1.0 1.0 1.0 1.1 1.1 1.2 1.2 1.2 1.3 1.3 1.4 3.4%

Tamaulipas 1.0 1.0 1.1 1.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 3.1%

Baja California 0.9 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.2 1.2 1.2 3.1%

Chihuahua 1.0 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2 3.0%

Guerrero 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.1 2.8%

Sinaloa 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 2.6%

Sonora 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 2.6%

Coahuila 0.8 0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9 1.0 2.4%

Hidalgo 0.6 0.6 0.7 0.7 0.7 0.8 0.8 0.9 0.9 0.9 0.9 2.4%

San Luis Potosí 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9 0.9 2.3%

Yucatán 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.8 1.9%

Tabasco 0.5 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.7 1.9%

Morelos 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 1.8%

Querétaro 0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.7 0.7 0.7 1.8%

Quintana Roo 0.3 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.6 0.6 1.5%

Zacatecas 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 1.5%

Durango 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 1.3%

Nayarit 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 1.1%

Aguascalientes 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 1.1%

Tlaxcala 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 1.0%

Campeche 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.7%

Colima 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.7%


37

This behavior of low prices for electricity, and the implementation of programs for reducing losses, have enabled the trade, medium-size industry, and domestic sectors will display meaningful increases in their consumed-energy volume.

Electricity Sales by Sector

In 2015, electricity sales increased 2.0% (equivalent to 4,185.9 GWh) regarding the previous year, reaching 212,200.8 GWh. The medium-size-enterprise sector had the highest growth, whose sales' share was of 38.3% from the total, 26.4% corresponded to the residential sector, 19.4% to big industry, 7.0% to commercial, 4.7% to agriculture, and 4.2% public services (see Figure 2.5).

FIGURE 2. 4. COMPOSITION OF ELECTRICITY SALES BY SECTOR, 2015 (GWh)

Source: SENER with information from the SIE.

During 2005-2015, the sales' annual growth was of 2.3%. The services sector had the highest AAGR, 3.4%, and big-industry, the lowest, 0.9% (see Table 2.4).

TABLE 2. 4. SECTORAL BEHAVIOR OF THE DOMESTIC ELECTRICITY SALES, 2005-2015 (GWh)

Source: SIE, SENER.

Services4.2%

Agriculture4.7%

Trade7.0%

Residential26.4%

Big industry19.4%

Medium-size enterprise

38.3%

Sector/Year

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Domestic Total

169,756.9 175,370.6 180,468.9 183,912.6 181,465.4 186,638.9 200,945.9 206,480.3 206,130.0 208,014.9 212,200.8 2.3%

Public Services

6,431.4 6,576.7 6,789.0 7,056.9 7,786.7 7,706.7 8,067.8 8,371.1 9,260.9 8,983.9 8,969.1 3.4%

Agricultural Pumping

8,067.1 7,959.5 7,803.8 8,108.6 9,298.8 8,599.6 10,972.8 10,816.5 10,282.2 10,027.7 10,058.8 2.2%

Trade 13,007.1 13,229.3 13,408.4 13,644.7 13,416.6 12,991.1 13,590.7 13,920.4 13,743.3 13,959.7 14,810.1 1.3%

Residential 42,531.5 44,452.4 45,834.9 47,451.2 48,539.5 48,700.4 51,771.4 52,029.9 52,369.8 53,914.0 55,986.0 2.8%

Industrial 99,719.8 103,152.7 106,632.8 107,651.2 102,423.8 108,641.0 116,543.0 121,342.3 120,473.9 121,129.6 122,376.9 2.1%

Big Industry

37,799.2 37,886.8 38,833.4 38,551.1 34,794.2 38,616.7 43,111.9 45,506.8 44,095.4 42,903.6 41,188.5 0.9%

Medium-size enterprise

61,920.5 65,266.0 67,799.3 69,100.1 67,629.7 70,024.4 73,431.2 75,835.6 76,378.4 78,226.0 81,188.4 2.7%

38

The trade sector, even if it has shown an AAGR of 1.3% during 2005-2015, between 2014 and 2015 increased its sale by 6.1% thanks to the electricity regularization programs in diverse points of the country (see Figure 2.5).

FIGURE 2. 5. SECTORAL BEHAVIOR OF THE DOMESTIC ELECTRICITY SALES, 2005-2015 (GWh)

Source: SIE, SENER.

Electricity Sales by Region

Regarding sales by region, the Northeast region concentrated the largest share of sales at domestic level, with 24.6% (52,128.4 GWh), seconded by the Central-Western region with 23.6% (50,099.2 GWh). The Central region came third with 22.9% of the sales, equivalent to 48,657.7 GWh; the South-Southeast had 15.3% (32,572.2 GWh), and the Northwest region concentrated 13.5% (28,743.4 GWh).

Estado de México had the largest share, 8.6% of the domestic total, followed by Nuevo León with 8.4%, and Mexico City with 6.8%. Furthermore, Colima, Nayarit, and Campeche had the smallest share, with 0.8%, 0.7%, and 0.6%, respectively (see Figure 2.6).

99,719.8 107,651.2 116,543.0 121,129.6 122,376.9

42,531.547,451.2

51,771.453,914.0 55,986.013,007.1

13,644.7

13,590.713,959.7 14,810.1

8,067.1

8,108.6

10,972.810,027.7 10,058.8

6,431.4

7,056.9

8,067.88,983.9 8,969.1

169,756.9

183,912.6

200,945.9208,014.9

2005 2008 2011 2014

Industrial2.1%

Residential2.8%

Trade1.3%

Agricultural2.2%

Services3.4%

AAGR2005-2015 = 2.3%

212,200.8

2015

39

FIGURE 2. 6. STRUCTURE OF THE DOMESTIC SALES BY FEDERAL ENTITY AND STATISTIC REGION, 2015

(GWh, percentage distribution)

Source: SIE, SENER.

2.2.3. Electricity Average Prices

In 2015, the availability of natural gas and its low prices resulted in a reduction of the electricity average prices. This situation fostered the process of progressive replacement of fuel oil and diesel with cheaper energy sources, like natural gas, and obtain thus, more benefits.

25.7%

22.7%

13.2%

11.6%

9.8%

4.9%5.4%3.6%3.1%

Central-Western50,099.2 GWh

Nayarit

Colima

Aguascalientes

Zacatecas

Querétaro

San Luis Potosí

Michoacán

Guanajuato

Jalisco

34.7%

34.8%

22.8%

7.7%

Northwest28,743.4 GWh

Baja CaliforniaSur

Sinaloa

Baja California

Sonora34.3%

22.6%

20.1%

17.2%

5.9%

Northeast52,128.4 GWh

Durango

Tamaulipas

Coahuila

Chihuahua

Nuevo León

34.1%

13.8%

10.6%

10.7%

9.4%

9.1%

8.1%4.1%

South-Southeast32,572.2 GWh

Campeche

Oaxaca

Guerrero

Chiapas

Yucatán

Tabasco

Quintana Roo

Veracruz

37.7%

29.7%

15.6%

7.9%5.3%3.8%

Central48,657.7 GWh

Tlaxcala

Morelos

Hidalgo

Puebla

Ciudad deMéxico

Estado deMéxico

40

In 2015, the average price for electricity decreased approximately 11.9% regarding 2014, reaching 1.4 pesos per kilowatt hour. The trade and industrial sectors displayed reductions of 7.7% and 19.8%, respectively. On the other hand, the services sector has kept a growth rate of 6.0% through the ten years, while the residential kept a constant AAGR of 3.0% (see Figure 2.7).

FIGURE 2. 7. AVERAGE ELECTRICITY PRICES BY TARIFF SECTOR (Pesos/kilowatt-hour)

Source: SIE, SENER.

Regarding operational area, CENACE reported that, in 2015, the Peninsular area recorded the highest average price for electricity with 2.07 pesos per kilowatt-hour, which contrasts with the Northwest area, which reached just 1.68 (see Table 2.5).

TABLE 2. 5. AVERAGE ELECTRICITY PRICE BY OPERATIONAL AREA (Pesos/kilowatt-hour)

Source: SENER with information from PRODESEN 2016-2030.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Trade 2.1 2.3 2.4 2.5 2.4 2.6 2.7 2.9 2.9 3.0 2.8

Services 1.5 1.6 1.7 1.7 1.8 1.9 2.0 2.1 2.3 2.4 2.5

Medium-size enterprise 1.1 1.2 1.2 1.5 1.3 1.4 1.6 1.6 1.7 1.7 1.4

Residential 0.9 1.0 1.0 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.2

Big industry 0.8 0.9 0.9 1.2 1.0 1.1 1.2 1.3 1.3 1.4 1.1

Agriculture 0.4 0.5 0.5 0.5 0.4 0.5 0.6 0.6 0.5 0.5 0.6

Industrial 1.0 1.1 1.1 1.4 1.2 1.3 1.4 1.5 1.6 1.6 1.3

4.2%

6.0%

3.8%

4.1%

3.5%

4.1%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Year/Operational

AreaCentral Eastern Western Northwest North Northeast Peninsular

Baja California

Baja California Sur

SIN SEN

2005 1.06 1.06 1.15 1.02 1.11 1.07 1.15 1.10 1.18 1.09 1.10

2006 1.19 1.17 1.24 1.13 1.23 1.17 1.24 1.20 1.23 1.20 1.20

2007 1.26 1.21 1.30 1.16 1.28 1.22 2.15 1.23 1.31 1.37 1.35

2008 1.35 1.34 1.43 1.30 1.43 1.35 1.59 1.39 1.44 1.40 1.40

2009 1.38 1.26 1.34 1.21 1.31 1.27 1.91 1.30 1.31 1.38 1.37

2010 1.51 1.36 1.45 1.32 1.41 1.39 2.60 1.36 1.42 1.58 1.54

2011 1.64 1.47 1.55 1.42 1.52 1.42 1.68 1.44 1.52 1.53 1.52

2012 1.67 1.55 1.58 1.51 1.62 1.57 1.75 1.54 1.60 1.60 1.60

2013 1.77 1.59 1.62 1.55 1.63 1.62 1.99 1.61 1.63 1.68 1.67

2014 1.89 1.67 1.71 1.62 1.67 1.68 1.92 1.66 1.70 1.74 1.72

2015 1.96 1.73 1.77 1.68 1.75 1.75 2.07 1.74 1.77 1.82 1.80

41

2.3. Electricity Consumption and Demand

Electricity demand is defined as the instant request to a power electric system, normally expressed in MW, for electricity consumption, which is the electric power used by all or a part of a facility during a given period time15 and is expressed in MWh. The main difference is that, the demand is an average measure of the electricity consumption rate, and consumption is the measure of the total electricity consumption.

2.3.2. Electricity Consumption

The growth in the electricity consumption is strongly related to the country's economic growth. This is explained because Mexico's economic performance is related to the productive activities that develop in the industrial, trade, services, agriculture, among other sectors, which require electricity to be carried out.

Between 2005-2015, the GDP grew 2.7% average annual, while the consumption of electricity grew at a 3.0% rate, as displayed in Figure 2.8.

FIGURE 2. 8. GDP AND ELECTRICITY CONSUMPTION, 2005-2015 (Annual rate)

Source: SENER with information from CENACE and INEGI.

Electricity consumption is the annual total of energy sales, remote self-supply, sales related to the reduction of non-technical losses, import, loss reduction, and own-uses. The consumption recorded in the SEN in 2015 was of 288,232 GW, 2.9% more regarding 2014.

For the Interconnected National System (SIN, for its Spanish acronym), the operational areas with the higher consumptions in 2015 were: Western, with 22.6% (65,220 GWh); Central with 18.6% (53,649 GWh); and Eastern with 16.2% (46,587 GWh). On the other hand, the Peninsular area had la smallest share with 4.0% (11,617 GWh) from the total recorded by the SEN. The areas of Baja California and Baja California Sur reached, jointly, 5.4% of the share (see Figure 2.9).

15 http://sie.energia.gob.mx/docs/glosario_elec_es.pdf

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Gross Domestic ProductAAGR 2.7%

Electricity consumptionAAGR 3.0%

42

FIGURE 2. 9. SHARE IN ELECTRICITY CONSUMPTION BY OPERATIONAL AREA (Percentage)

Source: SENER.

As for the behavior observed on the consumption of every SEN's operational area, Baja California Sur has the highest AAGR during 2005-2015, with 5.9%, reaching 2,546 GWh. The Peninsular area also displays a high growth with 5.2% for this period, but had an increase of 9.2% between 2014 and 2015, going from 10,635 GWh in 2014 to 11,617 GWh in 2015.

The Central Area has kept a growth rate of 1.3%, the lowest in the decade, as a result of a strong population concentration in the region, which limits its expansion and its electricity demand's increase. Between 2014 and 2015, its consumption increased only 0.8% (421 GWh), recording 53,649 GWh, as displayed in the following table:

TABLE 2. 6. BEHAVIOR OF ELECTRICITY CONSUMPTION BY OPERATIONAL AREA, 2005-2015 (GWh)


Table 2.7 shows the behavior of the capacity to serve remote self-supply loads, that is, the behavior of self-supply plants which inject power into the transmission grid to supply other consumption centers located in a site other than the one of the generating plant. During the last ten years, remote self-supply has grown potentially in every operational area, like in the Northwest area, which has increased 82.6%, or Baja California, with an AAGR of 32.4%.

Central18.6%

Eastern16.2%

Western22.6%

Northwest7.5%

North8.2% Northeast

17.4%

Peninsular4.0%

Baja California4.6%

Baja California Sur

0.9%

SIN: 272,564 GWh

SEN: 288,232 GWh

Area/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Central 49,129.0 50,523.3 51,953.0 52,429.7 52,158.2 54,227.4 55,107.6 54,866.3 53,891.1 53,227.9 53,649.0 1.3%

Eastern 36,208.0 37,452.0 38,322.0 39,106.8 39,096.2 40,097.9 42,447.5 43,835.2 44,224.3 44,901.0 46,587.0 3.0%

Western 47,734.0 49,239.0 51,603.0 52,404.6 52,179.3 55,602.0 60,066.3 61,664.6 61,974.1 63,539.8 65,220.0 3.7%

Northwest 15,506.0 15,966.0 16,616.0 16,690.4 16,997.0 17,338.6 19,251.0 20,097.0 20,465.6 21,088.6 21,642.0 4.0%

North 18,254.0 18,751.9 19,416.4 19,346.5 19,436.7 20,403.2 22,116.2 22,483.6 22,678.6 23,149.8 23,734.0 3.3%

Northeast 38,630.0 40,205.0 41,068.0 41,824.1 41,470.0 43,442.0 47,379.4 47,776.5 47,581.1 48,559.0 50,114.0 3.0%

Peninsular 7,218.0 7,721.0 8,353.3 8,853.6 9,216.0 9,205.9 9,734.6 9,937.7 10,300.0 10,635.2 11,617.0 5.2%

Baja California

10,466.0 11,088.0 11,272.0 11,418.2 11,099.6 10,991.2 11,426.5 12,020.4 11,996.2 12,598.4 13,122.0 2.5%

Baja California Sur

1,551.7 1,711.7 1,841.1 2,067.7 2,121.1 2,151.9 2,302.4 2,352.5 2,386.0 2,460.4 2,546.0 5.9%

SIN 212,679.0 219,858.2 227,331.8 230,655.7 230,553.4 240,317.1 256,102.5 260,661.0 261,114.8 265,101.3 272,564.0 3.0%

SEN 224,696.8 232,658.0 240,444.8 244,141.6 243,774.1 253,460.2 269,831.4 275,033.9 275,497.0 280,160.2 288,232.0 3.0%

43

TABLE 2. 7. REMOTE SELF-SUPPLY ELECTRICITY, 2005-2015 (GWh)


2.3.3. Electricity Losses

One of the main objectives in an electric system is to reduce electricity losses, technical as well as non-technical ones. The former is the result of heating the system's elements which conduct and transforms electricity; non-technical losses have place mainly during trading, due to illicit usage of electricity, measurement faults, and billing errors.

Per each operational area, diverse actions are carried out to reduce losses, such as constructing new backbones, recalibrating circuits, replacing obsolete transformers, regularization of services in different areas with the support of the competent authorities, and the replacement of electromechanical meters with electronic ones, among other.

From 2014 to 2015, the Central, Western, Northwest, and North areas have reduced their electricity losses, contrary to the Eastern, Northeast, Peninsular, Baja California, and Baja California Sur areas, which must make great efforts to reduce such losses (see Table 2.8 and Figure 2.10).

TABLE 2. 8. ELECTRICITY LOSSES BY OPERATIONAL AREA, 2005-2015 (GWh)


Area/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Central 1,479.0 1,633.0 1,681.0 1,947.1 1,923.2 1,473.0 1,544.3 1,597.7 1,867.7 2,373.4 2,989.7 8.5%

Eastern 855.0 1,073.0 1,096.0 1,141.7 1,321.6 1,422.8 1,368.5 1,670.2 2,397.6 2,763.8 3,161.6 15.2%

Western 1,811.0 1,693.0 2,298.0 2,268.0 2,542.8 2,693.4 2,595.7 2,651.3 3,136.7 4,096.1 5,240.7 14.5%

Northwest 1.0 9.0 13.0 12.9 68.9 290.0 326.1 393.8 665.8 2,026.4 2,477.1 82.6%

North 1,314.0 1,425.0 1,480.0 1,450.6 979.4 1,641.0 1,643.8 1,886.9 1,859.9 2,078.4 2,165.1 8.3%

Northeast 3,393.0 3,850.0 4,022.0 3,934.4 3,826.4 4,252.4 4,243.6 3,847.2 4,945.6 5,282.2 6,603.2 6.1%

Peninsular 34.0 22.0 37.0 17.0 41.2 109.7 100.6 109.6 132.0 212.9 336.3 25.0%

Baja California - - - - - 17.1 48.8 126.8 443.8 590.5 876.4 32.4%Baja California Sur

- - - - - - - - - - - n.a.

Area/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Central 14,602.0 15,856.3 16,886.0 16,848.3 16,708.8 18,087.7 17,116.2 15,542.3 13,751.1 12,885.3 12,022.4 -1.0%

Eastern 6,294.0 6,547.0 6,043.0 6,332.0 6,361.2 6,612.2 6,998.9 6,927.8 7,065.6 7,015.9 7,313.3 1.8%

Western 5,962.0 6,327.0 6,087.0 6,604.4 7,224.1 7,943.3 8,919.8 8,844.0 8,763.4 8,822.1 8,570.9 4.0%

Northwest 1,799.0 1,884.0 1,993.0 2,020.1 2,060.7 1,956.5 2,062.1 2,141.7 2,264.6 2,299.7 2,215.3 3.5%

North 2,271.0 2,382.0 2,568.0 2,585.6 2,671.9 2,866.3 3,280.4 3,278.1 3,355.5 3,023.5 2,845.4 2.6%

Northeast 4,261.0 4,253.0 4,494.0 4,583.6 4,989.2 4,326.5 4,699.1 4,739.7 4,719.3 4,715.2 4,908.6 2.6%

Peninsular 1,044.0 1,134.0 1,184.0 1,188.6 1,291.9 1,269.3 1,339.3 1,317.0 1,373.1 1,333.2 1,514.3 4.2%

Baja California 1,052.0 1,054.0 1,094.0 1,060.4 964.8 982.1 985.6 1,081.7 1,041.6 1,027.2 1,047.5 0.7%


44

FIGURE 2. 10. ELECTRICITY LOSSES, 2005-2015 (GWh)


Seasonal Behavior

Electricity consumption in 2015 had three periods with different seasonal behaviors. The first one, from January to March, was characterized by a decrease of 1,816.8 GWh in February. The second period, between April and September, concentrated 53.7% of the annual consumption, and kept an upward behavior. The third, and last, period, from October to December, had a downward trend to adjust to figures similar to the ones in January (see Figure 2.11).

FIGURE 2. 11. SEN'S MONTHLY GROSS CONSUMPTION, 2015 (GWh, Percentage)


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Central Western Eastern Northeast North Northwest Peninsular Baja California Baja California Sur

21,805.0

19,988.2

22,548.423,367.8

25,285.625,768.9

26,685.327,743.8

25,897.925,028.5

22,258.2 21,854.1

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan7.6% Feb

6.9%

Mar7.8%

Apr8.1%

May8.8%

Jun8.9%

Jul9.3%

Aug9.6%

Sep9.0%

Oct8.7%

Nov7.7%

Dec7.6%

45

2.3.4. Demand of the National Electricity System

As one of its main objectives, the Energy Reform aims to improve the economy of Mexican families and, facing a growing demand for electricity, shall foster mechanisms to serve this demand efficiently and at a low cost.

Diverse factors, already described in the previous sections, must be considered to estimate the electricity demand, such as the behavior of the sales in the different zones of the country, electricity losses, the historic behavior of the load and diversity factors, scenarios of sectorial consumption of electricity, among other. Furthermore, it is also necessary to determine the required capacity considering temporary variations (seasonal, weekly, daily, and hourly) to meet the year's maximum demand, that is, the maximum value of the demands presented within a time hour in the year for each area.

According to the CENACE's figures, on January 1st, 2015 at 9:00 hours was observed the minimum demand level in the SIN, with a value of 18,341 MWh/h: while on August 14, at 17 hours was recorded the maximum level with a value of 39,840 MWh/h.

Coincident Maximum Demand

The coincident maximum demand is the addition of the demands recorded in the operational areas in the sales instant when the SEN's maximum demand occurs. Such value is lower than the addition of the annual maximum demands of each area since they occur at different moments.

The coincident maximum demand recorded in 2015 for the SIN was of 39,839.8 MWh/h, 2.2% more than in 2014. For the SEN, under the assumption that every control region is interconnected, the demand was of 42,648.8 MWh/h, from which the North, Eastern, and Central areas concentrated 56.4% with 9,151.2 MWh/h, 7,984.7 MWh/h, and 6,931.6 MWh/h, respectively. The rest is distributed in the areas of Northeast with 6,082.0 MWh/h, Western with 3,935.9 MWh/h, and Peninsular with 1,610.9 MWh/h. Finally, the areas of Baja California and Baja California Sur had a share of 6.6% (2,890 MWh/h), (see Figure 2.12).

FIGURE 2. 12. SEN'S COINCIDENT MAXIMUM DEMAND, 2015 (MWh/h)

Baja California Sur includes La Paz and Mulegé. Source: Prepared by SENER with data from CENACE.

Central16.3%

Eastern18.7%

Western9.7%

Northwest9.2%

North21.5% Northeast

14.3%

Peninsular3.8%

Baja California 5.6%

Baja California

Sur1.0%

SIN: 39,839.8 MWh/h

SEN: 42,648.8 MWh/h

46

Gross Maximum Demand

Gross maximum demand is defined as the power to be generated or imported to meet the users' requirements, transmission losses, and the generation plants' own-uses. In the SIN, it increased 3.1% between 2005 and 2015, being the area of Baja California Sur the one which recorded the largest growth, 6.4% in that same period (see Table 2.9).

The Peninsular and Northeast area displayed growth rates of 5.1% and 4,8%, respectively; while the Central area remain with the lowest growth, 0.1%, given the concentration and economic maturity of this area during the last decade.

TABLE 2. 9. BEHAVIOR OF THE GROSS MAXIMUM DEMAND, 2005-2015 (MWh/h)

Source: Prepared by SENER with data from CENACE

2.4. Infrastructure of the National Electricity System

The new electricity market seeks to impulse works on electrical infrastructure which ensure electricity supply with the cheapest possible generating costs and the largest share of clean energies, in order to reduce the strong dependency on fossil fuels. To take advantage of the prices and availability of natural gas, during the last years, the development of infrastructure for conveying fuel has been fostered to rise electricity generation with new projects, or by upgrading some power plants fueled with natural gas.

2.4.1. Installed Capacity of the SEN

In 2015, the installed capacity of the electricity sector increased 4.0% regarding what was recorded in 2014, reaching 68,044.0 MW, equivalent to 2,519 MW of new capacity. In this period, clean technologies increased 6.9%, related to the fast growth of wind and geothermal power technologies. Hence, the annual growth of conventional technologies was of 2.8%, mainly fostered by the expansion of combined-cycle power plants (see Figure 2.13).

Area/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Central 8,287.0 8,419.0 8,606.0 8,435.0 8,702.0 9,004.0 8,844.0 8,651.0 8,411.0 8,192.0 8,151.0 0.1%

Eastern 5,684.0 5,882.0 5,786.0 6,181.0 6,071.0 6,356.0 6,577.0 6,626.0 6,709.0 6,767.0 6,960.0 2.5%

Western 7,047.0 7,106.0 7,437.0 8,069.0 7,763.0 8,175.0 8,669.0 8,975.0 9,207.0 9,104.0 9,374.0 3.7%

Northwest 2,872.0 2,916.0 3,059.0 3,072.0 3,285.0 3,617.0 3,772.0 3,870.0 4,087.0 4,034.0 4,154.0 4.8%

North 2,997.0 3,113.0 3,130.0 3,328.0 3,248.0 3,385.0 3,682.0 3,725.0 3,841.0 3,955.0 3,986.0 3.4%

Northeast 6,068.0 6,319.0 6,586.0 6,780.0 6,886.0 7,070.0 7,587.0 7,798.0 7,781.0 7,876.0 8,248.0 3.0%

Peninsular 1,174.0 1,268.0 1,275.0 1,375.0 1,435.0 1,520.0 1,544.0 1,558.0 1,628.0 1,664.0 1,789.0 5.1%

Baja California 1,909.0 2,095.0 2,208.0 2,092.0 2,129.0 2,229.0 2,237.0 2,302.0 2,225.0 2,350.0 2,479.0 2.9%

Baja California Sur

278.4 299.5 323.8 359.6 367.0 383.0 393.0 409.0 428.0 454.0 457.0 6.4%

SIN 31,268.0 31,547.0 32,577.0 33,680.0 33,568.0 35,310.0 37,256.0 38,000.0 38,138.0 39,000.0 39,840.0 3.1%

47

FIGURE 2. 13. SEN'S INSTALLED CAPACITY16, 2014-2015 (MW)

KERS: kinetic energy recovering system; FIRCO: Risk-Sharing Fund (for its Spanish acronym); DG: Distributed generation. Source: SENER.

From the total power-generation fleet (68,044.0 MW), 71.7% corresponds to plants with conventional technologies, and 28.3% to clean technologies. In order of participation, combined-cycle plants had a 35.3% share (24,042.7 MW), seconded by conventional thermal with 18.7% (12,710.7 MW), and hydroelectric with 18.4% (12,488.5 MW), (see Figure 2.14).

16 Includes mobile plants, the use of sugarcane bagasse and black liquor as fuels, according to the Law for the Promotion and Development of Biofuels.

0

5,000

10,000

15,000

20,000

25,000

Com

bine

d cy

cle

The

rmal

conv

enti

onal

Hyd

roel

ectr

ic

Coa

l fue

led

Gas

tur

bine

Win

d po

wer

Nuc

lear

Inte

rnal

com

bust

ion

Geo

ther

mal

Bioe

nerg

y

Flui

dize

d be

d

Effic

ient

coge

nera

tion

Sola

r, FR

, FIR

CO

and

GD

201465,452.1 MWC: 47,437.9 MWL: 18,014.3 MW

201568,044.0 MWC: 48,778.4 MWL: 19,265.7 MW

48

FIGURE 2. 14. INSTALLED CAPACITY BY TECHNOLOGY, 2015 (Percentage)

Source: SENER.

By the end of December 2015, from the total generating infrastructure, 61.6% corresponded to CFE's plants, 19.4% to Private parties17, and 19.0% to IEPs, as it can be observed in the following figure:

FIGURE 2. 15. SEN'S INSTALLED CAPACITY BY MODALITY, 2015 (Percentage)

Source: SENER.

Between 2005 and 2015, the SEN's installed capacity grew at a 2.4% annual rate, as a result of the availability of energy resource, and to the growth of an infrastructure in line with the electricity sector's modernization. The modalities with the largest growth rate are: cogeneration (9.8%), self-supply (6.8%), and IEPs (6.0%), which means a strong share of the private sector. The modality of continuous own-uses displays an AAGR of -1.4% (see Table 2.10 and Figure 2.15).

17 Private parties under the modalities: self-supply, cogeneration, export, continuous own-uses, small production, and other modalities (distributed generation, rural systems not interconnected reported by FIRCO, and generators with permits granted in 2016).

Combined cycle35.3%

Thermal conventional18.7%

Hydroelectric18.4%

Coal fueled7.9% Gas

turbine7.2% Wind power

4.1%

Internal combustion and Fluidized bed

2.6%

Nuclear2.2%

Bioenergy y Efficient cogeneration

2.0%

Geothermal, Solar, FIRCO, GD and FR

1.6%

CFE61.6%

IEPs19.0%

Self-supply10.5% Cogeneration

5.4% Export2.1%

Continuous own-uses0.7%

Other modalities0.7%

Small production0.1%

49

TABLE 2. 10. BEHAVIOR OF THE SEN'S INSTALLED CAPACITY BY MODALITY, 2005-2015 (MW)

Source: SENER.

FIGURE 2. 16. BEHAVIOR OF THE SEN'S EFFECTIVE CAPACITY, 2005-2015 (MW)

Source: SENER.

CFE

During the last decade, CFE's installed capacity, including IEPs, grew at an annual rate of 1.7%. By the end of 2015, it had an infrastructure of 188 plants, from which 159 belonged to CFE, and 29 managed by the IEPs, with a total 1,020 generating units (54,852.2 MW).

Within the technologies which have evolved the most during 2005-2015, wind-power stations stand out, with a growth of 78.1%, and internal-combustion, with 7.0%.

As for combined-cycle plants, they keep an annual growth of 5.2%, due to the constant upgrading of the new productive enterprise. As it can be observed in Table 2.11, conventional technologies have considerably reduced their growth throughout the decade, giving way to clean technologies.

Modality/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Total 53,857.6 56,309.7 59,008.3 59,431.1 60,440.5 62,260.9 60,989.5 61,971.4 63,593.5 65,464.3 68,044.5 2.4%

CFE 38,282.7 38,381.8 39,571.7 39,648.6 40,229.2 41,038.5 40,024.3 40,121.2 40,645.8 41,528.6 41,899.8 0.6%

IEPs 8,250.9 10,386.9 11,456.9 11,456.9 11,456.9 11,906.9 11,906.9 12,417.8 12,850.8 12,850.8 12,952.8 6.0%

Continuous Own-Uses

556.0 537.8 486.3 478.1 450.0 450.2 456.6 434.6 421.2 416.8 497.4 -1.4%

Self-supply 3,927.0 4,109.6 3,486.2 3,855.0 4,192.0 4,399.7 4,393.2 4,752.7 5,020.5 5,803.7 7,129.5 6.8%

Cogeneration 1,511.0 1,563.2 2,676.9 2,662.2 2,782.0 3,134.8 2,877.9 2,914.4 3,285.5 3,536.0 3,648.0 9.8%

Export 1,330.0 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.7 1,250.4 1,406.4 0.6%

Small Production

n.a. n.a. n.a. n.a. n.a. 0.3 0.3 0.3 39.1 78.1 64.5 n.a

Other modalities

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 446.1 n.a.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Small production Other modalities Continuous own-uses-1.4%

Export0.6%

Cogeneration9.8%

Self-supply6.8%

IEPs6.0%

CFE0.6%

50

TABLE 2. 11. BEHAVIOR OF CFE'S18 EFFECTIVE CAPACITY BY TECHNOLOGY, 2005-2015 (MW)

Source: SIE, SENER.

In 2015, CFE upgraded four generating units which used fuel oil and were upgraded to natural gas, and it is expected that throughout 2016, three other units will finish their upgrade.

By the end of 2015, CFE reported additions for 644.5 MW, modifications for 151.8 MW, and decommissioning for 310.9 MW, from which 266 were transferred to Grupo Fénix (previously, LyFC), (see Table 2.12).

18 Includes IEPs; includes information from the extinct Luz y Fuerza del Centro.

Technology/Year

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Total 46,533.6 48,768.7 51,028.6 51,105.5 51,686.1 52,945.4 51,931.2 52,538.9 53,496.5 54,379.3 54,852.5 1.7%

Thermal 28,971.0 31,175.8 32,575.4 32,647.6 33,188.2 33,649.2 32,761.7 32,637.8 33,782.4 33,915.6 34,357.6 1.7%

Steam 12,934.5 12,894.5 12,865.1 12,865.1 12,895.1 12,876.1 12,336.1 11,698.6 11,698.6 11,398.6 11,398.6 -2.0%

Combined Cycle

13,256.3 15,590.2 16,873.4 16,913.2 17,572.3 18,022.3 18,029.3 18,029.3 19,760.2 19,906.5 19,918.2 5.2%

CFE 5,005.4 5,203.3 5,416.5 5,456.3 6,115.4 6,115.4 6,122.4 6,122.4 7,420.3 7,566.6 7,578.3 4.7%

IEP 8,250.9 10,386.9 11,456.9 11,456.9 11,456.9 11,906.9 11,906.9 11,906.9 12,339.9 12,339.9 12,339.9 5.4%

Gas Turbine

2,598.6 2,509.3 2,620.2 2,653.2 2,504.7 2,536.7 2,185.4 2,658.1 2,064.4 2,303.4 2,739.4 -0.3%

Internal Combustion

181.7 181.7 216.7 216.1 216.1 214.1 210.9 251.8 259.2 307.2 301.4 7.0%

Dual 2,100.0 2,100.0 2,100.0 2,100.0 2,100.0 2,778.4 2,778.4 2,778.4 2,778.4 2,778.4 2,778.4 2.8%

Coal Fueled 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 2,600.0 0.0%

Nuclear 1,364.9 1,364.9 1,364.9 1,364.9 1,364.9 1,364.9 1,364.9 1,610.0 1,400.0 1,400.0 1,510.0 1.0%

Geothermal 959.5 959.5 959.5 964.5 964.5 964.5 886.6 811.6 823.4 813.4 873.6 -0.9%

Wind Power 2.2 2.2 85.5 85.3 85.3 85.3 86.8 597.6 597.6 597.2 699.2 78.1%

CFE 2.2 2.2 85.5 85.3 85.3 85.3 86.8 86.8 86.8 86.3 86.3 44.5%

IEP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 510.9 510.9 510.9 612.9 n.a

Hydroelectric 10,535.9 10,566.3 11,343.3 11,343.3 11,383.3 11,503.2 11,452.9 11,497.6 11,508.8 12,268.8 12,027.8 1.3%

Photovoltaic n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6.0 6.0 6.0 6.0 n.a

51

TABLE 2. 12. CFE'S ADDITIONS, MODIFICATIONS, AND DECOMMISSIONING CAPACITY, 2015

1/ Currently, gas turbine. 2/ Increase of effective capacity. 3/ Retirement of the unit. 4/ Decrease on the effective capacity. 5/ Retirement of units. 6/ Recovering of the effective capacity. 7/ Increase of the effective capacity. 8/ Retirement of the unit. Source: CFE.

Station Capacity (MW)

Unit TechnologyDate of addition,

upgrade, or decommissioning

Location

Additions 644.5

Emergency Mobile U. UME-16 y UME-18 (Santa Rosalía) 5.0 17 y 19 Internal Combustion 01/01/2015 Baja California Sur

Emergency Mobile U. UME-17 (Los Cabos) 2.5 18 Internal Combustion 01/01/2015 Baja California Sur

Salamanca Cogeneration 1/ 393.0 1, 2 y 3 Gas Turbine 26/01/2015 Guanajuato

Los Azufres 53.4 17 GeoThermal 01/03/2015 Michoacán

Emergency Mobile U. UME-05 (CT Valle de México) 18.0 5 Turbojet mobile 02/06/2015 Estado de México

Emergency Mobile U. UME-06 (CTG Xul-Ha) 19.0 6 Turbojet mobile 02/06/2015 Quintano Roo

Emergency Mobile U. UME-07 (CI Santa Rosalía) 10.0 7 Gas Turbine mobile 10/06/2015 Baja California Sur

Emergency Mobile U. UME-08 (CI Guerrero Negro II) 10.0 8 Gas Turbine mobile 10/06/2015 Baja California Sur

Sureste I (La Mata) IEP 102.0 34 U's Wind Power 13/06/2015 Oaxaca

Los Humeros 26.8 10 GeoThermal 07/07/2015 Puebla

Emergency Mobile U. UME-19 (Santa Rosalía) 1.6 20 Internal Combustion 01/10/2015 Baja California Sur

Emergency Mobile U. UME-20 (Santa Rosalía) 1.6 21 Internal Combustion 01/10/2015 Baja California Sur

Emergency Mobile U. UME-21 (Los Cabos) 1.6 22 Internal Combustion 01/10/2015 Baja California Sur

Upgrades 151.8

San Lorenzo Potencia 2/ 5.0 5 Combined Cycle 01/02/2015 Puebla

Laguna Verde 2/ 110.0 2 Nuclear 01/01/2015 Veracruz

Tepexic 6/ 24.0 1 y 2 Hydroelectric 01/04/2015 Puebla

Portezuelos II 6/ 1.1 1 Hydroelectric 01/04/2015 Puebla

Huinalá II 7/ 11.7 1 Combined Cycle 01/09/2015 Nuevo León

Decommissioning 310.9

Ciudad Obregón 3/ 14.0 1 Gas Turbine 01/02/2015 Sonora

Los Azufres 5/ 20.03, 4, 5 y

9GeoThermal 01/03/2015 Michoacán

San Lorenzo Potencia 4/ 5.0 3 y 4 Combined Cycle 01/02/2015 Puebla

Taller DPM S-800-1, S-300-1, S-500-1 8/ 1.2 1, 2 y 3 Internal Combustion 01/10/2015 mobile

Almacen de Tenayuca S-150-5 8/ 0.2 1 Internal Combustion 01/10/2015 mobile

CENACE T-300-2 8/ 0.3 1 Internal Combustion 01/10/2015 mobile

S.R. Gen. Term. Central S-150-1 8/ 0.2 1 Internal Combustion 01/10/2015 mobile

La Yesca S-150-6, S-150-9 8/ 0.3 1 y 2 Internal Combustion 01/10/2015 mobile

Los Cabos S-150-4, S-150-7 8/ 0.3 1 y 2 Internal Combustion 01/10/2015 mobile

Penal Islas Marías T-150-2 y T-150-3 8/ 0.6 1 y 2 Internal Combustion 01/10/2015 mobile

Santa Rosalía S-55-1 8/ 0.0 1 Internal Combustion 01/10/2015 mobile

Chetumal T-50-6 8/ 0.0 1 Internal Combustion 01/10/2015 mobile

Baja California Sur T-50-7 8/ 0.0 1 Internal Combustion 01/10/2015 mobile

Santa Rosalía CFE-OT-5000-1 8/ 2.9 1 Gas Turbine mobile 01/10/2015 Baja California Sur

Transfer to Grupo Fénix (former extinct LyFC) 266.0

Necaxa 109.0 10 U's Hydroelectric 01/12/2015 Puebla

Patla 37.0 1, 2, y 3 Hydroelectric 01/12/2015 Puebla

Tepexic 39.0 1, 2, y 3 Hydroelectric 01/12/2015 Puebla

Lerma (Tepuxtepec) 74.0 1, 2, y 3 Hydroelectric 01/12/2015 Michoacán

Alameda 7.0 1, 2, y 3 Hydroelectric 01/12/2015 Estado de México

Total 485.4

52

Private Parties

By the end of 2015, the CRE authorized 576 permits, from which 381 were for self-supply, 87 for cogeneration, 36 for imports19, 33 for continuous uses, 28 for IEPs, 6 for small production, and 5 for exports. In total, 28,015.2 MW of capacity were authorized, mainly concentrated in the IEPs and self-supply modality, as shown in the following figure:

FIGURE 2. 17. PERCENTAGE DISTRIBUTION OF AUTHORIZED PERMITS20 AND AUTHORIZED CAPACITY BY MODALITY, 2015

Source: SENER with information from the CRE.

Regarding the behavior displayed by the different private generators during the last decade, they have grown at an AAGR of 6.2%. Cogeneration has had the highest growth rate, 9.8%, contrary to continuous own-uses which has fallen -1.4% (see Table 2.13).

TABLE 2. 13. BEHAVIOR OF THE PERMITTEES' CAPACITY FOR ELECTRICITY GENERATION, 2005-2015

(MW)


From 2014 to 2015, self-supply modality increased 22.8% (1,325.8 MW) its operational capacity, reaching 7,129.5 MW (see Figure 2.18).

19 Regarding capacity, this is considered as maximum import demand; for generation, it is considered as imported energy (not generated in the country). 20 Considers under operation, under construction, and about to start works.

Continuous own-uses

5.7%Independent production

4.9%

Self-

supp

ly6

6.1

%

Export0.9%

Cogeneration15.1%

Import5.15% Small

production1.0%

Permits authorizedby the end of 2015

Continuous own-uses

1.8%

Independent production

50.4%

Cogeneration13.1%

Import0.8%

Small production

0.3%

Authorized capacity by the end of 2015

28,015 MW

Self-supply35.6%

Modality/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Total 7,324.0 7,541.1 7,979.8 8,325.7 8,754.4 9,315.4 9,058.3 9,432.4 10,096.9 11,084.9 12,745.8 6.2%

Continuous Own-Uses 556.0 537.8 486.3 478.1 450.0 450.2 456.6 434.6 421.2 416.8 497.4 -1.4%

Self-supply 3,927.0 4,109.6 3,486.2 3,855.0 4,192.0 4,399.7 4,393.2 4,752.7 5,020.5 5,803.7 7,129.5 6.8%

Cogeneration 1,511.0 1,563.2 2,676.9 2,662.2 2,782.0 3,134.8 2,877.9 2,914.4 3,285.5 3,536.0 3,648.0 9.8%

Export 1,330.0 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.4 1,330.7 1,250.4 1,406.4 0.6%

Small Production - - - - - 0.30 0.30 0.30 39.1 78.1 64.5 n.a.

53

FIGURE 2. 18. BEHAVIOR OF THE PERMITTEES' CAPACITY FOR ELECTRICITY GENERATION, 2005-2015

(MW)


Under the Presidency's regional division, installed capacity was distributed into five regions detailed below:

Northwest: in 2015, concentrated 14.15 of the total capacity (9,581.9 MW), being Baja California the state with the largest share. This region had an important contribution from conventional technologies, but solar energy has had, in the past few years, the highest increase of installed capacity, given the prevailing geographic conditions in that region of the country.

Northeast: by the end of 2015, this region's installed capacity reached 16,587.5 MW, equivalent to 24.4% of the total domestic capacity, where combined cycle had the largest share.

Central-Western: had an 18.3% of the installed capacity recorded in 2015 (12,443.1 MW), and is a region characterized for having the second largest share of hydroelectric stations; only the state of Nayarit has three big power stations with a capacity of a little over 2,400 MW.

Central: by the end of 2015, the central region had the smallest share with only 8.2% (5,565.4 MW) from the SEN's total installed capacity. Due to its geographic location in the national territory and its growing population density, states like Morelos and Mexico City have a limited infrastructure, hence, there were no considerable increases in the last years.

South-Southeast: this region has a strong share from clean technologies, having the largest concentration of SEN's infrastructure, 34.9% (23,735.6 MW). Within the prevailing technologies, hydroelectric power stations are concentrated in the states of Guerrero, Chiapas, and Oaxaca, with approximately 7,000 MW of capacity. Stands out its strong participation from wind power, and the only nuclear-power station of the country (see Figure 2.17).

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Self-supply6.8%

Cogeneration9.8%

Export0.6%

Continuous own-uses-1.4%

Small production

54

FIGURE 2. 19. INSTALLED CAPACITY BY FEDERAL ENTITY AND REGION, 2015 (MW)

Source: SENER.

Reserve Margin

Reserve margin is calculated as a variation in the effective gross capacity minus the coincident maximum gross demand. Regarding the operational reserve margin, this is defined as the difference between the total available resources (effective gross capacity minus unavailable capacity) and the coincident maximum demand (system's integrated maximum demand plus exports). The behavior of the reserve margin during 2015 is describe in the following figure:

22.9%

22.2%

20.3%

15.8%

7.5%5.6%5.2%0.4%0.1%

Central-Western12,443.1 MW

Aguascalientes

Zacatecas

Jalisco

Querétaro

Michoacán

Guanajuato

Nayarit

Colima

San Luis Potosí

42.8%

28.3%

18.5%

10.4%

Northwest9,581.9 MW

Baja CaliforniaSur

Sinaloa

Sonora

Baja California34.8%

21.1%

16.8%

16.7%

10.6%

Northeast16,587.5 MW

Durango

Nuevo León

Chihuahua

Coahuila

Tamaulipas

31.6%

21.1%

19.5%

11.8%

6.5%5.3%2.8%1.4%

South-Southeast23,735.6 MW

Quintana Roo

Tabasco

Campeche

Yucatán

Oaxaca

Guerrero

Chiapas

Veracruz

46.4%

26.0%

18.9%

6.6%1.6%0.4%

Central5,565.4 MW

Morelos

Tlaxcala

Ciudad deMéxicoPuebla

Estado deMéxicoHidalgo

55

FIGURE 2. 20. BEHAVIOR OF THE SIN'S OPERATIONAL RESERVE MARGIN, 2015

* Includes capacity from CFE, IEPs, import, and permittees surplus. Source: SENER with information from CENACE.

54,993.9 54,867.153,667.5 53,712.6 54,573.1 54,178.7

55,600.555,979.1

54,571.6 54,800.8 55,620.6 55,228.0

46,613.2 46,117.744,103.1 42,946.7 44,097.9 44,438.6

47,031.4

46,942.744,198.3 44,679.9 44,580.4 45,767.4

33,677.9

34,225.3

34,221.0

36,850.438,087.6

39,330.9 39,124.1

39,875.8

39,054.037,806.5

35,352.2 34,580.6

38.434.7

28.9

16.5 15.813.0

20.217.7

13.218.2

26.1

32.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

0

10,000

20,000

30,000

40,000

50,000

60,000

Gross Effective Capacity* (MW) Total Resources of Available Capacity (MW)

Coincident Maximum Gross Demand (MWh) Operating Reserve Margin (%)

56

2.4.2. Electricity Generation

Mexico has a big diversity of technologies for generating electricity, and which can be classified as conventional and clean energies Conventional technologies are those using fossil fuels to generate electricity, such as: combined cycle, internal combustion, conventional thermal, gas turbine, and fluidized bed.

Clean-technologies power stations use energy sources with few or null CO2 emissions. These technologies may use wind power, solar radiation, the energy produced by waves in the oceans, seas, rivers, geothermal reservoirs, biofuels (biomass and biogas), methane and other gases associated to solid or organic residues, nuclear energy, and the energy generated by efficient-cogeneration power stations.

By the end of 2015, electricity generation reached 309,552.8 GWh, including the generation reported to CRE by private generators, which increased 2.7% (8,090.3 GWh) regarding the previous year. Conventional technologies increased their generation 4.4%, contrary to clean technologies, which decreased -3.7%, explained by the reduction on the hydroelectric and solar generation.

It is worth mentioning that wind power had the largest increase in electricity generation between 2014 and 2015, with 36.1%, followed by efficient cogeneration with 31.2% (see Figure 2.21).

FIGURE 2. 21. GROSS GENERATION BY TECHNOLOGY, 2014 Y 2015

(GWh)

Source: SENER.

Conventional technologies concentrated 79.7%, prevailing combined-cycle generation with 50.1% from the total generation (155,185.4 GWh); clean technologies had a 20.3%, from which hydroelectric generation concentrated 10.0% from the SEN's total (see Figure 2.22).

14

9,4

89

.8

37

,21

9.2

38

,89

2.8

33

,61

2.9

9,6

77

.2

9,1

25

.8

6,4

26

.2

5,9

99

.7

4,3

46

.7

2,8

92

.0

2,3

08

.2

1,3

86

.9

85

.2

15

5,1

85

.4

39

,23

1.5

30

,89

1.5

33

,59

9.2

11

,57

7.1

11

,64

7.6

8,7

45

.1

6,3

31

.0

4,2

86

.3

3,7

95

.2

2,6

50

.6

1,3

69

.2

24

3.0

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Com

bine

dC

ycle

The

rmal

Con

vent

iona

l

Hyd

roel

ectr

ic

Coa

l fue

led

Nuc

lear

Gas

tur

bine

Win

d po

wer

Geo

ther

mal

Flui

dize

d Be

d

Effic

ient

Cog

ener

atio

n

Inte

rnal

Com

bust

ion

Bioe

nerg

y

Sola

r, FR

,FI

RC

O a

nd G

D

2014301,462.6 GWhC: 236,102.6 GWhL: 65,359.9 GWh

2015309,552.8 GWhC: 246,600.6 GWhL: 62,952.2 GWh

57

FIGURE 2. 22. GROSS GENERATION BY TYPE OF TECHNOLOGY, 2015 (Percentage)

Source: SENER.

As for generation by modality, CFE concentrated 55.2% (170,978.8 GWh) from the total in 2015, seconded by IEPs with 28.8% (89,157.3 GWh), self-supply with 7.7% (23,983.3 GWh), cogeneration with 5.1% (15,920.0 GWh), and the remaining 2.9% (9,513.4 GWh), to other modalities (see Figure 2.23).

FIGURE 2. 23. GROSS GENERATION BY MODALITY 2015 (GWh)

Source: SENER.

During 2005-2015, SEN's electricity generation has increased 25.2%, going from 247,259.6 GWh to 309,552.2 GWh by the end of the period, which represented an AAGR of 2.8%. For technologies using natural gas as their energy source, these have had a 6.2% average annual growth, while those using fuel oil have been reduced by 60.2% regarding what was produced in 2005.

Within clean technologies, there is a higher expansion rate in the energy matrix, like wind power, which grew 107.2% average, or solar power, with a 27.9% growth, as shown in the following figure:

Combined cycle50.1%

Thermal conventional

12.7%

Coal fueled10.9%

Hydroelectric10.0%

Gas turbine3.8%

Nuclear3.7%

Wind power2.8%

Internal combustion and Fluidized bed

2.2%

Geothermal, Solar, FIRCO, GD and FR

2.1%

Bioenergy and Efficient cogeneration

1.7%

CFE55.2%

IEPs28.8%

Self-supply7.7%

Cogeneration5.1%

Export2.3%

Other modalities0.4%

Continuous own-uses0.3%

Small production0.0%

58

FIGURE 2. 24. BEHAVIOR OF THE ELECTRICITY GROSS GENERATION BY SOURCE OF ENERGY USED, 2005-2015

(GWh)

Other: bagasse, biogas, sawdust, ethane, and gases. Source: SIE, SENER.

In 2015, CFE recorded an increase of 0.7 TWh on its electricity generation, including IEPs. As for conventional energy sources, natural-gas fueled generation increased the most. For clean generations, the latter had a decrease attributable to a reduction in the hydropower share, as displayed in Table 2.14.

In that same year, CFE upgraded its thermoelectric generating stations to dual-combustion ones, where, besides using fuel oil, natural gas can be used as well. The latter, to reduce fuel-oil usage, since it has a variable and high price, ad high GHG emissions. It stands out that, between 2005 and 2015, fuel-oil usage has been reduced nearly 60.2%.

TABLE 2. 14. CFE'S ENERGY GROSS GENERATION BY PRIMARY ENERGY SOURCE, 2005-2015 (TWh)


Regarding electricity generation by region and federal entity, the following can be observed:

0

50,000

100,000

150,000

200,000

250,000

300,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Other5.4%

Sola photovoltaic27.9%

Diesel2.4%

Coke6.2%

Geothermal-0.4%

Wind power107.2%

Uranium2.3%

Fuel oil-9.0%

Hydraulic2.1%

Coal3.6%

Natural gas6.2%

Source of energy/Year

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Conventional 173.3 177.2 187.4 179.9 191.2 193.1 206.7 214.6 211.5 204.2 210.4Natural Gas 79.4 96.0 108.7 115.1 121.7 123.4 130.7 131.0 138.1 143.9 151.5Coal 32.4 31.5 31.3 20.9 29.1 31.9 33.5 33.9 31.5 33.5 33.5Fuel Oil 60.2 48.5 46.7 43.0 39.2 36.5 41.1 47.3 39.7 25.7 24.1Diesel 1.1 1.2 0.7 0.9 1.2 1.2 1.4 2.4 2.2 1.1 1.4

Clean 45.7 47.9 45.1 56.0 43.9 49.4 52.5 47.3 47.1 55.9 50.4Hydraulic 27.6 30.3 27.0 38.9 26.4 36.7 35.8 31.3 27.4 38.1 30.1Uranium 10.8 10.9 10.4 9.8 10.5 5.9 10.1 8.8 11.8 9.7 11.6Geothermal 7.3 6.7 7.4 7.1 6.7 6.6 6.5 5.8 6.1 6.0 6.3Wind Power 0.00 0.04 0.2 0.3 0.2 0.2 0.1 1.4 1.8 2.1 2.4Solar Photovoltaic

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 219.0 225.1 232.6 235.9 235.1 242.5 259.2 261.9 258.6 260.1 260.8

59

Northwest: concentrated 13.5% of the total domestic generation, equivalent to 41,841.1 GWh. Stands out the state of Baja California, which concentrated 47.6% of the region (19,901.1 GWh), followed by Sonora (13,568.6 GWh), Sinaloa (5,686.8 GWh), and Baja California Sur with 6.4% (2,684.6 GWh).

Northeast: with 32.3% (99,855.0 GWh) is first in the region's share of total domestic electricity generation. Tamaulipas concentrates 37.2% (37,162.9 GWh) of the region, thanks to a strong participation of combined cycle, in addition to being number one at domestic level with 12.0% of the share. It is seconded by Coahuila with 20.5% (20,504.6 GWh), Nuevo León with 16.7% (16,652.3 GWh), Chihuahua and Durango with 15.7% (15,690.8 GWh) and 9.9% (9,844.3 GWh), respectively.

Central-Western: is third in electricity generation at domestic level by share, concentrating 16.9% (51,386.0 GWh). Stands out the share of two states, San Luis Potosí and Colima, jointly concentrating a little over 56.9% of the region's generation. On the contrary, the state of Aguascalientes, located within this region, had the smallest share in the domestic electricity generation with only 14.6 GWh (0.05%).

Central: it has the smallest share, 8.3% (25,737.1 GWh) from the domestic total. Hidalgo concentrates 47.8%, while Morelos has the smallest share with 0.2%.

South-Southeast: is number two of the total generation, and has a broad participation of clean-energies generation. This region contains many of the main hydroelectric, wind-power, and the only nuclear-power station of the country. By federal entity, Veracruz concentrated 40.3% of the region (36,473.6 GWh) by the end of 2015, and is number two in the SEN's total generation (11.8%). On the other hand, Quintana Roo had the smallest share of the region, 0.2% (144.4 GWh), (see Figure 2.25).

60

FIGURE 2. 25. SEN'S GROSS GENERATION BY FEDERAL ENTITY, 2015 (GWh, Percentage)

Source: SENER.

2.4.3. Electricity Transmission and Distribution

Along with the amendments of the Energy Reform, the activities for the transmission and distribution of electricity were ratified as strategic for the electricity sector development. In compliance with article second of the LIE, which points out that such activities are reserved for the Mexican State.

The National Transmission Grid (RNT, for its Spanish acronym) is a system integrated by a group of electric grids which transmit electricity to the General Distribution Grids (RGD, for its Spanish acronym) and to users

29.6%

27.3%

13.6%

9.3%

8.7%

8.6%2.6%0.3%0.0%

Central-Western51,386.0 GWh

Aguascalientes

Zacatecas

Jalisco

Nayarit

Michoacán

Querétaro

Guanajuato

Colima

San Luis Potosí

47.6%

32.4%

13.6%

6.4%

Northwest41,841.1 GWh

Baja CaliforniaSur

Sinaloa

Sonora

Baja California37.2%

20.5%

16.7%

15.7%

9.9%

Northeast99,55.0 GWh

Durango

Chihuahua

Nuevo León

Coahuila

Tamaulipas

40.3%

22.2%

12.9%

10.3%

6.3%4.1%3.7%0.2%

South-Southeast90,572.4 GWh

Quintana Roo

Tabasco

Campeche

Yucatán

Oaxaca

Chiapas

Guerrero

Veracruz

47.8%

28.2%

18.7%

3.4%1.7%0.2%

Central25,737.1 GWh

Morelos

Tlaxcala

Ciudad deMéxico

Puebla

Estado deMéxico

Hidalgo

61

in general. This grid is grouped in 53 transmission regions: 45 interconnected (62 links) and 8 which belong to the isolated systems of the Peninsula of Baja California.

In 2015 the transmission, sub-transmission, and low-tension grid reached a length of 885,426.0 kilometers21, which represented an increase of 5,734 km regarding 2014. This grid is formed by 230-240 kV lines with 51,479.0 km (5,8% from the total); 6.4% correspond to lines between 69 and 161 kV; 12.8% to lines between 23 and 34.5 kV; and 39.9% to lower than 13.8 kV (see Table 2.15 and Figure 2.26).

TABLE 2. 15. TRANSMISSION, SUB-TRANSMISSION, AND LOW-TENSION LINES, 2005-2015 (Kilometers)


FIGURE 2. 26. TRANSMISSION, SUB-TRANSMISSION, AND LOW-TENSION LINES, 2015

(Percentage)


21 Preliminary information from CFE by November 30, 2015.

Concept/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

SEN 764,888.0 778,589.3 791,630.0 808,973.0 817,613.0 829,335.0 850,851.0 859,143.0 870,446.0 879,692.0 885,426.0 1.5

CFE 693,756.0 706,206.0 718,269.0 734,560.0 743,200.5 753,669.0 764,408.0 772,228.0 781,957.0 791,261.0 799,907.0 1.4

400 kV 18,144.0 19,265.0 19,855.0 20,364.0 20,899.8 22,272.0 22,880.0 23,627.0 23,636.0 23,641.0 24,307.0 3.0

230 kV 27,148.0 27,745.0 28,164.0 28,092.0 27,801.0 27,317.0 26,867.0 26,682.0 26,998.0 27,543.0 27,172.0 0.0

161 kV 475.0 475.0 547.0 547.0 548.8 549.0 549.0 549.0 550.0 550.0 522.0 0.9

Less than 161 5,335.0 5,530.0 5,479.0 5,261.0 5,318.0 5,270.0 5,650.0 5,653.0 5,584.0 5,720.0 5,272.0 -0.1

138 kV 1,369.0 1,398.0 1,418.0 1,439.0 1,470.1 1,477.0 1,485.0 1,484.5 1,503.0 1,532.0 1,608.0 1.6

115 kV 40,847.0 42,177.0 43,292.0 42,701.0 42,320.0 42,358.0 43,821.0 43,613.5 45,231.0 46,115.0 46,154.0 1.2

85 kV 141.0 141.0 141.0 77.0 76.9 83.0 201.0 143.0 142.0 156.0 156.0 1.0

69 kV 3,241.0 3,157.0 3,067.0 3,066.0 2,983.0 2,982.0 2,946.0 2,921.0 2,948.0 2,778.0 2,745.0 -1.6

34.5 kV 66,287.0 67,400.0 69,300.0 70,448.0 71,777.8 72,808.0 73,987.0 75,184.0 76,185.0 77,027.0 79,359.0 1.8

23 kV 27,940.0 28,568.0 29,095.0 29,841.0 30,693.9 31,161.0 31,665.0 32,137.0 32,624.0 33,170.0 33,538.0 1.8

13.8 kV 269,390.0 273,249.0 278,119.0 286,306.0 289,090.3 293,323.0 296,984.0 300,426.5 304,152.0 308,123.0 311,395.0 1.5

6.6 kV 1 489.0 466.0 477.0 482.0 217.5 221.0 221.0 209.0 209.0 129.0 67.0 -18.0

Low tension 232,950.0 236,635.0 239,315.0 245,936.0 250,003.2 253,848.0 257,152.0 259,598.5 262,195.0 264,777.0 267,612.0 1.4

Ex. Ly FC 71,132.0 72,383.3 73,361.0 74,413.0 74,412.6 75,666.0 86,443.0 86,915.0 88,489.0 88,431.0 85,519.0 1.9

400 kV2.75%

230 kV3.07%

161 kV0.06% Below 161

0.60%138 kV0.18%

115 kV5.21%

85 kV0.02%

69 kV0.31%

34.5 kV8.96%

23 kV3.79%

13.8 kV35.17%

6.6 kV 10.01%

Low tension30.22%

Ex. Ly FC9.66%

62

By the end of 2015, CFE recorded a transformation capacity of 192,561.5 MVA, 3,015.4 MVA more than what recorded the previous year, and that is equivalent to 1.6% growth. This capacity was distributed in 86.4% for operating transformation capacity and 13.6% for CFE's reserved transformation capacity, as follows:

TABLE 2. 16. CFE'S SUBSTATIONS CAPACITY, 2005-2015 (MVA)

Source: SIE, SENER.

FIGURE 2. 27. TRANSMISSION CAPACITY BETWEEN SEN'S REGIONS, 2015

Source: CFE.

Concept/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015CFE's Transformation Capacity

134,708.1 136,993.5 141,688.6 143,793.3 147,132.4 179,175.1 25,043.4 185,192.2 187,104.1 189,546.0 192,561.5

CFE's Transformation Capacity currently operating

134,708.1 136,993.5 141,688.6 143,793.3 147,132.4 154,485.7 156,358.5 159,916.9 161,445.3 163,572.1 166,279.6

CFE's Transformation Capacity under reserve

n.a. n.a. n.a. n.a. n.a. 24,689.4 25,043.4 25,275.3 25,658.8 25,973.9 26,281.8

63

2.5. Foreign Trade

In 2015, the electricity trade balance displayed an increase of 141.7 GWh compared to 2014. The exports level decreased -12.5%, reaching 2,320.4 GWh, related to less exports to the United States and Guatemala. On the other hand, imports also decreased in the states bordering the U.S., and increased in the states bordering Guatemala (see Table 2.17).

TABLE 2. 17. ELECTRICITY SECTOR TRADE BALANCE, 2005-2015 (GWh)

Source: SIE, SENER.

Foreign Trade Interconnections

To trade electricity with other countries, the SEN is interconnected at different tension levels with the U.S., Belize, and Guatemala. These interconnections are divided into the ones of permanent use, and those used for emergencies; the latter do not operate permanently since, technically, it is not possible to joint big systems with small lines, due to the risk of instability in the electric system, in detriment of both countries.

The interconnection between Mexico and Belize, and the one between Mexico and Guatemala, are located in the south border. From the Mexican side, there is a 25-km transmission line running from the substation Tapachula Potencia towards the Guatemala Electrification Institute (INDE, for its Spanish acronym), which constructed a 71-km transmission line and the expansion of the substation Los Brillantes, in the department of Retalhuleu. Through this infrastructure, CFE can export 120 MW of firm energy, possible to expand it up to 200 MW. As for the interconnection with Belize, this operates permanently, since this country's system is small and do not generate instability problems to the SEN.

The trade of electricity in the north border is carried out through the SEN and two reliable regional councils of the United States, which have contact with the border and operate through asynchronous connections. The Western Electricity Coordinating Council (WECC) covers a surface of approximately 1.8 square miles (4.7 million km2), and it is the biggest and most diverse council of the North American Electric Reliability Corporation. It is worth mentioning that the largest foreign-trade flows of electricity with the U.S., are performed through the interconnections SEN-WECC. The WECC is connected to the SEN in Baja California, through two main substations located in California (Otay Mesa and Imperial Valley) through an asynchronous and permanent interconnection.

The WECC members in the U.S., are located in the states of California, Arizona, New Mexico, and a small part of Texas; while the CFE's system, which keeps those interconnections is located in Baja California, Sonora, and Chihuahua. Interconnections between both systems in Baja California makes viable having an 800 MW capacity for lines with a 230-kV tension, which are opera taped by California ISO (CAISO). The substations Diablo and Azcarate, in the U.S., are part of a grid of western Texas and southern New Mexico operated by El Paso Electric Company (EPE), but which is also supervised and evaluated by the WECC.

Concept/Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AAGR

Electricity exported 1,788.1 1,299.5 1,451.4 1,452.4 1,249.1 1,348.3 1,292.5 1,116.7 1,240.1 2,652.7 2,320.4 2.6

United States 1,533.3 1,088.3 1,223.9 1,201.5 1,010.8 840.1 617.9 648.3 801.7 1,910.9 1,704.2 1.1

Belize 253.2 209.2 225.2 248.3 216.2 159.6 170.2 237.8 233.9 233.2 255.0 0.1

Guatemala 1.6 2.0 2.3 2.6 22.1 348.6 504.3 230.7 204.4 508.7 361.2 71.4

Electricity imported 116.0 522.7 277.4 350.6 345.6 397.1 596.0 2,176.6 1,209.8 2,124.0 1,650.0 30.4

United States 116.0 522.7 277.4 350.6 345.6 397.1 593.1 2,149.3 1,180.8 2,119.0 1,629.6 30.2

Guatemala N/A N/A N/A N/A N/A N/A 2.9 27.3 28.9 5.0 20.4 n.a.

Trade Balance 1,672.1 776.8 1,173.9 1,101.8 903.5 951.3 696.5 -1,059.9 30.3 528.7 670.4 -8.7

64

The SEN is interconnected with another U.S. regional council, the Electric Reliability Council of Texas (ERCOT), which is evaluated and supervised according to the interconnection standards of the Texas Reliability Entity (TRE). The emergency interconnections with this council are: Falcon (138 kV) with a capacity of 96 MW; and Matamoros, with Military Highway (69 kV) and Brownsville (138 kV) with a 25 MW capacity and 176 MW, respectively (see Figure 2.28).

FIGURE 2. 28. LINKS and interconnections, 2015


HVDC

1/ Permanent interconnection

3/ Asynchronous interconnection

West(Belice)-Chetumal 1/

7 Eagle Pass(Texas) BtB light-Piedras Negras 1/ 3/

Laredo (Texas) VFT-Nuevo Laredo, 1/ 3 /

Imperial Valley(California)–La Rosita 1/

Otay Mesa(California)–Tijuana 1/

Falcon (Texas)-Falcón 2/

7

Azcárate(Texas)–Reforma 2/

Military Highway(Texas) –Matamoros 2/s

Sharyland(Texas) BtB-Reynosa 1/ 3/

Energía Buenavista(Texas)-Reynosa 1/

36 MW

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Symbology

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7

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Diablo(Texas)–Paso del Norte 2/

400 kV

69 kV

50 MW

Los Brillantes(Guatemala) – Tapachula 1/ 120 MW

180 MW

CAISO

EPE

E

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C

O

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25 MW

CAISO: California Independent System Operator

EPE: El Paso Electric

WECC: Western Electricity Coordinating Council

ERCOT: Electric Reliability Council of Texas

TRE: Texas Reliability Entity

65

2. Electricity Sector Outlook

Mexico has a clear objective, have a more dynamic and sustainable Electricity Sector. To achieve it, a new electric model has been created, with a more competitive, transparent, and clearly regulated business environment, seeking to eliminate barriers so generators and qualified users may have more options to purchase electricity.

The Energy Reform stipulates that the Mexican Electricity Sector shall include, in addition to other projects of the CFE business plan, private projects that will increase generation capacity which will enable a transition to clean energies, with lower costs and open to the state of the art technologies of the market. This planning shall identify the demand per regions to defined whether it is necessary or not to develop supply or any infrastructure, or the conditions to meet the needs through CFE or the private industry.

This chapter displays the results of the SENER planning exercise (PRODESEN 2016-2030), with a 15-year horizon, that considers the Indicative Program for the Installation and Decommissioning of Electric Stations (PIIRCE, for its Spanish acronym), the Program for the Expansion and Upgrading of the National Transmission Grid, and the Program for the Expansion and Upgrading of the General Distribution Grids.

3.4. Assumptions of the Planning Scenario

To carry out the planning of a strategic sector, as it is the Electricity Sector, it shall be considered -besides its main variables- the external environment to which it is subjected, since the needs of today's population demand more diversification the energy matrix, which meets its demand and benefit economy as well as the environment.

There shall be an understanding of today markets, based on the variables which have the most impact on electricity generation, as international prices and the fuels availability; or the implementation of more efficient technologies and the behavior of our economy faced with the rest of the world.

The SEN is formed by 10 control regions, from which 7 are interconnected and form the SIN. Within the SIN, there is a big diversity of demands, and it concentrates the largest electricity consumption, which make it necessary to have an efficient and economic energy serving. As for the three remaining regions, these are isolated from the national electric grid, in a time when one of the greatest challenges for the future planning of the SEN is to interconnect the grid.

3.4.1. International Context

The relation of the SEN with other countries is one of the external factors that have an impact on it, whether it is for trading fuels, or for projects looking forward to a regional integration of the electricity market through an interconnection to a transmission grid between Canada, the United States, and Mexico.

Behavior of the Natural Gas Prices

In 2015, the production of dry gas in Mexico reached a volume of 4,066.8 MMCFD; though, to meet the demand of natural gas (NG), it was necessary to import 3,548.0 MMCFD, from which 82.0% (equivalent to 2,910.3 MMCFD) came from the U.S., through pipelines, and 18.0% was liquefied natural gas (LNG) from other regions of the world22. On the other hand, as mentioned in the previous chapter, 58.0% of the gross

22 Natural Gas Outlook 2016-2030.

66

generation comes from plants using NG, which resulted in a large demand for that fuel in the electricity sector, demand that is subjected to this fuel availability in the region.

The rise in the electricity-sector NG demand in the last years, is also due to the downward behavior of the fuels prices, keeping low costs of production in technologies like combined cycle. Knowing these prices' trend allows an understanding to analyze the alternatives in case NG prices were not attractive, and it were necessary to resort to other sources.

According to figures from the U.S. Energy Information Administration (EIA), three scenarios have been considered for the Henry Hub NG spot prices (dollars of 2015), where the NG prices will be influenced by a series of factors, including oil prices, the resources availability, and the NG demand. For the reference case, the Henry Hub NG spot price (dollars of 2015) rises from 2.6 dollars per million BTUs (USD/MMBTU) in 2015 to 5.1 USD/MMBTU in 2030; and drops to 4.9 USD/MMBTU in 2040, as a result of the growth in the residential sector demand, and because within international markets, the production comes from resources increasingly more expensive (see Figure 3.1).

FIGURE 3. 1. SCENARIOS FOR THE HENRY HUB NATURAL GAS SPOT PRICES, 2015-2040 (2015 USD/MMBTU)

Source: SENER with information from U.S. Energy Information Administration

The two remaining scenarios consider variations in the prices derived from the increase or decrease on oil prices. These scenarios presume the same level of resources availability as in the reference case, but different oil prices. The high prices for crude oil have an impact on the LNG exports from the U.S., since this type of international agreements are, majorly, bound to oil prices, which makes exporting gas more attractive.

As it can be observed in the scenario with oil high prices, the Henry Hub NG spot price is expected to remain in levels close to the reference case from 2020 to 2040; nonetheless, the increase on LNG exports rises Henry Hub's median price up to 7.7 USD/MMBTU towards the end of the studied period, which is 59.4% more compared with the reference case. On the contrary, in the scenario with low oil prices, the trend is very close to the reference case.

Integration of the Mexican Electricity Sector into the North American Electrical Grid

Facing the global consensus on the need to fight climate change, a series of actions have been agreed to reduce the carbon footprint. Countries, like Canada, the United States, and Mexico in North America, are implementing significant changes in their respective electric systems, which will enable an optimal transition to a broader use of clean energies to generate electricity, ensuring a reliable, sustainable, and efficient supply.

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As part of the joint actions of this group is a trilateral cooperation which will allows a further development of the sectors, individually, and a collective reinforcement of the continent. Hence, the Canadian Electricity Association (CEA) published a document which reflects these trilateral efforts, and displays the advances for the integration between Canada and the U.S., in matter of electrical grid, and the inclusion, through new projects to be developed in the coming years, of the Mexican Electricity System.

This document23, "The North American Grid, Powering Cooperation on Clean Energy & the Environment", affords a series of recommendations destined to inform the scope and substance of any possible agreement for the electric integration, to foster the development of clean energies and the region's environmental protection. Such recommendations are accompanied by actions suggested to devise new energy policies between the three countries, and which are mentioned below:

• Increase the trade of electricity based on clean energies. It is suggested to institutionalize the current regulatory recognition of imported clean electricity through international borders, as an acceptable strategy to comply with the national objective and reduce carbon footprint. Besides, to upgrade and adapt administrative procedures to authorize electricity exports and, if necessary, eliminate cross-border barriers for trading electricity.

• Foster transportation electrification. It is proposed to ratify the pact among North American members, which will allow to, among other things:

- Support strategic investments on electric-vehicles infrastructure.

- Examine where the governmental actions may support the electrification of the main inter-jurisdictional transportation corridors.

- Set objectives to insert electric vehicles within the governmental fleets, and construct, in turn, charging stations in public parking lots.

• Speed up the processes to obtain permits for electric-current lines on cross-border transmission projects. It proposes the upgrade and adaptation of the procedures for obtaining permits to lay international electricity lines.

• Pursue, jointly, the innovation, research, and development of projects. It is suggested to share resources between the different agencies or ministries, national laboratories, and other public institutions, to achieve a better efficiency in clean energies and climate research.

• Support remote and clean electrification in indigenous communities. It is proposed to manage actions aimed to afford remote-electrification solutions to indigenous communities by means of a broader deployment of renewable resources, energy storage, and microgrids. Additionally, to facilitate the exchange of better practices to resolve a better use of clean energies within those communities.

• Coordinate mechanisms to fixate carbon prices. It is proposed to look after the coherence in the carbon-prices regimes, in such way that, emissions are reduced in the North American region at the lowest possible cost, and the provide the supporting relations needed to trade carbon at a subnational level.

• Examine climate adaptation, its risks and practices. Within the document, it is proposed as a fundamental priority of the North American Energy Ministries teamwork on climate change and energy, and climate adaptation. Additionally, to focus attention on critical vulnerabilities of the

23 Canadian Electricity Association, The North American Grid: Powering Cooperation on Clean Energy & the

Environment (2016).

68

cities' infrastructure, cross-border transmission problems, and scenarios where water is used for hydroelectric energy.

• Improve a reliable and safety electrical grid. It is proposed to improve the public and private information exchange, from government to government about possible threats to the electrical grid; reassure the commitments to the North American electric regime, under standards of reliability, and to understand the need of appropriate basic services for the proper functioning of the electrical grid.

• Collaborate with energy information. It is intended to foster the gathering, analysis, and exchange of energy information, especially when it is related to the cartography of the continental infrastructure. It is suggested the homologation of the cross-border exports and imports reports, as well as the harmonization of terms and key definitions. Help to free all the potential of advanced analytics to optimize the electrical-grid operations, and maximize the value and benefits for the users. It recognizes the effort made through the Memorandum of Understanding for Cooperation on Climate Change and Energy, signed for the cooperation on data exchange (NACEI).

• Significantly ensure the industry's consultancy. It suggests to set up a forum for governments to regularly consult with the industry for its application.

This document concludes there are meaningful opportunities to take advantage of the electric integration of North America, and establishes the strategic importance of the electricity sector as a joint solution for a broader use of clean energy. The CEA recommends a vision consistent with the free-trade agreement, which joined the three countries in a common pursue. Let this vision be a promise for the clean development of the region, and with it, the strengthening of each country's economic growth fostered by innovation and the trilateral progress of the electricity sector.

3.4.2. Macroeconomic Forecasts

Considering factors such as the behavior of the national economy in the demand estimates, as well as the electricity consumption at the medium and long term, helps to optimize, measure, and design the expansion of the generation and transmission capacity required to serve the population needs with quality, reliability, and stability criteria by the Electricity National System.

Two macroeconomic scenarios were set, upon the macroeconomic bases defined by the SENER, along with an interinstitutional group where entities like CENACE, CENAGAS, IMP, PEMEX, UNAM, and other areas of the Secretariat, participated. These scenarios comply with the Policy General Criteria for the Income Law Initiative and the Project for the Federal Expenditure Budget corresponding to the Fiscal Exercise 2015. This information was used to prepare the estimates on electricity consumption, constituting a referential trajectory of the SEN's planning exercise for 2016-2030. These scenarios are the bases to estimate the levels and trajectories of the energy consumption per sector and region.

Gross Domestic Product

In 2015, the GDP was characterized by a slight recovery regarding the previous year, 2.4% of annual variation. Likewise, electricity consumption increased 2.9% regarding 2014. The following figure shows how both variables' trends are closely related, since electricity is used to produce goods and services of the domestic economy.

69

FIGURE 3. 2. BEHAVIOR OF THE ELECTRICITY CONSUMPTION AND GROSS DOMESTIC PRODUCT (Annual variation)

Source: SENER, with information from INEGI and CAPEM, Oxford Economics.

Population

The Population National Council (CONAPO, for its Spanish acronym) published in 2015, there were 121.0 million Mexicans, and that, with an AAGR of 2.6% between 2004 and 2030, by the end of the period, it is expected to reach 137.5 million (see Figure 3.3). These projections coincide with the forecasts on the electricity demand, considering the level of users in the residential sector.

FIGURE 3. 3. MEXICAN POPULATION FORECASTS, 2005-2030 (Million people)

Source: SENER with information from CONAPO.

Exchange Rate

In 2015, the behavior of foreign exchange rates presented high variations derived from external factors to the national economy, accounting for 16.4 pesos per dollar (see Figure 3.4), 23.0% more than in 2014. This variable's behavior has a direct impact on the fuels prices, mainly on NG, since the U.S. is our main supplier.

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FIGURE 3. 4. EXCHANGE-RATE FORECASTS (Parity peso-dollar 2015)

Source: SENER, with information from INEGI y CAPEM, Oxford Economics.

3.4.3. Fuels Prices Forecasts

Along with the global commitment to fight CO2 emissions, fossil-fuels markets have displayed strong instabilities. One example is coal, which, given China’s downsize in its production, has forced coal-consumers in that region to increase their imports level, provoking thus, an upturn in this fuel international prices. Fuel-oil prices have also increased, and are expected to grow at a 5.0% rate, followed by coal with 3.8%, diesel 3.2%, and NG with 26% (see Figure 3.5).

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FIGURE 3. 5. FUELS PRICES FORECASTS, 2016-2030 (Base Index 2015=100)

1/ AAGR: Average Annual Growth Rate (referred to 2015) Source: Information from PRODESEN, SENER.

This planning exercise considered the fuels-prices forecasts based on the PIRA24 Energy Group, and is based on the valid official methodologies issued by the CRE to determine the NG maximum price.

Given the relevance that the use of NG has had for the past years to generate electricity, it is important to consider the expansion plans for the National Gas-Pipeline Network. The latter, due to NG' growing demand and the possible impacts if this fuel's prices drop. The Quinquennial Plan for the Expansion of the Integrated National System for the Transportation and Storage of Natural Gas 2015-2019, a document devised by the National Center for Natural Gas Control (CENAGAS, for its Spanish acronym) on October 2015, and approved by SENER. This document shows the indicative planning to evaluate more precisely the availability and demand of NG at the medium term.

The plan considers an expansion of 5,519 kilometers of 12 new gas-pipelines of the system, as displayed in the following table:

24 For further detail, visit http://www.pira.com

Scenario Low Planning High

Coal 3.6 3.8 4.2

Fuel oil 2.3 5.0 10.2

Diesel 0.9 3.2 3.6

Natural gas 2.2 2.6 5.4

Liquefied natural gas 3.0 3.3 2.0

AAGR1/ (%)

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100

120

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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

72

TABLE 3. 1. QUINQUENNIAL PLAN 2015-2019

*The gas-pipelines Lazaro Cardenas-Acapulco and Salina Cruz-Tapachula may be differed or modified in their route. Source. Quinquennial Plan for the Expansion of the Integrated National System for the Transportation and Storage of Natural Gas 2015-2019 used to elaborate the PRODESEN 2016-2030.

3.4.4. Participation of Clean and Potential Energies

Through the LTE, it is intended to gradually increase the participation of Clean Energies in the Electric Industry and, thus, achieve the goals set in matter of clean-energies generation and emissions reduction. To achieve the goal of a minimum 25% share of clean energies in 2018, to 30% in 2021, and 35% in 2024, it shall be considered the existing potential within the current renewable sources, make the most of them, and develop those programs which are technical and economically more feasible for the SEN's future planning (see Figure 3.6).

No. Project States benefitedEstimated date

of biddingEstimated

startup date StatusLength

(kilometers)

1 Tuxpan - TulaHidalgoPueblaVeracruz

2015 2017Awarded through biddig by CFE

263

2 La Laguna - AguascalientesAguascalientesZacatecasDurango


600

3 Tula - Villa de ReyesHidalgoSan Luis Potosí


295

4 Villa de Reyes - Aguascalientes - Guadalajara

AguascalientesJaliscoSan Luis Potosí


355

5 San Isidro - Samalayuca Chihuahua 2015 2017Awarded through biddig by CFE

23

6 Samalayuca - SásabeChihuahuaSonora


650

7 Jáltipan - Salina CruzOaxacaVeracruz

2015 2017 Under evaluation 247

8 Sur de Texas - TuxpanTamaulipasVeracruz

2015 2018Under bidding process

800

9 Colombia - Escobedo Nuevo León 2016 2018 Under evaluation 300

10 Los Ramones - CempoalaNuevo León Tamaulipas Veracruz

2017 2019 In evaluation 855

Estación de compresión El Cabrito

ChihuahuaNuevo León

2015 2016 Under evaluation N/A

11 Lázaro Cárdenas - AcapulcoMichoacánGuerrero


12 Salina Cruz - TapachulaChiapasOaxaca


5,159Total

STRATEGIC

SOCIAL COVERAGE

73

FIGURE 3. 6. TRAJECTORY OF THE CLEAN ENERGIES GOALS 2016-2030 (Percentage)

Source: Information from PRODESEN, SENER.

Identifying these potentials enable investors to locate zones where the clean-energy projects can be developed, and contribute to diversify the energy matrix, as described below:

TABLE 3. 2. CLEAN ENERGIES POTENTIAL


21.7%23.3%

25%26.7%

28.3%30%

31.7%33.3%

35%35.5%

35.9%36.4%

36.8%37.3%

37.7%

201620172018201920202021202220232024202520262027202820292030

TechnologyAvailable

Power(MW)

Type Source

Bioenergy 1,500Referent to the economically competitive power.

Iniciative for the Development of Renewable Energies inMexico: Biomass (SENER, 2012).http://www.pwc.com/mx/es/industrias/infraestructura/estudios-energias-Renewables.html

Efficient Cogeneration

7,045Referent to the national power in an medium scenario.

Study on Cogeneration in the Industrial Sector in Mexico(SENER, 2009).http://www.cogeneramexico.org.mx/documentos.php

Wind Power 12,000Conservative referent of the national power.

Iniciative for the Development of Renewable Energies inMexico: Wind Power (SENER, 2012).http://www.pwc.com/mx/es/industrias/infraestructura/estudios-energias-Renewables.html

Mexican Wind Potential: Opportunities and challenges inthe new electricity sector (Mexican Wind-PowerAssociation - AMDEE - and PWc; 2014).http://www.amdee.org/amdee-estudios

Geothermal 1,932According to Geothermal growth expectations.

Renewable Energies Outlook 2015-2029http://www.gob.mx/sener/documentos/prospectivas-del-sector-energetico

Hydroelectric 8,763According to the probable potential and to a plant factor of 30%.

Renewable Energies Outlook 2015-2029http://www.gob.mx/sener/documentos/prospectivas-del-sector-energetico

Nuclear 1,360Referent to the annual power per nuclear reactor with startup dates beginning in 2026.

Planning Study on the Generatio Expansion of theNational Electricity System considering theincorporation of Nuclear-Generation Capacity. Gerenciade Análisis de Redes, Instituto de InvestigacionesEléctricas (IIE). 2014.

Solar Photovoltaic 8,000According to the technically viable power.

Iniciative for the Development of Renewable Energies inMexico: Solar PV (SENER, 2012).http://www.pwc.com/mx/es/industrias/infraestructura/estudios-energias-Renewables.html

Renewable Energies Outlook 2015-2029.http://www.gob.mx/sener/documentos/prospectivas-del-sector-energetico

74

The share of clean energies is one of most important variables in the planning exercise, and directs the model's optimization to always comply with a certain generation level through clean sources, looking for the cheapest prices and location the resource availability.

3.5. Expected Behavior of the Electricity Demand

Electricity demand can be defined as the instant request to an electric power system, normally expressed in megawatts (MW) or kilowatts (KW). Likely, electricity consumption is the electric power used by all or part of a utilization facility during a defined period25.

Knowing the expected behavior of the energy demand in the national territory in the long term, optimizes the use of the current installed capacity and allows to plan, strategically, new project which will ensure the supply of electricity and keep the SEN's stability efficiently and sustainably.

The CENACE is empowered to estimate the electricity demand and consumption of load centers for purposes of the dispatch and operation of the SEN26, considering the economic growth forecasts and the prices of the fuels used to generate electricity supplied by the SENER.

3.5.1. Maximum Demand

The gross maximum demand is the power to be generated or imported to meet the users' needs, transmission losses, and the own-uses of the generating stations. Based on the demand estimates, the average annual growth for the planning scenario is of 3.7% for the next 15 years (see Figure 3.7).

FIGURE 3. 7. EXPECTED ANNUAL GROWTH OF THE SIN'S MAXIMUM DEMAND, 2016-2030


25 http://sie.energia.gob.mx/docs/glosario_ele_es.pdf 26 Article Thirteenth Transitory of the LIE.


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The forecast for the SIN's maximum demand presents an upward trend. The regions of Baja California Sur, Northwest, Northeast, and Peninsular, display a higher annual growth rate in their maximum demand, above all the system's median, as shown below:

FIGURE 3. 8. AVERAGE ANNUAL GROWTH OF THE SIN'S ELECTRICITY MAXIMUM DEMAND BY REGION

(Percentage)


By the end of the estimation period it is expected a maximum demand in the SIN of 68,791.9 MWh/h. The Western region will remain having the demand's largest concentration throughout the period, seconded by the Northeast region, as follows:

TABLE 3. 3. FORECASTS FOR THE MAXIMUM DEMAND BY CONTROL REGION, 2015-2030 (MWh/h)


National InterconnectedSystem

Historic behavior2005-2015

2.8%

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4

5

6

3

1

2

9

8

1 Central2 Eastern3 Western4 Northwest5 North6 Northeast7 Baja California8 Baja California Sur9 Peninsular

3.1%

3.6%

4.1%

3.7%

4.2%

3.3%

4.2%

3.6%

5.3%

Area/Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030AAGR (%)2016-2030

Central 8,154.0 8,386.5 8,564.2 8,816.6 9,083.0 9,355.2 9,645.6 9,943.0 10,256.9 10,581.9 10,922.2 11,270.5 11,632.8 12,018.8 12,409.8 12,816.4 3.1

Eastern 6,960.0 7,204.0 7,484.4 7,727.9 7,996.1 8,279.1 8,566.4 8,868.6 9,185.7 9,519.8 9,872.7 10,240.9 10,627.8 11,032.0 11,454.2 11,889.8 3.6

Western 9,374.0 9,655.0 10,054.7 10,436.4 10,825.2 11,227.8 11,639.2 12,069.0 12,510.0 12,975.8 13,458.5 13,955.1 14,476.2 15,005.1 15,558.4 16,135.5 3.7

Northwest 4,154.0 4,404.0 4,625.0 4,828.9 5,032.3 5,241.5 5,451.3 5,669.5 5,893.6 6,130.5 6,373.6 6,627.5 6,894.8 7,172.1 7,456.0 7,750.5 4.2

North 3,986.0 4,165.0 4,311.0 4,475.5 4,631.4 4,786.6 4,936.2 5,091.6 5,250.6 5,413.4 5,580.5 5,755.0 5,932.5 6,118.0 6,304.7 6,501.7 3.3

Northeast 8,248.0 8,537.0 8,918.7 9,298.1 9,697.8 10,117.0 10,541.2 10,983.6 11,447.7 11,932.0 12,428.7 12,950.8 13,492.6 14,055.2 14,643.7 15,252.9 4.2

Peninsular 1,789.0 1,855.8 1,930.0 2,005.6 2,088.5 2,173.8 2,263.8 2,355.7 2,453.3 2,556.6 2,663.4 2,776.5 2,894.1 3,016.3 3,143.5 3,275.0 4.1

Baja California 2,479.0 2,558.3 2,633.0 2,724.2 2,818.7 2,918.0 3,021.7 3,132.9 3,249.5 3,370.2 3,495.3 3,624.5 3,758.7 3,897.3 4,041.4 4,189.8 3.6

Baja California Sur1/

457.0 481.8 510.1 539.7 576.5 606.3 637.4 669.9 704.1 740.0 777.8 817.5 859.2 903.0 949.1 997.5 5.3

SIN 39,840.0 41,419.9 43,016.8 44,629.1 46,315.3 48,036.8 49,780.1 51,568.8 53,431.6 55,348.1 57,408.6 59,527.1 61,724.9 63,960.8 66,339.7 68,791.9 3.7

76

Integrated demand is the addition of all demands, and is recorded in its highest peaks, like when, and due to the effects of high temperatures during summer, some northern states require more energy to use air conditioning equipment. Likewise, the central area presents high demands in its residential activity for the constant use of lighting and heating, or for the intense industrial activity.

Instant demand is the power to which electricity shall be supplied in a given instant to fulfill the conditions of the integrated maximum demand; it is expected that, between 2016 and 2030, this demand happens at 17:00 hrs. in summer, and at 22:00 hrs. in winter (see Table 3.2).

TABLE 3. 4. INTEGRATED AND INSTANT DEMANDS OF THE STUDIED SCENARIOS, 2016-2030 (MWh/h, MW)


2.4.1. Gross Consumption

The forecasts for electricity consumption are obtained through adding variables which define that consumption. These forecasts consider hourly demands and national consumption per control region, electricity savings, reduction of electricity losses, domestic and regional electricity balances, diagnoses of real operation by control region, and the information of the market development (distribution). The projection of electricity consumption by control regions and the SEN is made using smoothing techniques for time series and linear-regression models27.

Between 2016 and 2030, for the planning scenario it is expected an annual growth for the SEN's gross consumption of 3.4%, to reach 476.0 TWh by the end of the period (see Figure 3.9 and Table 3.2).

27 For further details, refer to PRODESEN 2016-2030, pp. 58-60.

Integrated Instantaneous Integrated Instantaneous Integrated Instantaneous Integrated Instantaneous Integrated Instantaneous

2016 41,420 42,784 39,458 40,446 25,510 25,819 32,656 33,456 34,975 35,816

2017 43,017 44,394 40,937 41,962 26,402 26,721 33,822 34,652 36,194 37,066

2018 44,629 45,990 42,430 43,493 27,307 27,638 35,005 35,865 37,440 38,344

2019 46,315 47,785 43,999 45,102 28,325 28,668 36,271 37,163 38,757 39,693

2020 48,037 49,562 45,579 46,721 29,225 29,579 37,505 38,428 40,064 41,033

2021 49,780 51,363 47,235 48,420 30,292 30,661 38,882 39,840 41,537 42,543

2022 51,569 53,210 48,914 50,141 31,228 31,609 40,210 41,203 42,988 44,030

2023 53,432 55,134 50,660 51,931 32,204 32,599 41,602 42,630 44,506 45,587

2024 55,348 57,113 52,428 53,744 32,998 33,404 42,918 43,980 45,981 47,098

2025 57,409 59,241 54,369 55,734 34,244 34,666 44,521 45,624 47,683 48,843

2026 59,527 61,430 56,348 57,763 35,391 35,828 46,103 47,247 49,389 50,592

2027 61,725 63,700 58,399 59,866 36,530 36,981 47,715 48,901 51,139 52,385

2028 63,961 66,010 60,480 61,999 37,495 37,960 49,263 50,488 52,871 54,160

2029 66,340 68,467 62,722 64,298 38,853 39,335 51,064 52,335 54,802 56,139

2030 68,792 71,000 64,998 66,631 40,078 40,576 52,836 54,152 56,728 58,113

Year

Summer Maximum (17:00 hrs.)

Summer-Nocturnal Maximum (22:00 hrs.)

Winter Maximum (04:00 hrs.)

Winter Median (15:00 hrs.)

Winter Maximum (20:00 hrs)

77

FIGURE 3. 9. EXPECTED ANNUAL GROWTH OF THE SEN'S GROSS CONSUMPTION, 2016-2030


TABLE 3. 5. FORECASTS OF GROSS CONSUMPTION BY CONTROL REGION, 2015-2030 (TWh)

1/ Includes La Paz and Mulege. Source: Information from PRODESEN, SENER.

Baja California Sur records the largest growth during the period, 5.1%, seconded by the Northwest with 4.1%, and the Peninsular and the Northeast with 3.8%, both (see Figure 3.9)


AAGR1/ (%) 2.8 3.4 4.1

2.0

2.4

2.8

3.2

3.6

4.0

4.4

4.8

2016 2018 2020 2022 2024 2026 2028 2030

Area/Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

AAGR (%)

2016-2030

Central 53.6 54.7 56.1 58.0 60.2 62.4 63.9 65.5 67.1 68.7 70.7 72.6 74.6 76.6 78.8 81.1 2.8

Eastern 46.6 47.4 48.8 50.4 52.0 53.9 55.7 57.5 59.5 61.5 63.8 66.2 68.7 71.0 73.5 76.2 3.3

Western 65.2 66.5 68.8 71.2 73.7 76.3 78.9 81.5 84.2 87.0 90.0 93.1 96.3 99.7 103.2 106.7 3.3

Northwest 21.6 22.6 23.7 24.7 25.7 26.8 27.9 29.0 30.2 31.3 32.6 33.9 35.1 36.5 37.8 39.3 4.1

North 23.7 24.5 25.3 26.1 27.0 27.9 28.7 29.5 30.4 31.3 32.2 33.2 34.2 35.2 36.3 37.3 3.1

Northeast 50.1 51.5 53.4 55.5 57.7 59.9 62.4 65.0 67.7 70.2 72.9 75.8 78.7 81.7 84.7 87.8 3.8

Peninsular 11.6 11.7 12.0 12.5 13.0 13.6 14.2 14.7 15.4 16.0 16.7 17.4 18.1 18.8 19.6 20.4 3.8

Baja California 13.1 13.4 13.7 14.2 14.7 15.3 15.8 16.4 17.0 17.7 18.3 19.0 19.6 20.3 21.1 21.9 3.5

Baja California Sur1/

2.5 2.7 2.8 3.0 3.1 3.3 3.5 3.7 3.8 4.0 4.2 4.4 4.7 4.9 5.1 5.4 5.1

SIN 272.6 278.7 288.2 298.4 309.4 320.8 331.7 342.8 354.4 366.1 378.8 392.1 405.7 419.6 433.9 448.8 3.4

SEN 288.2 294.8 304.7 315.6 327.3 339.4 351.0 362.9 375.2 387.8 401.3 415.5 430.0 444.8 460.1 476.0 3.4

78

FIGURE 3. 10. ELECTRICITY GROSS CONSUMPTION AVERAGE ANNUAL GROWTH BY REGION (Percentage)


The Western, Northeast, and Central regions have the largest share in electricity consumption, concentrating 57.8% of the total in 2030, equivalent to 275.6 TWh (see Figure 3.10

National Electric System

Historic behavior2005-2015

2.7%

Expected growth2016-2030

3.4%

7

4

5

6

3

1

2

9

8

2.8%

3.3%

3.8%

3.3%

3.8%

3.1%

4.1%

3.5%

5.1%

1 Central2 Eastern3 Western4 Northwest5 North6 Northeast7 Baja California8 Baja California Sur9 Peninsular

79

FIGURE 3. 11. COMPARISON OF THE SHARE IN THE GROSS CONSUMPTION BETWEEN 2015 AND 2030 OF THE DIFFERENT CONTROL AREAS

(Percentage)


Central18.6%

Eastern16.2%

Western22.6%

Northwest7.5%

North8.2%

Northeast17.4%

Baja California

4.5%

Baja California

Sur0.9%

Peninsular4.0%

Small systems0.1%

Other5.0%

2015

Central17.0%

Eastern16.0%

Western22.4%

Northwest8.2%

North7.8% Northeast

18.4%

Baja California

4.6%

Baja California

Sur1.1%

Peninsular4.3%

Small systems0.1%

Other5.5%

2030

80

3.6. Expansion of the National Electricity System

To achieve an energy transition into a more sustainable, and efficient system that meets each of the Mexican society needs in electricity matter, it is necessary to have a planning which fosters the use of clean energies, ensuring the electricity supply. This can be achieved by strategically increasing the infrastructure of the electricity system, considering every influential factor, even negative ones, on its development.

The document of the Electricity Sector Outlook is based on the PRODESEN, elaborated by the SENER, and includes the Indicative Program for the Installation and Decommissioning of Power Stations 2016-2030 (PIIRCE, for its Spanish acronym). This program points out the required capacity, whether by technology, geographic location, or generating units, needed to meet a defined energy demand in the country; besides, it points out those power stations, which, given its age, reconversion, or modification, shall be indicatively decommissioned from the system.

Based on the PIIRCE, another document of indicative planning is prepared to define the required expansion of the National Transmission Grid (RNT, for its Spanish acronym) and of the General Distribution Grid. This information is fundamental for the decision-making of the market participants, distributors, investors, and public in general.

An important consideration for this 15-year SEN's planning, is taking into account the estimated time to execute projects, as well as their lifespan. The latter, due to the very nature of the electricity sector, where projects need a long maturity periods and, thus, investment decisions on the expansion works of the SEN are taken with several years in advance. Starting the date of the call for tender for a new generating station, up to its commercial startup, there passes approximately from four to seven years; and from three to five years for transmission projects. In addition, to carry out the formulation, evaluation, and authorization of the projects, the minimum required time is of one year.

3.6.1. Additional capacity to be installed

Through optimization models28, it is possible to estimate the type, size location, and startup date of the power stations needed to be installed to meet the forecasted demand. The results of this models show the combination of the power-stations portfolio with the minimum present value of the total costs for the system, while satisfying the defined restrictions, such as the share of clean energies.

The future capacity to be put on tender allows a broad participation of private investors in projects fostering the use of clean energies, even when they involve additions in transmission, to reach the preferred interconnection point and the alternative interconnection points, specified by the CFE in the bid requirement.

It is expected that between 2016 and 2030, 57,122 MW of capacity are added, from which 37.8% will come from conventional technologies (21,590.3 MW), and 62.2% from clean technologies (35,532.0 MW). Combined-cycle technology will increase its installed capacity by 20,453.7 MW. It is worth mentioning that, for these years, fossil-fuels technologies will not add any capacity, and will even be retired from the system.

From clean energies, wind power will add 12,000 MW to the system, followed by efficient cogeneration with 7,045.0 MW; bioenergy will have the smallest share of capacity throughout the period (see Figure 3.12 and 3.13).

28 PRODESEN 2016-2030, p. 7.

81

FIGURE 3. 12. SHARE IN THE ADDITIONAL CAPACITY BY TYPE OF TECHNOLOGY, 2016-2030 (Percentage)


FIGURE 3. 13. BEHAVIOR OF THE CAPACITY ADDITIONS BY TECHNOLOGY, 2016-2030 (MW)


As for additional capacity by modality, CFE and IEPs concentrate 35.5% (20,283.1 MW); projects under the modality of import, export, and generic projects will concentrate 26.4% (Figure 3.14 are displayed as "Other"); self-supply, 16.7%; cogeneration, 8.8%; generation, 6.9%; and small production, 5.5% (see Figure 3.14 and Table 3.6).

Combined cycle35.8%

TC, CI, TG, Coal fueled

2.0%

Wind power21.0%

Efficient cogeneration12.3%

Sola photovoltaic and Solar thermal

12.0%

Hydroelectric7.9%

Nuclear7.3%

0.0%

Geothermal and Bioenergy

1.7%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Nuclear Efficient cogeneration Bioenergy Solar thermal Sola photovoltaicGeothermal Wind power Hydroelectric Import Internal combustionGas turbine Coal fueled Thermal conventional Combined cycle

6,153.55,713.1

9,404.0

6,245.6

1,536.1

2,070.3

2,988.83,413.2

2,479.9 2,612.52,170.5

2,622.3

2,061.3

5,562.2

6,153.55,713.1

9,404.0

6,245.6

1,536.1

2,070.3

2,988.83,413.2

2,479.9 2,612.52,170.5

2,622.3

2,061.3 2,089.4

82

FIGURE 3. 14. ADDITIONAL CAPACITY BY MODALITY, 2016-2030 (MW)


TABLE 3. 6. ADDITIONAL CAPACITY BY MODALITY AND TECHNOLOGY, 2016-2030 (MW)

1/Includes projects under the modality of Import and Export, and Generic Projects. Source: Information from PRODESEN, SENER.

Due to the projects' status, 45.2% will correspond to projects under construction or about to start works, 41.1% to projects already authorized, new ones, or whose permit is under process; 10.6% to projects to be

CFE27.8%

PIE7.7%

Self-supply16.7%

Small production

5.5%

Cogeneration8.8%

Generation6.9%

Other26.4%

Concept CFE IEP Self-supply CogenerationSmall

Producer Generation Other1/ Total

Clean 3,456.8 802.8 7,723.5 5,029.0 3,075.2 1,067.9 14,377.2 35,532.4

Bioenergy - - - - 60.75 - - 60.75

Wind Power 885.89 802.80 6,231.07 - 264.00 202.90 3,613.35 12,000.00

Geothermal 189.48 - 75.00 - 30.00 - 600.38 894.86

Hydroelectric 2,253.42 - 362.30 - 49.79 - 1,826.84 4,492.35

Nuclear 110.00 - - - - - 4,080.90 4,190.90

Solar Photovoltaic 4.00 - 1,055.17 - 2,670.66 185.00 2,919.76 6,834.59

Thermal-solar 14.00 - - - - - - 14.00

Efficient Cogeneration

- - - 5,029.05 - 680.00 1,335.95 7,045.00

Conventional 12,421.54 3,602.12 1,841.31 13.00 89.94 2,898.16 723.65 21,589.72

Coal Fueled 120.00 - - - - - - 120.00

Combined Cycle 11,751.18 3,602.12 1,612.00 - 29.94 2,887.50 571.00 20,453.74

Internal Combustion

126.36 - 135.00 - - 10.66 - 272.02

Thermal Conventional

330.00 - - - - - 142.65 472.65

Gas Turbine 94.00 - 94.31 13.00 60.00 - - 261.31

Import - - - - - - 10.00 10.00

Total 15,878.3 4,404.9 9,564.8 5,042.0 3,165.1 3,966.1 15,100.8 57,122.2

83

put on tender; 2.4% to restoration and upgrading programs; and, finally, 0.7% to projects currently operating (see Figure 3.14).

FIGURE 3. 15. ADDITIONAL CAPACITY BY STATUS OF THE PROJECT, 2016-2030 (MW)

1 / Includes those generation projects with status: Conditioned, Canceled in PEF 2016, with progress in the interconnection process before CENACE and suspended Source: Information from PRODESEN, SENER.

Regarding capacity additions by control region, the Eastern region has the largest concentration with 15,2799.7 MW, due to more projects in states like Veracruz (6,176.2 MW), Oaxaca (4,868.3 MW), and Chiapas (2,478.5 MW). It stands out that in this region non-conventional technologies such as nuclear, wind, and hydraulic power prevail over conventional ones, managing to have the largest installed capacity with clean energy sources.

The Northeast region is second with 12,677.1 MW of additional capacity, standing out Nuevo León, which will add 6.9% of the total at domestic level. The Western region will increase 7,257.3 MW, equivalent to 12.7% of the domestic additional capacity, with a strong share from Guanajuato.

Within the Northwest region, Sonora will concentrate 8.1% of the domestic additional capacity. The Central and North regions will add, jointly, 11,401.3 MW, equivalent to 20.0% from the domestic total by the end of the projection period, derived from important projects in the states of Chihuahua and Hidalgo.

The Peninsular, Baja California, and Baja California Sur regions will have the smallest share in additional capacity in 2030, with only 3,908.8 MW, jointly (see Figure 3.15 and 3.7).

14,882.8 16,942.9 3,571.0 110.0 25.4

10,926.0 6,553.1 2,494.0 1,257.2 360.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Under construction, aboutto start up

Authorized, new project,generation permit pending,

Other 1/

To tender, projectallocated in the First Long-

Term Auction

Restoration and Upgrade Operating

Conventional Clean

84

FIGURE 3. 16. CAPACITY ADDITIONS BY CONTROL REGION, 2016-2030 (MW)


Additional Capacity2016-2030

57,122.3 MW

7

4

5

6

3

1

2

9

8

5,722.3

15,279.7

1,467.8

7,257.3

12,677.1

5,679.1

6,558.4

1,621.7

819.3

85

TABLE 3. 7. BEHAVIOR OF THE CAPACITY ADDITIONS BY FEDERAL ENTITY, 2016-2030 (MW)


3.6.2. Decommissioning of Electricity Generation

To define the development of the generating system, it was considered a decommissioning program based on the analysis of operation costs and the servicing years of the generating units. The indicative decommissioning program is based on the revision of the electricity consumption growth rate, the current conditions of the generating fleet, operation and maintenance programs, restoration and upgrading, repowering projects for some conventional thermoelectric stations, and the investment costs for new generating stations.

This program29 shall consider factors such as the startup, in the scheduled dates, of the power stations which will replace the candidates to be decommissioned, as well as the lines and substations required to maintain the reliability of the system; sustain a reliably reserve margin; reduce extended failures of some equipment; guarantee of fuels supply; and the forecasted growth of the demand.

For the period 2016-2030, it is expected a capacity decommissioning of 15,819.5 MW, related to 140 generating units, located in 22 entities of the country, from which 69.0% are thermoelectric stations (see Figure 3.17).

29 The decommissioning program only considers power stations from CFE and its subsidiary productive enterprises, members of the electric industry.

Federal Entity 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total

Aguascalientes - 120.0 63.0 - - - - - 153.0 - - - - - - 336.0

Baja California 310.9 - - 22.7 27.0 - - - 703.1 - - - 35.4 70.0 100.0 1,269.1

Baja California Sur

98.3 6.0 194.0 144.0 57.0 100.0 79.6 - - - 63.0 117.0 - - - 858.9

Chiapas 20.0 - 241.2 18.7 - - 1,398.7 - 800.0 - - - - - - 2,478.6

Chihuahua 178.0 1,010.6 - - - - 352.0 958.0 - 37.6 307.5 417.3 - - - 3,261.1

Coahuila 425.9 150.0 705.0 120.0 - - - 30.0 83.0 124.4 1,288.4 624.5 - - - 3,551.2

Durango 121.0 - - 939.1 - - - - 92.2 44.0 55.8 316.0 - - - 1,568.0

Estado de México

114.3 633.0 - - 225.7 - - - 30.0 - - - - 601.0 - 1,604.0

Guanajuato 90.0 30.0 307.0 - 717.2 700.0 - - - 187.0 - - - - - 2,031.2

Guerrero - - - - - 455.0 - - 461.5 - - - - - - 916.5

Hidalgo 41.8 564.7 - - 638.0 - 32.6 - 25.0 30.0 - - 1,162.0 - - 2,494.1

Jalisco 171.8 71.0 300.0 1,761.0 - - 25.0 27.0 42.7 206.0 55.0 63.0 - - - 2,722.5

Michoacán - - 26.6 - - - - - - - - - - - - 26.6

Morelos - 660.2 - - - - - - - - - - - - 629.1 1,289.2

Nayarit 24.0 - - - 10.0 191.4 41.0 268.2 1.3 - - - - - - 536.0

Nuevo León 1,394.7 - 883.7 1,000.0 380.0 - - - - - - 290.0 - - - 3,948.3

Oaxaca - - 396.0 2,518.4 515.0 - - 196.4 195.6 1,047.0 - - - - - 4,868.4

Puebla 26.6 - - 50.4 1.3 62.6 - - - - - - - - - 140.9

Querétaro 5.4 - - - - - - - - 60.0 - - - - - 65.4

Quintana Roo 60.0 - - - - - - - - - - - - - - 60.0

San Luis Potosí 30.0 100.0 450.0 1,022.3 1,013.0 - - 159.4 218.6 - - - - - - 2,993.2

Sinaloa - - - 1,484.8 796.3 - - - - - - - - - - 2,281.1

Sonora 794.8 964.3 939.0 322.7 - - 20.4 100.0 103.5 661.4 561.7 67.7 64.6 30.0 - 4,630.1

Tabasco 13.0 941.3 - - - 19.1 - 85.8 - - - - - - - 1,059.1

Tamaulipas 470.0 630.0 263.7 - 1,358.0 - - 750.0 - - - 275.0 - - - 3,746.7

Veracruz 761.1 14.5 - - - - 121.0 414.0 503.7 - 281.0 - 1,360.3 1,360.3 1,360.3 6,176.2

Yucatán 30.8 18.0 844.0 - 507.1 8.0 - - - - - - - - - 1,407.8

Zacatecas 380.0 240.0 100.0 - - - - - - 82.5 - - - - - 802.5

Total 5,562.2 6,153.5 5,713.2 9,404.0 6,245.6 1,536.1 2,070.3 2,988.8 3,413.2 2,479.9 2,612.5 2,170.5 2,622.3 2,061.3 2,089.4 57,122.4

86

FIGURE 3. 17. CAPACITY DECOMMISSIONING BY TECHNOLOGY, 2016-2030 (Percentage)


In 2015, the SEN had an installed capacity of 68,044.5 MW. If it is considered a programmed capacity decommissioning of 15,820.0 MW, and an addition of 57,122.3 MW, by 2030 it is expected to have an electric generating capacity of 109,367.1 MW; from this, 49.9% corresponds to conventional technologies and 50.1% to clean technologies (see Figure 3.18).

FIGURE 3. 18. INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, 2015 Y 2030 (Percentage)


The decrease from 71.7% to 49.9% on conventional technologies is due to a decommissioning of about -82.3% of thermal conventional stations (equivalent to 10,466.7 MW), -1,280.0 MW of coal-fired stations, and -1,307.4 MW of gas turbine. On the contrary, combined-cycle stations will rise their capacity from 24,042.7 MW (77.4%) in 2015, to 42,642.7 MW in 2030 (see Figure 3.19).


69.0%

Combined cycle13.0%

Coal fueled8.8%

Gas turbine8.4%

Internal combustion

0.4% Geothermal0.4%

Conventional71.7%

Clean28.3%

2015

Conventional49.9%

Clean50.1%

2030

87

FIGURE 3. 19. BEHAVIOR OF THE INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, 2015 Y 2030 (MW)

Does not include import. Source: Information from PRODESEN, SENER.

As for clean technologies, solar power will rise 27.2% average annual, recording an increase on its capacity for 6,703.8 MW by the end of the projection period; efficient cogeneration will rise from 583.1 MW in 2015 to 627.1 MW by 2030. Wind and nuclear power will increase their capacity by 438.3% and 277.5%, respectively (see Table 3.8).

24

,04

2.7

12

,71

0.7

12

,48

8.5

2,8

05

.1

1,1

19

.3

1,3

42

.8

1,5

10

.0

5,3

78

.4

4,9

03

.6

1,7

43

.1

42

,64

2.7

2,2

44

.0

16

,97

5.9

15

,10

1.1

8,6

72

.0

8,3

90

.7

5,7

00

.9

4,0

98

.4

3,5

96

.3

1,9

35

.3

Com

bine

dcy

cle

The

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conv

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onal

Hyd

roel

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Win

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and

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Bioe

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and

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dize

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2015 2030

88

TABLE 3. 8. BEHAVIOR OF THE INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, 2016-2030 (MW)


Technology 2016 2017 2018 2019 2020 2021 2022 2023

Conventional 48,555.3 52,552.1 53,175.4 55,397.1 57,652.7 56,276.2 55,866.3 55,726.4

Combined Cycle 26,587.1 30,311.0 32,571.6 38,021.3 41,054.8 40,592.3 40,592.3 40,592.3

Thermal Conventional 10,220.1 10,550.1 8,860.1 5,558.1 4,780.1 3,952.1 3,952.1 3,839.6

Coal Fueled 5,378.4 5,378.4 5,378.4 5,498.4 5,498.4 5,498.4 5,498.4 5,498.4

Gas Turbine 4,424.3 4,367.0 4,367.0 4,311.0 4,311.0 4,225.0 3,846.7 3,819.3

Internal Combustion 1,365.5 1,365.5 1,418.3 1,418.3 1,418.3 1,418.3 1,386.8 1,386.8

Fluidized Bed 580.0 580.0 580.0 580.0 580.0 580.0 580.0 580.0

Import - - - 10.0 10.0 10.0 10.0 10.0

Clean 21,820.9 23,920.4 27,299.9 30,163.8 33,345.6 34,904.6 36,974.9 39,963.7

Renewable 18,394.2 19,552.5 22,932.0 25,773.1 27,421.9 28,253.9 30,291.6 31,023.0

Hydroelectric 12,551.1 12,565.6 12,806.8 12,825.5 12,825.5 13,280.5 15,152.2 15,729.6

Wind Power 3,860.7 4,471.7 5,557.4 8,376.2 9,734.2 9,734.2 9,734.2 9,734.2

Geothermal 937.2 939.2 950.8 977.5 1,201.5 1,455.5 1,521.5 1,575.5

Solar Photovoltaic 1,031.3 1,562.0 3,603.0 3,580.0 3,646.8 3,769.8 3,869.8 3,969.8

Thermal-solar 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0

Other 3,426.7 4,368.0 4,368.0 4,390.7 5,923.7 6,650.7 6,683.3 8,940.7

Nuclear 1,620.0 1,620.0 1,620.0 1,620.0 1,620.0 1,620.0 1,620.0 1,620.0

Bioenergy 703.6 703.6 703.6 703.6 703.6 703.6 703.6 733.6

Efficient Cogeneration 1,096.5 2,037.8 2,037.8 2,060.5 3,593.5 4,320.6 4,353.2 6,580.6

KERS 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6

Total 70,376.2 76,472.5 80,475.4 85,560.9 90,998.3 91,180.8 92,841.3 95,690.1

Technology 2024 2025 2026 2027 2028 2029 2030AAGR

2016-2030

Conventional 55,058.9 55,044.9 54,914.9 54,701.9 54,642.2 53,897.6 54,526.7 0.75

Combined Cycle 40,592.3 40,592.3 40,655.3 40,772.3 41,412.6 42,013.6 42,642.7 3.9

Thermal Conventional 3,219.6 3,219.6 3,219.6 2,889.6 2,889.6 2,244.0 2,244.0 -10.9

Coal Fueled 5,498.4 5,498.4 5,498.4 5,498.4 4,798.4 4,098.4 4,098.4 -1.8

Gas Turbine 3,803.3 3,789.3 3,596.3 3,596.3 3,596.3 3,596.3 3,596.3 -2.0

Internal Combustion 1,355.3 1,355.3 1,355.3 1,355.3 1,355.3 1,355.3 1,355.3 1.0

Fluidized Bed 580.0 580.0 580.0 580.0 580.0 580.0 580.0 n.a.

Import 10.0 10.0 10.0 10.0 10.0 10.0 10.0 n.a.

Clean 43,376.9 45,856.7 48,406.2 50,459.6 51,919.9 53,380.2 54,840.5 7.22

Renewable 33,359.6 35,839.5 38,388.9 40,442.3 40,542.3 40,642.3 40,742.3 6.3

Hydroelectric 16,694.8 16,694.8 16,975.9 16,975.9 16,975.9 16,975.9 16,975.9 2.1

Wind Power 10,964.5 12,593.2 13,911.6 15,101.1 15,101.1 15,101.1 15,101.1 11.9

Geothermal 1,616.5 1,642.5 1,697.5 1,760.5 1,760.5 1,760.5 1,760.5 4.4

Solar Photovoltaic 4,069.8 4,894.9 5,789.9 6,590.9 6,690.9 6,790.9 6,890.9 27.2

Thermal-solar 14.0 14.0 14.0 14.0 14.0 14.0 14.0 n.a.

Other 10,017.3 10,017.3 10,017.3 10,017.3 11,377.6 12,737.9 14,098.2 11.2

Nuclear 1,620.0 1,620.0 1,620.0 1,620.0 2,980.3 4,340.6 5,700.9 9.3

Bioenergy 763.6 763.6 763.6 763.6 763.6 763.6 763.6 0.0

Efficient Cogeneration 7,627.1 7,627.1 7,627.1 7,627.1 7,627.1 7,627.1 7,627.1 18.7

KERS 6.6 6.6 6.6 6.6 6.6 6.6 6.6 n.a.

Total 98,435.8 100,901.6 103,321.1 105,161.5 106,562.1 107,277.8 109,367.2 3.21

89

3.6.3. Expected electricity generation

Based on the program for the expansion of the electric system, it is possible to simulate how each of the current and future power stations will participate in generating electricity, taking into consideration the requirements for fuels and the generation costs.

Generation by technology

In 2015, the gross electricity generation was of 309,552.8 GWh, from which 79.7% came from conventional technologies and 20.3% from clean technologies. In 2030, gross generation will increase to 443,606.1 GWh. From this generation, the share of clean energies will rise to 40.5%, while conventional energies will reduce their share to 59.5%.

By type of energy source, combined cycle stands out as the sole technology based on fossil fuels which rises its share in the total electricity generation, 8 percentage points in 2030 regarding 2015. On the contrary, conventional thermal generation will drop from 39,231.5 GWh in 2015 to 1.3 GWh by the end of the projection period. Likewise, coal-fired stations will have a sharp fall of -97.1% in the generation share, equivalent to -32,620.9 GWh; internal combustion will decrease its share from 0.9% to 0.0% by the end of the projected period.

Figure 3.20 shows the increases on combined-cycle generation, only 8 percentage points, reaching 257,649.3 GWh in 2030, an increase of 102,463.9 GWh more than in 2015.

On the other hand, clean technologies will show an accelerated growth n wind and solar powers, concentrating 13.6% of the total generation in 2030; nuclear plants will increase their share to 8.8% (see Table 3.9).

90

FIGURE 3. 20. SHARE OF TECHNOLOGIES FOR ELECTRICITY GENERATION, 2015 AND 2030 (GWh, Percentage)


Wind power2.8%

Geothermal2.0%

Fluidized bed1.4%

Combined cycle50.1%

Thermal conventional12.7%

Coal fueled10.9%

Hydroelectric10.0%

Nuclear3.7%

Gas turbine3.8%


Internal combustion

0.9% Bioenergy0.4%

FIRCO and GD0.1%

Solar0.03%

Kinetic energy recovery system

0.0012%

Geothermal2.8%

Gas turbine0.2%

Coal fueled0.2%

Fluidized bed0.9%

Combined cycle58.1%

Hydroelectric11.2%

Wind power10.7%

Nuclear8.8%


Solar2.9%

Bioenergy0.1%

Import0.017%

Solar thermal0.01%

Internal combustion

0.01%


0.00029%

2015 real309,553 GWh

2030443,606 GWh

91

TABLE 3. 9. BEHAVIOR OF THE ELECTRICITY GROSS GENERATION BY TYPE OF TECHNOLOGY, 2016-2030

(GWh)


Technology 2016 2017 2018 2019 2020 2021 2022 2023

Conventional 225,678.8 227,011.0 228,027.6 230,942.4 228,117.9 228,493.0 230,282.9 219,614.0

Combined Cycle 168,092.0 177,480.0 192,526.2 218,470.6 223,188.7 223,782.6 225,378.5 214,701.5

Thermal Conventional 5,195.4 2,302.7 217.1 - - - - -

Coal Fueled 38,711.3 38,427.2 30,168.8 7,707.9 274.0 96.1 275.5 94.5

Gas Turbine 8,193.4 3,454.0 120.0 405.8 341.1 325.5 339.5 476.9

Internal Combustion 1,312.1 1,183.9 832.3 120.3 64.5 50.9 51.4 103.2

Fluidized Bed 4,174.6 4,163.2 4,163.2 4,163.2 4,174.6 4,163.2 4,163.2 4,163.2

Import - - - 74.7 74.9 74.7 74.7 74.7

Clean 65,158.3 71,388.3 77,918.5 86,335.7 97,120.1 105,751.1 114,386.8 124,207.5

Renewable 51,854.3 56,595.9 61,826.4 69,498.8 77,939.4 84,666.0 92,594.7 95,176.2

Hydroelectric 34,153.6 34,108.8 34,812.9 34,893.1 34,988.7 36,842.6 44,122.7 46,129.2

Wind Power 10,520.9 13,109.5 15,762.7 21,480.3 27,753.4 30,758.8 30,758.8 30,758.8

Geothermal 6,604.0 6,637.7 6,688.4 6,748.3 8,599.3 10,304.4 10,771.7 11,154.0

Solar Photovoltaic 556.7 2,713.0 4,535.4 6,350.1 6,570.9 6,733.2 6,914.6 7,107.2

Thermal-solar 19.1 27.0 27.0 27.0 27.0 27.0 27.0 27.0

Other 13,304.0 14,792.3 16,092.1 16,837.0 19,180.6 21,085.1 21,792.0 29,031.3

Nuclear 10,717.8 11,062.0 11,062.0 11,062.0 11,092.3 11,062.0 11,062.0 11,062.0

Bioenergy 276.1 258.2 278.3 335.2 257.9 257.2 301.2 388.3

Efficient Cogeneration 2,310.1 3,472.1 4,751.8 5,439.7 7,830.4 9,765.9 10,428.8 17,581.0

KERS - - - - - - - -

Total 290,837.1 298,399.2 305,946.1 317,278.2 325,237.9 334,244.2 344,669.7 343,821.5

Technology 2024 2025 2026 2027 2028 2029 2030 AAGR

Conventional 216,171.6 223,111.4 230,330.5 237,929.3 246,340.3 255,782.2 263,830.4 0.5

Combined Cycle 211,042.2 217,743.1 225,307.1 231,800.6 241,178.7 249,886.4 257,649.3 3.4

Thermal Conventional - - - 0.2 - - 1.3 - 49.8

Coal Fueled 182.1 246.7 171.2 1,381.8 279.2 847.2 978.2 - 21.0

Gas Turbine 534.4 642.5 493.1 508.8 632.8 805.4 940.4 - 15.4

Internal Combustion 163.4 241.0 121.2 - - 5.2 23.2 - 27.1

Fluidized Bed 4,174.6 4,163.2 4,163.2 4,163.2 4,174.6 4,163.2 4,163.2 - 0.2

Import 74.9 74.7 74.7 74.7 74.9 74.7 74.7 n.a.

Clean 134,812.6 141,327.9 148,216.8 154,385.8 162,854.9 170,825.3 179,775.7 7.2

Renewable 102,781.1 109,358.4 116,247.3 121,909.9 122,435.4 122,277.2 122,455.5 6.7

Hydroelectric 49,285.8 49,151.2 49,902.0 49,902.0 50,038.8 49,902.0 49,902.0 3.2

Wind Power 34,659.5 39,673.4 43,715.6 47,365.6 47,495.5 47,365.6 47,365.6 11.9

Geothermal 11,475.6 11,628.3 12,017.7 12,463.8 12,497.9 12,463.8 12,463.8 4.6

Solar Photovoltaic 7,333.1 8,878.5 10,584.9 12,151.5 12,376.1 12,518.8 12,697.1 30.3

Thermal-solar 27.0 27.0 27.0 27.0 27.0 27.0 27.0 n.a.

Other 32,031.5 31,969.5 31,969.5 32,475.9 40,419.5 48,548.1 57,320.2 8.5

Nuclear 11,092.3 11,062.0 11,062.0 11,062.0 20,406.5 29,639.4 38,928.1 8.4

Bioenergy 468.6 492.8 492.8 899.6 472.4 279.1 257.2 - 10.5

Efficient Cogeneration 20,470.6 20,414.6 20,414.6 20,514.2 19,540.6 18,629.6 18,134.8 11.0

KERS - - - - - - - n.a.

Total 350,984.2 364,439.2 378,547.3 392,315.1 409,195.2 426,607.5 443,606.1 2.4

92

Generation by modality

Within the modalities for electricity generation, CFE's share will decrease from 55.2% in 2015 to 39.0% in 2030. This reduction is due mostly to the restructuring after the Energy Reform and to the transfer of some stations in the Valley of Mexico to new generators participating in the Electricity Market. The LIE Projects include stations under the modality of Generic Projects, Generators, and State-owned projects, or whose construction and operation have been included in the Expenditure Budget of the Federation as direct investments called Public-Utility Power Plants, besides, the IEPs and the plants included in the Federal Budget as conditioned investment, called Non-Utility Power Plants, and other private-parties projects. This new modality will have 19.6% by the end of the projection period.

Self-supply will increase its share from 7.7% to 13.1%, while cogeneration will decrease from 5.1% to 2.9%, as shown in the following figure:

FIGURE 3. 21 SHARE BY MODALITY IN ELECTRICITY GENERATION, 2015 AND 2030 (Percentage)

Does not include import. Source: Information from PRODESEN, SENER.

CFE55.2%

IEP28.8%

SS7.7%

COG5.1%

LIE PROJECT0.4%

PP0.05%

EXP2.3%

UPC0.33%

2015 real

CFE39.0%

IEP23.2%

LIE PROJECT19.6%

SS13.1%

COG2.92%

PP1.5%

EXP0.7%

UPC0.05%

2030

93

Generation by region and federal entity

The expansion program is strategic to foster regional economies; thus, between 2016 and 2030, it is expected a sharp increase in the electricity production of every SIN's regions, and which will be consumed by the different economic sectors.

As displayed in Figure 3.22, the Eastern region will have a higher growth and will present the largest concentration of electricity generation.

FIGURE 3. 22. BEHAVIOR OF ELECTRICITY GENERATION BY CONTROL REGION OF THE SIN, 2016-2030

(GWh)


The states of Veracruz (58,820.3 GWh), Tamaulipas (42,506.1 GWh), Sonora (25,684.4 GWh), San Luis Potosí (30,120.6 GWh), and Hidalgo (16,411.0 GWh) are the most representative of their respective regions, and will jointly generate 173,542.4 GWh in 2030 (see Figure 3.23).

62,303.5

118,100.3

90,950.9

110,106.361,184.9

73,583.0

15,058.6

41,577.9

12,928.9

36,034.9

24,254.6

34,659.4

11,276.8

13,073.4

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Baja California North Central Northwest Western Northeast Eastern

94

FIGURE 3. 23. GROSS GENERATION BY REGION AND FEDERAL ENTITY30, 2030 (GWh, Percentage)


30 The states of Campeche and Mexico City were not considered since they represent a marginal figure in the electricity generation.

34.2%

20.0%

12.9%

12.3%

7.5%5.2%4.6%2.4%0.9%

88,097.7 GWh

Aguascalientes

Zacatecas

Michoacán

Querétaro

Nayarit

Colima

Guanajuato

Jalisco

San Luis Potosí

33.8%

30.0%

16.7%

9.9%

9.6%

125,676.4 GWh

Durango

Coahuila

Chihuahua

Nuevo León

Tamaulipas

45.6%

18.4%

18.1%

9.5%

6.0%2.3%0.1%

128,946.6 GWh

Quintana Roo

Tabasco

Guerrero

Yucatán

Chiapas

Oaxaca

Veracruz

38.9%

25.8%

21.9%

13.5%

0.0%

42,217.6 GWh

Tlaxcala

Puebla

Morelos

Estado deMéxico

Hidalgo

43.8%

30.5%

19.6%

6.2%

58,667.9 GWh

Baja CaliforniaSur

Baja California

Sinaloa

Sonora

95

3.6.4. Expansion of the Transmission and Distribution Grid of the SEN

The SEN is formed by 53 transmission regions. For this planning exercise, it has been considered the transmission capacity of the link under maximum-demand conditions; each generating unit and its interconnection is assigned to one of the transmission regions to represent the electric system in the optimization model. Electric power stations, as well as the generation projects considered in the PIIRCE are classified according to the control region to which they belong.

TABLE 3. 10. NAME OF THE TRANSMISSION REGIONS

1/ Before Nacozari. 2/ Before Campeche. 3/ Ingrates Cozumel. 4/ Before Loreto. Source: SENER.

No. Name No. Name

1 Hermosillo 28 Carapan

2 Cananea1/ 29 Lázaro Cárdenas

3 Obregón 30 Querétaro

4 Los Mochis 31 Central

5 Culiacán 32 Poza Rica

6 Mazatlán 33 Veracruz

7 Juárez 34 Puebla

8 Moctezuma 35 Acapulco

9 Chihuahua 36 Temascal

10 Durango 37 Coatzacoalcos

11 Laguna 38 Tabasco

12 Río Escondido 39 Grijalva

13 Nuevo Laredo 40 Ixtepec

14 Reynosa 41 Lerma2/

15 Matamoros 42 Mérida

16 Monterrey 43 Cancún

17 Saltillo 44 Chetumal

18 Valles 45 Cozumel3/

19 Huasteca 46 Tijuana

20 Tamazunchale 47 Ensenada

21 Güémez 48 Mexicali

22 Tepic 49San Luis Río Colorado

23 Guadalajara 50 Villa Constitución

24 Aguascalientes 51 La Paz

25 San Luis Potosí 52 Los Cabos

26 Salamanca 53 Mulegé4/

27 Manzanillo

96

It is important to optimally develop the infrastructure for the transmission and distribution of energy, to minimize servicing costs. Thereby, it is necessary to incorporate new generation technologies which will allow to increase the efficiency of the transmission, distribution, and trading processes, and will help reducing operation costs and electricity losses. In the SEN, the exchange of big blocks of energy between regions is done through the backbone grid, formed by lines with tension levels of 400 KV and 230 kV. Additionally, the subtransmission grid regionally distributes energy with links of 161 kV up to 69 kV.

Between 2016 and 2025, 159 transmission works are considered, with a total of 13,066.0 km-c; 121 transformation works with a total of 41,952 MVA, and 117 compensation works with 7,288 MVAr, throughout the national territory (see Table 3.11).

TABLE 3. 11. SUMMARY OF THE MAIN WORKS AND INDICATORS BY CONTROL REGION, 2016-2025


Due to the startup of diverse generation projects throughout the country, considered in the Indicative Planning, it is necessary to develop transmission lines in accordance with the programmed expansion, designed to operate under normal conditions and contingencies. These lines should not be overloaded, and shall be operated within the established tension ranges; they should not have problems with angular and voltage stability; shall have transfer capacity between regions to share generation reserves; a high reliability in supplying energy to users; and count with the appropriate controls to afford flexibility to the operation.

Transmission Works

The main transmission system has been meshed at a 400-kV level in the Central, Eastern, Northeast, and Western regions of the country. On the contrary, in the North, Northwest, and Peninsular areas it is being strengthened with transmission lines in some isolated sections in 400 kV, which initially operate in 230 kV, and which have been gradually changed to a 400-kV tension.

For the period 2016-2030, it has been considered to construct 28,071.2 km-c. From these, 7,994.3 km-c will be of 69-161 kV-lines; 4,759.4 km-c of 230 kV-lines; 11,409.5 km-c of 400 kV-lines; and 3,908.0 km-c of lines between 400 kV and 500 kV of direct current (see Table 3.12).

Works (km-c) Works (MVA) Works (MVAR)

Central 15 542.8 6 2,393.3 4 366.8

Western 9 135.0 14 4,233.0 34 1,021.1

North 16 1,204.0 18 4,324.9 5 278.0

Northeast 16 1,475.2 15 5,708.3 7 506.5

Peninsular 17 1,373.0 4 1,020.0 15 866.5

Eastern 19 2,825.9 17 12,033.0 14 2,672.4

Baja California 19 1,999.3 16 4,233.3 15 363.8

Baja California Sur 17 1,321.1 12 1,646.6 10 100.0

Mulegé System 4 530.6 4 210.0 - -

Northwest 27 1,659.1 15 6,150.0 13 1,113.0

Total 159 13,066.0 121 41,952.0 117 7,288.0

Control RegionTransmission Transformation Compensation

97

TABLE 3. 12. PHYSICAL GOALS FOR TRANSMISSION WORKS, 2016-2030 (km-c)


The Western region has a large share of transmission projects, with the construction of 2,825.9 km-c, equivalent to 21.6% of all the works projected for this period. In contrast, the Western region has only 1.0% of the total works, since there is already an important concentration of transmission lines in that region (see Figure 3.24).

500 kV CD 400 kV CD 400 kV 230 kV 161-69 kV Total

2016 - - 1,181.2 231.9 855.3 2,268.4

2017 - - 784.8 744.4 3,266.6 4,795.8

2018 - - 667.4 560.8 797.9 2,026.1

2019 1,200.0 - 394.4 - 310.0 1,904.4

2020 - - - 22.8 357.7 380.5

2021 1,400.0 1,308.0 867.0 568.4 85.2 4,228.6

2022 - - - 112.9 289.2 402.1

2023 - - 678.0 451.2 584.7 1,713.9

2024 - - 3,069.0 229.7 154.2 3,452.9

2025 - - 420.0 609.4 444.0 1,473.4

2026 - - 1,525.5 532.3 233.7 2,291.5

2027 - - 1,252.0 362.4 99.5 1,713.9

2028 - - 267.0 241.9 252.9 761.8

2029 - - 303.2 13.0 119.4 435.6

2030 - - - 78.2 144.0 222.2

Total 2,600.0 1,308.0 11,409.5 4,759.4 7,994.3 28,071.2

427.6

28,498.8

Year Lines km-c

Individual and interconnection works on the applicant's expense

Total km-c

98

FIGURE 3. 24. MAIN TRANSMISSION WORKS BY CONTROL REGION OF THE SEN, 2016-2025


Transformation works

For the period 2016-2030, it has been considered to construct 62,855.4 MVA, from which 41.1% will be 400 kV-lines; 29.4% of 230 kV-lines; 14.7% of lines between 69 and 161 kV; and the remaining 14.8% of direct-current lines of 400 to 500 kV (see Table 3.13).

159 transmission works

13,066 Km-c

7

4

5

6

3

1

2

9

8

542.8

2,825.9

1,373.0

135.0

1,475.2

1,204.0

1,659.1

1,999.3

1,321.1

10

530.6

1 Central2 Eastern3 Western4 Northwest5 North6 Northeast7 Baja California8 Baja California Sur9 Peninsular10 Mulegé

99

TABLE 3. 13. PHYSICAL GOALS FOR TRANSFORMATION WORKS, 2016-2030 (MVA)


As shown in Figure 3.25, the Eastern region concentrates 28.7% of the total transformation works, equivalent to 12,033.0 MVA. In second place, the Northwest and Northeast regions concentrate, jointly, 28.3% and, with a smaller share, the isolated system Mulegé will have a 0.5% share (210 MVA).

500 kV CD 400 kV CD 400 kV 230 kV 161-69 kV Total

2016 0.0 0.0 4,300.0 1,850.0 1,309.5 7,459.4

2017 0.0 0.0 1,633.3 1,285.0 1,275.4 4,193.7

2018 0.0 0.0 1,535.0 2,798.3 1,181.9 5,515.2

2019 6,000.0 0.0 0.0 1,268.0 485.0 7,753.0

2020 0.0 0.0 875.0 460.0 618.7 1,953.7

2021 2,000.0 1,300.0 1,750.0 1,193.3 252.5 6,495.8

2022 0.0 0.0 0.0 280.0 430.0 710.0

2023 0.0 0.0 3,100.0 2,624.9 626.9 6,351.8

2024 0.0 0.0 4,625.0 1,230.0 260.0 6,115.0

2025 0.0 0.0 1,000.0 1,524.9 629.4 3,154.3

2026 0.0 0.0 1,205.0 40.0 720.0 1,965.0

2027 0.0 0.0 2,825.0 420.0 380.0 3,625.0

2028 0.0 0.0 1,000.0 1,333.3 352.5 2,685.8

2029 0.0 0.0 1,600.0 600.0 523.0 2,723.0

2030 0.0 0.0 375.0 1,558.3 221.3 2,154.6

Total 8,000.0 1,300.0 25,823.3 18,466.0 9,266.1 62,855.4

3,350.0

66,205.4

YearSubstations (MVA)

Individual and interconnection works on the applicant's expense

Total MVA

100

FIGURE 3. 25. MAIN TRANSFORMATION WORKS BY CONTROL REGION OF THE SEN, 2016-2025


During 2016-2025, derived for the high demand for installing new capacity, the Eastern, Northwest, and Western regions will concentrate 66% of the total compensation works. Baja California Sur will have the less compensation works, while there will not be any in Mulegé during the next years of the planning exercise.

121 transformation works

41,952 MVA

7

4

5

6

3

1

2

9

8

2,393.3

12,033.0

1,020.0

4,233.0

5,708.3

4,324.9

6,150.0

4,233.3

1,646.6

10

210.0

1 Central2 Eastern3 Western4 Northwest5 North6 Northeast7 Baja California8 Baja California Sur9 Peninsular10 Mulegé

101

FIGURE 3. 26. MAIN COMPENSATION WORKS BY CONTROL REGION OF THE SEN, 2016-2025


Special projects

The Program for the Expansion and Modernization of the National Transmission Grid (RNT, for its Spanish acronym) pursues three main objectives to be developed within the next 15 years considered in this planning exercise. The first one is the interconnection of the RNT with North America and Central America, and to serve the supply and demand needs of the system.

To cover the interconnection project from Baja California to the SIN, which would start up on April 2021, it has been programmed the construction of 8 transmission lines, 4 substations, and 3 reactors (see Table 3.12).

121 compensationworks

7,288 MVAr

7

4

5

6

3

1

2

9

8

366.8

2,672.4

866.5

1,021.1

506.5

278.0

1,113.0

363.8

100.0 1 Central2 Eastern3 Western4 Northwest5 North6 Northeast7 Baja California8 Baja California Sur9 Peninsular

102

TABLE 3. 14. BAJA CALIFORNIA-SIN INTERCONNECTION PROJECTS ((kV, km-c, MVA, MVAr)


Having an interconnection link in the cross-border regions afford many advantages, such as increasing trade between the North American electric systems, benefiting the economy of the related states; furthermore, a regional interconnection would also afford an operational backup for emergencies in the Northwest region. This project is planned to start up on December 2018, with the following features:

TABLE 3. 15. INTERCONNECTION PROJECTS NOGALES, SONORA-ARIZONA, U.S. (kV, km-c, MVA, MVAr)

1/ Laying of the second circuit. 2/ Laying of the first circuit. Source: Information from PRODESEN, SENER.

Transmission Lines TechnologyTension

(kV)Length (km-c)

Seri - Cucapah CD ± 500 1,400.0

Cucapah - Sánchez Taboada2/ CA 230 10.0

Cucapah entronque Centenario - Sánchez Taboada CA 230 2.0

Cucapah entronque Wisteria - Cerro Prieto II CA 230 2.0

Cucapah - Wind Power Rumorosa CA 400 170.0

Wind Power Rumorosa - La Herradura CA 400 120.0

La Herradura - Tijuana3/ CA 400 32.0

Santa Ana - Nacozari1/, 3/ CA 400 160.0

Total 1,896.0

Substation Technology EquipmentCapacity

(MVA)

Seri Estación Convertidora (1) CD EC 1,500

Cucapah Estación Convertidora (1) CD EC 1,500

Cucapah Bancos 1 y 2 (7) CA AT 875

La Herradura Bancos 1 y 2 (7) CA AT 875

Total 4,750

Compensation EquipmentTension

(kV)Capacity (MVAr)

Wind Power Rumorosa MVAr LT1 Reactor 400 67

Wind Power Rumorosa MVAr LT2 Reactor 400 50

Santa Ana MVAr Reactor 230 21

Total 138

Transmission Lines Number of circuits

Tension (kV)

Length (km-c)

Nogales Aeropuerto – Nogales North Tendido1/ 2 400 16

Nogales North – Frontera 2/ 1 230 11

Total 27

Compensation Equipment Tension (kV)

Capacity (MVAr)

Nogales Aeropuerto MVAr Capacitor 230 35

103

Another important project is to integrate the capacity of renewable electric power from the Eastern region and transmit it to regions with a higher demand for electricity. The latter, because it is intended to install 15,280 MW of capacity in that region in the coming years, being, mostly, electricity from renewable sources for which, currently, there is no transmission channel which allows the incorporation and operability of the intermittency.

This project is expected to start up on March 2020. On October 2016, CFE published the tender pre-requirements of the high-voltage, direct-current transmission line, with a transmission capacity of 3,000 MW, under the scheme of public-private association.

TABLE 3. 16. INTERCONNECTION PROJECTS FROM ISTMO DE TEHUANTEPEC-VALLE DE MEXICO (OAXACA)

(kV, km-c, MVA, MVAr)

1/ Laying of the first circuit. 2/ Laying of the second circuit. 3/ Recalibration. 4/ Direct current. Source: Information from PRODESEN, SENER.

Transmission Lines Tension Number of circuits

Length(km-c)

Ixtepec Potencia - Juile 400 2 136

Xipe - Ixtepec Potencia 400 2 50

Volcán Gordo - Yautepec Potencia L1/ 400 2 125

Yautepec Potencia - Topilejo L3/ 400 1 76

Yautepec Potencia - Ixtepec Potencia4/ ±500 2 1,260

Agustín Millán Dos - Volcán Gordo 2 400 2 48

Modernización LT de 400 kV Topilejo -A3640- Yautepec Potencia 6 400 1 76

Total 1,771

Substation Cantidad Equipment Capacity (MVA)

Yautepec Potencia 1 EC 3,000

Ixtepec Potencia 1 EC 3,000

Xipe Bancos 1, 2 y 3 10 AT 1,250

Xipe Banco 4 4 AT 500

Total 7,750

Compensation Equipment Tension Capacity (MVAr)

Xipe MVAr Reactor 400 100

Volcán Gordo 2 Reactor 400 16.7

Total 116.7

104

3. Sensitivity Exercises

Sensitivity exercise are aimed to afford a better understanding of the dynamics and trends of the Electricity Sector, as well as to comprehend the impact of the volatility of some of the variables considered within the sector's planning.

This chapter presents a study carried out by the National Commission for the Efficient Use of Energy, on the Scenario of Energy Transition developed during the works for the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, in compliance with what is established in the Law for the Energy Transition.

4.1. Energy Transition Scenario prepared by CONUEE

The Energy Transition Scenario was devised during the works of the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, per the Law for the Energy Transition. Its foundation was a base scenario prepared by SENER which profiles a behavior with no energy-efficiency actions. Afterwards, the CONUEE designed the Energy Transition Scenario, which includes energy-efficiency actions feasible in different end-consumption sectors, and which could jointly achieve the energy-efficiency goal set in the Strategy.

The scenarios of energy consumption are based on variables that reflect the economy's growth, the expected behavior of oil prices, and the population growth. Both scenarios (with and without actions) presume an AAGR of 3.3% for the country's economic activity during 2016-2050. As for the itemization foreseen for each of the main productive sectors part of the GDP, the following average annual growth rates are estimated for the prospective period: agriculture and livestock sector 2.9%; mining sector, 3.0%; manufacturing sector, 4.1%; construction sector, 3.3%; and services sector, 3.1%. On the other hand, it is expected a population of 137.5 million inhabitants in 2030, and of 150.8 million in 2050.

In Mexico, the energy demand from the industry, buildings, and transportation can be reduced without any impact on their productivity and competitiveness, thanks to the introduction of new technologies, and the substantial modification on how energy is consumed. These sectors will concentrate 95.9% of the energy final consumption, and 93% of the electricity consumption in 2050.

The Transition Scenario reflects the use of the diverse energy-savings potential in final-consumption sectors, whether about thermal or electric matter. This scenario proposes, in the short and medium term, to apply the existing energy-efficiency measures and stabilize the growth of the energy consumption and, in the long term, perform structural rechanging to transform the industry productive schemes, new infrastructure to give universal access to electric transportation, public and private, in cities, and improvement of the energy performance of residential and commercial buildings.

The fundamental components for reducing the energy demand are the following:

• Significant increase of the energy efficiency of new equipment and systems.

• Increase in the recycling processes of key industries.

• Replacement of currently operating equipment with high-efficiency ones in the industrial and commercial sectors.

• More use of public transportation in urban centers, and maximum reduction in the use of the individual automobile.

• Electrification, as much as possible, of the different transportation means, public as well as private.

105

By sectors, the highest reduction potential in the energy demand is in the transportation sector, while for the industrial one, it is estimated in 4.1%, and in buildings, 35% (see Figure 4.15).

FIGURE 4. 1. REDUCTION POTENTIAL OF THE FINAL ENERGY CONSUMPTION IN THE INDUSTRIAL, TRANSPORTATION, AND BUILDINGS SECTORS BY 2050

(PJ)

Source: SENER y CONUEE.

4.1.1. Energy-Efficiency Measures in the Transportation Sector

The base scenario established by the SENER points out the transportation sector as the most intensive one in energy consumption towards 2050, and will increase approximately in 38.5%. In this scenario, considered as inertial, electricity will represent 0.2% of the energy consumption, while gasolines will remain as the main fuel in this sector, standing for 55.8% of the demand.

Transportation will still demanding energy due to the people's growing needs of mobility, and to the activity required to move merchandise throughout the country. This scenario presumes there will be no diversification in the energy matrix of this sector.

FIGURE 4. 2. ENERGY CONSUMPTION IN THE TRANSPORTATION SECTOR, BASE SCENARIO (PJ)

4,355.5

725.0

1,671.0

1,651.9

3,190.7

393.4

1,661.7

1,135.6

0 2,000 4,000 6,000 8,000

Total

Edificios

Transporte

Industria

Escenario de transición Potencial

2,785.4 3,332.6

1,118.3

41%

50%

35%

42%

0

500

1,000

1,500

2,000

2,500

3,000

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

20

37

20

39

20

41

20

43

20

45

20

47

20

49

Gasolines and naphtha Diesel Kerosene Liquefied gas Electricity Dry gas Fuel oil

106

Source: SENER.

The Transition Scenario lays out that the energy consumption in the transportation sector will decrease at a 0.4% annual rate towards 2050, which will turn into a saving of 1,238 PJ. The main features of this scenario are the following:

• Urban rearrangement, which will lead to the redensification of the cities' downtown zones, reducing the needs of mobility.

• Development of a city structure which will favor a multi-modal mobility, including a further use of public and non-motorized transportation.

• Generalized use of information and communication technologies as tools to facilitate the mobility in cities.

• Growth of the distributed generation of electricity in buildings, including storage systems and electric cars, connected to the electricity grid under the scheme of intelligent grids.

• Massive electrification of transport, both for people and load, public or private.

These measures will allow to reduce the gasoline and diesel demand in about 30.4% by 2050. For that, the electricity consumption in the transportation sector would have to grow at a 15.8% rate average annual between 2015 and 2050. Within this scenario, such growth is slow during the first years, since the development of its related structure will be slow too, for it includes the growing integration of the vehicles, constructing charging stations, adaptation of the electric grid, construction or restoration of new interurban and interstate trains. Because of this electrification of the transportation sector, electricity consumption will display rates far above regarding the ones from the use of traditional fuels (see Figure 4.3).

FIGURE 4. 3. TRANSPORTATION SECTOR ELECTRIFICATION RATE IN THE TRANSITION SCENARIO (Percentage)

Fossil fuels: liquefied gas, gasolines and naphtha, kerosene, diesel, fuel oil, dry gas, and gas turbine. Source: CONUEE.

3.9%

23.2%

19.2%

8.9%

1.1% 1.2%

-2.1%

-4.8%

2010-2020 2020-2030 2030-2040 2040-2050

Electricity Fossil fuels

107

Towards 2015, it is expected that through these actions electricity would be the second most used fuel in the transportation sector, representing 32.6% of this sector's demand, equivalent to 683.7 PJ (see Figure 4.4).

FIGURE 4. 4. TRANSPORTATION SECTOR’S ELECTRICITY CONSUMPTION IN THE TRANSITION SCENARIO

(PJ)


4.1.2. Energy-Efficiency Measures in the Industrial Sector

The industrial sector has had an intensive consumption of energy, especially for the transformation of materials. Nevertheless, the technological transformation of the industry during the last years has modified industrial processes and, thus, its energy intensity. Among other factors, this is due to the sector's necessity to adopt the best practices and increase their productivity and remain competitive in the national and international markets.

During 2015, electricity was the second most used fuel in the industry, accounting for 34% of this sector's energy demand, equivalent to 540 PJ. The most intensive subsectors are the iron and steel, cement, chemistry, mining, and paper industries. In the base scenario, it is expected that electricity will become the most important fuel of the sector, representing 42% of the energy demand by 2050, equivalent to 1,169 PJ. On the contrary, other fuels, like oil products will lose importance, mainly fuel oil (see Figure 4.5).

3.9 4.3 6.3 50.4

292.5

683.7

1,917.0

2,274.8

2,534.6

2,849.6

2,309.3

1,411.4

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2005 2010 2020 2030 2040 2050

Elec

trci

ty c

onsu

mpt

ion

( PJ)

Electricity Fossil fuels

108

FIGURE 4. 5. INDUSTRIAL SECTOR ENERGY CONSUMPTION IN THE BASE SCENARIO (PJ)

Source: SENER

In this scenario, the rise on the electricity consumption will be fostered by the increasing activity of less intensive industrial branches and which use electricity as their main energy source, such as the automotive industry, which has increased its share in the GDP during the past years.

The Transition Scenario lays out measures seeking to rise the energy efficiency in the different industries, and which apply by and large, to big, medium-size, and small facilities. The main energy-efficiency measures which could foster this scenario are the following:

• Replacement of inefficient or obsolete equipment and systems.

• Automation of manufacturing processes.

• Implementation of the Energy Management Systems (SGEs, for its Spanish acronym).

• Increased optimization of products’ design to reduce the need of raw materials and matters.

• Increased recycling of industrial residues and derivative products.

• Use of the cogeneration potentials to simultaneously produce heat and electricity.

• Development of energy-performance standards for equipment and systems.

If this scenario goes into effect, during 2015-2050, the total energy consumption of the industry is expected to increase barely 0.1% annual average. Electricity will grow at a 0.5% rate annual average, while fuels (coal, oil products, and natural gas) will grow at 0.02%, becoming the main source of energy in the industrial sector, ahead of natural gas by 2050 (see Figure 4.6).

0

500

1,000

1,500

2,000

2,500

3,000

2010 2020 2030 2040 2050

Ener

gy c

onsu

mpt

ion

(PJ)

Electricity Dry gas Coke Coal Oil products Sugarcane bagasse Solar power

109

FIGURE 4. 6. INDUSTRIAL SECTOR ENERGY CONSUMPTION IN THE TRANSITION SCENARIO (PJ)


4.1.3. Energy-Efficiency Measures in Buildings

The buildings sector includes two categories: housing (individual and vertical), and commercial buildings. In Mexico, this sector is second in electricity consumption, behind industry. Residential buildings demand most of this sector's energy, approximately 82.2% of the total energy, and 72% of electricity.

In the behavior of buildings' energy consumption in Mexico many factors converge, such as: restoration in buildings, whether horizontal or vertical ones; the weather of the locality where they are located, which define their heating, ventilation, and air-conditioning (HVAC) needs; the technologies used in the enclosure, and how they are integrated into its design; and the technologies of the different equipment used to fulfill the requirements of lighting, cooling, comfort, among other.

Contrary to what happens in the industry and transportation, the technologies which allow a greater efficiency are already present at the market, and it is only necessary to develop and implant public policies which boost their application.

In this sense, the Transition Scenario lays out the execution of a series of policies and actions estimated to impulse the energy efficiency of the buildings sector in Mexico:

• General obligation to comply with the codes to preserve energy for every new building in the country.

• Design and application of supporting schemes which will allow the renovation of equipment and systems using energy in commercial, public, and residential buildings.

• Maintain, widen, and strengthen the Official Mexican Standards system on energy efficiency for products and systems.

• Take advantage of the development of Information Technologies (IT) to optimize the use of energy in buildings.

477.8613.7 666.8 651.2 633.7

875.5

1,030.31,084.7 1,051.9 1,017.4

43.4

25.3

26.725.0

22.2

2010 2020 2030 2040 2050

Electricity Fuels Renewable

37.9%

60.8%

1.3%

2050

110

• Mandate energy labeling for buildings.

4.2. Electricity Consumption

Nowadays, there are still big challenges for the electricity sector: the increasing demand for electricity, the need of generating electricity from clean energies, and the imminent necessity to foster the integration of the electric system.

Electricity has increasingly become an important fuel, growing 2.5 times in the whole world for the past 30 years31. According to the International Electrotechnical Commission (IEC), electricity is the energy form easiest to control, transport, and distribute; it is the cleanest at it usage point regarding other energy sources, thereby, it will be the changing factor32 which will contribute the most in mitigating climate change in the world.

Pursuant to the variables established, in the base scenario electricity consumption is estimated to increase at an AAGR of 1.8% between 2015 and 2050. During the analyzed period, the Transition Scenario would present an AAGR of 1.7%, which is 4.4% below the base scenario by 2050.

The Energy Transition Scenario considers the impulse of innovative and efficient technologies, and the modification of the way how energy is consumed in the final-consumption sectors. In this sense, this scenario outlined by CONUEE, lays out long-term technological trends essential to fulfill the national goals of decreasing the final-consumption energy intensity at an annual rate of 1.9% between 2018 and 2030, and of 3.7% between 2031 and 2050.

Given that the measures considered in this scenario require structural changes in the infrastructure, such as electric transportation, buildings rechanging, and the application of more integrated productive processes, the result will be a larger electrification of the energy consumption.

FIGURE 4. 7. ELECTRICITY CONSUMPTION IN THE FINAL-CONSUMPTION SECTOR FOR BOTH SCENARIOS

31 British Petroleum, BP Statistical Review of World Energy June 2016. 32 International Electrotechnical Commission, http://www.iec.ch/whitepaper/pdf/iecWP-energychallenge-LR-en-pdf

16%19% 20% 21% 22%

16%18% 18%

23%

33%

1,593.8

766.0

1,667.1

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2010 2020 2030 2040 2050

% o

f el

ectr

icit

y in

the

ene

rgy

mat

rix

Elec

tric

ity

cons

umpt

ion

(PJ)

% Base Scenario % Transition Scenario Transition Scenario Base Scenario

111

Source: SENER y CONUEE

The consumption of electricity in the transportation sector would increase to 683.7 PJ, different from the 5.1 PJ of the base scenario.

FIGURE 4. 8. ELECTRICITY CONSUMPTION IN THE TRANSITION SCENARIO BY SECTOR (PJ)

Source: CONUEE

If this trend continues, the total electricity consumption would be equivalent to 33% of the final energy consumption by 2050, compared with the 22% of the base scenario.

0

200

400

600

800

1,000

1,200

1,400

1,600

2010 2015 2020 2025 2030 2035 2040 2045 2050

Elec

tric

ity

cons

umpt

ion

(PJ)

Transportation Industry Buildings

112

Glossary

Additional total capacity Addition of the engaged capacity plus the non-engaged one.

Availability Factor which indicates the percentage of time in which a generating unit was available for service, out of its being or not required to operate. This index is calculated by dividing with the energy produced annually between the unit with its available capacity and the energy it would produce if it were used at 100%.

Average Demand Equal to the electricity needed in MWh during a year divided between the number of hours of the year (MWh/h)

Base Demand Minimal hourly demand within a given period (this outlook indicates the average of minimum daily demands).

Bases of the electricity market General administrative provisions containing the principles of design and operation of the Electricity Wholesale Market including auctions referred in the Electricity Industry Law.

Capacity Maximum power at which energy can be supplied to a generating unit, a power plant, or an electric device, and is specified by the manufacturer of the user.

Capacity additions through modernization

Additional capacity from an existing power plant through improvements on generating processes or through incorporating technological advances.

Capacity additions through rehabilitation

Capacity that could be recovered through programs for repairing or replacing damaged components in power plants whose capacity has been degraded.

CFE power plant Power plant which, with the entry into force of the Law for the Electric Industry. It is owned by the bodies, entities, or state enterprises and is under operating conditions, or whose construction and delivery is included in the Expenditure Budget of the Federation under the modality of direct investment.

113

Charge Power required by consumption devices which is measured in electrical units (watts); each time a user turns on a switch for connecting or disconnecting an electric appliance produces a variation in its electricity demands.

Clean Energies Certificate Certificate issued by the CRE which appoints the generation of a defined amount of electricity through renewable sources or clean technologies and which is used to comply with the mandatory requirements related to the consumption of Load Centers.

Cogeneration Procedure through which one can simultaneously obtain electric power and useful thermal power (steam, hot water, etc.). As a modality, it is the jointly generation of electric power with steam and/or secondary thermal power of other kind. It can be the direct or indirect electric power generation from residual thermal energy coming from processes using fuels, or vice versa.

Consumption Power delivered to users by public-service generating sources (CFE, LFC, and IPP), self-supply projects and cogeneration, and through imports contracts.

Continuity To serve the End Users' electricity demand with an interruption frequency lower than the one established in the criteria issued by the CRE.

Controllable Demand Electricity demand which End Users offer to reduce according to the Markets Rules.

Demand Power to which the needed electricity shall be supplied in a given instant. The average value within a given interval is equal to the energy needed between the numbers of time units of the interval (MWh/h).

De-rating Mandatory reduction of a unit's capacity as a consequence of a failure or deterioration of one of its components, or due to any other limiting condition.

Diversity Factor Relation between the addition of the individual maximum demands of two or more loads and the joint maximum demand. A factor more than one means that maximum demands do not occur at the same time.

114

Dry Gas NG containing smaller amounts of hydrocarbons heavier than methane. It is also obtained from processing plants.

Effective capacity Capacity available within a generating unit defined by environmental conditions and the physical state of its facilities, and corresponds to the plate capacity corrected as an effect of permanent degradations caused by deterioration or worsening of the equipment part of the unit.

Electricity Coverage Agreement between the Market Participants through which they undertake to trade electricity or Associated Products, or to comply with payments based on their prices, which shall be executed in a fixed time or date in the future.

Electricity Sector Group of participants, public and private, who intervene in the processes of generation, transmission, and distribution of electricity.

Export (modality) Electricity destined to foreign trade through projects like cogeneration, independent production, and small production complying with the legal and ruling provisions applicable in each case.

Permit holders in this modality are not allowed to dispose of the electricity that has been generated within the national territory, unless they are granted a permit from the CRE for performing such activity under another modality.

Financial Energy Transmission Rights

Correlative right and duty of receiving or paying the difference resulting from the congestion components of Local Marginal Pricing in two nodes of the Electric National System. For documenting the Financial Energy Transmission Rights, those bank statements issued by the CENACE will be writs of execution.

Grid Group of elements interconnected for the transmission, transformation, and compensation of energy transportation.

Gross capacity Effective capacity within a unit, power plant, or generating system.

Gross Generation Power generated in electric power plants, measured in the generators' terminals. A small amount of this energy is used for feeding auxiliary equipment within that same plant (own uses) and the rest is delivered to the transmission grid (net generation).

115

Gross Power Power to be supplied through the various capacity resources within the electric system (self-generation, imports, self-suppliers’ surpluses), including power from sales, transmission losses, own uses from power plants, and power to export.

Import (modality) Purchase of energy from generating plants abroad through legal acts signed between the electricity supplier and its consumer.

Independent Production Electricity generation coming from a power plant with a capacity for over 30 MW, exclusively destined to be sold to CFE or - if permitted by the Secretariat of Energy under the terms of the Electric Power Public Service Law -, for exports.

Interconnected National System Regional electrical systems which share through their connections their resources of capacity, and their economic, trustable, and efficient operation as a group.

Leasing Financing in which the leaser (client) agrees to pay an amount of money to the leasing company for the right of using the equipment during a given period.

Load center Facilities and equipment which, in a specific site, enables that an end user is supplied with electricity.

Load Curve Chart displaying the load's magnitude throughout a defined period.

Load Factor Relation between average demand and the value of the maximum demand recorded during a given period. The load factor approaches the unit as the load curve is more plane. A load factor closer to the unit represents a more intensive and continuous use of the equipment.

Losses Term applied to the energy (MWh) or to the electric power (MW) lost in the transmission and distribution processes. Losses are due mainly to the transformation of some amount of energy into dissipated heat within electrical conductors or appliances.

116

Maximum Coincident Demand Maximum demand observed in an interconnected system during a given period, and which is smaller than the addition of the maximum demands of the areas in this system, since the latter ones happen at different moments due to the regional and seasonal diversity and to electricity consumption patterns.

Maximum Demand Maximum value of hourly demands in the year (MWh/h).

Maximum Non-Coincident Demand

The addition of maximum demands within the areas of an electricity system, without considering the time in which they occur. The maximum non-coincident demand is larger or equal to the maximum coincident demand.

Megawatt (MW) Unit of power equal to 1,000,000 Watts.

Megawatt hour (MWh) Unit of power. In electricity, it is the power consumed by a one MW load during an hour.

Meshed system An electrical system is considered strongly meshed when its substations are interconnected through multiple connections, which enable them to prevent their stable operation from the sudden disconnection of one of their elements. It is a redundant measure of the system.

National Electrical System (SEN, for its Spanish acronym)

Integrated by public and private participants connected to the electricity national grid and which intervene in the generation, transmission, and distribution of electricity.

Natural Gas (NG) Hydrocarbons blend mainly formed by the methane found in the fields as a solution or in a gas phase with crude oil, or in oil-free fields.

Natural Liquefied Gas (NLG) NG mainly formed by methane (CH4) which has been liquefied through pressurization and cooling, to enable its transportation and storage.

Net capacity Gross capacity of a unit, power plants, or electric system to which have been subtracted the capacity to be used by generating plants.

117

Net Generation Electricity delivered to a transmission grid and which is equal to the gross generation minus the energy used for the plant's own uses.

Net Power Total power delivered into the grid, and which equals the gross generation from the system's power plants plus the imported power from other electric systems, plus the powered purchased from self-suppliers and co-generators.

Non-engaged additional capacity Additional capacity needed to meet the future demand whose construction or tendering process has not yet begun. According to the LSPEE and its Guideline, these capacity additions might be covered with private generation projects o by the CFE itself.

Operating Reserve Margin Difference between the capacity available and the maximum coincident demand of an electric system, expressed as percentage of the maximum demand, and where the capacity available is equal to the system's effective capacity, minus the capacity out of service due to maintenance, failures, and external events.

Operational Control of the Electric National System

Issuing of instructions related to:

• Allocation and dispatch of Power Plants and of the Controllable Demand.

• Operation of the Transmission National Grid corresponding to the Electric Wholesale Market, and

• Operation of the Distribution General Grids which correspond to the Electric Wholesale Market.

Permit holder Title holder of permits to generate, export, or import electricity.

Permit-holders power pant Power plant which, with the entry into force of the Law for the Electric Industry: it is included in a permission for generating electricity under the modality of independent production, or whose construction and operation has been included in the Expenditure Budget of the Federation under the modality of conditioned investment.

Photovoltaic Solar Power (Photovoltaics)

It is defined from the "photovoltaic effect", which refers to photons of light exciting electrons into a higher state of energy, allowing them to act as charge carriers for an electric current.

118

Plant Factor Indicates the degree of usage of the generating units’ capacity during a given period. It is calculated by dividing the average generation between its effective capacities.

Plate capacity It is the capacity defined by the manufacturer in the plate of the generating unit or electricity device. This capacity is often obtained when the unit is relatively new and operating under design conditions.

Pollutant Emissions Certificate

Certificate issued by the CRE to be sold in the Wholesale Electricity Market and is used to comply with the mandatory requirements for greenhouse effect gases produced by power plants.

Power Plant Facilities and equipment which, in a specific site, enables the generation of electricity and related products.

Projects by private parties It replaces the figure of permit holders when the Electric Industry Law came into force.

Reliability Ability of the Electrical National System to meet the electricity demand of End Users, according to the criteria issued by the CRE.

Remote self-supply Supply in charge of self-supply projects located in a different site from the generating plan through a public service transmission grid.

Reserve Margin Difference between the effective capacity and the maximum coincident demand of an electric system, expressed as percentage of the maximum demand.

Retiring capacity Capacity to be retired throughout the period, due to termination of lifespan or economic span of the facilities, or to expiration of purchase contracts of capacity.

Self-supply Supply of the electricity requirements from members of a private association through a power generating plant of their own. As a modality defined by CFE it is understood as: electricity generation for self-supply consumption provided that such energy is destined to meet the needs of individuals or legal entities and result in no damage to the country.

119

Self-supply project Development of a generating unit constructed by private parties, in order to supply its own electricity requirements or those between the members of an association of individuals.

Small production Electric power generation destined to:

Be totally sold to CFE, and whose projects cannot have a total capacity bigger than 30 MW within a given are; or to the self-supply of small rural communities or isolated areas that are not served, and whose projects cannot exceed 1 MW; or to exports, within the maximum limit of 30 MW.

Stored Power Potential power susceptible to become electricity in a hydroelectric plant, regarding the useful volume of stored water and the specific consumption for energy conversion.

Substation Group of electrical equipment localized in the same place having the necessary buildings for the conversion and transformation of electricity at a different tension level, and for the connection between two or more circuits.

Supplier Company in charge of supplying electricity in Mexico. Federal Electricity Commission

Sweet Gas NG which comes up free of acid gases from some non-associated gas fields or that have been processed in sweetening plants.

Synchronisms The way in which all the generators connected to an alternating current grid shall remain operating to ensure the stable operation of the electric system. Under this way of operating, the electric speed of each generator (angular speed of the rotor multiplied by the number of pole-pairs) remains equal to the angular frequency of the grid voltage in the connection point.

Thermal Solar Power Thermal solar technology produces power by concentrating solar array for heating and producing water steam which goes through a turbine, just in the same way it is done in a thermal or combined cycle power plant.

Trader Title holder of a Market Participant contract whose purpose is to perform trading activities.

120

Transmission capacity Maximum power than tan be transmitted through a transmission line, considering operating technical restrictions like: thermal limit, voltage drop, stability limit, etc.

Unavailability State where the generating unit is totally or partially disabled and cannot supply electric power due to a programmed eventuality as: maintenance, failure, capacity de-rating, and/or external events.

Unavailability due to de-rating Factor which points out the percentage of time a generating unit or plant de-rates its maximum power, without being disconnected, due to working problems on one of its components.

Unavailability due to external events

Index of the amount of time a generating unit is out of service due to an external event like: failures in transmission lines, natural phenomena, lack of fuel, etc.

Unavailability due to failures Factor which points out the percentage of time a generating unit or plant is out of service due to the decommissioning of a generating unit, due to failures in the plant's equipment.

Unavailability due to maintenance

Factor which points out the percentage of time a generating unit was unavailable due to stoppages for performing works for preserving the main equipment.

Voltage Electromotive force which expresses the potential difference between two points in an electrical field and is measured in volts.

121

Acronyms33

AAGR Average annual growth rate

ABWR Advanced Boiling Water Reactor

APF Federal Public Administration

AT High Tension

BP British Petroleum

BWR Boiling Water Reactor

CAC Capacity of self-supply and cogeneration plants

CAR Coal-fired power plant

CAT Leasing-Transference Construction

CC Combined Cycle

CENACE National Energy Control Center

CFE Federal Electricity Commission

CI Internal Combustion

CNA Water National Commission

CO2 Carbon Dioxide

CONAPO Population National Council

CONUEE National Commission for the efficient use of energy

COPAR Reference costs and parameters for the formulation of investment projects

CRE Energy Regulatory Commission

CSP Capacity of public service plants

CTCP Total cost in the short term

DAC High-consumption house tariff

DAL Locally self-supplied demand

DAR Remote self-supplied demand

DOE Department of Energy 33 Most of these initials correspond to the initials in their Spanish name.

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DOF Official Journal of the Federation

DSP Public-service users demand

EDF Électricité de France

EIA Energy Information Administration

EMA Accreditation Mexican Entity

EOL Wind-power plant

EPE El Paso Electric Company

ERCOT Electric Reliability Council of Texas

FBR Fast Breeder Reactor

Fide Trust for electricity saving

FRCC Florida Reliability Coordinating Council

GCR Gas Cooled Reactor

GDP Gross Domestic Product

GEO Geothermal power plant

GW Gigawatt

GWh Gigawatt-hour

HID Hydroelectric

IAEA International Atomic Energy Agency

IEA International Energy Agency

IEP Independent Energy Producer

IIE Institute for Electrical Investigations

IMP Mexican Petroleum Institute

km-c Kilometer-circuit

kV Kilovolt

kW Kilowatt

kWh Kilowatt-hour

LNG Liquefied Natural Gas

LSPEE Public Service Law of the Electricity Sector

123

LWGR Light Water Graphite Reactor

MMCFD Millions of cubic feet per day

MR Reserve Margin

MRO Operative Reserve Margin

MT Medium tension

MVA Megavolt ampere

MW Megawatt

MWe Electric megawatt

MWh Megawatt-hour

n.a. Not available

NCG New Clean Generation

NERC North American Electric Reliability Corporation

NOM Official Mexican Standard

NPCC Northeast Power Coordinating Council

NTG New Generation Technologies

OECD Organization for Economic Co-operation and Development

OLADE Latin America Energy Organization

OPF Financed Public Work

OS Open Season

PEF Expenditure Budget of the Federation

PEMEX Mexican Petroleums

PHWR Pressurized Heavy Water Reactor

PRC Capacity requirements program

PRIS Power Reactor Information System

PRODESEN Development Program for the National Electricity System

PRONASE National Program for the Sustainable Use of Energy

PRIS Power Reactor Information System

PWR Pressurized Water Reactor

124

R/P Ratio reserves-production

SE Secretariat of Economy

SEN Electric National System

SENER Secretariat of Energy

SERC Southeastern Electric Reliability Council

SIN National Interconnected System

SOx Sulfur oxides

SPP Southwest Power Pool

TC Conventional Thermal

TG Gas turbine

TGM Mobile gas turbine

TWh Terawatt-hour

USA United States of America

VFT Variable Frequency Transformer

WECC Western Electricity Coordinating Council

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References

Programa de Desarrollo del Sector Eléctrico Nacional, 2016-2030, SENER, México D.F., 2015.

Costos y Parámetros de Referencia para la Formulación de Proyectos de Inversión 2015. (COPAR - generación), Comisión Federal de Electricidad, México D.F., 2015.

Catálogo de Unidades Generadoras en Operación, 2015, Comisión Federal de Electricidad, México D.F., 2015.

International Energy Statistics, Energy Information Administration, U.S. Department of Energy, Washington, D.C., 2016.

World Economic Outlook, 2016, Fondo Monetario Internacional FMI, Washington, D.C. 2016.

126

International websites of general and specific interest:

http://energy.gov U.S. Department of Energy

http://www.eia.gov U.S. Energy Information Administration

http://www.nrel.gov National Renewable Energy Laboratory

http://www.iea.org International Energy Agency

http://www.iaea.org International Atomic Energy Agency

http://www.imf.org/external/index.htm Fondo Monetario Internacional

http://www.oecd.org Organización para la Cooperación y el Desarrollo Económico

http://www.worldenergy.org Consejo Mundial de Energía

http://www.olade.org.ec/intro Organización Latinoamericana de Energía

http://www.wwindea.org/home/index.php World Wind Energy Association

http://www.gwec.net Global Wind Energy Council

http://www.geothermal-energy.org International Geothermal Association

http://www.solarpaces.org/inicio.php Solar Power and Chemical Energy Systems

127

Explanatory notes:

• Totals of numerical or percentage data within the text, tables, charts, graphics or any figure, might not coincide with exactitude due to the rounding up.

• The information corresponding to the last historic year is subjected to afterward reviews.

• Just as in the case of totals of numerical data, the manual calculation of average annual growth rates may not coincide with the recorded values due to the rounding up.

• Within the Independent Energy Producer (IEP) modality, the figures recorded under the concept authorized capacity and operating capacity may not necessarily coincide with those recorded under the concept gross capacity hired by CFE.

References for comments

Readers interested in making comments, remarks, or enquiries may address to:

Subsecretaría de Planeación y Transición Energética

Secretariat of Energy

Insurgentes Sur 890, piso 3, Col. del Valle

México D.F. 03100

Tel: +(5255) 5000-6000 ext. 2217

Publication coordination:

Dirección General de Planeación e Información Energéticas

Tel: +(5255) 5000-6000 ext. 2477, 2217, 2097,2207

E-mail: [email protected]

[email protected]

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3. Electricity Sector - gob.mx...Administrative Support: María de la Paz León Femat, Maricela de Guadalupe Novelo Manrique