Mexico’s first electricity auction is 15x oversubscribed

15. February 2016 | Financial & Legal Affairs, Global PV markets | By:  Blanca Diaz Lopez

Technical bids were presented for more than 15 times the capacity of electricity and clean energy certificates in the solicitation. The price ceiling has been set at US$70. The first auction will be resolved on March 31 and the second auction will be convened during the second quarter of this year.

Through its first electricity solicitation, SENER expects an increase in investment in clean energy.

A total of 103 bidders applied for qualification in Mexico’s first electricity auction following its energy reform, according the nation’s Energy Ministry (SENER). 468 technical bids were presented for capacity, energy and Clean Energy Certificates (CEL). Sener notes that offers of electricity from wind and solar projects were among the bids.

The bids for energy and CEL totaled 102 terawatt-hours (TWh) and 109 million CEL. This is in contrast to the only 6.3 TWh and 6.3 million CEL available in the auction.

This auction was set up to deliver basic supply under the framework of the new electricity market which has been created in Mexico through its energy reform. This new electricity market began operations at the beginning of January. In this solicitation, the single purchaser is Mexico’s Federal Electricity Commission (CFE).

In January, CFE’s purchase offer for the auction was published. This included a price ceiling for clean energy from around US$70 per megawatt-hour.

The auction for electricity and CEL is performed as a package, with the two auctioned together. Each megawatt-hour is linked to one CEL. For the electricity a price ceiling of 884 pesos (US$ 47) per megawatt-hour (MWh) has been set, and for each CEL a maximum price of 444 pesos (US$24). This implies a maximum price of 1,328 pesos (US$71) per MWh for the two together. This price will decrease in future years.

15- or 20-year contracts for electricity and CEL contracts will be awarded in the auction. In addition to clean energy generation, 500 MW of capacity will also be auctioned under this solicitation.

SENER will review the offers and will issue pre-qualifications for this auction. The submission of final bids on price is set for January 28 and the date of the conclusion of the auction is set for March 31.

The rules of the electricity market issued at the end of last year suggest that auctions will be held annually. SENER notes that the second auction will be convened in the second quarter.

 

This article was translated by Christian Roselund. For the original in Spanish, please see the pv magazine Latinoamérica website.


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James Wimberley

Tuesday, 16.02.2016 12:49

The capacity auction was only oversubscribed 1.7 times, at 830 MW. I assume this was an auction for guaranteed supply, as the UK, and in practice limited to gas, hydro and geothermal.

The scale of the bidding is remarkable given the price ceiling. These were qualification bids, and the price bids will come later, but there was no point in incurring the prequalification costs if you didn't think you could meet the price. SENER do not give a breakdown by technology, and merely say that the bids included wind and solar as well as other technologies. We can however infer that the LCOE of solar power in Mexico is now below 7$c per kwh, matching the bottom end of Lazard's LCOE for US coal generation.

(http://www.gob.mx/sener/prensa/nutrida-participacion-en-la-fase-inicial-de-la-primer[..]

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