There is a constant in the electricity industry in the aftermath of the publication of the Law of the Electricity Industry: confusion. Players know there will be clean energy certificates, but they do not know how they work. Likewise, they do not know what criteria will be used when selecting which energy to dispatch. Energy generators are subjected to their own speculations, mainly renewable energy generators who fear competition against natural gas, the so-called “transition fuel” that is likely to stay in the years to come and become a protagonist in the energy matrix.
Jacobo Mekler, President of AMEXHIDRO, is concerned that the Law of the Electricity Industry places renewables and the cogeneration plants on the same playing field, as they will both receive clean energy certificates. “In the past, clean energies were the exclusive domain of renewables, but now combined cycles with carbon capture and cogeneration are seen as clean. These technologies will be competing for the benefits that could have been exclusively given to renewables, and having renewables compete with natural gas at current prices of below US$3 is a difficult task.” AMEXHIDRO successfully negotiated with the government for cogeneration plants to only receive the certificates for the additional energy that is generated, without counting the initial energy output that the facility generated before converting it to cogeneration. Mekler claims this will make renewables more competitive once again.
Just as prior to the Energy Reform, renewables will not enjoy subsidies so that everyone can compete head-to-head. There will no longer be a price and reserved transmission rights for wheeling, since all players will have equal access to the grid. This means all players will compete for the right to use the transmission lines, with priority given to the most affordable forms electricity. Everyone knows dispatching will be based on availability and price, but few people know what this entails, so this is where misinterpretations begin. Many players believe thermoelectric or cogeneration plants will have an advantage over renewables because the costs of their technology are lower. However, this is not the case. Eduardo Meraz, Director of CENACE, clarifies this matter, “Since energy will be dispatched according to the variable cost of generation, thus renewables will be the first to access transmission lines. Renewables use natural resources like the wind or solar irradiation that have low –if any- variable costs, and cost-based dispatch will prioritize energy generation methods that do not have to pay for fossil fuels.” The challenge will be to provide enough transmission infrastructure so that generators do not have to fight over the grid in order to reach consumption points. Congestion will be minimized through proper plans to expand the grid, while financial transmission rights will protect the generators’ revenues in case of congestion.
Although the private sector fears for the competiveness of renewables against the government’s elected champion, natural gas, Leonardo Beltran, the Ministry of Energy’s Undersecretary of the Energy Transition and Planning, believes these concerns are not entirely justified. “It is not a matter of renewables or natural gas; it is about natural gas and renewables.” After all, a diversified energy matrix is the first step to energy security.