Browsing by Subject "Energy reform"
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Item Cost assessment of clean generation incentives in Mexico for utility scale solar photovoltaic projects(2017-05) De la Fuente Gutierrez de Quevedo, Maria F; Spence, David B.Mexico recently opened the electric generation sector to competition. In addition, regulations to reach clean generation goals were implemented. These regulations include Clean Energy Certificates (CELs) obligations (similar to the Renewable Portfolio Standards in the United States), and the obligation of electricity suppliers to go into long term contracts with generators to guarantee the required electric energy and CELs supply. These contracts are procured through an auction mechanism. The purpose of this research is to i) estimate the cost of reaching the goals through the implemented policy, and ii) evaluate if the projects could be economically feasible by selling electricity in the short term market, without the incentives. This research looked at three different utility scale solar photovoltaic projects that will operate under long term contracts for the provision of electric energy and CELs. The revenues of the projects under the contract terms were modeled and contrasted with projected Locational Marginal Prices (LMPs). In addition, a discounted cash flow analysis was done for the three projects, both under long term contract conditions and short term market conditions. Two projects were found to be financially feasible under short term market conditions. For these projects, the LMP was between $1.34 and $4.03 USD/MWh higher than the long term contract price. One project was not feasible under short term market conditions. For this project to be feasible in the short term market, the LMPs needed to be over $1.49 USD/MWh higher than the projections, while the price paid in the contract for this project was approximately $1.29 USD/MWh higher than the projected LMPs. These results show that the policy implemented is efficient, provides benefits to customers, and in some cases to investors. In the cases where the projects were feasible without the incentive, they would have sold their energy for a higher price without the long term contract mechanism. In addition, the project that was not financially feasible under short term market conditions would have needed a higher premium over the LMP price, than the premium achieved through the long term contract.Item The future of electricity prices in Mexico(2016-05) Piazzesi di Vallimosa Zorrilla, Paolo; Spence, David B.; Pierce, Suzanne; Fisher, William L.Mexico passed an historic energy reform in 2014. In the electric sector, the previously vertically integrated state-owned company is now open to competition from private companies in the generation and commercialization of electricity, and a new wholesale electricity market was created. The reform was passed by the PRI administration shortly after returning to power, and its stated goal is to guarantee Mexico’s energy security. The administration predicts that competition and restructuring will result in a more efficient market and lower overall electricity prices for consumer. However, the final outcome is not yet clear. Factors including plummeting oil prices, rushed restructuring of state companies and regulators, a new wholesale market with little initial private participation, and high risks in new electricity contracts create an uncertain future for the price of electricity in Mexico. This document begins with an overview of the energy reform as it relates to the electric sector, describing the restructuring of state actors and their new responsibilities, the newly created wholesale electricity market, and important features of the reform including distributed generation and clean energy certificates. It also includes the relevant legal changes for new private investment in the electric sector. It then analyzes historical trends on the price of electricity, focusing on medium and high voltage rates which do not benefit from government subsidies. It also analyzes trends in the price of natural gas, the main indicator for generation costs in Mexico. These analyses attempt to make a prediction on the medium-term price of electricity in the new wholesale market. Case studies are included for reforms in Argentina and Chile, drawing political and technological lessons to be applied to the Mexican case. The thesis concludes that the energy reform was much needed and long overdue, although the political pressure to enact it before the presidential term is over has led to an imperfect implementation. While there has been no private investment in large capacity plants, investment in renewable energy has been an unexpected success of the reform.