Energy Storage Comes to Mexico

energy storage

California Energy Storage Alliance is proud to partner with MIREC Week for the launch of the Energy Storage Seminar.

In Mexico City earlier today, MIREC Week, Mexico’s leading new energy system congress was proud to confirm the addition to the agenda of an Energy Storage Seminar organised with the full support of the California Energy Storage Alliance.
Programme Director, Jamie Dowswell commented “we are very excited to have CESA onboard to help support the development of the Energy Storage Seminar at MIREC Week. We consider this to be the birth of the energy storage industry here in Mexico”.

California Energy Storage Alliance Executive Director Janice Lin commented, “we are very pleased to support MIREC Week and extend our relationship south of the border. We see collaboration as a huge opportunity for Californian businesses to share their learnings from what is the world’s most advanced energy storage market with our neighbours”.

Energy storage is growing very quickly and is set to play a highly disruptive role in the development of energy grids around the world. Jamie Dowswell explain why MIREC Week has decided to incorporate energy storage into this year’s programme “With the recent highly successful auctions dominated by solar and wind, there will be considerable opportunity and possibility for storage to become an important component of the new energy system of Mexico. We can clearly see that the favourable economics that have driven the costs of solar down 80% over the past 6 years will continue. What has happened with silicon PV economics will happen with energy storage systems and once solar starts to become a sizeable part of the mix it will be more economical to time shift this power to meet the evening peak energy demand, rather than build more generation capacity.”

Janice Lin confirmed that “Though California has established ambitious energy storage targets, some utilities have already exceeded those goals, demonstrating just how valuable energy storage can be for the grid. Energy storage is poised to become a significant part of the Mexican energy system by offering a resilient, affordable solution to the varying fluctuations of energy consumption and supply over time”.

Mr Dowswell concluded the “our research has already found considerable interest from clients and attendees to get up to speed on all the innovation occurring on energy storage. We think the corporates and industrialists paying high tariffs will be amongst the early adopter segment as they are most able to justify energy storage to maximise their self-consumption. Equally we are keen to learn from AES about the role storage can provide at grid scale. Excitement is really building for MIREC Week this year and we are very proud to help our clients develop their businesses and be a part of the building Mexico’s new energy system”.

Energy Storage Seminar @ MIREC Week, 17th May 3.15pm – 5.30pm
#1 Lessons from California: World’s most advanced energy storage market and storage economics
#2 Lessons from the Worlds’ first Storage Developer – Utility Scale Grid Storage
#3 Storage solutions for Industrial and Offsite Microgrids
#4 Delivering Value to the Residential Storage Market
#5 Storage Interactive Discussion Update

For further information about MIREC Week:
Mr Kevin Ward
MIREC Week Marketing & Partnerships Director
Green Power
T: +44(0) 0203 355 4226
E: kevin.ward@greenpowerglobal.com
W: http://www.MIRECWeek.com
W: http://www.greenpowerglobal.com

 About MIREC Week
MIREC WEEK Congress & Exhibition (16-20 May 2016), now in it’s 5th year,  is the annual meeting place for the leaders of the electricity revolution who are at the forefront of designing Mexico’s New Energy System. As the market celebrates the success of the country’s first clean energy auctions and against the backdrop of the Energy Transition Law, this is place where the entire clean energy industry meets to do business.

Solar + Storage = Baseload

solar storage

Could solar see unparalled growth for an energy technology? should it be viewed as a consumer product and hence follow adoption curves more common say with mobile phones? What happens when battery economics follow solar? Will we seeS+S=B (Solar+Storage=Baseload)?

As PV continues to scale rapidly  (China’s 16.5 GW in 2015 alone) it continues to get cheaper and as it gets cheaper, it continues to scale in an ever increasing virtuous circle (every time the installed base of solar doubles, the costs reduce by 24%). People have been expecting this to slow down dramatically but with the recent Enel bid in Mexico at $35 MWhr (albeit with some grid payment and tax support) is the “solar cost drop” going to stop soon and just how low can solar really go?

With the increasing trend for reverse auctions and the Mexican auctions seeing wind outbid by solar for the first time (albeit with the benefit of the grid connection supplements). Utilities and IPP’s will surely continue to select solar first (in the emerging sunnier markets) .

Beyond utilities and LCOE parity, a secondary tipping point will be reached when we get to very short payback periods (circa 5 years?). Then residential solar will explode to a huge majority [tip buy a house with lots of South facing roofs]. As I have written before, I believe residential solar can explode because it will follow consumer adoption trends and not energy innovation adoption trends, so more akin to the mobile phone boom.

Global mobile phone usage
1990 – 1995 – 2000 – 2005 – 2010
11m – 91m – 700m – 2000m – 5000m

Solar Households Penetration (Nad Forecast)
2015 – 2020 – 2025 – 2030 – 2035
5m – 30m – 500m – 1000m – 2000m

How does storage come into play. Well I’ve already written about storage economics (see article) and recent conversations with industry insiders see storage costs of around $15 MWhr for an 8 hour battery resource as achievable.

With the cost of solar on course,  fully unsubsidised, to reach $30 MWhr (in 2-5 years?) then a combined $45 MWhr price would say to me that integrated solar + storage solutions can gain scale significantly to be disruptive.

There is certainly already a huge, huge market to ensure solar + storage reaches scale by hitting the diesel genset market: islands, off grid rural communities, Africa and India’s disconnected millions, all offer highly economically viable short term targets that will help scale storage and potentially creating solar + storage as a defacto mass produced integrated product.

Sure there are barriers to widespread adoption, having the right scale battery+solar system and careful management of a battery’s degradation cycle, that could see storage better placed at grid nodes in the distribution network. However cheap storage will take the limits off solar, will we see a growth to 2 billion solar systems over the next decade? they could provide a lot of energy!

Certainly some big questions remain and as always it’s not the hardware or technology that is the challenge but it is the innovation in the softer side ofregulation and business models that is much, much harder to achieve.

What will the impact of this technology innovation have on business models and who will lead and become successful players in this market?

Will existing utilities and grid asset owners be part of the solution? Will we evolve to pure islands of micro-grids or will a cheaper, cleaner grid system be able to be developed?

How can grid back up be effectively priced?
How can the distribution grid and the development of a 2 way grid become an asset for emerging markets?

Can utilities be able to adapt to this hybrid distributed generation/storage + centralised generation/storage system of solutions?

Will utilities maintain margins in the face of an explosion of self generation by providing greater value through higher value energy management services?

Storage and the impact it is already happening on both the different grid and residential markets will all be discussed by leading players such as AES and Acquion Energy at MIREC Week in Mexico City at the California Energy Storage Association – Energy Storage Seminar. The latest updates from California,  AES’s 1GW of global grid storage deployment will be discussed together with the 2015 growth of 405% of the US residential storage market.

I hope to see you there!

US $2.6bn of renewables investment for next Mexican power auction…

greenbulb

 

Analysts predict that the next set of auctions (to be held in August later this year) will be at least 50% bigger than the first one a few weeks ago, and is designed to encourage more hydroelectric and combined-cycle gas projects to bid, in addition to renewables developments.

This may raise as much as US$4bn for clean energy projects as the Mexican government seeks to continue its successful tender process. And according to Cesar Hernandez, Deputy Secretary of Electricity, at least half of this investment will be for renewable projects.

Whilst the first power auctions were not overtly designed to attract only renewables development, it certainly was expected to be dominated by wind and solar.

In the next phase however the government has said that the minimum price for hydroelectric and combined cycle projects can change – clearly designed to increase their competitiveness. Companies are being invited to participate this month.

In a recent Bloomberg article Rafael Mateo, CEO of Acciona Energia, says: “With the first auction, Mexico proved it can bring new players to the market, and developers could bid at low prices, with profitable projects.”

He added that they will participate in the next auction with more than 500 MW of wind and solar.

Acciona won a contract to build a 168-megawatt wind farm in the state of Tamaulipas. The El Cortijo project is scheduled to begin operations in 2018. Acciona has set a target of 1 gigawatt of installed capacity in Mexico by 2019, doubling its current position.

Another reason that will continue to attract more companies to bid is the fact that developers can bid for contracts in Mexican pesos, indexed to the USD, a rule that has helped attract investments, according to the CEO of Cemex Energia – Roger Gonzalez Lau.

And as a final nod to the auctions attracting new investors, South Korean Import and Export Bank has financed CFE with US$1bn for the development of electrical infrastructure, potentially paving the way for more Korean companies to take part in the tenders.

These companies and other leading participants of the auctions will be talking in-depth about their experiences and strategic next steps in this fast-growth market at MIREC WEEK next month in Mexico City.

Further references:
The Weekly Brief Mexico (Spanish)
El Financiero (Spanish)
Bloomberg (English)

Bansri Shah
bansri
Managing Director
Green Power Global
@bansri_shah01

 

Mexico, Pemex, and the Rise of Electric Vehicles: a World of Growing Opportunities?

pemex

The recent liberalisation of the energy markets in Mexico has been widely reported for the opportunities in opening up Mexican oil/gas fields to  foreign oil companies for the first time. However the opening up of the market for electricity provision is also a huge opportunity, if not a bigger opportunity. Not only is there an opportunity to build a new energy system based upon renewable power generation assets, gas & cogen assets, energy storage and microgrids to serve the current electricity market, connect the 3m offgrid Mexicans and reduce the cost of electricity but to also supply a growing demand for charging Electric Vehicles.

Bloomberg predict that oil demand could soften globally by 2040 to the tune of 12% as Electric Vehicles demand rises to 30-50% of new car sales. How would a large global fleet of EV’s affect global oil players? Clearly demand reduction on this scale would reduce prices and could render the extraction of difficult offshore oil uneconomic, especially without major technology innovation to bring down costs. Some of Pemex’s fields enable it to produce some of the lowest cost crude in Latin America at $7-$10 a barrel. Even the new onshore/near shore fields should have production economics of sub $30 a barrel. In December the government will auction deep offshore licences and given the price range of $60-$90 extraction costs per barrel, it will be very interesting to see how successful these auctions will be. Will big oil companies attract the investment for offshore exploration and high cost extraction in today’s oil market? I should also point out that Pemex did make a $30bn loss in 2015 but they do have a $5bn cost reduction plan which should help them get closer to profit or back contributing to the Mexican government revenues again.

If electric vehicles scale rapidly then it would lead to a 10% rise in the demand for electricity by 2040 (using BNEF figures). This again presents a unique opportunity for Mexico, as the recent auctions showed with record low solar prices for a project built in 2018 ($35pMW for Enel’s Coahuila project in Northern Mexico) Mexico possess some of the best solar, wind and geothermal resources in the world to create a low cost energy system that could be a platform for considerable competitive industrial advantage.

Why should Electric Vehicles scale rapidly?

(1) Batteries – towards capital cost parity with ICE
EV’s will scale as they follow the normal technology experience curves such as silicon chips and photovoltaic cells. Battery density and range will increase and costs will fall. Lithium ion batteries reduced by 35% last year alone and current projections are saying that when Tesla, Panasonic, BYD and LG Chem launch their new giga plants in 2017/18 lithium ion battery production capacity will triple. This would lead to further reductions and forecasts of around a total 77% reduction in a battery cost in the period 2010-2018. As batteries make up 25% of the cost of an EV, this will put EV’s on the path to overtake internal combustion engine ICE cars in terms of comparable capital cost per segment by 2022-2026.

(2) Co-benefits
EV cars have significant lifetime cost advantages due to less components (3000 versus 7000), less moving parts, cheaper energy conversion (electricity per mile is roughly 33% of fossil fuel) and less wear on brake rubbers (regenerative braking). EVs also accelerate smoothly and quicker, are quieter and can be configured more comfortably, they will be the perfect urban car. As Tesla have proven it’s possible to produce highly desirable EV’s that will be attractive for every segment (Tesla 3launched on 31st March 2016, sold $11bn orders for 275,000 cars in 3 days, for a car due at the end of 2017. Note the Tesla 3 is a 5 seater $35,000 EV with a range of 350km). The EV platform and drive train gives greater flexibility for car designers to optimise safety, increase comfort and space. For example the Tesla 3 positions the driver further forward, creates more space and is a better product.

(3) Health
VW’s Dieselgate has revealed the hidden cost of diesel to health ministries and our lungs. EV’s especially those powered by an increasingly renewable energy supplied energy grid will greatly reduce urban toxins and in the smog filled ever growing cities of India and China, this will be hugely politically powerful.

(4) China wants EV’s to Scale
China will soon become the largest car market in terms of demand and supply. In addition China is viewing the Electric Vehicle as a future industrial strategy and seek global dominance just as it has done with the wind turbine and pv module sectors. It wants to be a global leader and so it will create a large domestic market and China could furthermore reduce its oil import bill too (335m tonnes of crude oil imported in 2015).

(5) Early adopter segments
Michael Liebriech, Chairman of Bloomberg New Energy Finance predicts that owners of houses with garages and driveways (for charging), who have a second car and live in/near the urban environment will be a significant early adopter segment. Some 60% of households in the US have a 2nd car. Indeed other segments such as taxis, car clubs and even silent electric delivery trucks (who will also have a considerable advantage for late night deliveries).

(6) Going Auto Auto – the rise of the Self Drive Robot
Electric vehicle platforms will also accelerate the rise of autonomous self drive cars (or as I call them Auto Auto’s). As Google/Facebook/Apple invest in what they view as “new connected platforms” the autonomous car will present a new S curve and opportunity for new entrants. The technology already exists for self drive, cost effective sensors and lidar systems are coupled with GPS and IT to turn cars into moving lounges or offices. Several US states (California and Michigan) are already vying to host large self drive testing centres and the US Federal government has earmarked $4bn for R&D into the sector.

These cars will be highly disruptive, as Anand Shah of Albright Stonebridge recently detailed people spend (waste) a lot of time driving in cars. Self driven cars are safer than humans (and could reduce the 1.5m people who die in road traffic accidents annually, reduce the huge road accident health bill and they will also greatly disrupt the car insurance market). In the recent Germanwings air disaster in Europe considerable questions were asked about why the human pilot was allowed to overrule the self drive in the plane – could the same occur in cars?

Self drive cars and trucks (that form synchronised tailgate convoys) can use the road more effectively at higher speeds. Indeed in an urban environment self drive cars + uber could even lead to an instantaneous doubling of roads by the conversion of onroad parking into additional lanes as well as significantly reduce the costs of personal urban mobility. Mr Shah pointed out that local governments around the world effectively subsidise the car industry to the tune of billions in the provision of roads and highly expensive urban real estate is given over to parking.

In the West a car is typically used only 4% of the time which is an incredible waste for a very expensive machine. In emerging markets a driver means a rich family’s car is used throughout the day from commute to school run to grocery shopping. Autonomous cars would provide one with the same benefits of a driver, the car could go and collect kids from school and transport to their next activity (I will certainly be an early adopter!). However the biggest disrupted industry is likely to be the car industry itself with a self drive uber model likely to be able to provide the convenience of personal mobility but with only 25% of the current car fleet required (read car sales plummet by 75%!).

Given all of the above it is clearly in Mexico’s interest to be at the forefront of the EV revolution and accelerate the adoption of electric vehicles. EV’s will protect and future proof the remaining jobs in the Mexican car industry, reduce the toxicity of Mexico’s cities and enable the new electricity system to be planned accordingly. An accelerated EV car market will even  improve the competitiveness of Pemex in a world of slowing oil demand.

1200 other senior energy executives will join Anand Shah and Bloomberg New Energy Finance and who will be speaking at MIREC Week, the leading event for building Mexico’s new energy system.

The hugely successful Mexico Energy Auctions set the new World Record for the Lowest Price for Solar Energy!

world record

The hugely successful Mexico Energy Auctions took place yesterday and attracted $2bn and also set the new World Record for the Lowest Price for Solar Energy!

In a sign of how quickly the energy economics are shifting Mexico took the lead in the race for one of the lowest ever recorded $ per MWh for a solar project in the World.

$40.5 MWh was the average price for a solar project and is incredible and showing a huge 30% jump from the previous record holder Austin Energy in Texas bid of $57.1 MWh (taking into account the Federal Tax Credit as actual bid price was $40 MWh – this was still lower than the famous $57.8 MWh paid by ACWA Power in Dubai in 2014).

Indeed it was not only solar which raised eyebrows but wind was down to $43.9 which is also amongst the lowest ever recorded price for energy. Some Midwest USA wind farms have reached $32 MWh but in Latin America where the weighted average cost of capital is considerably more than in the US, no one thought that renewables could be built this cheaply. This follows Peru’s recent power auction in January 2016, which also saw wind prices fall to only $48 MWh.

The message is clear, renewables are now clearly cheaper than fossil fuels and set to go even lower with some analysts predicting $20 MWh! In Mexico celebrations are ensuing and congratulations must go towards the leadership set by the government firstly to create a competitive auction process, price the market in dollars to attract inward investment and allow a level playing field for new, aggressive project developers to compete with CFE. The success will not only be measured in attracting over $2bn in foreign direct investment but in the steady reduction in energy prices that consumers and industry will now benefit from, as Mexico starts it’s first new steps into the brave world of creating a new energy system.

According to Bloomberg, eleven packages of wind and solar projects and certificates were sold at an average price of $41.80 per megawatt-hour. Solar energy accounted for 1,100 megawatts sold, and 620 megawatts of wind projects were awarded long-term contracts.

The auction met 84.66 percent of the state utility CFE’s demand. In order to buy the remaining power the company still needs, Mexico’s government will hold another power auction in April for the next phase in the success story. Over a 1200 senior executives looking at this and the whole vast array of opportunities that are now opening up in the development of Mexico’s new energy system will be attending MIREC Week in May.

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