Mexico unconvinced on wind economics -- Utility prepares 50 MW tender

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Mexico's state owned power company, Comision Federal de Electricidad (CFE), is to issue an international tender for the installation of 50 MW of wind capacity at Juchitan in Oaxaca state, confirms CFE renewables director Gerardo Hiriat le Bert. Presidential elections in Mexico are set for July 2000 and the call for bids would not be until the first quarter of 2001 when the new government takes office, he says. Authorities are still deliberating how to offer the contract and are considering running it as a self-financed state concern, seeking external financing or offering the whole project to the private sector.

The achievable capacity factor at the project site is over 50%, Hiriat says, adding that the capacity factor for seven Vestas 225 kW turbines installed in the area peaked in October 1998 at a world record of 82%. "The wind there is marvellously good," he adds, claiming that the site has potential for 2000 MW of wind turbines.

Power from Juchitan would serve Mexico City, with a transmission fee being charged for wheeling the wind power to city customers. The wires are already in place to take the area's 5000 MW of hydroelectric capacity to the city.

Mexico does not yet offer any tax incentives to wind power, which has to compete with conventional power sources on an entirely competitive basis, Hiriat says. Although installation costs can be higher than traditional sources, the Juchitan project would produce power at $0.033/kWh. This could compete with conventional sources in areas not linked to the national interconnected system where the alternative is costly diesel-fired generation, he explains.

The CFE has authorised an additional project at Juchitan, as well as projects on Cozumel island and at La Rumorosa in Baja California state. The three projects are approximately 20 MW each and to date none have a power purchase agreement (PPA) in place, Hiriat adds.

Catch 22

Mexican regulations allow wind power generators to operate under terms of self generation contracts to supply named companies, selling any power surpluses to CFE for what the utility chooses to pay. The generators are also obliged to buy power from the CFE when there is no wind -- at prices the utility decides.

Given the low prices that CFE buys power at and the high prices it sells at, however, private companies find it cheaper and more convenient to buy all their electricity from the CFE rather than invest in a wind project, Hiriat explains.

CFE is not entirely convinced that its resources are best spent on wind power and it continues to give greater support to thermoelectric projects. Although wind power benefits are felt in the long term, the short term reality is that thermoelectric generation can produce at half the cost of wind power's average $0.05 per kWh -- and wind power installation costs can be five times greater than those of thermal, adds Hiriat.

Mexican power demand is growing at 7% a year and the federal government estimates that investment in the order of $25 billion is needed over the next ten years. Given that urgency to meet relatively short term demand, experts concur that wind power will not play a significant part in the near future of Mexico's power sector.

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