MEXICAN ENERGY CRISIS

More than ever, Mexico is beginning to have some difficulties meeting its own electrical needs. The nation has hardly been able to keep up with the requirement for electricity supply, as has been the case for numerous years—it’s now been decades. The government-owned and run electrical monopoly has managed to keep a few steps ahead of demand, but they have very little margin for error. The CFE has started the process of modernizing a few of the hydroelectric units that have aged over time. A cost in the hundreds of thousands of dollars has already been paid for these repairs. Several of these plants required extensive restoration since they were constructed in the 1920s. In addition, the CFE has constructed additional facilities and plans to employ privately owned generators to run under the power buy-in scheme. But this may not be sufficient soon. Mexican power facilities produced 239 billion kilowatt hours (bkwh) in 2009. But the public devoured 202 bkwh, and ever then, the demand has been rising at an exponential rate. There is a constant increase in demand, with an estimated 800,000 new clients every year. Experts and authorities are starting to question how long the government agency can continue operating on private aid to deliver the required energy, given the large number of people and the limited supply. A really insightful query is put forward. Why is the nation still seeing some of the largest and craziest rate rises combined with shortages when there are so many improvements being made in the area of greener energy, such as wind and solar power? How come initiatives that may alleviate some of the nation’s greatest problems are languishing on draft tables instead of being implemented? Has the political and economic reform that has appeared to only intensify since its beginnings in the late 1990s now reached this point? For what reason is Mexico starving for electricity? The ancient supply/demand principle holds the key to the solution, at least partly. Armando Jimenez San Vicente, a former secretary of energy, and Victor Carrera, of the Centro de Investigacion y Docencia Economías, or CIDE, have both carefully studied the puzzle and concur that one of the main problems in the electricity sector in [mexico] has been the demand growth rates, which some times have been greater than the growth rate in installed [production] capacity. To put it simply, Mexico generates just enough power to meet its daily demand while output is always declining. According to conservative predictions, the annual growth in demand for accessible power will be 6%, with some forecasts creeping up to 8% or more for the general public and up to 30% for some sectors. This kind of development revolves on a long-established internal mechanism. With the addition of fresh budgetary concerns and financial difficulties brought on by significant funding cuts or withdrawals from the CFE, the situation at hand grows to the point of high danger. With 13% cutbacks in all areas, the CFE will be hard-pressed to maintain the roughly 100 company-owned hydroelectric plants and 430,000 miles of transmission lines that provide the bulk of the nation’s renewable energy. As usual, corresponding expenses are transferred to the customer. The elimination of government power subsidies in 2001 surprised customers. For some, there was a 70% increase in their rates. High volume users including food producers, farmers, and people in the tourism sector were severely impacted by the strike. and those costs have been rising ever since. In 2011 alone, prices increased from 20% to 22% over the whole nation—a leap of almost 7% in a single month! The impact of such figures on the Mexican economy is enormous. A group of entrepreneurs went to the capital this autumn in an attempt to create a stir and draw attention to the need for energy reform. These entrepreneurs left their respective sectors and regions throughout the nation to voice their unique concerns: Cancun hoteliers opened their accounts and revealed that power now made up at least 15% of their overall operating expenses. Food manufacturers protested the 30% rise in delivery fees for power. School officials proved that the sharp seasonal rises in energy prices are closely related to their day-to-day operations. While its own population suffers from shortages, Mexico continues to export power to other South American nations and even the United States. An excellent system gone awry All signs point to a fundamental issue at the heart of Mexico’s energy infrastructure. Numerous analysts, such as former president Vincent Fox, believe that the government’s monopoly on the transmission of power is a major contributing factor to Mexico’s impending energy problem. In 1960, the government nationalized the electric system as a precautionary measure. The government now has direct, permanent, and non-transferable authority over the transmission and distribution of electricity thanks to modifications to the nation’s constitution. Since then, the federal government has controlled the two government-owned firms that were established: the Federal energy Commission (FEC), which distributes energy to all other states, and Central Light and Power (LFC), which delivers electricity to the capital. Much of what was once an unattainable fantasy is now commonplace because of contemporary technology. Although special amendments to the Public Electricity Service Act enacted in 1992 allow private individuals and corporations to produce electricity, they must either consume that electricity themselves or sell it back to the CFE. Private players have the ability to create energy within their own forces rather than being so limited in resources., it seems that the CFE’s attempts to handle the situation have continued to be unsuccessful, leaving many wondering if they will loosen their grip. There will need to be other sources of income since the CFE’s budget is mostly used to pay for employment and other business-related expenditures, and elsewhere is often outside of Mexico. This is because money is flowing in much smaller amounts and expenses are only rising. The initial purpose of this technique was to promote cost-sharing and competition, but large, well-funded international firms—like big-box retailers or mining companies—have perverted it. These businesses often construct their own energy-producing facilities, which are typically wind turbines, and either utilize the energy to power their own activities or resell it for a profit. Meanwhile, these firms are required to provide financial guarantees amounting to hundreds of thousands or even millions of dollars before their project can even be considered for planning. Many native Mexicans believe that this technique has produced an exclusive society of energy-producing robber barons who are unfairly exploiting their natural resources. Sergio Ceransky of the Yansa group claims that these stringent guarantees are in quantities that no community in Mexico could meet. It implies that local initiatives that may be advantageous over the long term as well as the short term are often rejected in favor of those put forward by global corporations. Ceransky attributes the problem to discriminatory practices, stating that these are requirements that are basically designed to ensure that only projects presented by multinationals can compete. Because of its exclusivity, which stifles competition, rates rise. For generations, there are winds of change blowing. The energy used by Mexico’s power system has come from hydroelectric and thermal production units. These conventional power production techniques are now becoming less and less common. Ten years ago, over 25% of Mexico’s entire output came from hydropower. By the year 2010, the percentage had reduced to around 14%. Mexico is set to become one of the world’s fastest-growing wind energy industries as it approaches the dawn of a new age. Indeed, according to wind studies, there are enough feasible locations (with productivity of 30% or less) to produce 82 gigawatts annually! Under Calderon’s leadership, the revolution in wind harvesting began. Mexico produced a pitiful 6 megawatts of wind power when he became government in 2006. After only six years, the total has increased to 519 megawatts. 2011 saw the emergence of a different supplier. Wind farms were starting to pop up, and the ones that had already started producing a significant quantity of electricity. They were generating hundreds of megawatts annually, which prompted plans to launch at least a few more in the near future. These projects, which are largely located around the Tehuatepec Isthmus, would provide several gigawatts of wind-generated power in the near future. In fact, if the transmission infrastructure could be improved, the Sempra International-owned energias sierra juarez wind farm would be able to produce enough electricity there to power the whole country of Mexico! Technology is at our disposal, but will the government use it to its advantage? Political maneuvering might cause energy reform to stagnate. Carreón and Jiménez caution that change is required. Nevertheless, it has been difficult to advance the reform process, particularly in light of the fragmented and very political legislature. The rate and potential of the nation’s economic progress may depend on this government’s capacity to forge agreement. Despite the assurances of energy reform made by newly elected President Enrique Peña Nieto, others, like Ricardo Castillo, are dubious about the news. Castillo points to the lack of openness in the Peña administration as a cause for concern. Though exactly how president Peña Nieto will go about it remains a mystery, the president is promoting energy reform. Most people agree that he will concentrate exclusively on oil production. The irony is that, despite the fact that the nation is beginning to emerge as a global leader in the generation of green energy, its residents continue to pay exorbitant prices for power. the CEO of Orpical Group, Edward Ducoin The CEO of Orpical Group, Ducoin, is well-known for his ability to turn a modest business into a booming enterprise that was recognized by Inc. magazine for three years running as one of the 500 fastest growing businesses.The website Edwardducoin.comThe website orthopical.com linked articles: government, distribution, demand, energy, electricity, crisis, and Mexico

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