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Analysis of the Mexican Distributed Power Generation Market

  • April 2013
  • 53 pages
  • Frost & Sullivan
Report ID: 1158729

Summary

Table of Contents

Insufficient Centralized Electricity Provision Drives the Market

The failure of the traditional model for the electricity market, which includes a large infrastructure for power generation, transmission, and distribution, is laying the groundwork for a distributed power generation (DPG) model. Key activities in isolated areas of Mexico, such as in mining and oil and gas, are expected to increase their gross energy consumption and therefore incorporate new DPG solutions. In isolated areas, DPG is associated with diesel gensets rather than photovoltaic and small wind turbines. Despite certain segments, such as heavy industry, being driven to DPG as a result of high electricity rates, CFE's monopoly as the sole power utility restricts DPG growth through regulations and subsidies to residential consumers.

Executive Summary

• The Mexican distributed power generation (DPG) market is growing and is expected to continue to do so through the forecast period.
• Total market revenue was $X million in 2012 and, with a compound annual growth rate (CAGR) of X percent, will reach $X million by the end of forecast period. This growth will be in line with electricity needs.
• Mexico's electricity rates are among the lowest in Latin America due to government subsidies.
• Comisión Federal de Electricidad (CFE), Mexico's power utility, supplies electricity for X percent of the population. As the country’s major power utility, CFE's framework is designed for centralized electricity generation systems, not DPG equipment.
• The introduction of distributed generation units in Mexico is recent. Diesel gensets penetrated as a key solution in distributed power generation, and renewable technologies are also gaining momentum.
• Mexico is attractive for investments in non-conventional renewable energy (NCRE) projects, because solar irradiation is excellent in northern Mexico, and the wind is constant in the south.

CEO's Perspective

1. The market is developing quickly as its main customers gain economic strength.
2. Cummins is the dominant firm in the Mexican distributed power generation market, controlling X percent.
3. Insufficient centralized electricity provision will continue to increase the DPG market.
4. Internal combustion generating sets (ICGS) remain the preferred solution in this market.
5. Market revenue from renewable energy solutions is expected to increase in the medium to long term.

Market Overview

Geographic Scope
Mexico: Mexico is in North America and borders the United States in the north, the Atlantic Ocean in the east, and the Pacific Ocean in the west.

Research Service Scope
This study outlines the features and future of the distributed power generation market (DPG) in Mexico.

Technological Scope
The technologies covered in this deliverable are:
• ICGS
• Small wind turbine generators (SWTG)
• Photovoltaic (PV) modules

Definitions

• The base year for this study is 2012, and the forecast period is 2013 to 2017.
• The exchange rate is assumed to be US$1=X Mexican pesos.
• The market size is measured by revenue and installed capacity.
- Revenue figures are the yearly revenue generated by companies’ sales.
- Installed capacity figures refer to the total company-rated capacity of installed power supply.
• Market prices reflect the average manufacturer-rated price for distributed power generation technologies and are expressed as an average price per MW installed. All prices in the study are in US dollars ($) unless otherwise specified.
• The study also provides installed capacity and revenue forecasts and reviews market size with company shares and competitive factors in the market.
• The traditional model for the electricity market includes the use of large power plants for power generation, high-voltage infrastructure for power transmission over long distances, and local distribution lines.
• However, this utility of this model of electricity provision is limited in Mexico because of infrastructure constraints in isolated areas where mining, oil and gas, and telecomm operations are located.
• Distributed generation (DG) is the practice of installing and operating power generation equipment near facilities that use the energy supply. DG offers new opportunities to rural communities and facilities far from the electrical grid.
• By eliminating transmission losses, DPG improves energy efficiency and local control over electricity loads. Power utilities and industrial and commercial businesses profit from this model by employing common practices, including peak shaving, energy backup, black start, and co-generation.
- Peak shaving is the alternation of different energy sources to reduce electricity costs as soon as tariffs rise to rates higher than those of DG.
- Backup power maintains a continuous power flow during grid-related events such as supply interruptions or low voltage input.
- The use of DPG for black-start operations helps to re-establish on-site energy supply after a temporary shutdown or interruption.
- Co-generation is the combined production of both power and heat.

Product Specifications
• ICGSs are portable equipment capable of generating electricity with an internal combustion engine.
- The equipment uses combustion to induce a rotating movement and transfers that movement to a generator.
- ICGS equipment is classified based on the primary fuel it uses: diesel, gas, heavy fuel oil (HFO), and biodiesel. Rated power is also used as a measurement for this equipment.
• A SWTG system transforms primary energy from wind flow into electrical alternating current (AC).
- Kinetic energy is transferred from the movement of the air flow into the blades’ rotation through momentum variation that reduces wind speed. The low-speed, high-momentum rotation movement is converted into a high momenta rotation in the generator, producing power.
• PV modules: “Photovoltaic” literally means “electricity (voltaic) from light (photo).” PV power is a semi-conductor and often silicon-based technology that directly converts light energy into an electric current that can be used immediately or stored for later use.
• SHFs use hydro turbines to convert hydrostatic potential energy collected by a dam into rotational kinetic energy through the movement of water over blades.
• Rotational energy is transferred through a concentric shaft to a multi-pole rotor that generates AC.
• SHFs’ operational margin varies according to the availability of water flow and pressure, so power generation depends on water supply. The estimated capacity factor of small hydro stations is X percent, lower than the capacity factor of hydro facilities run on a river, which is estimated at X percent.

Key Questions This Study Will Answer

• How is distributed power generation structured in Mexico?
• What are the main segments of distributed power generation in Mexico?
• What are the main drivers and restraints underlying the growth of this market?
• How does centralized electricity generation affect new projects?
• Where are the key investment opportunities in the near and long terms?
• How will the structure of the market change over time?

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