Clean Energy Cost-Savings: A Study of Mexico’s Federal Electricity Commission (CFE)

Clean Energy Cost-Savings: A Study of Mexico’s Federal Electricity Commission (CFE)

determine the marginal price 4 . In contrast, approximately 52% of the electricity sales in the city of La Paz — a total of 800 gigawatt-hours (GWh) — were delivered to more than 111,000 residential customers at a median tariff price of MXN$1.05/kWh (US$50/MWh). The average LMP was therefore more than double the median residential tariff price paid for more than half of the electricity sales 5 . The overall median tariff price for the total demand was MXN$2.00/kWh (US$100/MWh), not even enough to cover the variable costs of generation.

In 2020, 75% of the electricity produced by CFE power plants in the Baja California Sur grid was generated in La Paz. Nearly all of that generation was from units fueled by fuel oil. Based on the processes used to produce this electricity, an estimated 19,600 tons of sulfur dioxide were released into the air in La Paz in 2020. Furthermore, an

estimated 1.334 billion tons of CO 2 e were also emitted. Using the same US$260/ton value for the avoided SO 2 emissions and US$64/ton for CO 2 e emissions, the 2020 totals in emissions allowances would represent US$5 million and US$85 million, respectively. In addition to the renewable energy plants mentioned earlier, the Energy Regulatory Commission reported a distributed generation installed capacity of 23.1 MW in Baja California Sur at the close of 2020. It should be noted that, according to CENACE’S response to a freedom of information request, since the first semester of 2020 there has been zero available capacity for installing new renewable energy systems in Baja California Sur. 6 It is difficult to fathom why renewable energy alternatives have not been considered, in view of this situation where: • Power generation in La Paz is fully dependent on imported fossil fuels (diesel and fuel oil) from the US and/or Mexico’s mainland; • Generation costs are very high; • In spite of having the highest electricity rates in the country, they are insufficient to even recover 4 In the Baja California Sur grid, the efficiency of the Punta Prieta thermal power plant is close to 30% and the Baja California Sur internal combustion power plant is over 40%, while the diesel-fired gas turbines have an efficiency of approximately 20%. 5 Taking into account both demand and real-time-market LMP, the weighted average for the Baja California Sur grid is more than MXN$2,422/MWh. 6 After the December 2016 publication of the Interconnection Manual for Power Plants with Less than 0.5 MW Capacity , the interconnection capacity for plants of this type into the Baja California Sur grid was limited to 10 MW. In March 2017, CENACE mandated CFE to not allow any new interconnections because the limit set forth in the manual had been surpassed. This limit was increased to 18 MW in December 2017 through Agreement A/066/2017, with 3 MW assigned to the La Paz region and the remaining 15 MW to the Los Cabos and Constitución regions. Beginning in 2020, all new interconnection applications will require a new study in order to determine distributed generation capacity in Baja California Sur. Without such studies, no decisions can be made on interconnecting new distributed generation plants to the grid.

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