Post on 24-Feb-2016
description
transcript
Energy policy & infrastructure
Guillermo Zúñiga, National CommissionerEnergy Regulatory Commission
May, 2013
Key messages
Mexico can achieve higher competitiveness by fostering public policies oriented to the introduction of competition in energy markets
The main pillar of in-depth energy reform lies in the improvement of market structures
Competition policy has a positive impact in how a country develops its infrastructure
Further sector-wide procompetitive efforts in energy must be carried out to develop infrastructure.
3
Mexico faces the burden of being perceived as an inefficient and crony economy…
"There are three 'economic Mexicos'. The first one is under the old control style of government. The second is the Mexico of vested interests, with power groups and firms that seek to capture rents from domestic consumers, mainly due to lack of domestic or international competition. The third one is a modern and progressive Mexico. This Mexico blossomed with NAFTA and still has great potential, but it is forced to pay rents to the other two 'Mexicos‘."
Sources: Claudio Loser y Harinder Kohli (coords.), Futuro para todos: acciones inmediatas para México, p. 48-49; Foro Económico Mundial, The global competitiveness report 2012-2013, p. 33; Ruchir Sharma, Breakout Nations, 2012, p. 73-83; Daron Acemoglu y James A. Robinson, Why nations fail: The origins of power, prosperity, and poverty, p. 39, 396; OCDE, México: Mejores políticas para un desarrollo incluyente, p. 44
"The lack of competition and excessive regulation have represented a burden to the Mexican economy for several years and has contributed to great income disparities. The product market regulation in Mexico is among the most restrictive and it obstaculizes competition. This, in consequence, reduces productivity and puts a brake in economic growth."
“Mexico still faces persistent structural challenges that will need to be addressed in order to continue improving the competitive edge of the economy. The lack of effective competition, especially in some key strategic sectors, also hinders the efficient allocation of resources that spills over into most sectors of the economy.”“Every nation has its big tycoons, but to a rare degree Mexico is owned by them. Cornered markets mean the oligopolists have little incentive to invest and innovate: domestic productivity growth has been virtually stagnant since the financial crisis of 1994. If competition increases and undermines the abnormally high profit margins of the large companies, that could lower consumer prices, raise overall productivity, and boost the country’s growth potential.”
“If you’re a Mexican entrepreneur, entry barriers will play a crucial role at every stage of your career. These barriers can be either insurmountable, keeping you out of lucrative areas, or your greatest friend, keeping your competitors at bay. The difference between the two scenarios is of course whom you know and whom you can influence – and yes, whom you can bribe.”
… situation that has been analized throughly by expert economists
4Fuente: Banco de México, Encuestas sobre las expectativas de los especialistas en economía del sector privado 2003-2012
Main policies that could foster investment in México Survey carried out by asking expert economist of the private sectorMobile average (six months)
4
Jun-04Oct-
04Feb
-05Jun-05
Oct-05
Feb-06
Jun-06Oct-
06Feb
-07Jun-07
Oct-07
Feb-08
Jun-08Oct-
08Feb
-09Jun-09
Oct-09
Feb-10
Jun-10Oct-
10Feb
-11Jun-11
Oct-11
Feb-12
Jun-120
5
10
15
20
25
Energy Reform Fiscal Reform
Labor Reform
Law Enforcement
Macroeconomic stability
Competition and regulationPublic Security
Infrastructure
Increasing agreement that lack of competition distorts economic sectors
Oil Production
Electricity Generation
Telecommunications
Media
Road transportation
Travel by Air
Construction
Banking
0 2000 4000 6000 8000 10000
10000
7445
6382
5994
4025
2233
1721
1684
1358
363
3043
1059
1858
1297
1147
1445
5
Concentration in selected sectors, 2010Herfindahl-Hirschmann Index
Source: CIDAC, ¿Qué tan abierta es en realidad la economía mexicana? (data); CFC analysis (restrictions)
Perfect competition
Mono-poly
MexicoUSA
Constitutional restraint
Constitutional restraint
Weak regulator
Underuse of spectrum
Closed to FDI, local barriers
Slots, closed skies
Local regulatory restraints
Inequal access to switches, ratings
Regulatory restrictions
EX
AM
PLE
S
Most of these sectors require large investments in infrastructure
Key messages
Mexico can achieve higher competitiveness by fostering public policies oriented to the introduction of competition in energy markets
The main pillar of in-depth energy reform lies in the improvement of energy market structures through competition.
Competition policy has a positive impact in how a country develops its infrastructure
Further sector-wide procompetitive efforts in energy must be carried out to develop infrastructure.
Market Structure: description• Oil and Gas
– State exclusivity over “oil industry”: it covers all upstream activities as well as downstream activities linked to oil and gas.
– Private investment has been allowed only to storage, transport, distribution and sales of natural gas and LPG.
– The prevailing market structures are vertically integrated monopolies.
Market Structure: associated problems
• Oil and Gas
– Exclusivity of state through only one operator leads to restrictions in terms of:
• Investment• Execution capacity• Access to new technologies• Development of activities which are less profitable than oil
– These restrictions maximize risk to State and Society– The absence of potential competition:
• Reduces Mexico’s competitiveness• Generates inefficiencies and waste of resources• Limits the growth of state-owned company due to lack of
incentives
Market Structure: description
• Electricity
– Private participation is only allowed for energy generation and capacity sales to Comisión Federal de Electricidad (CFE, the state-owned energy utility), self-supply (including cogeneration) and exports. Imports of energy for self-supply are also allowed.
– CFE is in charge of public service provision and it owns the transmission and distribution lines.
– The structure is that of vertically and horizontally integrated state-owned utility with a high degree of market power.
Market Structure: associated problems
Electricity • This quasi-monopoly structure generates the
following problems:– It limits most benefits to big consumers and
generators, as well as to CFE as energy buyer, due to lack of incentives.
– It constraints full and flexible competition in those activities most able to sustain it (generation and marketing), which would benefit users and CFE itself.
– It limits the necessary investment in less profitable activities (such as distribution) and transfers monopoly inefficiencies to the users who don’t have the option of self-supply.
– In general, it does not generate the proper incentives to achieve efficiency in our industry.
Institutional effectiveness
Independent regulatory agencies
Separation between policy formulation (Ministry) and enforcement of regulation (CRE)
Independent and technical decisions
Prevention of regulatory capture
ResultsObjectives Legal and Regulatory Actions (examples)
Introduction of competition and regulation in some sectors has shown positive results
Use of private financing and infrastructure
for public interest goals
Market–oriented energy project definition •e.g. Natural Gas Distribution Networks originating from private initiative instead of authority
Better risk allocation•e.g. Granting a fix duration of exclusivity in some energy projects in order to guarantee financial return
Using PPP in order to complement public investment•e.g. Private generators of electricity can sale electricity surplus to the State Owned Company
Procompetitive regulation
• Reduction of barriers to entry, allow FDI • Prohibit vertical integration in order to avoid
market dominance.• Regulation of SOC and private parties
transactions• Open Access obligation to take advantage of
network economies.
Increase of Private
Investment in Energy
Infrastructure
Enhanced competitiveness
of the whole economy
Better conditions for consumers
Key messagesMexico can achieve higher competitiveness by fostering public policies oriented to the introduction of competition in energy markets
The main pillar of in-depth energy reform lies in the improvement of energy market structures through competition.
Competition policy has a positive impact in how a country develops its energy infrastructure
Further sector-wide procompetitive efforts in energy must be carried out to develop infrastructure.
Total Generation Capacity of the National Electric System, 2012
Comisión Federal de Electricidad
40461.2263.7%
IndependentProduction
13,616 21.4%
Self Supply4,745 7.5%
Cogeneration2,908 4.6%
Exports1,330 2.1%
Own Usage435 0.7%
Small Production0.300.0%
Total capacity: 63
496.3 MW13
Energy sector has been benefited from procompetitive interventions
Estimated Private Investment in Electricity generation
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
3,184.5
4,180.96,177.3
12,041.213,823.7
15,063.517,285.5
19,738.020,639.922,605.3
24,620.2
28,214.1
31,179.132,735.4
36,217.937,073.7
37,214.7
14
MMUSD
Energy sector has been benefited from procompetitive interventions
Private Investment in liberalized markets of Natural Gas
15
Energy sector has been benefited from procompetitive interventions
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-
500
1,000
1,500
2,000
2,500
3,000
3,500
Accumulated Investment (MMUSD)
Transport Storage Distribution
Key messages
Mexico can achieve higher competitiveness by fostering public policies oriented to the introduction of competition in energy markets
The main pillar of in-depth energy reform lies in the improvement of energy market structures through competition.
Competition policy has a positive impact in how a country develops its energy infrastructure
Further sector-wide procompetitive efforts in energy must be carried out to develop infrastructure.
The “Pact for Mexico” intends to address much needed market structure reforms
17Source: Pact for Mexico
2.1 Economic competition will be intensified in all sectors of the economy, with special emphasis in strategic sectors such as telecommunications, transport,
financial services and energy
2.5 Carry out an Energy Reform that fosters investment and development.
Reforms needed to create a new competitive framework for the economic
processes of refining, petrochemicals, and hydrocarbons transportation
The “Pact for Mexico” intends to deepen the procompetitive effort in
energy markets …… through a Energy Policy that would lead to higher productivity and growth
Energy Policy
To foster a new structure of energy markets in Mexico, a New Energy Policy shall be instrumented (The recently approved National Energy Strategy follows this path).
Institutional framework
The institutional framework must give force and permanence to the energy policy
Thank you very much
gzuniga@cre.gob.mx