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good morning and apparently good evening to some of you thanks so much for joining us this is Jeremy Martin vice president for energy and sustainability at the Institute of Americas and we appreciate you all joining us for the latest installment of our 2017 energy webinar series and for those of you who've been participating with us for a while you know some of the basic logistics but let me just make sure others who may not be so familiar stand we will attend us as to a short introduction and we'll have a featured presentation a formal presentation from Commissioner Marcelino Madrigal from pray there is Energy Regulatory Commission in Mexico and then at the end of his formal presentation we'll have time for a question and answer session and we managed the question and answer session via the chat function so the presentation you can avail yourselves all the questions questions will be managed here so don't hesitate you can pose the questions at any point during the formal presentation we won't stop attend to those we'll wait till the very end but we not to wait for the end to put your questions and already figured out the chat function and send greetings from from London and we're lonely no you and I were talking about where some of the people may be participating from I think we begin to get some sense there on the the greetings we received via a mistake in DC so well again welcome everyone and we're delighted today to a little bit more in detail about Mexico but particularly in Mexico and the electric sector and the renewable energy potential in Mexico for those of you who participated a few weeks ago we spent a lot of time and we're delighted to have deputy secretary Laureus speaking about unconventional hydrocarbon resources and opportunities today we're going to get into the elements of the energy reforms underway in Mexico begun over four years ago but but particularly what many called the sort of final piece of the energy reforms and that was the energy transition law that was promulgated and formalized that signed into law December 2015 and the commissioner will walk us through a lot of these these elements but some of the highlights that I want to emphasize and why this has been such an important part of the overall reform but particularly in terms of the economic competitive 'ti of the track energy and obviously you've seen through that energy transition law some very clear targets 2018 Mexico has a target of 25% clean energy it goes up to 30% in 2021 and it hits 35% in 2024 I know there's probably some talk about seeing how they can be a little bit more on that injunction with some of the efforts on emissions and climate change and the laws there but the other thing I want to emphasize before I introduce our speaker is the success that the first two options and these successes in the auctions under the electricity reform in the interview performs pertaining to electric sector have set records for some of the in particular two auctions have over six billion dollars of investment commitments and I think when all of us have talked for years about the energy reforms of Mexico and what it meant economically in terms of the economy making the economy more competitive there's no better result in Mexico being able to have open options a pure market driven system to attract investment on the order of over six billion dollars but at the same time that's setting international records or pricing in terms of solar projects obviously some of those prices and since fluctuated in terms of what's the world record but is that the Mexico is 11 Guardia at this point when we're talking about some of the developments Auctions in terms of project development so let me introduce our speaker because I don't want to steal his thunder this is his message and he'll get into the details of how those things came to pass but more importantly what's next Marcelino Mathur missionary at the next Energy Regulatory Commission cray named a commissioner confirmed by the Mexican Senate dr. Madrigal was a senior energy specialist and many of you probably got to know him during his time at the World Bank where he specialized in economic operations planning power systems and electricity markets you may also remember his Taibbi inter-american Development Bank also working very closely on regional energy integration but also Power Systems transmission distribution in all elements of the electricity markets he has a PhD Waterloo in Canada as well as a master science from the University and graduated from Aurelio technological institute and without any further ado it's my pleasure to host and pass the word over to Marcelino medical doctor my dear girl thanks so much for your time this morning things things telling me things also juggling and the Institute of thematic asked for or having made this webinar I think it's great that we have people from many different places I am a lover of Technology so doing this webinar is really is really is really interesting for me so basically what I have for the presentation is to give you an overview of where we are and where we're going in terms of our implementation of the electricity reform please post your questions as Jeremy said and I think he will you know filter those at the end but basically the idea of the presentation is that tell you where we are in terms of the the cleaner you buy implementation the market reform which is the for the most part of the electricity sector so I will move the slides and send us any message if something is not working or you have not hidden me well but basically you you know what was the reform in Mexico energy issues in Mexico were you know rooted in the Constitution a deep reform that we had in Mexico in the hydrocarbons gas and electricity sector required a lot of changes starting from the Constitution then you have two major pieces of legislation which is the tricity industry law the hydrocarbons law and in turbo Tesla you see the energy transition law which is a very important piece of the reform there are other laws the laws that created the system of error the laws that gave more flexibility to the public utilities to compete in the India in the respective markets that's the no CFED law Pemex they love the regulatory entities we already have regulators in Mexico a 20 year old tradition in the electricity's regulation but with the reform regulatory bodies were strengthened dramatically we have I would say regulators whose legal foundations and responsibilities are are as important as any regulator in Europe or in the US for those in the u.s. we at the regulatory mission would be like your state regulator together with your federal regulator and you reliability regulator so in in fact in Mexico the the Energy Regulatory Commission we have tremendous powers in regulating the lazy city sector and opening up the markets so that's sort of the contextual self I would say that the electricity reform in Mexico we were late on this game as compared to our colleagues from more Latin American countries so the fact that we are late I think he has given us the possibility to work really fast you know from learning what others have seen in the past you know huge no not a few 15 to 20 years so the reform is the pieces are after the the classic ones we have a split the sector into the generation transmission distribution and retail segments generation is a fully competitive activity we created this a NASA which is a system and market operator it has a different law as a separate institution it used to belong to the power company and now the system operated from three years now it's a separate entity that is operating the market I would say that one of the important changes here is that the reform are together with the energy transition law is a clean energy market reform why because to markets and empower the consumer we are seeing how that combination is making that energy developing the developing happen are pretty pretty quick at the energy transition law there are many pieces to it including energy efficiency targets clean energy side the targets are are pretty clear by 2020 for 25 percent of energy has to come from clean energy today as we speak well around 20 percent of our energy coming from clean energy resources we have to mention though that clean in Mexico is all you know the technology solar hydro large and small wind biomass but we also include nuclear we have one nuclear power station in Mexico it's roughly 2,000 megawatts and that should be contributing maybe 2% to the existing energy share in Mexico so the the targets are sort of ambitious there is an aspirational period as part of the North American leaders summit to even go to 50 percent renewables by 2025 which I personally think is completely doable especially with what we have seen recently as you all know this commitment to clean energy comes from a long-standing tradition of Mexico with climate change mitigation I think we were the first developing country signed the Paris agreement Mexico is very firm on meeting its climate goals and international agreements so going to the specifics of the energy sector as as I just mentioned I wanted to someday on the the supplies I supply for us isn't real part so reform basically splits consumers into two flavors regulated consumers which is called basic supply in Mexico those are regulated consumers and unregulated consumers which is large industries or medium sized enterprises and those are called qualify consumers who can select their own super that doesn't mean that regulated consumers do not have choices and we will see how recent technology developments are helping even regulated consumers access other forms of tea energy supply so we have the transmission segment it has been separated into a separate company by CFE distribution has been split into 16 regions that will regulate in a separate fashion so we have distribution rights for 16 different regions in the country that is pure trading also in the market we have the system operator and we have generation is a free activity of course all the generation that we have previous to the enter of the electricity market most of it will be contracted to supply the regulated market and I will talk about that later on so market design and I think this is something that has been implemented taking into consideration all the experiences in energy performed I think the energy reform in Mexico understood from the beginning that you need both long-term markets and short-term markets why because long-term markets are very important to make sure to attract investment in new capacity in new energy and clean energy supply and of course the charter market you always needed because you need balance at the man with supply so both the long term market which I will explain later on is the options that you have seen and the charter market have already been launched these shorter market is already operating the clean energy certificates market we have a water system by which every user has to meet the clean energy requirement so there's a possibility to trade certificates the requirement kicks in in 2018 when this certificate market will start to operate the medium-term market is a market in which Dubai energy and capacity for a three-year product this market has been launched already a couple of weeks ago and we expect to have the results of this market in February of next year so this is a market that bridges the gap between the long term market and the short term market is basically two by three year products which i think is going to be very important especially for the retail market regulated consumers that cannot enter into really lush long term contracts like 15 20 years but maybe medium-sized industry I am manufacturer a car exporter maybe I can enter into three or less year contracts and the capacity market the charter market is a market that regulates capacity to ensure supply or equity this market has already been launched is an ex post market the prices at which your capacity is remunerated have already been here for 2016 so we have our of all these four markets three of them have been launched and the clean energy market because does the requirement stops in 2018 it will enter into 2018 and we will see some some of the numbers of the resources in this market as I said the shorter market is a spot market very similar to what you see and in the u.s. in PA m is a co optimized market for energy research she has model prices we have about 2009 prices already in Mexico is a market that we have financial transmission right and through the system of failure we will also have the exchange of clean energy certificates of course is a market that operates separately system operator will also have a clearinghouse for energy certificates the medium and the long term market I explained already the medium-term market has been launched the first result will be release in February of next year and the long-term market basically to contract energy capacity or clean energy to be delivered three four years in advance and for 10 years from 15 to 20 years so basically this is the mechanism to attract new capacity mainly for the regulated market and I will you know explain that later so the DTE Energy certificate we have the Commission are responsible for stating that the requirement is being met so we have already issued the rules for a tracking system that is being implemented is basically a computer system that with production and consumption of clean energy and is a system where parties can go and interact to buy and sell certificates very similar to the certificates markets you have indeed in the u.s. so this system will start its operation in 2018 and I read mentioned very quickly of course like everywhere else transmission is a fundamental part in clean energy development in a very short period of time with all the pieces that you require through to do three things in in transmission you need to have a transmission system that reaches all the facilities including renewables we have to be able to access it quickly in a non discriminatory fashion reasonable rates and with good quality so for each of those things we have an instrument a regulatory instrument that is already operating now for about two years ago so the way the transmission system is planned now is completely different as it was two years who plans the transmission system is the system operator with comments from the Regulatory Commission and final approval by the Minister of Energy so transmission planning is not handled by any power utility and and this is obvious from the theory of access but also from the practice it was very common that you know renewal energy providers had lots of trouble connecting the grid off of its competitor so the reform completely changed our planning is performed independently from any utility in the in the system we issue transmission rates understanding what has been happening before in Mexico and that you know for for renewables and for consumers to access the grid is very important to have very stable simple understandable rates so we decided to put emphasis on recalling the cost of transmission but what you pay to access the grid is very simple it's a number that you find in the internet you don't need to run complex you know load flow models to understand what is your what what's going to be your transmission rate and this is basically because we believe that you know suddenly transmission is an externality and as possible you want to eliminate it in an efficient way you can't always eliminate this barrier and we have very transparent very simple pricing of transmission and distribution rates this is very important for the market to develop and of course the System Operator we approved the remaining requirements for the system operator we are the Regulatory Commission so that means that the system is not depending anymore on CFE or any other utility on collecting revenues clean energy realm in Mexico is not new we have learned from the past five years so with the reform the Commission we are the responsible party for setting the the reliability rules in the grid that's why I mentioned that we have crear like FERC gnarrk and your state regulator at the same time so we issue a grid ode incorporates all operating rules planning rules for the system also the interconnection requirements for generation and load unloads and we have prepared prepared these requirements based always in the international experience from from many other countries so we have a grid code that is real is really up to date with international experiences we have requirements for voltage frequency controls that are in some cases similar to the u.s. in somewhere similar to Europe because we have different regions in the system excellence of quickly deductions the Lord pair of options this is what we buy energy capacity and clean energy for the regulated service so this is to create new investment to supply the future currently the map and I want to highlight something very important which is the process the processing the option is very open it's very transparent it has enough time for all the parties to prepare basically from the publication of the call for proposals to the time when you submit your beads you have at least 40 days the first option was completed in 225 days the second option in 263 days so the steps in the ocean are all publicly available and there is sufficient time for all kinds of price to participate and we have found that this is very important give in this case renewal energy so before you have very large projects you say 200 for 800 Mara projects but with clean energy solar and mean you can have very small developers trying to enter into the market so the idea was to leave enough time so the different parties with different experiences can enter into the auction so what is the products of the optional is energy Mara alpha C clean energy which is the certificate so if you classify as clean Larry you also cancel your certificate which is the attribute that your energy comes from a clean source and the capacity you know the capacity and we should Mexico is the ability to produce energy the peak demand uh period so all generators compete to supply those three products in a very open and transparent process this is lines very techy I will not go but basically the ocean is select the offers that maximize the social benefit meaning select the cheapest offers to supply the demand according to the maximum prices we are willing to pay for each of the different products which is energy clean energy and capacity so there is a maximum price in the option set up by the Regulatory Commission the the algorithm basically selects the cheapest offers more generators to supply the required amount so for those who work in the power industry this is like a dispatch a long-term dispatch algorithm you basically select the cheapest form all of the offers are generators and this is where things get really surprising especially for Mexico first option the energy we wanted to buy is around six terawatt-hours six millions of certificates basically clean energy and five megawatts of firm capacity so this is around four thousand megawatts of installed capacity the surprise is that the the human was a huge interest on participating in this market so you have 81 pre-qualified breeders with 366 different proposals so I think this flexibility in the option so that you could beat one project two projects three projects as model planning what region allows you probe in other region and making all those projects compete with each other was very attractive and you have this humongous participations of out of 81 pre-qualified participants 69 were qualified and you have a 11 winners in the second option the interest very similar very high 68 bidders 57 qualify participant and 23 bidders when I present this is like I always make the question when did you used to see any competing participants to install a gas fire or a coal-fired power generation it was impossible you always have two or three companies why non Konami's of scales you know all those technologies require very specific expertise but with renewal words this case can be small and you can have medium enterprises / or huge companies competing among each other so the technology progression has made competition for for supplying energy very very aggressive so those are the results basically a summary of the resource in the first version solar prices $44 win prices 53 55 dollars in average in the second auction solar 31 dollars per megawatt average and this includes everything you know the energy decline certificate and win $35 when the renewable energy targets were being constructed there was always a cetacean is renewable energy going to increase tariffs on prices and how much can we actually afford all kinds of alliances were made and if you see the result is is very surprising the maximum price we were willing to pay in the first option was $70 which is close to our average price now plus imagine and the resulting price was $48 in the second option we were willing to pay for energy $60 and the average price was $33 so this means that clean meeting the clean energy targets the incremental cost is going to be close to zero or maybe even negative gas prices in Mexico around 42 I mean that's five power generation forty to forty three dollars maybe 39:38 you have a very very efficient gas fire power generation so very surprising so in interesting period of two years we have contracted 5,000 megawatts and 5,000 megawatts is more than what Mexico has built over the past 15 years 15 years old in two years 5,000 megawatts of roads have been contracted and these are the companies now now operating in Mexico because they are building the power plants they are working on it so we haven't the first option in every new generation companies now competing to submit a regulated service that before was provided only by CFE in the second option 24 different companies all from different countries so in the period of two years to have now purified new agents in the market and these are companies from everywhere Spain Italy France China you name it very very strong interest in the in the in the in the options in Mexico and as you have here of course the prices in Mexico are breaking records wrinkles are blocking every every other day I just hear that solar project for 3 $1 as well it seems the Mexican energy is taking well advantage of the technology developments in renewable energy technologies and this is a personal reflection why do I think he has been so attractive policy reasons I think there is a very clear vision where we want to go and that is expressed in the energy transition law targets are very clear that gives predictability to companies if this market is big or small there is a long legacy in Mexico supporting climate change I think those very clear policy goals in the law made the Mexican market very attractive regulatory aspects to here we have very effective and simple rules to accessing the grid none of these projects has had a problem accessing the grief because there is a new process to be followed they know where the transmission rates transmission rates are very simple to understand they are predictable the option design also given enough time for all kinds of participant entered into this market is very important as I said because now you have a smaller large medium size and scale companies being able to participate in the generation market and of course it's a long-term problem this makes the projects bankable and financial and with that you can lower prices and other important reasons I really think is Mexico itself as a market Mexico is really a large economy is the second largest economy after Brazil in Latin America and our market was closed for business so when you open sociable mark as Mexico it becomes real attractive Mexico has loose food logistics good telecom infrastructure we have 120 million people more than 40 million electricity consumers so the market is big Mexico is beautiful too so I think it makes the whole package very very attractive and I work before in international financing and you can tell that this factor sometimes play play a role Mexico is really a big economy and if you're looking at the screen to look at the window how big is Mexico I mean Mexico cities around 20 mean people excellent so now let's move to the final part who are seeing this happening more quickly than we thought which is the retail side of the renewed energy development as I said in Mexico we have 40 million electricity consumers out of which 30 percent can be free consumers so those consumers are free right now in the market to select their supplier they are making a movie a movement is starting well big companies are purchasing by themselves are renewables a big beer company in Mexico is contracted directly because they can do it through the private market hundred hundred megawatts of solar power the tail market is really developing quickly we have around 417 generation permits right now people wanting to invest in Mexico we have 29 suppliers this open is that with supply the unregulated market we have 13 trading companies and we have already 81 large industrial consumers that are selecting an alternative supplier so the retail market is starting to develop and this market a small medium enterprises and and residential consumers are finding now very attractive distributed generation and I will listen this is the last part of my presentation what is happening with distributed generation in Mexico we show new regulations on distributed generation which include three different formats for your how to engage with the grid or how your energy is regulated we have net metering net billing and if you have a block of land if you can install a solar power generator which is hooked up into the grid and sell your energy to the sport market prices which in some regions of Mexico are very attractive for smaller scale distributed generation this is what is happening distributed generation is growing exponentially and is growing in the areas of the country but we have lots of Sun which is most of it and who is installing solar power in Mexico rooftop solar power small scale installations is not only residential consumers this is very important so half of the installations are in residential consumers and half in small and medium sized enterprises you know businesses shopping centers car manufacturers as small companies so the growth in in distributed generation is exponential these days in in Mexico so even though the regulated consumers cannot access the market under the electricity energy perform a distributed generation she will appear this distributed generation fear is all accepted generation and basically that says you can install up to 500 kilowatts of any power generation source without any permit and you just have to follow interconnection rules etc but up to 500 kilowatts which is not is not small really 500 kilowatts is considerable you can install it and you can supply energy one of these three schemes that I just mentioned that will in the meeting complete sale of the excess electricity or your total electricity to the distribution grid this is this is what I think is happening in Mexico that therefore even though we did it late is moving really fast in a time word you know technology development combined with market markets clear and transparent rules are making us work pretty quickly in the in the clean energy transformation I used to mention my personal anecdote when I was a kid we have to use would imagine that were to heat our water at home when I was a kid so I wanted to have a shower when you put the wood in the boiler I remember that I did that until I was like 15 years or then the oil industry developed in Mexico there was a refinery in Salamanca from the refinery we were able to get LPG cast and this is interesting natural gas never arrived to this part of Mexico what I was born but we had the song so most of my relatives in that part of Mexico they don't they live frog and avoided natural gas and they jump it directly to solar water heating while being a solar radiation in Mexico advanced of technologies and we are seeing how now with the reform with the ability of the consumer to select a supplier with the technology development a very clear simple transparent rules to access the grid the renewable energy development is is quickly moving what I think would happen is that we could reach very large shares of bio water and Rovers in a fraction of the number of the years that Spain or Germany needed so that is a challenge we need to quickly adapt the systems to make sure we can manage our this renewable resources so basically that was the of the presentation I hope you have enjoyed it and this open now for questions and answers Thank You Marcel sorry my thing happened quickly Mike thank you very much I was particularly moved by your personal anecdote there at the end and since you're obviously still very young that that wasn't that long ago that that was occurring in Mexico so I appreciate the up but the personal anecdote is is quite remarkable and definitely makes you makes you understand how quickly things have changed particularly in some parts of Mexico living where you you grew up for folks who I think a lot of you have already figured it out and seen how to pose questions but the way to close questions if you have any more use the chat function right there we have a lot of them here but Marcelo you know I was thinking about something as you spoke and one of the things I tried to say at the beginning and that there's a lot to applaud and again congratulations to you and everyone and across the entire government of Mexico as well as the industry for really moving so quickly on these reform measures but one of the key things is sort of that what's next question and let me put it into a very specific question for you that I think could help you helpful understand you did a nice job of you know and you spoke very eloquently about the level of competition that the two auctions have created the the slides that listed it is not to mention this the logos of the bidders and those who actually want I guess is better put so the question I would have is in terms of what's next how how confident is everyone that all of those projects will come online in the timeline and under the prescriptions of the bidding that was that as the bitter one in terms of the cost but also the timeline and for the delivery of the energy and and the certificates I guess to be very succinct how are those developing and are they all going to come online to the degree that they they were committed yes that's a very good question and unique this is also part of the change in the reform so now is the private sector who takes all those streets you know construction financing we have very good news a couple of weeks ago many projects are arriving financial closing and they are building so to the extent that they will finish on time for the most part you know it's a private sector question we hope they quick and they move as planned they have to enter in particular dates there are guarantees and will be trigger if they don't they don't show up this is basically you know the risk anyone is facing in in in any part of the wall you need to do environmental social clearing so to give you a number of how many of those we will enter it would be to two ambitions from my part because I don't know what is the status of separate but as you said we have very very robust private sector in Mexico we have companies that have been here for a long time we have top-of-the-line companies this is not to say that breaks will not have a challenge because everybody has a challenge as we know but you know hopefully as we learn through all those products we will come online the next option is coming out so you can always run another option to compensate for exact not time but basically this is we are in the hands of the private sector here to to push quickly for the projects there is a public sector part because the the environmental and social clearance is especially of course managed by the by the government the Minister of Energy and the environmental ministry but hopefully things move us as they move with infrastructure in Mexico say they move the way all the breaks have moved I think we will be successful actually no I think and I was I was a bit in artful and while th re had been some commentary over the last several months obviously whether you know the record level prices and the commitments that some of these projects are making we're going to be able to come online but like you said there's an auction process that maybe also looks at compensating for some of the potential fall-off and some of those let me move to some of the questions are our participants opposed we'll just go in order as we receive them there's there's a lot of different questions but let me start with something I think that's pretty interesting about energy storage and I know you just were here in San Diego participating in a huge event focused on storage so to speak a little bit if you could as to where energy storage fits in and the specific question is is energy storing story two considered under the energy transition law particularly utility scale battery energy storage yes what has been surprising to us here at the Commission is that we when we hear from consumers lash industrial consumers when we hear from generation companies they are telling us you know it may make sense to me I'm ready to put storage to supply this Factory and couple that with our generation facility some consumers are also tell us you know it made sense for me there is actually under study financed by the USTDA where they detect that in Mexico storage could be a very large-scale economic Olivia well so I should consider for distributed or distributed regulations allow for behind the meter storage you could install your storage already behind the middle for installations it was 500 kilowatts for large-scale what we are doing at the Commission and given the interest from many consumers is to to review our regulations and perhaps to list something soon that basically recognizes all the services that storage provides we sure axillary services regulation for frequency voltage support and Blackstar capability and we want to make that regulation brush ready in the sense that if the storage provides that service it should be recognized so this is something we are thinking on we don't have a calendar but we're already thinking on making sure that if anyone wants to put a storage they are recognized for the value that they provide and this this this study by the u.s. TDL actually identifies that in the next five years there are 2,000 mayor was of the storage that are economically viable in some pockets of the grid because of you know the economics of transmission and arbitrage in the energy market or it it seems that the storage market in Mexico is is attractive we hope to issue some regulations in that regard and see how the market develops back behind the meter right now you can do it we don't have statistics yet but but we're pretty sure some districts already had some you know small batteries coupled with their PV installations that's super now I do want to point out you call it the silent success but I'm particularly as former USTDA employee and particularly delighted to hear that such an important study has been completed and if you could share that maybe we can also make that available to everyone who's participating today I think that could be very interesting to look at so we'll look forward to that from you thanks for sharing thank you so here's an interesting question I think and I remember when we've had webinars and discussions in the past a lot of confusion is stemmed from what is actually happening and how is it happening on the clean energy certificate market so the cells as they're known the question here is what is the price of cells so maybe explain a little bit more and I know you talked about it in the auction process but answering that question maybe also set the context for why Mexico chose the cleaners your certificates as the way of helping to meet the clean energy goal will set out in the coming years yes and that's an excellent question if you see this the certificate system is a way I will put it like this to trade access certificates more like an opportunity market the regulated market is attracted to options and in those options the generators are selling the energy the certificates and the capacity of the power plants and they bid as a bundle all those three products so they are selling their energy their clean energy and the capacity so they implicit price of the certificate is in their in their efforts if you do and back of the envelope calculation and don't take this number as a given because this is not an efficient number I think it should be maybe ten to fifteen dollars the implicit value of the certificate this is not a market value yet we will see a market value once people start exchanging certificates in the marketing 2018 so the long term option sprint investment and those generators are already selling the certificates to the government if you compare the price of the price of her novels it could be conventional you will see that the difference is not that much that's why I say in some cases you could say is ten dollars but is more or less but with the declining prices of clean energy of course the certificate price will go down the service so there is not an implicit value that you can quickly calculate from the options the actual market you will really start revealing next year as I said some companies are only buying their own moon energy on the free market maybe they perceive that you know if I can get Friday dollar energy and is Tina Ray that will help me meet the clean energy requirement so that that's where we are now so an actual market price will start to be in 2018 implicit prices you can guess right now you have $40 wind $32 solar that means the certificate implicitly is not public in any but just so the the create certificates were an important policy tool as well I mean what we would call here you know more it's not exactly but similar to a renewable portfolio standard in that certificates helped you and helped the the authorities in Mexico to help you know it set that make that gap up to meet the 25 percent goal for next year right I mean so part of the clearance certificate market is driven by the goal of the clean energy target in the coming years right so yes yes so you see if you put the certificate system you still need instruments that be long-term investments so that's why the long term options are the the mechanisms for the regulated market will make sure those investments come that those are lower price that they are clean so is in fact our our system is I would say is a canary certificate system with this very important instruments to make sure the projects are bankable are financial which is the long-term option so the certificate market will be the way to track that the clean energy tiger is met and that if an industry is in excess or short of a few merits of Trinity you can buy those through the certificate but a certificate system by itself without central contacting for the regulated market maybe it would have completely different so I think the two mechanisms working at organic the wash meeting the goal excellent excellent no thanks for the clarification a lot of other questions let me let me jump to one here that gets to the to the arc we're talking a lot about the auction here in the in the bidding and the different parts of the bidding tidbit evaluations consider base load generation versus intermittent generation yes this is a very important question so basically if you are clean energy technology you can sell energy certificate and the capacity so in terms of the capacity the food energy they are evaluated the same however in mexico capacity is the ability that you have to deliver power during the peak years of the of day of the year the peak hours of the year so here basically if a solar farm believes unless you is a 100 megawatt facility he believes he can deliver the tin mayor was during the peak after he can make their bed and beating to the market only 10 megawatts if you are a base load generation like combat like geothermal power which actually work also in the option I just mentioned solar and wind because they were the majority winners but we had also geothermal power and of course that the thermal facility over most of its capacity so they are compared equally under the basis of the of the belief that every result has regarding meeting that peak peak peak power peak power capacity so they are compared exactly the same as if they were one or the other for the most part the option is technology for the most part perfect and there's and there's some other questions here that they get to some of the bet well thanks everyone for all the questions this is fantastic I think we've got unfortunately more material than we have time with with the commissioner but let's let's look at something here that continues on the discussion of sort of the project development and the question I posed at the beginning of the QA there's very specific question Marcelino does the Cray have a time limit to respond to generation permits requested by power generators we can all day they this an essay specifies Cray yes no of course we have below we have a time line at which we have to respond when somebody's requesting a permit our statistics show that we are responding on time you know getting a generation permit is pretty straightforward if you meet the requirements and the Lord you get your permit why because nice and free market activities are getting your license you get your license and then you buy a car so Theresa I don't remember the number of days because we always answer we have a issue as I said more than hundred yes the number of days we have to resort to any permit request is 90 days and what I know from the governing body being part of the governing body is that our statistics in responding are very good I always encourage any participant in the market that if they don't get a response on time they go through our webpage and request for a meeting and that's what is happening with determine the fact that this market is working is because we are implementing all regulations in a very effective and transparent way we want the market to tell us if we are not doing well in one side so please always send us this in fact actually there's a couple more things I want to get to I want to talk a little bit like reliability and I certainly want to talk about the next auction but first there's a couple different questions let me lump them together about tariff regime can you talk a little bit about I mean what some of these questions ask is the evolution of the tariff regime and how that's progressing and when Cray will begin to publish the new tariff regime so anything I know that sort of abroad compilation of questions and ideas there pitaka bertha tariff is the evolution and and what's coming next yes excellent and that's a very important question because I believe is key for the development of the retail market as I said this retail market is developing large industries are selecting after native suppliers appreciating directly their clean energy many industries are not making that decision because one of the pieces of the reform implementation that we are working on is a the evolution of the type regime what do I mean by that the the the reform clearly specifies that the old generation that belong to CFE the most efficient power plants are going to be contracted to supply the regulated service when that happens we have the cost of generation and we are transmission distribution and retail to determine the market very great for the regulated consumers we are working on that process I saw in the media yesterday that the Minister of Energy issued the notification that the contracts are signed so we hopefully the next month we will have the new tariff regime for the regulated service this is a very important decision we're not only as are involved why because the Minister of Energy will sign the contracts we issue the cost efficient ties and the Ministry of Finance at the same time has to issue the subsidies they believe they have to put in certain consumer classes so this is really an intern institutional word that we hope to implement through through this year definitely my systems have to be met before we could jump into that why was it that you hope the contrast those will be ready soon I believe in this or next week so with that we can start quickly moving towards issuing the new great and the Ministry of Finance to the side were they two would order to focalize the subsidy that they got approved in the budget for this year because now they the amount of the subsidies is approved in the Congress which is really a very important feature of so we hope to have that issue through the remainder of this year that's the plan no that's so imminent in coming soon so thank you for clarifying the status and what's what's coming very soon and next before we talk about the next auction let's talk about something that's very important and it's something you know for the over the years when we talk about the further incorporation and deployment of renewable energy and as clean energy targets and renewable portfolio standards get increased in various locales the question of grid stability and reliability comes up and there's a specific question here as to what policy measures and/or strategies are being adopted to ensure instability or reliability particularly latest projects closer to load Center is there a good mix of renewable and conventional so it's it's the increasing debate and we saw it actually very interestingly with the solar eclipse here the other day in California where the grid had a real challenge to manage through that because of the about 10,000 megawatts of solar that's on the system here yes excellent and that's a very important question because of course we need to understand what are the impacts what are the measures you can take to mitigate the potential impact so before that in the interconnected system in Mexico we have hydro gas and which is good to manage you know variability or intermittency in the integrated system they the the the the volume by event removals is not yet that peak to be worried Jana however we are very preparing with the reform to make sure we put the elements in place so that the system is managed properly as as as add variables increase exactly what are we doing as I said the grid so the interconnection requirements for wheel and solar plants are very modern we don't want to have very old technologies that were not able to cooperate with the grid and we have a big debate with the industry they were very cooperative about commenting our regulations on grid interconnection requirements but we have trade interconnection requirements that are very modern in the sense of green and solar technologies they need to cooperate to the extent possible with the viability of the great especially frequency voltage control that is one the system operators and a say in the market rules it is already required that this facilities provide a forecast and you know forest is keys this is the low cost measures you can do to improve the charter dispatch so far it does is already provided by these facilities so NASA takes this forecast and they improve it in a way that they know exactly what is going to happen with the resources so I saw today I think the things we are putting in place are working looking ahead and a beauty as you can see in the transmission expansion plans so many areas of the system could get a lot more of solar power and we could start seeing maybe mini doc cars in Mexico similar to California but the system operator is doing a very good job of preparing with that especially we have seen that if winter connected regions with more transmission the variability problems will mitigate considerably so we are aware of that the system operator is constantly learning of experiences from all I think right now as we speak there is a big conference on viability in the power grid so the status is the level is not yet data that is is creating problems although our system and our regulations are preparing for modern technologies and we are constantly in our transmission plants and and ours Margaret Palin actually released yesterday making sure we put the technologies to make this possible because th s is possible when we know is possible technically possible eclipses can be predicted with tremendous affinity if something is easy it is an eclipse I think we should be worrying more about the traditional you know an alive breaks outta conventional power generation breaks the to predict that it's almost impossible to predict an eclipse I think you know the de Mayans knew that 200 there are other things we need to look for but we are constantly working on that we will have a collaboration agreement with met in the u.s. we constantly meet with our colleagues in California and p.m. to learn as quickly as possible on the different solutions we need to implement because I'm just to make it short because I think our challenge is that we could get to very last shares in a very short period of time and and that's the challenge I would say how to implement the solutions much quicker in a fraction of the time that is California or Spain or Germany it so that's why we're working very closely with NASA and with police for more system operators and regulators no absolutely we could be good but I want to get to the final question thank thank you for that no absolutely eclipses of the nature we had this week are indeed quite predictable so thanks but but absolutely the role of Technology and how technology better energy storage or other elements of digital technology and how you manage some of these questions of intermittency or certainly on the tips of everyone's tongue in mine these days let's finish with their upcoming launch I do want you to spend at least a minute or two before we wrap up talking about the upcoming auction there's a specific question here regarding the auction and somebody wants to understand how the size or the the terms of the auction were determined specifically they're curious why it's a smaller quote-unquote auction than the last one and then beyond this auction so talk a little about that and then talk about you know beyond the third auction what you have in mind and what's on tap thank you so sighs there is an instrument that we issue at the Regulatory Commission which is the coverage requirements this long-term coverage requirements specified the amount of capacity and energy the the man has to be contracted beforehand to meet the security requirements of the reserve requirements issued by the Ministry of Energy so the the size of the oceans is such that according to the predictions the load we meet will meet the contracting requirements so basically what we want to make sure is that the load is contracted close to 100% to three years in advance the actual numbers are in this regulation that we issue but basically gradually we want to make sure that three two years in advance the load is perfectly contracted ups to its maximum demand plus the reserve margin that is in the in the supply security polity of scenario so vast numbers and NASA makes the calculation on what is the gap according to the prediction and how big needs to be the option so that's the way the requirement he said so the third option the amount of energy that is going to be contracted is 631 hours so it's not freely smaller than the previous one and what is important is that in this option not only the regulated service will be contracted which is contracting which is CFE so now three consumers are also purchasing energy and cleaner is option and in fact of the total demand in the option roughly ten percent comes from enterprises consumers there are free consumers that wanted to join the option to get these attractive prices this is what happened when they saw the prices that I went to the regulated service which is good the the free consumer said I also want those prices how can I access also and a window was open so that they could access the option and now the total demanding the option as I mentioned in person is coming from from unregulated consumers which is you know businesses or suppliers of electricity and the ocean is running dry now offers are being submitted and the option will be the results will be released by for them to calendar by November 22nd of this year the future it is you continue looking at what the system and then in trying to understand the needs of the system as well as the the cleaner targets inside so so there's more record-setting announcements are in terms of renewable energy from Mexico dr. Marcelino Madrigal thank you so much for all of your time and efforts this morning to not only present the updates on what's going on in Mexico but talk about some of the future and what's next and provide so much information during this question answer session thank you very much thanks everyone for joining us thanks for sticking with us a few minutes past the top of the hour I'd be remiss if I didn't also call attention to a couple other programs the Institute of the Americas is working on at the end of September together with the Secretary of Energy in Panama we're convening a roundtable of LNG and natural gas not just an energy secretary in Panama but more broadly in the economy and as that country continues its economic development the role of the canal in terms of LNG and natural gas perhaps as a as a ship born the proportion of fuel also it's never too early to save the date for a la jolla conference next year it's may 23rd 24th here in La Jolla of course so that's all we thank you the inner cap energy systems power thanks to all of you for joining us Jacqueline Sanchez thank you and we'll be in touch email with further what the recording as well as the presentation from dr. Madrigal and don't forget to follow us on social media my final parting words and uh dr. Madrigal thanks to Craig congratulations best wishes and we'll all be following the continued efforts from your colleagues across the Mexican government yeah thanks to all gentlemen you all know if you allow me also if please any market participants they are feeling that any regulation that anything is not working properly please get close to the Commission there is a process by we can hear any issue you may having accessing the grid please come to the Commission explain to us what is happening it really works so we are a very open institution come to us and let us know what I do delicious in accessing the markets because this is anuradha making sure consumers can access the market thank you very much things - thank you we will be sure to pass any comments along to you and your staff dr. Madrigal thanks again I have a great