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October 26, 2015

Santiago Barcón[1]

One of the main historical problems that the Mexican National Electrical System has faced is the lack of a clear and precise planning outlook. Without such tool, investment becomes very risky and uncertainty increases, which, as is natural, reduces the appetite of investors.

On June 30, 2015, the Program for the Development of the National Electrical System (PRODESEN for its Spanish acronym) was introduced, but it has many flaws that indicate a lack of dedication and knowledge of the electrical system by those who prepared it. Worse yet, it repeats the mistakes of the Program of Works and Investments of the Electric Sector (POISE for its Spanish acronym) and proposes large and unrealizable investments.

The PRODESEN substitutes the POISE and its launching had generated the expectation of a more precise and reliable planning instrument; nevertheless, it suffers from the same problems. In fact, between the two, the only difference is form: better graphics (less engineering) and better typography in the current version, indicating the work of a design consultant.

Unfortunately, substantially speaking, there are no real changes, and the need to comply with the deadline without a thorough analysis and discussion is clearly visible. It is very concerning that the tool that is intended to guide the development path of the electrical system contains errors and unattainable promises. In my professional work, I always considered the POISE to be painful: both bosses and partners always questioned the poor participation of the industry in the “official” figures; I did not blame them, and they quickly learned how to interpret the POISE and to view it as a letter of intent more than a planning tool.

The most used word in the PRODESEN, with the exception of the electric magnitude numbers, is the word “indicative”. Thus, if something is not carried out there is no problem and it is justifiable. Perhaps the authors would find it useful to learn that the Royal Spanish Academy Dictionary defines “indicative” as “showing or meaning something with signs or signals”. When considering that a plan entails the performance of actions, the word “indicative” becomes highly significant.

But enough comments so let’s begin the analysis. We will start with the generation reserve margin, where a goal of 13% is established. In my opinion, this is low given the poor meshed grid of our transmission system, and it means that if our peak demand is 50 GW, we must have 56.5 GW of generation capacity. Therefore, any value above such number represents unused assets, and even worse, when demand increases in the future, we will have an older and less efficient capacity fleet. It turns out that in 2015 we have a reserve of 28.6% but, according to what is proposed, we will reach 41.7% in 2019. This means that we will have an excess of 28 percentage points, which represent more or less 25 billion dollars in excess assets. This is a real waste of resources, therefore, we should ask the following: Why not postpone investments? Does the current administration really need to cut that many ribbons? Unfortunately, the POISE did not propose anything different. Reviewing history, the plan that covered the period from 2012 to 2016 was based on a 23.6% reserve to reach 17.1% in 2015; we have 10 percentage points more within a period of 3 years, which is clearly ridiculous and reveals that numbers are published to justify budgets.

The PRODESEN mentions the retirement of almost 16 GW of generation capacity, but even then, the reserve margins do not reach the suggested 13% until 2027. Seeing these numbers begs the question: Has anyone really reviewed the proposal? Of course having a larger reserve provides supply security, but there are various alternatives available for that purpose. The first one, which is urgent and reachable, is to build transmission lines more aggressively. If there is anything missing in Mexico, it is a meshed and rigid system. We have 52,185 Kms of transmission lines, defined as those of 230 KV and 400 KV, which only grew 1.1% from 2013 to 2014. The 69 KV to 169 KV lines have a length of 58,860 Kms and grew 1.6% in one year. Building transmission lines allows improvement in the conduction of energy, and consequently, lowers the nodal prices that in the end will define an important part of the wholesale market prices. Additionally, in order to meet the clean energy challenge that we have set, because of its natural intermittence, we require a more robust transmission system. At this time it is not possible to dispatch more electricity from La Ventosa, which has magnificent world-class winds, nor from Sonora, a paradise for the construction of solar photovoltaic plants.

Furthermore, would it be worthwhile to focus on energy efficiency? I recognize that such is not within the scope of the PRODESEN but it is a fundamental concept for the sector and certainly a pending subject of the energy reform. Avoiding the consumption of one negawatt costs the third of one watt. If we consider that in Mexico we can reach 10% minimum savings, which is easily attainable according to various sources such as the ACEEE (American Council for an Energy Efficient Economy) and the IEA (International Energy Agency), and that we have excess reserves, we do not need to invest in new generation for at least 10 years. I know that this kills the illusions of many, but to have idle energy generation plants in a country with economic privation such as ours, is a lack of respect to those in need.

Now, as to the numbers of those requiring the electricity service, such figure points to a 99.8% coverage by 2024, up from the current 98.4%. The PRODESEN indicates that 40 solar plants will be installed in 2015, each with a capacity of 41 KW, in order to support that effort. The problem is that these systems cannot be fully considered as rural electrification. It is commendable that isolated communities will have lighting and the possibility of connecting some televisions and refrigerators, but what really impacts everyday life is having access to power, that is, being able to connect motors for water pumps, small lathes, mills, balers, and so many other activities that are possible due to the modern horse of our era: the electric motor. In addition, batteries and other systems will require considerable and expensive maintenance, which is difficult to implement. Surprisingly, of the 40 projects that will be developed this year, none will be carried out in Chiapas or Oaxaca, two of the poorest states. Only 1 project will be installed in Guerrero, and 27 in Durango.

Regarding the measurement of quality, such is only lightly mentioned in the introduction of the document, which is troubling as it should be the cornerstone of a continuous service within adequate parameters. The User Interruption Time (TIU for its acronym in Spanish) was 37 minutes in 2014 and 60 minutes in 2010, signifying a reduction of 39%. Two comments on these numbers: In the first place, the TIU is a very poor measure of quality as it only keeps track of time, and 37 minutes is not the same as 296 events of 7.5 seconds each; current charges are every day more sensitive, and a computer or a digitally controlled process, which are the majority, are stopped with a supply failure of a few cycles. In second place, I do not believe in the reported data; obviously I do not have the information of the whole National Electrical System, but because of clients’ experiences and my own, such number is not credible.

Unquestionably, we now have a PRODESEN that substitutes the POISE, but it does not provide anything new. Both are so similar that they keep proposing nuclear generation plants, which are seemingly always part of the discussion but never part of the plan. After reading the PRODESEN, I remembered the popular phrase: “The more it seems that things change, the more they stay the same.”

Without a realistic plan that takes the bull by the horns and sets a clear path that gives certainty to investors, we are destined to continue postponing the development of both the energy sector and the economy. Was this not the reason for pushing the energy reform?

[1] President of the magazine Energía Hoy (, and member of the Consultative Committee on Electricity Matters at the Energy Regulatory Commission (CRE).

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