Evolution of the Mexican Energy Market

The Mexico energy reform began in 2013 with the goals of creating an open, transparent and competitive market to reduce electricity prices, increase reliability, and meet clean energy goals. To meet these goals, the state-ran generation owner, CFE, was split into six companies to ensure fair competition; an independent system operator, CENACE, was formed; and auctions for reliability and clean energy have been conducted. As a part of the broader reform, the Energy Transition Law established the requirement for long-term planning (Program of Development of the National Electric System or PRODESEN) and directly mandated clean energy goals. The latest PRODESEN was published in June 2017 and contains even more evidence towards the rapid evolution of the Mexican Energy Market.

The strong demand growth forecasted in Mexico over the next 15 years has decreased with each of the last three PRODESENs. In the latest PRODESEN (2017) the demand growth averages 2.9%, down from 3.4% in the 2016 PRODESEN and 3.6% in the 2015 PRODESEN. Historically, on average from 2005 to 2015, the demand growth has been 2.8%. Despite the reduction in forecasted demand growth, Mexico represents significant demand growth compared to other markets.


Figure 1. Historical and forecasted annual demand growth rates in each PRODESEN. Source

Historical generation is dominated by natural gas and oil which accounts for nearly 68% of all generation, and will remain a significant source of generation in the future. Based on a recent Mexico Energy Outlook by the International Energy Agency (IEA), Mexico has plenty of domestic fuel production capability but the competitive gas prices in the U.S. has led to rapid growth in gas imports from the U.S. (26% average annual increase in recent years) and account for 40% of demand. Future import growth estimates are supported by numerous pipeline projects between the U.S. and Mexico outlined in the PRODESEN. This increasing linkage between U.S. and Mexico markets suggests Henry Hub will be a good predictor in Mexico natural gas prices. With that said, Mexico is taking steps to attempt to boost domestic production and compete with imports by removing price caps on domestic supply. Forecasting these prices given market changes, such as removing price caps, will be a major challenge and have a significant impact on electric market forecasting.


Figure 2. Historical generation by fuel type from 2014 to 2016. Source

Large changes in fifteen-year forecasted capacity expansions have also occurred since the 2015 PRODESEN. The forecasted amount of combined cycle additions has decreased substantially, while wind and solar have increased. Particularly, solar capacity has dramatically increased most likely driven by record low solar prices. Expectations for hydro power have also fallen in each subsequent planning scenario as recent hydro forecasts have softened.


Figure 3. Total projected capacity additions over the fifteen-year PRODESEN forecast. Source

The Mexican energy market has made tremendous strides in a very short time frame from the enactment of laws in 2013 to long-term auctions spurring substantial investment in clean energy. It will be important to capture the changing natural gas market and renewable energy growth for power market forecasting. This can be accomplished through a combination of scenarios and stochastic simulations using a well vetted simulation tool and database. If you would like to schedule a demonstration of our Mexico database please contact sales@epis.com.

Filed under: Hydro Power, Mexico Power Market, Renewable Power, Solar PowerTagged with: , , ,

EPIS Releases Mexico Database for Use with AURORAxmp

Database will provide power market simulation, forecasting and analysis for Mexico and borders

Salt Lake City, Utah – October 26, 2016


EPIS, the market leader in power market simulation, forecasting and analysis, has released the Mexico Wholesale Market (Mercado Eléctrico Mayorista – MEM) database.  The database will be offered as an upgrade or add-in to its industry-leading AURORAxmp software.

Users of the AURORAxmp software, which is known for delivering unparalleled forecasting and analytical productivity, ease of use and support, will now have access to high quality MEM data, pulled from trusted sources. The AURORAxmp MEM database will be regularly updated to reflect the most recent PRODESEN assumptions from SENER and other key sources including: CENACE data, and analyst experience with CFE and other IPPs in Mexico.

“Recent and ongoing energy market reforms in Mexico, coupled with growth expectations, are creating significant investment opportunities in electric power generation and transmission infrastructure. The most recent PRODESEN (2016-2030) report estimates approximately $90B (USD) in generation investment opportunities and $25B (USD) in transmission and distribution investment opportunities,” said Ben Thompson, CEO of EPIS. “Our MEM database allows users of AURORAxmp to forecast and do market simulations, taking into account this important market.”

It is critical that data sources represent the current state of the National Electricity System and its expected evolution over the next 15 or 20 years. These sources need to be updated regularly, scrubbed to fill in gaps and reflect operational realties, and are tested and calibrated in models so it is trustworthy and commercially reliable. The MEM database offers this needed level of quality.

The AURORAxmp MEM database is formatted, tested, and immediately ready to use for high-quality valuations, market analysis (including energy and capacity), as well as congestion and risk analysis of Mexican power markets. It offers cross-border analysis with boundary zones, including Belize, Guatemala, ERCOT (TX), WECC (AZ) and WECC (CAISO).

The AURORAxmp MEM Database includes primary Mexican power grids, including:

  • Sistema Interconectado Nacional (SIN)
  • Baja California (BCA)
  • Baja California Sur (BCS)

The systems are fully represented by 53 zones that align with PRODESEN and include “proxies” for transmission with boundary zones like Belize, Guatemala, ERCOT (TX), WECC (AZ) and WECC (CAISO).

Our product contains the best available data, refined to represent the current system’s operational realities and market including:

  • Gas constraints
  • Hydro conditions
  • Policy initiatives, including clean energy goals
  • Well-documented sources

Highlights include:

  • Generation: Approximately 800 operational generators, with another 150 in advanced development (construction or LT auction winners), including supporting hourly wind and solar profiles for each zone
  • Fuel prices, including Mexico natural gas hubs Mexico diesel prices (driven to an extent by U.S. imports), Houston Ship Channel, Henry Hub, South Texas, Waha, SoCal Border and distillate/residual fuel oil (FO2/FO6), coal and diesel from U.S. EIA, adjusted for Mexican transport costs
  • Transmission: inter-zonal transfer limits (links) and underlying physical lines, with resistance values, from which loss assumptions can be derived

As with any AURORAxmp database, users can expect the highest level of software integration, model control and easy data exchange. Users can easily import and overlay their own assumptions and other data sources for more powerful, customized insights.

About EPIS

EPIS, LLC (www.epis.com) is the developer of AURORAxmp, the leading-edge software for forecasting wholesale power market prices. The company also provides ready-to-use data for North America and Europe, and unrivaled customer support to its growing body of customers worldwide. A variety of organizations-including utilities (large and small), independent power producers (IPPs), developers, traders, energy consultants, regulatory agencies and universities-use AURORAxmp to model power system dispatch and the formation of both nodal and zonal wholesale power prices, and to perform a wide range of associated analytics over the short- and long-term. AURORAxmp is a comprehensive solution to power market modeling needs. Offices are located in Salt Lake City, UT, Tigard, OR and Sandpoint, ID.

Filed under: Data Management, Mexico Power MarketTagged with: , , ,