Country and Sector Issues
This project aims to advance the market for the Integrated Solar Combined Cycle System (ISCCS), a technology with significant potential for replication in developing countries and for decreasing greenhouse gas (GHG) emissions.
Mexico ranks as the ninth largest emitter of greenhouse gases globally, with energy combustion accounting for 89% and industrial processes for 11% of CO2 emissions From 1990 to 2000, national CO2 emissions from fuel combustion rose by 23%, and projections indicate a further increase of 69% by 2010.
Within the next ten years the demands for electricity, natural gas and oil products are projected to rise by 75, 69 and 35 percent respectively.
The Mexican electricity system, primarily managed by Comisión Federal de Electricidad (CFE), provides services to 96% of the population Fossil fuels dominate the country's power generation, accounting for approximately 73% of the 47 GW installed capacity, with oil-fired plants contributing the largest portion at 43% of capacity and 49% of generation While combustion turbine plants make up less than 8% of total generation, they play a crucial role in meeting peak demands and serving isolated areas Additionally, gas-fired plants and hydroelectric sources each contribute over 19% and just below 14% of total generation capacity, respectively.
Mexico boasts significant renewable energy resources, yet its generation capacity from wind, solar, hydro, and geothermal sources remains limited Positioned in the global solar belt, Mexico benefits from high solar insolation, making it ideal for efficient grid-connected solar power generation.
The electricity system in Mexico has 1, 365 MW of nuclear capacity (2.90 percent), 960
MW of geothermal capacity (2 percent) and about 87 MW of wind capacity (considering
La Venta I and La Venta II plants, less than 1 percent).
By 2014, Mexico's power sector is set to undergo a significant transformation in its fuel mix, with natural gas usage expected to double and coal generation increasing by 50 percent The International Energy Agency (IEA) projects that by 2020, natural gas will account for 44 percent of the country's electricity generation, reflecting a five-fold increase in its use within the power sector.
The Energy Sector Program (PROSENER) prioritizes the expansion of renewable energy resources at the federal level, outlining strategic actions such as developing initiatives to boost renewable usage, enhancing the share of renewables in the electricity sector, advancing research and technology in renewable energy, and promoting education on sustainable energy practices.
Mexico has made significant strides in enhancing the market share of renewable energy through key policies Notably, the introduction of Accelerated Depreciation allows for 100% investment in renewable technologies made after January 2005 to be fully depreciated in the first year Additionally, a proposed Renewable Energy Law, which has already passed the lower house of Congress and is awaiting Senate approval, outlines various methodologies and dispatch conditions to effectively capture the value of renewable energy contributions.
The proposed Renewable Energy Law introduces the establishment of a trust fund aimed at fostering the development of emerging renewable energy technologies (Chapter IV, Article 18) Additionally, it suggests the creation of a second trust fund dedicated to supporting research and development initiatives for promising renewable energy technologies that are vital for the future growth of the national energy sector and other industries (Chapter VIII).
In March 2006, the Institute of Electrical Research (IIE-Mexico) highlighted key research and technology development priorities for Mexico's energy sector in the 21st century The report underscores the need to leverage Mexico's abundant solar resources by focusing on three main areas: the production of heat for industrial applications using solar energy, the advancement of concentrating solar power technology—particularly parabolic trough systems—and the development of photovoltaic panels.
Currently, there are no specific policies or regulatory frameworks in place to promote renewable energy and the advancement of new technologies in this sector Notably, investment in research and technology development within the electricity industry has significantly decreased, dropping from 1-1.5% of total electricity sales in 1993 to just 0.68% by 2006.
The integration of solar parabolic trough technology in integrated solar combined cycle systems (ISCCS) in Mexico, supported by the Global Environmental Facility (GEF), represents a significant advancement for the country's electricity industry in the 21st century This initial installation will provide Mexican engineers with valuable hands-on experience in combining combined cycle gas turbines (CCGTs) with solar fields, enhancing their ability to optimize thermodynamic integration.
The anticipated passage of the Renewable Energy Law in September 2006, along with the establishment of proposed trust funds, will enable the replication and expansion of solar thermal projects in Northern Mexico.
The energy industry in Mexico has been significantly shaped by research and technological development, as highlighted in Pablo Mulas del Pozo's 2006 seminar on the national development agenda Additionally, the 1993 report by the Federal Electricity Commission (CFE) provides critical insights into the structure and dynamics of Mexico's electrical sector, emphasizing its importance in the country's economic landscape.
CFE is actively considering the integration of solar fields into its coal-fired Rankine plants in Northern Mexico This innovative approach aims to enhance CO2 emission reductions by replacing coal with solar energy, rather than relying solely on natural gas.
Mexico boasts a robust industrial infrastructure, enabling the local production of up to 40% of plant components Notably, Mexican firms have successfully manufactured parabolic collectors for the LUZ installations in California.
Rationale for Bank involvement
Global warming has been identified as a very significant poverty and security issue The associated detrimental effects are likely to particularly manifest themselves in many developing countries
Historically, anthropogenic emissions contributing to climate change have predominantly originated from OECD countries; however, future modeling indicates that countries like India, China, and Mexico will increasingly contribute to these emissions, albeit on a smaller scale.
The GEF Operational Program 7 (OP 7) focuses on advancing technology development initiatives to enhance the market presence of low greenhouse gas-emitting technologies Although these technologies are not yet commercially viable, they hold significant potential for future competitiveness.
In 1996, the GEF’s Scientific and Advisory Panel identified high temperature solar thermal power technology as a promising renewable energy solution with great potential for cost reduction, particularly in countries within the solar belt By 1999, the GEF initiated four projects in India, Mexico, Morocco, and Egypt to facilitate the adoption of Integrated Solar Combined Cycle Systems (ISCCS).
Concentrating Solar Power (CSP) is viewed as the most cost-effective option for converting solar radiation into electricity, and it had been operationally proven in California since the mid-1980s
In 2005, a review sponsored by the World Bank-GEF assessed the status and replication potential of solar thermal electricity technology The findings highlighted that this technology merits ongoing support due to its significant advantages, especially for developing countries, despite some challenges in its implementation.
The World Bank and GEF's strategy for developing the market for Concentrating Solar Thermal Power, assessed by experts from the Global Research Alliance and Fraunhofer, highlights that while the technology has shown promise, it is still working towards competitiveness Furthermore, it is expected to experience a cost reduction trajectory akin to that of wind energy.
The World Bank and the Global Environment Facility (GEF), alongside various bilateral agencies, have collaborated with a wide range of Mexican policy, technical, financial, and environmental stakeholders Their discussions focus on fostering consensus regarding the importance of diversifying the energy sector, exploring the advantages of harnessing domestic renewable energy resources, and identifying the necessary technical assistance and program strategies to promote and maintain sustainable long-term renewable energy development.
SENER, CFE, and other agencies acknowledge the significant contributions of the World Bank and GEF in enhancing Mexico's renewable energy sector Their efforts include providing tailored, objective information based on international experiences, facilitating collaboration with diverse technical, financial, and policy experts, and conducting essential analyses to guide decision-making Over recent years, the Bank has played a crucial role in bolstering national institutional capacity to plan, integrate, and develop renewable energy through various projects supported by carbon finance and the Global Environmental Facility.
Since the Kyoto Protocol came into effect in February 2005, the Bank's collaboration with Mexico, particularly through the Global Environment Facility (GEF) and various projects under its Carbon Finance Business, has been crucial in bolstering Mexico's role in international agreements aimed at reducing greenhouse gas (GHG) emissions.
In 1993, Mexico ratified the United Nations Climate Change Convention, followed by the Kyoto Protocol on September 7, 2000 The submission of the Second National Communication to the UNFCCC at the end of 2006 underscores the Mexican Government's dedication to transparently report its advancements in reducing greenhouse gas emissions.
As a non-Annex I country, Mexico qualifies for financing from the Global Environment Facility (GEF) under the established Convention mechanism The project has been endorsed by the GEF Operational Focal Point and aligns with the country’s national priorities.
The proposed project has been included by Treasury (SHCP) in the Federal Expenditures/Investments Program for 2006 (Programa de Egresos de la Federación, PEF) and approved by Congress.
Higher level objectives to which the project contributes
Lending instrument
GEF Project – No associated Bank investment.
A GEF grant will support the proposed project by funding approximately 14.2 percent of the total investment costs, specifically covering the incremental expenses related to the installation of the solar component.
The costs associated with the thermal plant will be financed by CFE 4, and the project will be executed under the Finance-Build-Transfer model, also referred to as Obra Pública Financiada (OPF) Ultimately, this initiative will be owned by the State.
Project development objectives and key indicators
The project development objective is to demonstrate and encourage replication of ISCCS power generation technology in Mexico and elsewhere, thereby contributing to the reduction of global GHG emissions.
Key performance indicators associated with the project development objective include:
Total electricity generated from the solar thermal hybrid project (GWh/year)
Solar output as a percentage of total energy produced by the hybrid plant(GWh/year)
Project global environmental objectives and key indicators
The Treasury (SHCP) plays a crucial role in approving the total cost of the thermal plant as part of the annual budget dedicated to investments in the electricity sector Additionally, the GEF grant is allocated specifically for financing the solar field project.
The project offers significant global advantages, including the demonstration of the operational viability and added value of integrating a solar field with a large conventional thermal facility through ISCCS using solar parabolic trough technology Additionally, it aims to lower long-term technology costs and contribute to a reduction in global greenhouse gas emissions.
The carbon emissions reduction is estimated in 391,270 tons of CO2 over the 25 year economic life of the plant.
Key performance indicators associated with the global environmental objective include: Cost of solar thermal power (c /KWh)
Reduction of CO2 emissions (tons/year)
Project components
The design, construction and operation of the proposed Integrated Solar Combined Cycle System (ISCCS) include two components:
Component 1 Design and construction of a 31 MW (peak) solar field: the solar collector field consists of a large field of single-axis tracking parabolic trough solar collectors.
The design and construction of a 480 MW net gas-based thermal plant involves a standard configuration featuring two industrial frame combustion turbines, each linked to a heat recovery steam generator (HRSG) and a steam turbine.
The proposed project will only finance component 1, as indicated in the Table below.
Table 1 Design and Construction of a 485.5 MW (net) ISCCS Plant (4)
Component 1: 31 MW (peak) Solar Field
Fence (land of solar field) 0.241 0.241 100 - -
Incremental Cost due to Integration (2) 5.171 5.171 100 - -
(1) Includes only the expansion required for the maintenance of the solar field (i.e cleaning of mirrors, etc).
Integrating solar fields necessitates design modifications to thermal components, including the expansion of major equipment, adjustments in the power block based on the chosen configuration during the cycle optimization phase, and the incorporation of duct firing.
(3) This is an indicative cost, actual costs of the thermal component will be specified once the bidding has been awarded.
(4) The operation of the integrated ISCCS is responsibility of the CFE.
It is important to note that under the Finance Build Transfer scheme (known as Obra
Pública Financiada or OPF), the bid winner will design and construct the plant and CFE will operate and maintain it.
Lessons learned and reflected in the project design
In 1999, a portfolio of four ISCCS projects was initiated in India, Morocco, Egypt, and Mexico, supported by a grant of $194.2 million from the GEF program Despite this substantial funding, all projects have faced considerable delays in their implementation.
A 2004 STAP review of the portfolio found that low greenhouse gas emitting technologies face not only the usual challenges associated with innovation and market development but also common barriers impacting conventional projects, including transactional, informational, institutional, and capacity-related obstacles.
The lessons learned with the GEF portfolio as indicated by the STAP review include:
The difficulty in adapting emerging technologies to the IPP scheme
The four projects in the portfolio transitioned from the Independent Power Production (IPP) model to a more restricted private sector involvement Specifically, India, Morocco, and Egypt adopted the Engineer Procure Construct (EPC) model, which includes contracts for operation and maintenance Meanwhile, Mexico's project will be procured under the Finance Build Transfer (FBT) approach.
Obra Pública Financiada or OPF) where the project is ultimately State owned, operated and maintained by the CFE.
The 2004 STAP review indicated that the limited success of the Independent Power Producer (IPP) approach was primarily due to the private sector's risk aversion, which stemmed from the significant financing costs associated with large solar field investments This issue was further compounded by a broader global decline in interest in IPP projects across developing nations.
In Mexico, the CFE opted to switch from the Independent Power Producer (IPP) model to the Open Power Facility (OPF) scheme prior to initiating the bidding process This decision was influenced by legal constraints that prevented launching a bidding process with an unsecured grant Specifically, the GEF CEO endorsement could not be obtained before bidding due to uncertainties surrounding the project design and the reputation of the selected bid winner However, under the OPF scheme, the GEF CEO endorsement can be secured before bidding begins, as the project design is clearly outlined in the bidding documents and the plant will be owned and operated by CFE, a company recognized for its strong technical expertise and solid reputation.
Securing full co-financing is frequently a slow and difficult process for capital intensive projects in developing countries
Several projects in the portfolio have faced delays due to challenges in securing full co-financing, particularly in public sector power plants in Morocco, Egypt, and India In Mexico, under the Finance Build Transfer (OPF) model, bidders are tasked with financing the combined cycle gas turbines (CCGT) thermal facility Historically, the OPF scheme and CCGT transactions have been successful, leading to a low-risk perception among bidders Notably, for the solar thermal hybrid project, the winning bidder will not be required to finance the solar component, as funding will be provided upfront or in installments as construction progresses.
There are a limited number of consulting firms and suppliers in the solar thermal technology industry
The engineering design for three out of four projects is being handled by the same firm, indicating a limited pool of suppliers for solar thermal power technology Consultations and interest requests from the four utilities, along with experiences from the India ICB, suggest that there are likely only one or two suppliers in this field Additionally, approximately 15% of the solar thermal components' value is protected by intellectual property rights Notably, during the India project, the hesitation of power-plant bidders to accept liability for the solar thermal component's underperformance led to no bids being submitted after the 2003 bidding process.
Mainstream power generation firms are expected to dominate the bidding process for hybrid projects, as the solar contribution in these initiatives typically ranges from 6% to 10%.
The potential for ISCSS cost reductions still looks promising
Despite a robust rollout of solar thermal electricity plants in California during the 1980s, the last 12 years saw no new commercial-scale plants commissioned However, advancements in research and development have led to improved solar field components and innovative thermal storage concepts, alongside valuable operation and maintenance experience from existing plants Recently, the industry has experienced a resurgence, with several projects currently under construction globally Nevertheless, a critical mass of projects has yet to be achieved for the industry to become self-sustaining.
The assessment to review the GEF strategy for the market development of concentrating solar thermal power technology sponsored by the GEF in 2005 concluded that:
This report highlights the importance of continued support for solar thermal electricity technology, especially in developing countries where its benefits can be substantial Although the technology is not new, its development has stagnated, despite the essential components already being available The primary challenge lies in reducing costs, but the study suggests that there is no inherent barrier to achieving a cost reduction trajectory similar to that of wind energy, potentially making it cost-competitive in the future However, sustained and robust support mechanisms will be essential for its success.
Alternatives considered and reasons for rejection
Partnership arrangements (if applicable)
The project is co-financed by the Federal Commission of Electricity (86% of total project costs corresponding to the thermal component) and the Global Environmental Facility
(14 % total project costs corresponding to the solar component).
Institutional and implementation arrangements
The Ministry of Finance and Public Credit (SHCP) serves as the official recipient of grants, uniquely positioned as the sole Federal Government entity authorized to accept donations from international financing agencies Additionally, SHCP is responsible for designating the financial agent for various projects.
The Federal Commission of Electricity (CFE) is set to implement a project funded through budgetary allocations from the central government under the PIDIREGAS scheme This involves investments in power generating plants utilizing either the Independent Power Production (IPP) model or the Finance Build Transfer (OPF) approach In the OPF model, the contractor handles construction and financing, with CFE making full payment upon project completion and acceptance, thereby assuming ownership CFE finances these projects through methods approved by the Treasury, which may include accessing financial markets or securing loans from national or international institutions, and in some instances, purchasing pre-arranged financial schemes from contractors.
The Federal Commission of Electricity (CFE), through its Directorate for Financed Investment Projects, will take on comprehensive responsibilities for the implementation of the GEF project This includes preparing the bidding package with general technical specifications, managing the bidding process through bid structuring and evaluation, overseeing the purchase and operation of the Agua Prieta II ISCCS Plant, and conducting project monitoring and evaluation, along with regular reporting.
The bidding package for the Agua Prieta II ISCCS plant has been finalized, with the CFE announcing the bidding documents on June 27, 2006 The bid award is scheduled for November 30, 2006, and operations for the plant are anticipated to commence on March 31, 2009.
Nacional Financiera (NAFIN) has been designated by SHCP as the financial agent for the Project and as such will provide overall financial management of the Project and the
Special Account NAFIN will also be responsible for formal correspondence with the Bank.
The grant will be allocated directly to the contractor via a designated account, following the stipulations of a legal contract established between CFE and the contractor Disbursement will occur in tranches, contingent upon the project's progress and under the technical oversight of CFE.
Monitoring and evaluation of outcomes/results
The monitoring and evaluation of outcomes and results will be mainly the responsibility of CFE.
CFE and its dispatch center, CENACE, will provide data on total annual generation and unit costs during the plant's operation, while emissions reductions will also be calculated and reported by CFE.
In addition, CFE will monitor, evaluate and disseminate performance results from the project both domestically and internationally, as a way to promote learning and support future replication.
The Ministry of Energy (SENER) through its Research, Technology Development and Environment Directorate (Dirección General de Investigación, Desarrollo Tecnológico y
Medio Ambiente) within the Undersecretariat for Energy Planning will also support dissemination activities and the periodic evaluation of project’s outcomes.
The project's main goal is to showcase and promote the replication of ISCCS power generation technology in Mexico and beyond To achieve this, a robust monitoring, evaluation, and dissemination system is essential The project will adhere to World Bank procedures and GEF guidelines for effective oversight CFE will ensure comprehensive recording, documentation, and sharing of project data Key performance indicators will be tracked, enabling the implementation of corrective actions when needed and providing valuable insights for future similar initiatives.
A capacity assessment conducted during the preparation of the project indicates that CFE has the technical capacity to operate, maintain and monitor the project’s performance
The Results and Monitoring Framework, detailed in Annex 3, establishes the methodology for assessing project advancement in achieving its global and developmental goals, while specifying the intermediate indicators that measure progress towards these objectives.
Sustainability and Replicability
Over the past six years, CFE has demonstrated a strong commitment to the project by providing significant support during its preparation Despite facing delays and discrepancies between the Bank's and the country's procurement policies, CFE has consistently adapted its bidding process to meet the Bank's requirements High-level management from CFE has made multiple trips to Washington DC to explore alternative solutions and address implementation challenges In light of the impossibility of securing a GEF CEO endorsement prior to initiating the IPP process, CFE has agreed to modify the project to a Finance Build Transfer scheme Additionally, CFE has taken on the financial responsibility for land acquisition for the solar field, as GEF grants do not cover such expenses The company has also invested in developing technical specifications for the bidding package and conducting public consultations to align with the Bank's safeguards Furthermore, due to the rising electricity demand in northern Mexico, CFE plans to commence the bidding process for a hybrid plant in June 2006, even though the GEF CEO endorsement is not anticipated until the end of July 2006.
The ISCCS Agua Prieta II aims to function sustainably within the Mexican power system, utilizing combined cycle gas turbines (CCGTs) for efficient and clean gas-based thermal generation By operating primarily at base load, these plants replace older, less efficient facilities, enhancing overall efficiency Additionally, the integration of solar energy provides a safeguard against rising natural gas prices and mitigates performance issues during adverse temperature and humidity conditions.
Mexico has significantly advanced in implementing policies aimed at boosting the market share of renewable energy Key initiatives include the Accelerated Depreciation provision, allowing 100% investment in renewable technologies post-January 2005 to be fully depreciated in the first year, and the proposed Renewable Energy Law, which was passed by the lower house of Congress in late 2005 and is currently awaiting Senate approval This law outlines various methodologies and dispatch conditions to enhance the value derived from renewable energy contributions.
The proposed Renewable Energy Law introduces the establishment of a trust fund aimed at fostering the development of emerging renewable energy technologies (Chapter IV, Article 18) Additionally, it outlines the creation of a second trust fund dedicated to supporting research and development initiatives for promising renewable energy technologies that are vital for the future growth of the national energy sector and other industries (Chapter VIII).
In 2003, the Bank's Operational Procurement Review Committee mandated a modification to CFE's procurement process, requiring the involvement of an independent third-party auditor approved by the Bank to maintain the integrity of the two-envelope system CFE agreed to this condition and has since permitted the Bank to review the bid evaluation report for the power plant, reinforcing the Bank's fiduciary responsibilities.
CFE acknowledges the potential of integrating solar fields with existing coal-based power plants in Northern Mexico, a strategy that promises significant reductions in greenhouse gas emissions while also providing a safeguard against future spikes in natural gas prices.
Mexico's robust industrial base positions it to locally manufacture up to 40% of plant components, supporting the argument for national-level replication Notably, Mexican companies have successfully produced parabolic collectors for California's LUZ installations By manufacturing certain ISCCS components domestically, overall capital costs can be reduced, thereby enhancing the feasibility of technology replication.
The ISCCS Agua Prieta II Project aims to enhance global knowledge sharing and promote the adoption of solar technology in both developed and developing nations situated within the solar belt.
Critical risks and possible controversial aspects
Insufficient and/or non- competitive bid responses
The GEF grant will be disbursed in tranches during before and construction to lower the volume and costs of financing
The Finance Build Transfer (OPF) scheme represents lower risks for the bid winner considering that CFE will be the owner and operator of the plant
Failed bid Existing track record of CFE in IPPs and OPFs is solid and internationally recognized The biddings have always attracted a good number of participant bidders
The size of the thermal component is large and considered an attractive project by itself.
A number of international consortiums have already expressed interest in the bidding.
Solar trough technology has demonstrated a strong operational history, with parabolic reflectors successfully tracking the sun at California's SEGS plants for over 20 years, producing nearly 13 TWh from 1986 to 2005 Securing reliable warranties from manufacturers is crucial for successful project development.
Technological or design problems during operation
CFE's qualified technical employees will receive training from the contractor during the solar field construction, ensuring they learn optimal operational practices This training aligns with the interests of both the equipment supplier and the contractor, promoting effective field management.
M want to build a good reputation with the installation and appropriate operation of their equipment.
CFE will provide continuous training to plant operators and employees in charge of maintenance.
Poor maintenance of solar field due to constraints in budgetary resources approved by
This facility is among the first in the country to utilize renewable energy sources With both national and international visibility, it will place additional responsibility on CFE to ensure the effective operation and maintenance of this demonstration plant.
Risk due to change in government and potential changes in the Ministry of
CFE serves as the project's counterpart, and the recent change in government does not affect its personnel, as our main contacts have been with CFE for over a decade For at least the past ten years, SENER has consistently promoted policies that foster the development of renewable energy and technology.
The introduction of the new Energy Sector Program in 2007 is unlikely to alter the current situation, as the project is anticipated to be awarded before the new administration takes office.
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)
Loan/credit conditions and covenants
Economic and financial analyses
An Incremental Cost analysis was conducted to evaluate the investment and operating expenses associated with integrating a solar component into a gas-fueled combined cycle plant in Agua Prieta, with detailed findings available in Annex 15.
Results of the economic and financial analyses are summarized as follows:
The project is set to significantly enhance the Mexican power system by increasing thermal efficiency, which will lower fuel costs and replace outdated, less efficient plants Additionally, it will provide reliable capacity in a context of diminishing reserve margins.
The total project investment is around US$350 million, providing a net capacity of about 485.5 MW The additional expense for integrating a solar component is approximately US$49.35 million.
CFE's least cost expansion plan primarily relies on gas-fueled combined cycle plants, but the introduction of a solar thermal project represents a shift in this strategy This solar component not only raises capital investment and operational costs but also enhances the overall efficiency of the plant, leading to reduced fuel expenses The proposed GEF grant aims to support sustainable development aligned with the least cost objective, maximizing benefits while also delivering environmental advantages from the solar integration.
The project’s Economic Internal Rate of Return is 14.4%, for avoided cost of 52
The sensitivity analysis indicates that the project's economic returns remain stable despite rising fuel prices, as these changes affect both costs and benefits, with benefits being calculated as avoided costs.
Economic indicators are sensitive to variations in capital costs The project will break even at capital cost increase of 14.9%
The project will yield a financial return of 22%
Scenarios of Natural Gas Prices
The economic and financial analysis relies on the natural gas price scenarios released by the Ministry of Energy (SENER) in the last quarter of 2005 These scenarios align with the cost-benefit analysis conducted by the Federal Electricity Commission (CFE), which was submitted to the Treasury (SHCP) for consideration in the Federal Expenditures Program (PEF) and subsequent approval by Congress.
The economic and financial analysis is detailed in Annex 9.
Technical
The project is situated in the Municipality of Agua Prieta, Sonora, just 6.2 kilometers from Agua Prieta City and 2 kilometers from the US border This region, particularly Sonora, is part of Mexico's Northern States, which lies within the world's solar belt, offering optimal conditions for solar energy development due to its high direct normal insolation (DNI).
The Agua Prieta II ISCCS project will have a net thermal capacity of about 485.5 MW (net) including a solar field of about 31 MW (peak).
The project features a standard 2x2x1 configuration, consisting of two industrial frame combustion turbines paired with a heat recovery steam generator (HRSG) and a single steam turbine.
The solar component features an extensive array of single-axis tracking parabolic trough solar collectors, arranged in modular parallel rows along a north-south horizontal axis Each collector utilizes a linear parabolic reflector to concentrate direct sunlight onto a linear receiver, which contains a heat transfer fluid (HTF) positioned at the parabola's focal point.
Due to limited water availability in the region, the plant will utilize an air-cooled condenser The water supply will consist of gray water sourced from the Agua Prieta municipal sewage system, specifically from oxidation lagoons located approximately 5 kilometers from the site.
The documents titled "Escenarios de Precios de Gas Natural 2005-2014" and "Analisis de Costo Beneficio CCC Agua Prieta II (con campo solar) y I56 LT Red de Transmision Asociada a la CCC Agua Prieta II (con campo solar)" outline a project aimed at processing water for boiler quality and cleaning solar trough components To facilitate this, an 8-inch water pipeline will be installed along the highway, connecting the municipal wastewater treatment plant to the project site Additionally, a small modular wastewater treatment plant will be established on-site to enhance the quality of grey water, ensuring it meets the necessary standards for operational and maintenance purposes.
Parabolic trough technology is the leading solar thermal electric technology, demonstrated by nine large Solar Electric Generating Stations (SEGS) operating since 1984 in California's Mojave Desert These plants, with capacities ranging from 14 to 80 MW, collectively provide 354 MW of installed electric capacity Currently, several parabolic trough power projects are in the planning and development phases in countries such as Algeria, Australia, Crete, Egypt, Iran, Morocco, Spain, and in the US states of Nevada and Arizona, including the Agua Prieta II project.
The annual average efficiency of solar output is projected to reach 13.6%, which is competitive compared to California's SEGS, where efficiencies are around 12% This increased efficiency can be attributed to the advanced 2x2x1 combined cycle gas turbine (CCGT) configuration.
The proposed plant will utilize natural gas as its fuel source, with an existing pipeline located just 2 kilometers from the site The project plans to install an extension of this pipeline along the highway to ensure efficient fuel supply.
CFE is set to construct a transmission line as part of a distinct project managed by its Transmission Line Project Management division, which was awarded through a separate bidding process.
Fiduciary
The recent review of federal procurement and financial management systems evaluated CFE, the second-largest government company in the country, against international standards The assessment confirmed that CFE possesses the necessary experience, capacity, and organizational structure to effectively manage complex procurement processes required for the Project.
The Bank and CFE established a review schedule for key documents such as bidding materials, advertisements, and bid evaluation reports, implementing special arrangements to maintain the confidentiality of the award until it is finalized.
Financial Management Assessment: The Mexico Country Financial Accountability
The Country Financial Accountability Assessment (CFAA) conducted in October 2003 evaluated the federal public sector's financial management systems, which were deemed generally sound The overall financial management risk for the country was rated as moderate, with individual risk factors assessed as low to moderate The findings from the CFAA will indirectly influence this project, as funding is expected to enhance Mexico's public financial management systems.
The Bank has actively supported government initiatives to enhance areas identified by the CFAA for improvement, particularly in accounting processes and information systems For the Solar Thermal Hybrid Project Agua Prieta II, a Financial Management Assessment (FMA) conducted by the Bank confirmed that the project design ensures a high level of transparency, facilitating effective oversight and control, while promoting seamless implementation.
Based on this analysis, the regional financial management team (LCSFM) has determined that the project risk is Moderate and has concluded the following:
The CFE maintains a robust internal control environment with skilled personnel, an organized office structure, and effective segregation of duties While the project entails only a few payments (approximately three) from CFE to the winning bidder, the significant amount involved presents a moderate inherent risk To enhance financial management prior to implementation, actions such as executing the project’s Operational Manual, refining audit arrangements, and finalizing the Disbursement Report format will be necessary The financial agent NAFIN will offer implementation support and oversight, leveraging its extensive experience with Bank-financed projects For disbursement, expenditures will be recognized upon payments made from CFE to the bid winner Given the project's nature, at least two financial management supervision missions will be conducted in the first year, with one in subsequent years, and a Bank financial management specialist will assess the annual audit reports.
Social
The project, situated in the Municipality of Agua Prieta, is approximately 6.2 km from Agua Prieta City, which has a population of 63,942 according to the 2000 National Census, with 99.87% of residents living in the city The local economy is primarily driven by the industrial sector A social screening conducted during the project's preparation indicated that its construction and operation will not result in any negative social impacts.
The project is located in an isolated area, with good access via federal roads The installation and operation of the plant requires an area of about 118-120 hectares.
The project site is owned by a single legal private owner who currently does not utilize the land for any productive or social purposes The owner is open to selling the property to CFE, and in compliance with Mexican law, the land's value will be assessed based on its commercial worth.
The project is already included in the Municipal Development Plan and it will not create any conflict with other future development plans and/or proposed land uses.
On May 4, 2006, CFE conducted a public consultation attended by local authorities, associations, media representatives, NGOs, labor unions, and community members, which yielded positive results Participants expressed their support for the construction and operation of this innovative technological project For further details, please refer to Annex 10.
The project is set to create 660 jobs during its pre-construction and construction phases, with 450 positions allocated for unskilled labor CFE aims to fill these roles primarily with local residents, while more specialized positions will typically be sourced from the surrounding region or state.
During the construction and operation of the project CFE will implement a number of community activities; these are described in detailed in the Environmental Management Plan 10
Under the above-mentioned conditions, this project is not expected to have any significant social impacts, and as such is considered a Category B project.
Environment
The Agua Prieta II Integrated Solar Combined Cycle System (ISCCS) is situated in the northern region of Mexico, specifically between Agua Prieta, Sonora, and Douglas, Arizona This area is characterized by a desert climate, featuring minimal rainfall and abundant solar radiation While there is some small-scale agriculture, the primary economic driver in the region is industrial activities, particularly manufacturing.
The project site is located near the municipality of Agua Prieta, which has a population of around 64,000 and benefits from full utility coverage, including water, electricity, and sewage services The city is expanding southward, where many industries, including the Naco-Nogales combined cycle gas power plant situated 7 kilometers southeast, are located Additionally, oxidizing lagoons for the city's water treatment are found to the east of the site The construction of the new plant will involve an 8-inch water pipeline, strategically aligned with the existing highway right-of-way that connects to these lagoons The region also hosts various other industries, such as quarries and maquiladoras.
The proposed project will utilize natural gas as its fuel source, with an existing pipeline located just 2 kilometers from the site To connect to this supply, an extension will be installed along the highway.
10 Available in the Project files.
11 The water pipeline will supply 21 L/sec from the oxidation lagoons at the Municipal wastewater
C
The project will not involve the construction of new access roads, as it is conveniently located next to a local highway However, there will be internal access roads within the site, similar to those found in other power generation facilities.
The project site is situated at a considerable distance from protected and environmentally sensitive areas, with the nearest federally protected site located about 12 kilometers away, priority protection areas approximately 13 kilometers away, and bird protection zones around 200 kilometers distant Furthermore, its location is far enough from the urban center of Agua Prieta to eliminate any anticipated socio-economic or land use conflicts.
The Agua Prieta II Integrated Solar Combined Cycle System (ISCCS) project is anticipated to have minimal environmental impacts due to its specific intervention type and the area's physical characteristics This initiative aims to address the increasing electricity demand in the region while contributing positively to the environment by reducing CO2 emissions through its solar component.
The anticipated environmental impacts of this project primarily involve the management of hazardous waste and the release of air pollutants Throughout the various phases of power plant development, waste materials are expected to be generated Key types of waste pollutants include lubricant oils, contaminated soils, insulators, and solvents.
An Environmental Management Plan (EMP) was developed to address various concerns, including noise and effects on local flora and fauna, and was incorporated into the Environmental Assessment (EA) Climate dispersion models indicate that air pollution from the power plant's operations will be minimal, typically ranging from 5% to 50% of the standards set by the Mexican Ministry of Environment and Natural Resources (SEMARNAT) A summary of the primary impacts and proposed mitigation strategies can be found in Table 1 of Annex 10.
Under the above-mentioned conditions, this project is not expected to have any significant environmental impacts, and as such is considered a Category B project.
Environmental Assessment, EMP and Environmental License
In accordance with the Mexican legal framework, CFE prepared an EnvironmentalImpact Assessment (EIA) and obtained an environmental license for the project.
CFE developed an Environmental Assessment Report for the Agua Prieta II site to fulfill Bank requirements, alongside an Environmental Management Plan (EMP) to ensure compliance with environmental standards.
CFE is well-equipped to effectively manage the environmental impacts and oversee the social and environmental components of the project, as outlined in the Environmental Management Plan (EMP) The project will be monitored by the central Social Development and Environmental Offices at CFE, along with an on-site environmental specialist.
Safeguard policies
The Project has been categorized as “B”.
Safeguard Policies Triggered by the Project Yes No
Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X]
Safety of Dams (OP/BP 4.37) [ ] [X]
Projects in Disputed Areas (OP/BP 7.60) * [ ] [X]
Projects on International Waterways (OP/BP 7.50) [ ] [X]
The environmental impacts of the power plant are limited to the site, and effective mitigation measures have been outlined in the Environmental Management Plan (EMP), adhering to the World Bank’s guidelines, specifically OP 4.01.
Policy Exceptions and Readiness
The operation complies with all applicable Bank policies.
12 The EA and EMP are available in the project files.
* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties'
Annex 1: Country and Sector or Program Background
O VERVIEW AND C HALLENGES OF E NERGY S ECTOR IN M EXICO
Since the nationalization of foreign oil companies and the establishment of PEMEX in 1938, the energy sector has played a crucial role in Mexico's economic strategy Following the international oil crisis of 1973-1974, the Mexican government increased investments in oil exploration and production This led to the discovery of new oil fields in the early 1980s, transforming Mexico from an oil importer to a net oil exporter By 2004, Mexico had become the world’s fifth-largest oil producer, trailing only Saudi Arabia, Russia, the US, and Iran Today, Mexico stands as a significant non-OPEC oil producer and is home to one of the largest oil utilities globally, PEMEX.
Despite generating significant oil revenues, PEMEX stands as the world's most indebted oil company, with a net debt of approximately $32 billion as of 2003 The Federal government has historically depended on PEMEX for about one-third of its budget, with the company and its subsidiaries contributing around 60% of their annual revenues to the Treasury for essential social and infrastructure programs in health, education, and more Consequently, both PEMEX and the national budget are highly susceptible to fluctuations in international oil prices and other market shocks.
PEMEX's financial obligations to the government hinder effective investment and capital expenditure programs necessary for maintaining efficient production and boosting proven hydrocarbon reserves Various administrations have suggested reforms to the institutional and fiscal frameworks connecting PEMEX to Hacienda, alongside initiatives to encourage private sector involvement in the industry Nevertheless, these proposals have struggled to gain significant support in Congress.
Mexico, despite having the sixth-largest natural gas reserves in the Western Hemisphere, faces a growing challenge as domestic demand has outstripped production over the past decade, primarily due to the rise of natural gas-based electricity generation Currently, the country imports 15-20% of its natural gas from the US, making it increasingly susceptible to price volatility In response to this dependence and the associated costs, the Fox administration has prioritized a Strategic Gas Plan aimed at boosting domestic production and reducing import reliance This plan encompasses various measures to enhance the country's natural gas output.
Increase natural gas production through Multiple Service Contracts
Diversify natural gas supply import sources and increase LNG imports
13 Preliminary estimates, first three quarters 2004; EIA, DOE, 2004 Mexico Country Analysis Brief.
Reduce the flaring of associated natural gas
Expand natural gas transport, distribution and storage facilities (strengthen interconnection capacity of pipeline grid with US)
Allocate more exploration funding to increase proven reserves
Since the enactment of the 1995 Natural Gas Law, Mexico's downstream natural gas market has welcomed private investors, following constitutional amendments that permit private companies to engage in the transportation, storage, and distribution of natural gas.
The electricity sector in Mexico is characterized by a capacity stock that includes 8,250 MW of gas based independent power production (IPPs), 10,268 MW of hydroelectric capacity, 22,691
As of 2005, the total installed power generation capacity reached 46,137 MW, comprising 2,600 MW from thermoelectric sources (including fuel oil and diesel), 2,600 MW from coal-based power plants, 1,365 MW from nuclear energy, and 2.18 MW from wind generation Additionally, the national interconnected system features approximately 45,000 km of transmission and distribution lines.
Mexico's electricity sector is primarily served by two companies: Luz y Fuerza del Centro (LFyC) for the Mexico City metropolitan area, and the Federal Commission of Electricity (CFE) for the rest of the country Despite being one of the largest state-owned utilities in Latin America, CFE faces challenges in technical efficiency and service quality Additionally, its interdependence with Hacienda complicates financing and investment decisions, impacting the company's sustainability and future development.
A key concern for both internal and external analysts is the tariff structure and the design of electricity subsidies Notably, residential electricity subsidies tend to be regressive, disproportionately benefiting upper-middle-income households within the higher income deciles.
The majority of consumption subsidies are concentrated among the top users, despite consistent tariff increases over the past 15 years Average tariff levels remain inadequate to cover service costs, with cost recovery stabilizing at around two-thirds of total expenses from 1997 to 2003 There is a recognized absence of a coherent national policy framework to effectively set and connect electricity tariffs, subsidies, and cost-recovery objectives Since the early 1990s, various governments have introduced different models for power sector liberalization and reform, but these proposals have sparked significant political debate, public opposition, and congressional rejection.
The Mexican electricity sector is primarily dominated by two state enterprises: CFE, which holds 85% of the generating capacity, and Luz y Fuerza del Centro, with 4% PEMEX contributes 2%, while the remaining capacity comes from private self-generation In 2004, Mexico produced approximately 231 Terawatt-hours (TWh) of electricity, with geothermal and hydropower sources accounting for 14% Notably, 73% of the country's installed power generation capacity of 52 GW is derived from fossil fuels, with oil-fired plants making up the largest portion at 43% of capacity and 49% of generation, while coal plants contribute 12% to the total generation.
Combustion turbine plants account for less than 8 percent of total electricity generation and primarily serve to meet peak demand and supply isolated regions In contrast, gas-fired plants contribute over 19 percent to the overall generation, aligning closely with hydroelectric power, which also represents around 19 percent of the total generation capacity, while gas-fired facilities hold just under 14 percent of the total capacity.
Table 1 below shows the expected evolution of capacity and output in the country’s electricity sector through 2014:
360,62 1 Source: SENER Prospectiva del Sector Eléctrico 2005-2014
Peak demand for electricity has increased from 18.6 GW in 1990 to 27.3 GW in 2003, averaging nearly 4 percent growth annually Despite a slight decrease in demand from 2003 to 2004, reserve margins declined throughout the 1990s, prompting the need for new generating capacity from private sources Initially, the Federal Electricity Commission (CFE) utilized the build-operate-transfer (BOT) model, adding approximately 1,100 MW of combined cycle capacity in the late 1990s However, private investors have since favored the Independent Power Producer (IPP) model, which simplifies the process of securing power purchase agreements and building permits Currently, over 70 percent of the more than 5,500 MW of new permitted generating capacity under construction employs the IPP contracting approach.
As peak demand grows slowly, the urgency to build new energy capacity has diminished, but keeping older plants operational leads to increased fuel consumption, higher emissions, and more unplanned outages due to reduced reliability By 2010, the total expected capacity from new plants is around 11.9 GW, which is slightly less than the anticipated rise in peak demand Currently, only 45 percent of permitted plants are under construction, indicating that even if all ongoing projects are completed by 2010, the system's reserve capacity will remain relatively stable However, not all projects are likely to finish on time, and the rise in peak demand is expected to outpace the growth in generation capacity.
The Prospectiva indicates that over 5 GW of power plants are expected to retire during this period; however, without an accelerated construction pace, many of these aging facilities may remain operational.
The latest Prospectiva report reveals that by the end of the planning period in 2014, both total and operating reserves are projected to drop below the desired levels Additionally, the country is currently lagging by approximately 5 GW in the anticipated new generating capacity.
Major Related Projects Financed by the Bank and/or other Agencies
After a prolonged period of minimal involvement in Mexico's energy sector, the World Bank is now overseeing a diverse array of projects in this field, although PSR ratings for these initiatives are currently unavailable.
The Competitiveness Development Policy Loan includes a significant focus on the energy sector, emphasizing transparency and performance monitoring to enhance efficiency While it does not support major reforms in the energy sector, it plays a crucial role in fostering improved sector performance.
SENER has sought financial support from the Bank to establish a national rural electrification program focused on renewable energy, aiming to provide essential services to the 5 million underserved individuals, predominantly indigenous, residing in the Southern States and Veracruz The proposed project, which includes $15 million from the IBRD and $15 million from GEF, is scheduled for appraisal in early FY '07.
SENER has sought bank assistance to initiate the Large Scale Renewable Energy Development Project, aimed at helping Mexico gain experience in commercially viable grid-connected renewable energy solutions The project involves the construction of a 101 MW Independent Power Producer (IPP) wind farm and aims to enhance institutional capacity for valuing, acquiring, and managing renewable resources sustainably With a $25 million GEF grant, the project has been successfully prepared and appraised, with negotiations anticipated in May 2006 and Board approval granted on June 29, 2006.
Numerous Carbon Finance initiatives are underway in Mexico, focusing on wind energy, gas flaring reduction, and energy efficiency Building on the success of the first GEF project in Monterrey, a second landfill gas capture site is being established in the city, alongside another facility in Guadalajara The urban-waste-to-energy sector in Mexico holds significant untapped potential for further carbon finance opportunities.
An ESMAP technical assistance grant supports a pilot project in financial intermediation for energy efficiency New ESMAP assistance is planned for energy efficient housing and national strategy for energy efficiency.
SENER has been an active participant in the energy-environment component of the Environment Sectoral Adjustment Loan and the follow-on Development Policy Loan, described in Annex 4.
Other related World Bank projects include:
Integrated Solar Thermal Combined Cycle Power Project for Morocco (in preparation)
Integrated Solar Thermal Combined Cycle Power Project for Egypt (in preparation)
Carbon Finance projects in the World Bank’s Latin America and Caribbean portfolio:
Nova Gerar Landfill Gas, Brazil
Alta Mogiana Sugar Bagasse Cogeneration, Brazil
Lages Woodwaste Cogen Facility, Brazil
Chacaboquito Run-of-River Hydro, Chile
Rio Amoya Run-of-River Hydro, Colombia
Furatena Energy Efficiency and Rural Development Project, Colombia
Cote Run-of-River Hydro, Costa Rica
Skeldon Sugar Modernization Project, Guyana
La Esperanza Hydroelectric Development, Honduras
Santa Rosa Hydroelectric Project, Peru
Huaycoloro Landfill Gas Recovery, Peru
Wind Farm projects in the World Bank’s Carbon Finance portfolio:
NorthWind Bangui Bay Project, Phillippines
Burgos Wind Power Project, Philippines
Shandong Luneng Jiaodong Wind Farm Project, China
Puck Wind Farm Project, Poland
UNDP/GEF: Action Plan for Removing Barriers to the Full-Scale Implementation of Wind Power in Mexico (Phase 1), October 15, 2002
GEF/UNDP China: Capacity Building for the Rapid Commercialization of Renewable Energy
BMZ/GTZ: Promotion of Renewable Energies in Mexico (PROMOVER)
USAID: Various technical assistance projects
Results Framework and Monitoring
The results framework is described in the table below:
PDO Project Outcome Indicators Use of Project Outcome
1 Demonstrate the operation of an
2 Reduction of CO 2 emissions, which contribute to global climate change, relative to business as usual.
3 Reduction of long-term costs of
1 Total electricity generated from the solar hybrid project (GWh/y) and
Annual average efficiency of solar input to electric output (%)
Has the integration between the thermal and solar components been successful?
2 Reduction of annual CO 2 emissions (a minimum of 20kt of CO2/year).
3 Solar Thermal Power Plant costs in ¢ / kWh Energy levelized costs
Monitor generation output (production and dispatching)
Monitor solar generation cost and determine if change in operation of solar/ISCC plant is necessary to maximize solar output.
Report annually experiences and lessons learned
Calculate CO2 emission reductions Report energy levelized costs
Use of Intermediate Outcome Monitoring
The operational viability of solar thermal power generation is demonstrated in Mexico.
1 Yearly global production of electricity of the ISCC plant
2 Yearly contribution of solar electricity
Show that solar thermal plant – a high-end technology - can be constructed and operated efficiently under the conditions of a country such as Mexico
Low generation from the solar component or from the ISCC as a whole is symptomatic of management, incentives and operational problems that need immediate resolution
The information will be used to track progress towards project development and global objectives and to adjust or improve the operation of the project if necessary during implementation.
Target Values Data Collection and Reporting
Outcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection
Reductions in main air pollutants emissions (tons/yr) for CO2 0 0 0 12,000 15,500 15,500 Semiannual Continuous monitoring by CFE CFE
Annual average efficiency of solar input to electric output
0 >12% >12% >12% >12% >12% Semiannual Continuous monitoring by CFE
Results Indicators for Each Component
(GWh) 0 0 0 3,000 3700 3700 Semiannual Continuous monitoring by CFE CFE
Yearly generation of solar electricity
0 0 0 35 70 70 Semiannual Continuous monitoring by CFE CFE
CFE-Investment Projects will be in charge of monitoring and reporting activities
CFE-CENACE will confirm the data on actual production and dispatch of the hybrid plant.
CFE-Instruments and Calibration Division will verify the quality of the monitoring activities and data collection.
Data collection is the responsibility of CFE (operator and dispatch center).
CFE is equipped to handle project monitoring and evaluation tasks, with the Ministry of Energy (SENER) providing additional data review on crucial outcomes and indicators as needed to enhance their functions.
On August 11, 2005, the Federal Official Diary (DOF) published the COFEMER agreement, which outlines the guidelines for presenting regulatory improvement programs across various sectors and decentralized government entities within the Federal Public Administration Among the measures specified for the electricity sector are several key initiatives aimed at enhancing regulatory efficiency.
Implement transparent regulatory accounting for electricity tariffs and related services, adhering to best international practices This approach will reveal the economic and operational performance of each power plant in the generating portfolio, along with the fixed and variable costs linked to transmission and distribution.
To enhance accountability in state-owned electricity enterprises like CFE and LFC, it is essential to implement transparency measures and public disclosure This includes revealing dispatch rules and operations, as well as both short and long-run marginal costs Additionally, key indicators related to management, economic performance, and service quality should be disclosed to relevant authorities such as SENER, SHCP, and CRE.
Although the programs and mechanisms to establish these measures are still being designed, it is expected that they will be operative in the short term.
CFE will oversee the reporting of project outcomes and indicators, while the Bank will have the opportunity to analyze and verify the quality of this data during scheduled supervision missions.
Detailed Project Description
The design, construction and operation of the proposed Integrated Solar Combined Cycle System (ISCCS) include two components:
Component 1 Design and construction of a 31 MW (net) solar field: the solar collector field consists of a large field of single-axis tracking parabolic trough solar collectors.
The design and construction of a 485.5 MW (net) gas-based thermal plant involves a standard configuration featuring two industrial frame combustion turbines, each paired with a heat recovery steam generator (HRSG) and a steam turbine.
The proposed project will only finance component 1, as indicated in the Table below. Project Location
The project is situated in the Municipality of Agua Prieta, Sonora, just 6.2 kilometers from Agua Prieta City and 2 kilometers from the U.S border.
N Lat 31 º 13' 31.79" W long 109º 36.37' 37.83" in Mexico The altitude is 1256 meters above mean sea level.
The Northern States of Mexico, especially Sonora, are situated in the world's solar belt, characterized by the highest levels of direct normal insolation (DNI), making it an ideal region for solar energy development.
The Agua Prieta II ISCCS project will have a net thermal capacity of 485.5 MW including a solar field of about 31 MW (peak).
The project features a standard 2x2x1 configuration, comprising two industrial frame combustion turbines linked to a heat recovery steam generator (HRSG) and a single steam turbine.
The solar system features an extensive array of single-axis tracking parabolic trough solar collectors, arranged in modular parallel rows along a north-south axis Each collector utilizes a linear parabolic reflector to concentrate direct sunlight onto a linear receiver, which contains a heat transfer fluid (HTF) positioned at the focal point of the parabola.
Collectors follow the sun's path from East to West throughout the day, maintaining a constant focus on the linear receiver As the heat transfer fluid (HFT) flows through the receiver, it is heated and then directed to heat exchangers in the power block, where it generates high-pressure superheated steam.
Superheated steam enhances the steam supplied by the Heat Recovery Steam Generator (HRSG) to conventional reheat steam turbine generators for electricity production The exhaust steam from the turbine is condensed in a standard condenser and pumped back to the heat exchangers as condensate, where it is converted back into steam Meanwhile, the cooled Heat Transfer Fluid (HTF) is recirculated through the solar field after passing through the HTF side of the solar heat exchangers.
Figure 4.3 Pictures of an ISCCS
Due to limited water resources in the region, an air-cooled condenser will be implemented The water supply will consist of gray water sourced from a municipal sewage system and storage tank, specifically oxidation lagoons located 5 kilometers away from the site This gray water will be treated to generate boiler-quality makeup water for the power plant's operations and provide adequate water for cleaning the solar trough components.
Parabolic trough technology stands out as the most established solar thermal electric technology, bolstered by nine large-scale Solar Electric Generating Stations (SEGS) operational since 1984 in California's Mojave Desert These facilities, with capacities ranging from 14 to 80 MW, collectively contribute 354 MW of installed electric capacity Additionally, several parabolic trough power projects are in the planning and development phases across various countries, including Algeria, Australia, Crete, Egypt, Iran, Morocco, Spain, and Nevada in the US.
ISCCS Technology Development and Experience 17
There are currently three suppliers of solar steam systems using solar trough technology:
There are two suppliers of heat collection elements (HCEs) Solel uses their proprietary HCE; Flagsol and Solargenix use HCEs provided by Schott.
The feasibility study conducted by Sargent & Lundy in November 2004 explores the Integrated Solar Combined Cycle System (ISCCS) in Mexico, focusing on its potential for sustainable energy development This report, prepared for the World Bank, highlights the innovative integration of solar power with combined cycle technology, aiming to enhance energy efficiency and reduce environmental impact The findings underscore the viability of ISCCS as a transformative solution for Mexico's energy landscape, promoting renewable energy sources and contributing to global sustainability goals.
Currently, Flagbeg is the sole supplier of mirrors Flagbel purchased Pilkington who supplied all the mirrors for the currently commercially operating solar trough plants in the United States.
This review of current parabolic trough technology highlights the three key components that account for 66% of the total direct costs in solar fields: support structures (29%), heat collector elements (HCEs) (19%), and mirrors (18%).
The Luz LS-2 and LS-3 collectors, utilized in the latest SEGS plants (SEGS VII-IX), exemplify cutting-edge technology in solar energy concentration However, the LS-3 collector's thermal performance and alignment maintainability have not matched the earlier LS-2 design, which was implemented in the SEGS III-X plants Consequently, the LS-2 design is anticipated to be the preferred choice for contractors Additionally, there are currently three new parabolic trough collector designs in various stages of development.
New collectors focus on reducing weight and simplifying fabrication by minimizing the number of required components Recent wind tunnel tests have yielded enhanced data that aids in optimizing structural design and further decreasing weight.
18 “EUROTROUGH Design Issues And Prototype Testing At PSA,” Proceedings of ASME International Solar Energy Conference - Forum 2001, Solar Energy.
The "Task 2 Report: New Space-Frame Parabolic Trough Structure" by Duke Solar highlights the importance of weight management for long-term reliability in solar collector designs Future innovations may focus on better integrating reflectors into the structure to optimize load distribution and minimize material use While non-metallic materials are being explored, their cost-effectiveness remains uncertain Significant cost savings could be achieved by reducing the number of components and simplifying fabrication and assembly processes, although this potential has not yet been quantified due to the absence of a new collector structure erection Additionally, the individual metal components can be sourced globally, allowing for competitive pricing and further cost reductions.
When choosing a support structure, it is essential to select suppliers who have validated their designs through both wind tunnel testing and real-world installations Critical operational factors include ensuring proper alignment to optimize efficiency under wind loads and minimizing the risk of mirror breakage caused by attachment issues and other related problems.
Project Costs
Design and Construction of a 566 MW net ISCCS Plant (4)
Component 1: 31 MW (peak) Solar Field
Fence (land of solar field) 0.241 0.241 100 - -
Incremental Cost due to Integration
Component 2: 480 MW (net) Thermal Plant
(1) Includes only the expansion required for the maintenance of the solar field (i.e cleaning of mirrors, etc).
Integrating a solar field necessitates design modifications to thermal components, including the expansion of major equipment and adjustments to the power block based on the chosen configuration from the cycle optimization phase, as well as the incorporation of duct firing.
(3) This is an indicative cost, actual costs of the thermal component will be specified once the bidding has been awarded.
(4) The operation of the integrated ISCCS is responsibility of the CFE.
Implementation Arrangements
The Ministry of Finance and Public Credit (SHCP) serves as the official recipient of international grants, being the sole Federal Government entity authorized to accept donations from international financing agencies Additionally, SHCP designates the financial agent responsible for managing the project.
The Federal Commission of Electricity (CFE) will implement the project, funded by a budget allocation from the central government through the PIDIREGAS scheme This involves either the Independent Power Production (IPP) model or the Finance Build Transfer (OBF) modality, where the contractor manages construction and financing Upon satisfactory completion, CFE pays the contractor in full and assumes ownership of the project CFE secures financing through authorized modalities from the Treasury (SHCP), utilizing financial markets or loans from national and international institutions, and may also purchase pre-arranged financial schemes from the contractor.
CFE through its Directorate for Financed Investment Projects (Dirección de Proyectos de
Inversion Financiada will take on the comprehensive responsibilities for the GEF project implementation, which includes preparing the bidding package with general technical specifications, managing the bidding process by structuring solicitations and evaluating responses, overseeing the purchase and operation of the Agua Prieta II ISCCS Plant, conducting project monitoring and evaluation, and providing regular reports.
The bidding package for the Agua Prieta II ISCCS plant has been finalized, with the CFE announcing the bidding documents on June 27, 2006 The bid award is scheduled for November 30, 2006, and the plant is anticipated to commence operations by March 31, 2009.
Nacional Financiera (NAFIN) has been appointed by the SHCP as the financial agent for the Project, tasked with managing the overall finances and the Special Account Additionally, NAFIN will handle formal communications with the Bank and offer procurement assistance to CFE.
The grant will be transferred through a special account directly to the contractor under the terms and conditions of a legal contract signed between CFE and the contractor
The grant will be disbursed in tranches as the construction of the project proceeds under the technical supervision of the CFE.
The detailed implementation arrangements are provided in the Project’s OperationalManual 25
Financial Management and Disbursement Arrangements
The Mexico Country Financial Accountability Assessment (CFAA), completed in October 2003, evaluated the federal public sector's financial management systems, which were deemed generally sound with moderate overall risk While individual risk factors were rated low to moderate, the CFAA's findings indirectly affect funding for projects like the Solar Thermal Hybrid Project Agua Prieta II, as resources will flow through Mexico's public financial management systems, including the Comisión Federal de Electricidad (CFE) The Bank has been actively supporting improvements in areas identified by the CFAA, such as accounting processes and information systems To ensure transparency and effective oversight for the Agua Prieta II project, the Bank has initiated a Financial Management Assessment (FMA) aimed at facilitating smooth implementation.
Based on this analysis, the regional financial management team (LCSFM) has determined that the project risk is Moderate and has concluded the following:
The CFE possesses a strong internal control environment with capable personnel and effective segregation of duties, ensuring efficient project management Despite involving only a few payments, the substantial amounts create a moderate inherent risk that necessitates enhanced financial management measures prior to project implementation, including the establishment of an Operational Manual and finalizing audit arrangements and Disbursement Report formats NAFIN, with its extensive experience in Bank-financed projects, will provide essential implementation support and oversight Expenditures will be recognized upon payments from CFE to the bid winner, and to address the project's characteristics, at least two financial management supervision missions will occur in the first year, followed by one in subsequent years, with annual audit reports reviewed by a Bank financial management specialist.
The financial management (FM) procedures outlined in the Operational Manual (OM) should incorporate the simplifications suggested in the FM/Disbursements section of the Bank's Review of Country Systems document, submitted to the federal government in July 2005 Prior to the project's effectiveness, further visits will be conducted to confirm that all FM arrangements align with the established agreements before the project commences.
The project will be carried out by CFE, a public decentralized organization responsible for electricity generation and distribution in Mexico, operating independently from the national budget CFE generates its income through fees for electrical services, ensuring financial autonomy Headquartered in Mexico City, CFE boasts a strong internal control environment, staffed by skilled professionals in a well-structured office with effective segregation of duties.
Flow of Funds and Information
CFE, not funded by the National Treasury (TESOFE), will utilize a Designated Account to make advance payments to the bid winner Following these payments, CFE, with the support of NAFIN, will request withdrawals from the Grant Account to replenish the Designated Account Additionally, CFE will provide expenditure reports or Statements of Expenditure (SOE) to the Bank at specified intervals.
The Government of Mexico is required to reimburse the Bank for any identified ineligible expenditures during external or internal audits, Bank supervision missions, or financial agent reviews.
The following diagram presents the preliminary proposed flow of funds for the project:
Funds flow (steps 1 to 5) - Information flow (steps A to B)
Payment to the bid winner
CFE will uphold accounts to prepare project financial reports, and LCSFM has evaluated the current accounting policies and procedures at CFE, deeming them satisfactory for the Bank Prior to the project launch, efforts will be made to align the project accounting procedures with the existing practices at CFE as closely as possible.
Information Systems and Staffing (key FM staff)
The project's accounting records will be maintained using CFE's current systems, which are well-supported by a skilled staff experienced in managing externally financed loans, particularly from the Inter-American Development Bank CFE operates on the SAP system, which is currently being upgraded from version 4.6 to 5.0, a transition that is deemed acceptable by the Bank.
CFE will prepare annual project financial statements for auditing purposes, adhering to the formats outlined in the standard Terms of Reference established annually between the Bank and the Secretaría de la Función Pública (SFP) Additionally, the project's Operational Manual (OM) will provide comprehensive details on reporting and monitoring within the Financial Management section.
The CFE will prepare and submit Financial Monitor Reports (FMRs) to the Bank every semester, detailing the sources and uses of funds for the Project, including a breakdown of funds from the GEF Trust Fund Grant Each report will highlight variances between actual and planned fund usage The initial FMR is due within 45 days after the first semester post-project effectiveness, covering expenditures from the first advance to the semester's end Subsequent FMRs will follow the same timeline, submitted within 45 days after each calendar semester.
Annual financial audits of project fund management will be conducted in accordance with Bank policy and the country systems approach being implemented in Mexico The audits will follow the framework established by the Memorandum of Understanding (MOU) between the Government of Mexico and the Bank Detailed information on external audits will be provided in the Financial Management section of the project Operations Manual (OM).
A project audit covering all project activities is due six months after the end of any fiscal year in which project expenditures are incurred (as determined by the government’s
Secretaría de la Función Pública [SFP], which is the executive branch’s auditor at a
The Secretariat is responsible for coordinating the audit, which will include a report covering the calendar years 2006 and 2007, to be submitted to the Bank by June 30, 2008 The final audit report is expected six months after the project's completion, with the standard audit period running from January 1 to December 31 each year.
The audit report for CFE's financial statements will encompass this project, with the final Terms of Reference (TERs) set to be finalized by the end of June.
2007 to allow time for all needed arrangements.
Disbursement Arrangements and Retroactive Financing
Disbursements will utilize Statements of Expenditures (SOEs) or disbursement reports, with the final format to be determined in collaboration with CFE and the financial agency NAFIN SOEs will facilitate disbursements for expenditures related to contracts for goods priced under $500,000 equivalent and for works costing less than the specified threshold.
Each contract will have a value of $10,000,000, and the disbursement reports will align with the agreements made between CFE and the winning bidder It is essential that this contract meets the Bank's approval.
Designated Account (DA): For this project, NAFIN (as financial agent) will establish a
Procurement Arrangements
Procurement in Mexico: Recent Developments
Procurement for the proposed project will adhere to the World Bank’s guidelines outlined in the “Guidelines: Procurement under IBRD Loans and IDA Credits” and the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers,” both dated May 2004, along with the stipulations set forth in the Legal Agreement.
The Bank has partnered with the Government of Mexico to utilize COMPRANET for Bank-financed procurement in accordance with the Procurement Guidelines established in May 2004 A new generation of standard bidding documents for goods and works has been developed in collaboration with the Secretaría de la Función Pública Additionally, a harmonized Request for Proposals package and Standard Bidding Documents for International Competitive Bidding (ICB) have been agreed upon by the Bank, IDB, and the Government The Bank has also conducted two sector studies—one at the federal level and another at the state level—to assess the acceptability of Mexico's procurement systems and to evaluate government procurement performance The studies confirm that Mexico maintains strong procurement procedures.
The Project exclusively utilizes an International Competitive Bidding (ICB) method in accordance with national law and CFE procedures In June 2004, the case was submitted to OPRC, which granted exceptional approval for the implementation of CFE's international bidding procedures.
The GEF grant will allocate a fixed amount of US$ 49.35 million to finance the solar energy field of a thermal power plant, under a local scheme called Lump-Sum Privately-Financed Publicly-Owned Works This funding will exclusively cover the expenses associated with the solar energy field.
Procurement of Goods and Non-consulting Services
The project centers around the construction of a 510 MW thermal power plant, which will be awarded through international bidding procedures established by Comisión Federal de Electricidad (CFE), as the Bank lacks Standard Bidding Documents (SBDs) for such contracts These procedures have been reviewed and deemed acceptable under the Bank's Procurement Guidelines, specifically para 3.13 (a) The Bank will maintain close oversight of key aspects of the bidding process to ensure adherence to its guidelines.
The Bank will actively participate in creating the bidding documents by conducting an ex-ante review, utilizing templates from previous CFE transactions Following recent changes to Mexico’s national procurement laws in July 2005, the bidding process will now implement a one-envelope system, as recommended by the Bank, replacing the former two-envelope method.
No other procurement action is expected under the Project
7 The project does not include any consultant services
The Bank and CFE established a review schedule for bidding documents, advertisements, and bid evaluation reports, implementing special arrangements to maintain confidentiality regarding the award until it is finalized.
CFE, the second-largest government company in the nation, recently underwent a performance review of its procurement processes, benchmarking them against international standards The review highlighted that CFE possesses the necessary experience, capacity, and organizational structure to effectively manage complex procurement procedures required for the Project.
Table 1: Project Costs by Procurement Arrangements
Expenditure Category ICB NCB Other Total Cost
1 Supply and Install Power Plant 300
1 Figures in parentheses are the amounts to be financed by the GEF grant All costs include contingencies
10 The GEF participation includes only one large and specialized bidding There is no need to prepare a procurement plan for a single activity.
Economic and Financial Analysis
The project aims to accelerate the global adoption of solar thermal technology, aligning with the GEF Operational Program 7 objectives By enhancing the efficiency of the gas-fueled combined cycle plant in Agua Prieta and increasing its average firm capacity, this initiative will contribute to the development of a critical mass in solar thermal projects Additionally, it seeks to lower production costs for this technology in conjunction with other similar GEF projects.
An ancillary global benefit of the project is the direct carbon abatement achieved by substituting solar energy for fossil fuels
This annex outlines two key elements: (a) the economic rationale for the Solar Thermal Power Project aligned with the least-cost expansion goals of the power sector, and (b) the financial metrics of the proposed project in relation to generation alternatives or avoided costs within the Mexican energy system It is further supported by background information on the Mexican power sector in Annex 1 and the Incremental Cost analysis detailed in Annex 15, both of which are essential for the project's economic justification.
The power sector's expansion adheres to a legally mandated least-cost approach, leading to a significant shift towards gas-fueled combined cycle plants as the primary focus for the next decade This evolution is marked by a projected doubling of natural gas usage, while fuel oil consumption is expected to decline substantially Despite the volatility and uncertainty associated with gas prices, gas-fueled combined cycle technology is poised to remain the cornerstone of cost-effective generation expansion.
The least cost approach validates the economic rationale behind the plants in the expansion plan, as they represent the investment strategy that optimizes economic benefits to meet the power system's growth demands The introduction of a solar thermal project alters the least-cost plan by incorporating a solar element that raises capital and operational costs, yet enhances the plant's overall efficiency and reduces fuel expenses This impact results in an incremental cost, detailed in Annex 15 Consequently, the proposed GEF grant will facilitate sustainable development aligned with the least cost objective, maximizing benefits while providing environmental advantages through the solar component.
Figure 9.1: Current Fuel Mix in Generation
Figure 9.2: 2014 Fuel Mix in Generation
Economic Analysis of the Solar Thermal Project
The project utilizes the SENER/CFE expansion plan as its base case, which encompasses demand forecasts, economic growth projections, and technology expectations Despite the proposed solar thermal plant's modest net capacity of approximately 535 MW, it will significantly benefit the energy system by providing reliable capacity amid a decreasing reserve margin Additionally, it will contribute to lower fuel costs due to its superior thermal efficiency, effectively replacing older, less efficient plants.
The Solar Thermal Plant Agua project offers significant economic advantages, primarily through electricity generation and a decrease in greenhouse gas emissions This analysis emphasizes the benefits of electricity production, as these are directly linked to the integration of solar technology, as outlined in the Incremental Cost analysis (Annex 15).
To meet the increasing electricity demand, investments in generation capacity are essential, as outlined in CFE's least cost plan This analysis considers the economic benefits of electricity generation based on the avoided cost of alternative generation methods, which ranges from $50 to $54/MWh under the SENER alto crude oil forecasts Specifically, the analysis adopts an avoided cost of $52/MWh, reflecting the alto forecast of $46 per barrel This approach highlights the operational flexibility of solar thermal plants, which maintain a base load plant factor of 80% and provide reliable firm capacity.
The cost structure of the solar thermal plant includes investment expenses such as EPC costs, owners' costs, and land and water treatment, alongside operation and maintenance costs and fuel expenses For the analysis period from 2009 to 2033, gas prices are projected at an average of $4.9/mmBtu based on SENER’s alto case; however, recent forecasts indicate that actual prices may be significantly higher for both gas and oil A sensitivity analysis addresses these variations, showing that in a high fuel price scenario, avoided costs could rise to $61.36/MWh, reflecting crude oil prices of $60/bbl and adjusted gas prices of $6.34/mmBtu as per DOE estimates.
The Economic Internal Rate of Return (EIRR) represents the rate at which a project generates value for both investors and society, factoring in the actual costs incurred by Mexico for the resources utilized, as well as the opportunity costs associated with the energy and capacity displaced due to the project Table 1 provides a summary of the findings from the economic analysis.
The projected future costs of electricity generation in Mexico are significantly influenced by the economic costs of oil and natural gas, with coal playing a lesser role The planners at CFE rely on reference values from SENER, which develops these estimates with expert assistance.
The Economic Internal Rate of Return (EIRR) for the base case is 14.4%, aligning closely with the base case discount rate of 12%, as the project adheres to a least cost expansion plan Sensitivity analysis indicates that the project's economic returns remain stable despite potential increases in fuel prices, as such fluctuations would affect both costs and benefits equally However, the least favorable outcomes arise in the unlikely scenario where gas prices rise while oil prices remain unchanged Additionally, the project's viability is sensitive to changes in capital costs, with a break-even point reached at a 14.9% increase in capital costs.
Table 9.1: Summary of Project Economic Indicators
Project EIRR Value of Output per MWh
Financial Analysis of the Solar Thermal Power Project
This section provides a financial analysis of the Solar Thermal Power Project in Agua Prieta, utilizing a financial spreadsheet model with values expressed in real U.S dollars The project's income is generated from two main sources: electricity payments throughout its 25-year lifespan and a one-time subsidy payment from the GEF, totaling approximately US$49.35 million For simplicity and in alignment with the anticipated final Independent Power Producer (IPP) arrangement, the model assumes that capacity payments for the plant are combined with energy payments.
Financial outflows relate to operating expenses, including fuel costs, and taxes The model also accounts for depreciation provisions
The project financing has been approved by the Government of Mexico (GoM) under the PIDIREGAS scheme, utilizing the Financed Public Project (OPF) modality The selected contractor for the power plant will take on the financing and construction risks, with payments from CFE contingent upon satisfactory project completion, fully secured by government guarantees Following project completion, CFE will seek long-term financing for the OPF, currently evaluating various public and commercial options with anticipated annual interest rates of 6% to 7% over a ten-year loan duration.
Actual figures and other general assumptions used for the financial model are summarized in Table 9.2 below.
Debt Contribution in Financing 100 percent
Tax Rate (percent of Net Income) 9 percent
Electricity Price – avoided cost (c/kWh) 5.2 cents/kWh
(1) This is an indicative cost; actual costs of the thermal component will be specified once the bidding has been awarded.
(2) The amount includes: US$ 349.957 Million on EPC Cost (including escalation and financing costs) asUS$ 22,703 as CFE’s owner’s cost (as determined by the consultant company Sargent & Lundy)
To assess the financial viability of the project, we calculate the net present values (NPV) of its financial rate of return across various discount rates Notably, the project demonstrates a positive NPV for discount rates reaching up to 21 percent.
Table 9.3: NPV of the project for the sponsor for various discount rates
Discount Rate Project (Sponsor's) NPV
The full cash-flow analysis for the project is presented in the following pages in Table 4.
Ta riff Subsidy Pa ym ent $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Maxim um possible depre cia tion $ 261,639,538 $ 239,311,086 $ 215,088,953 $ 188,840,580 $ 160,424,131 $ 129,687,840 $ 96,469,320 $ 60,594,813 $ 21,878,400 $ - $ - $ -
Maxim um depreciation without compensation against other a ctivities $ 22,328,452 $ 24,222,133 $ 26,248,373 $ 28,416,449 $ 30,736,290 $ 33,218,521 $ 35,874,507 $ 38,716,413 $ 21,878,400 $ - $ - $ -
Rele ased from Re serve 0 0 0 0 0 0 0 0 0 0 0 0
Be fore-Tax Cash Flow $ (324,770,757) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) $48,492,406 $48,492,406
Ta xes Payable (Benefit Received) $0 $0 $0 $0 $0 $0 $0 $0 $1,789,097 $4,050,985 $4,364,317 $4,364,317
Ta riff Subsidy pa ym ent if no t taxa ble $ 49,000,012 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
A fter-Ta x Ca sh Flow $ - $44,275,869 ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($4,724,143) ($6,513,240) ($8,775,128) $44,128,089 $44,128,089
Cum ula tive After-Tax Cas h Flow $44,275,869 $39,551,726 $34,827,583 $30,103,440 $25,379,297 $20,655,154 $15,931,011 $11,206,868 $4,693,628 ($4,081,500) $40,046,589 $84,174,678
Debt Service Coverage Ratio (DSCR) 0.91 0.91 0.91 0.91 0.91 0.91 0.91 0.91 0.88 0.84 n/a n/a
Logical Test for DSCR>re quire d 1 1 1 1 1 1 1 1 1 1 0 0
Ene rgy Pay me nt $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968 $ 176,923,968
Tariff Subsidy Pay me nt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Inte re st on Rese rv es $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Inte re st on Loans $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
M ax im um possible depreciation $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
M ax im um de preciat ion without com pe nsa tion against ot her activ ities $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Relea sed from Rese rv e 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxe s Pay a ble (Benefit Re ceiv ed) $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317 $4,364,317
Tariff Subsidy pay me nt if not taxa ble $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cum ula tiv e After-Ta x Cash Flow $128,302,767 $172,430,856 $216,558,945 $260,687,034 $304,815,123 $348,943,213 $393,071,302 $437,199,391 $481,327,480 $525,455,569 $569,583,658 $613,711,747 $657,839,836
Debt Se rv ic e Cov e ra ge Ratio (DSCR) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Logica l Test for DSCR>re quired 0 0 0 0 0 0 0 0 0 0 0 0 0
Cost Reduction and Sustainability of Solar Thermal Power Generation Technology
The primary goal of electricity generation technologies is to achieve competitive costs Numerous studies have investigated the potential for reducing costs in solar thermal power generation This section highlights these studies, emphasizing the learning curve concept, which posits that each time production doubles, a significant cost reduction occurs, typically around 20%.
Cost reduction and growth rates of other renewable energy technologies
Safeguard Policy Issues
The project is situated in the Municipality of Agua Prieta, around 6.2 km from Agua Prieta City, which has a population of 63,942 according to the 2000 National Census, with nearly all residents (99.87%) living in the city itself The region's economy is primarily driven by the industrial sector.
A social screening was conducted during the project's preparation, revealing that its construction and operation will not lead to any negative social impacts.
The project is located in an isolated area, 6.2 km from the Agua Prieta city and counts on excellent access by a federal road.
The installation and operation of the plant requires an area of 112 hectares
The project site is owned by a single legal private owner, who is open to selling the land to CFE Currently, the property lacks productive or social use, and its value will be determined according to Mexican law, based on its commercial worth.
The project is already included in the Municipal Development Plan and it will not create any conflict with other future development plans and/or proposed land uses
On May 4, 2006, CFE conducted a public consultation attended by local authorities, associations, media representatives, NGOs, labor unions, church members, and community members The consultation yielded positive results, with participants generally expressing support for the construction and operation of this innovative technological project.
The project is set to create 660 jobs during the pre-construction and construction phases, with 450 positions designated for non-qualified labor, primarily aimed at local residents CFE anticipates that specialized workforce roles will also be filled by individuals from the surrounding region or state.
During the construction and operation of the project CFE will implement the following community activities:
Launch an energy efficiency program to lower household expenditure in electricity bills(e.g incentives to replace old inefficient refrigerators and other).
Implement a communication program during the construction and operation stages to inform local authorities, communities and different stakeholders about the project
A solar thermal hybrid facility has the potential to garner significant national and international interest To foster community engagement, CFE plans to implement an information and dissemination program targeting schools and universities.
Exploring the development of a botanical garden within the solar thermal hybrid plant's facilities involves collaboration with local universities and utilizing the local workforce.
The Agua Prieta II Integrated Solar Combined Cycle System (ISCCS) is situated in northern Mexico, about 6 kilometers southwest of the Agua Prieta-Douglas border This desert region experiences low precipitation and high solar radiation, making it ideal for solar energy projects While small-scale agriculture is present, the primary economic driver is industrial activities, particularly manufacturing.
The project site is located in a region heavily impacted by human activities, with the city of Agua Prieta, about 6 kilometers to the east, gradually encroaching on agricultural land Nearby, the Naco-Nogales combined cycle gas power plant is situated 7 kilometers to the southeast, while oxidating lagoons for the city's water treatment facility are located to the east, on the urban fringe Additionally, the area is home to various industries, including quarries and maquiladoras, contributing to the region's industrial landscape.
The project is not expected to have significant adverse environmental impacts on human population or environmentally protected areas.
As mentioned before, this project is defined as a Category B given that its potential adverse environmental impacts on human population or environmentally protected areas are considered very small
Figure 10.1: Location of Agua Prieta II Integrated Solar Combined Cycle System.
NACO-NOGALES Combined Cycle Power Plant
In accordance with the Mexican legal framework, CFE prepared an Environmental Impact Assessment (EIA) and obtained an environmental license for the project.
CFE developed an Environmental Assessment Report for the Agua Prieta II site to comply with Bank requirements, along with an Environmental Management Plan (EMP) to ensure effective environmental oversight.
The anticipated environmental impacts of the power plant project primarily involve hazardous waste disposal and air pollutant emissions Waste generation is expected throughout the development phases, with key pollutants including lube oils, contaminated soils, insulators, and solvents To address these concerns, an Environmental Management Plan (EMP) was developed and incorporated into the Environmental Assessment (EA), also considering additional impacts like noise and effects on local flora and fauna Air pollution levels from the plant's operation are projected to be minimal, typically ranging from 5% to 50% of the standards set by the Mexican Ministry of Environment and Natural Resources (SEMARNAT) A summary of the main impacts and proposed mitigation strategies is provided in Table 1, while other minor impacts are detailed in the EA.
Table 10.1: Main environmental impacts from Agua Prieta II ISCCS
Production of hazardous waste materials such as used lube oils, thermal insulators, solvents, batteries, and welding butts
Disposal of hazardous waste material will follow Mexican federal and local laws (1)
Hazardous materials will be securely stored in a designated area at the plant for a maximum of six months, after which they will be disposed of in accordance with national environmental regulations.
- Lube oils and batteries should be recycled
Soil polluted with lube or fuel oils, construction material soaked with greases and oils
Residuals from construction; residuals from land clearing and land leveling
These residuals will be stored in piles, and later carried by truck to be disposed of in authorized places
Residuals from septic tanks and latrines A specialized company will be in charge of their collection and transfer to a residual water treatment plant for its final disposal
Domestic trash This will be placed in closed metal containers
Municipal utility will transfer it for final disposal
28 The EA and EMP are available in the project files.
Table 10.1: Main environmental impacts from Agua Prieta II ISCCS
During construction, air pollution emissions from vehicles used, dust and other particles, smoke from burning of materials
- All vehicles must meet the norms related to exhaust emissions (2)
- To minimize the production of dust, main access roads must be humidified
- All material carried in trucks for disposal must be covered with a canvas
- Burning of trash or other materials is not allowed
Air pollution emissions during operation - Low NOx generating technologies must be used
NOx emissions must meet standards (3)
- NOx and O 2 emissions must be continuously monitored
- Air quality standards must be met (4)
From vehicles and construction equipment during construction -Vehicles must meet sound norms (5)
- Construction equipment must only be used during schedules of normal activity of the local population
To mitigate sound during plant operations, a 10-meter wide buffer zone will be established This sound barrier will consist of a combination of native trees and bushes, effectively reducing noise impact in the surrounding area.
(1) Ley General de Equilibrio Ecologico y Proteccion al Ambiente en Materia de Residuos Peligrosos
(2) NOM-041-ECOL-1993 for gasoline vehicles; NOM-045-ECOL-1993 for diesel vehicles
Under the above-mentioned conditions, this project is not expected to have any significant environmental impacts, and as such is classified as Environmental Category: B (Partial Assessment).
The Environmental Assessment (EA) for the combined cycle natural gas power plant with solar generators encompasses a comprehensive project description and its location, an analysis of potential socio-economic impacts, and an evaluation of environmental effects throughout all development phases, addressing issues such as hazardous waste generation, air and noise pollution, and impacts on local flora and fauna Additionally, the EA includes an environmental management plan to mitigate these impacts effectively.
What are the main features of the EMP and are they adequate?
The Environmental Management Plan (EMP) details the potential impacts at each stage of project development and outlines necessary measures to mitigate these effects Key concerns highlighted by the Environmental Assessment (EA) include the disposal of lubricants, oil-contaminated soil, solvents, and other waste generated during construction and operation The EMP specifies existing federal regulations and the required steps to ensure compliance with Mexico's environmental laws, effectively minimizing the project's environmental footprint These outlined steps are both thorough and appropriate.
How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft
EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted?
Project Preparation and Supervision
Initial PID to PIC May 25 th , 2006
Initial ISDS to PIC May 25 th , 2006
Planned date of effectiveness December 4, 2006
Planned date of mid-term review June 11, 2007
Key institutions responsible for preparation of the project:
Comisión Federal de Electricidad (CFE) with support from the Secretaría de Energía
Bank staff and consultants who worked on the project included:
Gabriela Elizondo TTL, Senior Energy Specialist LCSFE
Ernie Terrado Senior Energy Specialist, Consultant LCSFE
Enrique Crousillat Lead Energy Specialist LCSFE
Juan David Quintero Lead Environmental Specialist ESSD
Elena Correa Senior Social Specialist ESSD
Efraim Jimenez Lead Procurement Specialist LCOAA
Juan Carlos Alvarez Legal Counsel LCOAA
Victor Ordonez Senior Financial Management Specialist LCOAA
Juan Carlos Serrano ET Consultant LCOAA
Hernan Gonzalez ET Consultant ESSD
Georg Caspary ST Consultant LCSFE
Bank funds expended to date on project preparation:
2 Trust funds: $305,000 – GEF project Preparation Grant ‘PDF B’ (TF022852)
Estimated Approval and Supervision costs:
Documents in the Project File
Sargent & Lundy 2006 Integrated Solar Combined Cycle System Project: Technical and
Economic Evaluation, A Report prepared for the World Bank Project Number 11697-003
Spencer Management Associates 2006 Technical Review of Study by S&L entitled
Integrated Solar Combined Cycle System Project: Technical and Economic Evaluation and developed May 2006.
Federal Commission of Electricity (CFE) 2006 Social and Environmental Assessment
Project Agua Prieta II and Environmental Management Plan.
Global Research Alliance 2005 Assessment of the World Bank / GEF Strategy for the
Market Development of Concentrating Solar Thermal Power A report for the World Bank.
Sargent & Lundy 2004 Feasibility Study of Integrated Solar Combined Cycle System
(ISCCS) Mexico A Report prepared for the World Bank Project Number 11697-001.
Spencer Management Associates 2000 Final Report Mexico Feasibility Study for an ISCCS
Mexico A Report prepared for the World Bank.
The project files also include all relevant official letters and communications between the Bank and the Government of Mexico including SHCP, SENER and CFE.
Statement of Loans and Credits
Original Amount in US$ Millions
Difference between expected and actual disbursements
Project ID FY Purpose IBRD IDA SF GEF Cancel Undisb Orig Frm Rev’d
P091695 2006 MX Modernization Water & Sanit Sector
P089171 2006 MX GEF Environmental Services Project 0.00 0.00 0.00 15.00 0.00 0.26 0.00 0.00
P088732 2006 MX Access to Land for Young Farmers 100.00 0.00 0.00 0.00 0.75 97.01 21.76 0.00
P088728 2006 MX (APL1) School-Based Management
P085593 2006 MX (APL I) Tertiary Educ Student Ass 180.00 0.00 0.00 0.00 0.00 180.00 21.35 0.00
P085851 2005 MX Basic Education Dev Phase III 300.00 0.00 0.00 0.00 1.61 99.84 -28.56 0.00
P074755 2005 MX State Judicial Modernization Project 30.00 0.00 0.00 0.00 0.00 30.00 7.00 0.00
P089865 2005 MX-(APL1) Innov for Competitiveness 250.00 0.00 0.00 0.00 0.00 239.80 18.20 0.00
P035751 2004 MX Community Forestry II (PROCYMAF
P059161 2003 GEF MX-Climate Measures in Transport 0.00 0.00 0.00 5.80 0.00 2.00 5.58 0.00
P065988 2002 GEF MX Consolidat.Prot Areas (SINAP
P077602 2002 MX Tax Admin Institutional Development 52.00 0.00 0.00 0.00 0.00 6.55 5.15 0.00
P066321 2001 MX: III BASIC HEALTH CARE
MEXICO STATEMENT OF IFC’s Held and Disbursed Portfolio
In Millions of US Dollars
FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic.
FY Approval Company Loan Equity Quasi Partic.
Country at a Glance
P OVERTY and SOC IAL America middle-
GNI per capita (Atlas method, US$) 6,790 3,600 4,770
GNI (Atlas method, US$ billions) 704.9 1,948 2,748
Most recent estimate (latest year available, 1998-04)
P overty (% of population below national poverty line) 18
Urban population (% of total population) 76 77 72
Life expectancy at birth (years) 74 71 69
Infant mortality (per 1,000 live births) 23 28 24
Child malnutrition (% of children under 5) 8
Access to an improved water source (% of population) 91 89 93
Gross primary enrollment (% of school-age population) 110 123 106
KEY EC ONOMIC RATIOS and LONG-TERM TRENDS
Exports of goods and services/GDP 17.4 16.8 27.8 30.1
P resent value of debt/GDP 24.6
P resent value of debt/exports 80.7
Exports of goods and services 6.0 9.6 2.7 11.5 4.1
M exico Upper-middle-income group
Access to improved water source
M exico Upper-middle-income group
STRUC TURE of the EC ONOMY
General gov't final consumption expenditure 9.2 11.5 12.4 11.7
Imports of goods and services 9.6 21.6 29.5 31.9
General gov't final consumption expenditure 2.2 1.2 0.8 -1.2
Imports of goods and services 14.8 10.6 0.7 10.2
Note: 2004 data are preliminary estimates.
* The diamonds show four key indicators in the country (in bold) compared with its income-group average If data are missing, the diamond will be incomplete.
Growth of capital and GDP (%)
Growth of exports and imports (%)
P RIC ES and GOVERNMENT FINANC E
(% of GDP , includes current grants)
Export and import levels (US$ mill.)
Exports of goods and services 33,926 71,184 177,299 201,911
Imports of goods and services 21,028 91,616 187,680 215,372
Reserves including gold (US$ millions) 7,355 6,300 59,027 64,204
Conversion rate (DEC, local/US$) 0.2 3.4 10.8 11.3
EXTERNAL DEB T and RESOURC E FLOWS
Total debt outstanding and disbursed 94,830 138,545 140,391 140,778
Composition of net resource flows
Foreign direct investment (net inflows) 390 10,973 12,625 17,377
C urrent account balance to GDP (%)
C omposition of 2004 debt (US$ mill.)
Incremental Cost Analysis
Broad Development Goals and Baseline
Approximately 73% of Mexico's 44 GW installed power generation capacity relies on fossil fuels, with oil-fired plants accounting for the largest portion at 43% of capacity and 49% of generation While combustion turbine plants make up less than 8% of total generation, they primarily serve peak demand and remote areas Additionally, gas-fired plants contribute over 19% to generation, closely matching the share of hydroelectric power, which holds just under 14% of the total generation capacity.
By 2014, Mexico's power sector is set to undergo a significant transformation in its fuel mix, with natural gas usage expected to double and coal generation increasing by 50 percent The International Energy Agency (IEA) projects that by 2020, natural gas will account for 44 percent of the country's electricity generation, marking a five-fold increase in its use within the power sector.
The Energy Sector Program (PROSENER) at the federal level prioritizes the enhancement of renewable energy resource utilization It outlines strategic actions such as developing initiatives to boost renewable energy usage, increasing the renewable energy capacity share in the electricity sector, advancing research and technology in renewable energy, and promoting education on renewable energy.
Recent policy initiatives aim to boost the market share of renewable energy by introducing key measures These measures include a provision for Accelerated Depreciation, allowing 100% investment in renewable energy technologies made after January 2005 to be fully depreciated in the first year Additionally, a proposed Renewable Energy Law, which was passed by the lower house of Congress in late 2005 and is currently awaiting Senate approval, outlines various methodologies and dispatch conditions to effectively harness the value of renewable energy contributions.
This project aims to enhance the global adoption of solar thermal technology, aligning with the goals of GEF Operational Program 7 By adding approximately 30 MW of solar thermal capacity, it will support similar GEF initiatives in Egypt and Morocco, ultimately creating a critical mass that reduces production costs and accelerates commercial breakthroughs in this renewable energy sector.
The project offers a significant global advantage through direct carbon abatement by replacing fossil fuels with solar energy Although the impact is modest due to the low contribution of the solar field and the use of natural gas as the replaced fuel, it results in an estimated reduction of approximately 391,270 tonnes of carbon dioxide over the plant's 25-year lifespan.
The GEF alternative proposes constructing a solar thermal-fossil fuel hybrid system, known as the Integrated Solar Combined Cycle System (ISCCS), instead of the planned gas-fired CCGT power plant in Sonora, Mexico (Agua Prieta II) This hybrid system will integrate a solar capacity of approximately 30 MW with the existing CCGT plant, which has a capacity ranging from 455 to 615 MW and a minimum net summer design output of about 455 MW.
The final size and layout of the plant will be determined after evaluating bids from competing companies submitted between July and November 2006 To ensure the use of the most efficient technology at the lowest cost, the selection of technology and configuration will remain flexible, adhering to the guidelines set by CFE and the GEF Operational Program 7.
5 The incremental cost analysis presented here is preliminary and based on the results of a consultant study on the cost and performance of a possible ISCCS configuration for Agua Prieta
The studied configuration consists of two industrial frame combustion turbines paired with a heat recovery steam generator (HRSG) and a single steam turbine, commonly known as a 2x2x1 setup To assess the performance of the Integrated Solar Combined Cycle System (ISCCS) plant, a comprehensive operational model was developed, analyzing hourly data throughout the year This evaluation incorporated the effects of solar radiation, ambient temperature, and relative humidity on the performance of the solar field, gas turbine, and steam turbine for each hour.
5 The Reference Case analyzed has the following characteristics:
Table 15.1: Analyzed characteristics of ISCCS reference case
Plant type Integrated solar combined cycle system
Capacity of combined cycle portion 479.3
Net electricity to grid (GWh/yr) 3402
Solar share (% of energy output) 2
EPC costs of ISCCS (US$ million) $348,000
Levelized electricity costs w/o grant (US¢/kWh) 5.3
The analysis directly compares the proposed solar thermal plant with the least-cost conventional solution of similar capacity, acknowledging that integrating solar thermal energy into the national grid may necessitate adjustments to the system expansion plan This is due to the potential mismatch between the plant's output and the system's peaking or baseload requirements While these broader system-wide impacts are not addressed in the current analysis, a straightforward plant-by-plant comparison is deemed adequate at this stage.
The Mexican power system is experiencing rapid growth, with anticipated capacity increases of approximately 1.7 GW annually over the next decade In this context, the proposed addition, especially the solar thermal component, is relatively small and can be integrated into the existing infrastructure without significant impact.
In analyzing the trade-off between spatial and temporal system boundaries, a plant-by-plant comparison provides insights into the entire lifetime of a plant, despite overlooking systemic effects Conversely, a system expansion analysis encompasses a broader spatial boundary but typically spans only 10-15 years of a plant's operational life Given the current context, where systemic effects are deemed minimal and the expansion plan's time horizon is limited, prioritizing the comprehensive assessment of the entire plant life cycle is deemed more crucial.
The GEF alternative is expected to yield some enhancements in domestic air quality, albeit with marginal additional benefits that can be disregarded Notably, Mexico has already taken proactive steps to address local air pollution concerns, particularly in areas with the most severe issues, thereby minimizing the incremental impact of the GEF alternative.
This initiative aims to establish Mexico as a global leader in solar thermal technology commercialization, positioning the country as a key provider of goods and services for upcoming Solar Thermal Power (STP) projects.
A comprehensive cost estimate was created for a 2x2x1 configuration utilizing the GE Frame 7FB combustion turbine, incorporating standard pricing for the necessary equipment Additionally, a separate estimate was developed to compare the costs between a conventional combined cycle plant and one optimized to integrate solar energy Finally, a baseline cost estimate for a standard combined cycle gas turbine (CCGT) plant with duct firing, equivalent to the energy output of the solar field, was also established.
10 The main recurrent cost elements are fuel purchases and operation and maintenance (O&M) Gas prices were taken from SENER’s alto case which assume an average of 4.9
STAP Roster Review
BERKELEY • DAVIS • IRVINE • LOS ANGELES • RIVERSIDE • SAN DIEGO • SAN FRANCISCO SANTA BARBARA • SANTA CRUZ
E NERGY AND R ESOURCES G ROUP D ANIEL M K AMMEN
310 B ARROWS H ALL A SSOCIATE P ROFESSOR OF E NERGY AND S OCIETY
B ERKELEY , CA 94720-3050 R ENEWABLE AND A PPROPRIATE E NERGY L ABORATORY
WWW: http://socrates.berkeley.edu/erg T EL : (510) 642-1139
E MAIL : dkammen@socrates.berkeley.edu
1 WORLD BANK/GLOBAL ENVIRONMENT FACILITY HYBRID SOLAR THERMAL
This proposal outlines the design, installation, and operation of a 300 MW hybrid power plant, integrating 270 MW from a Combined Cycle Gas Turbine (CCGT) powered by natural gas and 30 MW from an Integrated Solar Combined Cycle (ISCC) system The project will be executed by an Independent Power Producer (IPP) contractor, aiming to enhance energy efficiency and sustainability through this innovative energy solution.
The Build-Own-Operate (BOO) arrangement includes a $52 million grant from the Global Environment Facility (GEF) for the solar component, while approximately $128 million needed for the combined cycle gas turbine (CCGT) system is being sourced from Mexican and foreign private commercial entities.
There are currently contracts for over 80 IPP facilities in Mexico, which are currently producing or are scheduled to provide almost 4,000 MW of power (> 21,500 GWh of annual production).
The planned hybrid solar thermal power plant in Mexicali, Mexico, aims to address the anticipated demand for over 500 MW of new capacity in the state over the next decade This initiative aligns with the Mexican Government's commitment and the Federal Electricity Commission's (CFE) efforts to enhance the clean energy component within the national energy mix, creating a favorable environment for the successful development of the project.
The project aims to establish the first large-scale commercial solar thermal power facility in a developing nation, focusing on building experience to reduce costs through practical learning It also seeks to cultivate expertise within the Mexican industry, enabling local companies to compete for future contracts on both regional and international levels.
This project is highly commendable and deserves support due to its readiness for deployment in solar thermal power generation The hybrid design of the facility mitigates risks, making it more appealing to independent power producers (IPPs) Achieving cost reductions hinges on operational experience and consistent project execution Additionally, fostering technical and economic expertise among diverse IPPs, along with enhancing renewable energy capacity in Mexico's national grid, are crucial for establishing a sustainable clean energy sector.
The ISCC field will operate primarily for intermediate and peak loads, enhancing plant efficiency and financial appeal for potential independent power producers (IPPs) A key objective of the project is to leverage the design, construction, and operation of this facility to gain valuable experience with hybrid power plants, which will subsequently lower costs and boost the feasibility of future renewable energy projects This strategy is supported by the well-established experience curve theory, which indicates that generating costs decrease with increased production—typically by 20% for every doubling of capacity However, two critical issues regarding the application of this theory must be addressed in relation to the project.
The project's renewable energy component is minimal, featuring only 30 MW of solar power compared to 270 MW of gas, resulting in a mere 11% contribution from renewables While a CCGT plant with this limited solar addition can effectively manage peak shaving, the Concept Document must justify the project's necessity One potential argument is that this initiative serves as a proof of concept, paving the way for future solar thermal power installations that might not occur otherwise Additionally, the document should address why a policy directive from CFE, which could mandate a renewable component in IPP proposals, would not achieve the same objectives without the substantial $52 million grant Given CFE's commitment to clean energy, the effectiveness of this alternative strategy warrants further exploration.
32 The Photovoltaic Market Transformation Initiative (PVMTI) implemented by the International Finance Corporation is also based on this theory (World Bank, 1996).
Cost improvements through learning typically rely on the production of similar units, allowing lessons from one project to benefit future endeavors However, the proposed peaking facility is expected to be quite unique, raising concerns about whether the insights gained from the ISCC component will apply to other units that may be developed soon Given the distinct nature of this project and the absence of comparable initiatives elsewhere, it is crucial to evaluate how the production and operation of this facility will enhance the company’s prospects for future solar thermal projects in Mexico or internationally This consideration must be explicitly addressed in the document; if the answer is negative, justifying the investment becomes challenging, despite the project's overall appeal.
The project document emphasizes that a comprehensive forecast of potential tariff structures is contingent upon the selection of the Independent Power Producer (IPP) and the approval of specific project plans Although consumer electricity tariffs will remain unaffected by this proposal, the profitability of the plant may be influenced by the design and operation of the solar peaking facility Therefore, it is advisable for the Concept Document or a related financial feasibility study to assess the potential effects of the solar hybrid component on the overall economics of the plant.
The Incremental Cost Analysis (Annex 4) is a comprehensive and exemplary model for project analysis presentations Making this material available as an accessible spreadsheet for both public and private sector organizations, such as Independent Power Producers (IPP), could enhance understanding and encourage further proposals for clean energy initiatives, including hybrid solar thermal power plants.
The impact of awarding a single contract for the hybrid solar thermal power plant on achieving the goal of establishing 10 solar thermal supply companies by 2010 remains uncertain It raises questions about whether the Mexican government plans to issue follow-up contracts, initiate additional projects, or implement other measures to further stimulate the solar industry Without such initiatives, it is essential to assess whether supporting this plant will generate enough interest and infrastructure to encourage further private-sector investment in the solar thermal sector.
The Global Environmental project aims to enhance economic attractiveness and develop backstop technologies, with a critical focus on reducing greenhouse gas emissions, which should be explicitly mentioned in the project's objectives According to Annex 4, Table 6, the estimated avoided emissions from a comparable fossil-fuel facility exceed 8,000 tons of carbon per year, totaling over 200,000 tons of carbon over the project's lifetime.
The anticipated timeline for solar thermal power plants to achieve competitiveness with fossil fuels is set for 2025, according to Annex 1, Table This timeline raises concerns about the potential for such projects to significantly influence market growth and acceleration.
Duke, R D and Kammen, D M (1999) “The economics of energy market transformation programs”, The Energy Journal, 20
Neij L (1997) “Use of experience curves to analyze the prospects for diffusion and adoption of renewable energy technology ,”
Vettas, N (1998) “Demand and supply in new markets: diffusion with bilateral learning”, Rand Journal of Economics, 29, 215-
World Bank Group (1996) “Photovoltaic Market Transformation Initiative project documents,” International Finance
Response by the Project Team to Comments by the STAP reviewer
MEXICO: Hybrid Solar Thermal Power Plant
Second page of STAP comments, paragraph 2, first part
The small scale of the proposed demonstration project is essential for validating the argument and mitigating risks associated with configuration, HRSG design, and system control A manageable initial step is crucial, as larger systems pose greater design and operational challenges, along with increased risks Balancing costs involves choosing between a high solar component that offers significant demonstration impact but at a higher expense, and a low solar component that is more cost-effective yet has a limited demonstration effect The modular nature of the technology ensures that even a smaller system remains relevant for future large-scale projects This initiative, alongside other planned pilots, aims to foster long-term cost reduction opportunities in the solar thermal industry.
Second page, paragraph 2, second part
To ensure the inclusion of solar components in future bids, CFE faces challenges due to the current higher costs of Solar Thermal Power compared to combined cycle gas turbine (CCGT) plants Unless CFE is prepared to cover these additional expenses, it cannot mandate Independent Power Producers (IPPs) to incorporate Solar Thermal Power in their proposals.