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Electricity sourcing: Risks and opportunities in Mexico

HOW CAN YOUR ORGANIZATION TAKE ADVANTAGE AND MITIGATE RISKS FROM RECENT CHANGES AND TRENDS IN THE MEXICAN MARKET THROUGH ELECTRICITY SOURCING?

 

Recent regulatory changes in the energy sector, new renewable requirements being rolled out in 2018, and rate increases from the Federal Electricity Commission (CFE) will have a profound impact on electricity spend in Mexico. Organizations are facing new opportunities and risks that stem from these transformations. Hence, they will need to explore advanced ways to meet their energy supply needs, while capturing savings, avoiding escalating energy costs and achieving their internal sustainability goals. Electricity spend optimization is a strategic issue that is being addressed and driven by C-level executives around the world, due to its impact on their Organization’s growth, sustainability and profitability goals.

Accenture’s support has led to the formalization of Power Purchase Agreements (PPAs) between our clients and electricity generators resulting in savings ranging from 15 to 20 percent.

WHAT ARE THE IMPLICATIONS OF THE 2013 ENERGY REFORM ON YOUR ORGANIZATION’S ELECTRICITY COSTS?

  • Cost reduction through electricity sourcing:
    Users can source electricity through two mutually exclusive regimes: retail and self-supply. The retail regime could take 5 years or longer to become fully established and offer attractive electricity prices and generation options. On the other hand, self-supply is a mature regime with diverse generator options and available capacity, which is expected to increase in the future. Depending on the pricing model, a self-supply PPA could save users 5 to 20 percent of their electricity costs every month.

  • Cost avoidance related to Clean Energy Certificates:
    Beginning in 2018, a new requirement states that companies must use a minimum percentage of clean-source electricity out of their total consumption. If the requirement is not met, Organizations will have the obligation to purchase Clean Energy Certificates (Certificados de Energía Limpia in Spanish) for every noncompliant MWh. In the 2017 auction, the market price was 20.57 USD per CEL. The 2018 requirement is 5 percent, and it will grow every subsequent year, reaching 13.9 percent in 2022.

WHAT ACTIONS SHOULD YOUR ORGANIZATION GO THROUGH TO CAPTURE OPPORTUNITIES, AVOID COSTS, AND MANAGE RISKS IN ELECTRICITY PROCUREMENT?

  1. Identify current internal initiatives to reduce incurred electricity price and spend.

  2. Estimate the impact of Clean Energy Certificates requirement in the Organization’s costs.

  3. Identify and define the type of clean energy sources that are more favorable for the company considering social responsibility and green operation objectives, as well as the level of pollution generated through the operation.

  4. Develop knowledge of electricity consumption options and pricing.

  5. Build a business case to support the selection of electricity pricing model, estimating the potential savings with alternative generators.

  6. Execute a strategic sourcing project to select the best generator in the market to meet company requirements and optimize cost.

HOW CAN ACCENTURE SUPPORT YOUR ORGANIZATION TO GENERATE TANGIBLE BENEFITS?

Our practice has developed strong global business capabilities in commodities trading to support utilities, mid-stream pipeline, energy companies and final users. End-to-end expertise in market operations and commodities trading have allowed us to help clients along the value chain to optimize their spend, assets or commercial portfolios, depending on their business objectives.

Accenture has also supported companies operating in Mexico through:
  • The formalization of agreements (PPAs) with generators for the provision of electricity along several years (5-10 years typically) with savings in the range of 15-20 percent.

  • Avoidance of costs related to CELs, ranging from 5 percent in 2018 to 14 percent in 2022 out of total consumption, by obtaining electricity from clean energy generators.

  • Alignment on business case to support the electricity procurement strategy and decisions by the C-level.

  • Transfer of knowledge for the optimization and management of electricity costs.

CONTACT


Manuel Gómez

Strategy Managing Director

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Ezequiel Luis

Strategy Senior Manager

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Marco Martínez

Procurement Senior Manager

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