Natural gas and electricity infrastructure project contracts valued at US$2.8 billion are up for grabs in Mexico. The country’s national power company CFE is offering these contracts at the end of this year. This is in response to the country’s growing need for cheap electricity.
The projects include two combined-cycle power plants, two natural gas pipelines as well as an electricity transmission project, all located near Mexico's northern border with the US.
The scheme is designed to increase natural gas imports from the US and help decrease electricity rates by utilising cheaper inputs and using a modern power infrastructure. The Mexican electrical power intensive industry currently faces challenges in the cost of electricity, which relies heavily on diesel generation – sometimes reaching 80% higher costs than the US. High electricity bills are limiting the growth of Mexico’ businesses.
Companies including IEnova, the Mexican unit of U.S. energy firm Sempra Energy, South Korea's KEPCO and France's GDF Suez are expected to compete for the contracts. CFE Chief Executive Enrique Ochoa said the contracts will be open to private firms in international public tenders and the projects are expected to enter into operation by 2017.
The projects include:
The combined-cycle Norte III power plant located about 30 km (19 miles km) south of the border city of Ciudad Juarez will cost about US$1 billion. It will feature an installed capacity of 928MW. The combined-cycle Guaymas II power plant located in northwestern Sonora state will cost about US$822 million and feature installed capacity of 714MW. The winning bids will be announced in December this year.
The 423km (263 miles) Encino-La Laguna natural gas pipeline will transport gas from southern Texas and supply northern Chihuahua and Durango states. It will cost about US$650 million and the winning bid will be announced in October this year.
The Huasteca-Monterrey transmission line will cover 431km (268 miles) crossing northern Tamaulipas and Nuevo Leon states and include two substations. It is set to cost about US$257 million, and the winning bid will be announced in November this year.
There are also plans for a 23km (14 miles) San Isidro-Samalayuca natural gas pipeline will transport gas from southern Texas to the new Norte III power plant in Chihuahua state. It will cost about US$50 million and the winning bid will be announced in December.
Time to create a healthy energy mix
Natural gas is increasingly replacing oil as a feedstock in power generation. Mexico's oil production has seen a steady decrease since 2005 as a result of natural production declines from Cantarell and other large offshore fields.
Since Mexico is a net importer of natural gas, higher levels of natural gas consumption will likely depend on more pipeline imports from the US or liquefied natural gas (LNG) imports from other countries.
All other fuel types contribute relatively small amounts to Mexico's overall energy mix. Most of Mexico's non-hydro renewables consumption (3% of Mexico’s total generation in 2013) is attributable to traditional biomass, the use of which is important in rural areas. The country also has noteworthy geothermal and wind energy sectors.
The most significant source is currently geothermal, including the 645MW Cerro Pietro plant in Baja California, followed by biomass and waste combusted in fossil-fueled power plants. At present, there is relatively little wind and solar generation in Mexico.
Several wind projects are in development in Baja California and southern Mexico. The Isthmus of Tehuantepec in Oaxaca has especially favorable wind resources and has been a focus of government efforts to increase wind capacity. The Oaxaca II, III, and IV wind projects came online in the first half of 2012, and are due to be joined by the Oaxaca I and La Venta III projects later in 2014 to early 2015. Each project phase includes just over 100 MW of capacity.
In Baja, Sempra International is developing the Energía Sierra Juarez (ESJ) wind farm. The electricity from this farm will be exported to the United States on a new transmission line. The 156MW first phase of ESJ will be completed in 2014. ESJ's long-term development plan includes additional phases, with a potential total capacity of over 1.2GW.
With these developments, Mexico is poised to become one of the world's fastest-growing wind energy producers. This may finally help Mexico reach energy independence.