Geothermal energy in Mexico has huge natural potential to generate electricity, and since 2013 a number of policy changes are influencing new contracts. Lillian Sol Cueva investigates the upsides and drawbacks of geothermal for Mexico.
The areas with the highest underground temperatures and geothermal potential are regions with geologically young or active volcanoes; for example, the Pacific Rim also called the Ring of Fire, which includes hot-spots in Japan, the US, Chile, Mexico. In non-volcanic areas, there is also a stable supply of slightly less heat at depths of anywhere from 10 to hundreds of meters below the surface.
Geothermal springs can be used directly for heating purposes or indirectly for electricity generation. For instance, geothermal hot water is used to bathing, heat buildings, de-ice roads etc.; while geothermal power plants use steam to generate electricity. Basically, geothermal plants pull hot water and steam from the ground; the steam rotates a turbine that activates a generator, which finally produces electricity.
Currently, many regions in the world are already choosing geothermal power as energy source to diversify their energy matrix and reducing dependence on fossil fuels. According to the Geothermal Energy Association, the operating capacity for geothermal power generation worldwide grew from 10,715 MW to 13,300 MW, in 2015. In El Salvador and Iceland geothermal plants already account for more than 25 percent of electricity produced; in fact, in 2014, 66 percent of primary energy use in Iceland came from geothermal.
Heating up Geothermal Energy in Mexico
Latin America has an enormous geothermal potential, close to 15 percent of the world’s total geothermal capacity. Mexico leads the region’s list, as it is the fourth geothermal energy producer in the world, after the US, the Philippines and Indonesia. According to the National Inventory of Renewable Energies, Mexico has a total installed geothermal capacity of 926 MW today, but this only makes up 6.9 percent of its overall potential. There is thus much room for improvement! Mexico’s geothermal power capacity is expected to rise due to a new regulatory framework, the foundation of a national geothermal innovation center, and the announcement of the country’s first private geothermal dealership and a joint EUR-20-million geothermal research project.
What has changed? In 2013, the Mexican Congress approved important constitutional modifications for an energy reform that ended the state monopoly on oil and gas production and power generation in general. In 2014, a number of important pieces of legislation were approved to operationalize the constitutional energy reform. One of these legislations, passed on August 2014, was the new Ley de Energía Geotérmica (Geothermal Energy Law). The Geothermal Law allows exploration and exploitation of new geothermal areas in Mexico, not only by the Federal Electricity Commission (CFE for its Spanish acronym) but also by private companies. In essence, the new law defines the process for application and authorization, permits, and concessions for all stages of geothermal extraction in the country (i.e. reconnaissance, exploration and exploitation).
With the new laws in place, the country’s first Wholesale Electricity Market (MEM by its Spanish acronym) began in January 2016. The MEM will host short-term transactions as well as medium to long-term contracts. Long-term contracts (long-term capacity and clean energy contracts (15 years) and Clean Energy Certificates (20- year contract)) can either be bilateral among market participants or can be awarded through auctions. During the first long-term auction in March, geothermal was largely absent. Instead, 11 proposals were selected, of which seven to wind farms and four to solar projects. However, later in September 2016, during the second long-term auction, 25 MW-year capacity was awarded to CFE’s geothermal power plan called Los Azufres III, Phase II, expected to start operations in 2018. This auction was the first time in which CFE acted as a commercial company, presenting the purchasing offer at competitive prices.
Equally important, in 2014, the Mexican federal government launched the Mexican Center for Innovation in Geothermal Energy (CEMIE-Geo for its Spanish acronym). CEMIE-Geo is an academic-industry alliance supported by the Mexican Secretary of Energy (SENER by its Spanish acronym) and the National Science and Technology Council (CONACYT by its Spanish acronym) aimed at promoting and accelerating the use and development of geothermal energy in Mexico. Today, CEMIE-Geo carries a portfolio of more than 30 research projects on technologies, innovation, direct use and evaluation of the country’s geothermal potential.
Finally, on November 19th, Mexico and the European Union launched a joint EUR-20-million geothermal research project, designed to develop and implement new geothermal technologies; as the most recent effort to rise the geothermal energy potential in Mexico.
Although it is true that geothermal plants are more sustainable than fossil fuel extraction and burning, there are considerable negative effects of their operation, which must be also considered as part of an integral geothermal policy in Mexico. First, policy makers need to consider the negative impacts that geothermal has on water resources, due to the amount of continuous water supply needed to produce steam (between 1,7000 and 4,000 gallons of water per MWh). Another environmental challenge which policy makers need to take into consideration are the associated hazardous chemicals that are emitted in geothermal plants, such as hydrogen sulfide, arsenic, ammonia and mercury. Finally, the issue of induced earthquakes must be addressed when selecting and promoting adequate geothermal technologies and locations, since these can occur by enhanced geothermal systems (EGSs) or “hot dry rock” technique (hot rock reservoirs are first broken up by pumping high-pressure water through them, the plants then pump more water through the broken hot rocks, where it heats up, returns to the surface as steam, and powers turbines/generators to produce electricity).
In conclusion, if Mexico wants to be a leader in the production of geothermal energy, it must heat up its potential, at the same time that it must protect from and avoid the negative impacts of this renewable energy.
Lillian Sol Cueva is a Mexican citizen and holds a degree in International Relations from the National Autonomous University of Mexico and a master’s degree in Humanitarian Action from the University of Groningen, the Netherlands. Her professional experience includes work in public policy, human and womens rights, sustainable development, energy and climate change. She has gained professional experience as a researcher, project coordinator, volunteer and public official in several national and international NGOs, as well as the Mexican government.