On March 30, 2016, we published a blog post introducing the seven winners of the first long-term electricity tender, just after CENACE made the winning companies’ names public. However, just like it happens in Mexican soap operas, the situation took a dramatic turn of events when CENACE decided to repeat the tender after realizing that one of the winning companies, Wind Gestamp, had allegedly presented incorrect data. Furthermore, other participants had also raised concerns about potential failures in the algorithm used by CENACE to include the project’s location into the decision-making process, forcing the technical system operator to readjust its model.

In the second attempt, the results of the long-term auction drew 11 winners and a total of 18 selected proposals.  In addition to Gestamp Wind Mexico, the new results also withdrew Parque Eólico de Reynosa and Alten Energías Renovables from the winning pool. The list of definitive winners was composed of Enel Green Power México, Sol de Insurgentes, SunPower Systems, Recurrent Energy, Jinko Solar, Photoemeris Sustentable, and Vega Solar, which submitted solar energy proposals; and Energía Renovables del Istmo II, Energía Renovable de la Peninsula, Aldesa Energías Renovables, and Consorcio Energía Limpia, which participated with wind energy projects.

Source: Translated from La Razón

Source: Translated from La Razón

Solar energy was the unquestionable winner of the tender, as 12 out of the 18 winning proposals are based on this technology, amounting to 1,771MW of the assigned energy with an average price of US$45.15 per megawatt-hour. The results obtained by solar energy in this first electricity tender enhance Mexico’s position as one of the world’s most attractive solar markets. Wind, on the contrary, experienced a reduction in the amount of megawatts assigned from the first to the second tender, finally amounting to 562MW. Together, the 18 proposals represent 84% of the total energy originally requested by CFE, and 94.6% of the MX$5,380,911 worth of CELs offered in the tender.

A bittersweet success

After the first results were published, renowned international media qualified the first Mexican electricity tender as an undeniable success. However, CENACE and the system’s miscalculations  tarnished the country’s achievement even though the results of the second attempt were also remarkable. According to César Hernández Ochoa, Undersecretary of Electricity, the situation observed by CENACE during the first electricity tender is contemplated in the tendering guidelines but must not be the norm under regular conditions. Moreover, performing the second attempt at the tendering round the night before the results were announced was also seen as a questionable decision from CENACE’s part, as it could raise questions about the process’ transparency. Nonetheless, the operator made the regulations that validate its decision available on its website, as well as the new algorithm that was used in the process.

Despite the extraordinary events, the first long-term electricity tender can be considered successful  in the sense that it managed to allocate most of the energy required by CFE at a lower price than expected. Nonetheless, the Mexican authorities need to learn from the experience and improve the process to avoid the incidence of similar issues in the future. If these type of errors continue to happen in future tenders, the country could be at risk of losing the investors’ trust, missing the business opportunities opened by this reform. Nonetheless, it is expected that Mexico will pass quickly through the learning curve in the electricity market just as it has done in the hydrocarbons sector.

Sources: El Financiero, Sin Embargo, CENACE, Milenio, El Financiero

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