«NATIONAL RENEWABLE ENERGY LABORATORY RENEWABLE ENERGY OPPORTUNITY ASSESSMENT FOR USAID MEXICO November 2015 Andrea Watson, Ricardo Bracho, Rachel ...»
ENHANCING CAPACITY FOR LOW EMISSION DEVELOPMENT STRATEGIES
NATIONAL RENEWABLE ENERGY
LABORATORY RENEWABLE ENERGY
OPPORTUNITY ASSESSMENT FOR USAID
Andrea Watson, Ricardo Bracho, Rachel Romero, Megan Mercer
EC-LEDS is managed by the U.S. Agency for International Development (USAID) and Department of State with support from the U.S. Department of Energy, U.S. Environmental Protection Agency, U.S. Department of Agriculture, and U.S. Forest Service.
Printed with a renewable-source ink on paper containing at least 50% wastepaper, including 10% post consumer waste.
TP-7A40-65016 November 2015
NOTICEThis report was prepared as an account of work sponsored by an agency of the United States government.
Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof.
ENHANCING CAPACITY FOR LOW EMISSION DEVELOPMENT STRATEGIES
ACRONYMSAMDEE Mexican Wind Association ASOLMEX Mexican Association of Photovoltaic Solar Energy BLM Bureau of Land Management CEADIR Climate Economic Analysis for Development, Investment, and Resilience CEL Clean Energy Certificate CEMEX Cementos Mexicanos (National Mexican Cement Company) CENACE National Center for Energy Control CEWD Center for Energy Workforce Development CFE Federal Electricity Commission CICC Interministerial Commission on Climate Change CONALEP The National College of Technical Professional Education COP21 Conference of Parties 21 (or, the 2015 Paris Climate Conference) CRE Energy Regulatory Commission CREZ Competitive Renewable Energy Zone EC-LEDS Enhancing Capacity for Low Emission Development Strategies EE Energy Efficiency ERCOT Electric Reliability Council of Texas ETS Emissions Trading Scheme GCC
IIE Instituto de Investigaciones Eléctricas IMCO Instituto Mexicano para la Competitividad INDC Intended Nationally Determined Contribution INECC National Institute for Ecology and Climate Change Inmujeres National Institute for Women IREC Interstate Renewable Energy Council
LARCI Latin America Regional Climate Initiative LSPEE Public Electricity Service Law LIE Ley de la Industria Eléctrica (Electricity Industry Law)
MDB Multilateral Development Bank MLED Mexico Low Emissions Development Program MRV Measurement, Reporting and Verification Mt CO2e Million metric ton carbon dioxide equivalent
NAFIN Nacional Financiera NREL National Renewable Energy Laboratory PEACC Mexican state-level climate action plans POISE Programa de Obras e Inversiones en el Sector Eléctrico (Work Program for Electric Sector Investment)
TA Temporada Abierta de Reserva de Capacidad de Transmisión y Transformación de Energía Eléctrica TDY Temporary Duty Assignment UCED Unit Commitment and Economic Dispatch UNAM National Autonomous University of Mexico UNDP United Nations Development Programme USAID United States Agency for International Development UVIG Utility Variable-Generation Integration Group iii
TABLE OF CONTENTS1 Introduction
1.1 Executive Summary
1.3 Energy Reform Context
1.3.1 Wholesale Electricity Market
1.3.2 Transmission Planning
1.3.3 Clean Energy Incentives
1.3.4 Organizational Changes with the Energy Reform
2 Enabling Large-scale Renewable Energy in Mexico: Barriers and Opportunities
2.1 Building Blocks for Scaling Up Renewable Energy
2.1.1 Planning for a RE future: Grid Integration
2.1.2 Renewable Energy Priority Zones
2.1.3 Financing Required to Achieve the Clean Energy Goals
2.1.4 Smart Incentives, Competitive Procurement, and Climate Planning
2.1.5 Capacity Development
2.1.6 Red de Mujeres en Energía (Women in Energy Network)
2.2 GHG Emissions and Renewable Energy in Mexico
Appendix I: TDY Leave Behind
Appendix II: List of TDY Meetings and Attendees
Appendix III: Renewable Energy Building Blocks
Appendix IV: Grid Integration Check List for Mexico
Appendix V: USAID RUTAS Program
1.1 Executive Summary The United States Agency for International Development (USAID) Enhancing Capacity for Low Emission Development Strategies (EC-LEDS) program is designing its second phase of assistance to the Government of Mexico (GOM). In preparation for program design, USAID has asked the National Renewable Energy Laboratory (NREL) to assist in identifying options for enabling renewable 1 energy in Mexico and reducing greenhouse gas (GHG) emissions in the energy sector.
The NREL team conducted a literature review and consulted with over 20 Mexican agencies and organizations during a two-week temporary duty assignment (TDY) to Mexico to identify gaps, opportunities, and potential program theme areas for consideration by USAID for support to Mexico.
The USAID Global Climate Change Office (GCC) recently introduced informal guidance for USAID renewable energy program design (See Appendix III). GCC recognizes that countries with large amounts of renewable energy deployment (thousands of megawatts (MW)) achieved these results through a few core pillars, or building blocks, that enable renewable energy. These building blocks align with areas where USAID can effectively inform and support country efforts to advance large-scale renewable energy deployment as a priority pathway for GHG emission reductions. The NREL team considered this building blocks framework as it compiled this renewable energy assessment for Mexico.
Opportunity and program themes are presented for grid planning and integration, locational concentration (renewable energy priority zones), renewable energy finance, and capacity building. Additional projects and gender activities are also identified. A discussion of GHG emissions implications is included. The opportunities and program theme areas are intended to help guide USAID/Mexico as it considers options for new program design. Additional development will be required to evaluate and translate the information presented in this assessment into an actionable program.
USAID has an opportunity to enable renewable energy and help Mexico successfully meet its emission reduction goals by developing a robust, technical, and concentrated approach to one or more of the program theme areas presented here.
1 For the purpose of this document, renewable energy is defined as wind, solar, geothermal, biopower, and smallscale hydropower unless otherwise defined.
1.2 Background 2,3 In June 2012, Mexico passed General Climate Change Law, which set forth both a GHG emission reduction goal and a clean energy generation goal of 35% by 2024. In early 2013, the Enrique Peña Nieto administration released an updated National Climate Change Strategy, with a vision for the next 10, 20, and 40 years for reducing GHG emissions while promoting development and resiliency in Mexico 4. In April 2014, the Mexican Ministry of Environment and Natural Resources (SEMARNAT) released a revised Special Program on Climate Change for the period 2014 to 2018. The PEACC is more focused policy document for the short-term, derived from the guidance provided in the General Climate Change Law. In addition, Mexican states are developing statelevel climate change action plans (PEACCs), in coordination with the Mexican Ministry of Environment and Natural Resources (SEMARNAT) and the National Institute for Ecology and Climate Change (INECC).
The Mexican Electricity Industry Law or Ley de la Industria Eléctrica (LIE) was enacted on August 11, 2014 and defines clean energies as those energy sources and electricity generation processes whose emissions or waste, where they exist, do not exceed the thresholds established in the guiding regulations 5. According to the law, clean energy
includes electricity generated from the following sources:
e) Bioenergy sources, as determined by the Law for the Promotion and Development of Bioenergy
f) Methane and other gases associated with waste disposal sites, livestock farms and wastewater treatment plants, among others
g) Hydrogen through combustion or used in fuel cells, as long as they meet the minimum efficiency established by the Energy Regulatory Commission (CRE) and with the emissions criteria based on the Life Cycle Analysis established by SEMARNAT 2 In addition to citations, information included is from NREL note taking during meetings and recent conversations with government organizations.
3 Partially Excerpted from the NREL RE Assessment SOW 4 “National Climate Change Strategy 10-20-40 Vision, Federal Government of Mexico” (Inter-ministerial Commission on Climate Change, June 2013), http://mitigationpartnership.net/sites/default/files/encc_englishversion.pdf.
5 Enrique Peña Nieto and Honorable Congreso de la Unión Mexicano, LEY DE LA INDUSTRIA ELÉCTRICA, 2014, http://dof.gob.mx/nota_detalle.php?codigo=5355986&fecha=11/08/2014.
j) Agricultural waste and municipal solid waste, when such processing does not generate dioxins and furans or other issues that may affect the health or the environment and meets the Mexican official standards issued by SEMARNAT
k) Efficient cogeneration plants that meet the efficiency criteria issued by the CRE and the emissions standards established by SEMARNAT
m) Thermal power plants with carbon dioxide capture processes and geological storage having an efficiency which is equal or superior in terms of kWhgenerated per tonne of carbon dioxide equivalent emitted into the atmosphere than the minimum efficiency set by the CRE and emissions criteria established by SEMARNAT
n) Technologies considered as low carbon technologies accordance with international standards
o) Other technologies that can be determined by the Ministry of Energy (SENER) and the SEMARNAT, based on parameters and standards for energy and water efficiency, emissions and waste generation, direct, indirect or life cycle analysis. 6 The LIE has left the door open for SEMARNAT to include natural gas combined cycle generation as clean energy. Many experts in Mexico believe it is unlikely that Mexico will actually take advantage of this since there is no global precedent; very few other countries consider this as a clean technology. Nonetheless, the possibility remains unless the Mexican congress passes the Energy Transition Law.
At the time of this assessment report, the Mexican Congress is charged with analyzing and voting on a new law, The Energy Transition Law or Ley de Transición Energética (LTE). Under the LTE, the clean energy definitions remain the same but the law adds a limit of GHG emissions. For a technology to be considered clean, it must emit 100 kg/MWH of GHG emissions or less. Under this proposed law, natural gas generation would not be considered clean energy. The LTE does allow natural gas to continue to be the transition fuel but these plants could not compete for clean energy certificates.
The LTE specifies intermediary clean energy generation goals (25% by 2018 and 30%
by 2021). The law includes the following additional elements:
According to calculations from the Latin American Regional Climate Initiative (LARCI), the accomplishment of the 35% clean energy generation and improved energy efficiency mandates in the law would represent a potential reduction of between 95-115 MtCO2e by 2030 in the electricity sector. This mitigation potential represents almost one third of the total GHG mitigation needed by the country to meet its -30%/2020 goal mandated in the General Climate Change Law and in its international mitigation commitments. The status of the LTE and the adoption or not of its components will have implications on USAID program design. As USAID undertakes program design, the status of this law should be taken into account.
Through the Energy Reform, Mexico is currently in the process of making the most significant changes to its energy sector in 80 years. In December 2013, Mexico amended its constitution and subsequently passed secondary legislation and new regulations that have reformed the energy structure in Mexico. As a result of this energy reform, the electricity sector, long dominated by the vertically integrated utility, the Federal Electricity Commission (CFE), is being restructured and a new wholesale electricity market will become operational on January 1, 2016.
To implement these new policies, the GOM is rapidly taking on new responsibilities across a spectrum of issues related to climate change and energy reform. For example, SEMARNAT is developing a new, mandatory GHG emission registry that will • require all emission sources greater than 25,000 tons of CO2-equivalent (CO2e) per year to report and verify CO2e emissions annually.
SENER is working to meet the GOM’s stated goal of 35% electricity generated • from clean sources by 2024. This requires new technical capabilities and management techniques for the country’s electricity grid, which will experience significantly more variable renewable energy sources entering into the power grid such as solar and wind.