Grid access, not the tariff, set the schedule in mid-2018

A company siting or expanding an industrial plant in Mexico in June 2018 was running a connection problem that rarely showed up in the capital budget. Power was available. Getting a new load centre connected to it, at the voltage and in the location the plant needed, ran on a regulatory clock that SENER had only just written down. The Manual para la Interconexión de Centrales Eléctricas y Conexión de Centros de Carga, issued by SENER and published in the Diario Oficial de la Federación on 9 February 2018 over the signature of Energy Secretary Pedro Joaquín Coldwell, set a single procedure for connecting a Centro de Carga to the Red Nacional de Transmisión or to a Red General de Distribución.

For a plant director or a CFO approving a site, the practical consequence is narrow and expensive. The connection process, not the supply contract, is usually what fixes the earliest date the facility can draw firm load. On our read, that is the variable most often left unmodelled in a Mexican greenfield case.

What the connection process actually required

The February 2018 manual kept the three studies that had governed interconnection since the Ley de la Industria Eléctrica took effect: the estudio indicativo, the estudio de impacto en el sistema, and the estudio de instalaciones. An applicant may request one technical clarification per study. Once the studies are issued, the applicant has 30 business days to ask the transporter or distributor to execute the connection agreement, after which the application lapses. Norton Rose Fulbright, reviewing the manual, put the outside limit for resolving a connection application at 170 days.

Two points follow that a procurement lead should carry into a site decision. CENACE runs the studies and can require additional works and infrastructure to keep the network secure, which means the scope of what your project has to pay for is not fully known when you sign the land. And the clock only starts when a complete application is filed, so incomplete single-line diagrams and unconfirmed load lists are not administrative annoyances. They are schedule.

Why the node matters more than the tariff class

Mexican wholesale energy is priced nodally. CENACE's Diccionario de Datos Abiertos, referencing the DOF note of 4 July 2016, decomposes the Precio Marginal Local at each NodoP into exactly three components: energy, losses, and congestion. Two plants on the same tariff schedule in different states pay different energy prices in the same hour, and the gap is losses plus congestion rather than market noise in the abstract.

The regulated side of the bill moves with voltage. Under the CFE tariff schedule approved by CRE and in force through this period, a medium-tension user with demand of 100 kW or more sits on GDMTH, with base, intermedia and punta periods. Industrial supply taken at subtransmission voltage falls under DIST, and supply taken directly at transmission voltage falls under DIT, the lowest-cost industrial class. Transmission and distribution charges, including the wheeling charges known as porteo, are regulated tariffs approved by CRE. They are not prices negotiated with CFE, and CFE does not set them.

A site that requires a step up in connection voltage to reach the class its load justifies is therefore buying two things at once: a lower regulated charge and a longer, more study-intensive connection. That trade is worth quantifying before the lease, not after.

The relief was being tendered, not built

The congestion that shows up in a node's PML was, in mid-2018, the direct object of two large transmission procurements. CFE tendered the Ixtepec Potencia to Yautepec Potencia system, a 3,000 MW link at plus or minus 500 kV DC with associated AC reinforcement, running roughly 1,200 circuit kilometres to move output from wind capacity in the Istmo de Tehuantepec to the industrialised centre of the country. CFE announced the process on 13 February 2018 with bids due 21 June 2018. Cost estimates published at the time differ: Norton Rose Fulbright put the investment at roughly USD 1.6 billion, Haynes Boone at roughly USD 1.7 billion. Commercial operation was expected in December 2021.

SENER separately tendered a 1,500 MW, plus or minus 500 kV DC interconnection of about 1,400 circuit kilometres to link Baja California's grid to the national interconnected system, with an estimated investment of roughly USD 1.1 billion, bids due 17 August 2018 and contract execution by 16 November 2018 (Norton Rose Fulbright, June 2018).

Neither line was carrying power in June 2018. A facility whose economics depended on cheap Istmo wind reaching a central-Mexico node was depending on a project that had not yet been awarded.

What private capital could and could not do in transmission

This is where the market is routinely misdescribed. Transmission and distribution remained exclusive activities of the Mexican State after the 2013 and 2014 reform. A private company could not own a Mexican transmission or distribution network, and no private investor was directing capital into "T&D infrastructure" as an ownership position.

What the reform did open was contracting. Both 2018 tenders were structured so that a private contractor designs, finances, builds, tests and operates the asset, then transfers the rights, permits and property to CFE. The Ixtepec to Yautepec DC portion was let on a build, operate and transfer basis with the AC portion on a build, lease and transfer basis, and the Baja California link on a design, build, finance, operate and transfer basis. The private party holds a contract and a revenue stream, not a grid.

The distinction is commercial, not academic. If you are evaluating whether new transmission will reach your region, the question is not whether investors find the sector attractive. It is whether a specific CFE or SENER tender has been awarded, financed and given a commercial operation date, and whether that date survives a change of federal administration. Mexico held a presidential election on 1 July 2018, four weeks after this article first published.

Grid access checks on a candidate site

• The connection voltage available at the specific site, and whether it supports GDMTH, DIST or DIT for your projected demand.
• Historical PML at the nearest NodoP, separated into energy, losses and congestion, using CENACE's published data rather than a national average.
• Whether an estudio indicativo has ever been run for the site or for a neighbouring load, and what reinforcement works it identified.
• The status of any transmission or distribution expansion your case assumes, named by project and by award date.
• Your own document readiness: single-line diagram, load list, demand profile in 15-minute intervals, and the corporate documents CENACE and the distributor will require.

The fourth long-term auction was still live at this date. SENER published the convocatoria in March 2018 (pv magazine México, 16 March 2018), and no result had been issued. A procurement plan that assumed a fourth-auction price for supply starting in 2020 was, in June 2018, an assumption rather than a contract.

Review a site's grid access before the lease is signed

Mexico Energy Partners reviews connection feasibility for new and expanding industrial sites, including available voltage, nodal price history and the study sequence a connection will require. An initial review needs the site location, projected demand in kW, the intended connection voltage and, for an existing facility, 12 months of CFE billing.

Request a site grid-access review

Related reading: how Mexico's electricity market is structured, financing renewable energy projects in Mexico, and our project management and energy procurement capabilities.