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Electricidad

Mexico: Third power auction likely to be more successful, despite too-low prices

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In an interview with pv magazine, Santiago Barcón, columnist for Energía Hoy and advisor to Mexico’s Energy Regulatory Commission, talks positively about the results of Mexico’s third power auction, despite final prices coming in lower than expected.

pv magazine: The third energy auction in Mexico concluded with an offer from the consortium Mitsui/Trina of around US$19 per MWh. What’s your opinion on this price?

Barcón: Before the auction, several experts in the Mexican electricity sector made bets on what the final price would be. We all expected a decrease with respect to the prices seen in the second auction. But nobody guessed the final price in the third auction, as all the bets were at least 20% higher than the Mitsui/Trina offer.

pv magazine: Are these prices too low?

Barcón: Yes, they are very low and will need companies with a very good cash flow. However, the winners of this auction were all large groups, such as Enel and the French group, Engie with huge financial resources that do not need loans and can build the plants with their own funds. I think those happiest with these prices will be the lawyers, since the smallest mistake in the development of the projects, or the slightest inconvenience in the execution of the works could result in big losses. I have been able to talk with other players, such as the French EDF, which did not participate in the contest, and they were happy not to have to build such projects.

pv magazine: But EDF submitted a similar bid to that of Mitsui/Trina at a recent auction in Saudi Arabia.

Barcón: These two markets are so different, I cannot make an evaluation in this sense.

pv magazineIn your last interview with pv magazine, you said up to 40% of the projects selected in the two previous auctions could not be built. What will be the percentage of realization of the third auction?

Barcón: Surely larger, since, as I said before, in this auction there were very big and serious groups. The competitions of the previous years were joined by companies, which did not have the necessary success capabilities a very difficult environment, like the Mexican energy sector, imposes. As for this auction, however, I am very optimistic.

pv magazine: In Argentina, the auction that is about to conclude could end with a final price for solar of around $40 per MWh. What is the factor determining this price difference between the two Latin American countries?

Barcón: I do not have all the available data now to make an exhaustive and comparative evaluation of the two auctions. What I can say is that transparency is a determining factor for the low prices of the Mexican auction. I do not want to get involved in the rhetoric of transparency now, but it is true that the recent energy reform in Mexico is bearing fruit. For example, in the last auction there was not a single complaint of any kind by all the players involved, nor by the part that belonged to the oil companies.

pv magazine: In short, your assessment of the third auction is very positive?

Barcón: Without a doubt, the whole process was transparent and, although prices were lower than expectations, I do not see concerns for the future of the selected projects.

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