CENACE announces the winners of the Second Long Term Auction for Energy, CELs and Capacity

October, 2016

CENACE announced the ruling of the Second Long Term Auction.

On September 28 th , 2016, the National Center for Energy Control ("CENACE"), announced the ruling of the Second Long Term Auction SLP-1/2016 whereby the winning bidders were awarded with contracts for the acquisition of energy, clean energy certificates[1] ("CELs") and capacity.

In terms of the award of the second long term auction, the following percentages of the offered maximum quantities by the Federal Electricity Commission ("CFE") were assigned: 80% of the 1, 483 MW of capacity; 84% of the 10. 6 million MWHr/year of energy; and 87% of the 10.6 million of CELs.

23 bidders were declared winners with 56 offers, which include solar, wind, geothermal, combined cycle and hydroelectric technologies. The solar photovoltaic energy dominated covering more than the 50% of CEL's sale, followed by wind farms which will cover about 40% of the energy to be sold.

In this second long term auction, the CFE participated as a basic services supplier (buyer) and, in contrast to the 2015 First Auction, CFE participate as well as a clean energy generator (seller). The CFE as a seller submitted two offers which were awarded in order to provide 199 thousand MWh of energy, 199 thousand CELs and 400 Megawatts of capacity, through a geothermal power plant "los Azufres III" in Michoacan and a combined cycle power plant "Aguaprieta II" in the state of Sonora.

On the other hand, and even though the prices to buy offered by the CFE have been considered to be low in comparison with other international markets, the CFE received offers 44% below the maximum offered price to buy clean energy and 64% lower than the maximum offered price to buy capacity. The offered average price for clean energy in the auction was 33.47 US dollars, 30% lower than the offered price in the 2015 First Long Term Auction.

Finally, in accordance with Ministry of Energy this second auction will attract to the country an investment of around 4 billion dollars during the next three years. In this regard, and even though the offered prices were low, we consider that this second auction evidences that there is an important renewable and clean energy market being shaped in the country, as the participants showed their interest by covering more than 80% for each of the offered products.

[1] Titles issued by the Energy Regulatory Commission which represent a specific amount of electricity generated from renewable and clean energy sources in order to comply with mandatory requirements related to consumption load centers.

For more information, please contact our experts:

Edmond Grieger, Partner:

+ 52 (55) 5258-1048, egrieger@vwys.com.mx 

Sofia López, Associate:

+ 52 (55) 5258-1048, slopez@vwys.com.mx