OREANDA-NEWS. February 02, 2017. Private-sector companies will be allowed to participate as buyers for the first time in Mexico's third power auction on 17 April.

State-owned utility CFE was the sole buyer in the country's first two auctions that tested the electricity component of a comprehensive 2014 energy reform ending the CFE's monopoly.

"We expect the participation of many private-sector companies as buyers in the next auction, not just the CFE," energy minister Pedro Coldwell said yesterday at the Energy Mexico conference.

The third auction is expected to deepen Mexico's recently launched wholesale power market and help the country to meet its clean energy targets.

Mexico has committed to a target of generating 35pc of electricity from "clean energy" sources by 2023, 40pc by 2035 and 50pc by 2050. To meet those targets conventional power generators will be required to present clean energy certificates (CELs) for 5pc of total generation in 2018, 5.8pc in 2019 and up to 35pc by 2024. The 2020 clean energy requirement will be announced in March, said Cesar Hernandez, deputy electricity secretary at the energy ministry.

The CFE secured 5.4mn MWh in "clean" energy supply in the first auction held in March 2016, and another 8.91mn MWh in addition to 1,187MW of stand-by capacity in the second auction in September.

All technologies participated in the capacity auction, but only "clean" technologies, mainly renewables such as solar and wind, participated in the auction for supply and associated certificates. Coldwell did not indicate whether these terms would remain the same.

At a weighted average price of \\$33.5/MWh, the offers received in the second auction were some of the lowest in the world, and Coldwell expects these prices to reach new lows in the upcoming auction.

Investments of \\$6.6bn were secured in the first two auctions with national installed capacity expected to grow 170pc over the next three years as the projects contracted in the auctions come on line.

The energy ministry expects medium and large heavy industries such as the iron ore, steel and petrochemicals, as well as independent power producers looking to meet their clean energy targets, to participate in the next auction as buyers. The previous auctions have shown it is possible to buy "very cheap, clean energy" and that will be attractive to large companies across several sectors, said Hernandez.

Interested buyers will be subject to a preliminary vetting process in order to participate in the auction. Long-term contracts will be awarded through an electronic clearing system meant to help mitigate the risk of non-compliance by the buyers.

Looking ahead, grid operator Cenace is expected to launch a fourth auction in the last quarter of 2017 that will offer medium-term power supply contracts, in contrast to the long-term 15-year electricity supply contracts offered under the first two auctions, said Hernandez.