World Small Hydropower Development Report 2013

Transcription

1 World Small Hydropower Development Report MEXICO

2 Disclaimer Published in 2013 by United Nations Industrial Development Organization (UNIDO) and International Center on Small Hydro Power (ICSHP) UNIDO and ICSHP All rights reserved This report was jointly produced by United Nations Industrial Development Organization (UNIDO) and International Center on Small Hydro Power (ICSHP) to provide information about small hydropower. The document has been produced without formal United Nations editing. The designations employed and the presentations of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of UNIDO and ICSHP concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as developed, industrialized and developing are intended for statistical convenience and do not necessarily express a judgement about the stage reached by a particular country or area in the development process: Mention of firm names or commercial products does not constitute an endorsement by UNIDO or its partners. The opinions, statistical data and estimates contained in the articles are the responsibility of the author(s) and should not necessarily be considered as reflecting the views or bearing the endorsement of UNIDO and its partners. While every care has been taken to ensure that the content is useful and accurate, UNIDO and ICSHP and any contributing third parties shall have no legal liability or responsibility for the content or the accuracy of the information so provided, or for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information. Copyright: Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a copy of the publication containing the quotation or reprint. Recommended citation: Liu, H., Masera, D. and Esser, L., eds. (2013). World Small Hydropower Development Report United Nations Industrial Development Organization; International Center on Small Hydro Power. Available from

3 2 Americas 2.2 Central America Mexico Bajo en Carbono Team, Mexico Key facts Population 116,901,761 1 Area 1,964,375 km 2, of which 1,959,248 km 2 is continental and the rest is islands Climate Varies from tropical to desert 2 Topography High, rugged mountains; low coastal plains; high plateaus; desert. Highest point: Volcan Pico de Orizaba 5,700 m Rain pattern Average annual rainfall varies depending on the region between 50 mm in the North West and 4,000 mm in the South East, with a national average of 780 mm. The rainy season from May to October accumulates 83 per cent of the annual rainfall. 3 Electricity sector overview The total installed electricity generation capacity in Mexico is GW, of which GW belongs to the Public Service by Comision Federal de Electricidad (CFE), including the capacity of independent power producers (IPP) who sell energy exclusively to CFE under long-term contracts; and MW belong to private or other public generators, under the figures of Self Supply and Cogeneration. 4 5 The installed capacity of the 30 large hydropower plants amounts to GW, and that of small hydropower to GW. 6 The share of hydropower in the total installed capacity is 19.1 per cent and the share of small hydropower is 0.7 per cent. The total annual gross electricity generation in 2012 was TWh. 4 Fossil fuels in various forms (coal, steam/gas, internal combustion, combined cycle) and nuclear power accounted for approximately 86 per cent. The total generation from renewable sources is 14 per cent. It is expected that the demand of electricity will grow 3.6-per cent each year over the next 15 years. In 2010, 97.7 per cent of the population had access to electricity, with 98.9 per cent coverage in urban and 93.5 per cent in rural areas. 7 Most of the population had no access to the grid. The main barriers to rural electrification are difficulty of grid access to dispersed populations over a large area due to the country s rugged terrain and limited infrastructure. Renewable energy, not necessarily connected to the grid, is the most extensively explored source by most of Mexico s isolated communities, where small hydropower has significant untapped potential. The framework of the Programme of Rural Electrification and of Popular Colonies has allowed more than one thousand localities to be connected to the grid by With the implementation of this programme, all localities with more than 100 inhabitants will be included in the statistics for rural electrification rate. 8 Wind Geothermal Nuclear Hydro Fossil fuels 0.14% 2.52% 3.91% 13.88% Figure 1 Electricity generation in Mexico Source: Secretaría de Energía 9 Note: Data from % 0% 20% 40% 60% 80% Small hydropower sector overview and potential In Mexico, a hydropower generation facility is considered eligible for regulatory and other incentives aimed at renewable energy projects when its capacity is lower than 30 MW. 11 There are two exceptions to this upper limit rule: When the small hydropower plant has a reservoir with volume of up to 50,000 m 3, or it occupies less than one hectare; When the small hydropower plant is developed in an existing reservoir, even with larger volume, that can be equipped to generate electricity. Even though the participation of private investors in energy generation has been allowed by legislation since 1992, there are very few small hydropower projects in operation and the installed capacity is still incipient. In December 2012, the Energy Regulatory Commission (CRE) issued 36 permits to private generators for small hydropower plants with a total capacity of MW; out of which 17 plants of MW are in operation, 16 plants with MW are under construction, and 3 plants with 25.2 MW are inactive. The total estimated annual generation of the 36 small hydropower private plants will be 2,325 GWh, of which 802 correspond to the 17 plants in operation. 5 The average plant factor that makes these small hydropower projects feasible is 57 per cent. CFE has 42 small hydropower plants of up to 30 MW in operation with a total installed capacity of 301 MW. 6 In addition, it is currently planning nine projects of up to 30 MW with a total capacity of 172 MW. The total capacity of public and private small hydropower plants in operation is 453 MW (for plants up to 30 MW) (figure 2). In 1995 the National Energy Saving Commission (CONAE, now CONUEE) estimated the small hydropower potential of Mexico at 3,250 MW 1

4 (capacity from 2 MW to 10 MW), as part of a total national hydropower potential estimated by CFE. 10 Since then, several values close to 3,250 MW or rounded to 3 GW have been reported in many official documents. 11 Conversely, in 1994, the CFE had published an estimated total hydropower potential for Mexico of 159 TWh in terms of annual energy generation. Extra effort will be needed to identify the exact national small hydropower potential. SHP installed capacity (up to 10 MW) SHP potential (up to 10 MW) SHP installed capacity (up to 30 MW) SHP potential (up to 30 MW) n/a MW 453 MW Figure 2 Small hydropower capacities in Mexico In 2006, CFE solicited a study of the hydro power potential in three pilot river basins in Mexico. Technology was adapted and developed for the systematic and exhaustive evaluation of the Culiacán, Nautla and Tecolutla river basins, covering a total of 30,000 km 2, about 1.5 per cent of the territory. The study focused on run-off river projects up to 30 MW. The basic hydropower potential of all stream reaches, with an average length close to 3 km, was successfully evaluated (table). Small hydropower potential in pilot river basins in Mexico (Megawatts) River basin Feasible project capacity Culiacán 29.8 Nautla 91.1 Tecolutla Notes: Based on a distributed hydrologic model. The frequency analysis of runoff series (flow duration curves) was carried out, with daily data of 20 years. These results strongly suggest that the real small hydropower potential of the country may be significantly greater than what was presented before. The hydropower potential would be even greater if the following were taken into account: small hydropower projects with reservoir, pumped storage schemes, installation of equipment in existing irrigation and urban hydraulic infrastructure, and rehabilitation of existing small hydropower plants. Only a national assessment with the available technology can elucidate the question. Renewable energy policy 3250 MW Mexico is committed to generating 35 per cent of its electricity through renewable sources by 2024 (currently 12 per cent). To do this, several laws and regulations have been passed, above all to facilitate connection to the power grid. By the end of 2012, the framework for small-scale renewable energy tender offers (<30 MW) was created to promote investments by allowing installations to contribute to the power grid through the use of technologies such as solar photovoltaic and thermal, co-generation and small hydro. Furthermore, the approval of the General Climate Change Law, an internal emission trading system is planned, possibly linked to other international initiatives, as a tool for Mexico to achieve its goal of reducing carbon dioxide (or CO 2 equivalent) emissions by 30 per cent by 2020 and by 50 per cent by Within the energy sector, the following national policies seek to promote the development of renewable sources for electricity generation: In 2001, CRE adopted a specific regulation for renewable energy sources in order to encourage the development of electricity generating projects; In 2008, the Law on the Use of Renewable Energy and Energy Transition Financing (Ley para el Aprovechamiento de Energías Renovables y el Financiamiento de la Transición Energética) aimed at regulating the use of renewable energy sources and clean technologies to generate electricity for purposes other than providing public electricity service, as well as establishing the national strategy and the instruments to finance the energy transition. The National Strategy for Energy Transition and Sustainable Use of Energy is the instrument used by the Federal Government to promote policies, programme projects and actions to achieve greater use of renewable energy and clean technologies, and to promote energy efficiency and sustainability and reduced reliance on fossil fuels, mainly oil as the primary source of energy. It sets objectives, lines of action and goals related to 2024, while considering the impact that the energy sector has on the environment not only in relation to end use but considering the whole energy chain, from production to final consumption, and considering factors such as greenhouse gas emissions and the sustainable use of natural resources. In parallel, the Law for Sustainable Energy in all its processes and activities also published in This Law also provides the National Programme for Sustainable Energy (PRONASE) via the Advisory Council for Sustainable Energy, the National Information Subsystem on the Use of Energy and the National Commission for the Efficient Energy Use. 2

5 The new legislation of the electric sector places the obligation on the Secretariat of Energy (SENER) to elaborate and publish the inventory of all renewable energy sources. Legislation on small hydropower The Political Constitution of Mexico stipulated in Article 27 pertains exclusively to the Nation to generate, transmit, transform, distribute and supply electric energy which is intended for public service. In this matter no concessions will be awarded to particulars. The Public Service is carried only by the Federal Commission of Electricity (CFE). In 1992 the Law of the Public Service of Electric Energy was modified to stipulate in Article 3 that it is not to be considered as Public Service. With that legal modification particulars have now the right to generate, co-generate and import energy, but not to sell it to the public; thus they can only use it for self-supply, export or to sell exclusively to CFE. It is then permitted to form a partnership of private developers of specific renewable energy projects with different technologies and a pool of industrial, commercial and municipal energy consumers. These new enterprises fulfil the condition of Self Supply. The licensing process includes the following main procedures: Legal incorporation of the company (15 days) obtained by the developer Environmental Impact Assessment (EIA) authorization (20 or 60 days) issued by the Secretariat of Environment and Natural Resources (SEMARNAT). Three options with increasing levels of complexity depending on the project include either a preventive report, a particular or a regional EIA. Water authorization (60 days, for 5 to 50 years) issued by the National Water Commission (Conagua) which grants the concession to use surface water, exemption if eligible as a renewable energy project permit to use federal zone and a permit to build hydraulic infrastructure Feasibility studies by the CFE are also required. These consist of a study on grid connection (30 days) and a feasibility study on transmission (20 days). Moreover contracts issued by the CFE need to be obtained; these include: a contract on grid connection (90 days), a contract to buy/sell renewable energy to CFE, an agreement of electric backup and an agreement of transmission. Permits for electric energy generation are issued by the CRE within 20 to 50 days. Municipal Permits for construction are issued by the Municipal Governments involved. Barriers to small hydropower development The typical barriers to small hydropower development in Mexico are listed below. Most of them could also apply to other countries of Central America with due nuances. Technological: Inexistence of a detailed and reliable national hydropower potential inventory in natural and artificial streams. Coupled with a high hydrological uncertainty due to lack of adequate basic meteorological and hydrometric information. Focus of the studies on local projects, rather than focus on entire river basins to systematically assess all feasible projects, with economies of scale in the planning and construction stages. Technical deficiencies in small hydropower project formulation, due to rudimentary methods applied in the early phases of prospecting and pre-feasibility studies. For this reason the success rate is too low, where only two out of ten identified sites attain the construction stage, but all consume effort, time and money. This discourages new investments in prospecting. Inadequate or incomplete assessment of small hydropower project flows of costs and benefits. Social: Legitimate social and community concerns about hydropower projects, often based on lack of education and objective information. In addition to, disproportionate expectations of local communities regarding compensations to remedy regional underdevelopment and lack of services. Ideological and political opposition induced from within the country and from abroad against large and small hydropower projects, private participation in the electricity sector and foreign investments. Regional insecurity and delinquency. Regulatory and Legal: Requirement for complete feasibility studies prior to having the assurance to obtain all the permits are costly. Coupled with complex and multiple licensing procedures with federal, state and municipal authorities. Restrictions play a vital role as a barrier to small hydropower development. High restrictions on projects proposed in protected areas, without impact analysis. Restrictions for licensing of small hydropower projects in existing hydraulic urban and irrigation infrastructure. Requirement to connect to the grid in higher voltage. Exposure to risk of issuance of new concessions for different water uses or diversions upstream of the project. 3

6 Long period of licensing and legal processes in addition to long period of contract preparation for structuring projects. Exposure to the risk of legal challenges by another developer for a site that is under prospecting or licensing process. Requirement to establish a trust to control the property of assets, contracts, rights and cash flows of the project. Economic: A lack of coverage and capacity of electric grid in areas with high hydropower potential, thus requiring major investment in interconnection lines. A lack of coverage and maintenance of roads in areas with high hydropower potential, thus requiring major investment in access roads. Charges or duties for the volume of water used to generate energy, rather than for the energy produced. Commercial: Saturation of the consumer market for self-supply. Low credit rating of prospective energy consumers. And the low price of the energy delivered to the national electric system. Exposure to the risk of gradual or sharp decline in energy prices due to energy bids. Difficulty to access mechanisms of payment for greenhouse gas emissions reduction Financial: Lack of financing options for the prospecting and pre-feasibility phases. Limitation of funds made available by commercial banks for small hydropower projects, in some cases due to lack of specific experience. Terms of commercial credit in the country are not conducive, regarding interest rate, loan term and grace period. Requirement to augment the ratio of equity capital to debt and the condition to disburse equity capital prior to using debt capital. Requirement to structure syndicated loans for larger projects. Difficulty access to mezzanine funds, clearly subordinated to principal debt, to complement equity capital. High requirements of banks to assess the specific track record and financial solvency of the project developers. High requirements of financial guarantees, beyond the project expected cash flows, such as long term power delivery agreements, high credit rating of energy consumer partners, construction and supervision contracts with highly ranked firms (EPC), operation and maintenance contracts during the loan term and the requirement of opinions from independent experts. Difficulty to access mechanisms of partial guarantees of the loan and of guarantees against project cost overruns. References 1. Consejo Nacional de Población (2009). Proyecciones de la población de Mexico Available from Accessed March Central Intelligence Agency (2012). The World Factbook. Available from 3. Comisión Nacional del Agua (2012). Servicio Meteorológico Nacional. Available from Accessed November Secretaría de Energía (2013). Prontuario Estadístico del Sector Energético. Mexico, D.F. Available from Comisión Reguladora de Energía (2013). Permisos de generación e importación de energía eléctrica. Available from Accessed March Comisión Federal de ELectricidad (2013). Centrales generadoras al mes de mayo de Available from cas/paginas/centrales-generadoras.aspx. Accessed March Instituto Nacional de Estadística y Geografía (2010). National census ITER Available from aspx. Accessed November Organización Latinoamericana de Energía (2012) Energy Statistics Report. Quito. 9. Secretaría de Energía (2010). Balance Nacional de Energía. Mexico, D.F. Available from 20Nacional%20de%20Energ%C3%ADa%202010_2.pdf. 10. Comisión Nacional para el Ahorro de Energía (1995). Estudio de la Situación Actual de la Minihidráulica Nacional y Potencial en una Región de los Estados de Veracruz y Puebla. Available from Secretaría de Energía (2013). Estrategia Nacional de Energía Mexico, D.F. Available from 12_2026.pdf. 12. Armando Trelles and others (2006). Identificación y evaluación de proyectos minihidroeléctricos en la cuenca del río Culiacán. Informe de proyecto TH Instituto Mexicano de Tecnología del Agua, Jiutepec. 13. Armando Trelles and others (2006). Identificación y evaluación de proyectos minihidroeléctricos en la cuenca de los ríos Nautla y Tecolutla. Informe de proyecto TH Instituto Mexicano de Tecnología del Agua, Jiutepec. 4

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