Mexico power system expected to remain under pressure

Mexico’s power system is likely to experience stability and reliability issues due to rising demand.

Growth trends in the economy, coupled with an expected boom in manufacturing investment as a result of nearshoring and with underinvestment in grid infrastructure, will squeeze supply.

According to Sofía Solís, an electric power analyst at Wood Mackenzie, demand in Mexico is expected to grow by 1% each year through 2028, and then 2% per year.

“Even though demand will grow, the matrix has not grown as much as we would have wished in recent years,” she told a webinar hosted by distributed solar player BayWa México.

“In the short term, if this situation persists, we expect system saturation to continue, that prices in some regions remain high, and especially in the [Yucatán] peninsula because saturation is not allowing the cheap power generated in the north to arrive there. We expect system saturation and an increased likelihood of blackouts,” Solís said.

Mexico’s power grid has been strained in recent weeks due to a heatwave and related use of air conditioning. At some points in June and July, demand was up 10% in the annual comparison, causing the system’s reserve margin to drop and raising concerns in several states.

With 80GW of installed capacity and demand peaks of around 55GW, Mexico has ample available capacity in theory, but in reality capacity depends on the ramp-up times of power plants, fuel availability, time of day, maintenance and a plant’s capacity factor (how close to full capacity it can operate), among other contingencies.

Another key point is the ability to supply the peak demand areas. Focused on expanding its combined cycle generation capacity, public utility CFE has decreased transmission grid investments, prompting undersupplied states like Querétaro to finance grid expansion independently.

For now, the grid will see new capacity coming from CFE, which has a large pipeline of gas-fired combined cycle units, and distributed generation solar, which has steadily grown in recent years.

While late last year regulator CRE proposed new rules for the distributed generation segment that sparked industry concerns, it is still assessing the comments submitted by the public.