Industrial cogeneration in Mexico: Opportunity for GHG mitigation and regulation barriers

This paper presents an analysis of the implications to the Mexican energy demand and associated carbon dioxide emissions for year 2005, of cogeneration in new plants of five energy intensive industrial branches: petrochemical, chemical, sugar, paper and pulp, and fertilizers. Estimation of carbon dioxide abatement costs and an incremental cost curve for carbon dioxide mitigation options are also presented. Maximum cogeneration potential for new plants in Mexico reaches 8820 MW, nearly 22% of total installed capacity for year 2005. We demonstrate that there are ample and cost effective opportunities for energy savings and abatement of CO2 emissions due to industrial cogeneration, nevertheless there are important obstacles that hinder the implementation of this energy saving option. In 1994 a new Mexican Regulation law for electricity production allows cogeneration for the first time, however, the actual electricity prices, and the lack of regulation regarding electricity sales form industries to Comision Federal de Electricidad (CFE, the Mexican state-owned utility) present important barriers for the implementation of large scale cogeneration plants.