Electricity Sector Outlook

Transcription

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2 Electricity Sector Outlook Mexico,

3 Secretariat of Energy Pedro Joaquín Coldwell Secretary of Energy Leonardo Beltrán Rodríguez Deputy Secretary of Energy Planning and Transition Fernando Zendejas Reyes Deputy Secretary of Electricity Aldo Flores Quiroga Deputy Secretary of Hydrocarbons Gloria Brasdefer Hernández Senior Officer Rafael Alexandri Rionda Director General of Energy Planning and Information Víctor Manuel Avilés Castro Director General of Social Communication 2

4 Elaboration and Review: Rafael Alexandri Rionda Director General of Energy Planning and Information Fabiola Rodríguez Bolaños Director for the Integration of the Sector s Outlooks (frodriguez@energia.gob.mx) Alain de los Ángeles Ubaldo Higuera Deputy Director of Energy Consumption (aubaldo@energia.gob.mx) Eder García Jimenez Deputy Director of the Energy Sector Planning (egarciaj@energia.gob.mx) Thalia Ramírez Flores Head of Department of Energy Markets Planning (tramírez@energia.gob.mx) Diana López Becerril Internship Administrative support: María de la Paz León Femat, Maricela de Guadalupe Novelo Manrique Secretariat of Energy 3

5 Acknowledgements National Energy Control Center Federal Electricity Commission National Commission for the Efficient Use of Energy Energy Regulatory Commission Corporate Operations Directorate of PEMEX Ea Energy Analyses PEMEX Corporate Secretariat of Finance and Public Credit Undersecretariat of Hydrocarbons, SENER Undersecretariat of Electricity, SENER Directorate General of Clean Energies, SENER Mexican Petroleum Institute National Institute for Electrical Research and Clean Energies National Institute for Nuclear Research Mexico-Denmark Cooperation Program in Matter of Energy and Climate Change Technical University of Denmark, Department of Energy Systems Analysis 4

6 1. Index Index...5 Index of Charts...9 Index of Tables Index of Figures Index of Maps Presentation Introduction Executive Summary Legal and Regulatory Framework of the Mexican Electricity Sector Regulatory Framework Political Constitution of the United Mexican States Electric Industry Law Energy Transition Law Planning Law Law of the Coordinated Regulatory Organs for the Energy Matters Law of the Federal Public Administration (LOAPF) Law of the Federal Electricity Commission Electricity Sector Planning Instruments and Policies Transition Strategy to Promote the Use of Cleaner Technologies and Fuels Auctions of the Electricity Market Issuing of Clean Energy Certificates Of the Devise of the Electricity Sector Outlook Historical Diagnosis of the Electricity Sector Mexican Economy Analysis Electric Power Users and Tariffs

7 Electric-Power Users Average Prices of Electricity Electricity Sales, Consumption, and Demand Electricity Sales Remote Self-Supply Electricity Losses Electric Power Consumption Electricity Demand Maximum Coincident Demand Maximum Gross Demand Infrastructure of the Electric National System Electricity Generation Installed Capacity Electric Power Gross Generation Changes in the Infrastructure of the SEN s Electricity Generation Plants Electricity Transmission and Distribution Grid Transmission Distribution Cross-Border Interconnections Electric Power Trade Electricity Sector Outlook Assumptions of the Planning Scenario International Environment Development Program for the National Electricity System Macroeconomic Forecasts Gross Domestic Product Population Exchange rate Fuels Prices Forecasts

8 Clean Energy Targets and Potentials of Renewable Energies Expected Behavior of Electricity Demand and Consumption Maximum Demand Gross Consumption Expansion of the National Electric System Electricity Generation Capacity Additions of Electricity Generation Capacity Electricity Generation Capacity Withdrawal Expected behavior of the electricity generation capacity Electric-Power Generation Electricity Generation by Technology Electricity Generation by Control Region Fuels Consumption Reserve Margin Expansion of the Transmission and Distribution Grid Transmission Distribution Sensitivity Exercise Study of the Long-Term Impact of the Natural-Gas Prices in the Electricity Sector Background Importance of the utilization of NG in the Electricity Sector Methodology, Inputs, and Description of the Scenarios Inputs for the planning and description of the scenarios Scenarios Description Analysis of the Results Investments and capacity expansion Electric Power Generation and Fuel Consumption Expansion of the Transmission Grid

9 Greenhouse Gases Emissions Electricity Prices Conclusions A. Statistical Annex B. Methodological Annex Glossary Abbreviations and Acronyms References

10 Index of Charts Chart Interconnection with North America Chart Clean-Energies Potential Chart Additional Capacity by Modality and Technology, Chart Additional Capacity by Status of the Project and Technology, Chart Transmission Regions Chart New Projects for Expanding the RNT and the RGD Chart Other Projects Chart Distribution Projects Chart Pollutant Emissions by Fuel Chart A. 1. Projects under Study and in Prospective Analysis in 2015 which are part of the PRODESEN Chart A. 2. Projects under Study and in Prospective Analysis in 2016 Which Are Part of the PRODESEN Chart A. 3. Projects Programmed and Instructed by the SENER in 2015 Which Are Part of the PRODESEN Chart A. 4. Projects Programmed and Instructed by the SENER in 2016 Which Are Part of the PRODESEN Chart A. 5. Transmission Projects Which Are Part of the PRODESEN Chart A. 6. Projects of Transformation Which Are Part of the PRODESEN Chart A. 7. Compensation Projects Which Are Part of the PRODESEN Chart A. 8. Power-Plants Investmen Catalog in Balmorel

11 Index of Tables Table Main Macroeconomic Variables of Mexico, Table Electricity Users by Operational Area Table Users Share by Electricity Operational Area Table Average Price of Electricity by Operational Area Table Electricity Remote Self-Supply Table Electricity Losses Table Maximum Gross Demand Table Behavior of the SEN s Electricity Generation Capacity by Modality, Table Changes in the Infrastructure of the SEN s Electricity Generation Plants, Table Transmission Capacity by Control Region Table Summary of the Transmission Lines Kilometers by Federal Entity Table Distribution Lines Table Electric Power Foreign Trade Table Forecasts of the Integrated Maximum Demand by Control Region, Planning Scenario Table SIN s Integrated and Peak Demands by Studied Scenario, Table Forecasts of the Gross Consumption by Control Region, Table Behavior of the Capacity Additions by Federal Entity, Table Behavior of the Installed Capacity by Type of Technology, Table Behavior of the Electric Power Total Generation by Technology,

12 Index of Figures Figure SEN s Regulatory Framework Figure Amendments to the Political Constitution of the United Mexican States in Electricity matter Figure LIE Main Provisions Figure Wholesale Electricity Market Figure Planning Elements and Control of the SEN Figure Considerations for Elaborating the Programs of Expansion and Modernization of the National Transmission Network and the General Distribution Grids Figure Main Objectives of the Energy Transition Law Figure Activities of CFE Figure Percentage of Clean Generation in the Total Electricity Generation Figure Process of Electricity Auctions Figure Characteristics of the Clean Energy Certificates Figure Requirements of Clean Energy Certificates Related to the Corresponding Obligation Periods Figure Macroeconomic Variables of Mexico, Figure Users Share by Sector, Figure Users Share by Electricity-Operational Area, Figure Average Prices of Electricity by Tariff Sector Figure Average Prices of Electricity by Tariff Sector, January-December Figure Electricity Sales and Consumption Figure Sectoral Behavior of Electricity Domestic Sales, Figure Sales Composition by Sector Figure Domestic Sales Structure by Federal Entity and Statistical Region, Figure Electricity Losses Figure Behavior of Electricity Consumption by Control Region Figure Electricity Consumption by Operational Area,

13 Figure Maximum Integrated Demand by Control Region Figure Maximum Coincident Demand Figure Behavior of the SEN s Installed Capacity by Type of Technology Figure Installed Capacity by Type of Technology, Figure Behavior of the SEN s Installed Capacity by Modality, Figure SEN s Installed Capacity by Modality, Figure Installed Capacity by Federal Entity Figure Behavior of the Gross Generation by Type of Technology, Figure Gross Generation by Type of Technology Figure Gross Generation by Modality Figure Gross Generation by Federal Entity Figure Transmission Lines Figure Worldwide Electricity Generation and by Regions Figure Worldwide Capacity of Solar and Wind Power Figure GDP s Forecasts, Figure Population Growth Forecast in Mexico, Figure Currency Exchange Forecast, Figure Scenarios of Fuels Prices Forecasts, Figure Trajectory of the Clean Energies Target, Figure Annual Growth Expected of the SIN s Maximum Demand, Figure Average Annual Growth of the Electricity Maximum Demand by Control Region Figure Annual Growth Expected for the SEN s Gross Consumption, Figure Average Annual Growth of the Electricity Gross Consumption by Control Region Figure Comparative of the Share in the Gross Consumption between 2016 and 2031 of the Different Control Regions Figure Share in the Additional Capacity by Type of Technology, Figure Behavior of the Capacity Additions by Technology, Figure Share in the Additional Capacity by Modality,

14 Figure Capacity Additions by Control Region, Figure Electricity-Generation Capacity Withdrawal by Technology, Figure Comparative of the Installed Capacity by Type of Technology, 2016 y Figure Electricity-Generation Installed Capacity by Technologies Figure Comparative of the Share in the Total Generation by Technology, 2016 and Figure Behavior and Share of Electric Power Generation by Regions of the SEN, Figure Fuel Consumption, Figure Efficient Planning Reserve of the SIN Figure Efficient Planning Reserve in Baja California and Baja California Sur Figure Prospective Prices of Henry Hub Natural Gas, Figure Behavior of the Production and Import of Dry Gas, Figure Demand of Domestic Natural Gas by Sectors, Figure Behavior of the Electric Power Capacity and Generation of Combined Cycle, Figure Expansion of Accumulated Capacity in Electricity Generation Plants (Base Scenario) Figure Differences between GN_0.5 Scenario and Base Scenario in Installed Capacity for Electricity Generation Figure Electricity Generation in the Base Scenario Figure Electricity Generation in the Scenarios of NG Price Variation Figure Decrease in the NG Consumption regarding the Base Scenario Figure Behavior of the Capacity Factors of Combined-Cycle Plants Figure Optimized Expansion of the Capacity of the Electricity Transmission Lines Figure Greenhouse Gases Emissions in Electricity Generation Figure Percentage of Clean-Energy Generation in the Different Scenarios Figure Average Price of Electricity Weighted by Transmission Region in the SEN Figure Average Weighted Price of Hourly Electricity in the SEN and Generation of Wind, Solar, and Hydropower Plants Figure A. 1. Electricity Generation Capacity Defined Externally in Balmorel Figure A. 2. Natural Gas Prices Range de in Mexico, According to the price of Natural Gas Forecasted for each Transmission Region

15 Figure A. 3. Fuel Oil Prices Range de in Mexico, According to the price of Fuel Oil Forecasted for each Transmission Region Figure A. 4. Uranium Prices Figure A. 5. Diesel Price Figure A. 6. Coal Prices Range in Mexico, According to the price of Coal Forecasted for each Transmission Region Index of Maps Map Map of the Electric National System Map Connection Capacity between the 53 SEN s Transmission Regions Map Cross-Border Interconnections Map Map of the SEN s Transmission Regions Map A. 1. SEN s Existing and Planned Transmission Lines up to Map A. 2. Wind-Power Capacity Factors Map A. 3. Solar-Power Capacity Factors

16 Presentation During the last years, Mexico s economy has displayed, a positive behavior in a context of uncertainty and volatility and has become even stronger since the 2009 crisis. In order to achieve this, it was necessary to adopt a series of Structural Reforms which would foster every economic sector and move the country forward. In particular, the Energy Reform has been able, along with economic growth, to modernize the electric and oil industries with an increasing participation and investment of the private sector. One of the greatest achievements of the Energy Reform during the present administration was to generate a little less than 18% of electricity from clean energies at 20% target; and in the coming two years, thanks to the Transition Energy Law, it is expected to reach almost 30%. On the other hand, it has been possible to achieve some of the Energy Reform objectives due to the conclusion of the three Long-Term Electricity Auctions is expected to attract investments for 9 billion dollars; an addition to new capacity of 7,451 megawatts of clean generation, and the creation of the Universal Electricity Service Fund which will serve electricity to 1.8 million Mexicans currently living in extreme poverty and with no access to this basic service. In line with these results, Mexico confirms its leadership role to combat climate change by diversifying its energy matrix with clean energies. Moreover, Mexico is now opening new possibilities to the private sector as well as strengthening the National Electric System, which will bring about benefits to the country and to its economic growth. 15

17 Introduction The Mexican Electricity Sector is undergoing a deep modernization process, and thanks to the Energy Reform, is firmly moving forward. As a result of the electricity auctions, today there is a larger investment in new clean electricity generation capacity which is expected to strengthen the National Transmission and Distribution Grid and, therefore, be able to serve the country s needs for electricity and attaining greater economic dynamism. The Electricity Sector Outlook is a document of energy policy issued by the Secretariat of Energy (SENER, for its Spanish acronym), which presents the planning for the next 15 years based on the current situation of the Mexican electricity market and the new technology trends in the world. This Outlook is divided into four chapters. The first one provides the legal and regulatory framework of the Mexican Electricity Market, which includes the most relevant aspects and results of the Energy Reform, its secondary legislation, and new instruments for the energy transition. The second chapter displays a historical diagnosis of the Electric National System (SEN, for its Spanish acronym) of the last ten years ( ). It also describes the main variables, such as the electricity domestic consumption, the demand s seasonal behavior, median prices, and the existing infrastructure for generating and transmitting electric power. This information is the main basis for the future planning since it reflects the trends and main needs of the country in energy matters. The third chapter describes the result of the planning exercise for the Development Program for the National Electricity System (PRODESEN, for its Spanish acronym) , which displays the future electricity generation capacity and the expansion required for the transmission grid to serve the expected demand. Finally, Chapter Four presents a sensitivity exercise which allows a better understanding of the dynamics and trends of the Electricity Sector, and a thorough knowledge of the impact that some of the volatile variants have on the sector planning. 16

18 Executive Summary The Electricity Sector Outlook is a document of energy policy that becomes an analytical tool for different users such as investors, researchers, scholars, and State Productive Enterprises which require general and specific information about the electricity sector. The main purpose of this document is to present a historical panorama of the Mexican electricity sector and its expectations for the foreseeable future. Regulatory and legal framework of the Mexican Electricity Sector The first chapter describes the main regulations and legal instruments governing the operations of the Mexican Electricity System. Likewise, it gives a brief description of how the Wholesale Electricity Market works. Historical Diagnosis of the Electricity Sector This chapter describes a brief diagnosis of the Electricity Sector for the period In it is possible to identify the main components of the sector, such as electricity, installed capacity, gross generation, and expansion of the transmission and distribution lines during the last years, among other information. Achieving a sustained growth of the Mexican economy requires a robust and reliable electricity sector that helps carrying out the production activities needed for the country s development. Thus, during the decade , the GDP grew 2.4% annual average, and population, 1.2%, while electricity consumption grew by 2.6%. By the end of 2016, 98.5% of the population had access to electricity services, increasing electricity sales by 2.8% (equivalent to 5,871 GW) regarding the previous year, standing out the industrial sector, which concentrated 57% of the total sales recorded during that year. To supply the growing demand of electricity, the installed capacity of the electricity sector had an average annual growth rate (AAGR) of 2.9% during the last decade, raising from 56,317 MW in 2006 to 73,510 Mw in 2016, an increase of 17,194 MW. From what was reported in 2016, 71.2% from the total generating park corresponded to conventional-technology power plants, and the remaining 50.2%, to clean-technologies power plants. By the end of 2016, electricity generation reached 319,363.5 GWh, with a large share from clean technologies: 20.3% of the total generation matrix. Stands out hydroelectric generation as the main clean energy, generating 30,909 GWh. Within the share of conventional technologies, combined cycle represented 50.2% of electricity generation, equivalent to 160,378 GWh. Finally, the SEN s transmission capacity in 2016 was of 74,208 MW, an increase by 4% regarding As for the National Interconnected System (SIN, for its Spanish acronym), its transmission capacity was of 72,450 MW, an increase of 2,756 MW. The Northeast region had the largest capacity, 18,670 MW, which represented an increase by 3% regarding Electricity Sector Outlook This chapter includes the results of the exercise published in the PRODESEN , which reflects the commitment of SENER to design and carry out the SEN s energy policy and its planning. It takes as a reference the scenarios with a 15-year horizon from the Indicative Program for Commissioning and Decommissioning of Power Plants (PIIRCE, for its Spanish acronym), the Program for the Expansion and Modernization of the National Transmission Network, and Program for the Expansion and Modernization of the General Distribution Grids. 17

19 The global energy panorama is changing and diversifying rapidly. The growing demand of electricity, mostly in developing countries of the Asian region, have fostered the sector s expansion and technologies such as solar and wind power are growing very fast. Macroeconomic forecasts are the most important variables for elaborating a planning exercise, since they are the main reference for identifying the country s energy needs for the coming years. In Mexico, in the base scenario is expected a GDP s average annual growth of 2.9%, reaching 457,561 GWh by the end of the prospective period. Between 2017 and 2031 there is expected an addition of 55,840 MW in electricity generation capacity, from which 37.4% correspond to conventional technologies (20,876 MW) and 62.2% to clean technologies (34,964 MW). The technologies with the largest contribution to the system are combined cycle with 33.9%, and wind power with 24.2%. By the end of the prospective period it is estimated the total decommissioning of 15,814 MW of generation capacity, related to the decommissioning of 137 units, mostly, from conventional technologies. In 2016, electricity generation reached 319,364 GWh, from which 79.7% came from conventional technologies, and 20.3% from clean technologies. By 2031, electricity generation is expected to increase by 43.0% reaching 456,683 GWh, from which 54.1% will come from conventional technologies and 45.9% from clean technologies. Sensitivity Exercise Sensitivity exercises are aimed to provide a better understanding of the dynamics and trends of the Electricity Sector, as well as to delve into the impact of some of the variables volatility on the sector planning. The exercise presented in this chapter Study of the Long-Term Impact of Natural Gas Prices on the Electricity Sector was devised using the Balmorel 1 energy model in coordination with members of the Integrated System Modeling (SIMISE 2, for its Spanish acronym), and the SENER. The purpose of the study is to present and assess the impacts derived from the uncertainty of the natural gas prices and their possible repercussions in the planning of the Mexican electricity sector, considering changes in capacity, electricity generation, and the expansion of the electricity transmission network, as well as their impact on the greenhouse gas emissions (GHG). 1 Open-source license ISC: 2 The Integrated System Modeling of the Energy Sector (SIMISE) contains databases and models for carrying out the main activities of the energy planning: macroeconomy, demand, supply, and demand supply optimization. It considers different regions and passages of time. 18

20 1. Legal and Regulatory Framework of the Mexican Electricity Sector Derived from the Energy Reform, the regulatory context of the Mexican Electricity Sector has become stronger in order to comply with the National Development Plan and supply energy to the country with competitive prices, quality, and efficiency throughout the production chain 3. To make sure Mexico will fulfill the commitment undertaken and become an international reference, the group of laws, standards, and new regulations are subjected to continuous updates which will enable the optimal development of the Wholesale Electricity Market (MEM, for its Spanish acronym)migration into a global economy context. This market shall provide sufficient basis for an interrelation between the recently constituted state productive enterprise, the new participants from the private sector, and the supervision of the regulatory agencies. This chapter will present the main regulations and legal instruments governing the operations of the Mexican Electricity Sector. Likewise, it gives a brief description of how the Wholesale Electricity Market works Regulatory Framework The SEN is a strategic element for the country s development. After the Energy Reform, the SEN has been restructured with a group of laws, regulations, standards, and manuals which contribute to its strengthening and bring about the necessary conditions for every sector to participate in it. Following are described a series of legal and regulatory provisions governing the electricity system; it also identifies the importance of the institutions within the SEN s planning activities: FIGURE SEN S REGULATORY FRAMEWORK Constitutional (December 20, 2013) Legislative (August 11, 2014) Regulations (October 31st, 2014) Administrative Article 25, paragraph IV Article 27, paragraph VI Article 28, paragraph IV Transitory articles: Third otenth oeleventh otwelfth othirteenth osixteenth, subparagraph b) oseventeenth oeighteenth otwentieth Electric Industry Law Energy Transition Law Planning Law Law of the Coordinated Regulatory Organs in Energy Matter Law of the Federal Electricity Commission Law of Geothermal Energy Regulation of the Electric Industry Law Regulation of the Law of CFE Internal Regulation of the SENER Regulation of the Law of Geothermal Energy Rules of the Wholesale Electricity Market Guidelines for issuing the Clean Energy Certificates Interconnection Guidelines Tariffs Standards Manuals Source: Elaborated by SENER. 3 Objective 4.6. of the National Development Plan ( 19

21 Political Constitution of the United Mexican States Regarding electricity, the Energy Reform has as its main legal framework the amendments made to articles 25 and 27 4 of the Political Constitution of the United Mexican States. These amendments establish that the State, through the SENER, is in charge of carrying out the SEN s Planning activities as follows: FIGURE AMENDMENTS TO THE POLITICAL CONSTITUTION OF THE UNITED MEXICAN STATES IN ELECTRICITY MATTER Art. 25 The public sector shall exclusively be in charge of those strategic areas established in Article 28, paragraph fourth of the Constitution. The Federal Government shall at all times keep ownership and control over agencies and public productive corporations that have been established. In the case of planning and control of the national power system, the public power transmission and distribution systems, as well as the exploration and exploitation of oil and other hydrocarbons, the Nation shall be empowered to carry on those activities pursuant to paragraphs sixth and seventh of Article 27 of this Constitution. Art. 27 The Nation shall exclusively carry out the planning and control over the national electric system, and over the power transmission and distribution utilities. No concession shall be granted in these activities, notwithstanding the power of the State to execute contracts with private parties in accordance with the laws, which shall determine the ways in which private parties may participate in all other activities related to the electric power industry. Source: Elaborated by SENER Electric Industry Law The Electric Industry Law (LIE, for its Spanish acronym) 5 was enacted on August 11, 2014 and is the result of strengthening the SEN s Planning process, as a regulatory law of the Political Constitution of the United Mexican States. The LIE establishes a Free Competition Regime to generate and trade electric power, and it also includes the participation of private parties in the generation and distribution of public service with new contractual models establishing that, just as the SEN s planning and control, are still activities exclusive to the State. Article 11, Electric Industry Law: The Secretariat of Energy is authorized to: III. Conduct the process of planning and elaborate the Development Program for the National Electricity System. Source: Elaborated by SENER. The purpose of the LIE is to regulate the planning and control of the SEN, the Public Service of Electricity Transmission and Distribution and all related activities of the electric industry, in addition to promote the sustainable development of the electric industry and ensure its continuous, efficient, and safe operation to benefit users, as well as the compliance with the obligations of public and universal service of clean energies and pollution emissions reduction. Within the LIE s main provisions there are the faculties bestowed upon the authorities, such as the SENER, the Energy Regulatory Commission (CRE, for its Spanish acronym), and the National Energy Control Center 4 Enacted on December 20, 2013 and published in the Official Journal of the Federation (DOF)

22 (CENACE, for its Spanish acronym), for the planning and control of the SEN and other activities related to the electricity sector, as shown in the following figure: FIGURE LIE MAIN PROVISIONS Law of the Electric Industry Of the Authorities Of the Planning and Control of the SEN Of the different Activities of the SEN The SENER is authorized to: -Establish, lead, and coordinate the country s energy policy in matter of electric power. -The coordination of the performanc e assessment of the CENACE and the MEM. The CRE is authorized to: -Regulate and grant electricitygeneration permits and models of interconnect ion agreements. - Issuing of the MEM s basis and surveillance of its operation. The CENACE will be the MEM s operator, will review and update its operating provisions. -Carry out auctions for signing electricity coverage agreements between the generators and the representati ves of the load centers. The SENER will develop indicative programs for installing and decommissi oning Power Plants, whose relevant aspects will be incorporate d into the Developme nt Program of the National Electric System. The State will exercise the Operating Control of the SEN through the CENACE, which will determine the elements of the National Transmissio n Grid and General Distribution Networks as well as their operation correspondi ng to the MEM. Of Electric- Power Generation Power Stations with capacity 0.5 MW and Power Stations of any size represented by a Generator in the Electricity Wholesale Market require a permit granted by the CRE to generate electricity. Of the Transmission and Distribution The State, through the SENER, Transporters, and Distributors can associate or sign agreements with private parties for carrying out, on behalf of the Nation, among other, the financing, installation, maintenance, management, operation, and expansion of the infrastructure necessary to provide the T&D Public Service. Of Trading Trading comprises the provision of Electricity Supply to End Users; represent Exempt Generators in the Wholesale Electricity Market; purchase T&D services based on Regulated Tariffs, among other. Source: Elaborated by SENER. Wholesale Electricity Market The LIE also establishes the constitution of a Wholesale Electricity Market (WEM, for its Spanish acronym) with the main purpose of bringing transparency to the transactions between the participants of the electric industry. This Market will operate based on the SEN s physical characteristics and will be subjected to what is planned in the Market Rules. Article 96. Electric Industry Law The Market Rules will establish procedures which will allow to perform, at least, buy/sell transactions of: Electric power; - Connected services included in the WEM; - Power or any other product which warrants the sufficiency of the resources to serve the electricity demand; - The products mentioned above, through import or export; - Financial Transmission Rights; - Clean Energy Certificates; and Other products, collection rights, and penalties required for the efficient functioning of the SEN. Within the Market it will be possible to sign electricity coverage agreements to realize buy/sell operations related to electricity, power, or the connected services in a nodule of the SEN, between Generators, Traders, and Qualified User participating in it. Figure 1.4. describes the WEM s structure 6. 6 For further detail, see: 21

23 FIGURE WHOLESALE ELECTRICITY MARKET Financial Transmission Rights Auctions (per year, three years, monthly). Medium and Long- Term Auctions (Energy, Power, and CELs). Auctions Short-Term Market Electricity (Day ahead, Real time, Hour ahead). Connected Services (Reserve: regulating, rolling, non-rolling, supplemental rolling; and non-rolling supplemental. Market of Clean Energy Certificates Power Balance Market At least once a year starting in Per year for the immediate prior year. Source: Elaborated by SENER. To follow up on the planning and operation activities of the WEM, the following Market Manuals 7 have been published: Long-Term Auctions Manual Account statement, Invoicing, and Payments Manual Guarantee of Compliance Manual Resolution of Controversies Manual Bequeathed Interconnection Agreements Manual Short-Term Energy Market Manual Market Information System Manual Registry and Accreditation of Market Participants Manual Assignation of Bequeathed Financial Rights Manual Power-Balance Market Manual Interconnection of Generating Stations with Capacity of less than 0.5 MW Manual Manual of Bilateral Transactions and Registry of Electricity Coverage Agreements Regulation of the Electric Industry Law The Regulation is intended to establish the provisions which regulate the operational planning and control of the SEN, as well as the activities to generate, transmit, distribute, and trade of the electric industry. For the elaboration of the PRODESEN, the Regulation shall consider, at least, the following: 7 For further detail, see: 22

24 FIGURE PLANNING ELEMENTS AND CONTROL OF THE SEN Development Program for the Sustainable Use of Energy (PRODESEN) Electricity demand forecasts and the prices for the electric industry primary inputs; Coordination of the indicative programs for commissioning and decommissioning of Power Stations with the development of the programs to expand and modernize the National Transmission Network and the General Distribution Grids; Policy of Reliability established by the Secretariat; Indicative programs for commissioning and decommissioning of Power Stations which foreseen the infrastructure needed to ensure the Reliability of the Electric National System; Coordination, along with the planning of the National Gas-Pipeline Network s expansion program and the promoting mechanisms of Clean Energies, and Comprehensive cost-benefit analysis of the varied alternatives of expansion and modernization of the National Transmission Network and the General Distribution Grids. Source: Elaborated by SENER. The regulation of the LIE, in its Article 9, establishes the incorporation of mechanisms to gather the opinion of Market Participants and interested parties in developing projects of electric infrastructure in the terms defined by the Secretariat in order to elaborate the expansion and modernization programs of the National Transmission Network and the General Distribution Grids. Likewise, the prior programs shall be considered during this process, as well as the works and investments in course of execution as shown below: FIGURE CONSIDERATIONS FOR ELABORATING THE PROGRAMS OF EXPANSION AND MODERNIZATION OF THE NATIONAL TRANSMISSION NETWORK AND THE GENERAL DISTRIBUTION GRIDS Programs of Expansion and Modernization of the National Transmission Network and the General Distribution Grids The programs will be elaborated annually and will have a 15-year projection. The CENACE or the Distributors, as corresponding according to article 14 of the Law, will suggest the programs to the Secretariat and the CRE in February of each year, without prejudice to submitting special programs in other months in order to advance the startup of priority projects. The CRE will issue its opinion to the Secretariat within a period of 30 working days starting the day the programs were received. The Secretariat, when appropriate, will authorize the programs within a period of 30 working days starting the day of receipt of the CRE s opinion. The Secretariat, when appropriate, will authorize the programs within a period of 30 working days starting the day of receipt of the CRE s opinion. Source: Elaborated by SENER. 23

25 Once the programs referred to in this article are authorized, the Secretariat will publish the PRODESEN by May of each year Energy Transition Law The Energy Transition Law (LTE, for its Spanish acronym) is aimed to regulate the sustainable use of energy as well as the obligations in matters of clean energies and reduction of pollutant emissions from the electric industry, maintaining competitiveness in the production sectors (see Figure 1.7). As supporting mechanisms, the LTE establish as instruments for planning the energy national policy in matter of clean energies and energy efficiency, the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, the Special Program of Energy Transition (PETE, for its Spanish acronym), and the National Program for the Sustainable Use of Energy (PRONASE, for its Spanish acronym), which should be revised annually by the SENER, the CRE, the CENACE, and the National Commission for the Efficient Use of Energy (CONUEE, for its Spanish acronym). The LTE entrusts the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels to set the Goals in order to meet the electricity consumption through a portfolio of alternatives which include Energy Efficiency and a growing proportion of clean generation, in conditions of economic feasibility. FIGURE MAIN OBJECTIVES OF THE ENERGY TRANSITION LAW Source: Elaborated by SENER. 8 For further detail, see 24

26 Planning Law Establishes the guidelines and main principles for conducting the National Development Plan and the National System for Democratic Planning. Likewise, and according to article 4 of the Law, the Federal Executive is in charge of leading the national development planning Law of the Coordinated Regulatory Organs for the Energy Matters The Law of the Coordinated Regulatory Organs for the Energy Matters establishes the grounds for the organization and functioning of the Coordinated Regulatory Organs, which are the National Hydrocarbons Commission (CNH, for its Spanish acronym) and the CRE. In such way, and to foster a competitive and efficient energy sector, the State will be in charge of the technical and economic regulation in matters of hydrocarbons and electricity through these entities Law of the Federal Public Administration (LOAPF) Article 3 of the LOAPF points out the SENER is in charge of establishing, conducting, and coordinating the country s energy policy. Thereby, the SENER shall prioritize the energy security and diversification, as well as energy saving and environmental protection. This same article, in its Section V 9, endows the SENER to carry out the energy planning in the short and long-term, an activity which should consider the criteria of sovereignty and energy security, progressive reduction of the environmental impacts from the production and consumption of energy, a larger share of renewable energies, energy saving, and a better efficiency of its generation and use, among other Law of the Federal Electricity Commission The Law of the Electricity Federal Commission (CFE) regulates article 25, fourth paragraph, of the Constitution, and of the Thirteenth Transitory of the Decree whereby it is amended and added various provisions of the Political Constitution of the United Mexican States, in Energy Matters. It is aimed to regulate the organization, administration, functioning, operation, control, evaluation, and accountability of the State Productive Enterprise CFE. Article 2, Law of the Electricity Federal Commission: The CFE is a State Productive Enterprise exclusive property of the Federal Government, with its own legal personality and patrimony, and which will enjoy technical, operational, and management autonomy Some of the main attributions of CFE are to serve, under the terms of the applicable legislation, the public service of electricity transmission and distribution, on behalf and order of the Mexican State (see Figure 1.8). 9 For further detail see 25

27 FIGURE ACTIVITIES OF CFE The generation divided into units and trade of electricity and associated products, including their import and export, according to the Law of the Electric Industry, and under terms of the strict legal separation established by the Secretariat of Energy; Import, export, transportation, storage, buy and sell of natural gas, coal, and any other fuel; The development and execution of projects on engineering, research, geological and geophysical activities, supervision, service provision to third parties, as well as any other related to the generation, transmission, distribution, and trading of electricity and other activities part of its purpose; Research, development, and implementation of energy sources which will enable the compliance with its purpose, in accordance with the applicable provisions; Research and technological development required for the activities of the electric industry, trading of products and technological services resulting from these research, as well as the training of highly-specialized human resources; Use and management of real estate, industrial property, and technology available to serve or provide any additional service such as, including, but not limited to, construction, leasing, maintenance, and telecommunications. The CFE might guarantee and grant guarantees in favor of third parties; Acquisition, tenure, or share in the asset composition of partnerships with a purpose similar to or compatible with its own purpose; and Rest of the activities needed for the comprehensive execution of its purpose. Source: Elaborated by SENER Electricity Sector Planning Instruments and Policies The Energy Reform meets the country needs for energy to ensure a larger supply of fuels at the best prices. After the modernization and strengthening of institutions, regulatory entities, and the new state productive enterprise, its becomes necessary a series of planning instruments and policies which contribute in a new design of the Electricity Sector. Below are some of the instruments and policies which will bring about the necessary grounds for an efficient Electricity Sector with competitive prices that will enable the development of the country Transition Strategy to Promote the Use of Cleaner Technologies and Fuels The Transition Strategy to Promote the Use of Cleaner Technologies and Fuels is a planning instrument that governs the national policy in the medium and long term in matter of clean energies, sustainable use of energy, improvement in energy productivity, and the economic feasibility of pollutant emissions reduction. It was developed based on consulting mechanisms established after the constitution of the Consultative Council for Energy Transition (CCTE, for its Spanish acronym) on April 7, 2016, in accordance of the LTE s mandate, and which created four Working Groups: 26

28 1. Energy Production 2. Energy Consumption 3. Energy Efficiency 4. Energy Storage One of the main components is to establish goals and obligations on clean energies and energy efficiency. Thereby, the Strategy establishes goals, as shown in Figure 1.9, in order to satisfy electricity consumption through a portfolio of alternatives that includes Energy Efficiency and a growing proportion of clean-energies generation, in conditions of economic feasibility. FIGURE PERCENTAGE OF CLEAN GENERATION IN THE TOTAL ELECTRICITY GENERATION 2018: 25% 2024: 35% 2050: 50% Source: Elaborated by SENER. The Strategy shall contain a long-term component for a 30-year period which define the scenarios suggested for achieving the Goals on clean energies and the Goal on energy efficiency. It will also include a medium-term planning component for a 15-year period that should be updated every three years, once it has already been executed what is disposed in the corresponding article with regard to the long-term component Auctions of the Electricity Market Articles 10 and 11 of the Regulation of the LIE determine is the CRE the responsible of establishing the basis in the Electricity Market and the criteria to be observed by the CENACE in the auctions carried out to buy power. In addition, they establish these auctions could not limit the technology which contributes with the technical solution required by the CENACE. Hence, power auctions shall be subjected to the following terms: 27

29 FIGURE PROCESS OF ELECTRICITY AUCTIONS The CENACE should devise the auction s preliminary terms which will contain, at least: the power to be auctioned; the technical requirements to ensure the reliability; the specifications for the submittal of the economical proposal; the methodology to assess the participants in the auction procedure; the model of agreement, and the terms and stages of the auction procedure. The CENACE shall publish the preliminary terms in its website at least 10 working days prior to the date of the auction, for the purpose of receiving comments. The CENACE will take into consideration the comments received and will incorporate the ones it deems appropriate. The CRE will evaluate and, if the case, approve the auction terms within 30 working days, and There shall be a period, determined by the CENACE, between the date of the call s issuing and the act of receipt of proposals and opening of technical offers, and which will not exceed 90 days to let the interested parties make the necessary technical, financial, and economic studies to compose their proposals and carry out the clearing meetings. Source: Elaborated by SENER. With the results of the first three long-term electricity auctions, it will be reached the national target of having at least 35% of electricity from green sources by The process of the First Long-Term Electricity Auction of the Wholesale Electricity Market, which began in 2015, ended on March 2016, in accordance with the activities schedule foreseen in the Tender Procedures. The verdict assigns the long-term coverage agreements to 11 companies, which submitted the 18 winning proposals. These proposals competed with 69 participants, which represented a total of 226 proposals. The winner companies were Aldesa Energia Renovable, Consorcio Energia Limpia 2010, Enel Green Power, Energia Renovable Peninsula, Energia Renovable del Istmo II, Jinksolar Investment, Photoemeris Sustentable, Recurrent Energy Mexico, Sol de Insurgentes, SunPower Systems, and Vega Solar. In the first auction, SENER reported to have served a demand of 5,380,911 clean energy certificates, which represents 84.9% of CFE s initial request; as well as 5,402,880.5 MWh of energy, 84.9% of the original demand. The auctioned energy is equivalent to 1.9% of Mexico s annual generation, with projects of 18 to 500 MW that will be installed in Yucatan, Coahuila, Guanajuato, Tamaulipas, Jalisco, Aguascalientes, and Baja California Sur. The Second Electricity Auction was carried out on September 2016, with the participation of 57 bidders, from which 23 were the winners with 56 proposals for solar photovoltaic power, wind power, and other clean energies. 28

30 It is worth mentioning that this auction will bring an investment of 4 billion dollars to install 2,871 MW of new installed capacity of clean energies. The average price of clean energy was of dollars per MWh, a highly competitive price at international level, 30% less than what was obtained in the first auction. Meanwhile, CFE presented two winner proposals for clean-technology stations: Geothermal Power Plant los Azufres III Phase II, located in Michoacan; and the Combined-Cycle Power Plant Agua Prieta II, in Sonora. Each year, both plants will provide around 199 thousand Clean Energy Certificates (CELs, for its Spanish acronym) and 199 thousand MWh of power. Thus, as a result of the two contests for buying electricity in the long term, 34 companies will be established throughout the national territory for all the clean energies participating, with a joint investment of 6,600 million dollars which will add almost 5 thousand MW of clean generation capacity. From the Third Electricity Auction, whose verdict was announced by the CENADE and the SENER on November 2017, one of the most affordable prices was obtained: dollars per MWh, and it is expected an investment of nearly 2,400 million dollars to construct 15 new clean-energy power stations in eight states, adding 2,256 MW of electricity generation capacity to the SEN. Just like in the other two auctions, CFE will buy Energy, Power, and CELs to the winning generators. However, for the first time, la Auction was opened to different buyers which, as the Load Responsible Entities, submitted buying purchase offers for the three electric products Issuing of Clean Energy Certificates In its article 3, section VIII, the LIE defines the CELs as a title issued by the CRE granting the production a defined amount of electric power from clean energies, and with which the requirements associated to the consumption of load centers are complied. FIGURE CHARACTERISTICS OF THE CLEAN ENERGY CERTIFICATES Clean Energy Certificates One CEL supports the generation of 1 MWh of clean electricity. As the CELs are an instrument of the market, they do not have a fixed price, since it depends on the demand and supply. Clean technologies, as defined in Art. 3 of the LIE, have the right to receive CEL for its considered energy. The participants obliged to consume CELs are described in Art. 123 of the LIE. Source: Elaborated by SENER. The Certificates are an instrument for fostering new investments into clean energies and allow the transformation of national targets on clean generation into individual obligations, in an efficient and affordable way for the country. The percentage is defined from a quotient, where the numerator corresponds to the estimate of clean generation from: a) clean electric power stations operating since August 11, 2014; b) bequeathed power stations operating before August 11, 2014 (as long as they have executed a project to increase their production of clean energy); and c) clean power stations with a capacity that has been excluded from a Bequeathed Interconnection Agreement to be included in an Interconnection Agreement in the terms of the Electric Industry Law. And the denominator corresponds to the estimate on electricity consumption subtracting the consumption of clean energy from the bequeathed power stations which do not operate in the terms of the Electric Industry Law. 29

31 Thus, under the guidelines established by the Criteria for Granting Clean Energy Certificates and the Requirements for its Acquisition, considering the national targets on clean generation, the existing power stations, the ones under development, available resources, and the estimates of electricity consumption for a 15-year planning period. FIGURE REQUIREMENTS OF CLEAN ENERGY CERTIFICATES RELATED TO THE CORRESPONDING OBLIGATION PERIODS % % % % % Source: Elaborated by SENER 1.3. Of the Devise of the Electricity Sector Outlook The document of the Electricity Sector Outlook is a tool for the Electricity Sector Planning and complies with the mandate of the LOAPF in its Article 33, Section V, and Article 24 of the Internal Regulation of the SENER. Article 24, Section XIV, Internal Regulation of the SENER Of the faculties of the General Directorate of Energy Planning and Information... Devise and submit to the approval of the hierarchical superior, the outlook projects in the medium and long term of the energy sector, which include electricity, natural gas, liquefied petroleum gas, oil, and oil products, with a planning horizon of minimum 15 years. The information contained in the Electricity Sector Outlook is organized in two horizons: historical and prospective. The historical information is obtained from different sources such as the Energy Information System (SIE, for its Spanish acronym), CRE, CENACE, CFE, and information provided by the Undersecretariat of Electricity. Regarding the prospective information, a substantial element in this planning document, is based on PRODESEN , issued by the Secretariat of Energy, and a planning instrument of the SEN for the generation, transmission, and distribution activities with a 15-year horizon. 30

32 2. Historical Diagnosis of the Electricity Sector The Mexican Electricity Sector has undergone a transformation during the last years. The most significant change was going from a monopolistic model to a free-competency model, where all its participants have equal participation opportunities. Thus, in the face of the growing needs of the Mexican population, this new model has been efficiently adapted to an expanding economy and with greater challenges to achieve the energy stability and safety required by the country. This chapter presents a brief diagnosis of the Mexican Electricity Sector for the period that identifies the main components of the sector, such as the consumption of electricity, installed capacity, gross generation, and the expansion of the transmission and distribution lines during the last years, among other information Mexican Economy Analysis In the face of a weaker international economic environment, a series of structural reforms have been carried out aimed to bring stability to the country. Particularly, the energy reform introduced important changes in the structure and operation of the Mexican energy sector, since it allowed the participation of the private sector in the exploration, development, production, transformation, and trading of hydrocarbons, as well as in the generation, transmission, distribution in the case of the electric industry. In the last years it has been observed a panorama of modest international growth and a general stagnation of trade. At the same time, the drop of oil prices weakened the businessmen expectations to invest in the energy sector, reducing thus oil revenues which represented only 16.3% of the public sector total income by the end of During all 2016 and the first semester of 2017, the Mexican economy has faced significant challenges which have risked the macroeconomic stability in recent times. Just like: currency exchange depreciation, the US elections results, inflationary pressures, large increases in the Central Bank interest rates, the normalization process of rates in the US, the fall in manufacturing exports, among other. Despite the latter, our economy still has strong foundations to increase its growth within the coming years. Achieving a sustained growth of the Mexican economy requires a robust and reliable electricity sector which allows to carry out all the productive activities necessary for the country s development. Thereby, to identify how much energy was required by the population in a defined period, it is necessary to understand the behavior of the main macroeconomic variables related to the electricity sector, and consequently, analyze the future growth expectations. As it is shown in Table 2.1., between 2006 and 2016 Mexico displayed an average growth of 1.2% in its population, reaching million people in The Mexican exchange rate has constantly depreciated regarding the American dollar. By the end of 2016, it reached 18.4 Mexican pesos per American dollar, -0.13% regarding These increases have consequences in the foreign trade, in the production, and in the exchange rate market, as is the case of the purchase of imported hydrocarbons. 10 Oxford Economics Mexico & Latin America. 31

33 TABLE MAIN MACROECONOMIC VARIABLES OF MEXICO 11, (Different units) Macroeconomic Variable Population (million people) GDP (billion pesos 2008) Average exchange rate (pesos per dollar) Consumer prices (average annual variation percentage) AAGR , , , , , , , , , , , AAGR: Average Annual Growth Rate Source: SENER with information from INEGI. Regarding the growth in economic activity, measured through the Gross Domestic Product (GDP), recorded an average annual growth rate (AAGR) of 2.4% during The economic growth in the last years was almost exclusively promoted by private consumption, supported by low inflation, workers remittances, credit expansion, higher real salaries, and employment creation in the formal sector. In 2015, the GDP grew 2.5%, far below the Government s expectations stated in the General Criteria of Economic Policy. In 2016, the economy presented performances below the objectives, and grew only 2.3%. The electricity sector represented about 2% of the Mexican GDP, and 6.1% of the industrial activity. The National Consumer Price Index (INPC 12, for its Spanish acronym), is a statistical instrument to measure inflation and which is closely related to electricity prices. An increase on the energy prices impact varied production sectors, increasing the cost of goods and services. As shown in Figure 2.1, during the period this index was in decline. FIGURE MACROECONOMIC VARIABLES OF MEXICO, (Annual Variation) GDP Average exchange rate Consumer prices Source: SENER with information from INEGI Electric Power Users and Tariffs The SEN is organized in nine regions which are the National Interconnected System (SIN, for its Spanish acronym), and the isolated systems of Baja California and Baja California Sur. Besides, it considers the small 11 These values were considered for the planning exercise , and correspond to what the INEGI published in 2016, as the last year estimated. Therefore, they might not coincide with the date published in An economic index commonly used, and which is aimed to measure the price variation through time of a fixed basket of goods and services that represents the household consumption (see 32

34 isolated systems 13. The operation of these nine regions is in charge of the eight control centers located in the cities of Mexico, Puebla, Guadalajara, Hermosillo, Gomez Palacio, Monterrey, and Merida; the two regions of Baja California are managed from Mexicali (see Map 2.1). MAP MAP OF THE ELECTRIC NATIONAL SYSTEM Source: PRODESEN Electric-Power Users In 2016, 98.5% of the population had electricity 14. The CFE served nearly 40.8 million customers, which had an average annual growth rate above 5.8% during the last 10 years. By the end of 2016, the Residential Sector concentrated 88.6%, seconded by the Commercial Sector with 9.8%; the Industrial, 0.8%; Services, 0.5%; and Agricultural, 0.3% of the total (see Figure 2.2). FIGURE USERS SHARE BY SECTOR, 2016 (Percentage) Commercial 9.8% Industrial 0.8% Services 0.5% Agricultural 0.3% Residential 88.6% Source: SENER with information from CFE. 13 The isolated systems are: Baja California, Baja California Sur, and Mulege. 14 Sectorial Objective 4, Country Report

35 The SEN has increased its number of users at an AAGR of 2.6% since 2006, going from 31.9 million to 40.8 million users, that is 8.9 million new users throughout 10 years. The Northeast region has displayed the largest growth rate in the decade, 8.1%, that was an addition of 1.9 million users in 2016, to reach 4.0 million users. This increase is the result of a growing economic development strengthened by the commercial and industrial activity of the region. Between 2006 and 2016, the Peninsular and the Baja California regions grew 4.3% and 4.0%, respectively, covering a total of 3.1 million electricity users. Likely, the Eastern and Northern regions displayed an AAGR of 3.3%, each, while Baja California grew 2.8%; the Central region, 2.4%, adding up 22.9 million users. Different from other regions, the Northwest region reduced its number of users in 2.0 million between 2015 and 2016, displaying a rate of decrease of 3.5% during the decade (see Table 2.2). From the 40.8 million users recorded in 2016, the Eastern region had the largest share with 10.4 million users, equivalent to 25.4%; seconded by the Western region with 24.2%, and the Central region with 21.4%, as shown in Figure 2.3. TABLE ELECTRICITY USERS BY OPERATIONAL AREA (Million users) Region AAGR Central % Eastern % Western % Northwest % North % Northeast % Peninsular % Baja California % Baja California Sur % SIN % SEN % * Baja California Sur: System La Paz and Mulege. Source: Elaborated by SENER with information from CENACE. FIGURE USERS SHARE BY ELECTRICITY-OPERATIONAL AREA, 2016 (Percentage) Peninsular 4.3% Northeast 9.7% North 5.1% Baja California 3.3% Baja California Sur 0.7% Central 22.4% Northwest 4.8% Western 24.2% Eastern 25.4% 1 System La Paz and Mulege. Source: Elaborated by SENER with information from CENACE. 34

36 By federal entities, the State of Mexico and the City of Mexico concentrated 19.1% of the total electricity users; this is due to the high population density 15 of the Valley of Mexico and to the zone s important economic activity. The entities with less users are Baja California Sur and Colima, with a 0.7% share, respectively, from the domestic total (see Table 2.3). TABLE USERS SHARE BY ELECTRICITY OPERATIONAL AREA (Million users) Entity/Year Dom. Share Estado de México % Mexico City % Jalisco % Veracruz % Puebla % Guanajuato % Nuevo León % Michoacán % Chiapas % Oaxaca % Tamaulipas % Baja California % Chihuahua % Guerrero % Sinaloa % Sonora % Coahuila % Hidalgo % San Luis Potosí % Yucatán % Tabasco % Morelos % Querétaro % Quintana Roo % Zacatecas % Durango % Nayarit % Aguascalientes % Tlaxcala % Campeche % Colima % Baja California Sur % Domestic Total % Source: Elaborated by SENER. 15 Population Density is the ratio between a defined space and the number of its inhabitants (for further detail, see 35

37 Average Prices of Electricity In Mexico, there are specific tariffs (public, agricultural, temporary, and aquacultural services) and general tariffs determined by the voltage level (low, medium, and high voltage) and by the type of service (backup and interrupted) 16. The increase in electricity tariffs can be attributable to many causes, such as the high prices of fossil fuels. In the last years, the increase in the prices of fuel oil and diesel fuels used in power plants have brought an increase in the electricity tariffs. In the period , the average price of electricity 17 remained at an AAGR of 2.9%. The agricultural sector, subsided just as the residential sector, displayed a growth of 2.7%, and the residential, 2.3%. The commercial and services sectors have the largest variability in their average prices during the last decade, 3.0% and 5.5%, respectively. As for the industrial sector, it has had a 2.9% growth in the same period, recording an average price of 1.1 MXN per kwh in 2006, and 1.3 MXN per kwh in 2016 (see Figure 2.4). FIGURE AVERAGE PRICES OF ELECTRICITY BY TARIFF SECTOR (Pesos/Kilowatt-hour) Total AAGR = 2.9% Commercial 3.0% Services 5.5% Industrial 2.9% Residential 2.3% Agricultural 2.7% Source: Elaborated by SENER with information from Energy Information System. In 2016, the average retail tariff in Mexico increased by 22.2% between January and December, due to the behavior of the fuels prices and to the blend of fuels used by CFE in generation. As reported by CFE in its Business Plan , the current basic tariff is based on transferring the average generation cost to the majority of clients, while low-consumption residential clients and agricultural ones receive subsided tariffs (see Figure 2.5). 16 For further detail, see 17 Average annual price paid by an end user per unit of energy received, according to the tariff sector in each control region. 18 For further detail, see 36

38 FIGURE AVERAGE PRICES OF ELECTRICITY BY TARIFF SECTOR, JANUARY-DECEMBER 2016 (Pesos/Kilowatt-hour) Commercial Services Industrial Residential Agricultural Average Price Source: Elaborated by SENER with information from Energy Information System. By operational area, the Peninsular area has the historical highest average prices, 1.89 MXN per kwh, average, derived from the high generation costs. On the other hand, the Northwest area averaged 1.41 MXN per kwh in the last decade. TABLE AVERAGE PRICE OF ELECTRICITY BY OPERATIONAL AREA (Pesos/kilowatt-hour) Year Central Eastern Western Northwest North Northeast Peninsular Baja California Baja California Sur SIN SEN * System La Paz and Mulege. Source: Elaborated by SENER with data from CENACE Electricity Sales, Consumption, and Demand The electricity sector is closely related to the national economy; therefore, it is one of the most dynamic sectors. The new design of the electricity market allows a free and effective competency, where the consumers demanding the largest amounts of electricity at affordable prices are the most benefited ones. Today s society consume more energy for its daily activities, just as the industry requires more energy for its production processes, and the remaining sectors for their timely functioning, such as the agricultural sector for 37

39 extracting water for irrigation. Thereby, electricity consumption has grown at an AAGR of 2.6% between 2006 and 2016, and electricity sales, 2.3% (see Figure 2.6). The gross consumption of electricity is the summing up of the energy sales, remote self-supply, import, electricity losses, and own-uses. This section presents the evolution of these components throughout the last decade and how they are distributed by region in Mexico. FIGURE ELECTRICITY SALES AND CONSUMPTION (GWh) 350, ,000 Electricity sales AAGR 2.3% Electricity consumption AAGR 2.6% 250, , , ,000 50, Source: Elaborated by SENER with data from CENACE Electricity Sales In the new model of the electricity market, each company should manage the sales of the electricity they produce, taking into account all the peculiarities of each users. The five economic sectors (Agricultural, Commercial, Industrial, Residential, and Services) have jointly contributed to a growth of 2.3% in electricity sales. The agricultural sector had the highest AAGR, 3.1% in the analyzed period, since it recorded an increase in this sector s sales by 3,368.3 GWh between 2006 and However, the commercial sector displayed a lower AAGR, about 1.5%. The residential sector increased 13,915.7 GWh its sales, going from 44,452.4 GWh in 2006 to 58,368.1 GWh in 2016, an annual increase by 2.9%. The industrial sector had the largest increase, of approximately 21,232.6 GWh during the same period, and an AAGR of 2.0%, finally reaching 124,385.4 GWh (see Figure 2.7). 38

40 FIGURE SECTORAL BEHAVIOR OF ELECTRICITY DOMESTIC SALES, (GWh) 175, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , AAGR = 2.3% Commercial 1.5% Source: Elaborated by SENER with data from CENACE. Industrial 2.0% Services 2.7% 2014 Residential 2.9% 2016 Agricultural 3.1% From 2015 to 2016, the total electricity sales increased by 2.8%, equivalent to 5,871.5 GWh. By share, the industrial sector concentrated the largest percentage of electricity sales. In 2016 the sum of Medium-Sized Company and Major Industry both within the industrial sector jointly represented 57.0% of the total (see Figure 2.8). FIGURE SALES COMPOSITION BY SECTOR (GWh) Services 4.0%Agricultural 5.2% Commercial 7.0% Medium-size company 38.3% Residential 26.8% Major Industry 18.7% Source: Elaborated by SENER with data from CENACE. By region, the electricity sales reported in the Northeast were of 53,322.5 GWh, equivalent to 24.5% of the national total, positioning as number one. By its share, this region was seconded by the regions: Central Western (23.9%), Central (22.5%), South Southeast (15.4%), and Northwest (13.7%), as shown in Figure

41 The states of Nuevo Leon and the State of Mexico recorded the largest statal sales, each with an 8.5% share in the national total. As for the states of Nayarit and Campeche, these had the smallest share, 1.3% jointly, equivalent to 2,970.4 GWh. FIGURE DOMESTIC SALES STRUCTURE BY FEDERAL ENTITY AND STATISTICAL REGION, 2016 (GWh, Percentage) 7.8% 6.2% 22.9% Baja California Sur 16.9% Durango Sinaloa 19.2% Tamaulipas 35.0% Baja California 22.9% Coahuila Chihuahua 34.3% Sonora 34.9% Nuevo León Northwest 29,890.3 GWh Northeast 53,322.5 GWh 4.1% 8.0% 9.0% Campeche Oaxaca 3.0% 3.5% 5.3% 4.3% 9.9% 12.1% Nayarit Colima Aguascalientes Zacatecas 9.7% 11.0% 11.0% 14.1% Guerrero Chiapas Yucatán Tabasco 13.1% 23.0% 25.7% Querétaro San Luis Potosí Michoacán Guanajuato Jalisco 3.9% 5.5% 8.1% 15.5% Tlaxcala Morelos Hidalgo 33.1% South-Southeast 33,674.6 GWh Quintana Roo Veracruz Central-Western 52,010.5 GWh 29.5% Puebla Mexico City 37.5% Estado de México Central 49,174.5 GWh Source: Elaborated by SENER with data from CENACE. Remote Self-Supply Electricity remote self-supply, measured in GWh, is the load supply through the public service s transmission grid to self-supply projects located at a distance from the power station. Table 2.5 points out the capacity s behavior for serving these remote self-supplied loads. 40

42 It can be observed that, in the last 10 years, remote self-supply has grown exponentially in every operational area, standing out the Northwest region which has grown at an AAGR of 109.8% during TABLE ELECTRICITY REMOTE SELF-SUPPLY (GWh) Region AAGR Central 1, , , , , , , , , , , ,392.7 Eastern 1, , , , , , , , , , , ,828.4 Western 1, , , , , , , , , , , ,323.5 Northwest , , , ,470.3 North 1, , , , , , , , , , ,441.4 Northeast 3, , , , , , , , , , , ,298.2 Peninsular Baja California Baja California Sur⅟ / BCS includes System La Paz. Source: Elaborated by SENER with data from CENACE. Electricity Losses CFE is in charge of taking the necessary measures to reduce Technical 19 and Non-technical 20 electricity losses, one of the main objectives in the SEN s strategic planning. To achieve this, it is necessary to implement some mechanisms such as modernizing the grids reliability. On September 2016, the CFE reported that the accumulated losses index (technical and non-technical) regarding the previous year, was of 12.5%. This was a decrease of 0.61% 21 in the loss index regarding December Different actions are taken for each region to reduce losses, such as the construction of new backbones, recalibration of the circuits, replacement of obsolete transformers, the regularization of services in different areas with the support of the competent authorities, and the replacement of electromechanical meters with electronic ones, among other. Table 2.6 shows how the Central region has reduced its electricity losses in 2.1%, which decreased from 15,856.3 GWh in 2006, to 11,605.7 GWh in As for the Baja California Sur and Peninsular regions, they have increased their electricity losses by 3.4% and 2.7%. respectively, making it necessary to solve this problem through interconnection to the SIN in the case of Baja California Sur or the creation of new grids or the improvement of the medium and low voltage grids, whichever the case (see Figure 2.10). 19 Energy dissipated due to the physical properties of the system and the conductors in transmission, transformation, and distribution. 20 Energy lost in an electric power system due to illegal uses, measurement or invoicing errors. 21 These indexes refer to the Distribution systems and include high voltage (which are transferred to Transmission by November). Transmission losses, which are only technical, represent 1.65% of the system. 41

43 BCS includes System La Paz. Source: Elaborated by SENER with data from CENACE. TABLE ELECTRICITY LOSSES (GWh) Region AAGR Central 15, , , , , , , , , , , % Eastern 6, , , , , , , , , , , % Western 6, , , , , , , , , , , % Northwest 1, , , , , , , , , , , % North 2, , , , , , , , , , , % Northeast 4, , , , , , , , , , , % Peninsular 1, , , , , , , , , , , % Baja California 1, , , , , , , , % Baja California Sur % 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: Elaborated by SENER with data from CENACE. FIGURE ELECTRICITY LOSSES (GWh) Central Western Eastern Northeast North Northwest Peninsular Baja California Baja California Sur Electric Power Consumption During the period , the SEN s electric-power consumption grew at an AAGR of 2.6%, rising from 232,658.0 GWh to 298,791.7 GWh. The Peninsular region had the largest growth, 4.8% AAGR, seconded by Baja California Sur with 4.6%. The SIN grew at the same AAGR of the SEN, 2.6%. Within this system, the Northwest region had the largest growth in the decade, 3.8%, recording 15,966.0 GWh in 2006 and 23,388.6 GWh by the end of Analyzing years 2015 and 2016, the region with the largest growth in its consumption was the Central region, which increased 10.2% reaching 59,102.6 GWh due to the intense economic activity and to the population density of the zone. During those same years, the Northwest region also increased its region by 8.1%, equivalent to 1,746.6 GWh. On the contrary, the Western region reduced its electricity consumption by 1,813.4 GWh (-2.8%), the same as the Baja California Sur region, which reduced its consumption by 5.1 GWh (-0.2%) between 2015 and 2016 (see Figure 2.11). 42

44 FIGURE BEHAVIOR OF ELECTRICITY CONSUMPTION BY CONTROL REGION (GWh) 232, , , , , , , , , , ,792 Baja California Sur Peninsular Baja California Northwest North Eastern Northeast Central Western SEN * Baja California Sur: System La Paz and Mulege. Source: Elaborated by SENER with data from CENACE. By the end of 2016, from the total 298,791.7 GWh, the Western region concentrated 21.2% (63,406.6 GWh), followed by the Central region with 19.8% (59,102.6 GWh), and the Eastern with 15.9% (47,642.0 GWh). On the contrary, the Peninsular area had the smallest share, 4.1% (12,128.9 GWh) of the SEN s total consumption. The areas of Baja California and California Sur reached, jointly, 5.4% of the share (see Figure 2.12). FIGURE ELECTRICITY CONSUMPTION BY OPERATIONAL AREA, 2016 (GWh) * BCS includes System La Paz. Source: Elaborated by SENER with data from CENACE. 43

45 Electricity Demand To estimate the electricity demand, it is necessary to consider many factors such as the behavior of the sales in the different zones of the country, electricity losses, the historical behavior of the load and diversity factors, scenarios of electricity consumption by sector, among other. These elements were described in the previous sections, besides considering the determination of the required capacity, taking into account temporary variations (seasonal, weekly, daily, and hourly) to serve the year s maximum demand, that is, the maximum value of the demands happening in one-hour time in the year for each area. In 2016, the CENACE reported the minimum level of the SIN s integrated demand 22 on January 1 st at 9:00 am, recording 18,723 MWh/h. Conversely, the maximum level of the integrated demand was recorded on July 8, 2016, at 17:00 hours, equivalent to 40,893 MWh/h. As it can be observed in Figure 2.13, the Western Region concentrated 21.1% of the total integrated demand of the SIN, 9,351 MWh/h. The Northeast region was second with 8,710 MWh/h (19.7%), followed by the Central region with 8,567 MWh/h (19.4%). FIGURE MAXIMUM INTEGRATED DEMAND BY CONTROL REGION (MWh/h/) Peninsular 4.3% Northeast 19.7% Central 19.4% North 9.6% Northwest 9.8% Western 21.1% Eastern 16.1% Source: Elaborated by SENER with data from CENACE. Maximum Coincident Demand Defined as the maximum demand of a group of combination systems, it is equivalent to the maximum demand achieved if that group were unique. This demand is lower than the summation of the annual maximum demands observed in each region, because the maximum regional values do not happen in the same interval. By the end of 2016, the maximum coincident demand recorded for the SEN was of 43,448.5 MWh/h. Without considering the isolated systems, the maximum coincident demand reported for the SIN was of 40,893.1 MWh/h, from which 19.4% came from the Northeast region (8,438.6 MWh/h), 18.9% corresponded to the Western region (8,213.8 MWh/h), 17.6% to the Central region (7,668.4 MWh/h), and 14.8% to the Eastern region (6,425.2 MWh/h). The regions with the smallest share were the Northwest, Northern, and Peninsular regions, jointly concentrating 10,047.0 MWh/h (23.4%), as displayed below in Figure Integration of the hourly load during one year measured in MWh/h. 44

46 FIGURE MAXIMUM COINCIDENT DEMAND 2016 (MWh/h) Baja California Sur includes La Paz and Mulegé. Source: Elaborated by SENER with data from CENACE. Maximum Gross Demand The maximum gross demand is defined as the power to be generated or imported to serve the users requirements, transmission losses, and own-uses of the power stations. For the SIN, this demand grew 2.5% per year since 2006, reaching 40,893 MWh/h in In the last ten years, the Peninsular region had the largest growth, 4.4%; seconded by Baja California Sur with 4.3%. On the contrary, the central region had a lower growth rate during that same period, approximately 0.3%, going from 8,419 MWh/h in 2006 to 8,567 MWh/h in 2016 (see Table 2.7). Baja California Sur includes La Paz and Mulegé. Source: Elaborated by SENER with data from CENACE. TABLE MAXIMUM GROSS DEMAND (MWh/h) Region AAGR Central 8,419 8,606 8,435 8,702 9,004 8,844 8,651 8,411 8,192 8,151 8, % Eastern 5,882 5,786 6,181 6,071 6,356 6,577 6,626 6,709 6,767 6,960 7, % Western 7,106 7,437 8,069 7,763 8,175 8,669 8,975 9,207 9,104 9,374 9, % Northwest 2,916 3,059 3,072 3,285 3,617 3,772 3,870 4,087 4,034 4,154 4, % North 3,113 3,130 3,328 3,248 3,385 3,682 3,725 3,841 3,955 3,986 4, % Northeast 6,319 6,586 6,780 6,886 7,070 7,587 7,798 7,781 7,876 8,248 8, % Peninsular 1,268 1,275 1,375 1,435 1,520 1,544 1,558 1,628 1,664 1,789 1, % Baja California 2,095 2,208 2,092 2,129 2,229 2,237 2,302 2,225 2,350 2,479 2, % Baja California Sur % SIN 31,547 32,577 33,680 33,568 35,310 37,256 38,000 38,138 39,000 39,840 40, % 45

47 2.4. Infrastructure of the Electric National System During the last ten years, one of the main objectives of the energy planning has been to have a reliable infrastructure that guarantees the supply of electricity, where this energy, in addition to being more environmentally friendly, would be as affordable as possible. Having a larger diversification of the sources for electricity generation means a larger inclusion of renewable energies whose costs have considerably decreased and the maximum utilization of conventional energies, such as natural gas, which has presented a great availability and low prices in the last years, and thus has fostered the development of infrastructure to transport fuel and increase the electricity generation with new projects or with the upgrading of some power stations to use this fuel. This section details the behavior of the Mexican Electric System s infrastructure, such as the installed capacity, and the transmission and distribution capacity, key elements to make electricity available to every user Electricity Generation Installed Capacity In the last decade, the electricity generation installed capacity grew at an AAGR of 2.9%, rising from 56,317 MW in 2006 to 73,510 MW in 2016, an increase by 17,194 MW. For the period , clean technologies had an AAGR of 3.8%, concentrating 28.8% (21,179 MW) of the country s total installed capacity by the end of Regarding conventional technologies, combined cycle grew 4.3% per year, increasing its capacity by 7,985 MW during a 10-year period and recording, by the end of 2016, 27,274 MW of installed capacity. Contrastingly, the installed capacity of Conventional Thermal technology has decreased 1,468 MW, displaying an AAGR of -1.0% (see Figure 2.15). FIGURE BEHAVIOR OF THE SEN S INSTALLED CAPACITY BY TYPE OF TECHNOLOGY (MW) 73, , , , , , , , , , , KERS FIRCO Solar Distributed Generation Bioenergy Geothermal Nuclear Wind Hydroelectric Fluidized Bed Efficient Cogeneration Internal Combustion Gas Turbine Coal Fired Thermal Conventional Combined Cycle General Total Source: Elaborated by SENER with data from CFE, CRE and Undersecretariat of Energy Planning and Transition. 46

48 Between 2015 and 2016, there was a significant growth in the SEN s electricity generation installed capacity, an increase by 8.1% and equivalent to 5,486 MW of additional capacity. It is worth mentioning that the solar and distributed generation technologies presented the largest increases, 157.4% and 110.6%, respectively. Thus, from the total generation park in 2016, 71.2% corresponded to power stations with conventional technologies, and the remaining 28.8%, to clean energies stations. Combined cycle has the largest share with 37.1% (27,274 MW), followed by conventional thermal and hydroelectric with 17.1% (see Figure 2.16). FIGURE INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, 2016 (Percentage) Gas Turbine 6.9% Hydroelectric 17.1% Coal Fired 7.3% Wind 5.1% Internal Combustion and Fluidized Bed 2.8% Thermal Conventional 17.1% Combined Cycle 37.1% Nuclear 2.2% Bioenergy and Efficient Cogeneration 2.6% Geothermal, Solar, FIRCO, GD and KERS 1.8% Source: Elaborated by SENER. Regarding the installed capacity by modalities, cogeneration has grown at an AAGR of 10.2% during the studied period, while self-supply grew 8.2%. On the other hand, the own-uses modality had an annual decrease of 1.0%, reporting 538 MW in 2006 and 497 MW in 2016 (see Table 2.8 and Figure 2.17). TABLE BEHAVIOR OF THE SEN S ELECTRICITY GENERATION CAPACITY BY MODALITY, 2016 (MW) Modality AAGR Total 56,310 59,008 59,431 60,440 62,261 60,990 61,971 63,593 65,464 68,044 73, % CFE 38,382 39,572 39,649 40,229 41,039 40,024 40,121 40,646 41,529 41,900 43, % IPPs 10,387 11,457 11,457 11,457 11,907 11,907 12,418 12,851 12,851 12,953 13, % Continuous Own Uses % Self-Supply 4,110 3,486 3,855 4,192 4,400 4,393 4,753 5,021 5,804 7,129 9, % Cogeneration 1,563 2,677 2,662 2,782 3,135 2,878 2,914 3,285 3,536 3,648 4, % Export 1,330 1,330 1,330 1,330 1,330 1,330 1,330 1,331 1,250 1,406 1, % Small Production n.d. n.d. n.d. n.d n.a Other modalities n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d n.a. *Other modalities also consider: Generator, Share-Risk Trust (FIRCO) and Distributed Generation. Source: Elaborated by SENER with information from Undersecretariat of Electricity. 47

49 FIGURE BEHAVIOR OF THE SEN S INSTALLED CAPACITY BY MODALITY, (MW) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Small Production Other modalities Continuous Own Uses -1.1% Export 1.5% Cogeneration 11.3% Self-Supply 9.3% IPPs 4.9% CFE 1.2% *Other modalities also consider: Generator, FIRCO and Distributed Generation. Source: Elaborated by SENER. By the end of 2016, CFE concentrated 59.1% (43,269.1 MW) of installed capacity, seconded by independent energy producers (IEPs) with 13,255.4 MW (18.3%), and self-supply with 9,576.8 MW (see Figure 2.18). FIGURE SEN S INSTALLED CAPACITY BY MODALITY, 2016 (MW) IPPs 18.0% Self-Supply 13.0% Cogeneration 6.0% Export 2.1% Continuous Own Uses 0.7% CFE 58.9% Other modalities 1.2% Small Production 0.1% *Other modalities also consider: Generator, FIRCO and Distributed Generation. Source: Elaborated by SENER. In accordance with the Presidency of the Republic, the installed capacity was distributed in five regions detailed below: Northwest: In 2016 concentrated 14.1% of the total capacity (10,384.2 MW), being Baja California the state with the largest share, 42.9%. This region is characterized by having a meaningful contribution of conventional technologies, though, during the last years, solar energy has displayed the largest increase in installed capacity thanks to the geographic conditions which prevail in that part of the country. 48

50 Northeast: By the end of 2016, the installed capacity in this region reached 18,942.3 MW, equivalent to 25.8% of the total national capacity with the largest share of combined cycle. Central Western: This region has the second largest share of hydropower plants with 17.3% of the installed capacity recorded in 2016 (12,728.8 MW); just in the state of Nayarit, there are three large hydropower stations with a capacity of just over 2,400 MW. Central: By the end of 2016, this region had the smallest share, 8.9% (6,552.8 MW) of the SEN s total installed capacity. Given its geographic location in the Mexican territory and its growing population density, states like Morelos and Mexico City have a limited infrastructure which explains why there has not been any significant increase in the last years. South Southeast: This region has a large share in clean technologies and the largest SEN s infrastructure, 33.5% (24,640.4 MW). Hydropower stations prevail in this region, located in the states of Guerrero, Chiapas, and Oaxaca, with approximately 7,000 MW of capacity. Stands out the large share of wind power and the only nuclear power station of the country (see Figure 2.19). 49

51 FIGURE INSTALLED CAPACITY BY FEDERAL ENTITY (MW, Percentage) 9.8% 9.7% 17.0% Baja California Sur 14.8% Durango Sinaloa 19.8% Chihuahua 30.2% Sonora 24.0% Coahuila Nuevo León 42.9% Baja California 31.6% Tamaulipas Northwest 10,384.2 MW Northeast 18,942.3 MW 1.4% 2.8% 5.1% 6.4% Quintana Roo Tabasco 0.1% 1.2% 5.5% 11.7% Campeche 6.2% 7.2% 15.5% 20.2% 21.7% 22.4% Aguascalientes Zacatecas Querétaro Jalisco Michoacán Guanajuato Nayarit Colima San Luis Potosí 1.4% 5.6% 10.4% 17.3% Tlaxcala Mexico City Morelos 18.8% 20.3% 33.5% South-Southeast 24,640.4 MW Yucatán Oaxaca Guerrero Chiapas Veracruz Central-Western 12,728.8 MW 25.0% Puebla 40.5% Estado de México Hidalgo Central 6,552.8 MW Source: Elaborated by SENER. 50

52 Electric Power Gross Generation The SEN s electric power gross generation is the total energy delivered, equivalent to the addition of the gross generation from power stations, the energy imported from other electric systems, and the energy purchased from self-supply and co-generators surpluses. Today, the energy generation in Mexico is more diversified than in the past years, having a larger participation of other clean technologies such as efficient cogeneration and bioenergy. As for conventional technologies, combined cycle has become the main source of electricity generation thanks to the expansion and upgrading of the natural-gas infrastructure in the country and will allow a larger access to this fuel characterized by its low prices and low pollution indexes. In 2006, electricity generation reached 254,906.3 GWh, from which 81.1% came from fossil-fuels technologies. By the end of 2016, the gross generation reached 319,363.5 GWh, an average annual growth of 2.4%, and a larger share of clean technologies: 20.3% of the total generation matrix. Throughout the decade, the technologies with the largest share were: wind power, with 100.4%; and efficient cogeneration with 48.5%, per year. On the other hand, power stations with Conventional Thermal presented an AAGR of 4.8%, reducing its electricity generation in approximately 16,164.8 GWh (see Figure 2.20). FIGURE BEHAVIOR OF THE GROSS GENERATION BY TYPE OF TECHNOLOGY, (GWh) 274, , , , , ,363.5 KERS 309, , , , ,462.2 FIRCO Solar Distributed Generation Bioenergy Geothermal Nuclear Wind Hydroelectric Fluidized Bed Efficient Cogeneration Internal Combustion Gas Turbine Coal Fired Thermal Conventional Combined Cycle General Total Source: Elaborated by SENER with data from CFE, CRE and Undersecretariat of Energy Planning and Transition. By the end of 2016, 79.7% of the electricity generation came from conventional technologies, and the remaining 20.3%, from clean technologies. Within the conventional ones, combined cycle increased by 5,218.4 GWh its generation since 2015, recording 160,378.3 GWh in 2016, which represented 50.2% of the total generation. From clean technologies, wind power increased its share in the generation matrix concentrating 3.3%, just as nuclear power, while hydropower was reduced to 9.7% (see Figure 2.21). 51

53 FIGURE GROSS GENERATION BY TYPE OF TECHNOLOGY 2016 (GWh) Coal Fired 10.7% Hydroelectric Thermal 9.7% Conventional 12.6% Combined Cycle 50.2% Gas Turbine Nuclear 3.9% 3.3% Wind 3.3% Internal Combustion and Fluidized Bed 2.2% Geothermal, Solar, FIRCO, GD and KERS 2.0% Bioenergy and Efficient Cogeneration 2.0% Source: Elaborated by SENER. By modality, CFE reported the largest concentration of electric power generation in 2016 with 174,718.1 GWh (54.7%). The IEPs concentrated 27.8%, equivalent to 88,675.0 GWh, and Self-supply with 29,650.4 GWh (see Figure 2.22). FIGURE GROSS GENERATION BY MODALITY 2016 (Percentage) IPPs 27.8% Self-Supply 9.3% Cogeneration 5.5% Export 2.0% CFE 54.7% Other modalities 0.4% Continuous Own Uses 0.3% Small Production 0.0% Source: Elaborated by SENER. Regarding electricity generation by region and federal entity, the following is observed: Northeast: With 31.2% (99,704.9 GW), it has the largest share by region in the total electricity generation. The state of Tamaulipas concentrates 36.2% (36,084.1 GWh) of the region, thanks to its strong participation of combined cycles in this entity. Additionally, it is second at national level with 11.3% of share, being seconded by the state of Coahuila with 20.8% (20,745.6 GWh); Nuevo Leon with 17.4% (17,357.7 GWh); Chihuahua with 16.3% (16,281.7 GWh); and Durango with 9.3% (9,235.9 GWh). South Southeast: It is second in the total generation and is characterized by having an ample share in clean energies generation. This region contains many of the most important hydropower and wind plants, as well as the only nuclear power plant of the country. By federal entity, Veracruz concentrated 41.4% (39,339.1 GWh) of the region by the end of 2016, and it is the first state with the largest share in the SEN s total generation (12.3%). As for Quintana Roo, this state had the smallest share in the region, 0.1% (124.5 GWh). 52

54 Central Western: It is third in generation at national level, concentrating 16.7% (53,446.5 GWh). Stands out the participation of two states, San Luis Potosi and Colima, which concentrate, jointly, about 53.8% of the region s generation. It is worth mentioning the state of Aguascalientes had the smallest share in the total electricity generation with only 40.4 GWh (0.1%). Northwest: Concentrated 13.7% of the national total generation, equivalent to 43,780.8 GWh. Stands out the state of Baja California, which concentrated 47.4% of the region (19,427.1 GWh), and was seconded, in order of participation, by the states of Sonora (16,256.4 GWh), Sinaloa (5,160.6 GWh), and finally, Baja California Sur with 6.7% (2,946.7 GWh). Central: It has the smallest share, 8.6% (27,397.0 GWh) of the national total. The state of Hidalgo concentrates 48.6% of the region, while Morelos has the smallest share, 1.0% (see Figure 2.23). FIGURE GROSS GENERATION BY FEDERAL ENTITY (GWh, Percentage) 6.7% 9.3% 11.8% Baja California Sur 16.3% Durango 37.1% Sinaloa 17.4% Chihuahua Sonora 20.8% Nuevo León Coahuila 44.4% Baja California 36.2% Tamaulipas Northwest 43,780.8 GWh 0.1% 0.3% 2.8% 7.6% 8.3% 8.5% Aguascalientes Zacatecas Jalisco Northeast 99,704.9 GWh 0.1% 3.4% 3.8% 6.4% 10.2% 11.4% 23.2% Quintana Roo Tabasco Campeche Yucatán Oaxaca 18.6% Querétaro Chiapas 25.2% 28.7% Nayarit Michoacán Guanajuato Colima San Luis Potosí 1.0% 1.6% 2.7% 21.2% 25.0% Morelos Tlaxcala Mexico City 41.4% South-Southeast 94,941.8 GWh Guerrero Veracruz Central-Western 53,446.5 GWh 48.6% Puebla Estado de México Hidalgo Source: Elaborated by SENER. Central 27,397.0 GWh 53

55 Changes in the Infrastructure of the SEN s Electricity Generation Plants Throughout 2016, a total of 3,447.7 MW entered into operation from manifold technologies in all the country. Four power stations underwent a testing phase summing up 1,304.3 MW, and were located in the states of Baja California, Coahuila, Morelos, and Veracruz. As for the MW from three power stations (two hydropower plants and one combined cycle plant), were capacity recovery, and 39.9 MW from increased capacity. By the end of 2016, there was a capacity decrease of 78.7 MW, and a definite withdrawal of 27.3 MW, of the modalities of Self-supply and CFE-generation (see Table 2.9). TABLE CHANGES IN THE INFRASTRUCTURE OF THE SEN S ELECTRICITY GENERATION PLANTS, 2016 (MW) Modification Capacity Startup 3,444.7 Under testing phase 1,304.3 Capacity Recovery Capacity Decrease 78.7 Final Decommissioning 27.3 Capacity Increase 39.9 Source: PRODESEN

56 Electricity Transmission and Distribution Grid The Mexican State maintains ownership of the Public Service of Transmission and Distribution in accordance with what is established in Article Second of the Law of the Electric Industry. The National Transmission Network (RNT, for its Spanish acronym) is a system integrated by a group of electrical grids which transport the generated electric power to the General Distribution Grids (RGD, for its Spanish acronym) and to the general users. This network is grouped together in 53 transmission regions: 45 interconnected (62 connections) and 8 which belong to isolated systems of the Baja California Peninsula. Transmission In 2006, the SEN s transmission capacity was of 74,208 MW, an increase by 4% regarding For the SIN, the transmission capacity was of 72,450 MW, an increase by 2,756 MW. The Northwest region had the largest capacity in 2016 with 18,670 MW, an increase of 10% regarding 2015 (see Map 2.2. and Table 2.10). MAP CONNECTION CAPACITY BETWEEN THE 53 SEN S TRANSMISSION REGIONS 2016 Source: Elaborated by SENER with data from CENACE. 55

57 TABLE TRANSMISSION CAPACITY BY CONTROL REGION (MW) Control Region Capacity 2015 *System La Paz (the Mulege region is an isolated system with no connections). Source: Elaborated by SENER with data from CENACE. Capacity 2016 AAGR (%) Central 11,100 11,400 3 Eastern 15,460 16,550 7 Western 12,450 12,450 0 Northwest 5,520 6, North 4,060 4,110 1 Northeast 18,150 18,670 3 Peninsular 2,954 3,210 9 Baja California 1,433 1,488 4 Baja California Sur SIN 69,694 72,450 4 SEN 71,397 74,208 4 Regarding the total length of the transmission lines, they decreased 260 km between 2015 and 2016, recording 104,133 km by the end of 2016, from which 98.3% belonged to CFE 23, and the remaining 1.7%, to the extinct LyFC. The transmission lines from 161 to 400 kv concentrated 50% of the total, equivalent to 52,061 km, while transmission lines from 69 to 138 kv concentrated 48.3% (50,330 km). The remaining 1.7% corresponded to other transmission lines with voltage levels of 400 and 230 kv. As for the transmission line with a 115-voltage level concentrated 44.5% of the total; the transmission lines of 230 and 400 kv concentrated 26.1% and 23.4%, respectively (see Figure 2.24). FIGURE TRANSMISSION LINES 2016 (Kilometers) 400 kv 0.2% 230 kv 44.5% 161 kv 1.1% 0.5% 2.6% 138 kv 115 kv 26.1% 23.4% 0.4% 1.3% 85 kv 69 kv 400 kv* 230 kv* Source: Elaborated by SENER with data from CFE. 23 The CFE s Deputy Directorate of Transmission (ST for its Spanish acronym) reports lines of 400, 230, and 161 kv and, in particular according to agreement lines served of less than 161 kv of small length. 56

58 The states of Sonora, Veracruz, and Chihuahua concentrated 8.6%, 8.4%, and 7.9%, respectively, of the backbone grid 24 due to their large territorial extent that enables a larger length of the transmission network. On the contrary, the states of Baja California Sur and Colima had the smallest share, 0.7% (see Table 2.11). TABLE SUMMARY OF THE TRANSMISSION LINES KILOMETERS BY FEDERAL ENTITY 2016 (Kilometers) No. Federal Entity Category 400 kv 230 kv Total (km) Source: Elaborated by SENER with data from CFE. 1 Aguascalientes Baja California Baja California Sur Campeche ,294 5 Mexico City Coahuila 1,820 1,033 2,853 7 Colima Chiapas 1, ,444 9 Chihuahua 214 4,013 4, Durango , Guanajuato 531 1,022 1, Guerrero 293 1,178 1, Hidalgo , Jalisco 1,802 1,064 2, Estado de México 1,073 1,063 2, Michoacán , Morelos Nayarit Nuevo León 1, , Oaxaca 834 1,052 1, Puebla 1, , Querétaro Quintana Roo San Luis Potosí 1, , Sinaloa 1,440 1,572 3, Sonora - 4,557 4, Tabasco Tamaulipas 1, , Tlaxcala Veracruz 3,366 1,104 4, Yucatán , Zacatecas ,002 Total 24,714 28,566 53, Lines with a voltage level of 400 and 230 kv. 57

59 Distribution Regarding the RGD 25, integrated by medium-voltage 26 grids and low-tension grids 27, serves 40.7 million users, with 1,446,529 pieces of distribution transformers and a total capacity of 53,528 MVA. In 2016 the RGD increased its length in 0.6%, 4,967 km additional to 2015, reaching 779,119 km. From this grid, 93.7% corresponded to CFE Distribution, and the remaining to Other 28 (see Table 2.12). Source: Elaborated by SENER with data from CFE Distribution. TABLE DISTRIBUTION LINES (Kilometers) Distribution Lines Length 2015 Length 2016 Distribution CFE 774, ,119 Voltage Level 34.5 kv 79,413 80,013 Voltage Level 23 kv 62,755 65,047 Voltage Level 13.8 kv 312, ,118 Voltage Level 6.6 kv Voltage Level 2.4 kv 6 9 Voltage Level low 319, ,805 Other 52,334 51,969 Total 826, ,087 Cross-Border Interconnections With the purpose of trading electricity with other countries, the SEN is interconnected to different voltage levels with the USA, Belize, and Guatemala. These interconnections are divided into permanent use interconnections and the ones used in emergency situations. The latter are characterized for not operating permanently since, technically, it is not possible to connect large systems with small lines, due to the risk of instabilities in the electric system, to the detriment of both countries (see Chart 2.1). CHART INTERCONNECTION WITH NORTH AMERICA Emergency Ribereña - Ascárate ANAPRA Diablo Ojinaga - Presidio Matamoros Brownsville Matamoros - Military Permanent Tijuana Miguel La Rosita Imperial Valley IPPdras Negras Eagle Pass Nuevo Laredo Laredo Cumbres F. Planta Frontera Cumbres F. - Railroad Source: Elaborated by SENER. As shown in Map 2.3, one of the interconnections is located in Quintana Roo and is connected to Belize, while the other is located in Chiapas and is connected to Guatemala: Xul Ha West 25 The General Distribution Network (RGD) is used to transport electricity to general public. 26 Medium-voltage grids whose supply levels are higher than kv or less than 35 kv. 27 Low-voltage grids whose supply levels are equal o or less than 1 kv. 28 CFE Distribution report lines which serve 138, 115, 85, and 68 kv. 58

60 Tapachula Los Brillantes MAP CROSS-BORDER INTERCONNECTIONS Source: Elaborated by SENER with data from CENACE. 59

61 2.5. Electric Power Trade In 2016, the electricity balance of trade had a decrease of GWh compared to The exports level was reduced by -15.2%, falling to 1,967.6 GWh, related to a lower export volume to the USA and Belize. On the other hand, imports increased in the states bordering the USA and Guatemala (see Table 2.13). TABLE ELECTRIC POWER FOREIGN TRADE (GWh) Concept AAGR Electric Power Exported 1, , , , , , , , , , , United States 1, , , , , , , Belize Guatemala Electric Power Imported , , , , , United States , , , , , Guatemala N/D N/D N/D N/D N/D n.a Trade Balance , , , Source: Energy Information System with information from CFE and CENACE. 60

62 3. Electricity Sector Outlook Since December 2013, Mexico is undergoing a deep restructuration in its energy model. After the results of the first three auctions, the Electricity Sector is moving towards a modernized sector, with a global vision, and totally dynamic, which is still fostering the national economy. The electric industry seeks to promote a sustainable development, always ensuring a continuous, efficient, and safety operation. In such way, and in response to the growing needs of energy supply, the SEN through the Wholesale Electricity Market, requires a model of free competency that guarantees transparency and fosters the participation of private investors and state productive enterprises. Thus, the SENER is committed to design and execute the energy policy and the SEN s planning through varied instruments such as the Electricity Sector Outlook. This document is based on the Indicative Programs for the Commissioning and Decommissioning of Power Plants (PIIRCE, for its Spanish acronym), the Program of Expansion and Upgrading of the National Transmission Network, and the Program of Expansion and Upgrading of the General Distribution Grids, which show the results of the indicative planning published in the PRODESEN to a 15-year horizon Assumptions of the Planning Scenario The new model of the Mexican Electricity Sector should provide new investment opportunities and foster economic growth. Thereby, it should ensure the development of an electricity market which enables the reliable supply of electricity with transparent prices in accordance with the global reality, which makes it necessary to understand the international environment of this sector. The next section describes the international environment as well as the main inputs considered in the electricity sector planning, such as the macroeconomic forecasts, which describe the economy expected growth, population, currency exchange, and the forecasts for fuels prices. On the other hand, the commitments undertaken by Mexico to reduce the greenhouse house emissions (GHG), are one of the conditioning variables in the future planning of the SEN International Environment According to the figures in the BP Statistical Review of World Energy June , at the global level, the generation of electricity in 2016 increased by 2.5% regarding 2015 to reach 24,816.4 TWh. This growth was mainly due to a faster growth of non-oecd (Organization for Economic Co-operation and Development) members, standing out the Asian-Pacific region as shown in Figure For further detail, see 61

63 FIGURE WORLDWIDE ELECTRICITY GENERATION AND BY REGIONS (TWh) 19, , , , , , , , , , ,816.4 Africa Middle East Central and South America North America Europe and Eurasia Asia Pacific Worldwide Total Source: Elaborated by SENER with information from BP Statistical Review of World Energy Nowadays, electricity world markets are undergoing a transition process which has increased the share of renewable energies in electricity generation. Solar and wind power stand out, since they increased their generation capacity exponentially by 33.2% and 12.0%, respectively, between 2015 and 2016 (see Figure 3.2). FIGURE WORLDWIDE CAPACITY OF SOLAR AND WIND POWER (MW) 74,008 5,762 8,323 94,189 14, ,747 23, ,888 39, ,872 70, ,250 98, , , , , , , , , , Wind Solar Photovoltaic Source: Elaborated by SENER with information from BP Statistical Review of World Energy Development Program for the National Electricity System The Electricity Sector Outlook takes as its main input the indicative planning exercise published in the Development Program for the National Electricity System (PRODESEN) , which has as its main objectives: ensure the SEN s efficiency, quality, reliability, continuity, and safety; foster the diversification of the electricity generation matrix, as well as the national energy security; promote the installation of sufficient resources to serve the SEN s demand; comply with the clean-energies targets; foresee the necessary 62

64 infrastructure to ensure the SEN s reliability; and incentivize the generation efficient expansion, considering quality criteria, reliability, continuity, and grid safety, that will minimize the service provision costs, thus reducing the congestion costs. It is important to mention that the SEN is formed by 10 control regions, from which 7 are interconnected and form the SIN, while the remaining 3 regions are isolated (Baja California, Baja California Sur, and Mulege). On the other hand, the PRODESEN contains the planning of the electrical infrastructure for the next 15 years, resulting from the coordination of the Indicative Program for Commissioning and Decommissioning of Power Plants (PIIRCE) with the Programs of expansion and Modernization of the National Transmission Network and the General Distribution Grids 30. As for the PIIRCE, it contains the 15-year projection of the new generation capacity by type of technology and geographic location of the new power stations, as well as the units or stations notified by the generators for decommissioning Macroeconomic Forecasts Knowing the macroeconomic forecasts allows to identify the behavior expected for the variables which define the demand and consumption of electricity, such as the population growth, economic growth, currency exchange, among other. Once the electricity demand and consumption are estimated, it can be defined the electrical infrastructure to serve the population s energy requirements in a 15-year planning horizon. Gross Domestic Product For the period , three scenarios for the growth of the Gross Domestic Product (GDP) were projected based on the General Criteria of Economic Policy 2017 published by the SHCP. In the base scenario, main reference scenario, it is expected an AAGR of 2.9% for the next 15 years 32 (see Figure 3.3). FIGURE GDP S FORECASTS, (Annual Variation) 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% GDP High Scenario GDP Base Scenario GDP Low Scenario Source: Elaborated by SENER with information from INEGI and Oxford Economics 30 For further detail, see: 31 Article 18 of the LIE. 32 The GDP s forecasts are estimated annually in the last quarter of the previous year, so 2016 is estimated for this exercise. 63

65 Population In 2016, Mexico recorded a population of million people. For the planning period, , it is expected an AAGR of 0.8%, reaching million people by the end of the period (see Figure 3.4). FIGURE POPULATION GROWTH FORECAST IN MEXICO, (Million people) 140 AAGR 0.8% Source: Elaborated by SENER with information from INEGI. Exchange rate By the end of 2016, the exchange rate was of 18.3 pesos (MXN) per dollars (USD), and it is expected that between 2017 and 2031 it will have an AAGR of 1.1%, reaching 21.8 MXN per USD. This variable mostly impacts the forecasts on the international fuels prices for the electricity sector, making it necessary to analyze their trend as shown in the following figure: FIGURE CURRENCY EXCHANGE FORECAST, (Dollar-Pesos) Source: Elaborated by SENER with information from INEGI and Oxford Economics Fuels Prices Forecasts The forecasts of fuels prices are another essential variable for estimating the electricity consumption and demand and are annually adjusted based on the projections of international and national reference prices. For this planning exercise , three scenarios were devised for fuels forecasts, as shown in the following figure: 64

66 FIGURE SCENARIOS OF FUELS PRICES FORECASTS, (Base Index 2016 = 100) 1/ AAGR: Average Annual Growth Rate with base year Source: Elaborated by SENER, with information from PRODESEN Clean Energy Targets and Potentials of Renewable Energies The LTE is intended to gradually increase the share of clean energies within the electric industry in order to comply with the goals established in matters of clean generation and emissions reduction. To achieve the target of a clean-energies minimum share of 25% in 2018, 30% in 2021, and 35% in 2024, it should be considered the potential of the existing renewable sources to maximize their use and develop the most feasible sources technically and economically for the future SEN s planning (see Figure 3.7). FIGURE TRAJECTORY OF THE CLEAN ENERGIES TARGET, (Percentage) % 37.7% 37.3% 36.8% 36.4% 35.9% 35% 35.0% 33.3% 32% 30.0% 28.3% 27% 25.0% 22.7% Source: Elaborated by SENER with information from LTE. 65

67 The potentials of renewable energies allow investors to locate the zones where clean-generation projects can be developed, and which will contribute the diversification of the energy matrix, as described below: CHART CLEAN-ENERGIES POTENTIAL Technology Available Power (MW) Bioenergy 1,500 Efficient Cogeneration 7,045 Wind 12,000 Geothermal 1,932 Hydroelectric 8,763 Solar Photovoltaic 8,000 Type Referred to the economically competitive potential. Referred to the domestic potential in an Medium Scenario. Conservative reference of the domestic potential. According to the growing expectations of geothermal. According to the probable potential and a plant factor of 30%. According to the tecnically feasible potential. Source Initiative for the Development of Renewable Energies in Mexico: Biomass (SENER, 2012). uctura/estudios-energias-renewables.html Study about Cogeneration in the Industrial Sector in Mexico (SENER, 2009). php Initiative for the Development of Renewable Energies in Mexico: Wind (SENER, 2012). uctura/estudios-energias-renewables.html Mexican Wind Potential: Opportunities and Challenges in the New Electricity Sector (Asociación Mexicana de Energía Wind - AMDEE - y PWc; 2014). Renewable Energies Outlook vas-del-sector-energetico Renewable Energies Outlook vas-del-sector-energetico Initiative for the Development of Renewable Energies in Mexico: Solar PV (SENER, 2012). uctura/estudios-energias-renewables.html Renewable Energies Outlook vas-del-sector-energetico Source: Elaborated by SENER with information from PRODESEN

68 3.2. Expected Behavior of Electricity Demand and Consumption The CENACE is responsible 33 for estimating the electricity demand and consumption of the load centers for the SEN s dispatch and operation. Thereby, the long-term forecasts of the country s economy and the longterm electricity domestic are taken into account to determine the long-term trajectories of the electricity demand and consumption 34. Knowing the future behavior of the long-term electricity demand and consumption in the national territory, optimize the use of the existing installed capacity and elaborate, strategically, new projects which should ensure electricity supply and maintain the SEN s stability in an efficient and sustainable way Maximum Demand The maximum gross demand is the power that should be generated or imported to meet the users needs, transmission losses, and own-uses of the generating plants. Based on the demand estimates, it is projected an AAGR of 3.0% for the planning scenario in the next 15 years (see Figure 3.8). FIGURE ANNUAL GROWTH EXPECTED OF THE SIN S MAXIMUM DEMAND, (Percentage) 4.2 Scenario Low Planning High AAGR (%) Source: Elaborated by SENER with information from PRODESEN The regions of Baja California Sur and Peninsular record higher average annual growth for the projection period , with 3.9% and 3.8%, as displayed in the following figure: 33 Article Thirteenth Transitory of the LIE. 34 Electricity demand is defined as the instant request to an electric power system normally expressed in MW or kw. Electricity consumption is the electric power used by all or a part of a utility during a defined interval. 67

69 FIGURE AVERAGE ANNUAL GROWTH OF THE ELECTRICITY MAXIMUM DEMAND BY CONTROL REGION (Percentage) 2.8% 7 3.9% 8 3.3% 4 3.0% 5 3.1% National Interconnected System Historical Behavior % Expected Growth % 6 3.3% 1 Central 2 Eastern 3 Western 4 Northwest 5 North 6 Northeast 7 Baja California 8 Baja California Sur 3 2.0% 1 2.8% 2 3.8% 9 Source: Elaborated by SENER with information from PRODESEN By 2017, the SIN has a forecast of 42,243 MWh/h, and it is expected to reach 63,318 MWh/h by the end of As displayed in Table 3.1., the Western and Northeast regions record the highest values expected for the SIN s integrated maximum demand. The integrated demand is the summation of all the demands and it is recorded in the highest peaks, when, for example, due to the effects of the summer high temperatures, some northern states require more energy for air conditioning equipment. Another case of high demands happens in the center of the country by the constant use of lighting and heating in households, or by the intense industrial activity. Peak demand is the largest instance of power usage in a given time frame to respond to the conditions of the integrated maximum demand, and it is expected to happen at 17:00 hours in summer, and at 23:00 hours in winter during the period (see Table 3.2). 68

70 TABLE FORECASTS OF THE INTEGRATED MAXIMUM DEMAND BY CONTROL REGION, PLANNING SCENARIO (MWh/h) Region Central 8,666 8,840 9,029 9,229 9,415 9,604 9,797 9,999 10,209 10,419 10,639 10,868 11,100 11,336 11,575 Eastern 7,320 7,529 7,741 7,966 8,190 8,427 8,670 8,928 9,182 9,430 9,680 9,941 10,212 10,485 10,771 Western 9,632 9,941 10,272 10,622 10,984 11,364 11,755 12,151 12,565 12,984 13,410 13,833 14,264 14,702 15,153 Northwest 4,520 4,699 4,866 5,036 5,199 5,364 5,541 5,728 5,903 6,090 6,273 6,461 6,658 6,858 7,061 North 4,405 4,541 4,690 4,841 4,990 5,145 5,296 5,452 5,604 5,765 5,925 6,093 6,264 6,429 6,597 Northeast 9,023 9,310 9,615 9,927 10,250 10,581 10,920 11,263 11,613 11,970 12,339 12,707 13,091 13,475 13,860 Peninsular 1,954 2,015 2,084 2,165 2,250 2,336 2,425 2,518 2,613 2,714 2,819 2,929 3,045 3,165 3,289 Baja California 2,702 2,787 2,868 2,951 3,036 3,125 3,216 3,309 3,401 3,495 3,590 3,692 3,787 3,888 3,981 Baja California Sur Mulege SIN 42,243 43,499 44,816 46,165 47,573 49,000 50,464 51,944 53,500 55,056 56,643 58,225 59,923 61,603 63,318 Source: Elaborated by SENER with information from CENACE. Year TABLE SIN S INTEGRATED AND PEAK DEMANDS BY STUDIED SCENARIO, (MWh/h) Summer Maximum Summer Night Winter Minimum Winter Average Winter Average Summer Maximum (17:00 hrs) Maximum (23:00 (04:00 hrs) (14:00 hrs) 1/ (14:00 hrs) 2/ (20:00 hrs) Integrated Instant Integrated Instant Integrated Instant Integrated Instant Integrated Instant Integrated Instant ,243 43,591 40,466 41,483 27,133 27,459 33,910 34,740 27,746 28,423 35,915 36, ,499 44,812 41,666 42,712 27,917 28,253 34,893 35,748 28,544 29,242 36,949 37, ,816 46,233 42,923 44,001 28,753 29,099 35,936 36,818 29,393 30,113 38,043 38, ,165 47,626 44,198 45,307 29,468 29,824 36,937 37,845 30,132 30,871 39,124 40, ,573 49,080 45,555 46,698 30,479 30,848 38,110 39,049 31,150 31,916 40,331 41, ,946 53,556 49,850 51,082 33,069 33,478 41,181 42,185 33,574 34,391 43,554 44, ,500 55,160 51,339 52,606 34,046 34,468 42,401 43,437 34,562 35,404 44,833 45, ,071 56,782 52,828 54,132 34,873 35,306 43,553 44,619 35,408 36,273 46,075 47, ,726 58,495 54,427 55,770 36,051 36,500 44,922 46,023 36,593 37,488 47,487 48, ,381 60,203 56,008 57,390 37,092 37,554 46,222 47,355 37,646 38,567 48,850 50, ,069 61,944 57,620 59,041 38,157 38,633 47,550 48,718 38,723 39,672 50,242 51, ,752 62,471 59,214 60,675 39,049 39,538 48,793 49,992 39,638 40,611 51,581 52, ,555 65,542 60,954 62,457 40,325 40,830 50,275 51,512 40,920 41,925 53,109 54, ,343 67,387 62,665 64,210 41,443 41,963 51,675 52,948 42,053 43,086 54,581 55, ,160 69,261 64,405 65,992 42,573 43,108 53,095 54,405 43,200 44,263 56,076 57,435 Source: Elaborated by SENER with information from CENACE Gross Consumption The forecasts on electricity consumption are obtained by aggregating variables that determine such consumption, just as: hourly demands, national consumption by control region, electricity savings, reduction of electricity losses, national and regional electricity balance, diagnoses of real operation by control region, and the information of the market development (distribution). The projection of the electricity consumption by control regions and of the SEN is elaborated by using time-series smoothing methods and linear regression models For further detail, see Methodology for elaborating the electricity forecast in the PRODESEN , p

71 The planning scenario in the SEN expects that the electricity gross consumption displays an average annual growth of 2.9% during the projection period (see Figure 3.10), going from GWh in 2017 to 457,561 GWh, equivalent to a growth of approximately 151,331 GWh. FIGURE ANNUAL GROWTH EXPECTED FOR THE SEN S GROSS CONSUMPTION, (Percentage) Scenario Low Planning High AAGR (%) Source: Elaborated by SENER with information from CENACE. The regions of Baja California Sur and Peninsular display the forecasts with the highest growth, 3.8% each, while the Central region displays the lowest growth with 2.1%, as shown in Figure 3.11 and Table

72 FIGURE AVERAGE ANNUAL GROWTH OF THE ELECTRICITY GROSS CONSUMPTION BY CONTROL REGION (Percentage) 2.8% 7 National Interconnected System 3.8% 8 3.2% 4 2.9% 5 3.1% Historical Behavior % Expected Growth % 6 3.2% 3 3.8% 1 Central 2 Eastern 3 Western 4 Northwest 5 North 6 Northeast 7 Baja California 8 Baja California Sur 2.1% 1 2.7% 2 9 Source: Elaborated by SENER with information from PRODESEN TABLE FORECASTS OF THE GROSS CONSUMPTION BY CONTROL REGION, (GWh) Region Central 60,093 61,301 62,605 63,971 65,255 66,563 67,897 69,268 70,720 72,171 73,697 75,252 76,849 78,487 80,139 Eastern 48,791 50,111 51,521 52,954 54,402 55,933 57,505 59,132 60,739 62,353 64,003 65,682 67,414 69,163 70,951 Western 65,125 67,219 69,457 71,812 74,256 76,831 79,468 82,137 84,934 87,768 90,651 93,495 96,410 99, ,416 Northwest 23,959 24,910 25,797 26,692 27,558 28,430 29,367 30,359 31,282 32,272 33,244 34,238 35,278 36,335 37,411 North 25,335 26,119 26,975 27,829 28,696 29,586 30,455 31,331 32,216 33,138 34,059 35,004 35,968 36,918 37,884 Northeast 53,771 55,483 57,300 59,129 61,064 63,041 65,061 67,069 69,166 71,296 73,493 75,723 77,968 80,260 82,550 Peninsular 12,573 12,969 13,415 13,931 14,477 15,028 15,600 16,199 16,809 17,461 18,133 18,840 19,589 20,358 21,155 Baja California Baja California Sur 13,797 14,228 14,646 15,071 15,504 15,957 16,422 16,899 17,379 17,859 18,347 18,856 19,352 19,869 20,346 2,625 2,716 2,816 2,920 3,035 3,157 3,281 3,410 3,543 3,681 3,823 3,971 4,124 4,281 4,438 Mulegé SIN 289, , , , , , , , , , , , , , ,507 SEN 306, , , , , , , , , , , , , , ,561 Source: Elaborated by SENER with information from CENACE. By share percentage within the electricity gross consumption, in 2016 as well as in 2031, the Western region will concentrate the largest share, and Mulege, the smallest (see Figure 3.12). 71

73 FIGURE COMPARATIVE OF THE SHARE IN THE GROSS CONSUMPTION BETWEEN 2016 AND 2031 OF THE DIFFERENT CONTROL REGIONS (Percentage) Source: Elaborated by SENER with information from CENACE. 72

74 3.3. Expansion of the National Electric System In order to meet the growing electric power demands and comply with the clean energy targets 36, it is necessary to carry out an energy policy that, within the current constitutional framework, ensures the competitive, sufficient, high-quality, economically feasible, and environmentally sustainable supply for the society development. The indicative planning presented in this document fosters the diversification of the energy matrix to move forward to a larger use of clean energies, increasing the infrastructure needed to achieve this goal in a strategical manner. The next section identifies the country needs in terms of new generation capacity to be installed, as well as the requirements of expansion of the transmission and distribution grids which satisfy the potential of available and future generation Electricity Generation Capacity The SEN s planning uses the PIIRCE as reference; thus, it considers new generation capacity by type of technology and geographic location of the new power plants, as well as the units or power plants notified by the generators to be decommissioned. Through an optimization model aimed to solve the expansion of generation capacity, the PIIRCE provides information about the type, size, and location of the power plants to be installed and their startup date, in addition to the transmission expansion that will ensure the integration of the new electricity generation at a minimum expansion cost for the system 37. One of the considerations for elaborating a 15-year planning of the SEN is taking into account the estimated time to execute the projects and their lifespan. This is due to the very nature of the electricity sector, where the projects have long maturing periods, and the decisions on investments for works of the SEN s expansion are taken years ahead. Since the call for competing proposals for constructing a new generating power plant, up to its commercial startup, four to seven years pass; while the transmission projects take from three to five years prior to their startup date. Additionally, the minimum time required to formulate, evaluate, and authorize projects is of one year. Additions of Electricity Generation Capacity It is estimated that between 2017 and 2031, 55,840 MW of electricity generation capacity will be added, from which 37.4% will correspond to conventional technologies (20,876 MW), and 62.6% to clean technologies (34,964 MW). It is worth mentioning that, from the total capacity additions, the two technologies with the largest contributions to the system are: combined cycle plants with 33.9%, and wind power plants with 24.2%, as shown below in Figure Article 13 of the LIE. 37 For further detail see Long-Term Generation Planning Methodology, PRODESEN , Section

75 FIGURE SHARE IN THE ADDITIONAL CAPACITY BY TYPE OF TECHNOLOGY, (Percentage) Hydroelectric 3.0% Nuclear 7.3% Geothermal 2.3% Bioenergy 2.4% Efficient Cogeneration 9.6% Combined Cycle 33.9% Solar Photovoltaic and Thermosolar 13.8% Wind 24.2% TC, CI, TG, Coal Fired 3.4% Source: Elaborated by SENER with information from PRODESEN FIGURE BEHAVIOR OF THE CAPACITY ADDITIONS BY TECHNOLOGY, (MW) 7,761 5,885 5,492 4,011 4,176 4,577 2,677 1,770 1,251 3,078 3,399 3,869 2,696 2,350 2, Nuclear Efficient Cogeneration Bioenergy Thermosolar Solar Photovoltaic Geothermal Wind Hydroelectric Import Internal Combustion Gas Turbine Coal Fired Thermal Conventional Combined Cycle Source: Elaborated by SENER with information from PRODESEN Regarding the projects under new modalities, 22.7% are generic projects, 26.1% does not have a permit to generate electricity, 19.4% are projects with permits under the LIE, and the remaining 27% corresponds to capacity additions through generation permits under the Public Service Law of the Electricity Sector (LSPEE, for its Spanish acronym), modalities previously identified as self-supply, cogeneration, export, small production, and IPP (see Figure 3.15). 74

76 FIGURE SHARE IN ADDITIONAL CAPACITY BY MODALITY, (Percentage) Cogeneration 3.9% Export 0.5% Small Production 5.3% IPP 4.9% Generic 27.5% Self-Supply 12.3% Generation 19.4% With no electricitygeneration permit 26.1% Source: Elaborated by SENER with information from PRODESEN From the total additional capacity by modality and project as shown in Chart 3.2, it can be observed a large share of generic projects with clean technologies, 10,664 MW, equivalent to 19.1%. As for conventionaltechnologies projects, the ones without a generation permit, they concentrate 12.65% of the total future capacity to be installed (see Chart 3.2). CHART ADDITIONAL CAPACITY BY MODALITY AND TECHNOLOGY, (MW) Concept Self-Supply Cogeneration Export Generation Generic Source: Elaborated by SENER with information from PRODESEN Small Production IPP With no electricitygeneration permit Clean 5,965 2, ,544 10,664 2, ,527 34,964 Bioenergy , ,348 Wind 3, ,542 2, ,870 13,498 Geothermal , ,298 Hydroelectric ,681 Nuclear 4,081 4,081 Solar Photovoltaic 1,176 2, ,398 1,358 7,685 Thermosolar Efficient Cogeneration 2, ,055 5,359 Conventional ,277 4, ,740 7,043 20,876 Coal Fired Combined Cycle 470 5,136 3, ,740 6,681 18,950 Internal Combustion Fluidized Bed Thermal Conventional Gas Turbine Total 6,895 2, ,821 15,377 2,942 2,740 14,570 55,840 Total 75

77 By status of each electricity generation project, 36.3% is in construction or about to start up; 36.1% in paperwork, authorization, or allocation; 27.5% corresponds to new projects to be developed; and 0.1% have already began operating or are in testing phase (see Chart 3.3). CHART ADDITIONAL CAPACITY BY STATUS OF THE PROJECT AND TECHNOLOGY, (MW) Technology In construction, about to begin works Allocated, authorized, in process Source: Elaborated by SENER with information from PRODESEN To be developed In opertion, Under testing phase Total Clean 11,989 12,254 10, ,964 Bioenergy , ,348 Wind 5,313 5,457 2, ,498 Geothermal , ,298 Hydroelectric 71 1, ,681 Nuclear 0 0 4, ,081 Solar Photovoltaic 5,044 2, ,685 Thermosolar Efficient Cogeneration 1,296 3, ,359 Conventional 8,286 7,877 4, ,876 Coal Fired Combined Cycle 7,336 7,752 3, ,950 Internal Combustion Fluidized Bed Thermal Conventional Gas Turbine Total 20,275 20,131 15, ,840 According to estimates, the Northeast region concentrates 25.6% of the capacity additions, equivalent to 14,310 MW, being Tamaulipas the most benefitted state with 6,559 MW of new capacity to be installed. The Eastern region is second with 23.8% (13,273 MW), standing out Veracruz with 5,808 MW, equivalent to 10.4% of the total, and with the largest volume of capacity additions with clean technologies such as bioenergy, efficient cogeneration, wind power, hydropower, nuclear, and solar. The Western and North regions will concentrate 12.7% and 12.1%, respectively, while the Northeast will concentrate 9.7%. As for the Peninsular, Baja California, Central, and Baja California Sur regions will jointly add 16.1% of the new capacity (see Figure 3.16 and Table 3.4). 76

78 FIGURE CAPACITY ADDITIONS BY CONTROL REGION, (MW) 3, , , ,310.5 Additional Capacity ,840 MW 6 7, Central 2 Eastern 3 Western 4 Northwest 5 North 6 Northeast 7 Baja California 8 Baja California Sur 9 Peninsular 3 1 1, , , Source: Elaborated by SENER with information from PRODESEN

79 TABLE BEHAVIOR OF THE CAPACITY ADDITIONS BY FEDERAL ENTITY, (MW) Federal Entity Total Aguascalientes Baja California , ,695 Baja California Sur Campeche Chiapas Chihuahua , ,336 Mexico City Coahuila ,518 Durango ,676 Estado de México ,181 Guanajuato Guerrero Hidalgo Jalisco ,355 Michoacán Morelos Nayarit Nuevo León , ,377 Oaxaca ,361 Puebla Querétaro Quintana Roo San Luis Potosí , ,182 Sinaloa - - 1, ,591 Sonora ,204 Tabasco ,250 Tamaulipas ,360 6,559 Veracruz , ,720 1,360-5,808 Yucatán ,237 Zacatecas Total 2,677 7,761 5,885 4,011 1,770 1,251 3,078 4,176 3,399 3,869 2,696 5,492 4,577 2,350 2,849 55,840 Source: Elaborated by SENER with information from PRODESEN

80 Electricity Generation Capacity Withdrawal The PIIRCE only considers the scheduled decommissioning of CFE s power stations based on the operating costs and years of service of the generating units. To comply with the program, it is important to consider a series of conditions such as the startup in the programmed date of the power stations which will replace the ones decommissioned; the reduction of the prolonged failures; preservation of the SEN s reliability; surety of the fuels supply and the growth forecasted of the electricity demand. By the end of the prospective period, it is estimated a generation capacity of 15,814 MW related to the decommissioning of 137 units, mostly of conventional technologies with approximately 99.6% of the total (see Figure 3.17). FIGURE ELECTRICITY-GENERATION CAPACITY WITHDRAWAL BY TECHNOLOGY, (MW) Internal Combustion 0.4% Geothermal 0.4% Gas Turbine 8.4% Coal Fired 12.2% Combined Cycle 9.6% Thermal Conventional 69.1% Source: Elaborated by SENER with information from PRODESEN Expected behavior of the electricity generation capacity As it was shown in the previous chapter, by the end of 2016, the SEN s installed capacity reached 73,510 MW. Since it is scheduled a capacity withdrawal of 15,814 MW, and an addition of 55,840 MW, by 2031 the SEN s electricity generation is expected to be of 113,269 MW, from which 49.6% will come from clean technologies and 50.4% from conventional technologies (see Figure 3.18). The 71.2% to 50.4% decrease in the conventional technologies share is mainly due to the withdrawal of 55 units of conventional thermal power plants (10,921 MW); 53 gas-turbine power plants with a total capacity of 1,323 MW; 13 combined-cycle units (2,043 MW); 5 units of internal-combustion with a 66.6 MW capacity; and 4 units of coal-fired technology with a capacity withdrawal of 1,400 MW. 79

81 FIGURE COMPARATIVE OF THE INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, 2016 AND 2031 (Percentage) Clean 28.8% Conventional 71.2% Clean 49.6% Conventional 50.4% Source: Elaborated by SENER with information from PRODESEN Clean technologies are expected to display a meaningful growth, mainly from wind-power plants, which will concentrate 15.2% of the total generation capacity by 2031, seconded by hydropower plants with 12.6%, and solar power with 6.9%, as shown in Figure 3.19 and Table 3.5. FIGURE ELECTRICITY-GENERATION INSTALLED CAPACITY BY TECHNOLOGIES 2031 (Percentage) Geothermal 1.89% Bioenergy 1.98% Gas Turbine 3.43% Coal Fired 3.63% Nuclear 5.02% Internal Combustion 1.61% Thermal Conventional 1.78% Fluidized Bed 0.92% KERS 0.01% Thermosolar 0.01% Efficient Cogeneration 6.00% Combined Cycle 39.01% Solar Photovoltaic 6.91% Hydroelectric 12.60% Wind 15.21% Source: Elaborated by SENER with information from PRODESEN

82 TABLE BEHAVIOR OF THE INSTALLED CAPACITY BY TYPE OF TECHNOLOGY, (MW) Technology Conventional 51,798 53,847 52,967 51,795 51,295 50,150 50,127 51,278 52,387 54,486 54,684 56,430 56,921 56,921 57,043 Combined Cycle 28,094 31,498 33,697 34,714 34,404 34,173 35,400 37,432 38,202 40,165 40,704 43,107 44,181 44,181 44,181 Thermal Conventional 12,088 10,722 7,748 5,559 5,239 4,371 3,313 2,353 2,353 2,353 2,012 2,012 2,012 2,012 2,012 Coal Fired 5,378 5,378 5,507 5,507 5,507 5,507 5,507 5,507 5,507 5,507 5,507 4,807 4,107 4,107 4,107 Gas Turbine 4,201 4,201 3,967 3,967 3,637 3,623 3,430 3,541 3,880 3,880 3,880 3,880 3,880 3,880 3,880 Internal Combustion 1,456 1,467 1,467 1,467 1,467 1,436 1,436 1,404 1,404 1,541 1,541 1,583 1,701 1,701 1,823 Fluidized Bed ,041 1,041 1,041 1,041 1,041 1,041 1,041 1,041 1,041 1,041 1,041 Clean 22,917 27,246 30,425 32,822 33,982 35,139 36,989 39,022 41,313 43,082 45,239 47,763 51,149 53,499 56,225 Renewable 18,406 21,985 25,164 27,561 28,269 29,426 30,457 31,603 33,463 34,927 36,503 37,987 39,138 40,127 41,494 Hydroelectric 12,604 12,633 12,633 12,633 12,660 12,660 13,176 13,176 13,503 13,689 13,919 14,270 14,270 14,270 14,270 Wind 4,329 5,505 6,957 8,050 8,500 9,444 9,800 10,710 11,601 12,627 13,640 14,581 15,602 16,388 17,233 Geothermal ,005 1,121 1,226 1,359 1,589 1,671 1,701 1,731 2,146 Solar Photovoltaic 539 2,903 4,630 5,965 6,170 6,332 6,462 6,582 7,119 7,239 7,341 7,451 7,551 7,725 7,830 Thermosolar Other 4,511 5,261 5,261 5,261 5,713 5,713 6,532 7,420 7,850 8,156 8,736 9,776 12,011 13,371 14,732 Nuclear 1,608 1,608 1,608 1,608 1,608 1,608 1,608 1,608 1,608 1,608 1,608 1,608 2,968 4,329 5,689 Bioenergy ,256 1,256 2,076 2,209 2,239 2,239 2,239 2,239 2,239 2,239 2,239 Efficient Cogeneration 1,940 2,690 2,690 2,690 2,842 2,842 2,842 3,596 3,996 4,302 4,882 5,922 6,797 6,797 6,797 KERS Total 74,715 81,093 83,392 84,617 85,277 85,289 87,116 90,300 93,699 97,568 99, , , , ,269 Source: Elaborated by SENER with information from PRODESEN Electric-Power Generation Based on the Expansion Program of the Electric System it is possible to simulate how each existing and future power plants will participate in generating electricity, based on fuels requirements and generation costs. Electricity Generation by Technology In 2016, electric power generation reached 319,364 GWh, from which 79.7% came from conventional technologies and 20.3% from clean technologies. By 2031, generation will increase in 43.0% reaching 456,683 GWh, from which 54.1% will come from conventional technologies, and the remaining 45.9% from clean technologies. It is important to mention that, even if the share of combined-cycle technology in the generation matrix decreases from 50.2% to 44.6%, this technology will increase 1.3% per year, going from 160,378 GWh in 2016 to 203,822 GWh in 2031, as it is the prevailing technology in the system. As for clean technologies, their share in the generation matrix will increase exponentially, 8.1% average annual in the projected period. Stand out solar and wind power, which will increase their share by growing at an AAGR of 29.3% and 12.0%, respectively, between 2017 and 2031 (see Figure 3.20 and Table 3.6). 81

83 FIGURE COMPARATIVE OF THE SHARE IN THE TOTAL GENERATION BY TECHNOLOGY, 2016 AND 2031 (GWh) Thermal Conventional 12.6% Coal Fired 10.7% Gas Turbine 3.9% Internal Combustion 1.0% Fluidized Bed 1.2% Hydroelectric 9.7% Wind 3.3% Solar 0.1% Geothermal 1.9% 2016 real 319,364 GWh Efficient Cogeneration 1.6% Nuclear 3.3% Bioenergy 0.5% Combined Cycle 50.2% Distributed Generation FIRCO 0.01% 0.02% Fluidized Bed Internal Combustion 1.6% 1.1% Gas Turbine 0.4% Coal Fired 6.3% Thermal Conventional 0.1% Hydroelectric 8.5% Wind 14.8% ,683 GWh Nuclear 8.5% Bioenergy 2.8% Efficient Cogeneration 5.1% Combined Cycle 44.6% Solar Geothermal Photovoltaic 3.3% 2.9% Source: Elaborated by SENER with information from PRODESEN

84 TABLE BEHAVIOR OF THE ELECTRIC POWER TOTAL GENERATION BY TECHNOLOGY, (GWh) Technology Conventional 232, , , , , , , , , , , , , , ,175 Combined Cycle 148, , , , , , , , , , , , , , ,822 Thermal Conventional 38,025 35,148 29,319 17,608 13,283 13,183 9,249 4, Coal Fired 34,496 34,496 35,294 35,524 35,445 35,445 35,445 35,524 35,445 35,445 35,445 33,918 30,523 28,841 28,841 Gas Turbine 4,629 2,618 2,021 3,187 2,900 2,905 2,475 1,995 2,363 2,257 2,293 2,211 1,580 1,868 1,740 Thermal Conventional 3,354 2,912 2,653 2,901 3,271 3,504 3,304 3,146 2,985 3,874 3,862 4,084 4,601 4,444 4,924 Fluidized Bed 3,825 3,825 3,825 3,825 7,218 7,218 7,218 7,228 7,218 7,218 7,218 7,228 7,218 7,218 7,218 Clean 70,649 80,766 91,420 96, , , , , , , , , , , ,509 Renewable 49,445 55,186 66,624 70,505 78,043 85,034 90,889 97, , , , , , , ,027 Hydroelectric 31,930 32,177 32,235 32,280 32,132 31,795 33,910 34,211 35,425 36,622 37,347 38,923 38,874 38,863 38,865 Wind 13,863 17,116 23,769 26,730 32,557 35,563 38,805 43,762 46,669 50,258 53,469 56,703 59,877 62,341 67,581 Geothermal 3,262 3,585 3,938 2,879 2,908 6,886 7,161 7,998 8,713 9,640 11,257 11,859 12,037 12,247 15,160 Solar Photovoltaic 368 2,283 6,658 8,592 10,422 10,766 10,988 11,237 12,151 12,355 12,530 12,762 12,900 13,209 13,396 Thermosolar Other 21,204 25,580 24,796 26,257 29,775 30,189 35,513 41,319 42,801 42,912 43,494 45,205 56,930 65,776 74,482 Nuclear 10,925 10,925 10,925 10,955 10,925 10,925 10,925 10,955 10,925 10,925 10,925 10,955 20,167 29,410 38,652 Bioenergy 3,412 3,412 3,412 3,422 5,585 5,585 11,491 12,486 12,671 12,671 12,671 12,705 12,671 12,669 12,666 Efficient Cogeneration 6,867 11,243 10,459 11,881 13,265 13,678 13,097 17,878 19,206 19,316 19,898 21,544 24,092 23,697 23,165 Total 303, , , , , , , , , , , , , , ,683 Source: Elaborated by SENER with information from PRODESEN Electricity Generation by Control Region The total generation of electric power in the SEN will increase at an AAGR of 3.0% between 2017 and The regions with the largest growths are Baja California (7.7% AAGR) and Western (6.1% AAGR), contrary to the Northwest and Central regions, which will decrease 0.6% and 0.2%, respectively, for the same period. Regarding the share by regions, by 2017 the Northeast region is expected to generate 30.6% of the total, seconded by the Eastern region with 28.0% and the Western region with 10.6% (see Figure 3.21). FIGURE BEHAVIOR AND SHARE OF ELECTRIC POWER GENERATION BY REGIONS OF THE SEN, (GWh, Percentage) Source: Elaborated by SENER with information from Undersecretariat of Electricity. 83

85 Fuels Consumption The consumption of fuels will increase by 4.8% in the period , going from 2,624,411 TJ in 2017 to 2,749,470 TJ in The fuels with the largest growth are uranium with 9.4%, and the combination of biogas, bagasse, and solid residues with 9.1% per year. Natural gas will grow at a 2.7% annual rate, reaching 1,658,158 TJ by the end of the projection period, and will become the prevailing fuel concentrating 60.3% of the total consumption for electricity generation. This increase is mainly due to the startup of 14 gas pipelines in the national network and entry pipelines currently in construction and expected to start up in ,000,000 FIGURE FUEL CONSUMPTION, (Terajoule) 2,500,000 2,000,000 1,500,000 1,000, , Other Diesel Biogas, Bagasse and Solid Residues Uranium Coal Fuel Oil Natural Gas The category Other includes residue gas and exothermic chemical reaction. Coal includes petroleum coke. Source: Elaborated by SENER with information from PRODESEN For further detail, see the Natural Gas Outlook

86 Reserve Margin According to what is established in the Reliability Policy 39 in each of the power regions valid through 2016, the values of the Reserve Margin or Efficient Planning Reserve of the exercise , comply with the stipulated criteria and are presented below: FIGURE EFFICIENT PLANNING RESERVE OF THE SIN (Percentage) 34% 35% 37% 31% 27% 24% 23% 23% 22% 23% 22% 24% 25% 24% 23% Source: Elaborated by SENER with information from PRODESEN FIGURE EFFICIENT PLANNING RESERVE IN BAJA CALIFORNIA AND BAJA CALIFORNIA SUR (Percentage) 56% 55% 51% 46% 39% 43% 31% 27% 24% 27% 23% SIBC SIBCS Source: Elaborated by SENER with information from PRODESEN

87 Expansion of the Transmission and Distribution Grid Another significant input for the SEN s planning exercise is the Program of Expansion and Modernization of the National Transmission Network (RNT), which is aimed to minimize service-provision costs, reduce congestion costs, and incentivize an efficient expansion of the generation under criteria of quality, reliability, continuity, and safety of the network. Transmission The SEN is made up of 53 transmission regions. This planning exercise takes into account the transmission capacity of the connections under conditions of maximum demand; each generating unit and its interconnection is assigned to one of the transmission regions to represent the electric system in the optimization model. Electric power plants as well as the generation project included in the PIIRCE are classified according to the control region they belong to. CHART TRANSMISSION REGIONS No. Name No. Name No. Name 1 Hermosillo 21 Güémez 41 Lerma 2 Cananea 22 Tepic 42 Mérida 3 Obregón 23 Guadalajara 43 Cancún 4 Los Mochis 24 Aguascalientes 44 Chetumal 5 Culiacán 25 San Luis Potosí 45 Cozumel 6 Mazatlán 26 Salamanca 46 Tijuana 7 Juárez 27 Manzanillo 47 Ensenada 8 Moctezuma 28 Carapan 48 Mexicali 9 Chihuahua 29 Lázaro Cárdenas 49 San Luis Río Colorado 10 Durango 30 Querétaro 50 Villa Constitución 11 Laguna 31 Central 51 La Paz 12 Río Escondido 32 Poza Rica 52 Los Cabos 13 Nuevo Laredo 33 Veracruz 53 Mulegé 14 Reynosa 34 Puebla 15 Matamoros 35 Acapulco 16 Monterrey 36 Temascal 17 Saltillo 37 Coatzacoalcos 18 Valles 38 Tabasco 19 Huasteca 39 Grijalva 20 Tamazunchale 40 Ixtepec Source: Elaborated by SENER with information from CENACE. The purpose of the proposal of expanding the RNT s infrastructure is to increase the transmission capacity between exporting zones and foster that electricity generation projects have open access to the RNT. Thus, the program s objectives are: interconnect the SIN with the isolated systems of Baja California and Baja California Sur; interconnect the RNT with North America and Central America; and serve the supply and demand of electricity needs. To achieve these objectives, the Program includes three project modalities: Programmed, Under study, and Under prospective analysis (see Charts A1-A4, Statistical Annex). 86

88 Programmed and instructed projects Programmed projects are projects and works completely evaluated and identified in the planning process, which can be programmed for their execution. Projects under study and under prospective analysis Projects under study are projects and works completely identified in the planning process and are under evaluation and study phase to determine the possible gross benefit for the SEN after its execution. Projects under prospective analysis are potential projects subjected to evaluation and planning studies to identify the works required for their execution and, afterwards, quantify their benefits for the SEN. Additional to the projects mentioned above, and to comply with the Program s objectives, the following projects are included: CHART NEW PROJECTS FOR EXPANDING THE RNT AND THE RGD Objective Type of Project Project Interconnect the SIN with the isolated systems of the Península of Baja California Interconnect the RNT with North America and Central America Serve the demand and supply of electric power Programmed Programmed Under analysis Programmed Under analysis Interconnection Baja California Sur-SIN Interconnection Baja California-Imperial Irrigation District Asynchronous Connection Back to Back Ciudad Juárez, México-El Paso, Texas Asynchronous Connection Back to Back México-Guatemala Asynchronous Connection Back to Back in Reynosa, Tamaulipas Interconnection Sureste-Peninsular El Arrajal Bank 1 Supply Oaxaca and Huatulco Increase on the Transmission Capacity between the regions Puebla, Temascal, Coatzacoalcos, Grijalva and Tabasco Other projects on transmission, transformation and compensation Transmission corridor throughout the USA border Change of voltage in the supply network of Tijuana Apps of Smart Grid in the Expansion and Modernization Program Source: Elaborated by SENER with information from PRODESEN In such way, for the period , the Program of Expansion and Modernization of the RNT will sum up to the physical resources: 410 transmission works with a total of 23,772.5 km-c; 256 transformation works with a total of 58,099 MVA; and 259 compensation works with a total of 11,930.7 MVAr (see Charts A5-A7 in the Statistical Annex). These additional physical resources are made up of project instructed by the SENER and which were revaluated, projects to be instructed by the SENEER, illustrative projects to CENACE s proposals; and bequeathed and new projects of the Distribution and Construction Deputy Directorates of the CFE. 87

89 Regarding the main projects of the Program, 35 transmission works are considered with a total of 4,554.6 km-c; 11 transformation works of approximately 7,706.3 MVA; and 10 compensation works which represent 3,146.1 MVAr. Likewise, the same program considers other projects from which six of them are transmission works (102.6 km-c); two are transformation works (200 MVA); and ten are compensation works (1,619.8 MVAr). CHART OTHER PROJECTS Name of the Project 1 Donato Guerra 2 Atlacomulco Potencia - Almoloya 3 Culiacán Poniente connection Choacahui - La Higuera 4 Compensation reactiva Inductiva en Esperanza 5 Maneadero connection Ciprés - Cyearn 6 Kilómetro 110-Tulancingo 7 Izúcar de Matamoros MVAr 8 Alvarado II y San Andrés II MVAr 9 Ayutla-Papagayo 10 Compensation reactiva Inductiva en Seri 11 Rubí connection Cárdenas - Guerrero 12 Ascensión II Banco 2 13 Frontera Comalapa MVAr 14 Esfuerzo MVAr 15 Amozoc y Acatzingo MVAr 16 Tabasco Potencia MVAr 17 El Habal Banco 2 Source: Elaborated by SENER with information from PRODESEN

90 Distribution The Program of Expansion and Modernization of the General Distribution Grids is primarily aimed to supply electricity to end users at competitive prices, under criteria of quality, reliability, continuity, safety, and sustainability, also considering the opening to the integration of the Distributed Generation. Furthermore, the Program includes five particular objectives: Meet the demand and supply of electricity in the General Distribution Grids (RGD); increase the efficiency of the electricity distribution; increase the quality, reliability, and safety in the RGDs and in the electricity supply; comply with the market requirements for the RGDs; and move forward to a Smart Electric Grid (SEG) in order to optimize the RGDs operation. To comply with these objectives, the following projects will be carried out: CHART DISTRIBUTION PROJECTS Objective Subject Project Meet the demand of current and new users Installation of service-drops and meters Satisfy the electricicty supply and demand in the RGD Increase the effiency in electricity distribution Guarantee open access to Distributed Generation Electrification of rural communities and marginal urban zones Reduce technical and non-technical losses Replacement of submarine cable of the Holbox island RGD's Capacity analysis Electric Universal Service Fund (FSUE) Reduction of Technical Losses Reduction of Non-Technical Losses Increase quality, reliability, and safety in the RGD and Electricity Supply Comply with the Electricity Market requirements for the RGD Move forward to a Smart Electric Grid Modernize and expand the RGD infrastructure Build infrastrurcture to participate in the Electricity Market Develop and incorporate systems and equipment which will enable the transition to a SEG Increase in the RGD's reliability Modernization of the distribution substations Modernization of the RGD Modernization of the Electric Grid of Av. Paseo de la Reforma Replacement of the submarine cable in Isla Mujeres Management of the Energy Balance of the RGD for the WEM RGD's Geographic Information Advanced metering infrastructure Advanced Distribution Management System Source: Elaborated by SENER with information from PRODESEN

91 4. Sensitivity Exercise Sensitivity exercises are aimed to provide a better understanding of the dynamics and trends of the Electricity Sector, as well as to deepen in the impact of volatility on some of the variables considered within the sector planning. The exercise displayed in this chapter was elaborated with the Balmorel 40 Model, in coordination with members of the Comprehensive Modeling System (SIMISE 41, for its Spanish acronym), the Technical University of Denmark, Ea Energy Analysis, and the SENER. The Balmorel model has been used before in different energy modeling exercises within the Mexican-Danish Climate Change Mitigation and Energy Program 42, along with the Directorate General of Energy Planning and Information of the SENER. The present exercise is based on the general assumptions of the Electricity Sector Planning, contained in the PRODESEN , which are in investigation phase and are not considered into the SEN s planning; thus, these are indicative exercises which might or might not be considered in the long-term planning Study of the Long-Term Impact of the Natural-Gas Prices in the Electricity Sector Mexico is undergoing a transition process for using cleaner energies in the industrial sector s production techniques and in the generation of electric power. Thereby, a series of energy policies have been implemented in Mexico to foster the use of natural gas, such as the development and expansion of the infrastructure to transport natural gas and promote its use given the benefits of its low prices in the last years. The purpose of this study is to present and evaluate the impacts derived from the uncertainty of natural-gas prices and their possible consequences in the Mexican electricity sector, including changes in capacity, electric power generation, and the expansion of the electric transmission national network, as well as their impact on the GHG Background During 2016, the natural-gas import prices through pipeline fell approximately 26.7% 43 regarding the previous year, for the European Union members, while in the United States, the export prices through pipeline decreased nearly 10.9% 44. The import prices of natural liquefied natural gas displayed a similar behavior, with a general reduction in every region, particularly in the USA (56.9%) 45. This behavior is, in part, the result of the increase in the global liquefaction capacity, especially in Australia. 40 Open-source model under ISC license: http 41 The Comprehensive Modeling System (SIMISE) contains databases and models to perform the main activities of the energy planning: macroeconomy, demand, supply, and demand-supply optimization. Includes different regions and periods of time. 42 With the participation of Ea Energy Analyses and the Technical University of Denmark

92 Figure 4.1. shows the expected behavior to 15 years of the Henry Hub natural gas prices 46, where each of the information sources variate during the first 6 years, due to the uncertainty of the prices regarding the fuel. These projections are an essential part in obtaining the probable cost for gas import in the coming years. FIGURE PROSPECTIVE PRICES OF HENRY HUB NATURAL GAS, (USD 2016 /MMBTU) World Bank EIA PRODESEN Source: Elaborated by SENER. The average price of liquefied natural gas for the USA market was of 4.71 USD/MCF 47, while the price of natural gas imported through pipeline was of 4.78 USD/MCF for Europe, which clearly shows the competitivity of the liquefied natural gas as an import source for Europe. Besides, the market of liquefied natural gas continued its globalization in 2016, with 18 countries with operating liquefaction capacity and 40 countries with regasification capacity 48. It is foreseen that the USA will contribute with 40% of the global production surplus for 2022, thanks to the growth in its natural-gas extraction industry. In other words, if 3,630 billion cubic meters were consumed in 2016, and by 2022 is expected a consumption of 4,000 billion cubic meters, the USA would have contributed with 40% of the 370 billion cubic meters. Thus, by 2022, the USA gas production will be of 890 billion cubic meters, which represents one fifth of the global production. Besides, it is expected that Marcellus, one of the largest fields in the world located in the eastern USA, will increase its production by 45% between 2016 and 2022, even with this downtrend in price 49. Importance of the utilization of NG in the Electricity Sector During the last years, Mexico has increased its NG demand, and since the domestic production of this fuel has significantly decreased, it has been necessary to resort to import, mainly from the USA through pipeline. NG imports have increased at an average annual growth of 15.1% in the last decade. In 2016, the imports level exceeded the domestic production due to a growing domestic demand of this fuel and to low prices in the USA which, regarding the extraction costs of the domestic NG, are lower (see Figure 4.2). 46 In the next years, with the startup of the new gas pipelines promoted by CFE, it will be possible to have access to the Waha basins, whose price is currently cheaper than Henry Hub s. In a later update of this study, this premise will be incorporated

93 FIGURE BEHAVIOR OF THE PRODUCTION AND IMPORT OF DRY GAS, (MMCFD) 1, , , , , , , , , , , , , , , , , , , , , , Import Domestic production Source: Natural Gas Outlook , SENER. In the last ten years, the historical domestic demand of NG has displayed an AAGR of 3.0%, recording 7,618.7 MMCFD by the end of The electricity sector is the largest consumer of this fuel, concentrating 50.9% of the total demand (3,878.5 MMCFD) by the end of 2016, as shown in the following figure. FIGURE DEMAND OF DOMESTIC NATURAL GAS BY SECTORS, (MMCFD) 8,000 7,000 6,000 5, , , , , , , , , , , ,000 4,000 3,000 2,000 1,000 2, , , , , , , , , , , Motor-Carrier Sector Services Sector Residential Sector Industrial Sector Oil Sector Electricity Sector Domestic demand Source: Elaborated by SENER. According to what is reported in the PRODESEN , by the end of 2016 Mexico had an electric power consumption of 298,792 GWh, and it were necessary 73,510 MW of installed capacity for generation to satisfy this consumption. Natural gas has a relevant share in the electricity sector, being the most used fuel in the sector, mainly for combined-cycle technology, which concentrated 37.1% (27,271 MW) of the total installed capacity in

94 Thanks to its efficiency, combined cycles have a high plant factor of nearly 85% for power plants above 300 MW. Thus, between 2006 and 2016, electricity generation by combined cycles grew 5.7% per year; in such way that by the end of the period, it concentrated 50.2% (160,378 GWh) of the total electric generation reported (319,364 GWh), (see Figure 4.4). FIGURE BEHAVIOR OF THE ELECTRIC POWER CAPACITY AND GENERATION OF COMBINED CYCLE, (MW y GWh) 30,000 25,000 20,000 15,000 10,000 5, , , CC Capacity CC Generation 180, , , , ,000 80,000 60,000 40,000 20,000 0 Source: Elaborated by SENER. Regarding pollutant emissions, NG is the fossil fuel with the lowest levels and, due to the higher efficiency of combined-cycle plants, the emissions per electricity generating unit are considerably lower than other technologies, except for NOx, as shown in the following chart. Source: PRODESEN Technology CHART POLLUTANT EMISSIONS BY FUEL (Kg/MWh) Pollutant CO 2 SO 2 NO X Particles Coal Fired ( 350 MW) Coal Fired (> 350 MW) Combined Cycle Internal Combustion ( 20 MW) Internal Combustion (> 20 MW) Fluidized Bed Thermal Conventional ( 115 MW) Thermal Conventional ( 250 MW) Thermal Conventional (> 250 MW) Gas Turbine (Diesel) Gas Turbine (gas) Methodology, Inputs, and Description of the Scenarios The influence of the NG price in the optimal planning of the electricity sector is analyzed with an exploratory approach. It describes varied scenarios which explore different futures, and the results provide knowledge about the range of possible optimal decisions in the electricity sector planning under determined conditions of 93

95 natural-gas prices 50. The objective of these exploratory scenarios is to sensitize about the uncertainty and its associated risks in the electricity sector planning, and thus foster its integration in the strategic decision making. Methodology This study was elaborating using the Balmorel Optimization Model 51, an open-source model that enables the simultaneous optimization of investments and dispatch in the electricity sector, assuming free competency in the market. Optimization in Balmorel ensures that all the domestic demand of electricity is served complying with the clean energy targets 52, minimizing the total generation costs (annualized operation and investment costs), and subjected to restrictions regarding the sources availability, such as infrastructure for transmission and the supply of NG, or the seasonal potentials and/or schedules of hydropower, wind power, or solar power generation. In Balmorel, the SEN is represented as aggregated in 53 transmission regions (Map 4.1), equivalent to the ones defined in the planning model used by the SENER to devise the PIIRCE, and also used by the CENACE for the Long-Term Auctions process. Electricity transmission within a same region is considered as limited and is restricted between the different regions due to the capacity of the lines that connect them. MAP MAP OF THE SEN S TRANSMISSION REGIONS Obregon 2 Los_Mochis 30 Lazaro_Cardenas 3 Obregon 31 Central 4 Los_Mochis 32 Poza_Rica 5 Culiacan 33 Veracruz 6 Mazatlan 34 Puebla 7 Juarez 35 Acapulco 8 Moctezuma 36 Temascal 9 Chihuahua 37 Coatzacoalcos 10 Durango 38 Tabasco 11 Laguna 39 Grijalva 12 Rio_Escondido 40 Ixtepec 13 Nuevo_Laredo 41 Campeche 14 Reynosa 42 Merida 15 Matamoros 43 Cancun 16 Monterrey 44 Chetumal 17 Saltillo 45 Cozumel 18 Valles 46 Tijuana 19 Huasteca 47 Ensenada 20 Tamazunchale 48 Mexicali 21 Guemez 49 San_Luis_Rio_Colorado 22 Tepic 50 Villa_Constitucion 23 Guadalajara 51 La_Paz 24 Aguascalientes 52 Los_Cabos 25 San_Luis_Potosi 53 Mulege 26 Salamanca 27 Manzanillo 28 Carapan 29 Queretaro Source: Elaborated by SENER with the Balmorel model and with information from PRODESEN Inputs for the planning and description of the scenarios This section describes the main inputs to elaborate the sensitivity exercise with the Balmorel optimization model. 50 All the monetary values reported in this exercise are represented in 2016 USD. 51 See Annex B Methodology. 52 See Equations 7 and 14 in the Annex B Methodology. 94

96 Electricity demand The behavior of the electricity gross demand of the SEN from 2018 to 2031 is estimated by the CENACE, considering an average annual growth of the GDP of 2.9%, and forecasting an average annual growth of the SEN s electricity gross demand of 2.9% until Electricity generation plants The database of the generation plants in Balmorel has 828 plants whose capacity, costs, and technical operating characteristics are defined in an exogenous manner, according to what is published in the PIIRCE , and taking into account the plants with the category In Operation 53 and Firms 54 defined in it, as well as the electric units or plants notified by the generators for its decommissioning. The Balmorel model contains a catalog of 20 technologies to invest in according to the result of the optimization, with defined costs and operating characteristics, and incorporating learning curves related to the investment costs defined in the PIIRCE 2017, which estimate a decrease of the investment costs of wind and solar power plants by 24% in 2031 regarding the current value, and by 5% for geothermal plants 55. The possibility of investing in a technology in a defined region, as well as the maximum capacity that could be installed, is limited to the resources availability 56 - such as the natural gas transmission and distribution infrastructure, or the existing biomass and the potentials of renewable energies generation: hydropower with and without reservoir, geothermal, wind power, and solar power. The investment in nuclear power plants is only allowed in the transmission regions of Hermosillo, Huasteca, Veracruz, and La Paz; and of fluidized bed, only in Rio Escondido, according to the power plants suggested to be optimized in the PIIRCE Wind power plants, solar power plants, and hydropower plants without reservoir have availability hourly profiles, while hydropower plants with reservoir was determined using monthly profiles. The hourly availability of the remaining technologies for electricity dispatch is represented by the plant factors considered in the PIIRCE Transmission of electricity between regions Balmorel incorporates the Program for the Expansion and Modernization of the National Transmission Grid proposed by the CENACE in 2017, including only the projects defined as programmed for its execution. The transmission capacity between the different connected regions is defined in conditions of maximum demand. Balmorel contains a catalog for investments in 57 transmission lines to connect or increase the transmission capacity between regions. The model optimizes the investments in transmission lines when the investment cost is lower than the associated cost to the congestions in the transmission of electricity between regions. Natural gas transmission and distribution network The consumption of natural gas has been restricted due to the existing infrastructure and to the Quinquennial Plan for the Expansion of the National Integrated System for Natural Gas Transportation and Storage The transmission regions have limited their NG consumption according to the existing and planned capacity of the gas pipelines. In the regions with no infrastructure for NG supply, no expansion is considered in the Quinquennial Plan, and it has not been permitted the installation of NG-fueled plants. Fuels prices 53 In Operation corresponds to the SEN s power plants which operated regularly or began operations during 2016, according to the information reported by the CFE, CENACE, and the CRE. 54 Firm corresponds to generation projects not subjected to the optimization of the planning model, and to be installed in the date indicated by the generators, as long as they comply with the criteria specified in the PIIRCE See Chart A.8 in Annex A Statistics. 56 See Equations 11 and 12 of the Annex B Methodology. 95

97 The inputs of the fuels prices considering regional differences (see Map 4.2) are defined in the PIIRCE 2017 and are adopted for the Balmorel model 57. Map 4.2 shows how, according to the 2031 projections of NG price, this will be higher in the regions far away from the NG injection points 58, such as the southwestern coast and the Yucatan peninsula, due to a higher cost associated to transportation and distribution. On the contrary, it is expected that transmission regions located closer to the NG injection points, whether imports or domestic production, will have lower NG prices. MAP GEOGRAPHIC DISTRIBUTION OF NG PRICES IN 2031 (USD 2016/GJ) Precio Gas Natural (USD/GJ) Source: Elaborated by SENER, with data from Balmorel. Scenarios Description It has been defined four scenarios with different NG prices and whose variation ranges were determined according to the deviations in the different projections and considering the historical fluctuations of its price. Base: The NG prices considered are defined in the PRODESEN fuels prices database 59. GN_0.5: NG prices in all the regions defined in Map 4.1; during the period these will increase 0.5 USD/GJ regarding the values in the Base scenario. GN_01: NG prices in all the regions defined in Map 4.1; during the period these will increase 1 USD/GJ regarding the values in the Base scenario. 57 See Figure A.1. in the Statistical Annex

98 GN_02: NG prices in all the regions defined in Map 4.1; during the period these will increase 2 USD/GJ regarding the values in the Base scenario Analysis of the Results The following sections describe the impact of the different NG-prices scenarios on the SEN s planning optimization and dispatch in Mexico, according to the results obtained with the Balmorel optimization model. Investments and capacity expansion In the Base scenario (see Figure 4.5), during the first years where the addition of new electricity generation capacity is allowed (starting 2021), investments go to the zone of Baja California Sur for gas turbines fueled by diesel, fuel-oil plants, solar photovoltaic plants, and wind-power plants. In the zone, today s electricity price is the highest in the country, besides the occurrence of critical situations to meet the total demand required. Likewise, there will be additions from solar photovoltaic plants in the zone of Quintana Roo, whose average annual prices are 30% above the national average and also has a scarce installed capacity. In the rest of the SEN, the current installed capacity and the planned installed capacity covers the electricity demand. There are investments in geothermal and cogeneration plants, since their annualized investment costs and the operation costs imply to the SEN less expenses in electricity generation, and less heat expense in industrial processes, besides contributing to achieve the clean energy targets. Since 2022, there have been investments in hydropower plants without reservoir, since they also represent less costs for electricity generation. By 2021, there will be capacity additions of wind power plants in the rest of the SEN and hydropower with reservoir; and by 2025, in combined cycles. The latter, because from the economic point of view, these technologies meet efficiently a larger demand that is currently facing a decrease in its generation capacity (mainly due to decommissioning) and, at the same time, ensure the compliance with the clean-energies targets. By 2030 and 2031, it can be observed an increase in the accumulated capacity derived from the results of the learning curves where investment costs for wind power and solar power technologies decrease, favoring their investment from those years on. 97

99 FIGURE EXPANSION OF ACCUMULATED CAPACITY IN ELECTRICITY GENERATION PLANTS (BASE SCENARIO) (MW) Geothermal Biomass Hydroelectric Solar Wind Nuclear Cogeneration Fluidized Bed Internal Combustion Gas Turbine Combined Cycle Source: Elaborated by SENER. For the GN_0.5 scenario (with a NG price in each region of 0.5 USD/GJ above the Base scenario), Figure 4.6 shows larger investments in wind power plants by 2023, and smaller investments in combined cycle plants. By 2031, wind-power installed capacity is 48% above the Base scenario, and combined cycle capacity, 6% below. FIGURE DIFFERENCES BETWEEN GN_0.5 SCENARIO AND BASE SCENARIO IN INSTALLED CAPACITY FOR ELECTRICITY GENERATION (MW) Differences in Electricity Generation Capacity regarding the Base Scenario (MW) Biomass Hydroelectric Solar Wind Nuclear Cogeneration Fluidized Bed Internal Combustion Gas Turbine Combined Cycle Source: Elaborated by SENER. In the GN_1 scenario, investments in wind power plants begin in 2022 because, even if there is enough installed capacity to meet the demand, electricity generation using NG can be more expensive than investing in wind turbines in zones with a high potential just as transmitting electricity to zones with high NG prices. In this scenario, by 2031, the installed capacity of wind power plants is 92% more than in the Base scenario, and combined cycle, 12% less. 98

100 In the GN_2 scenario, capacity additions in wind power plants happen until 2021, just as in the case of GN_1 scenario, due to a lower generation cost. By 2031, wind-power installed capacity is foreseen 132% above the Base scenario. Likewise, starting 2021, a larger capacity will be added from solar plants, estimated 13% more than in the Base scenario. In the GN_2 scenario, there are investments in fluidized bed and nuclear-power capacity, which do not happen in the Base scenario. Installed capacity in combined-cycle plants decrease 21% regarding the Base scenario. The results from Figure 4.6 show a decrease in investments in efficient-cogeneration technologies for scenarios of NG price variation, reaching a decrease of 11% of installed capacity (in terms of electric power) in the GN_2 scenario. This decrease in capacity, relatively small, proves that cogeneration is an efficient technology for providing electricity and heat for industrial processes in an optimal manner; mostly if compared to their separated generation and despite the uncertainty of NG prices which could impact investments in zones with access to cheaper electricity. Even if the variation of the NG prices has an impact on the optimal capacity of combined-cycle power plants, the model is still investing in this technology for the three scenarios. The latter, because there are transmission regions located far away from zones with a high potential of renewable energies, such as wind power, hydropower, or solar power; and because combined-cycle power plants play a significant role in ensuring the system s stability in the face of electricity generation fluctuations, which are describe in detail in the sections below. Electric Power Generation and Fuel Consumption Figure 4.7 shows that by 2021, when capacity additions are allowed by the optimization model, electricity generation from cogeneration and geothermal power plants have a considerable increase, while combinedcycle generation decreases 10% compared to Starting 2022, as shown in the figure below, the production from hydropower plants increases, just as wind power plants by By 2031, electricity generation through combined cycles is 16% higher compared to 2018 and taking into account the assumptions described in the previous section. FIGURE ELECTRICITY GENERATION IN THE BASE SCENARIO (GWh) Source: Elaborated by SENER. Because the system is not able to react to a price increase due to the existing generation capacity and to the time required to construct new plants with alternative technologies, the electricity generated by combined cycles regarding 2018, increases in the scenarios of NG price variation during the first years until 2020, as shown in Figure

101 In the NG price-variation scenarios, the consumption of natural gas is lower than in the Base scenario, due to the increase in coal-fired generation. NG supply in optimal conditions and with no disruptive element that affects its availability/supply, the use of thermal plants burning fuel oil is marginal, due to its lesser efficiency and higher cost, which is not favored by the analyzed increase in NG prices. It can be observed that in the three scenarios the renewable energies generation has a considerable increase until 2031, resulting thus cost competitive if compared with combined-cycle plants with higher variable operating costs due to the increase in NG prices. FIGURE ELECTRICITY GENERATION IN THE SCENARIOS OF NG PRICE VARIATION (GWh) Source: Elaborated by SENER. In the three scenarios of NG price variation, electricity generation by combined-cycle plants decreases in 2031 regarding 2018, decreasing thus NG consumption in the system up to a 44% in GN_2 scenario compared to the Base scenario (see Figure 4.9). However, in the GN_0.5 scenario, the decrease in NG consumption is lower than 10% up to 2028, when there are investments in more alternative capacity, as shown in Figure 4.6. On the other hand, in the GN_1 scenario, and given the huge increase in the NG price, investments in renewable energies come earlier and are larger than the ones in the GN_0.5 scenario. In the GN_2 scenario, the increase in NG price is high enough as to make the system to decrease its consumption, mostly after 2021 when it will begin investing in new generation. 100

102 FIGURE DECREASE IN THE NG CONSUMPTION REGARDING THE BASE SCENARIO (Percentage) 50% GN_0.5 GN_1 GN_2 40% 30% 20% 10% 0% Source: Elaborated by SENER. As shown in Figure 4.8, combined-cycles generation in the GN_2 scenario in 2031 is 52% less than in the Base scenario. Nonetheless, the total installed capacity in this period is only 21% less (see Figure 4.5 and 4.6). Even if combined-cycle plants work less time per year in accordance with the increases in NG prices, they provide flexibility to the SEN for answering in a quick and efficient manner to electricity fluctuations, ensuring the strength of the electricity sector and a better integration of renewable energies, as indicated in Figure 4.10 where it can be observed a decrease in the capacity factor 60 of combined-cycle plants. FIGURE BEHAVIOR OF THE CAPACITY FACTORS OF COMBINED-CYCLE PLANTS 61 (Percentage) Base GN_0.5 GN_1 GN_2 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Elaborated by SENER. 60 The capacity factor of a plant is calculated as que quotient between the power generated by the plant during one whole year, and the energy generated if it had been working at full load during that period, according to the nominal power values. 61 Figure 4.10 represents the weighted average value of every power plant installed in the country. 101

103 Expansion of the Transmission Grid Higher NG prices decrease its consumption and favor investments in renewable energies; however, not every region in the country have optimal potentials for investing in wind, solar, or hydropower technologies. To make sure that all the SEN can benefit from generating electricity at a low cost despite the fuels prices fluctuation, as well as to ensure the system s stability with the integration of variable energies, it is necessary to expand the electricity transmission grid, as shown in Figure Without a robust transmission grid, it is not possible to integrate large amounts of fluctuating energies in the energy matrix, and only sub-optimal solutions at region level could be achieved, instead of optimal solutions at national level. FIGURE OPTIMIZED EXPANSION OF THE CAPACITY OF THE ELECTRICITY TRANSMISSION LINES (MW) 25,000 Base GN_0.5 GN_1 GN_2 20,000 15,000 10,000 5, Source: Elaborated by SENER. Greenhouse Gases Emissions An increase in the NG prices in the short term (three years) without the possibility to react by diversifying the energy matrix, would derive in a slight increase in the greenhouse gases (GHG) emissions (see Figure 4.12) due to a larger generation by fuel-fired plants, which have the potential for higher emissions 62. As the capacity additions of renewable power plants increase, the GHG emissions decrease, as it occurs in the GN_2 scenario, with a 25% less than in the Base scenario in See Table A.1 in Annex Methodology. 102

104 FIGURE GREENHOUSE GASES EMISSIONS IN ELECTRICITY GENERATION (MTon CO2-eq) 140 Base GN_0.5 GN_1 GN_ Source: Elaborated by SENER. One of the restrictions of the optimization program is to meet the clean-energy targets established in the LTE 63. However, Figure 4.13 shows that these targets are surpassed and achieved without any mathematics restriction, since clean technologies are the most efficient way to meet the SEN s electricity demand. The figure shows that, the higher the NG price, the higher the proportion of clean energies in the optimized energy matrix, since clean energies are more economically competitive than combined cycles, which are still having an essential role ensuring the efficiency and stability of the electricity system. FIGURE PERCENTAGE OF CLEAN-ENERGY GENERATION IN THE DIFFERENT SCENARIOS (Percentage) 70% Base GN_0.5 GN_1 GN_2 60% 50% 40% 30% 20% 10% 0% Source: Elaborated by SENER. 63 For further detail, see Figure 3.7 of this document 103

105 Electricity Prices The price of electricity and the cost for meeting one more unit of demand are defined according to the Day- Ahead Market, which is part of the Short-Term Energy Market operated by the CENACE 64, and operating since the end of January Electricity prices are nodal prices 65, defined as Domestic Marginal Prices, which include components of energy, of congestion, and losses; which capture the marginal cost of generating electricity and saturation, and the losses of the electricity transmission lines in the system. The marginal cost of energy is given by the operation s variable costs of the generators, that is, technologies which have a lower variable cost, such as wind or solar power plants, are dispatched first, and so on. The price of electricity at a defined interval is the variable cost of the last plant that was dispatched which is the one with the highest variable costs of all the plants in operation. The average price of electricity in the SEN, as calculated by Balmorel, represents the cost of supplying one more unit of electricity demand, taking into account the congestions to electricity transmission between regions 66, and the loss related to it 67. As shown in Figure 4.14, it can be observed the price in the Base scenario is always lower than the one in the scenarios with NG price variations. However, this difference is reduced as the new generation capacity is installed. Up to 2021 it is not possible to add new capacity, and the system has to use similar amounts of natural gas, but at a higher price. Thereby, the increase on electricity price is proportional to the increase of the NG price. By adding new generation capacity, the prices of electricity in the GN_0.5, GN_1, and GN_2 scenarios decrease, reducing thus the difference regarding the electricity price in the Base scenario; however, they are still very high. Despite a better integration of variable renewable energies with a zero-variable cost 68, the technology that set marginal prices (the last unit dispatched) is, at certain regions and hours, a plant that burns NG, such as a combined cycle plant or a gas-turbine unit. Due to congestions and losses in the transmission network, in determined regions and hours, power plants with variable costs with lower costs can represent a marginal technology, such as when there is an elevated generation from wind power and the price of electricity in that regions increases considerably. Figure 4.14 shows how the GN_2 scenario displays in some years electricity prices below the GN_1 and GN_0.5 ones, since in the GN_2 scenario the intervals and/or number of regions increase where the marginal price of electricity is fixed by technologies that do not consume NT, compared to the other scenarios, decreasing the electricity average annual price Manual of the Short-Term Energy Market 66 See Map A.1 of the Statistical Annex. 67 In the optimization models of electric dispatch, the electricity price is the marginal or shadow value of the power balance equation. 68 According to data defined in the Methodologic Annex. 104

106 FIGURE AVERAGE PRICE OF ELECTRICITY WEIGHTED BY TRANSMISSION REGION IN THE SEN (USD/MWh) 90 Base GN_0.5 GN_1 GN_ Source: Elaborated by SENER. In Figure 4.15 it can be observed the price variation in the Base scenario throughout 2031 is small in an optimal system, without considering disruptions in the supply of fuels or in the operation of plants and distribution and transmission lines. The GN_2 scenario (Figure 4.15) displays higher fluctuations in electricity prices that the Base scenario; this is evident when the moments where electricity prices are lower coinciding with the periods in which the generation from wind and solar plants is higher. Due to a better integration of wind power in the GN_2 scenario, with an installed capacity 132% higher than the Base scenario, there are certain intervals and regions where technologies with very small variable costs fix the price of electricity. In the hours when the capacity factors of wind and solar powers are lower, the technology which fixes the marginal price of electricity are generally natural-gas fired plants; therefore, the increase in the price of electricity corresponds to the increase of the NG price, since the hydropower generation capacity could not satisfy all the demand. 105

107 FIGURE AVERAGE WEIGHTED PRICE OF HOURLY ELECTRICITY 69 IN THE SEN AND GENERATION OF WIND, SOLAR, AND HYDROPOWER PLANTS (USD/MWh) Average Weighted Price of Electricity in the SEN (USD/MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Elaborated by SENER. Production RE GN_2 Base GN_ Wind-Power Generation (MWh) Despite the integration of variable renewable energies in the Base scenario, whose generation have a significant variation throughout the year, and even between short intervals, the technology which fixes the electricity price (the last to be dispatched attending variable costs and ensuring the system s reliability) are mostly natural-gas fired plants, all of which can be corroborated when Map 4.2., on average electricity prices in each transmission region in 2031, is compared with Map 4.3, on the geographic distribution of NG prices during the same period. Contrasting both maps, it can be observed that the regions with higher NG prices have higher electricity prices that the ones with access to NG with a lower price; except for some zones, such as the Grijalva region, where, due to its hydropower capacity and to the high wind potential of the zone of the Isthmus of Tehuantepec, electricity prices are kept lower even if they would have access to NG with a higher price in Hourly electricity is defined each month through a representative week. 106

108 MAP AVERAGE PRICE OF ELECTRICITY BY TRANSMISSION REGION 2031 (BASE SCENARIO) Precio Electricidad (USD/MWh) Map 4.3 shows regions with a high wind, hydropower, and/or solar power potential 70, or with access to it through the electricity transmission network, where electricity prices are less dependent on the variations of NG prices. Though, regions located far away from zones with a high potential of renewable energies, and where an increase in the electricity transmission infrastructure would be too expensive for the system, electricity prices are very dependent on the NG prices, and they could increase 31% in the GN_2 scenario regarding the Base scenario in MAP DIFFERENCES OF AVERAGE ANNUAL ELECTRICITY PRICES BY TRANSMISSION REGIONS 2031 GN_2 VS BASE SCENARIO Diferencia Precio Electricidad GN_2 vs. Base 31% 27% 22% 18% 70 See Maps A.2 and A.3 in the Statistical Annex. 107

109 Conclusions The purpose of this sensitivity exercise is to provide an analysis that allow investors and decisions-makers to identify different opportunity areas, such as the promotion of a larger capacity of clean technologies within the electricity-generation matrix that minimize the dependency of the Mexican electricity sector on noncontrollable external factors, always ensuring the system s energy security. The current significance and dependency of natural gas on the fuels demand, more specifically in the electricity sector, is very high, and will continue like that during the analyzed period until For that purpose, elaborating exercises that show the system s behavior when facing variations, whether of prices or NG availability, helps to identify the possible impacts derived from the uncertainty inherent to the future in international markets, and avoid sub-optimal transitions that could considerably raise the cost of electricity generation within the country. The study indicates that, with a diversified energy matrix, a better integration of renewable energies, and a robust electricity transmission network, the vulnerability of the Mexican electricity sector to increases in NG prices can be minimized, and also reducing the greenhouse gases emissions. 108

110 A. Statistical Annex CHART A. 1. PROJECTS UNDER STUDY AND IN PROSPECTIVE ANALYSIS IN 2015 WHICH ARE PART OF THE PRODESEN Project Internal transmission corridors in DC Identification of the needs for voltage dynamic regulation in zones with high-load density as Bajío, city of Monterrey and Mexico City Repowering of 400 kv-lines in the transmission corridor San Bernabé Topilejo. Repowering of 400 kv-lines in the transmission corridor Tula Querétaro Potencia Maniobras. Repowering of 400 kv-lines in the transmission corridor Tepic Dos Cerro Blanco. Interconnection of the BC isolated sytem to the SIN Interconnect the RNT with the electric grids in North America and Central America Analysis Perspective PRODESEN 2015 Study Status With no benefit for SEN Programmed 1/ One project may contain more than one current status, because during its study stage became more than one project; such is the case of the direct-current transmission corridors and the interconnection lines with North America and Central America. Source: Elaborated by SENER. Source: PRODESEN

111 CHART A. 2. PROJECTS UNDER STUDY AND IN PROSPECTIVE ANALYSIS IN 2016 WHICH ARE PART OF THE PRODESEN Status Project Under Analysis Study No benefit to the SEN Programmed PRODESEN 2016 Interconnection of Baja California Sur and Mulegé to SIN Dos Bocas Bank 7 Batteries bank 10 MW to integrate 90 MW capacity additions of electricity renewable generation in Baja California Sur Voltage change of the transmission line Nacozari Moctezuma Review of the infrastructure of the interconnections between Mexico-North America and Mexico-Central America, standing out: 1. Asynchronous Connection Back to Back Ciudad Juárez, Chihuahua, El Paso, Texas 2. Asynchronous Connection Back to Back located in Reynosa, Tamaulipas 3. Asynchronous Connection Back to Back between Mexico Guatemala Cross-border transmission line in Direct Current running through the northern border. Design of the transmission and distribution network of the main cities with high-voltage load and touristic zones Voltage change in the supply grid of Tijuana Transmission grid of the city of Chihuahua to La Laguna Design of the transmission network to foresee the integration of renewable generation in zones with high potential Analysis to continue or to increase the applications of smart electric grids 1/ One project may contain more than one current status, because during its study stage became more than one project; such is the case of the direct-current transmission corridors and the interconnection lines with North America and Central America. Source: Elaborated by SENER. Source: PRODESEN

112 CHART A. 3. PROJECTS PROGRAMMED AND INSTRUCTED BY THE SENER IN 2015 WHICH ARE PART OF THE PRODESEN Works Management Voltage kv Equipment Transmission Transformation Circuits km-c MVA Transformation Compensation MVAr Direct Current Transmission Line Tehuantepec-Valle de Mexico FEOF: Aug-2020 Volcán Gordo-Yautepec Potencia¹ CA Yautepec Potencia - Topilejo 3, CA Central Agustín Millan II - Volcán Gordo 1, CA Volcán Gordo MVAr (current limiting reactor) R 66.8 Xipe - Ixtepec Potencia CA Yautepec Potencia Converting Station LCC EC /400 Ixtepec Potencia Converting Station LCC EC /400 Xipe Banks 1, 2 y AT /230 Eastern Xipe Bank T /115 Xipe MVAr R 100 Yautepec Potencia - Ixtepec Potencia +/ CD Bipolar 1221 Ixtepec Potencia - Juile¹ CA Submarine Alternating Current Transmission Line Playacar - Chankanaab FEOF: Apr-2020 Playacar - Chankanaab II CA 1 25 Playa del Carmen - Playacar CA Chankanaab II Banks 3 y T /34.5 Peninsular Chankanaab II MVAr CAP 6 Chankanaab MVAr CAP 6 Cozumel MVAr CAP 6 Alternating Current Transmission Line in Puebla FEOF: Dec-2019 Puebla Dos-Lorenzo Potencia 1 Eastern CA Alternating Current Transmission Line in Tapachula, Chiapas FEOF: Sep-2019 Angostura - Tapachula Potencia CA Tapachula Potencia MVAr (current limiting Eastern R 100 reactor) Compensation of the zone Guanajuato FEOF: Apr-2019 Guanajuato MVAr CAP 22.5 Santa Fe II MVAr Western CAP 30 Lagos Galera MVAr CAP 22.5 Compensation of the zone Querétaro FEOF: Apr-2019 Buenavista MVAr CAP 22.5 Dolores Hidalgo MVAr CAP 22.5 La Fragua MVAr Western CAP 22.5 La Griega MVAr CAP 22.5 Querétaro Oriente MVAr CAP 22.5 Compensation of the zone Apatzingán FEOF:Apr-2018 Cerro Hueco MVAr (traslado) 7 Western 69 1 CAP 8.1 Compensation of the zones San Luis y Mexicali FEOF:Sep-2018 Hidalgo MVAr CAP 21 Baja California Packard MVAr CAP 21 Compensation de las zona de Ensenada FEOF:Sep-2018 San Simón MVAr Baja California CAP 7.5 Compensation de las zonas Guasave FEOF:Apr-2017 Guamúchil Dos MVAr Northwest CAP 22.5 Compensation of the zone Tijuana FEOF: Sep-2018 Guerrero MVAr 69 1 CAP 16 Baja California Mexico MVAr 69 1 CAP 16 Compensation of the zone Los Cabos and La Paz FEOF: Sep-2018 Santiago MVAr Baja California CAP 7.5 Bledales MVAr Sur CAP /Lay of the first circuit. 2/Lay of the second circuit. 3/Recalibration. 4/Submarine Cable. 5/Underground circuit or segments. 6/Replacement of series equipment and repowering of the caliber circuit 113 ACSR high-temperature conductor for capacity increase1500 MVA. 7/ Work due to change in the scope. FSUD: Feasible startup date. AC: Alternating Current. DC: Direct Current. CAP: Capacitor. R: Reactor. T: Transformer. AT: Autotransformer. CS: Converter Station. Source: Elaborated by SENER. 111

113 CHART A. 4. PROJECTS PROGRAMMED AND INSTRUCTED BY THE SENER IN 2016 WHICH ARE PART OF THE PRODESEN Works Management Voltage kv Equipment Interconnection Baja California - SIN FEOF: Apr-2021 Cucapah-Seri ± CD Bipolar 1,400 Cucapah - Sánchez Taboada CA 2 10 Cucapah connection Centenario - Sánchez Taboada CA 2 2 Cucapah connection Wisteria - Cerro Prieto II Baja California CA 2 2 Wind Rumorosa-Cucapah CA Wind Rumorosa - La Herradura CA Compensati La Herradura - Tijuana CA 2 32 Santa Ana - Nacozari CA Northwest Seri Converting Station VSC ± EC 1800 ± 500/400 Cucapah Converting Station VSC ± EC 1800 ± 500/400 Cucapah Banks 1 y 2 ± AT 875 ± 400/230 La Herradura Banks 1 and 2 Baja California ± AT 875 ± 400/230 Wind Rumorosa MVAr (current limiting reactor) R 67 Wind Rumorosa MVAr (current limiting reactor) R 50 Santa Ana MVAr (current limiting reactor) Northwest R 21 Asynchronous Connection Back to Back of 150 MW in Nogales, Sonora Arizona, USA FEOF: Apr-2019 Nogales Airport-Back to Back Nogales, USA Tramo CA 2 16 Nogales Airport-Back to Back Nogales, USA Tramo 1 2 Northwest CA 2 11 Nogales Airport MVAr CAP 35 Transmission Network for the Utilization of the Wind Sources of Tamaulipas FEOF: Jun-2021 Jacalitos - Regiomontano CA Reynosa Maniobras - Jacalitos CA 2 66 Airport-Reynosa Maniobras 1 Northeast CA 2 29 Jacalitos MVAr (bus reactor) R Jacalitos MVAr (current limiting reactor) R 66.7 Chichi Suárez Bank 1 FEOF: Mar-2020 Chichi Suárez Connection North - Kanasin Potencia CA Chichi Suárez Connection Nachi-cocom - Cholul CA Chichi Suárez Connection Nachi-cocom - Izamal CA 2 9 Peninsular Chichi Suárez Connection Nachi-cocom - Itzimná CA Chichi Suárez Connection North - Kopté CA 2 1 Chichi Suárez Bank T /115 Potrerillos Bank 4 FEOF: Transmission Apr-2020 y Transformation Oct-2020 Potrerillos Connection León I - Ayala CA 2 32 Potrerillos - San Roque CA 2 8 Western Potrerillos Bank T /115 León Tres Bank 3 (Transfer) AT /115 Guadalajara Industrial FEOF: Apr-2019 Guadalajara Industrial - Bugambilias (section 1) 3, CA Recalibración Guadalajara Industrial - Bugambilias (sectio 69 1 CA Guadalajara Industrial - Bugambilias (section 2) CA Guadalajara Industrial connection Miravalle-Álamos Higu 69 1 CA 2 9 Western Guadalajara Industrial - Las Pintas 69 1 CA Santa Cruz-Parques Industriales CA Santa Cruz connection-san Agustín-Acatlán 69 1 CA Guadalajara Industrial Bank 2 4 T /69 Zone La Laguna FEOF: Apr-2023 Transmission Circuits km-c MVA Torreón Sur - Takata CA Takata - Torreón Oriente CA Torreón Sur - Maniobras Mieleras CA 1 5 Maniobras Mieleras - Diagonal 6 North CA Transformation Transform Torreón Sur - Torreón Oriente CA Torreón Oriente - California CA Torreón Sur Bank T /115 ation on MVAr Notes: 1/Lay of the first circuit. 2/Lay of the second circuit. 3/Recalibration. 4/Submarine Cable. 5/Underground circuit or segments. 6/Replacement of series equipment and repowering of the caliber circuit 113 ACSR high-temperature conductor for capacity increase1500 MVA. 7/ Work due to change in the scope. FSUD: Feasible startup date. AC: Alternating Current. DC: Direct Current. CAP: Capacitor. R: Reactor. T: Transformer. AT: Autotransformer. CS: Converter Station. Source: Elaborated by SENER. 112

114 CHART A. 5. TRANSMISSION PROJECTS WHICH ARE PART OF THE PRODESEN (Kilovolt; kilometer-circuit) Code or Name of the Project Transmission Lines Voltage (kv) No. Circuits Length (km-c) Needed Date Feasible Date Regional Control Management Projects to be instructed Atlacomulco Potencia - Almoloya Atlacomulco Potencia - Almoloya 2/ Apr-18 Dec-18 Central Veracruz II Tamarindo II Veracruz II - Tamarindo II 1/ Apr-15 Apr-20 Eastern Cable Subterráneo Veracruz I- Mocambo Veracruz I - Mocambo 8/ Apr-15 Apr-20 Eastern Culiacán Poniente connection Choacahui Culiacán Poniente connection Choacahui - La Higuera (A3N40) Apr-18 Apr-19 Northwest La Higuera Maneadero connection Ciprés-Cañón Maneadero connection Ciprés - Cañón Apr-17 Apr-19 Baja California Kilómetro Tulancingo Kilómetro Tulancingo Sep-16 Sep-19 Central Ayutla - Papagayo Ayutla - Papagayo Apr-16 Apr-20 Eastern Manuel Moreno Torres San Cristóbal Oriente Manuel Moreno Torres - San Cristóbal Oriente 1/ Apr-16 Apr-20 Eastern Capacity Increase de Puebla II - San Lorenzo Potencia (A3930 y A3T20) Apr-16 Apr-20 Eastern Transmission between the regions Juile - Ixtepec Potencia (A3V30 y A3V40) Apr-16 Apr-20 Eastern Puebla Temascal, Irapuato II Bank 3 (traslado) Irapuato I - Irapuato II (recalibración) 3/ Apr-19 Apr-20 Western Líneas Conín Marqués Conin - Marqués Oriente 2/ Apr-20 Apr-20 Western Oriente y San Ildefonso - Tepeyac Tepeyac - San Ildefonso 2/ Apr-20 Apr-20 Western El May connection Navojoa Industrial - El El May connection Navojoa Industrial - El Carrizo Apr-18 Apr-20 Northwest Carrizo Coromuel connection Punta Prieta II - Palmira Apr-22 Apr-22 Baja California Sur Villa Constitución - Olas Altas Apr-22 Apr-22 Baja California Sur Olas Altas - Pozo de Cota 1/ Apr-22 Apr-22 Baja California Sur Interconnection SIN- BCS Tlaltizapán Potencia Bank 1 Supply de energía en Oaxaca y Huatulco Transformation Guadalajara Oriente y Zapotlanejo Valle del Mezquital Bank 1 Línea Silao Potencia Las Colinas Línea Calera Calera Industrial Hermosillo Misión - Quiroga Línea Dynatech Rolando García Urrea El Infiernito - Mezquital 4/ ±400 Bipolar Apr-22 Apr-22 Mulegé El Infiernito - Bahía de Kino 4/, 7/ ±400 Bipolar Apr-22 Apr-22 Mulegé Mezquital - Villa Constitución 4/ ±400 Bipolar Apr-22 Apr-22 Mulegé Bahía de Kino - Esperanza 4/ ±400 Bipolar Apr-22 Apr-22 Northwest Esperanza - Seri Apr-22 Apr-22 Northwest Morelos - Tianguistenco Apr-20 Apr-21 Central Tlaltizapán Potencia - Yautepec Potencia 2/ Apr-20 Apr-21 Eastern Tlaltizapán Potencia connection Yautepec Potencia - Volcán Gordo Apr-20 Apr-21 Eastern Yautepec Potencia - Zapata (93500 y 93190) 13/ Apr-21 Apr-21 Eastern Yautepec Potencia - Cementos Moctezuma (93300) 13/ Apr-21 Apr-21 Eastern Zapata - Cementos Moctezuma (93200) 13/ Apr-21 Apr-21 Eastern Tlaltizapán Potencia connection Tezoyuca - Jojutla Apr-20 Apr-21 Eastern Tlaltizapán Potencia - Tepalcingo Apr-20 Apr-21 Eastern San Jacinto Tlacotepec - Pinotepa Nacional 1/ Apr-16 Apr-21 Eastern Jalapa de Díaz - Oaxaca Potencia 2/ Apr-21 Apr-21 Eastern Guadalajara Oriente connection Puente Grande II - Guadalajara II Apr-20 Apr-20 Western Guadalajara Oriente - Zalatitlán Apr-20 Apr-20 Western Guadalajara II - Parque Industrial Apr-20 Apr-20 Western Guadalajara II - El Salto Apr-20 Apr-20 Western Valle del Mezquital connection C.H. Zimapán - Dañu (93050) Apr-20 Apr-20 Western Valle del Mezquital connection Zimapán - Tap Zimapán (73260) Apr-20 Apr-20 Western Valle del Mezquital - Tap Zimapán Apr-20 Apr-20 Western Silao Potencia - Las Colinas 1/, 2/, 11/ Apr-21 Apr-21 Western Calera - Calera Industrial 3/ Apr-20 Apr-20 Western Quiroga - Misión 8/ Apr-20 Apr-20 Northwest Dynatech Rolando García Urrea Apr-21 Apr-21 Northwest Bácum - Ciudad Obregón Dos Bácum - Ciudad Obregón Dos 8/ Apr-21 Apr-21 Northwest Las Monthas Bank 1 Las Monthas - Huejutla II Apr-21 Apr-21 Northeast Cerro Prieto II - El Arrajal 1/ Apr-22 Apr-22 Baja California El Arrajal Bank 1 El Arrajal - San Felipe 1/ Apr-22 Apr-22 Baja California Rubí connection Cárdenas - Guerrero Rubí connection Cárdenas - Guerrero 8/, 9/ Apr-19 Apr-19 Baja California LT Frontera connection Frontera connection Industrial - Universidad 8/, 9/ Industrial - Universidad Apr-20 Apr-20 Baja California González Ortega connection Mexicali Oriente - Cerro Prieto IV Apr-19 Apr-19 Baja California Mexicali Oriente - Punto de Interconnection Frontera (Gateway) 1/, Interconnection Baja Apr-19 Apr-19 Baja California 15/ California Imperial Irrigation District Parque Industrial San Luis - Punto de Interconnection Frontera (Pilot Knob) 1/ Apr-19 Apr-19 Baja California Chapultepec connection Cerro Prieto II - San Luis Rey 12/ Apr-19 Apr-19 Baja California Escárcega Potencia - Punto de inflexión Sabancuy 2/ Apr-21 Apr-21 Peninsular Puerto Real Banks 1 y 2 Punto de inflexión Sabancuy - Puerto Real 14/ Apr-21 Apr-21 Peninsular Puerto Real - Palmar Apr-21 Apr-21 Peninsular Manlio Fabio Altamirano - Olmeca 1/, 10/ May-18 Apr-22 Eastern Interconnection Sureste-Peninsular Olmeca - Temascal III 1/, 10/ May-18 Apr-22 Eastern Olmeca connection Dos Bocas - Infonavit 10/ May-18 Apr-22 Eastern Olmeca connection Dos Bocas - Veracruz I 10/ May-18 Apr-22 Eastern Olmeca connection Veracruz I - J.B. Lobos 10/ May-18 Apr-22 Eastern Copainalá connection Manuel Moreno Torres - Malpaso (A3050) Apr-22 Apr-22 Eastern Copainalá connection Manuel Moreno Torres - Malpaso (A3150) Apr-22 Apr-22 Eastern Copainalá - Chicoasén II Apr-22 Apr-22 Eastern Kantenáh connection Dzitnup - Riviera Maya (A3Q60) Apr-22 Apr-22 Peninsular Kantenáh connection Dzitnup - Riviera Maya (A3Q70) Apr-22 Apr-22 Peninsular Kantenáh - Playa del Carmen Apr-22 Apr-22 Peninsular Leona Vicario - Punto de Inflexión Balam Apr-22 Apr-22 Peninsular Punto de Inflexión Balam - Balam Apr-22 Apr-22 Peninsular Punto de Inflexión Balam - Punta Sam Apr-22 Apr-22 Peninsular Leona Vicario - Yaxché Apr-22 Apr-22 Peninsular Kantenáh - Leona Vicario 1/ Apr-22 Apr-22 Peninsular Kantenáh - Copainalá 4/ ±500 Bipolar 1,800.0 Apr-22 Apr-22 Peninsular 113

115 706C D POISE BEQUEATHED PROJECTS CFE CONSTRUCTION DEPUTY DIRECTORATE Tecate II - El Encinal I 1/ May-16 Jan-17 Baja California Ixtapa Potencia - IPP de La Cuesta Potencia Nov-09 Oct-17 Eastern Regiomontano - San Roque May-16 May-17 Northeast Regiomontano connection Huinalá - Lajas (A3740) May-16 May-17 Northeast Regiomontano - Cadereyta May-16 May-17 Northeast Regiomontano connection Huinalá - Tecnológico May-16 May-17 Northeast Mexicali II - Tecnológico Feb-17 Jun-17 Baja California González Ortega connection Mexicali II - Ruiz Cortines Feb-17 Jun-17 Baja California Derramadero connection Ramos Arizpe Potencia - Primero de May Jul-17 Jul-17 Northeast Derramadero connection Saltillo - Frightliner Jul-17 Jul-17 Northeast Derramadero connection Álamo - Agua Nueva Jul-17 Jul-17 Northeast Derramadero - Chrysler Jul-17 Jul-17 Northeast Derramadero - Saltillo Jul-17 Jul-17 Northeast Mina - Central Diesel Santa Rosalía Oct-11 Jun-18 Mulegé Lago connection Madero - Esmeralda 6/, 8/ Nov-15 Nov-18 Central Teotihuacán - Lago 6/ Nov-15 Nov-18 Central Monte Real connection Airport San José del Cabo - San José del Cabo Jun-13 Dec-17 Baja California Sur 1201E B 1128C Victoria - Nochistongo Dec-16 Dec-18 Central Huehuetoca - PI Nochistongo Dec-16 Dec-18 Central Chimalpa II connection Nopala - San Bernabé Oct-16 Feb-17 Central Chimalpa II connection Remedios - Águilas Oct-16 Feb-17 Central El Fraile - Ramos Arizpe Potencia (L1) Oct-17 Feb-18 Northeast El Fraile - Ramos Arizpe Potencia (L2) 1/ Oct-17 Feb-18 Northeast El Fraile connection Las Glorias - Villa de García Oct-17 Feb-18 Northeast Chicoasén II connection Manuel Moreno Torres - Malpaso Dos Nov-17 Dec-17 Eastern Cereso - Terranova 1/ Apr-17 Apr-18 North Cereso connection Samalayuca - Reforma (93280) Apr-17 Apr-18 North Cereso connection Samalayuca - Reforma (93150) Apr-17 Apr-18 North Cereso connection Samalayuca II - Paso del North Apr-17 Apr-18 North Cahuisori Potencia connection CM Cahuisori - Gamón Lake Mar-17 Mar-17 North Cahuisori Potencia connection CM Cahuisori - Agnico Eagle Mar-17 Mar-17 North Canatlán II Potencia connection Durango II - Canatlán II Tramo Feb-17 Feb-17 North Durango II - Canatlán II Potencia 1/ Feb-17 Feb-17 North Canatlán II Potencia connection Durango II - Canatlán II Tramo Feb-17 Feb-17 North Cereso - Moctezuma 1/, 5/ Apr-17 Apr-18 North Champayán - Güémez 1/ Apr-16 May-17 Northeast Güémez - Regiomontano 1/ Apr-16 May-17 Northeast Regiomontano connection Huinalá - Lajas (A3270) Apr-16 May-17 Northeast Guaymas Cereso - Bácum 2/ Nov-16 Nov-17 Northwest Seri - Guaymas Cereso Nov-16 Nov-17 Northwest Empalme CC - Guaymas Cereso 1/ Nov-16 Nov-17 Northwest Empalme CC connection Planta Guaymas II - Obregón III L Nov-16 Nov-17 Northwest Empalme CC connection Planta Guaymas II - Obregón III L Nov-16 Nov-17 Northwest Hermosillo IV - Hermosillo V 2/ Nov-16 Nov-17 Northwest Seri connection Hermosillo IV - Hermosillo V Nov-16 Nov-17 Northwest Choacahui - Bácum Jul-19 Jul-19 Northwest Choacahui connection Louisiana - Los Mochis II Jul-19 Jul-19 Northwest Santa Isabel - Mexicali II 2/ Apr-16 Aug-17 Baja California Camino Real connection Punta Prieta II - El Triunfo Apr-16 Feb-17 Baja California Sur Culiacán Poniente connection Choacahui - La Higuera Mar-17 Jun-17 Northwest Culiacán Poniente - Punto de Inflexión Culiacán I Mar-17 Jun-17 Northwest Culiacán Poniente - Punto de Inflexión Culiacán Poniente Mar-17 Jun-17 Northwest Culiacán Poniente connection La Higuera - Navolato Mar-17 Jun-17 Northwest Punto de Inflexión Culiacán I - LT Culiacán I - Tres Ríos Mar-17 Jun-17 Northwest Querétaro Potencia Maniobras - Santa María 1/ Jan-17 Jun-17 Western Tlajomulco connection Acatlán - Atequiza Feb-17 May-17 Western Tlajomulco connection Colón - Guadalajara II Feb-17 May-17 Western Tlajomulco connection Guadalajara Industrial - Guadalajara II Feb-17 May-17 Western Xpujil - Xul-Ha Mar-17 Apr-17 Peninsular Escárcega Potencia - Xpujil 2/ Mar-17 Apr-17 Peninsular Empalme CC connection Bácum - Seri L Nov-16 Oct-17 Northwest Empalme CC connection Bácum - Seri L Nov-16 Oct-17 Northwest Pueblo Nuevo - Obregón IV 1/ Nov-16 Oct-17 Northwest Hermosillo Airport - Esperanza 2/ Apr-18 May-18 Northwest Esperanza connection Punto P - Subestación Dos Apr-18 May-18 Northwest Bácum - Obregón IV Apr-17 May-18 Northwest Bácum connection Empalme CC - Obregón III Apr-17 May-18 Northwest Santa Ana - Nogales Airport Apr-17 May-18 Northwest Pozo de Cota - El Palmar Apr-18 Jan-19 Baja California Sur Central Diesel Los Cabos - Pozo de Cota Apr-18 Jan-19 Baja California Sur Silao Potencia connection Romita - Silao I Apr-18 Jul-18 Western El Encino - Moctezuma 2/ Sep-18 Sep-18 North Cuauhtémoc II - Quevedo 2/ Feb-19 Feb-19 North Cuauhtémoc II - Manitoba Feb-19 Feb-19 North Quevedo - Campo Feb-19 Feb-19 North Azufres III (U-18 ) - Tap Azufres Switcheo Dec-17 Feb-18 Western Azufres Switcheo - Azufres Switcheo Sur Dec-17 Feb-18 Western Texcoco - La Paz 3/ Nov-15 Dec-17 Central POISE BEQUEATHED PROJECTS CFE DISTRIBUTION DEPUTY DIRECTORATE Atotonilquillo connection San Jorge - Poncitlán Jul-17 Jul-18 Western Angostura - Comitán Sep-08 Apr-22 Eastern Laguna de Coyuca connection IPP de La Cuesta - Mozimba Dec-18 Dec-18 Eastern Fundición - Navojoa North Jun-10 Mar-17 Northwest Janos - Monteverde Jun-17 Jul-17 North Terranova - Rayón Jun-19 Jun-19 North Oblatos connection Colimilla - Guadalajara Oriente Dec-14 Jan-18 Western Tepatitlán - Cuquio May-16 Dec-17 Western Comalcalco Sur connection Comalcalco - Tulipán Nov-09 Feb-18 Eastern Ocotlán Oaxaca connection La Cienega - Minera Cuzcatlán Nov-09 Aug-20 Eastern Xoxtla connection San Lorenzo Potencia-Tonantzintla Dec-18 Dec-18 Eastern Xalostoc connection Zocac - Cuauhtemoc Dec-20 Dec-20 Eastern Cuetzalan connection Teziutlán II - Papantla Potencia Feb-17 May-17 Eastern Villa Unión - Rosario - Esquinapa Jun-11 Jun-19 Northwest Bamoa connection San Rafael - Guasave Dec-11 Aug-17 Northwest 114

116 1210F 1210I 1211D 1212F 1212H 1212I 1320E 1323B 1420C 1420F 1420G 1520C 1520D 1521D 1521E 1521F 1620 Progreso - Bacum Dec-10 Aug-17 Northwest Kohunlich (Parque Industrial) connection Popolnah - Canek May-12 Feb-18 Peninsular Ucú connection Poniente - Hunucmá May-12 Jan-18 Peninsular Estrella connection Güémez - Victoria Dec-16 Dec-17 Northeast Rangel Frías connection San Nicolás - Universidad Dec-21 Dec-21 Northeast Ruiz Cortinez connection Juan José Ríos - Leyva Solano Sep-13 Feb-18 Northwest Navojoa Oriente connection Pueblo Nuevo - Navojoa North Dec-13 Jun-17 Northwest Nainari connection Ciudad Obregón II - Ciudad Obregón III Dec-13 Aug-17 Northwest Yal-Kú connection Aktun-Chen - Playa del Carmen Dec-13 Jul-20 Peninsular Mandinga connection El Tejar - Paso del Toro Dec-13 Jun-17 Eastern Airport connection Veracruz II - Dos Bocas Mar-17 Nov-17 Eastern Los Reyes connection La Paz - Aurora Aug-13 Apr-17 Central Culhuacán - Xochimilco Aug-13 Aug-17 Central Aragón connection Esmeralda - Xalostoc Aug-13 Jan-18 Central Morales - Jamaica Aug-13 Jan-18 Central Nonoalco - Buentono Aug-13 Jan-18 Central Jamaica - Buentono Aug-13 Jan-18 Central San Cristóbal connection Jarachina - Pemex Jun-12 Dec-18 Northeast Lázaro Cárdenas - Meoqui Oct-17 Oct-17 North Meoqui - Francisco Villa Oct-17 Oct-17 North Conalep connection Macuspana II - El Zopo Dec-13 Jul-18 Eastern El Castillo - Naolinco Dec-12 May-19 Eastern Tecnológico Hillo connection Hermosillo Loma - Ladrilleras Jun-14 Jul-17 Northwest Quiroga - Bagotes Jun-13 May-18 Northwest Caracol connection Cerro Gordo - Valle de Mexico Dec-14 Nov-17 Central Chicoloapan connection Chapingo - Aurora Dec-14 Aug-19 Central Cumbres - San Cristóbal - Santander Jun-15 Dec-18 Northeast Mirador connection Plaza - Tecnológico Jul-15 Dec-18 Northeast Chávez Uno - Batopilas 1/ Jan-18 Jan-18 North Namiquipa connection Ruiz Cortines - Nicolás Bravo Jan-18 Oct-18 North Villas del Cedro connection La Higuera - Culiacán I Dec-14 Jan-20 Northwest Guamúchil - Angostura Jul-15 Jan-20 Northwest San Carlos - Los Algodones May-14 Jan-20 Northwest Ocuca connection Santa Ana - Cerro Cañedo Dec-14 Feb-20 Northwest Balam - Kekén Mar-17 Dec-18 Peninsular Cosoleacaque connection Chinameca II - Acayucan Mar-17 Jul-18 Eastern Xochitla connection Victoria - Nochistongo Dec-14 Apr-18 Central Lago de Guadalupe connection Cofradía - Remedios Mar-17 Apr-18 Central Condesa - Diana Mar-17 Apr-18 Central Condesa - Tacubaya Mar-17 Apr-18 Central Airport connection Aurora - Santa Cruz Dec-22 Dec-22 Central Sendero connection Progreso - San Luis Potosí II May-15 May-18 Western Acuitlapilco connection Contla - Santa Ana Chiautempam Dec-18 Dec-18 Eastern Obispado connection Jerónimo - Orión Jun-16 Dec-18 Northeast Revolución connection Valle Verde - California Oct-17 Oct-17 North Aguascalientes I - Calvillo - Salitre Apr-15 Dec-18 Western Aguascalientes Potencia Peñuelas - Encarnación Apr-15 Apr-19 Western San Luis de la Paz - San José Iturbide Apr-15 Apr-19 Western Santa María connection Guasave - Hernando de Villafañe May-15 Feb-20 Northwest Lomas de Anza - Industrial San Carlos May-16 Feb-20 Northwest La Reina connection Las Trancas - Cementos Moctezuma Dec-16 Mar-18 Eastern Popular - Lucero Feb-18 Oct-18 North El Trébol connection Monthteñas - Oasis Feb-18 Oct-18 North Elena connection Polvorín - Enertek Dec-16 Dec-17 Northeast Parque Industrial Linares connection Lajas - Linares Dec-17 Dec-18 Northeast Papantla Distribución connection Tajín - Tepeyac Aug-18 Aug-18 Eastern La Manga connection Hermosillo IV - SE Punto P Dec-16 Mar-20 Northwest Domingo Viejo connection Monterrey Potencia - Propasa Dec-16 Dec-18 Northeast San Vicente connection Nuevo Vallarta - Jarretaderas Dec-17 Dec-18 Western Juan José connection Sayula - Ciudad Guzmán Dec-17 Feb-18 Western Grids Atlacomulco (LT) Dec-17 May-19 Central Grids reorderingvalle de Bravo (LT) Dec-17 Jun-19 Central Grids conversión aéreo-subterráneo Chapa de Mota Central (KM-C) Dec-17 Sep-20 Central Grids conversión aéreo-subterráneo Temoaya Central (KM-C) Dec-17 Oct-20 Central Grids aerial-underground conversion Tejupilco (KM-C) Dec-17 Oct-20 Central Grids conversión aéreo-subterráneo Ciudad Altamirano Central (MVA) Dec-17 Oct-20 Central Grids SE Ruiz Cortinez Dec-17 Sep-20 Baja California Grids Guerrero Negro Dec-17 Sep-20 Mulegé Chinitos connection Pericos - Guamúchil Dec-17 Mar-20 Northwest El Fuerte Penal connection El Fuerte - Carrizo Dec-17 Apr-20 Northwest El Fuerte Penal connection Los Mochis II - El Fuerte Dec-17 Apr-20 Northwest La Higuera - Costa Rica Dec-17 May-20 Northwest Isla de Tris connection Sabancuy - Carmen Dec-17 Apr-20 Peninsular Zacatlán connection Chignahuapan - Tetela de Ocampo Dec-17 Dec-20 Eastern Aluminio connection Veracruz Dos - Jardín Mar-19 Mar-19 Eastern Gaviotas connection Villahermosa II - Ciudad Industrial Oct-20 Oct-20 Eastern Pakal - Na connection Los Ríos - Palenque Jan-19 Jan-19 Eastern Bonfil - Papagayo Dec-17 May-20 Eastern Tuxtepec III connection Cerro de Oro - Benito Juárez C Dec-17 May-20 Eastern Tuxtepec III connection Cerro de Oro - Benito Juárez C Dec-17 May-20 Eastern Canticas - Vista Mar (Sust. Aéreo - Subterráneo) Dec-17 Mar-18 Eastern Canticas - López Mateos (Sust. Aéreo - Subterráneo) Dec-17 Mar-18 Eastern López Mateos - Pajaritos (Sust. Aéreo - Subterráneo) Dec-17 Mar-18 Eastern Pajaritos Dos - Puerto Franco (Sust. Aéreo - Subterráneo) Dec-17 Mar-18 Eastern Vistamar - Puerto Franco (Sust. Aéreo - Subterráneo) Dec-17 Mar-18 Eastern Pajaritos Dos - Puerto Franco - López Mateos Dec-17 Mar-18 Eastern Grids Tlalixtaquilla Dec-17 May-18 Eastern Grids Zapotitlán Dec-17 May-18 Eastern Grids Atlatlahuacan Dec-17 May-18 Eastern Loss reduction Area Chalco (KM-C) May-17 Jun-18 Central Loss reduction Area Ayotla (KM-C) May-17 Jun-18 Central Loss reduction Area Ixtapaluca (KM-C) May-17 Jun-18 Central Loss reduction Area Chalco Rural (KM-C) May-17 Jun-18 Central Loss reduction Area Amecameca (KM-C) May-17 Jun-18 Central Loss reduction Zona Villahermosa (KM-C) May-17 Sep-17 Eastern Non-technical losses reduction Zona Atizapán (KM-C) Jun-17 Jul-17 Central Non-technical losses reduction Zona Naucalpan (KM-C) Jun-17 Jul-17 Central Non-technical losses reduction Zona Cuautitlán (KM-C) Jun-17 Jul-17 Central Non-technical losses reduction Zona Ecatepec (KM-C) Jun-17 Jul-17 Central Non-technical losses reduction Zona Tlalnepantla (KM-C) Jun-17 Jul-17 Central Non-technical losses reduction Cuautitlán Atizapan,Ecatepec (KM-C) Jun-17 Jul-17 Central 115 Non-technical losses reduction Zona Basílica (KM-C) Jun-17 Jul-17 Central Loss reduction Zona Nezahualcóyotl (KM-C) Jun-17 Sep-17 Central Juandho - Apasco Dec-16 Jul-20 Central

117 1620B Juandho - Actopan Dec-16 Jul-20 Central Portales connection Hermosillo IV - Hermosillo II Apr-18 Feb-18 Northwest Évora - Salvador Alvarado Apr-18 Jun-20 Northwest Évora connection Guamúchil II - Guamúchil Apr-18 Jun-20 Northwest Boca del Monte - Huatusco Jun-20 Jun-20 Eastern Fisisa connection Topilejo - Iztapalapa Aug-13 Aug-19 Central Morales - Verónica Dec-13 Sep-19 Central Polanco - Morales Dec-13 Sep-19 Central PROJECTS DISTRIBUTION DEPUTY DIRECTORATE Caimanero - Guasave 1/ Northwest P16-NO3 Caimanero - Bamoa 1/ Northwest Caimanero connection Guamúchil II - Los Mochis II Northwest Caimanero connection Santa María - Guasave Northwest La Choya - Oriente 8/ Northwest P16-NO4 Mar de Cortés Puerto Peñasco - Playa Encanto Northwest Mar de Cortés connection Seis de April - Puerto Peñasco Northwest Mar de Cortés connection Seis de April - Puerto Peñasco Northwest P17-NO1 Navojoa Centenario connection Navojoa - Navojoa North Northwest P17-NO3 Villa Mercedes connection Hermosillo Misión - Quiroga 8/ Northwest P17-NO6 P17-NT3 P17-NT4 Hermosillo Airport - Hermosillo Loma Tres Hermanos - Nueva Holanda Vicente Guerrero II connection Fresnillo - Jerónimo Ortiz Northwest North North Hermosillo Airport - Bagotes Tres Hermanos connection Monthteñas - Nueva Holanda Vicente Guerrero II - Vicente Guerrero Northwest North North P17-PE2 Ticul Potencia - Mérida Potencia 1/ Peninsular Benito Juárez connection Vizcaíno - Guerrero Negro I Mulegé P17-MU1 Vizcaíno - Benito Juárez 1/ Mulegé P17-MR2D Jerónimo Ortiz - Mazatlán II 1/ North P17-MR3D Tlaltizapán Potencia - Volcán Gordo 2/ Eastern Pachuca Potencia - San Martín Potencia 1/ Central San Martín Potencia - Tepetlixpa Eastern Tepetlixpa connection Yautepec Potencia - Topilejo Central Tepetlixpa connection Yautepec Potencia - Tecali Central Tepetlixpa - Chalco 1/ Central Pachuca Potencia - San Martín Potencia 2/ Central Tula - Pachuca Potencia 1/ Central PROJECTS CFE-DISTRIBUTION DEPUTY DIRECTORATE D15-NO2 Hermosillo V - Dynatech abr-16 abr-21 Northwest D15-NT1 La Palma connection Moctezuma - Valle Esperanza dic-18 dic-18 North D15-NT2 Felipe Pescador connection Durango I - Jerónimo Ortiz abr-23 abr-23 North D16-CE1 Ferrocarril connection Diana - Condesa dic-21 dic-21 Central D16-CE2 Santa Fe connection Las Águilas - Contadero nov-18 jul-19 Central D16-OR1 Cholula II connection Poniente - San Rafael abr-19 abr-19 Eastern D16-OR7 Ocuituco- Cuautla Dos abr-21 abr-21 Eastern D16-OR9 Berriozabal connection Manuel Moreno Torres - Ocozocuautla sep-19 ene-20 Eastern D16-OR10 Cales - Pijijiapan dic-20 dic-20 Eastern D16-OR11 Huautla - San Miguel Santa Flor dic-18 abr-20 Eastern D16-OR24 Tilapa - Zinacatepec oct-19 ago-20 Eastern D16-OC1 Nueva Jauja - Tepic Industrial abr-20 abr-20 Western D16-OC3 Tapalpa - Sayula 1/ abr-20 abr-20 Western D16-OC5 Campos connection Colomo Distribución - Terminal de gas Manzanillo abr-18 abr-19 Western D16-OC12 Querétaro Industrial connection Querétaro Maniobras - Querétaro I abr-19 abr-19 Western D16-OC13 Nueva Pedregal connection Antea - Jurica abr-20 abr-20 Western D16-OC17 Unión de San Antonio - San Francisco del Rincón abr-20 abr-20 Western D16-NO6 Flores Magón connection Louisiana - Mochis Central abr-25 abr-25 Northwest D16-NO7 Compuertas connection Centenario - Los Mochis III abr-20 abr-20 Northwest D16-NT2 Mitla connection Terranova - Patria abr-21 abr-21 North D16-NT3 Colina connection Boquilla - Apraham González abr-20 abr-20 North D16-NT4 Colonia Juárez - Nuevo Casas Grandes abr-20 abr-20 North D16-NT6 Cuatro Siglos connection Sources - Tecnológico jun-18 jun-18 North D16-BC4 La Encantada connection Metrópoli - Tijuana I 9/ abr-21 abr-21 Baja California 1/ Lay of the first circuit. 2/ Lay of the second circuit. 3/ Recalibration. 4/ Direct Current. 5/ Started operation in 230 kv. 6/ Work instructed to CFE for its construction. 7/ Submarine Cable. 8/ Circuit or segment with underground cable. 9/ Started operation in 69 kv. 10/ Replaces project PRODESEN Dos Bocas Banco 7 and associated grid. 11/ Lay of the third circuit (3.7 km). 12/ Interconnection project BC-IID. 13/ Replacement of series equip for increasing transmission capacity to 386 MVA. 14/ Reconstruction of aerial segments and over duct with ampacity equivalent to a conductor gauge 1113 ACSR. 15/ Two conductors per phase. Source: Elaborated by SENER 116

118 CHART A. 6. PROJECTS OF TRANSFORMATION WHICH ARE PART OF THE PRODESEN Code or Name of the Project Substation Qty Equip Capacity (MVA) Transformation Ratio Date Needed Feasible Date Regional Control Management Querétaro Bank 1 (replacement) Querétaro I Bank 1 (replacement) 3 AT /115 Apr-18 Apr-19 Western Chihuahua North Bank 5 Chihuahua North Bank 5 4 AT /115 Apr-19 Apr-20 North Ávalos Bank 3 (traslado) 3 AT /115 Oct-19 Oct-20 North Irapuato II Bank 3 (traslado) Irapuato II Bank 3 (traslado) 4 AT /115 Apr-19 Apr-20 Western El Habal banco 2 (traslado) El Habal Bank 2 (traslado) 3 AT /115 Oct-19 Apr-19 Northwest Interconnection SIN-BCS Coromuel Bank 1 4 AT /115 Apr-22 Apr-22 Baja California Sur Villa Constitución Bank 1 4 AT /115 Apr-22 Apr-22 Baja California Sur Villa Constitución Converting Station VSC 1 EC ±400/230 Apr-22 Apr-22 Baja California Sur Mezquital Converting Station VSC 1 EC ±400/115 Apr-22 Apr-22 Mulegé Esperanza Converting Station VSC 1 EC 1,020.0 ±400/400 Apr-22 Apr-22 Northwest Tlaltizapán Potencia Bank 1 Tlaltizapán Potencia Bank 1 4 T /115 Apr-20 Apr-21 Eastern Guadalajara Oriente Bank 3 4 T /69 Apr-20 Apr-20 Western Transformation Guadalajara Oriente y Z Zapotlanejo Bank 2 3 AT /230 Apr-20 Apr-20 Western Valle del Mezquital Bank 1 Valle del Mezquital Bank 1 (traslado) 4 AT /115 Apr-20 Apr-20 Western Ascensión II Bank 2 Ascensión II Bank 2 (traslado) 3 AT /115 Apr-18 Apr-18 North Nuevo Casas Grandes Bank 3 Nuevo Casas Grandes Bank 3 (traslado) 3 AT /115 Apr-21 Apr-21 North Francisco Villa Bank 3 Francisco Villa Bank 3 3 AT /115 Apr-20 Apr-20 North Nueva Rosita Bank 2 Nueva Rosita Bank 2 3 AT /115 Apr-20 Apr-20 Northeast Las Monthas Bank 1 Las Monthas Bank 1 (traslado) 4 T /115 Apr-21 Apr-21 Northeast El Arrajal Bank 1 El Arrajal Bank 1 4 AT /115 Apr-22 Apr-22 Baja California Puerto Real Banks 1 y 2 Puerto Real Banks 1 y 2 7 AT /115 Apr-21 Apr-21 Peninsular Puerto Real Bank 3 (Traslado) 1 T /34.5 Apr-21 Apr-21 Peninsular Olmeca Bank 1 1/ 4 T /115 May-18 Apr-22 Eastern Copainalá Converting Station VSC 1 EC 1,800.0 ±500/400 Apr-22 Apr-22 Eastern Interconnection Sureste-Peninsular Kantenáh Bank 1 4 T /115 Apr-22 Apr-22 Peninsular Leona Vicario Bank 1 4 T /115 Apr-22 Apr-22 Peninsular Kantenáh Converting Station VSC 1 EC 1,800.0 ±500/400 Apr-22 Apr-22 Peninsular BEQUEATHED PROJECTS POISE CFE-CONSTRUCTION DEPUTY DIRECTORATE El Encinal I Bank 1 1 T /69/34.5 May-16 Jan-17 Baja California Tecate I SF6 Bank 1 1 T /69/13.8 May-16 Mar-17 Baja California Regiomontano Bank 1 4 T /115 May-16 May-17 Northeast Derramadero Bank 1 4 T /115 Jul-17 Jul-17 Northeast Central Diesel Santa Rosalía Bank 2 1 T /13.8 Oct-11 Jun-18 Mulegé 706C Lago Banks 1 y 2 2/ 2 AT /230 Nov-15 Nov-18 Central Monte Real Bank 1 1 T /13.8 Jun-13 Dec-17 Baja California Sur Chimalpa II Bank 1 4 AT /230 Oct-16 Feb-17 Central Cahuisori Potencia Bank 1 4 AT /115 Mar-17 Mar-17 North Canatlán II Potencia Bank 1 4 AT /115 Feb-17 Feb-17 North Puebla II Bank 4 4 AT /230 Oct-14 Jan-17 Eastern Tecali Bank 3 3 AT /230 Oct-14 Jan-17 Eastern Santa Isabel Bank 4 4 AT /161 Apr-16 Aug-17 Baja California Camino Real Bank 1 1 T /13.8 Apr-16 Feb-17 Baja California Sur Culiacán Poniente Bank 1 4 AT /115 Mar-17 Jun-17 Northwest Tlajomulco Bank 1 4 AT /230 Feb-17 May-17 Western Bácum Banks 3 y 4 7 AT /230 Nov-16 Oct-17 Northwest Seri Banks 1 y 2 7 AT /230 Nov-16 Oct-17 Northwest 1116D Esperanza Bank 1 4 AT /115 Apr-18 May-18 Northwest Guaymas Cereso Bank 2 (ampliación) 4 AT /115 Apr-18 May-18 Northwest Bácum Bank 2 3 AT /115 Apr-17 May-18 Northwest Nogales Airport Bank 2 3 AT /115 Apr-17 May-18 Northwest Pozo de Cota Bank 1 2 AT /115 Apr-18 Jan-19 Baja California Sur Silao Potencia Bank 3 3 AT /115 Apr-18 Jul-18 Western Moctezuma Banks 5 y 6 7 AT /230 Sep-18 Sep-18 North Quevedo Bank 2 3 AT /115 Feb-19 Feb-19 North 1302 Cuauhtémoc II Bank 3 3 AT /115 Feb-19 Feb-19 North ProjectS LEGADOS POISE SUBDIRECCIÓN DE DISTRIBUCIÓN CFE B 1128C 1210I PROJECTS TO BE INSTRUCTED Atotonilquillo Bank 1 1 T /23 Jul-17 Jul-18 Western Huixtla Bank 2 1 T /13.8 Sep-09 Nov-18 Eastern Laguna de Coyuca Bank 1 1 T /13.8 Dec-18 Dec-18 Eastern Monteverde Bank 1 1 T /34.5 Jun-17 Jul-17 North Rayón Bank 1 1 T /13.8 Jun-19 Jun-19 North Oblatos Bank 1 1 T /23 Dec-14 Jan-18 Western Cuquio Bank 1 1 T /23 May-16 Dec-17 Western Comalcalco Sur Bank 1 1 T /13.8 Nov-09 Feb-18 Eastern Ocotlán Oaxaca Bank 1 1 T /13.8 Nov-09 Aug-20 Eastern Xoxtla (Coronango) Bank 1 SF6 1 T /13.8 Dec-18 Dec-18 Eastern Xalostoc Bank 1 1 T /13.8 Dec-20 Dec-20 Eastern Cuetzalan Bank 1 1 T /13.8 Feb-17 May-17 Eastern Bamoa Bank 1 1 T /34.5 Dec-11 Aug-17 Northwest Progreso Bank 1 1 T /13.8 Dec-10 Aug-17 Northwest Kohunlich (Parque Industrial) Bank 1 1 T /13.8 May-12 Feb-18 Peninsular Ucú Bank 1 1 T /13.8 May-12 Jan-18 Peninsular Estrella Bank 1 1 T /13.8 Dec-16 Dec-17 Northeast Rangel Frías Bank 1 2 T /13.8 Dec-21 Dec-21 Northeast Rangel Frías Bank 2 2 T /13.8 Dec-23 Dec-23 Northeast Ruiz Cortinez Bank 1 1 T /13.8 Sep-13 Feb-18 Northwest Industrial San Carlos Bank 2 1 T /13.8 Dec-12 Aug-20 Northwest Navojoa Oriente Bank 1 1 T /13.8 Dec-13 Jun-17 Northwest Nainari Bank 1 1 T /13.8 Dec-13 Aug-17 Northwest Yal-Kú Bank 1 (SF6) 1 T /13.8 Dec-13 Jul-20 Peninsular Mandinga Bank 1 (SF6) 1 T /13.8 Dec-13 Jun-17 Eastern Airport Bank 1 1 T /13.8 Mar-17 Nov-17 Eastern 117

119 1211D 1212F 1212H 1212I 1320E 1323B 1420C 1420F 1420G 1520A 1520C 1520D 1521D 1521E 1521F Los Reyes Banks 1 y 2 (replacement) 2 T /23 Aug-13 Apr-17 Central Culhuacán Banks 1 y 2 SF6 2 T /23 Aug-13 Aug-17 Central Aragón Banks 1 y 2 SF6 (replacement) 2 T /23 Aug-13 Jan-18 Central Pensador Mexicano Banks 1 y 2 SF6 (replacement) 2 T /23 Aug-13 Jan-18 Central Moctezuma Banks 1, 2, 3, y 4 SF6 (replacement) 4 T /23 Aug-13 Jan-18 Central Pachuca Banks 1 y 2 SF6 (replacement) 2 T /23 Aug-13 Jan-18 Central San Cristóbal Bank 1 1 T /13.8 Jun-12 Dec-18 Northeast Conalep Bank 1 1 T /13.8 Dec-13 Jul-18 Eastern Naolinco Bank 1 1 T /13.8 Dec-12 May-19 Eastern Tecnológico Hillo Bank 1 1 T /13.8 Jun-14 Jul-17 Northwest Quiroga Bank 1 1 T /13.8 Jun-13 May-18 Northwest Caracol Banks 1 y 2 2 T /23 Dec-14 Nov-17 Central Chicoloapan Bank 1 y 2 2 T /23 Dec-14 Aug-19 Central Santander Bank 1 1 T /13.8 Jun-19 Dec-18 Northeast Cumbres Poniente Bank 2 1 T /13.8 Jun-19 Dec-18 Northeast Mirador Bank 1 1 T /13.8 Jul-15 Dec-18 Northeast Namiquipa Bank 1 1 T /34.5 Jan-18 Oct-18 North Villas del Cedro Bank 1 1 T /13.8 Dec-14 Jan-20 Northwest Angostura Bank 1 1 T /34.5 Jul-15 Jan-20 Northwest Los Algodones Bank 1 1 T /13.8 May-14 Jan-20 Northwest Ocuca Bank 1 (replacement) 1 T /13.8 Dec-14 Feb-20 Northwest Kekén Bank 1 1 T /13.8 Mar-17 Dec-18 Peninsular Cosoleacaque Bank 1 1 T /13.8 Mar-17 Jul-18 Eastern Xochitla Bank 1 1 T /23 Dec-14 Apr-18 Central Lago de Guadalupe Banks 1 y 2 2 T /23 Mar-17 Apr-18 Central Condesa Bank 1 SF6 (replacement) 1 T /23 Mar-17 Apr-18 Central Airport Bank 1 1 T /23 Dec-22 Dec-22 Central Toluca Banks 1 y 2 modernización 2 T /23 Dec-14 Apr-18 Central Sendero Bank 1 (SF6) 1 T /13.8 May-15 May-18 Western Laguna del Conejo Bank 1 1 T /13.8 May-14 Dec-17 Northeast Mirador Bank 2 1 T /13.8 Jun-16 Dec-20 Northeast Río Verde Bank 2 1 T /34.5 May-14 Dec-17 Northeast Acuitlapilco Bank 1 1 T /13.8 Dec-18 Dec-18 Eastern Obispado Bank 1 1 T /13.8 Jun-16 Dec-18 Northeast Revolución Bank 1 1 T /13.8 Oct-17 Oct-17 North Haciendas Bank 2 1 T /23 Oct-17 Oct-17 North Rosario Bank 2 1 T /34.5 Jun-14 Jun-17 Northwest Cajeme Bank 2 1 T /13.8 May-16 Jun-17 Northwest Santa María Bank 1 1 T /13.8 May-15 Feb-20 Northwest Lomas de Anza Bank 1 1 T /13.8 May-16 Feb-20 Northwest Cumbres Poniente Bank 3 1 T /13.8 Jun-23 Jun-23 Northeast La Reina Bank 1 1 T /13.8 Dec-16 Mar-18 Eastern Laguna de Términos Bank 2 1 T /13.8 Dec-16 Mar-20 Peninsular Lucero Bank 1 1 T /13.8 Feb-18 Oct-18 North El Trébol Bank 1 1 T /34.5 Feb-18 Oct-18 North Elena Bank 1 1 T /13.8 Dec-16 Dec-17 Northeast Parque Industrial Linares Bank 1 1 T /13.8 Dec-17 Dec-18 Northeast Papantla Distribución Bank 1 1 T /13.8 Aug-18 Aug-18 Eastern La Manga Bank 1 1 T /13.8 Dec-16 Mar-20 Northwest Domingo Viejo Bank 1 1 T /13.8 Dec-16 Dec-18 Northeast Chinitos Bank 1 1 T /13.8 Dec-17 Mar-20 Northwest El Fuerte Penal Bank 1 1 T /13.8 Dec-17 Apr-20 Northwest Isla de Tris Bank 1 1 T /13.8 Dec-17 Apr-20 Peninsular Mayakobá Bank 2 1 T /13.8 Dec-17 Apr-20 Peninsular Zacatlán Bank 1 1 T /13.8 Dec-17 Dec-20 Eastern Aluminio Bank 1 1 T /13.8 Mar-19 Mar-19 Eastern Gaviotas Bank 1 1 T /13.8 Oct-20 Oct-20 Eastern Pakal-Na Bank 1 1 T /13.8 Jan-19 Jan-19 Eastern Matehuala Bank 2 (replacement) 1 T /34.5 Dec-17 May-17 Western San Vicente Bank 1 1 T /13.8 Dec-17 Dec-18 Western Juan José Arreola Bank 1 1 T /23 Dec-17 Dec-18 Western Aerial-underground conversion Chapa de Mota Central (MVA) 1 T /0.24 Dec-17 Sep-20 Central Aerial-underground conversion Temoaya Central (MVA) 1 T /0.24 Dec-17 Oct-20 Central Aerial-underground conversion Tejupilco (MVA) 1 T /0.24 Dec-17 Oct-20 Central Aerial-underground conversion Ciudad Altamirano Central (MVA) 1 T /0 Dec-17 Oct-20 Central Loss reduction Area Chalco (MVA) 1 T /0.12 May-17 Jun-18 Central Loss reduction Area Ayotla (MVA) 1 T /0.12 May-17 Jun-18 Central Loss reduction Area Ixtapaluca (MVA) 1 T /0.12 May-17 Jun-18 Central Loss reduction Area Chalco Rural (MVA) 1 T /0.12 May-17 Jun-18 Central Loss reduction Area Amecameca (MVA) 1 T /0.12 May-17 Jun-18 Central Loss reduction Zona Villahermosa (MVA) 1 T /0.12 May-17 Sep-17 Eastern Loss reduction Zona Atizapán (MVA) 1 T /0.22 Jun-17 Jul-17 Central Loss reduction Zona Naucalpan (MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Zona Cuautitlán (MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Zona Ecatepec (MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Zona Tlalnepantla ( MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Cuautitlán, Atizapán, Ecatepec (MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Zona Basílica (MVA) 1 T /0.12 Jun-17 Jul-17 Central Loss reduction Zona Nezahualcóyotl (MVA) 1 T /0.22 Jun-17 Sep-17 Central Portales Bank 1 1 T /13.8 Apr-18 Feb-18 Northwest Évora Bank 1 9 T /13.8 Apr-18 Jun-20 Northwest Mochis Central Bank 2 1 T /13.8 Apr-18 Feb-18 Northwest Ah-Kim-Pech Bank 2 2 T /13.8 Apr-18 Apr-23 Peninsular Boca del Monte Bank 1 1 T /13.8 Jun-20 Jun-20 Eastern Fisisa Banks 1 y 2 (SF6) 2 T /23 Aug-13 Aug-19 Central Morales Banks 1 y 2 2 T /23 Dec-13 Sep-19 Central 118

120 LIMITED PROJECTS P16-NO3 Caimanero Bank 1 4 AT /115 Apr-23 Apr-23 Northwest P16-NO4 Mar de Cortés Bank 1 4 AT /115 Apr-22 Apr-22 Northwest P17-OC10 Querétaro Potencia Bank 4 3 AT /115 Apr-23 Apr-23 Western P17-NO2 Mazatlán Oriente Bank 2 1 T /13.8 Apr-21 Apr-21 Northwest P17-NO3 Villa Mercedes Bank 1 1 T /13.8 Jun-21 Jun-21 Northwest P17-NO4 Tecnológico Hillo Bank 2 1 T /13.8 Apr-21 Apr-21 Northwest P17-NO6 Hermosillo Airport Bank 1 4 AT /115 Jun-24 Jun-24 Northwest P17-NT3 Monthteñas Bank 3 3 AT /115 Apr-22 Apr-22 North P17-NT4 Vicente Guerrero II Bank 1 4 AT /115 Apr-22 Apr-22 North P17-PE2 Mérida Potencia Bank 1 4 AT /230 Apr-25 Apr-25 Peninsular P17-MU1 Benito Juárez Bank 1 1 T /34.5 Jun-22 Jun-22 Mulegé P17-MR3D Tepetlixpa Bank 1 4 AT /230 Apr-28 Apr-28 Central PROJECTS DISTRIBUTION DEPUTY DIRECTORATE D15-OR1 El Porvenir Bank 1 1 T /13.8 Dec-16 Dec-19 Eastern D15-NT1 La Palma Bank 1 1 T /34.5 Dec-18 Dec-18 North D15-NT2 Felipe Pescador Bank 1 1 T /13.8 Apr-23 Apr-23 North D15-NT3 Conejos Medanos Bank 1 (replacement) 1 T /34.5 Jun-20 Jun-20 North D15-NT4 Arenales Bank 2 1 T /34.5 Jun-17 Jun-17 North D16-CE1 Ferrocarril Bank 1 (SF6) 1 T /23 Dec-21 Dec-21 Central D16-CE2 Santa Fe Banks 1, 2 y 3 (SF6) 3 T /23 Nov-18 Jul-19 Central D16-OR1 Cholula II Bank 1 1 T /13.8 Apr-19 Apr-19 Eastern D16-OR6 Lomas Bank 1 (SF6) 1 T /13.8 Dec-21 Dec-21 Eastern D16-OR7 Ocuituco Bank 1 1 T /13.8 Apr-21 Apr-21 Eastern D16-OR8 Ocosingo Bank 3 (replacement) 1 T /34.5 Dec-16 Dec-18 Eastern D16-OR9 Berriozabal Bank 1 1 T /13.8 Sep-19 Jan-20 Eastern D16-OR10 Cales Bank 1 1 T /13.8 Dec-20 Dec-20 Eastern D16-OR11 Huautla Bank 1 1 T /13.8 Dec-18 Apr-20 Eastern D16-OR13 Mapstepec Bank 1 (replacement) 1 T /13.8 Oct-17 Dec-18 Eastern D16-OR14 Mazatán Bank 1 (replacement) 1 T /13.8 Apr-19 Apr-19 Eastern D16-OR17 Salina Cruz Bank 1 (replacement) 1 T /13.8 Sep-17 Jan-19 Eastern D16-OR19 Sarabia Bank 1 (replacement) 1 T /13.8 Jul-17 Dec-18 Eastern D16-OR20 Tapachula Airport Bank 2 1 T /13.8 Oct-17 Dec-18 Eastern D16-OR21 Tapachula Oriente Bank 1 (replacement) 1 T /13.8 Oct-17 Jul-18 Eastern D16-OR22 Tehuantepec Bank 1 (replacement) 1 T /13.8 Feb-18 Dec-18 Eastern D16-OR23 Tenosique Bank 2 (replacement) 1 T /34.5 Jan-17 May-18 Eastern D16-OR24 Tilapa Bank 2 1 T /13.8 Oct-19 Aug-20 Eastern D16-OC1 Nueva Jauja Bank 1 1 T /13.8 Apr-20 Apr-20 Western D16-OC2 Tlajomulco Bank 2 1 T /23 Apr-19 Apr-19 Western D16-OC3 Tapalpa Bank 1 1 T /23 Apr-20 Apr-20 Western D16-OC5 Campos Bank 1 (SF6) 1 T /13.8 Apr-18 Apr-19 Western D16-OC8 Santa Cruz Bank 2 1 T /13.8 Apr-19 Apr-19 Western D16-OC10 Cimatario Bank 2 3/ 1 T /13.8 Apr-19 Apr-19 Western D16-OC11 Estadio Corregidora Bank 2 1 T /13.8 Apr-19 Apr-19 Western D16-OC12 Querétaro Industrial Bank 2 1 T /13.8 Apr-19 Apr-19 Western D16-OC13 Nueva Pedregal Bank 1 3/ 1 T /13.8 Apr-20 Apr-20 Western D16-OC14 Satélite Bank 2 3/ 1 T /13.8 Apr-19 Apr-20 Western D16-OC16 Jesús del Monte Bank 2 1 T /13.8 Apr-20 Apr-20 Western D16-OC17 Unión de San Antonio Bank 1 1 T /13.8 Apr-20 Apr-20 Western D16-NO3 Río Sonora Bank 2 1 T /13.8 Apr-21 Apr-21 Northwest D16-NO6 Flores Magón Bank 1 1 T /13.8 Apr-25 Apr-25 Northwest D16-NO7 Compuertas Bank 1 1 T /13.8 Apr-20 Apr-20 Northwest D16-NT1 Saucito Bank 2 1 T /23 Apr-20 Apr-20 North D16-NT2 Mitla Bank 1 1 T /13.8 Apr-21 Apr-21 North D16-NT3 Colina Bank 1 1 T /13.8 Apr-20 Apr-20 North D16-NT4 Colonia Juárez Bank 1 1 T /13.8 Apr-20 Apr-20 North D16-NT5 Monteverde Bank 2 1 T /34.5 Apr-23 Apr-23 North D16-NT6 Cuatro Siglos Bank 1 1 T /13.8 Jun-18 Jun-18 North D16-NE5 Las Torres Bank 2 1 T /13.8 Jun-17 Jun-18 Northeast D16-NE8 La Silla Apodaca Bank 2 1 T /13.8 Jun-21 Jun-21 Northeast D16-BC1 Carranza Bank 2 1 T /13.8 Apr-20 Apr-20 Baja California D16-BC3 Pacífico Bank 2 1 T /69 Apr-21 Apr-21 Baja California D16-PE1 Bonfil Bank 2 1 T /13.8 Oct-18 Oct-18 Peninsular 1/Replaces project PRODESEN Dos Bocas Banco 7 and associated grid. 2/Work instructed to CFE for its construction. 3/Work with resources from contributions. Source: Elaborated by SENER. 119

121 CHART A. 7. COMPENSATION PROJECTS WHICH ARE PART OF THE PRODESEN (Kilovolt; Megavolts amperes reactive) Code or Name of the Project Compensation Equip Voltage (kv) Capacity (MVAr) Date Needed Feasible Date Regional Control Management Donato Guerra MVAr (transfer) Donato Guerra MVAr (transfer) 1/ Reactor Dec-15 Dec-19 Central Inductive-reactive compensation in Esperanza MVAr Reactor Oct-18 Apr-19 Northwest Esperanza Izúcar de Matamoros MVAr Izúcar de Matamoros MVAr Capacitor Apr-16 Apr-19 Eastern Alvarado II y San Andrés II MVAr Increase of transmission capacity between the regions Puebla Temascal, Temascal Coatzacoalcos, Temascal Grijalva y Grijalva- Alvarado II MVAr Capacitor Apr-16 Apr-19 Eastern San Andrés II MVAr Capacitor Apr-16 Apr-19 Eastern Puebla II C.S. Banks 1 y 2 (A3910 y A3920) 2/ Capacitor Apr-19 Apr-20 Eastern Temascal II C.S. Banks 1 y 2 (A3260 y A3360) 2/ Capacitor Apr-19 Apr-20 Eastern Juile C.S. Banks 1, 2y 3 (A3T90, A3040 y A3140) 2/ Capacitor Apr-19 Apr-20 Eastern Tabasco Inductive-reactive compensation in Seri Seri MVAr Reactor Oct-18 Apr-19 Northwest El Carrizo MVAr (transfer) El Carrizo MVAr (transfer) Capacitor Apr-18 Apr-19 Northwest Camino Real MVAr Camino Real MVAr Capacitor Apr-20 Apr-20 Baja California Sur Olas Altas MVAr Capacitor Apr-22 Apr-22 Baja California Sur Villa Constitución MVAr Capacitor Apr-22 Apr-22 Baja California Sur Interconnection SIN-BCS Central Diesel Los Cabos Synchronous condenser Condensad or Ind./75 Cap. Apr-22 Apr-22 Baja California Sur Punta Prieta II Synchronous condenser Condensad or Ind./75 Cap. Apr-22 Apr-22 Baja California Sur Tabasco Potencia MVAr (transfer) Tabasco Potencia MVAr (transfer) Reactor Dec-17 Dec-19 Eastern Energy supply in Oaxaca and Huatulco Ciénega MVAr (current limiting reactor 93740) Reactor Apr-21 Apr-21 Eastern Amozoc and Acatzingo MVAr Amozoc MVAr Capacitor Apr-19 Apr-19 Eastern Acatzingo MVAr Capacitor Apr-19 Apr-19 Eastern Esfuerzo MVAr Esfuerzo MVAr Capacitor Apr-19 Apr-19 Eastern Frontera Comalapa MVAr Frontera Comalapa MVAr Capacitor Apr-17 Apr-20 Eastern Valle de Guadalupe MVAr Valle de Guadalupe MVAr Capacitor Apr-20 Apr-20 Western Valle del Mezquital Bank 1 Loreto y Villa Hidalgo MVAr Humedades MVAr Loreto MVAr (transfer) Capacitor Capacitor Apr-20 Apr-20 Apr-20 Apr-20 Western Western Huichapan MVAr Villa Hidalgo MVAr Capacitor Capacitor Apr-20 Apr-20 Apr-20 Apr-20 Western Western Ascensión II Bank 2 La Salada MVAr Capacitor Apr-18 Apr-18 North Nuevo Casas Grandes Bank 3 Nuevo Casas Grandes MVAr Capacitor Apr-21 Apr-21 North Loreto MVAr Loreto MVAr Capacitor Apr-20 Apr-20 Baja California Sur Kantenáh MVAr (current limiting reactor 1) (transfer) Reactor Apr-22 Apr-22 Peninsular Kantenáh MVAr (current limiting reactor 2) Interconnection Sureste-Peninsular (transfer) Reactor Apr-22 Apr-22 Peninsular Ojo de Agua Potencia STATCOM STATCOM Ind./300 Cap. Apr-23 Apr-23 Eastern B 1128C 1210I PROJECTS TO BE INSTRUCTED CFE-CONSTRUCTION DEPUTY DIRECTORATE Derramadero MVAr (transfer) Reactor Jul-17 Jul-17 Northeast Monte Real MVAr Capacitor Jun-13 Dec-17 Baja California Sur Güémez MVAr Reactor Apr-16 May-17 Northeast Champayán MVAr Reactor Apr-16 May-17 Northeast Bácum MVAr Reactor Jul-19 Jul-19 Northwest Camino Real MVAr Capacitor Apr-16 Feb-17 Baja California Sur Escárcega Potencia MVAr Reactor Mar-17 Apr-17 Peninsular Xul-Ha MVAr Reactor Mar-17 Apr-17 Peninsular Bácum MVAr Reactor Nov-16 Oct-17 Northwest Moctezuma MVAr Reactor Sep-18 Sep-18 North Quevedo MVAr Reactor Feb-19 Feb-19 North León III MVAr Capacitor Apr-18 Apr-19 Western León IV MVAr Capacitor Apr-18 Apr-19 Western Cachanilla MVAr Capacitor Apr-19 Apr-19 Baja California Central MVAr Capacitor Apr-19 Apr-19 Baja California Mexicali II MVAr Capacitor Apr-19 Apr-19 Baja California González Ortega MVAr Capacitor Apr-19 Apr-19 Baja California CFE-DISTRIBUTION DEPUTY DIRECTORATE Huixtla MVAr Capacitor Sep-09 Nov-18 Eastern Laguna de Coyuca MVAr Capacitor Dec-18 Dec-18 Eastern Monteverde MVAr Capacitor Jun-17 Jul-17 North Rayón MVAr Capacitor Jun-19 Jun-19 North Oblatos MVAr Capacitor Dec-14 Jan-18 Western Cuquio MVAr Capacitor May-16 Dec-17 Western Comalcalco Sur MVAr Capacitor Nov-09 Feb-18 Eastern Ocotlán Oaxaca MVAr Capacitor Nov-09 Aug-20 Eastern Xoxtla (Coronango) MVAr Capacitor Dec-18 Dec-18 Eastern Xalostoc MVAr Capacitor Dec-20 Dec-20 Eastern Cuetzalan MVAr Capacitor Feb-17 May-17 Eastern Bamoa MVAr Capacitor Dec-11 Aug-17 Northwest Kohunlich (Parque Industrial) MVAr Capacitor May-12 Feb-18 Peninsular Ucú MVAr Capacitor May-12 Jan-18 Peninsular Estrella MVAr Capacitor Dec-16 Dec-17 Northeast Rangel Frías MVAr Capacitor Dec-21 Dec-21 Northeast Rangel Frías MVAr Capacitor Dec-23 Dec-23 Northeast Ruiz Cortinez MVAr Capacitor Sep-13 Feb-18 Northwest Industrial San Carlos MVAr Capacitor Dec-12 Aug-20 Northwest Navojoa Oriente MVAr Capacitor Dec-13 Jun-17 Northwest Nainari MVAr Capacitor Dec-13 Aug-17 Northwest 120

122 Yal-Kú MVAr Capacitor Dec-13 Jul-20 Peninsular Mandinga MVAr Capacitor Dec-13 Jun-17 Eastern Airport MVAr Capacitor Mar-17 Nov-17 Eastern 1211D Los Reyes MVAr Capacitor Aug-13 Apr-17 Central Culhuacán MVAr Capacitor Aug-13 Aug-17 Central Aragón MVAr Capacitor Aug-13 Jan-18 Central Pensador Mexicano MVAr Capacitor Aug-13 Jan-18 Central Moctezuma MVAr Capacitor Aug-13 Jan-18 Central Pachuca MVAr Capacitor Aug-13 Jan-18 Central 1212F San Cristóbal MVAr Capacitor Jun-12 Dec-18 Northeast Conalep MVAr Capacitor Dec-13 Jul-18 Eastern Naolinco MVAr Capacitor Dec-12 May-19 Eastern Tecnológico Hillo MVAr Capacitor Jun-14 Jul-17 Northwest Quiroga MVAr Capacitor Jun-13 May-18 Northwest Caracol MVAr Capacitor Dec-14 Nov-17 Central 1212H Chicoloapan MVAr Capacitor Dec-14 Aug-19 Central Santander MVAr Capacitor Jun-19 Dec-18 Northeast Cumbres Poniente MVAr Capacitor Jun-19 Dec-18 Northeast Mirador MVAr Capacitor Jul-15 Dec-18 Northeast Namiquipa MVAr Capacitor Jan-18 Oct-18 North Villas del Cedro MVAr Capacitor Dec-14 Jan-20 Northwest 1212I Angostura MVAr Capacitor Jul-15 Jan-20 Northwest Algodones MVAr Capacitor Jul-15 Jan-20 Northwest Ocuca MVAr Capacitor Dec-14 Feb-20 Northwest Kekén MVAr Capacitor Mar-17 Dec-18 Peninsular Cosoleacaque MVAr Capacitor Mar-17 Jul-18 Eastern Xochitla MVAr Capacitor Dec-14 Apr-18 Central 1320E Lago de Guadalupe MVAr Capacitor Mar-17 Apr-18 Central Condesa MVAr Capacitor Mar-17 Apr-18 Central Airport MVAr Capacitor Dec-22 Dec-22 Central Toluca MVAr Capacitor Dec-14 Apr-18 Central Sendero MVAr Capacitor May-15 May-18 Western Laguna del Conejo MVAr Capacitor May-14 Dec-17 Northeast Mirador MVAr Capacitor Jun-16 Dec-20 Northeast 1323B Río Verde MVAr Capacitor May-14 Dec-17 Northeast Acuitlapilco MVAr Capacitor Dec-18 Dec-18 Eastern Obispado MVAr Capacitor Jun-16 Dec-18 Northeast Revolución MVAr Capacitor Oct-17 Oct-17 North Haciendas MVAr Capacitor Oct-17 Oct-17 North Rosario MVAr Capacitor Jun-14 Jun-17 Northwest 1420C Cajeme MVAr Capacitor May-16 Jun-17 Northwest Santa María MVAr Capacitor May-15 Feb-20 Northwest Lomas de Anza MVAr Capacitor May-16 Feb-20 Northwest Cumbres Poniente MVAr Capacitor Jun-23 Jun-23 Northeast La Reina MVAr Capacitor Dec-16 Mar-18 Eastern 1420F Laguna de Términos MVAr Capacitor Dec-16 Mar-20 Peninsular Lucero MVAr Capacitor Feb-18 Oct-18 North El Trébol MVAr Capacitor Feb-18 Oct-18 North Elena MVAr Capacitor Dec-16 Dec-17 Northeast Parque Industrial Linares MVAr Capacitor Dec-17 Dec-18 Northeast Papantla Distribución MVAr Capacitor Aug-18 Aug-18 Eastern 1420G La Manga MVAr Capacitor Dec-16 Mar-20 Northwest Domingo Viejo MVAr Capacitor Dec-16 Dec-18 Northeast Matehuala MVAr Capacitor Dec-17 May-17 Western San Vicente MVAr Capacitor Dec-17 Dec-18 Western Juan José Arreola MVAr Capacitor Dec-17 Dec-18 Western 1520A Chinitos MVAr Capacitor Dec-17 Mar-20 Northwest El Fuerte Penal MVAr Capacitor Dec-17 Apr-20 Northwest Isla de Tris MVAr Capacitor Dec-17 Apr-20 Peninsular Mayakobá MVAr Capacitor Dec-17 Apr-20 Peninsular Zacatlán MVAr Capacitor Dec-17 Dec-20 Eastern Aluminio MVAr Capacitor Mar-19 Mar-19 Eastern 1520C Gaviotas MVAr Capacitor Oct-20 Oct-20 Eastern Pakal-Na MVAr Capacitor Jan-19 Jan-19 Eastern San Quintín MVAr Capacitor Jun-19 Apr-25 Baja California Portales MVAr Capacitor Apr-18 Feb-18 Northwest Évora MVAr Capacitor Apr-18 Jun-20 Northwest 1520D Mochis Central MVAr Capacitor Apr-18 Feb-18 Northwest Ah-Kim-Pech MVAr Capacitor Apr-18 Apr-23 Peninsular Boca del Monte MVAr Capacitor Jun-20 Jun-20 Eastern Fisisa MVAr Capacitor Aug-13 Aug-19 Central 1521D Morales MVAr Capacitor Dec-13 Sep-19 Central LIMITED PROJECTS P16-NO4 Mar de Cortés MVAr Reactor Apr-22 Apr-22 Northwest P17-NO1 Navojoa Centenario MVAr Capacitor Apr-21 Apr-21 Northwest P17-NO2 Mazatlán Oriente MVAr Capacitor Apr-21 Apr-21 Northwest P17-NO3 Villa Mercedes MVAr Capacitor Jun-21 Jun-21 Northwest P17-NO4 Tecnológico Hillo MVAr Capacitor Apr-21 Apr-21 Northwest P17-NT3 Monthteñas MVAr Capacitor Apr-22 Apr-22 North Tres Hermanos MVAr Capacitor Apr-22 Apr-22 North P17-BC3 Cañón Compensador Estático de VAr CEV Apr-20 Apr-20 Baja California P17-PE3 Leona Vicario MVAr Capacitor Apr-25 Apr-25 Peninsular Yaxché MVAr Capacitor Apr-25 Apr-25 Peninsular P17-MR2D Mazatlán II MVAr (current limiting reactor 1) Reactor Apr-27 Apr-27 Northwest Volcán Gordo MVAr (current limiting reactor 2) Reactor Apr-24 Apr-24 Central San Martín Potencia MVAr (current limiting reactor 1) Reactor Apr-26 Apr-26 Eastern P17-MR3D Tepetlixpa MVAr (current limiting reactor 1) Reactor Apr-28 Apr-28 Central Tepetlixpa MVAr (current limiting reactor 2) Reactor Apr-28 Apr-28 Central San Martín Potencia MVAr (current limiting reactor 2) Reactor Apr-28 Apr-28 Eastern 121

123 PROJECTS DISTRIBUTION DEPUTY DIRECTORATE D15-NT1 La Palma MVAr Capacitor Dec-18 Dec-18 North D15-NT2 Felipe Pescador MVAr Capacitor Apr-23 Apr-23 North D16-CE1 Ferrocarril MVAr Capacitor Dec-21 Dec-21 Central D16-CE2 Santa Fe MVAr Capacitor Nov-18 Jul-19 Central D16-OR1 Cholula II MVAr Capacitor Apr-19 Apr-19 Eastern D16-OR6 Lomas MVAr Capacitor Dec-21 Dec-21 Eastern D16-OR7 Ocuituco MVAr Capacitor Apr-21 Apr-21 Eastern D16-OR9 Berriozabal MVAr Capacitor Sep-19 Jan-20 Eastern D16-OR10 Cales MVAr Capacitor Dec-20 Dec-20 Eastern D16-OR13 Mapstepec MVAr Capacitor Oct-17 Dec-18 Eastern D16-OR14 Mazatán MVAr Capacitor Apr-19 Apr-19 Eastern D16-OR20 Tapachula Airport MVAr Capacitor Oct-17 Dec-18 Eastern D16-OR21 Tapachula Oriente MVAr Capacitor Oct-17 Jul-18 Eastern D16-OR22 Tehuantepec MVAr Capacitor Feb-18 Dec-18 Eastern D16-OC1 Nueva Jauja MVAr Capacitor Apr-20 Apr-20 Western D16-OC2 Tlajomulco MVAr Capacitor Apr-19 Apr-19 Western D16-OC3 Tapalpa MVAr Capacitor Apr-20 Apr-20 Western D16-OC8 Santa Cruz MVAr 8/ Capacitor Apr-19 Apr-19 Western D16-OC10 Cimatario MVAr Capacitor Apr-19 Apr-19 Western D16-OC11 Estadio Corregidora MVAr Capacitor Apr-19 Apr-19 Western D16-OC12 Querétaro Industrial MVAr Capacitor Apr-19 Apr-19 Western D16-OC13 Nueva Pedregal MVAr Capacitor Apr-20 Apr-20 Western D16-OC14 Satélite MVAr Capacitor Apr-19 Apr-20 Western D16-OC17 Unión de San Antonio MVAr Capacitor Apr-20 Apr-20 Western D16-NO3 Río Sonora MVAr Capacitor Apr-21 Apr-21 Northwest D16-NO6 Flores Magón MVAr Capacitor Apr-25 Apr-25 Northwest D16-NO7 Compuertas MVAr Capacitor Apr-20 Apr-20 Northwest D16-NT1 Saucito MVAr Capacitor Apr-20 Apr-20 North D16-NT2 Mitla MVAr Capacitor Apr-21 Apr-21 North D16-NT3 Colina MVAr Capacitor Apr-20 Apr-20 North D16-NT4 Colonia Juárez MVAr Capacitor Apr-20 Apr-20 North D16-NT5 Monteverde MVAr Capacitor Apr-23 Apr-23 North D16-NT6 Cuatro Siglos MVAr Capacitor Jun-18 Jun-18 North D16-NE5 Las Torres MVAr Capacitor Jun-17 Jun-18 Northeast D16-NE8 La Silla Apodaca MVAr Capacitor Jun-21 Jun-21 Northeast D16-BC1 Carranza MVAr Capacitor Apr-20 Apr-20 Baja California D16-BC3 Pacífico MVAr Capacitor Apr-21 Apr-21 Baja California D16-BC4 La Encantada Bank 1 3/ 1 T /69/13. 8 Apr-21 abr-21 D16-PE1 Bonfil MVAr Capacitor Oct-18 Oct-18 Peninsular 1/Project with scope shift. 2/Replacement of the existing Series Compensation Equipment with equipment with capacity at 1350 MVA.3/Replaces project PRODESEN Dos Bocas Banco 7 and associated grid. Source: Elaborated by SENER. FIGURE A. 1. ELECTRICITY GENERATION CAPACITY DEFINED EXTERNALLY IN BALMOREL (MW) 90,000 Thermosolar Electricity-Generation Capacity (MW) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 Biomass Geothermal Solar Photovoltaic Wind Hydroelectric Efficient Cogeneration Nuclear Internal Combustion Gas Turbine Fluidized Bed 10,000 Coal Fired Thermoelectric Combined Cycle Source: Elaborated by SENER. 122

124 FIGURE A. 2. NATURAL GAS PRICES RANGE DE IN MEXICO, ACCORDING TO THE PRICE OF NATURAL GAS FORECASTED FOR EACH TRANSMISSION REGION (USD 2016/GJ) Source: Elaborated by SENER FIGURE A. 3. FUEL OIL PRICES RANGE DE IN MEXICO, ACCORDING TO THE PRICE OF FUEL OIL FORECASTED FOR EACH TRANSMISSION REGION (USD 2016/GJ) Source: Elaborated by SENER 123