CLEAN ENERGY IN MESSICO FILIPPO BERARDI Climate Change Specialist www.fomin.org

2.

1. CHI SIAMO AL MIF?

2. CLIMATESCOPE

3. CLEAN ENERGY IN MESSICO

4. LA RIFORMA ENERGETICA (ENGLISH)

5. PROGETTO SMART METERS (ENGLISH)

6. Q&A

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3.

1. CHI SIAMO AL MIF?

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4.

1.1 IL MULTILATERAL INVESTMENT FUND

Membro dell’Inter-American Development Bank Group (IDB)

La maggiore fonte di assistenza tecnica verso il settore privato in LAC

Un laboratorio per l’innovazione per testare e diffondere nuovi business models

Vari strumenti finanziari usati, che includono finanziamenti non rimborsabili per assisenza tecnica, prestiti e investimenti diretti

Focus sullo sviluppo della PMI, famiglie a basso ingresso e protezione ambiente

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5.

1.2 MIF NEL CONTESTO DEL GRUPPO BID

x

La principale fonte di

fondi per l’assistenza tecnica per PMI e ONG in

LAC

La principale fonte di finanza per lo sviluppo verso

Governi in America Latina e Caribe (LAC)

Lo sportello del settore privato del Gruppo

BID, fornisce finanziamenti per lo sviluppo di progetti e

imprese di medie dimensioni in LAC.

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6.

1.3 IMPULSO PER L’ ATTIVITÀ PRIVATA

Il MIF ha un ruolo chiave nel facilitare accesso a finanziamenti per tecnologie verdi in LAC…

– Creando green technology funds per aumentare le possibilita di accesso al finanziamento per aziende di clean tech

– Ponendo le basi per mobilitare (micro) finanziamenti affinche’ PMI e famiglie a basso ingresso possano avere accesso a prodotti o servizi verdi

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7.

1.4 IMPULSO PER L’ ATTIVITÀ PRIVATA

… e nel sviluppare anelli mancanti

nella catena di valore per clean tech:

– Fornendo ‘capacity building’ a managers di fondi di investimento in clean tech, PMI e service providers

– Collegando PMI alle catene di valore dei prodotti clean tech

– Testando nuovi ‘buisness models’ per la generazione distribuita, incluso quella off-grid per popolazioni remote

– Abbassando i costi di acecsso alle informazioni per piccoli produttori e consumatori di clean tech (market intelligence)

+

= +

BUSINESS

LIVELIHOODS

ACCESS TO

SERVICES

ENERGY

CO2 REDUCTION

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8.

2. CLIMATESCOPE

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9.

2.1 CLIMATESCOPE 2014

Climatescope: Report, Indice e On-line Tool interattiva che fornisce informazioni dettagliate per addetti ai lavori del settore low-carbon e clean energy

Sviluppato dal MIF in collaborazione con Bloomberg New Energy Finance, UK DFID and Power Africa

2014: Terza edizione. 55 tra i più importanti paesi in via di sviluppo in LAC, Africa e Asia.

http://global-climatescope.org/en/

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10. www.fomin.org

11.

3. CLEAN ENERGY IN MESSICO

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12. www.fomin.org

13.

La maggior parte degli investimenti

in clean energy in Messico ad oggi

sono stati fatti nell’eolico (82%).

Piccolo idroelettrico (5%),

geotermico (5%), biomassa /

rivalorizzazione rifiuti (5%) e solare

(3%) rappresentano ancora una

piccola frazione degli investimenti.

3.1 CLIMATESCOPE MÉXICO

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14.

Il prezzo dell’energia elettrica in

Messico è cresciuto a un ritmo

elevato, del 4.3% all’anno, tra il

2006 e il 2013.

Prezzo medio (retail) nel 2013

di $0.17/kWh, ma utenti

commerciali e utenti

residenziali con alto consumo

(DAC) pagano $0.23/kWh e

$0.28 kWh rispettivamente.

Ottime risorse per generazione

distribuita, specialmente solare

fotovoltaico, ma politiche pre-

riforma non sufficienti (energy

bank net-metering)

Obbiettivi della riforma del settore energetico

includono la promozione di maggior

competitività nella generazione. Attraverso

l’abolizione del monopolio statale nella

generazione, ci si propone di incrementare il

numero delle imprese di generazione,

creando uno spot-market per l'elettricità.

3.2 CLIMATESCOPE MÉXICO

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15.

4. MEXICO ENERGY SECTOR REFORM

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Miguel Angel Hernandez Director, Smart Grids & Utility Solutions AF-MERCADOS EMI

Sonsoles Martínez Consultant, Smart Grids & Utility Solutions AF-MERCADOS EMI

16.

4.1 MEXICO ENERGY SECTOR REFORM

Objectives

• Decrease Generation costs by increasing market participants and

competition.

• Strengthen security of supply, in particular facilitating distributed generation

to compensate potential bottlenecks in transmission.

• Loss Reduction (from actual 21% ATC&C), where Small Electrical Systems

play an important role in the new framework.

• Compliance with environmental policy targets by fostering renewable

energy sources (expected 35% renewable generation by 2024).

Distributed PV and Mini-Grids systems perfectly fit in the rationale of the new framework.

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17.

PREVIOUS FRAMEWORK

• CFE (the state-owned utility) was

the sole electricity provider with the

commitment to supply energy at

least possible cost.

• Private Generation was allowed

only for PPAs with CFE or self

consumption.

• Transmission, distribution and

commercialisation of electricity

were under monopoly of the CFE.

REFORM

• Introduce Competition in the

sector and creates an open Market.

• Private Generation is now

allowed, but subject to market

regulations to be approved over the

coming months.

• Transmission remains a monopoly.

Distribution is in principle a

monopoly but with room for private

investors. Commercialisation

becomes a free market with an

electricity spot price.

4.2 MEXICO ENERGY SECTOR REFORM (i)

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18.

PREVIOUS FRAMEWORK

• CFE was in charge of all

operations, monitoring and

authorizations in the National

Electricity System (SEN).

• SENER (Ministry of Energy) was in

charge of issuing regulations for the

sector.

• CRE (regulator) was in charge of

proposing tariffs and developing the

secondary regulations

REFORM

• CFE disposes of some of the

previous activities.

• SENER is now in charge of high level sector planning.

• CRE participates in the planning and provides authorizations for

generation.

• CENACE becomes the ISO and

shall propose the G&T plans to be

approved by SENER. Also in

charge of Auxiliary Services.

4.3 MEXICO ENERGY SECTOR REFORM (ii)

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19.

PREVIOUS FRAMEWORK

• Generation >0.5MW -> PPA with

CFE.

• Smaller plants sold their energy

with an administrative contract.

• There were no independent

Retailers (only CFE)

REFORM

• CRE provides the authorization to

the plants > 0.5MW.

• Smaller plants do not need authorization but require an

intermediate retailer.

• Retailers are required and shall be

authorized by CRE.

• Basic Service

• Eligible Customers Service

• Last Resource Service (for

Eligible Customers only)

4.4 MEXICO ENERGY SECTOR REFORM (iii)

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20.

PREVIOUS FRAMEWORK

• No strong specific policy support for

Clean Energy generation

• An exception was the limited Net

Metering approach, whereby retail

consumers could export excess

power to the national grid but can

only be paid with a billing credit.

REFORM

• SENER shall establish Clean Energy and Emissions Certificates that can be obtained in Mexico and

potentially traded in international

markets.

4.5 MEXICO ENERGY SECTOR REFORM (iv)

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21.

5. SMART METERS IN LOW INCOME HOUSES

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22.

kW Installed Installed capacity per year (kW)

Accumulated capacity (kW)

5.1 MEXICO – PV BACKGROUND

Primary Energy Production (MW)

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23.

Taking into account the potential benefits of the smart grids, and in particular, of Smart Meters, the MIF has requested a study to map the feasibility conditions for the installation of Smart Meters together with photovoltaic distributed generation in low-income housing developments in Mexico.

5.2 MAPPING THE FEASIBILITY

Team:

• Miguel Ángel Hernández

• Moisés Lino

• Sonsoles Martínez

• Claudio Gori

• Gianni Casa

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24.

o Review of the energy distribution regulatory framework

o Review of the technical specifications of the power grid and its compatibility with existing types of smart meters

o Assessment of potential benefits for users

o Identification and analysis of different financial and organizational models that can be used for the installation and maintenance of smart meters and photovoltaic systems

o Analysis of the potential barriers for the integration of such technology

5.3 METHODOLOGY

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25.

Mini Grid

DAC Users

MSMEs

5.4 Scenario Analysis

Mini Red

Low Income house-holds

MSMEs Mini Grid

Non-viable scenarios

Low Income houses • Highly subsidized tariffs, non-profitable for the client • Unavailable financing

High consumption residential (DAC) Users

• Not the MIF’s target population • Not an innovative approach

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26.

5.5 MODEL 1: SMALL & MEDIUM ENTERPRISES

• 3.9 millions of Micro, Small, and

Medium-sized Enterprises (MSMEs) in Mexico

• They generate more than 50% of GDP and 72% of employment

• 17% of the national energy consumption (92GWh)

• The model uses the “Bank of

Energy” concept (net-metering policy) currently operating in Mexico

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27.

5.6 MODEL 1: SMALL & MEDIUM ENTERPRISES

Main assumptions:

•Time frame: 15 years

•Consumption profile based on historical information of commercial customers

•Tariff T2 (CFE, 2013) Installed capacity PV: 2.7 kW

•PV panel cost: USD 2,150/kW

•Smart Meter Cost: USD 520

•MSME request a credit to cover 70% of the investment costs

•Loan Annual Interest of 12%

•Loan payment period of 5 years

Financial Indicator

Total Profit 15 Years (NPV)

USD 2,467

IRR 8.72%

Results of Model 1

Net investment equals to USD 38 per month during the first 5 years

From year 6 the client sees a net profit of USD 75 per month

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28.

Strengths:

• (A) Simplicity

• (B) Regulatory support

Weaknesses:

• (D) Recipients are a bit different from Project's original Target

• (E) Limits for Expansion

• (F) Low Return on Investment

Opportunities:

• (G) Quick Start

Threats:

• (H) The lack of FIT

• (I) Difficulties to access credits

• (J) Tariff change

Model 1: MSMEs

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29.

5.7 MODEL 2: MINI GRID

Utility Meter

MSMEs

LI House1

MSMEs

M1 M2

NB1 NB2

NBU

Mc1

CFE Local Trader

LI House2

Energy Flow

Residential clients generate solar energy to cover their consumption and sell the exceeding energy to commercial clients within the Mini-Grid

Commercial clients buy the energy generated by the residential clients and the remaining from the CFE (through the Local Operator)

The aggregated annual consumption of the grid must always be positive

The Model considers the Mini-Grid as a single entity for the “Bank of Energy” concept (Net-metering policy)

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30.

5.8 MODEL 2: MINI GRID

Utility Meter

MSMEs

LI House1

MSMEs

M1 M2

NB1 NB2

NBU

Mc1

CFE Local Trader

LI House2

Economic Flow

Residential clients cover their consumption with self-generated energy Commercial clients pay their consumption at their current tariff. The energy from the PV panels is paid to the residential clients; the remaining to CFE (through the Local Operator)

Profit sharing: Part of the income from energy trade are passed over to CFE (10%) and to the Local Operator (15%) for the operating costs.

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31.

5.9 MODEL 2: MINI GRID

Main assumptions :

•Time Frame: 15 years

•Consumption profile based on historical information of residential customers

•Tariff 1D –Baja California- (CFE, 2013) for residential and T2/T3 for commercial customers

•Installed capacity: 10 kW.

•Required surface ~60m2

•PV Panel Cost: USD 2,150/kW

•Smart Meter Cost: USD 520

•Subsidy of 45% of the PV investment (equivalent to 10 years of the current subsidy in tariffs)

• Residential clients request a credit that covers 90% of the investment costs

•Credit annual interest of 12%

•Loan payment period of 15 years-Mortgage

Financial Indicator

Total Profit 15 Years (NPV)

USD 1,215

IRR 18.07%

Results of Model 2

Net savings between 100% and 50% of the subsidized energy during the first 15 years

Net profit of USD 112 per month from year 16

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32.

Strengths:

• (A) Enables an Economic Balance

• (B) Independency from potential regulatory subsidies

• (C) Facilitates local knowledge development

• (D) Beneficiaries are in line with the target group.

Weaknesses:

• (E) Complexity of the Solution

• (F) Major initial investment is required

• (G) MSMEs may not be interested

Opportunities:

• (H) Alternative to provide Low Income Households with access to Renewable Energy.

Threats:

• (I) Challenges to access financing

• (J) Potential regulatory opposition

• (K) Tariff change

Model 2: Mini Grid

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33.

5.10 FEEDBACKS AND NEXT STEPS

• Mexican Stakeholders positively received the models and are eager to continue exploring their capabilities by means of additional activities. In this regard:

• SENER invited the Project Team to present the proposal within the Smart Grid Round Table created in in Mexico by CFE, CRE and SENER.

• CRE invited the team to join –as a separate task- a pilot initiative in Jalisco for renewable energy distributed generation.

• CONAVI expressed their interest share knowledge and infrastructure.

• Next Steps must be in the development of a Pilot Project.

• Benefits for Sponsors:

• Positioning in the nascent port-reform Energy Market

• Collaboration with CFE and other stakeholders

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THANK YOU!

QUESTIONS?

Filippo Berardi filippob@iadb.org

Miguel Angel Hernandez Miguel.Hernandez@afconsult.com

35.

NEXT STEPS FOR THE IMPLEMENTATION OF THE REFORM

• Define whether Specialized Inspection Units will be required for small

generation

• CRE to release regulations on private she sale of electricity.

• Extension of the concept of Bank of Energy.

• Regulations for the operation of small electrical systems.

• Implementation of frameworks for green credits and other financing

schemes for these type of projects and mentioned in Article 69 of the LIE

are defined.

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36.

• Develop and update the photovoltaic systems installation norms, to make

them mandatory and not voluntary, regarding:

• Safety in construction, wind overturning, etc.

• Panel certification by the authorized laboratories in order to have

technical guarantees.

• Update of the CFE G0100-04 specification “ Interconnection to the LV

electrical network of photovoltaic systems with an installed capacity up

to 30 kW”. Consider inverters without transformer, which would allow

to decrease the return of investment periods since they are more

efficient and economical.

NEXT STEPS FOR THE IMPLEMENTATION OF THE REFORM

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37.

MODEL 1: MSMES

Telecommunications 1 • ‘Point to Point’: Local areas with a low client density (3 MSMEs in 4000 m2)

Meter with a 3G or

GPRS module.

Every meter transmits

the data directly to MDMS

(CFE)

CFE needs a software

capable of reading the

data from the meters.

GPRS/3G Meter

L.V

WAN

MDMS (CFE)

M.V

Generartion

GPRS/3G Meter

T1

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38.

MODEL 1: MSMES

Telecomunications 2 • Scheme AMR: Areas with high client density

Meter with RF module, it

communicates with C1 C1

C1: Local data Concentrator,

it communicates with CA

through Radio 169

CA: Area data Concentrator

that communicates with the

management system (MDMS)

through GSM, GPRS or WEB

CFE requires a software

capable of reading the data

from the meters

RF

L.V

WAN

MDMS (CFE)

M.V

Generation

RF

C1

CA/Gateway

T1

Radio 169 Comm.

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39.

MODEL 2: MINI GRID

Telecomunications 1

• Scheme AMR: CFE Operator of the Mini Grid

Meter with RF module, it

communicates with C1 (bi-

directional)

C1: Local data Concentrator,

it communicates with CA

through Radio 169

CA: Area data Concentrator

that communicates with the

management system (MDMS)

through GSM, GPRS or WEB

CFE requires a software

capable of reading the data

from the meters

RF

Frecuencia

L.V

WAN

Sistema de

gestión de datos

CFE

M.V

Generación

C1

CA/Gateway

T1

Radio 169 Comm.

Mini Red

Medidor

Mini-Red

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40.

MODELO 2: MINI GRID

Telecomunicactions 2

• Scheme AMR: Local Operator of the Mini Grid

Meter with RF module and

bi-directional measurement

‘Walk-by’ reciever with RF

module that measures directly

from the meters

The Local Operator does not

require a remote data

acquisition software

L.V

M.V

Generation

T1

Mini Grid

Mini-Grid

Meter

RF 169 MHz

‘Walk By’

Measurement

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41.

BACK UP- PV

PV System Efficiency % 16%

Combined PV system Losses % 30.7%

Global PV System Efficiency % 11.1%

Peak Power per m2 kw/m2 0.15

Capital Cost (PV) $ (MXN)/kW 28,800

PV Panel characteristics:

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42.

BACK UP- Energy Generation

Model 1 MSMEs Average ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC

T2

Pv Power kW 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71

Solar Energy received by PV kWh/day 104 80 100 109 119 118 119 114 112 107 105 89 76

Energy generated per day kWh/day 11.52 8.83 11.04 12.04 13.24 13.04 13.24 12.64 12.44 11.84 11.64 9.83 8.43

Load Factor % 17.68% 13.55% 16.94% 18.48% 20.33% 20.02% 20.33% 19.40% 19.10% 18.17% 17.86% 15.09% 12.94%

Days per month Days - 31 28 31 30 31 30 31 31 30 31 30 31

Energy generated kWh/month - 273.71 309.03 373.24 397.32 404.35 397.32 391.90 385.68 355.18 360.80 294.98 261.27

Model 1: MSMEs

Generated energy by the MSME

Model 2: Mini Grid

Generated energy by the Low Consumption Residential Client

Model 2 MicroGrid Average ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC

T1D

Pv Power kW 10 10 10 10 10 10 10 10 10 10 10 10 10

Solar Energy received by PV kWh/day 383 293 367 400 440 433 440 420 413 393 387 327 280

Energy generated per day kWh/day 42.44 32.52 40.66 44.35 48.79 48.05 48.79 46.57 45.83 43.61 42.87 36.22 31.05

Load Factor % 17.68% 13.55% 16.94% 18.48% 20.33% 20.02% 20.33% 19.40% 19.10% 18.17% 17.86% 15.09% 12.94%

Days per month Days - 31 28 31 30 31 30 31 31 30 31 30 31

Energy generated kWh/month - 1008.269 1138.368 1374.912 1463.616 1489.488 1463.616 1443.658 1420.742 1308.384 1329.082 1086.624 962.4384

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43.

Model 1: MSMEs

Initial investment

Pv Capital Costs $78,182

Capital costs reduction 0%

Smart meter $7,000

Subsidy $0

Financial Conditions

% Gearing Ratio 70%

Interest rate 12%

Payment Years 5

Annual Payment $16,541.30

Discount rate 2.29%

Costs

Credit Payments $16,541

O&M 0.5%-0.7%

PV conditions

Panel efficiency 100%-84%

Assumptions Year 0 5 10 15

Costs

Investment Cash $25,555 - - -

Credit Payment $16,541.30 - -

O&M $391 $469 $547

Total $25,555 $16,932 $469 $547

Benefits

Energy Savings ($) 0 $11,609.51 $10,991.99 $10,374.46

Results

Profit/ Cash Flow -$25,555 -$5,322 $10,524 $9,828

Accumulated Profit -$50,681 $3,408 $53,862

Total 15 Years (NPV) $33,050

BACK UP- Cost Benefit Analysis

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44.

BACK UP- Cost Benefit Analysis

Model 2: Mini Grid

Initial investment

Pv Capital Costs $78,182

Capital costs reduction 0%

Smart meter -

Subsidy $129,600 45%

Financial Conditions

% Gearing Ratio 90%

Interest rate 12%

Payment Years 15

Annual Payment $20,931

Discount rate 2.29%

Costs

Credit Payments $20,931

O&M 0.5%-0.7%

PV conditions

Panel efficiency 100%-84%

Assumptions Year 0 5 10 15

Costs

Investment Cash $15,840.0 - - -

Credit Payment $20,931.26 $20,931.26 $20,931.26

O&M - - -

Total $15,840 $20,931 $20,931 $20,931

Benefits

Energy Savings ($) 0 $4,284.62 $4,284.62 $4,284.62

Energy Sales Benefits $19,735 $18,685 $17,635

Results

Profit -$15,840 $3,088 $2,038 $989

Accumulated Profit $2,119 $14,410 $21,453

Total 15 Years (NPV) $16,225

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