The need for flexibility, sustainability, certainty, patience and international best practices were oft-repeated refrains by panelists at the Institute of the Americas’ Mexico Electricity Roundtable.
Almost one hundred attendees from Mexico, the United States and Central America convened on April 9 in Mexico City to discuss the outlook for the electric sector and where Mexico’s energy reform measures stood. Discussions of the draft wholesale electric market rules, the evolving regulatory framework and the role for renewables and natural gas featured prominently.
Sounding much like a management class syllabus, a deeper dive reveals that flexibility, sustainability, certainty, patience and international best practices are a useful summation of the challenges and opportunities in Mexico as it rewrites its electric rules.
The need for flexibility will become ever more apparent as the government refines the market rules over the coming months. And as one former California regulator suggested, “flexible compliance” is a concept that should inform the rules’ implementation once they are set in place on January 1, 2016.
Further, insuring that not only the first several months and year under the new rules are successful will require that the market fosters competition and thus provides sustainability.
Investors’ desire for certainty was perhaps one of the most oft-repeated intonations over the course of discussions, and with good reason. When making significant long-term investments, companies and firms desire predictability and certitude.
On the other side of the coin is the need for patience, particularly in the Mexican context of overhauling 75 years of a statist approach.
But while patience is a virtue for all involved, it should also provide the opportunity for Mexico to redouble its analysis of international best practices. What has worked and what pratfalls to avoid from across the globe should continue to inform the development of the electric market in Mexico. That is to say, continuing to move Mexico up the electric sector learning curve is crucial.
Mexico continues to make international headlines as it strives to overturn years of state control of its energy sector for a market-oriented structure. Many arguments in favor of the reform focused on the role it will play in enhancing Mexico’s competitivity and, perhaps most relevant for the general public, reducing energy costs, specifically power bills across the country.
Without a doubt, the draft market rules announced in late February have unleashed much debate and analysis. The Mexican government has provided assurances that the process is open to feedback and will represent a transparent evolution to find the most balanced and appropriate approach. The next version will be unveiled later this year and the market goes into effect on December 31.