Since the national energy reform started in Mexico approximately five years ago, much has been achieved, and there are still plans to enact. Onshore oil and gas projects are expected to advance and continue to develop. Pemex as well as private companies are investing to increase production as a result of previously awarded blocks, contract migrations and additional farm-outs. Significant opportunities exist for engineering service companies with expertise in onshore infrastructure development related to oil and natural gas production, pipeline development and storage facilities.

The ongoing expansion of natural gas pipelines will open new markets for these fields and bolster the economy.

In the retail oil market, a combination of limited refining capacities and rising demand means that Mexico is currently a net importer of oil products. The oil products market is being liberalized ahead of the initial schedule. Since 2016, importation of oil products such as liquified petroleum gas, gasoline and diesel has been open to non-PEMEX entities. From January to November 2017, the retail oil market was opened, one year earlier than initially announced. Furthermore, subsidies on oil products were phased out from 2008 to 2014.

Natural gas is the second largest primary energy source in Mexico (23% of total primary energy supply in 2016, versus 63% for oil), and in the Ministry of Energy (SENER) projections to 2029, gas demand is set to grow gradually. This demand underlines the need to focus on upstream supply, storage and transportation in policy discussions. The expansion of the gas pipeline network has lagged behind the boom in gas demand. Further expanding the system is urgent, as the system has already reached saturation on several occasions. These events also highlight the need for more storage capacity in the system. Creating an integrated national gas grid also requires close cooperation between CENAGAS (the independent system operator) and private pipeline owners. In the retail natural gas market, it is critical that the gas release programme, under which PEMEX must reduce its market share to 30% by 2020, be implemented successfully. New investment for an estimated US $9.6 billion annually in electricity is essential to meet the rapid growth expected in electricity demand (IEA, 2016), allowing Mexico to reach its target of producing 35% of its electricity from clean sources by 2024, compared to 21% in 2019.

The clean energy target is to be met through a quota system that includes a clean energy certificate obligation on retail suppliers (currently, and until the third long term power auction carried out in 2017, only the Comisión Federal de Electricidad) and large consumers that do not use retail suppliers. Clean energy technologies are defined to include renewable energy, nuclear energy, efficient cogeneration and fossil fired generation with carbon capture and storage. Clean energy certificates have been granted to facilities since August 2014; they can be bought directly under bilateral contracts with generators, in the clean energy certificate market launched in 2018, or at long term auctions. Consequently, generators of clean electricity will obtain additional revenue by supplementing their sales of electricity with the sales of clean energy certificates.

A centerpiece of the reform effort is the auction system for energy, capacity and clean energy certificates, which allows investments from new players into the market on a competitive basis. The auctions offer long term contracts (15 years for energy and capacity, and 20 years for clean energy certificates) that provide a degree of stability over future cash flows for generation companies.

The Mexican clean energy auction system is a sophisticated procurement mechanism for the promotion of renewable energy. Distinctively, it seeks to capture the relative value for the system of different generation technologies by location and production profile. Projects located in higher priced areas of the country, or capable of delivering power at times of day when it is particularly needed, would receive higher revenues through the auctions and therefore attract more attention from potential investors.

Based on the two first tenders, held in 2016, the auction system is providing a substantial boost to growth of solar and wind energy, tapping Mexico’s wind and solar resources at competitive prices. It is unclear how new nuclear could compete under the current rules, which have yet to determine whether Mexican NPPs can legally participate in the electricity market, and which require the projects to be ready within three years of the auction.

Regarding costs, electricity prices for households and farmers up to a consumption cap are subsidized between 60% and 70% of the total cost. Artificially low electricity prices are likely to hamper government efforts to pursue efficiency yet should be replaced by targeted social policy measures for those in need. The relevant regulators and SENER have expressed their intent to work with the Federal Electricity Commission (CFE) on correcting these distortions. Bringing down technical and non-technical losses, which are currently higher than elsewhere in OECD countries, would reduce the need for investment in additional generating capacity, while improvements in operational efficiency in the newly unbundled CFE could significantly reduce the retail component of the cost structure. A strengthened transmission and distribution system would further help reduce losses and is also necessary to support the projected growth in demand and in supply from variable sources — solar and wind.

The reform is implemented in stages. The real time market, capacity market and clean certificates market are important elements that were introduced in 2017–2018. Most of the remaining challenges now lie in the decisiveness and speed of implementing the reform, including the necessary adjustments and improvements that are likely to be required after the first years of experience.

Climate change objectives are deeply entrenched in Mexico’s current policy making, not least in energy reform. To meet these goals, Mexico is pursuing a number of concurrent strategies setting ambitious clean energy goals, such as the National Programme for Sustainable Energy Use 2014–2018 which, among many benefits, is likely to help bring down Mexico’s carbon intensity. With regard to new policies for world energy, such measures help to cut the carbon intensity of the economy by more than half. The strong proliferation of renewables in the power sector, where around one in two gigawatts of new capacity installed to 2040 is projected to be either wind or solar, coupled with a shift to natural gas from more polluting oil, makes a major contribution to the decrease in CO₂ emissions from the power sector.

Mexico is a non-Annex I Party to the United Nations Framework Convention on Climate Change (UNFCCC) and ratified the Kyoto Protocol in 2000. It is an active non-Annex I Party in conducting and communicating national inventories on greenhouse gas emissions, having submitted five national communications under the UNFCCC. Mexico hosted a successful Sixteenth Conference of the Parties (COP16) in Cancun (2010) which lay the groundwork for a successful outcome at COP21 in Paris in December 2015. Mexico’s 2020 goal (set at COP15 in Copenhagen) of “reducing its GHG [greenhouse gas] emissions up to 30% with respect to the business-as-usual scenario by 2020” was incorporated into the UN process at Cancun. The target is conditional on the “provision of adequate financial and technological support from developed countries” (Mexico’s notification to the UNFCCC, January 2010). In September 2016, Mexico ratified the 2015 Paris Agreement.

Source: Energy policies beyond IEA countries.

Table 1 shows estimated availabel energy sources in Mexico.

TABLE 1. ESTIMATED AVAILABLE ENERGY SOURCES

*Solid, liquid: in million tonnes; gas: in billion m³; uranium: metric tonnes; hydro, renewable: TW.

**Fuente: Uranium 2018 Resources, Production and Demand, OECD/NEA 2018.

Note: 1 tonne uranium = 3.88713 x 10⁽³ EJ.

1.1.3. Energy statistics

Table 2 shows some energy statistics for Mexico.

TABLE 2. ENERGY STATISTICS

*Latest available data.

** Exajoules.

—: Data not available.

Source: Subsecretaría de Planeación y Transición Energética, 2018.

The electricity reform being carried out is still under way. In 2013, the energy reform required a modification of the Mexican Constitution to liberalize the generation and retailing of energy production. Less than three years later, the new wholesale electricity market was launched in January 2016. Through November 2017, three long term electricity auctions have taken place.

In the meantime, regulated electricity tariffs had already declined sharply between 2013 and 2017 in most categories. Already at the early stage of the reform, CFE accelerated investments to enable some power plants to use natural gas instead of expensive and polluting fuel oil. Within two years, from 2013 to 2015, the consumption of fuel oil dropped by almost 50%, and this trend is expected to continue.

The long term success of the reform rests on the definition of detailed rules and implementation. However, some important steps have been taken, including the publication of market rules in September 2015 and the manuals and other regulations published in 2016 and 2017.

In February 2015, CFE became a state enterprise. With this new status, CFE gained management autonomy and corporate governance similar to a private business. It is expected that, in power generation, this new status will lead to more profit oriented investment and operation decisions, in addition to increased efficiency. This lays the groundwork for improvement of CFE’s performance and for developing its potential in the new competitive environment.

In January 2016, SENER issued a decision to vertically and horizontally unbundle CFE and to enable it to participate in the market. First, CFE is vertically separated in its network, generation and retailing activities. This unbundling is limited to a legal separation, with the creation of a subsidiary for transmission, another for distribution, yet another for basic supply and several for generation. In addition, CFE may establish other subsidiaries and affiliates as deemed necessary. The unbundling remains partial as it is carried out at a legal, not ownership, level. The only ownership unbundling concerns the system operator, the National Centre of Energy Control (CENACE), which became a state agency and does not belong to CFE’s holding group.

Second, CFE was also to be horizontally unbundled through 2017 in order to constitute a total of six generating companies, including one subsidiary managing existing independent power producer contracts, and five companies to perform the activities of conventional power plants. CFE power plants were allocated to each generation company in November 2016 in a way that creates competitive conditions in each regional location of the power system and limits market power issues.

Each of the six generating companies has similar conditions of financial sustainability and profitability, a balanced mix of technologies and remaining technical lifetime. This horizontal separation of generation should lay the foundation for competition in the electricity market. To ensure a competitive market, the bids in the electricity wholesale market must be based on costs, meaning that generation companies will not be allowed to bid above their short term marginal costs in this market. Each megawatt-hour generated will be paid at the clearing price that reflects the corresponding energy, losses and congestion components at every node. This cost based market approach is designed not only to prevent the exercise of market power, but also to set scarcity prices during tight system conditions and limit the participation of the demand side in electricity markets.

The evaluation and control of marginal production costs, fuel costs and power plant efficiency are performed by SENER on the basis of information provided by CENACE. In addition, the Energy Regulatory Commission (CRE) is designing bilateral contracts to be signed between CFE’s regulated retailers and existing CFE generation. The length of these contracts will differ for each plant to allow a smooth transition to a fully implemented market. Finally, the Market Surveillance Unit at SENER hired an independent market monitor to ensure the efficient and competitive operation of the market. This function was performed by SENER during 2016, but was transferred to the CRE in 2017.

The opening of the electricity sector to a competitive market will be progressive, since independent power producers have kept their long term contracts with CFE, and the construction of new power plants by competitors will take time. Retail suppliers have the ability to buy electricity on the wholesale market from 2017 and compete with regulated tariffs.

The structure of the electric power sector in Mexico (Fig. 1) includes several aspects discussed in detail below.

FIG. 1. Electricity market.

Generation

On 29 January 2016, the new wholesale electricity market was launched with six subsidiaries, one nuclear business unit and other private generation companies. Installed capacity in Mexico amounted to 75 685 MW, with 70.5% from conventional power plants and 29.5% from clean power plants in 2017. Installed capacity rose 3% compared to that of 2016. Clean energy installed capacity rose by 1148 MW, a surge of 5.4%, mostly due to new wind power plants (464 MW). Conventional power plants totaled 1027 MW, a 2% relative increase to 2016. Up to 57.2% of the installed capacity was owned by CFE and the remaining 42.8% by other generators. During 2017, 329 162 GWh was generated, 3.1% more than in 2016.

In 2016–2017, installed capacity in conventional technologies increased by 1027 MW, or 2%. Almost 97% of this increase is related to the expansion of combined cycle plants (810 MW) and internal combustion (182 MW), that is, an annual increase of 3% and 12.5%, respectively.

Source: PRODESEN 2018–2032.

Transmission

The entire transmission and distribution network in Mexico is owned by CFE. The transmission system is operated by the independent system operator CENACE. The overall electricity system is referred to as the national electricity system. The national interconnected system covers the main transmission network of Mexico, excluding Baja California and Baja California Sur.

Mexico benefits from an already well developed transmission network. Electricity is transmitted over long distances, which can lead to high thermal losses. Reducing network losses is therefore an important objective for dispatching. In 2017, high voltage lines of 161–400 kV covered 52 606 km and lines of 69–138 kV covered 51 059 km. Mexico City forms a central node in the high voltage network.

Source: PRODESEN 2018–2032.

Source: Synthesis of the CFE Directive Information, December 2016 (Síntesis de información directiva de CFE).

Distribution

CFE is currently responsible for electricity distribution. There are 16 geographical divisions in charge of distribution. At the end of 2017, the Mexican transmission and distribution grids covered an overall length of around 829 925 km, providing electricity to 98.7% of the Mexican population.

The Federal Secretariat of Energy (SENER)

SENER is the main body responsible for the coordination of the electricity sector. There is no split responsibility between states. The department is in charge of electricity market reform, including preparing laws and decrees, and implementation. It has also contributed to many of the initial decisions on market design and prepared the organization of long term auctions, responsibilities that will be transferred to the regulator or the system operator at a later stage of the reform. As part of the reform, CFE was transformed into a state productive enterprise that SENER will continue to control. SENER will also regulate its unbundling. The mandate of CRE does not allow it to control state owned companies.

The regulator

CRE’s main tasks are to calculate network tariffs (transmission and distribution) and the final basic supply tariffs, as well as other regulated activities (for example, operation of the basic service suppliers, the electricity system operator CENACE). CRE enjoys technical, operational and managerial autonomy and can dispose of its own revenues coming from a tax, not from the state budget.

The Ministry of Finance and Public Credit (SHCP)

SHCP has temporary powers to determine retail tariffs for the basic service suppliers until CRE issues the final determination methods for these. The unbundling of CFE and the introduction of regulated network tariffs are expected to increase transparency about the costs of CFE.

The National Centre for Energy Control (CENACE)

The electricity system operator, CENACE, will be the cornerstone of the future system organization. CENACE is an autonomous body, formerly part of CFE. It was created in 2014 and is responsible for operating the national electricity system and the wholesale electricity markets. CENACE does not own the transmission assets, which remain the property of CFE, but CENACE operates the wholesale electricity market to ensure least cost dispatch of all power plants in adherence to economic considerations such as free competition, transparency and market efficiency. Similar to independent system operators and regional transmission operators, it also plays a key role in the planning of the power system, including investments in transmission, defining capacity requirements, operating capacity markets and running the long term auctions.

Table 3 shows installed capacity, electricity production and consumption in Mexico, and Table 4 contains energy related ratios.

TABLE 3. INSTALLED CAPACITY, ELECTRICITY PRODUCTION AND CONSUMPTION

Source: Comisión Federal de Electricidad (CFE).

*Includes efficient cogeneration as a clean energy.

—: no data available.

TABLE 4. ENERGY RELATED RATIOS

Source: System of Energy Information/SENER (http://sie.energia.gob.mx/).

The National Commission for Nuclear Energy (CNEN) was established in 1956 to pave the way to introduce nuclear power and nuclear applications in Mexico. CNEN encompassed all nuclear activities in the country (exploration for uranium, nuclear research, regulation, etc.) except for the generation of electricity by nuclear means, which was the sole responsibility of CFE, and the utilization of nuclear radioisotopes. Later, CNEN was transformed into the National Institute on Nuclear Energy (INEN), which redefined its attributions but with very few changes to its responsibilities.

In 1979, INEN was replaced by three organizations: (i) The National Institute of Nuclear Research (ININ), in charge of all the aspects related to research; (ii) Mexican Uranium (URAMEX), in charge of uranium exploration and eventually uranium production; and (iii) the National Commission for Nuclear Safety and Safeguards (CNSNS), in charge of nuclear regulation and safeguards. In 1985, URAMEX was dissolved and all its functions were passed to the Secretariat of Energy.

Mexico’s interest in nuclear power dates back to the early 1960s. The first steps were taken in 1966, when a preliminary investigation of potential sites for nuclear power stations was carried out under the auspices of CFE and the CNEN. At the end of the decade, the government concluded that NPPs might play a major role in the greater energy mix. In early 1969, CFE decided to invite bids for a 600 MW(e) NPP of a proven type, and invitations to tender were sent to several manufacturers. Bids were received at the beginning of 1970, but the final decision, with up to date bids, was taken in the middle of 1972. In 1976, construction of the LVNPP was initiated, comprising two reactors of 654 MW(e) net each. The first unit went into commercial operation in July 1990 and the second in April 1995.

Figure 2 shows the current organizational structure of the nuclear power sector in Mexico.

FIG. 2. Current organizational chart of the nuclear power sector in Mexico.

As mentioned above, there is only one nuclear plant in operation in Mexico, with two boiling water reactors (BWRs). There is still a plan to add three power units towards 2029–2031, if financial means are met. PRODESEN demonstrates that 40% of the additional capacity to be installed through 2029 shall consist of clean technologies, contributing 32.552 MW. It is anticipated that up to 12% could consist of nuclear generation.

TABLE 5. STATUS AND PERFORMANCE OF NUCLEAR POWER PLANTS

n.a.: Data not applicable.

On 26 December 2014, LVNPP Unit 2 received permission from Mexico’s regulatory authority to operate at the extended power uprate level (120% of the original licensed thermal power); it operated during 2015 at this new power level (2 317 MW(th), 805 MW(e) and 803 MW(e)) gross capacity per unit. Yet, the new operating licence at this power level has not yet been issued by the Secretariat of Energy.

During 2017, the 18th refuelling outage of LVNPP Unit 1 was extended from an original 40 days to 48 days. In the current operating cycle 19, the unit is operating at a power level of 2 317 MW(th) and 810 MW(e). For LVNPP Unit 2, the 15th refuelling outage was planned for 43 days in 2017; the unit is operating at a power level of 2 317 MW(th) and 810 MW(e). LVNPP Unit 1 went into commercial operation in 1990 and Unit 2 followed in 1995. Both units were originally licensed for 30 years of operation. Therefore, in 2015, an application for a licence renewal of both LVNPP units, allowing their operation for 30 more years, was submitted to Mexico’s regulatory authority.

An independent spent fuel storage installation, with a capacity for storing 130 dry cask storage systems, was constructed at the LVNPP site to store fuel generated during a 60 year operational lifetime. CFE plans to store 1157 spent fuel bundles in 13 dry cask storage systems between 2018 and 2019, for which an authorization is required from the CNSNS.

As a result of the Fukushima events in March of 2011, the CNSNS requested that LVNPP take action to enhance the safety of the reactors following the below orders issued by the United States Nuclear Regulatory Commission:

1. EA-12-049: Issuance of Order to Modify Licenses with Regard to Requirements for Mitigation Strategies for Beyond-Design-Basis External Events;

2. EA-12-051: Order Modifying Licenses with Regard to Reliable Spent Fuel Pool Instrumentation;

3. EA-13-109: Issuance of Order to Modify Licenses with Regard to Reliable Hardened Containment Vents Capable of Operation under Severe Accident Conditions.

Furthermore, in accordance with the international community, the CNSNS requested LVNPP to reassess its safety margins in the form of a stress test. This reassessment is set to measure the ability of LVNPP to withstand damage from hazards such as earthquakes, flooding, terrorist attacks or aircraft collisions that challenge plant safety functions and may lead to a severe accident.

To comply with the regulatory requirements requested by the CNSNS mentioned above, LVNPP is developing flexible and diverse mitigation strategies to cope with beyond design basis events caused by extreme external events such as earthquakes and hurricanes and the loss of large areas of the facility due to large fires and explosions from any cause, including beyond design basis aircraft impacts. These strategies will allow LVNPP to maintain or restore key safety functions for all reactors on-site with installed equipment, portable equipment stored on-site, or, when needed, portable equipment stored off-site. Once the strategies are implemented, LVNPP will have the capability to mitigate beyond design basis events by maintaining or restoring key safety functions like core cooling, spent fuel pool monitoring and cooling, repowering critical control and instrumentation buses, and containment integrity to prevent the release of radionuclides and combustible gases to the environment by preventing containment overpressure failure.

As part of the post-Fukushima lessons learned, severe accident management guidelines (SAMGs) are being developed by LVNPP. The SAMGs provide direction to the operators as to when actions should be taken and which strategies, of those mentioned above, will help to take actions during a severe accident scenario to terminate the progress of core damage and prevent/minimize further escalation of an accident sequence.

Not applicable.

Pre-feasibility studies and analyses are being conducted on the possibility of increasing the nuclear fleet. PRODESEN demonstrated that three 1 360 MW nuclear power units could be added in 2029, 2030 and 2031, respectively. The energy sector programme 2013–2018 proposes the development of the electrical infrastructure, increasing nuclear power participation and including measures to strengthen the development of human resources, to strengthen national industrial and technological capabilities existing in the nuclear field and to strengthen the regulatory body (SENER, 2013). The plant has entered into agreements with the local authorities, the Department of Defense, the Department of the Navy and other pertinent organizations for cooperation in case of a nuclear or radiological emergency. Currently, there are studies to expand the installed capacity of LVNPP. Among the presentations of different suppliers of nuclear power technology, General Electric—Hitachi promoted different types of reactors for LVNPP, such as advanced boiling water reactors and economic simplified boiling water reactors.

Not applicable.

Not applicable.

Not applicable.

Not applicable.

ININ carries out actions for nuclear scientific and technological development, for the promotion, transfer, adaptation and assimilation of nuclear technologies. It also carries out research projects in response to energy sector needs and provides technical assistance to nuclear facilities. It develops disciplines from which the country could benefit in other topics for national development as well. The institute has qualified personnel, nationally and internationally recognized experts in several sciences and engineering areas, providing the ability to support multidisciplinary projects. Within the field of peaceful uses for nuclear energy, ININ has defined 11 research and development topics.

INEEL is committed to meeting energy needs through innovation, efficiency and continuous improvement of their processes, within the legal and regulatory framework applicable to the management of quality, sustainable development, labour equality and non-discrimination, environmental management, safety and health at work.

The objectives of INEEL include the following:

• To carry out and promote scientific research, experimental development and technological research in order to solve the scientific and technological problems related to the improvement of the electrical industry;

• To contribute to diffusion and implantation, within the electrical industry, of those technologies that best adapt to the economic development of the country;

• To maintain effective relations with similar institutions in other countries and with academic and technological research institutes in the country;

• To provide courses of specialization and update knowledge in science, technology and industrial administration in the area of the electrical industry;

• To provide advice to CFE, the electrical manufacturing industry and engineering and consulting services related to the electrical industry;

• To propose to the SENER and CFE applied and technological research programmes, and the corresponding plans of operation, investment and financing in the short, medium and long term;

• To patent and license developed technologies and the results of the research obtained, as appropriate.

None.

Mexico is a member of the World Association of Nuclear Operators, the Institute of Nuclear Power Operations, the Electric Power Research Institute and the OECD Nuclear Energy Agency, and is an observer in the International Framework for Nuclear Energy Cooperation.

The CNSNS is the regulatory body responsible for the regulation and oversight of nuclear and radioactive installations and practices. In addition, it is responsible for inspecting and authorizing the fabrication, use, storage, reprocessing and transportation of nuclear fuel, nuclear and radioactive materials, and equipment containing such materials, and the processing, refurbishment, disposal and storage of radioactive waste. The regulatory authority is engaged in the licensing activities related to assessing applications for long term operation and preparing for the safety review of new reactors.

The licensing process for an NPP consists of two steps. The first step concludes with the granting of a construction permit, while the second step concludes with the issuance of a licence for commercial operation. The process starts with an application to build an NPP by the utility, which must present this application to the national regulatory body (CNSNS), along with preliminary studies of the following:

• Siting environmental impact;

• Quality assurance programme during construction phase;

• Preliminary safety assessment report.

If these documents satisfy the scope required by CNSNS, the utility is required to present the technical information on the planned NPP. This information includes the construction procedures and fundamental safety systems designed to cope with the operational transients and postulated accidents. This is evaluated by the CNSNS’ technical personnel, and a set of questions is then transmitted to the utility before the pouring of any concrete at the site. In the case of LVNPP, three provisional construction permits were granted to CFE before the definitive construction permit was issued. This limited work authorization has been eliminated from the present procedure for future NPPs.

During the actual construction phase, the regulatory body inspects the construction of the NPP and has the legal authority to stop the work if the agreed standards are not met. After the evaluation of the documentation, the regulatory body can issue the technical basis to grant the construction permit, addressed to the Department of Energy, as this is the authority legally allowed to grant the permit.

At a certain stage of construction, before the start of the pre-operational test period, the utility is required to present the regulatory body with technical information related to the following:

1. Final design of the NPP;

2. Final site studies;

3. Final environmental impact studies;

4. The quality assurance programme for NPP operation;

5. Final studies on plant performance during transients and postulated accidents;

6. The set of operating procedures;

7. The operations personnel training programme;

8. The pre-operational and start-up test programme;

9. Proposed technical specifications.

If these process documents are not clear enough in any technical subject, the regulatory body generates questions to clarify the topic. As a result of this process, the regulatory body issues the following documents:

1. Permit to load the fuel;

2. The set of technical specifications.

The technical basis to grant the operating licence is addressed to the Department of Energy, as according to the nuclear law this is the only authority that can grant such documents.

After the fuel load, the regulator monitors the performance of the low power test period and any change of power (0–5%, 5–10%, 10–25%, 25–50%, 50–75% and 75–100%). Engineers of the national body review the test results and evaluate possible discrepancies between the results and the acceptance criteria.