POWER January 2017 - 17

by 2040 producing a unit of electricity is
projected to emit one-third less CO2
than
today; but emissions from the power sector
still rise by 6%, " said the IEA.
Nuclear power will play a mammoth role
in decarbonization efforts. Between the
start of 2015 and late 2016, 19 new nuclear
reactors commenced operation (twothirds
of them in China), and construction
began on nine new reactors over the same
period. Today, about 64 GW of new nuclear
capacity is under construction, a third of
it in China, but also in Russia, the United
Arab Emirates, the U.S., South Korea, the
EU, and in India. And, the IEA stressed,
while 14% of the global nuclear fleet is
40 years old or more, some countries are
moving to extend nuclear plant lifetimes
to 60 or even 80 years.
However, the IEA expects that a majority
of the world's currently existing power
facilities-of all fuel types-will be retired
by 2040. Only 36% of total generation will
come from existing plants, it said, highlighting
what it expects will be a massive
challenge in attracting investment for new
generation capacity (Figure 2). Cumulative
global investment in the power sector
will hover at $19.2 trillion over the period
between 2016 and 2040-averaging $770
billion per year. About 42% will be spent
on transmission and distribution, 14% on
fossil fuels, 13% on wind, 11% on solar,
9% on hydro, 7% on nuclear, and 4% on
other renewables, it projected.
Mexico Makes Rapid
Progress on Energy
Reform
Barely a year after Mexico launched a
wholesale market with retail competition
as part of a wide-scale reform of its power
sector, the country has managed to implement
a transparent system that is attracting
investment. Mexico has also expanded
its grid and deployed notable amounts of
renewables that are producing power at
unprecedented low prices, a key Ministry
of Energy official said during a December
2 event hosted by two research centers at
the University of Houston Law Center.
Dr. César Emiliano Hernández Ochoa,
undersecretary of electricity of the Mexican
Ministry of Energy (Secretaría de Energía,
SENER), told attendees at the Center
for U.S. and Mexican Law and the Environment,
Energy and Natural Resources Center
that the country began contemplating
energy reforms after its entrance into the
North American Free Trade Agreement
in 1994, when it more freely welcomed
foreign investment and trade opportuniJanuary
2017 | POWER
3. The breakup. Mexico is in the process of restructuring Comisión Federal de Electricidad
(CFE), Mexico's monopolistic state-owned utility, distributing assets to five generation companies
and a sixth subsidiary to administer power purchase agreements around the country. A
government official in December said that, while still owned by CFE, the companies would have
" Chinese walls " -no coordination between competitive segments and separate marketing-as
well as specialized supervision of each activity and clear information about the performance of
each company. Courtesy: SENER
ties. But it also grappled with reliability
challenges spurred by rising demand and
crumbling infrastructure, including inefficient
power plants. It also suffered from
soaring electricity prices: Average electric
rates during the first quarter of 2013
were 25% higher than in the U.S.-and if
subsidies were stripped, prices were 73%
higher, said Hernández.
In December 2012, after a decade of
contemplated electric sector reforms by
the conservative National Action Party,
President Enrique Peña Nieto of the nationalistic
Partido Revolucionario Institucional
(PRI) assumed the Mexican
presidency, and Mexico's Congress enacted
a series of reform-enabling constitutional
amendments in December 2013. (Secondary,
clarifying legislation was passed
in August 2014.) By November 2014,
CENACE, a regulatory body that was a department
of government-operated electric
utility Comisión Federal de Electricidad
(CFE), had been restructured to become
an independent authority tasked with operation
of a wholesale electricity market.
And, in January 2016, the government
launched the wholesale electricity market.
By the end of 2016, the country had
held two auctions in which private companies
made bids to sell power under longterm
contracts to CFE starting in 2018. The
two auctions alone have incentivized $6.6
billion of total investments, including new
projects in 15 states, much from a diverse
www.powermag.com
mix of foreign companies, Hernández said.
A third auction is planned for April 2017.
So far, the country has also set up hourly
cost-based energy and ancillary services,
yearly capacity markets (administered by
the government), clean energy certificates,
and financial transmission rights. Hernández
noted that Mexico's government consulted
with many stakeholders and outside
firms to plan how it would embark on transforming
its traditional industry model into
a competitive market, and it took into account
best practices from countries around
the world that had taken similar steps. For
example, nodal prices for spot energy markets
were modeled on Argentina, Chile, Ireland,
Russia, Singapore, and New Zealand,
but also U.S. markets such as PJM and the
Electric Reliability Council of Texas. Capacity
market features were borrowed from the
UK, Ireland, Russia, Colombia, and parts
of the U.S. The Clean Energy Certificate
program with clean portfolio requirements
came partly from Italy, the UK, Australia,
Chile, and India.
The government was determined to
achieve several goals with the reform:
It
sought to improve
competitiveness
of industry and commerce, increase the
disposable income of the population in
general, and create opportunities to export
low-cost power, Hernández said.
Analysis yielded projections that reform
could reduce system costs by 29.5%, and
it pinpointed a glaring need to cut en17

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POWER January 2017

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