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Integrating the Electricity Markets in US Mexico Central America

Integrating the Electricity Markets in US Mexico Central America

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Published by: hsarmientou on Jul 27, 2009
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 —Mexico is undergoing a process of significantstructural changes in the energy sector, in particular in theelectric power sector, such as the restructuring of power markets;increasing emphasis on socio-economic and environmentalimpacts of the electric power system; and consideration of anhigher role of energy technologies compatible with sustainabledevelopment. Traditional industry framework has been exposedto new market structures and greater competition, both of whichare being introduced by changing regulations on who cangenerate, transmit, distribute and sell electricity. At present,Mexico’s power industry is changing to a competitive integratedmodel. One area in which there is particular interest is thepotential for increased cross-border trade in electricity betweenMexico and the United States (US) and very recently betweenMexico and Central America (CA). Such an increase wouldprovide environmental and economic benefits to all countries,which of course is the primary reason for engaging in trade. Thispaper describes the recent developments on international powergrid interconnections in Mexico with the US and CA.
 Index Terms
 —Asynchronous Interconnections, InternationalPower Grid Interconnections, Synchronous Interconnections.
I. I
 VER the last few years many electric utilities in the worldhave started implementing important changes in their organization in order to promote efficiency and improve their financial situation [1].Most of the changes in the power industry are related tothe introduction of competition and disaggregation of electricservices [2]. The unbundling of generation, transmission anddistribution has altered the nature of traditional planning andoperation approaches used by the vertically integrated utility.In Mexico, the electric sector has been undergoing a process of deregulation since 1993 [3], [4], [5], [6], and [7],where the power industry is changing to a competitiveintegrated model.The generation of electric energy has been opened to private investment for external (i.e. non-utility) production,through the ownership, design, construction, maintenance and
Miguel Angel Avila Rosales is retired from Comision Federal deElectricidad, Mexico (e-mail:miguel.avila@ieee.org). Hector G Sarmiento is with Gerencia de Transmision y Distribucion,Instituto de Investigaciones Electricas, Mexico (e-mail:hsu@iie.org.mx). Allthe ideas, conclusions and statements in this paper represent individual positions and by no means should be associated to the Comision Federal deElectricidad.
operation of power plants. So far a large portion of thegeneration capacity additions required to face future loaddemand has been met by non-utility generators [8].One area in which there is particular interest is the potentialfor increase cross-border trade in electricity between Mexicoand the United States (US) and very recently between Mexicoand Central America (CA). Such an increase would provideeconomic benefits to all countries, which is of course the primary reason for engaging in trade [9], [10], [11], [12], and[13].Moreover, it could also generate substantial environmental benefits--in terms of reduced emissions of global pollutantssuch as carbon dioxide and regional pollutants such as sulfur oxides and nitrogen oxides--depending on the composition of available capacity (the mix of renewable and fossil-firedgeneration resources), the size and direction of the energyflows, and the time frame under consideration.Electricity industry restructuring is based in part on theassumption that transmission systems should be flexible,reliable and open to all exchanges no matter where thesuppliers and consumers of energy are located and who theyare. However, neither the existing transmission systems nor itsmanagement infrastructure can fully support this openexchange [14], [15] and [16].This paper describes the recent developments oninternational power grid interconnections in Mexico with theUS and CA.II.
 Since 1993, there was an effort to attract privateinvestments to increase the financial capacity of the electricitysector [17], through the most important reform of the Ley delServicio Publico de Energia Electrica (LSPEE) [18], since thenationalization of the electricity sector in 1960.With this reform a new organization was set up that havethe following main characteristics:1.
The Comision Federal de Electricidad (CFE), anational and vertically integrated state-ownedutility, is the dominant utility in this organization.In particular, the new law preserves the monopolyof the CFE in the new public electric service.2.
The other state-owned utility, Luz y Fuerza delCentro (LyFC), is a regional utility and has asmaller role in the new organization.
Integrating the Electricity Markets in UnitedStates-Mexico-Central America
Miguel Angel Avila Rosales,
Senior Member, IEEE 
, and Hector G Sarmiento,
Senior Member, IEEE 
Electricity generation is open to private investmentthrough the external power producer whichincludes the power self-supplier, combined heatand power producer, small power producer,independent power producer, exportation power  producer and power importer. These activities arenot considered as public service in the new law.4.
In this new organization the CFE is the only purchaser of power from independent power  producers and small power producers and of theelectricity surplus form combined heat and power  producer and power self-supplier. Also, theelectricity network is owned by CFE andconsequently this utility is the only seller of transmission services and back-up power.5.
The coordination between CFE and the external power producers is through long-term contracts (or notifications in the case of short-term electricitysurplus). These contracts include power purchaseagreements, prices or tariffs associated with theelectricity network services of CFE for combinedheat and power producer and power self supplier,exportation power producer and power importer.In this new organization, the CFE obtains bids to developthe power capacity with private investment. This bidding is themain mechanism to introduce competition in the electricitysector.An important outcome of this energy reform is a newfinancing pattern in the Mexican electricity sector.III.
 The CFE is the electric utility in Mexico responsible for the public supply of electricity, which includes power system planning, power generation for public service, andtransmission and distribution of electric power.Power system planning is part of a national energy planning process, which in turn defines fuel policies and diversificationstrategies to coordinate the execution of alternative projects,such as hydroelectric, geothermal, wind and nuclear power  plants.Under this process, investments programs are subject to thegovernment budget process, which considers economic goals,financial resources and retail electric rate policies. TheMexican government manages the energy sector, includingelectricity, through the Secretaria de Energia (SE) and theComision Reguladora de Energia (CRE).The administration of the national grid is carried out byCFE through the Centro Nacional de Control de Energia(CENACE). There are eight control centers that coordinate theoperation at regional level, and a national control center thatdefines the operation policies and the security standards.
Áreas del Sistema Eléctrico Mexicano
2. Oriental3. Occidental4. Noroeste5. Norte6. Noreste7. Baja California8. Baja California Sur9. Peninsular1. Central
 Fig. 1. Comision Federal de Electricidad Control Centers.
The existing cross-border interconnections are alsocoordinated by CENACE through agreements with theWestern Electricity Coordinating Council (WECC) and theElectric Reliability Council of Texas (ERCOT).Figs. 1 and 2 show the eight control centers of CFE and theexisting international cross-border interconnections with theWECC and ERCOT, respectively.
 LA R E D O  (  T e x a s )  - N U E V O  LA R E D O 
 8 0 M W
 FA L C O N  (  T e x a s )  – FA L C O N 
 3 0 M W
120M W
 EA G L E  PA S S  (  T e x a s )  - P I E D RA S  N E G RA S  (  B t B ) 
 3 6 M W
 C F E -A E P  (  V F T ) 
 1 0 0 M W
 C F E - S HA R Y LA N D  B t B ) 
 1 5 0 M W
 Fig. 2. Comision Federal de Electricidad Existing International Cross-BordeInterconnections.
The main objective in the planning process is to determinean optimal expansion plan that meets future electricity demandand minimizes the investment, operation and loss of load costs, providing adequate levels of reliability and quality under environmental, financial and energy regulations.Due to the complexity, the problem is solved bydecomposition in time (long, mid and short term time frames)and by geographical hierarchy (generation, bulk transmission,regional transmission and distribution networks).Additional to the uncertainty of traditional planningmethods, regarding load forecast, fuel availability, generationand transmission forced outages rates and hydrologicalconditions, CFE has to consider also the uncertainty of privatesector investment under the cogeneration and self-supply
schemes which is a key issue in the planning procedure due tothe impact of size and location of these resources.With locations, sizes and dates determined for hydro andthermal plants, several models are combined to define therequired electrical network [19].The transmission planning methodology used is based on aminimum cost analysis that selects projects which show long-term utilization, that improve system reliability, and are least-cost options [14], [15] and [16].The methodology involves four stages. It begins defining agroup of feasible generation scenarios. Then, the methodologydevelops minimum cost transmission plans for all thegeneration scenarios. The next stage is to schedule thetransmission programs required during the corresponding period, starting from the final year and proceeding backwards(mid and short-term).The objective is to identify both priorities and optimumtiming to develop each project. Finally, the methodology proceeds to classify transmission projects for implementation purposes, which allows identifying robust programs, when thisexists.A robust program is comprised of projects that include alldesirable attributes (reliability, flexibility and economy). Thislast stage helps the design of hedging mechanisms to mitigateassociated risks with the final plan.The transmission planning methodology also includes a profit analysis which quantifies costs and benefits of thetransmission plan to assure that an acceptable profitability isachieved.IV.
 A. History of US/Mexico Electricity Exchanges
The level of exchanges of electric energy between the USand Mexico has been influenced by a variety of geographic,economic, and political factors.Throughout the middle of the 20
century demographic andeconomic conditions led to a significant increase in electricenergy transactions between Mexico and the US regions near the US-Mexican border [20].Since 1984, net electricity exports from Mexico to the USincreased significantly with the signing of a 220MW firm power purchase agreement between CFE and San Diego Gas& Electric (SDG&E) and South California Edison (SCE).In 1967, the Western System Coordinating Council(WSCC), now called WECC, was formed in the US to promote bulk power system reliability through coordinated planning and operation.The establishment of this regional council, along with thefounding of ERCOT in 1970 has facilitated the regionalcoordination of electric energy exchanges between utilities inthe US and CFE (Fig. 3). CFE has been a member of WECCsince April 1985.
North American Interconnections
Fig. 3. North American Electric Reliability Corporation.
The US and Mexico share a common border of about 1,310km within the WECC region. ERCOT and CFE share acommon border of 1,200 km.
 B. Existing US/Mexico Interconnections
CFE has several interconnections with electric systems of various utilities along the US-Mexico border. Some of theseties have been used for permanent interchanges of energy,while others are used only for emergency purposes (Fig. 2).The most substantive interconnections between WECCmember systems and CFE exist between SCE and CFEs BajaCalifornia region. These facilities consist of two 230 kV ties between SDG&E and CFE: a twinned 230 kV tie connectingSDG&Es Miguel bus with CFEs Tijuana bus; and a singlecircuit 230 kV tie between SDG&Es Imperial Valley andCFEs La Rosita substation. Both of these interconnections aresynchronous ties with a combined transfer capability of up800MW (Fig. 2).The only other additional significant interconnection between WECC and CFE exists between El Paso ElectricCompany (EPECO) and CFEs Norte region. These consist of two 115 kV ties (Fig. 2).These interconnections provide acombined transfer capability of 200MW (Fig. 2). However, theCFE load must be electrically isolated from the Mexicansystem in order to be synchronized with and supplied byEPECO.In the summer of 2001, American Electric Power (AEP),Texas, placed in service its first asynchronous interconnection between ERCOT and CFE in Eagle-Pass, Texas (Fig. 2). A 36MW Voltage Source Converter (VSC) was selected in thisapplication in order to supply reactive power support inaddition to real power injection [21]. Eagle-Pass is located inthe western part of the Central Power and Light (CPL) systemin ERCOT and is served by two 138 kV transmission lines(Fig. 2).It was also the first such ERCOT interconnection to be justified on the basis of reliability, and was selected over atransmission line project with lesser benefit/cost.

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