BMI View: The launch of a wholesale power market and the success of the fi rst long-term energy auction in Mexico underscore the multiple business opportunities that w ill be on offer in the country 's reformed power sector. Coupled with robust macroeconomic prospects, significant public investment and our forecast for strong growth in power consumption, these regulatory advancements support our positive outlook for the Mexican power sector over the coming decade - with natural gas and renewables to outperform.
|e/f = BMI estimate/forecast. Source: EIA, BMI, National sources|
|Generation, Total, TWh||311.789||318.304||336.986||355.911||369.678||383.594||396.180|
|Consumption, Net Consumption, TWh||261.1||270.3||285.8||301.5||318.4||331.0||342.6|
|Capacity, Net, MW||68,830.6||71,579.7||76,506.8||81,813.7||83,700.3||85,411.4||87,461.1|
Latest Updates And Structural Trends
Mexico's wholesale electricity market was launched in late January 2016. Under the reformed power market, the state-controlled utility Comision Federal de Electricidad (CFE) - broken down in subsidiaries with budget and functional independence - and private market participants make offers to sell and buy electricity and ancillary services in day-ahead, hour-ahead and real-time markets. In addition, power generators are able to sell electricity to the CFE (via long-term and medium-term auctions to supply regulated clients) or directly to qualified consumers via bilateral contracts. Finally, the new market structure introduces Clean Energy Certificates (CEL).
Solar and wind power dominated Mexico's first long-term energy auction, reinforcing our positive outlook for the Mexican renewables sector. Finalised in early April 2016, the tender awarded 15-year power purchase agreements and 20-year clean energy certificates (CEL) to 12 new solar power projects and five new wind farms. Mexico's low cost of labour, ideal natural conditions and significant domestic manufacturing capacity for solar and wind components allowed companies to present bids at very competitive prices. With power delivery from the projects expected to start in 2018, we have revised up our forecasts for solar and wind power capacity and generation in Mexico over our 10-year forecast period.
On March 29, the agreement for the unbundling of the CFE was published on Mexico's official gazette, with the functional and regional separation of the company expected to be completed in June 2016. Under this regulation, the CFE will be separated in a number of independent companies that will carry out the activities of power generation, transmission, distribution and commercialisation. The units will have functional and regional diversification and will be financially distinct from each other.
The unbundling of the CFE is a crucial step for the success of Mexico's wholesale power market. While competition and efficiency in the market will actually be fostered by the reform only if governing bodies comply with their mandates of avoiding unfair cooperation between the separated units of the CFE, progress in the restructuring process is a positive sign for potential investors in the Mexican power sector. Participation in the market has been relatively limited so far, as it was reported that in late March 2016 only two private generators were competing with the CFE in the spot market, although another three applications were being processed by the CRE.
Underscoring our positive outlook for the Mexican power sector, international investors are giving vast and growing attention to the market in the form of framework financing agreements or direct investment. During April 2016, for instance, Mexico signed a number of Memorandums of Understanding focused on the power sector with South Korea and Germany. In particular, Bancomext (a Mexican state-owned bank and export credit agency) and Germany's development bank KfW agreed to allocate EUR80mn to finance the introduction of new solar and wind power technology in Mexico, and EUR100mn for the promotion of clean energy and energy efficiency in the country.
Mexico's positive macroeconomic trajectory supports our forecast for strong growth in power consumption over the next ten years. BMI's Country Risk team remains optimistic toward Mexico's economic growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.
The Mexico Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Mexico Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Mexico to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Mexico's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Mexico.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).