Jan. 25, 2018


Guillermo García Alcocer

Mexico

Guillermo García Alcocer

Chairman, Energy Regulatory Commission (CRE)

“When we started the reform there was a strong opposition from industry against green energy.”

BIO

Guillermo García Alcocer was ratified by the Mexican Senate as the Chairman of the Mexican Energy Regulatory Commission in April 2016. He headed the technical group responsible for proposing and successfully negotiating the constitutional changes with Congress to build the Energy Reform of 2013-2014. Prior to the designation as chairman of the Mexican Energy Regulatory Commission, he held different positions at the Energy Ministry among which his role as Head of Public Policies on Exploration and Extraction of Hydrocarbons stands out. He studied economics at the Instituto Tecnológico Autónomo de México (ITAM).

The flow of investment into the energy sector has been significant. To what extent is this due to a stable regulatory framework?

The Energy Reform has been able to promote investments in Mexico. There is trust in the system and trust in the way the regulation and the laws were written. A way of measuring that trust is in the investments that have been drawn to Mexico. Currently, we have USD83 billion of investment in place, most of it in the upstream arena, although, in the future, there is great potential for other parts of the value chain. We have identified more than 130 companies from 19 countries, out of which 51 are Mexican, that had never been here in the past. We are in the business of getting the market to trust the system and that has been extremely successful in terms of showing to potential investors that the regulation was built in a collaborative manner, we listened to the industry's concerns, and we are not afraid of making adjustments to the regulations. We are afraid of setting regulations that are incorrect, do not set a level playing field, and do not set the right conditions for investors to come and be comfortable with projects. We have an open relationship with companies and there are rules of contact that are similar to the US Sunshine Act. This is a great example of what transparency and good contact rules can do for an industry.

How would you assess the impact of the liberalization of these markets for final consumers?

What we have gained from this process is something that we have in all the other markets in Mexico: competition. There was only one gasoline service provider. By now, we have over 27 brands and are adding one each week or every two weeks. For example, we have BP, Chevron, Shell, Gulf, Glencore in partnership with Group 500, and Costco opening service stations. We have Arco, for instance, which used to be Tesoro, a large refiner from the US. We have all of these brands and most of them are including additives that make the product different from what PEMEX offered traditionally. Nevertheless, PEMEX is the wholesale seller at the present for all these brands. Competition will become a reality in the wholesale market coming into the country by the coasts and the border. In the center, some things are happening due to the railroads that right now have permits from CRE. Things are moving from the center by trains, from the coasts by boats, and from the border by pipeline as well as trucks.

What are the main obstacles left to be able to meet the 2050 goal of 50% of clean energies?

We have a great deal of opportunities. The decision of some countries to move away from green energy provides Mexico an opportunity to be the leader here. We are being realistic and the country has a great deal to offer. Most of our country has the solar potential; the areas where we have less potential for solar energy are equivalent to the solar potential in Spain and almost twice in Germany. If we took 1% of the territory of Sonora, which is a large state, and used that to build a solar facility, this would generate all the energy the country requires. It is flexible and that is why there are projects all over the country. Most of the 52 projects are solar. However, there is a complementary area in Mexico that is attractive for wind in Tamaulipas, Oaxaca, and Yucatán, and this is a way of decentralizing the energy. Wind projects are also successful in Mexico so that is also great news for the development of this country. It has been an interesting discussion in Mexico because when we started the reform there was a strong opposition from industry against green energy, not because it was bad but because it was expensive. They understood it was beneficial for the country, but it was also expensive and they were unsure if it would contribute to their competitiveness. However, soon there were many auctions conducted worldwide and suddenly it was clear that solar was not only inexpensive but cheap. There was a major change in technology and Mexico was one of the countries where the prices of solar energy dropped earlier. We are in a great shape to maintain the pace of projects.

How would you assess the development of the energy infrastructure in the country?

We have identified areas in which there is congestion; the wind projects in Tamaulipas and Oaxaca have experienced congestion and the full potential for renewables cannot be reached unless we develop new infrastructure. That is why we are working on a superhighway, which we call the Oaxaca Transmission line that is a direct current system. We are also working to get a line into Baja California Sur for a transmission line that would connect the generation of solar to the consumers of Baja California. There is a new scheme for developing these projects that was recently announced in which the Ministry of Energy becomes the leader of the auction. The priority is to relieve the congestion in the system and continue to promote these projects that make renewables more attractive.

Can you tell us more about clean energy certificates (CEL) and the role they play in supporting this market?

This will start in 2018, and it will foster a free market and prices will be set by a counterpart. We need to know that suppliers have a certain percentage of the generation from renewable sources. The goal was set at 5% for 2018 and 5.8% for 2019. Therefore, 5.8% of the energy sold in the country through the market has to have a backup in the renewable energy generation. The system was designed in collaboration with USAID. Most of the renewables that we see currently that are in operation are from the law that was changed. We want them to migrate to the new system because the new renewables and the new generation that is in the market needs to have this backup. CEL will be a system in which suppliers will register and will have a certificate; we always have to know who the owner of the certificate is.

Is Mexico sharing its know-how in renewable energies with the rest of the Latin American region?

Mexico was chosen as the country where the World Forum on Energy Regulation will be held in 2018. Mexico has shown that in a few years a country can make a 180-degree change. This is an important forum, with more than 100 delegates from around the world attending. We will discuss on the empowerment of consumers; we are focused on empowering consumers through solar roofs and give them the freedom to choose the gas station that best suits them. To achieve that, we have the Gasoapp so they can compare prices and it can determine their location. We already have more than 57,000 users. Moreover, we will share our experience concerning how to be regulators that do the minimum regulation required and allow technological change.

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