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Mexico

Mexico

Precedent setting contract in Mexico

Mexico's first ever transmission contract for renewables power with the state power company Comision Federal de Electricidad (CFE) has been signed by a new joint venture. Enron Wind, on its way to becoming a General Electric subsidiary, has teamed up with Mexican developer Grupo Fuerza to form Fuerza Eolica for a series of projects. The deal marks a milestone for wind energy development in the country.

Mexico's first ever transmission contract for renewables power with the state power company Comision Federal de Electricidad (CFE) has been signed by a new joint venture. Enron Wind, on its way to becoming a General Electric subsidiary, has teamed up with Mexican developer Grupo Fuerza to form Fuerza Eolica for a series of projects. The deal marks a milestone for wind energy development in the country.

The CFE dominates Mexico's power market. With the exception of self supply by private companies, rules do not allow private generation. Fuerza Eolica thus needs a CFE contract to supply power from a 30 MW wind plant to be built at La Ventosa in Oaxaca to cement company Cruz Azul for its Lagunas facility, also in Oaxaca.

CFE contract, which is needed in addition to a generation permit from energy regulator Comision Reguladora de Energia (CRE), establishes wheeling charges and may well blaze a precedent setting trail through the permit and contract difficulties which have largely prevented Mexico from realising its impressive wind potential. Just 2.5 MW is operating in the country today.

Enron Wind and Grupo Fuerza are 50:50 partners in Fuerza Eolica and plan to start construction in early 2003 for operations to start by May. A 60 MW second phase will follow if phase one economics, and specifically transmission costs, prove favourable, says Fuerza Eolica's Carlos Got-

tfried Joy. As in the first phase, Cruz Azul will buy all the power, but this time from a plant further away in Hidalgo state.

The advantages for Cruz Azul are estimated minimum savings on power costs of 29% from the first phase alone, stemming from the elimination of back-up power costs, according to Gottfried and Enron Wind's commercial director, Rafael Alcalde-Navarro. Under the interconnection contract for renewable power sources, the user pays CFE for the wind power by capacity, plus the energy balance (at already established rates) between demand and wind supply, plus a transport tariff. CFE credits the generator for power supplied.

La Ventosa has formidable winds of up to 45 m/s and a capacity factor conservatively estimated at 48%. The only wind turbine certified for the wind regime is the Enron Wind 900kW/60Hz, Gottfried claims, detailing that rotors will be 52-55 metres at tower heights of 45-60 metres.

The partners are considering a number of financing options in both equity and long term loans for the estimated $40 million cost. They expect to close financing in July, he adds. Gottfried says that heavy duty generators will be needed to cope with site conditions, raising the installed cost per megawatt compared with the cheapest wind plant being developed today.

The 90 MW that Fuerza Eolica plans for La Ventosa is not its only project in Mexico. The joint venture has applied for licences for 425 MW of projects -- and has a further 400 MW in various stages of planning. CRE generation licenses have already been secured for the 30 MW Cozumel 2000 project and the 60 MW Baja California 2000 project, for which it has applied for CFE transmission contracts. Furthermore, a CRE license is pending for the 300 MW Fuerza Eolica de Baja California project and the 4.5 MW Fuerza Eolica de Guerrero Negro project. The company plans to export generation from the 300 MW Baja California project to the US, where Enron Wind would market the power if its application for an export permit is granted.

Fuerza Eolica expects to secure all licenses and contracts this year. Gottfried has hopes that most, if not all, the projects will be realised in less time than the 12 years the first batch of projects have taken to develop.

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