Mexico’s Energy Leaders Meet at MBS 2023

Mexico’s Energy Leaders Meet at MBS 2023 Mexico Business Summit celebrated its first edition on Nov. 28, 29 and 30, 2023. This one-of-a-kind B2B industry event brought together 2,000+ business and political leaders around eight key industries that are shaping Mexico’s future: Energy, Automotive, Electromobility, Natural Gas, Talent, ESG, Nearshoring and Logistics. Mexico Energy Forum 2023 and Mexico Natural Gas Forum 2023, organized within the framework of MBS 2023, shed light on the state of the industry, with analyses of the past, present, and future of the energy sector, providing insights into the decade since the opening of the energy market with the 2013 Energy Reform. Andrea Villanueva, Senior Legal Counsel, CFE, described how the Reform paved the way for private investment in infrastructure and energy, while allowing the introduction of more projects with renewable focuses. Héctor Olea, President and CEO, Gauss Energia, identified nearshoring and the energy transition as the two major challenges Mexico faces in energy. Trends Driving the Energy Transition As energy demand in Mexico continues its upward trajectory, power producers are confronted with the dual challenge of increasing output capacity while aligning with the burgeoning demand for sustainable energy sources. David Yang, President, SPIC-Zuma Energía; Angie Soto, Director General, Nx Buena Energía; Fernanda Langarcia, Energy Manager, Grupo Deacero; and Javier Meneses, Director, T&ELS, met to discuss the dynamic nature of the regulatory environment and the strategic adjustments they have done to navigate obstacles and seize opportunities. Jorge Musalem, Strategic Projects Manager, CFE, imparted a valuable presentation about the changes the energy sector is experimenting, and how technology is accelerating the process. Acknowledging the rise in demand for clean energy and the threat of climate change, Musalem said it is important to promote clean energy projects. However, he warned that distributed generation cannot happen to the detriment of CFE. He said that if CFE clients disconnect themselves from the grid, CFE will sell less energy at the same costs, which could lead to price increases that might incentivize more clients to disconnect, meaning more costs for CFE. Leonardo Beltrán, Distinguished Visiting Fellow, Center on Global Energy Policy at Columbia University | SIPA, talked about renewables and the significant opportunity they represent to enhance Mexico's energy mix and meet the increasing demand for clean energy sources. Many stakeholders recognize the country's potential to harness its solar resources. "Achieving an effective balance and collaboration is crucial," he underscored. In the electricity sector, there has been a missed opportunity over the past five years to advance the incorporation of renewable energies, analyzed Guillermo García, Planning and Performance Evaluation Vice President, ITAM. “The critical issue is the need for more investment in transmission and distribution infrastructure, posing challenges in reaching industries and commerce.” Experts discussed private sector' participation in the industry and dwelled on companies’ priorities regarding energy for the future. Experts explained that as Mexico faces an increase in demand, energy requirements have shifted to meet the current objectives of economic and environmental sustainability. “This is the first time in about a century that energy requirements are this many. Energy now must be sufficient, cheap, and cleaner,” said Carla Medina Perezgomez, President, ASOLMEX, and Vice President Corporate Affairs, Saavi Energia. Humberto Alarcón, CEO, Suneco, highlighted the importance of flexibility in Mexico’s energy industry to simply respond to the energy demand and to address ESG commitments. Salvador Portillo, President, CANAME, also addressed how government incentives, regulatory certainty, infrastructure development, and collaboration among stakeholders have taken center stage in propelling the electrical equipment manufacturing industry forward. “One of the main challenges is to comply with the agreements Mexico has: reduce emissions by 22% and achieve net zero, total carbon neutrality, by 2050,” explains Guadalupe Mijares, Marketing & Sales Operations and Regional Sales Manager, Hitachi Energy Mexico. In this context, Abraham Zamora Torres, President, Mexican Energy Association, and Senior Vice President, Corporate and Public Affairs, Sempra Energy, talked about the challenge that a strained transmission and distribution infrastructure poses for diversifying energy sources in Mexico, while experts mentioned the surge of Distributed Generation (DG) as an answer to the challenges the industry faces. DG, characterized by smaller-scale solar installations across residential, commercial, and industrial settings, has gained prominence. DG fosters energy independence, enabling businesses and households to generate their own power and lower their electricity costs. The decentralized nature of these projects not only contributes to environmental sustainability but also democratizes access to solar energy benefits shared Humberto Alarcón, CEO, Suneco. Another trend gaining great predominance is the development of the electromobility sector. Beltrán, highlighted this sector as a factor that will guide the economy and the energy transition. Other leaders converged to unravel the challenges and key insights into the production and widespread adoption of electric vehicles (EVs). Filiberto Tamez, COO, Car Fast; Lorenzo Ortego, CEO, Voltway; Kijana Mack, Executive Director, Mexico Energy Partners; Irma Velazquez, CEO, Energy and Water Development Corp; and Rafael Valdez, Commercial Director Mexico, Central America, and Caribbean, CIRCUTOR, discussed the imperatives to shape the future of sustainable mobility in the country that are necessary to properly adopt electrification. Electricity supply remained a major topic of discussion as a critical factor for the evolution of the automotive industry. Ana Muradas, Sales & Business Engineer Director, Quartux; Andrés Friedman, CEO and President, Solfium; Guadalupe Paredes, COO, Luxem Energía; Carla Ortiz, Country Manager Mexico, RER Energy Group México; and Miguel Chavarría, Head of Climate Solutions, South Pole, exchanged insights on the need for a reliable and efficient electricity supply to power manufacturing processes, machinery, and supporting the increasing integration of electric vehicles (EVs). Diversifying the matrix was a main topic at MBS 2023. Alternative fuels, biogas, derived from sources like organic food waste and agricultural residues, have emerged as a pivotal component in companies' decarbonization strategies. While Mexico has vast potential for the production of biogas, active projects to produce it are scarce in the country. This renewable energy source could diversify the country’s energy matrix and reduce its dependence on fossil fuels, shared Guillermo Chaim Serrano, General Director, Brimex Energy. Mitsui is also positioning itself to expand its footprint in the Mexican market leveraging this resource. Carlos Fuentes, Business Development Executive, Mitsui & Co Infrastructure Solutions, explained the diverse raw materials for biogas production, ranging from organic food waste and agricultural residues to wastewater treatment plants. Industrial offtakers and experts had the opportunity to lay out their priorities and the challenges they have faced amid the energy transition. "There are no prepared spaces to supply the energy required by new foreign companies, which is becoming an increasingly important priority for clients,” sayid Ruth Corona, Director, Energy & Sustainability Services, JLL Mexico. ESG was a strongly touched upon topic across the Energy agenda, highlighting offtakers’ needs for clean and accessible energy. José Francisco Martínez, Deputy Director, Utilities Walmart, mentioned that compared to previous years, “Renewable energy is not against profitability.” However, due to the nature of renewable sources, their availability may fluctuate, warned Susana Cárdenas, Country Manager, Energyby5. The reliability and stability of renewable resources may also vary, depending on location and the nature of resources. To mitigate these concerns, some businesses are implementing a mix of energy resources to ensure a stable energy supply, said Yazmin López, Energy and Environment Manager, Iconn. Addressing Nearshoring The priorities, needs, opportunities, and challenges laid out by offtakers, power producers, and other market players, revolved in great measure around addressing concerns related to increasing energy demand brought by nearshoring. Experts explored the role of energy in Mexico's nearshoring rise and the country’s need to expand and modernize its electrical grid to guarantee a reliable electricity supply. According to Ricardo Zúñiga, Country Manager, CapWatt, concerns among industrial stakeholders include the lack of infrastructure available to new users looking to establish operations and the limited capacity for existing businesses to expand. Eduardo Robledo, Senior Commercial Manager, Tuto Power, noted that to attract the desired economic development, Mexico’s energy strategy should also incorporate renewable solutions, aligning with the increasing global trend of companies seeking to reduce their carbon footprint. Aldrich Richter, Managing Director, Bergen Engines, agreed, saying that investors are not only worried about having an energy supply, but how clean is this supply. He called for regulations that would allow companies to generate their own energy. Jerson Reyes, Key Account Manager, ENGIE, said the interconnection between nearshoring and the energy sector is no longer a distant future but a “present future,” emphasizing the role of adaptability in the sector. Carlos Hernández, CEO and Founder, Sujio, summarized the primary concerns of industrial consumers: ensuring legal certainty and transparent pricing in the wholesale electricity market, feasibility for expanding energy demand and attracting investments, seeking cost savings on energy tariffs compared to CFE, and a strong emphasis on clean energy solutions for the short, medium, and long terms. As nearshoring materializes, it is the northern and Bajío region states the ones that have proven active in attracting investment and dealing with the deployment of infrastructure for industrial operations. State governments are already making substantial investments in infrastructure, including roads and mobility systems. “Mexico has the energy capacity and an extensive distribution network spanning 110,000km — a phenomenon ripe for leveraging in the context of nearshoring initiatives,” said José Ramón Silva, Tamaulipas Minister of Energy Development. Considering renewables, both states and corporations see distribution and availability as a challenge. “Availability is fundamental for all industries,” added Gabriela Carvajal, General Director Energy Commission, State Government of Puebla. Eduardo Sánchez, Director General Renewable Energy of Nuevo Leon, mentioned he advocates for co-responsibility, where both government entities and corporations pitch in to make energy use cleaner and more efficient. Ivonne Ramírez, Director General of the Energy Agency, State Government of Hidalgo concurred adding that if every company uses energy as efficiently and as responsibly as possible, quality improves. Víctor Cervantes, President of the Energy Commission of Jalisco, advocates for leveraging each state's unique strengths, such as biomass in regions that are agricultural powerhouses. At the heart of the industry's efforts to meet energy challenges, lies the role of Mexico’s infrastructure to ensure a reliable supply. Benjamín Torres-Barrón, Lead Partner of the Energy, Mining and Infrastructure practice for Baker McKenzie in Latin America and Mexico, shares that over the past months, Mexico has received over 170 letters of intention to invest in the county, although energy remains a major concern for investors. In this context, investment plans must go hand in hand with a regulatory framework that does not result in a changing public policy, said Ariel Garfio, Von Wobeser. The window of opportunity that nearshoring poses must be leveraged on time and with the right investments, says Antonio Vivanco Casamadrid, Partner, Wisdom Energies. According to Manuel Rodríguez Arregui, CEO, Ainda, Energia & Infraestructura, modernizing and escalating the system’s capacity does not only rely on deploying more infrastructure but on reconfiguring and analyzing alternatives. Furthermore, while there must be more investments in infrastructure, the industry also needs innovative solutions and alternatives that do not involve deploying projects from the ground, but rather the reconfiguration of already existing infrastructure or the use of the natural gas infrastructure. Alejandro Fajer, Managing Director of Quartux, explains that existing technology is also available to alleviate the pressures of the system, such as energy storage systems. Emmanuel Moctezuma, Business Development Sr. Manager - Energy Storage, AES Mexico, highlights energy storage as a linchpin in Mexico's pursuit of a reliable and resilient energy grid. “Today, even more projects are being deployed to redouble efforts and face the challenges of deploying more sustainable energy. A larger battery project is announced practically every six months,” shared Moctezuma. ESG in the Energy Sector Despite seeming progress made in Latin America to achieve ESG goals, Javier Pastorino, Managing Director Mexico, Central America and Caribbean, Siemens Energy, considers it important to properly measure the progress in the region as reality might be different from perception. "Over the past 15 years, there has been a perception that in Latin America we are reducing emissions by 17%, when in reality, we have increased by 5%. We must mention this to create a sense of urgency,” he said. While there is a growing interest in reducing carbon footprints and meeting environmental, social, and governance (ESG) goals, renewable energy use also depends on competitive prices. In this sense, Érika Santiago, Senior Manager of External Affairs, Communication and Sustainability, AES Mexico, considers clean energies to be more cost-effective than traditional sources, today. Cristina Kessel, Sustainability Director, Sempra Infraestructura, shared Sempra Infraestructura’s point of view, focusing on natural gas as a transitional fuel, “responsibly contributing to the construction of an energy matrix in Mexico, with a strong emphasis on the development of renewable energies," she added. One of the main trends in sustainable energy lies in energy efficiency practices, which can reduce companies’ energy consumption, thereby reducing their gas emissions. “The least polluting energy is the one that goes unconsumed,” stated Ana Laura Ludlow, Vice President and Chief Government Affairs & Sustainability Officer, ENGIE. To move forward in the ESG pathway, Miguel Carreón, Regional Leader Mexico and CA, Baker Hughes, underscored the importance of joint efforts to address upcoming obstacles. As businesses and countries strive to reach decarbonization goals, it becomes imperative to identify areas that have been overlooked while developing overarching goals. Central to the decarbonization journey is the need to drastically reduce carbon emissions in organizations, according to Escamilla. Moreover, "leadership toward achieving net zero is not merely an end goal but a necessary path for the energy industry," says Escamilla. Rob Cordray, Senior Vice President Consulting, Rystad Energy, shared ideas around the different options adopted in the industry to power tomorrow’s economy sustainably. Cordray talked about the opportunities and challenges that batteries, energy storage, natural gas, and different components of the industry represent. “Energy generation is a multifactor activity, it is almost impossible to speak about one single energy source,” said Cordray. The Role of Natural Gas In the pursuit of decarbonization, natural gas emerges as the transitional fuel of choice. Francisco Barnés de Castro, President, Cifra2 Energy Consulting, touched on the natural gas agenda, explaining the current state of this industry in Mexico. “Mexico is becoming increasingly dependent on imported natural gas since the state finds it more profitable for PEMEX to invest in oil,” he explained. As mentioned by Areli Covarrubias, Commercial and Development Director, Sempra Infraestructura, natural gas could be a key player in Mexico's energy landscape for the foreseeable future, however, potentially extending its significance until 2040-2050. Natural gas accounts for 60% of power generation in Mexico, but most of that gas comes from the United States, creating vulnerability to potential disruptions. "To address [gas dependency], an industry plan is essential to ensure a secure and less dependent relationship with the United States and create compelling incentives for curbing irregular migration," said Warren Levy, CEO, Jaguar E&P. Exploiting large reserves in the southern part of the country is an attractive opportunity, said Ricardo Ortiz Hernández, General Director Gas & Energy, Diavaz. However, natural gas infrastructure becomes critical in light of nearshoring and increasing energy demand. Natural gas has been linked to higher GDP growth, with states having ready access to natural gas experiencing a 50% higher growth rate, says Leonardo Robles, Vice President, TC Energy. While expectations for development exist, execution of these opportunities is lacking. According to Gustavo Núñez, Managing Director Mexico & Central America Sector Rosen Group, major efforts have been made regarding Natural Gas Infrastructure Integrity Management and today it must be a fundamental piece of decision-making for operators. “In this way, we can move to a model not only of precaution and mitigation, but of prevention,” he added. Regarding industrial activities, natural gas infrastructure stands out as a major challenge. Gustavo Blejer, Manager for the Americas, Bonatti; Gustavo Nuñez, Managing Director at Rosen Group; Max Kolbe, Vice President of Growth and Development, Wood; and Rashid Luyen, Head of Section - Offshore and Mid/Downstream Mexico, DNV, discussed the natural gas network, identifying a significant challenge in allocating resources to preventive maintenance, particularly for the aging CENAGAS network, emphasizing the need for specific maintenance services tailored to natural gas’ needs. The global natural gas industry grapples with the dual challenge of reducing methane emissions while ensuring operational efficiency and profitability. “Natural gas will guide the energy transition over decades to come. When burnt correctly, it is one of the kindest fossil fuels with the environment: it is cheap, it is available and the available infrastructure supports to a very good extent economic development,” says Malvin Delgado, Director, Sales & Client Engagement LATAM, Picarro. However, when managed incorrectly, natural gas could also result in harm to the environment and represent setbacks for companies in their sustainability goals and great economic losses. To address this environmental concern and achieve economic sustainability, the industry must embrace innovative solutions, explained Delgado. Alberto Alonzo, President, Mexico Pacific Limited, shared exclusive and interesting insights on Mexico Pacific’s North American West Coast Project, a liquefied natural gas (LNG) initiative. Alonzo also discussed the role that LNG plays for the country.