Mexico is working towards making its power network clean, efficient and resilient. Under its Plan Nacional de Desarrollo (PND) 2019–2024 or National Development Plan 2019–2024, it envisages promoting sustainable development by involving communities in the production of energy from renewable sources to electrify about two million inhabitants of small, isolated communities in the country. This has led to a shift in the areas of focus of the Secretaría de Energía (SENER) or Ministry of Energy. The ministry is now emphasising distributed generation (DG), mainly for the electrification of isolated or backward areas, rather than investing in large transmission projects to connect them to the national grid. The DG installation proposal in Mexico considers states with municipalities that have less than 2,500 inhabitants (rural communities), have a higher percentage of people living in poverty, and do not have electricity supply.
This also follows the optimistic plans of the country to increase the share of clean energy sources in the total generation mix to 54.2 per cent by 2036, including battery energy storage (BES), hydrogen-based combined cycle power plants or central de ciclo combinado (CCC), and solar photovoltaic (PV)-based DG capacity. The rising share of intermittent generation from clean energy projects also poses issues for the existing traditional grid. To deal with this, SENER is promoting BES capacity and offers tax benefits for BES-based clean DG projects.
Following this, SENER recently published the Programa de Desarrollo del Sistema Eléctrico Nacional (PRODESEN) 2022–36 or the National Electric System Development Plan 2022–36, with an emphasis on DG, BES and smart grids. Under PRODESEN 2022–36, SENER plans to add over 56 GW of generation capacity, including 9 GW (16 per cent) of DG capacity, and 4.6 GW (8.2 per cent) of BES capacity. Although BES integration is not being considered in the short term (only 72 MW during 2022–25), it is expected that with the change in inverter, its share in the total generation capacity is likely to increase. About 40 per cent of the total planned capacity will be based on clean energy sources.
As per its analysis, the rising share of DG is also likely to reduce the net electricity demand handled by Red Nacional de Transmisión (RNT) or National Transmission Network, and Redes Generales de Distribución or General Distribution Network (RGD), and thus likely to impact their planning and modernisation requirements as well. In the planning scenario for PRODESEN 2022–36, of the total net consumption of 4,80,537 GWh, DG is likely to contribute 15,156 GWh, representing a 3 per cent reduction in the net consumption handled by RNT and RGD. Similarly, under the alternative scenario, rising production of DG is likely to reduce net energy consumption handled by RNT and RGD in 2036 by 4.9 per cent. These estimates do not include savings in the transmission and distribution losses.
In accordance with this generation type and capacity, RNT and associated RGD network expansion plans have also been mentioned in PRODESEN 2022–36. As per the SENER analysis, more than 5,058 circuit km (ct. km) of line length and about 30 GVA of substation capacity will be added in the country during 2022–36. This includes 15 new RNT projects and 17 new RGD projects with a cumulative capacity of 136 ct. km and 2,007 MVA. SENER, under the latest PRODESEN, has maintained its focus on the upgrade and modernisation of the transmission network, instead of investing in large transmission projects.
Planned generation capacity under PRODESEN 2022–36
PRODESEN includes the Programa Indicativo para la Instalación y Retiro de Centrales Eléctricas (PIIRCE) or Indicative Program for the Installation and Removal of Power Plants, under which SENER plans the power generation network for the studied period. For the period 2022–36, SENER plans to add over 56 GW of generation capacity, the majority of which will be based on clean energy sources. This generation capacity addition has been divided into two periods, 2022–25, and 2026–36.
For the 2022–2025 period, projects with an interconnection contract and strategic infrastructure projects (necessary to comply with the national energy policy of the PND 2019–2024) are considered. Starting from 2026, projects resulting from the medium- and long-term optimisation process are also integrated, whose objective is to guarantee the efficiency, reliability, continuity and safety of the SEN, as well as the fulfillment of the clean energy goals of the country, so as to minimise the cost of operation of the Sistema Eléctrico Nacional (SEN) or National Electric System in the medium- and long-terms.
During 2022-25, 16,568 MW of generation capacity will be added, and from the period 2026 to 2036, PIIRCE estimates an incorporation of 39,510 MW of capacity, including the DG capacity based on solar PV (6,679 MW).
About half the planned capacity under PRODESEN 2022–36 is clean energy-based. To maintain the stability of the SEN amidst the rising share of intermittent energy generation capacity, SENER is also focusing on CCCs and internal combustion power plants to maintain grid flexibility. These projects have been categorised as strategic infrastructure projects (necessary to comply with the national energy policy of the PND 2019–2024). The incorporation of hydrogen in the CCCs will reduce the consumption of natural gas in these power plants.
During 2022–25, 5,671 MW of CCCs with natural gas and 1,508 MW of internal combustion is planned. During 2026–36, 3,481 MW of CCC capacity, 4,366 MW of hydrogen-based CCC capacity, and 1,340 MW of cogeneration capacity have been planned. Together, these account for about 30 per cent of the total planned capacity.
In this PIIRCE 2022–2036, the incorporation of storage systems is considered (4,505 MW during 2026–2036) to increase the operational flexibility and reliability of SEN.
For DG capacity, two growth scenarios (planning and greater dynamism or alternate) were analysed under PRODESEN 2022–36. For the planning scenario, the installed capacity of DG is estimated to reach 4,964 MW by 2026, with a growth rate of 146.4 per cent with respect to its existing capacity as of 2021, with an average annual growth of 590 MW. In the case of the alternate scenario, it is estimated that by 2026 there will be an installed capacity of 6,728 MW and an average annual growth of 943 MW.
Generation capacity replacement
During 2022–36, 3,447 MW of existing capacity will be replaced as part of the strategy to strengthen the national energy policy. This includes 3,433 MW of thermal capacity and 14 MW of geothermal units. During 2024 and 2025, majority of the generation capacity will be replaced.
SENER has set some optimistic targets for the improvement of the country’s power network under PRODESEN 2022–36. It has, however, been criticised for incorporating fuels with a high social, environmental and climate impact, such as gas and fuel oil, mainly for CCC projects. The government has been favouring fossil sources such as gas and fuel oil for power generation. According to data from the annual reports of CFE from 2020 to 2021, the share of energy generation from fuel oil increased from 5.65 per cent to 13.8 per cent, representing an annual increase of 144 per cent. This is despite the fact that this type of fuel is more expensive, less efficient and has greater environmental impact.
Further, the political and legislative uncertainty in the country has always affected its electricity sector. Recently, the Mexican President proposed changes to the Ley de la Industria Eléctrica (LIE) or Electric Industry Law, including modifying the grid dispatch rules to prioritise electricity generated by CFE, granting clean energy certificates (CELs) to CFE power plants, empowering Mexico’s energy regulatory commission, Comisión Reguladora de Energía (CRE), to revoke generation permits granted to private parties, and promote the review of long-term power purchase contracts entered into with investors. Senators, Comisión Federal de Competencia Económica (COFECE) or Federal Economic Competition Commission (COFECE) and the State of Colima pleaded against these reforms in Suprema Corte de Justicia de la Nación (SCJN) or Supreme Court of Justice of the Nation, arguing that the proposed LIE reforms are unconstitutional as they contradict the established jurisdiction, the free market, and access principles of the energy market. If implemented, these changes will impact the private sector participation in the country’s generation network, and thus affect the transmission and distribution network financing capacity of CFE.