energy diversification priorities for the mexican electrical sector

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Energy Vol. 13, No. 10, pp. 787-796, 1988 0360-5442/88 $3.W + 0.00 Printed in Great Britain. All rights reserved Copyright @ 1988Pergamon Press plc ENERGY DIVERSIFICATION PRIORITIES FOR THE MEXICAN ELECTRICAL SECTOR MANUEL MARTINEZ Laboratorio de Energia Solar, Universidad National Autonoma de Mexico, Apartado Postal No. 34, 62.580Temixco, Morelos, Mexico (Received 4 June 1987; received for publication 6 April 1988) Abstract-The establishment of priorities in the selections of alternative sources of energy has been studied for the Mexican electrical sector in the year 2000. A hierarchial analytical process has been implemented as a priority-setting framework and the net present value method was used for economic evaluation. Reasonable electrical requirements and proven reserves of alternative energy sources were considered, as well as possible future social, technological and financial factors. Three different diversification policies were analyzed. A list of the probable participation by source is obtained. Also, a reference cost for electricity and break-even capital costs for alternative energy systems are obtained. INTRODUCTION Mexico has large proven reserves of hydrocarbons, about 72,000 million barrels of oil equivalent (mboe). Nevertheless, diversification of energy sources is necessary for four main reasons: there are technical and economical limits on the volume of hydrocarbons which can be extracted from the Earth; there are also restrictions on the acquisition of foreign currency needed for industrial development; of great importance are the by-products of the hydrocar- bons industry and prospective increases in the costs per barrel for non-renewable resources. Viqueira’ and Ponce’ have estimated, by using constant annual rates for internal energy- demand increases, that the Mexican reserves could last until the year 2010. Alonso and Rodiguez3 have shown that, even if the proven hydrocarbon reserves and the techno-economic production limits increase at moderate rates, Mexico will have to import hydrocarbons or else must implement a sound energy-diversification program around the years 2010-2020, depend- ing on the economic growth rate of the country. A previous study4 established a general model for the energy balance of Mexico. It was assumed that the total energy production is equal to the total internal energy demand plus the total amount of energy exported. The total imports of energy and variations in stock are small quantities compared with the total, and they can be neglected while performing balance calculations. It was also assumed that the total energy exported was only due to hydrocarbons, which implies that exports of electricity and hydrocarbon by-products are small quantities compared with the hydrocarbon-exportation volume. Both assumptions were proven to be correct for the Mexican energy scenario. Finally, the internal energy demand was divided into two components: electrical and non-electrical demand of energy. The total energy production was divided into four categories: hydrocarbon production for electrical uses, hydrocarbon production for non-electrical uses, alternative energy production for electrical uses, and alternative energy production for non-electrical uses. It is shown that the internal total primary energy demand for Mexico in the year 2000 could be between 7 and 10 EJ/yr. Furthermore, it is concluded that, in order to provide for a smooth energy transition, it will be necessary to produce between 40 and lOOTWh/yr with alternative sources for electrical uses and between 0.4 and 0.6 EJ/yr for non-electrical uses in the year 2000. The purpose of this paper is to establish priorities in the selection of alternative sources of energy for the Mexican electrical sector in the year 2000. The following factors are considered: energy demand, reserves of alternative energy sources, and industrial and socio-economic guidelines. 787

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Energy Vol. 13, No. 10, pp. 787-796, 1988 0360-5442/88 $3.W + 0.00 Printed in Great Britain. All rights reserved Copyright @ 1988 Pergamon Press plc

ENERGY DIVERSIFICATION PRIORITIES FOR THE MEXICAN ELECTRICAL SECTOR

MANUEL MARTINEZ

Laboratorio de Energia Solar, Universidad National Autonoma de Mexico, Apartado Postal No. 34, 62.580 Temixco, Morelos, Mexico

(Received 4 June 1987; received for publication 6 April 1988)

Abstract-The establishment of priorities in the selections of alternative sources of energy has been studied for the Mexican electrical sector in the year 2000. A hierarchial analytical process has been implemented as a priority-setting framework and the net present value method was used for economic evaluation. Reasonable electrical requirements and proven reserves of alternative energy sources were considered, as well as possible future social, technological and financial factors. Three different diversification policies were analyzed. A list of the probable participation by source is obtained. Also, a reference cost for electricity and break-even capital costs for alternative energy systems are obtained.

INTRODUCTION

Mexico has large proven reserves of hydrocarbons, about 72,000 million barrels of oil equivalent (mboe). Nevertheless, diversification of energy sources is necessary for four main reasons: there are technical and economical limits on the volume of hydrocarbons which can be extracted from the Earth; there are also restrictions on the acquisition of foreign currency needed for industrial development; of great importance are the by-products of the hydrocar- bons industry and prospective increases in the costs per barrel for non-renewable resources.

Viqueira’ and Ponce’ have estimated, by using constant annual rates for internal energy- demand increases, that the Mexican reserves could last until the year 2010. Alonso and Rodiguez3 have shown that, even if the proven hydrocarbon reserves and the techno-economic production limits increase at moderate rates, Mexico will have to import hydrocarbons or else must implement a sound energy-diversification program around the years 2010-2020, depend- ing on the economic growth rate of the country.

A previous study4 established a general model for the energy balance of Mexico. It was assumed that the total energy production is equal to the total internal energy demand plus the total amount of energy exported. The total imports of energy and variations in stock are small quantities compared with the total, and they can be neglected while performing balance calculations. It was also assumed that the total energy exported was only due to hydrocarbons, which implies that exports of electricity and hydrocarbon by-products are small quantities compared with the hydrocarbon-exportation volume. Both assumptions were proven to be correct for the Mexican energy scenario. Finally, the internal energy demand was divided into two components: electrical and non-electrical demand of energy. The total energy production was divided into four categories: hydrocarbon production for electrical uses, hydrocarbon production for non-electrical uses, alternative energy production for electrical uses, and alternative energy production for non-electrical uses.

It is shown that the internal total primary energy demand for Mexico in the year 2000 could be between 7 and 10 EJ/yr. Furthermore, it is concluded that, in order to provide for a smooth energy transition, it will be necessary to produce between 40 and lOOTWh/yr with alternative sources for electrical uses and between 0.4 and 0.6 EJ/yr for non-electrical uses in the year 2000.

The purpose of this paper is to establish priorities in the selection of alternative sources of energy for the Mexican electrical sector in the year 2000. The following factors are considered: energy demand, reserves of alternative energy sources, and industrial and socio-economic guidelines.

787

788 MANUEL MARTINEZ

ALTERNATIVE ENERGY SOURCES

An alternative source of energy is any primary source different from oil and natural gas, which provides more than 90% of commercial needs. An obvious first step in setting energy-diversification policy is to quantify the proven reserves. These figures are not very sound and the Mexican government should make a serious effort to evaluate this potential. Nevertheless, from information provided by the government,5 it is possible to surmize the following data for the year 2000 concerning electricity uses.

Hydroelectric energy

The Comision Federal de Electricidad (CFE) has established proven hydroelectric reserves equivalent to 24,500 MW of installed capacity. The electricity generated per year, at 35% plant capacity, is about 75 TWh.

Coal

Minera Carbonifera Rio Escondido (MICARE), which is the only company performing exploration and exploitation of coal for the power industry, has estimated proved reserves equivalent to 4000 MW of installed capacity. The electricity generated per year, at 80% plant capacity, is about 28 TWh.

Geothermal energy

Instituto de Investigaciones Electricas (IIE) has identified proven reserves equivalent to 4000MW of installed capacity. The electricity generated per year, at 75% plant capacity, is about 26 TWh.

Nuclear energy

Uranio Mexican0 (URAMEX), which has been dismantled by the government, quantified proven reserves equivalent to 1300MW of installed capacity. The electricity generated per year, at 60% plant capacity, is about 6.8TWh.

Solar energy

It has been estimated3 that a distributed system of photovoltaic generators, according to a development program growing at reasonable estimated rates, could be generating about 2.3TWh/yr. Nevertheless, a larger PV program will be considered here, generating about 4 TWh/yr. If the potential of the photothermal systems is considered to be about 1 TWh/yr, then the total electricity generated per year is about 5 TWh.

Wind energy

It has been estimated3 that wind-energy conversion systems could produce about 0.2 TWhlyr.

There is no other alternative energy source that could be used to generate significant amounts of electricity in Mexico by the year 2000. The total reserves of alternative energy sources are equivalent to about 14TWh/yr.

The specified energy scenario for Mexico in the year 2000 establishes a total internal energy demand between 7 and lOEJ/yr and a corresponding electricity demand between 140 and 2OOTWh/yr. This scenario assumes a successful energy-conservation program saving 30% of the total energy that would otherwise be required in the year 2000. The internal electricity demand is assumed to grow at constant rates between 4.5 and 7.0%/yr.

In order to obtain the required amount of electricity from alternative sources of energy, two cases were studied: a 30% contribution from these sources (as is the case today) and an increased share of 60%. The electricity generated for a smooth energy transition should be between 40 and 1OOTWh during the year 2000. The proven reserves of alternative energy sources for electricity generation have been estimated to be about 141 TWh/yr. It is therefore clear that we may select between different energy sources to satisfy electricity requirements.

Mexican electrical energy diversification priorities 789

NON-ENERGY SECTOR CONSIDERATIONS

It has been assumed, as a matter of basic energy policy, that there is a need to save and use the energy produced more efficiently. Diversification of energy sources is also needed. All of the identified alternative energies are technicallv viable. In order to establish a proper selection procedure for energy sources, it is necessary to take into account development requirements and goals, as well as industrial and social guidelines.

Development goals that are usually employed as a policy guide in Mexico include the following: to increase the number of jobs, improve economic growth, obtain an equitable distribution of wealth, foster decentralization of activities at the national level, obtain and maintain a large degree of freedom in economic and technical decisions at the international level, and reduce pressures on the balance of payments while meeting environmental constraints.

The industrial factors involved are the end-use sector, technology maturity, evaluation period, associated requirements, investment level, availability of foreign currency, and increasing productivity and production.

Other important factors are population number and distribution, level of industrialization, social acceptance of technical innovation, and appropriate international transfer of technology,

PRIORITY-SETTING MODEL

Saaty6 established an analytical hierarchy. His method was chosen because it provides a comprehensive problem-solving framework. It is a systematic procedure for representing the elements of any problem. It allows us to organize the basic facts by breaking down a problem into smaller parts which may be compared pairwise. This method does not require that judgments be consistent. The degree of consistency of the judgments becomes apparent at the end of the process. The basic law of hierarchic decomposition requires that elements of the lost or bottom level of the hierarchy be pairwise comparable with elements in the next higher level. The objective is to derive priorities for the elements in the last level that reflects, as best possible, their relative impact on the structure of the hierarchy.

The principle of comparative judgments calls for setting up a matrix to carry out pairwise comparisons of the relative importance of elements in the second level with respect to the overall objective of the first level. The process of comparing elements in each level is continued through the hierarchy. From pairwise comparison, matrices for local priorities are generated. These express the impact of a set of elements on an element in the level immediately above. Priorities were synthesized according to Saaty’s paper.

An intrinsic by-product of this theory is an index of consistency, which provides information on serious violations from numerical and transitive consistency. We seek additional information and reexamine the data in order to improve consistency. Also, a consistency ratio is obtained by comparing the consistency index with corresponding average values from random entries.

The scale used in making judgments is 1 for equal importance, 3 for moderate importance, 5 for great importance, 7 for very great importance, and 9 for primary importance. If activity i has a number assigned to it when compared with activity i, then i has the reciprocal value when compared to i.

ENERGY PRIORITIES

The first step is the decomposition or structuring of the problem as a hierarchy (Fig. 1). The first priority is to satisfy the electricity demand with alternative sources of energy. In the second level, we list the eight factors which contribute to this goal. The third and last level shows the six alternative energy-source candidates, which are to be evaluated in terms of the factors in the second level. The factors in the second level are labour intensity, large economic growth, equitable wealth distribution, foster decentralization, national technology development,

790 MANUEL MARTINEZ

Level 1: satisfying the electricity demand with alternative sources of energy. Level 2: 1, labour-intensive; 2, large economic growth; 3, equitable wealth distribution; 4, foster decentralization: 5. national technology development: 6, availability of foreign currency: 7. environmental order: 8. all Mexicans with electricity supply. Level 3: I. hydroelectric energy; II. coal: III. nuclear energy; IV, geothermal energy: V. solar energy, and VI. wind energy.

Fig. 1. Decomposition of the problem into a hierarchy.

availability of foreign currency, environmental order, and supplying all Mexicans with electricity.

The second step is the introduction of a comparative judgment. We arrange the elements in the second level into a matrix and seek to judge their relative importance with respect to the overall goal of satsifying the total electricity demand. The pairwise comparison matrix for level two is given in Table 1, along with the priority vector, the consistency index (C.I.), and the consistency ratio (C.R.). The judgment values are those of the author.

Table 1. The second step (pairwise comparison matrix for level 2). The number associated to each policy factor is defined in

Fig. 1.

Policy Factors Priority Vector

1 2 3 4 5 6 7 8

11 5 l/3 l/3 3 7 3 l/3 0.112 2 115 l/7 I/? 113 5 l/5 l/7 0.028

4’ 3 3 7 : : l/3 1 5 5 7 7 : 113 l/3 0.174 0.229 65 117 l/3 l/5 3 115 l/7 l/7 l/5 1:7 7 1 l/3 l/7 l/7 l/Y 0.015 0.048

L l/3 3 : l/5 3 l/5 3 : 97 : l/5 1 0.324 0.070

The third step involves pairwise comparisons of elements in the bottom level. The elements are alternative energy sources. There are eight 6 x 6 matrices of judgments. Three sets of judgments were considered: Opinion A, which values soft technologies over hard ones; Opinion B, which assumes that hard technologies have precedence over soft ones, and Opinion C, in which all energy sources have equal importance. The eight matrices of Opinion A are shown in Table 2. Only one matrix needs to be written down for Opinion B and is shown in Table 3. Also, Opinion C needs only one written matrix, which is shown in Table 4.

The last step is to apply the principle of composition of priorities. In order to establish the composite or overall priorities for the alternative energy sources, we define the local priorities of the source with respect to each factor in a matrix, multiply each column vector by the priority of the corresponding factor and then add across each row, which results in the composite or overall priority vector for the alternative energy sources. The matrices generated for Opinions A, B and C are shown in Tables 5,6 and 7, respectively. The corresponding three results for the overall priorities are shown in Table 8. They neatly reflect the judgments given previously and present a quantitative distribution pattern to establish priorities.

Mexican electrical energy diversification priorities 791

Table 2. The third step for Opinion A (pairwise comparison for the bottom level with eight matrices). The Arabic number associated

with each energy source is defined in Fig. 1.

1. Labour Priority intensive Vector

I I I III IV V VI

I 1 l/5 113 l/5 119 117 0.027

I I 5 1 3 1 l/5 113 0.109

I I I 3 l/3 1 l/3 l/V l/5 0.048

IV 5 1 3 1 l/5 113 0.109

v 9 5 9 5 1 3 0.468

VI 7 3 5 3 l/3 1 0.238

2. Economic Growth

I I I I I I IV V

I 1 3 5 7 7

I I l/3 1 3 5 5

Ill 115 l/3 1 3 3

IV l/7 l/5 113 1 1

V 117 115 l/3 1 1

VI l/9 l/7 l/5 113 l/3

VI

9 0.468

7 0.255

5 0.130

3 0.059

3 0.059

l/3 0.028

Priority vector

C.I .= 0.055 C.R.= 0.044

3. Wealth Priority Distribution Vector

I II III IV v VI

I 15 7 3 l/3 3 0.242 II l/5 1 3 l/3 l/7 l/3 0.051

III l/7 l/3 1 l/5 l/9 l/5 0.027 IV l/3 3 5 1 l/5 1 0.111 V 7

VI $3 3 9 5 1 5 0.457 5 1 l/5 1 0.111

C.I.= 0.052 C.R.= 0.042

4. Foster Priority Decentralization Vector

, I II III IV V VI

I 1 3 7 1 l/3 1 0.169 II l/3 1;5 5 l/3 l/5 l/3 0.070

III l/7 1 l/7 l/9 l/7 0.024 IV 3 7 1 l/3 1 1 0.169 V 3 5 9 3 13 0.399

VI 1 3 7 1 l/3 1 0.169

C.I.= 0.027 C.R.= 0.021

continued overleaf

792 MANUELMARTINEZ

Table 2-continued

5. National Priority Technology Vector

I II III IV v VI

I 13 5 1 l/3 l/5 0.111 II l/3 1 3 l/3 l/5 l/7 0.051

III l/5 l/3 1 I/5 l/7 l/9 0.027 IV 1 3 5 1 l/3 l/5 0.111 V 3 5 7 3 1 I/3 0.242

VI 5 7 9 5 3 1 0.457

C.R.= 0.052 C.R.= 0.042

6. Foreign Currency

Priority Vector

I II III IV V VI

I II $7

7 9 3 5 3 0.425 1 3 l/5 l/3 l/5 0.048

III l/9 l/3 1 l/7 l/5 l/7 0.026 IV l/3 5 7 1 3 1 0.204 V l/5 3 5 l/3 1 l/3 0.094

VI l/3 5 7 1 3 1 0.204

C.I.= 0.045 C.R.= 0.036

7. Environmental Order

Priority Vector

11 7 II l/7 1 III l/5 : IV l/3 ! v 3

VI 1 ;

I II III IV v VI

7 1:3 3 l/3 1 0.204 L l/5 l/9 l/7 0.026 3 1 l/3 l/7 l/5 0.048 5 3 1 l/5 l/3 0.094 3 7 5 1 3 0.425 7 5 3 l/3 1 0.204

8. Electricity Priority Coverage Vector

I II III IV V VI

I 13 3 5 l/3 7 0.240 II l/3 1 1 3 l/5 5 0.100

III l/3 1 1;3 3 l/5 5 0.110 IV l/5 l/3 1 l/7 3 0.059 V 3

VI l/7 $5 5

l/5 1:3 1:9 0.453

Y 0.027

C.I.= 0.073 C.R.= 0.059

Mexican electrical energy diversification priorities 793

Table 3. The third step for Opinion C (pairwise comparison for the bottom level with only one matrix).

Any factor in level two

Priority vector

I

I I I I I I I

l/5 1 I 1 115 1 II 5

III 5 -L IV l/5 V l/5

VI l/5

1

l/9 1

l/9 l/9 l/9

l/9 l/9

I C.l.= 0.110 C.R.= 0.089

Table 4. The third step for Opinion C (pairwise comparison for the bottom level with only one matrix).

Any factor Priority in level two Vector

I II III IV v VI

I 11 11 11 0.167 II 11 11 11 0.167

o.lb7 0.167 o.lb7 0.167

C.l.= 0 C.R.= 0

Table 5. The last steo for Ooinion A (overall orioritv matrix). The Roman and Arabic numbers . ire definkd in kg. 1.

1 2 3 4 5

0.112 0.028 0.174 0.229 0.048

0.027 0.468 0.242 0.169 0.111 0.109 0.255 0.051 0.070 0.051 0.048 0.130 0.027 0.024 0.027 0.109 0.059 0.111 0.169 0.111 0.468 0.059 0.457 0.399 0.242 0.238 0.028 0.111 0.169 0.457

8

0.324

I II

III IV V

VI

0.425 0.204 0.048 0.026 0.026 0.048 _L 0.204 0.094 0.094 0.425 0.204 0.204

0.240 0.110 0.110 0.059 0.453 0.027

Table 6. The last step for Opinion B (overall priority matrix).

1 b 0.112

2 3 4 5 6 7 8

0.028 0.174 0.229 0.048 0.015 0.070 0.324

I 0.125 0.125 0.125 0.125 0.125 0.125 II 0.376 0.376 0.376 0.376 0.376 0.376

Ill 0.376 0.376 0.376 0.376 0.376 0.376 IV 0.041 0.041 0.041 0.041 0.041 0.041 V 0.041 0.041 0.041 0.041 0.041 0.041

VI 0.041 0.041 0.041 0.041 0.041 0.041

' 0.125 1 0.376

~ ;.;I; 0:041 0.041

0.125 0.376 0.376 0.041 0.041 0.041

794 MANUEL MARTINEZ

Table 7. The last step for Opinion C (overall priority matrix).

1 2 3 4 5 6 7 a

0.112 0.028 0.174 0.229 0.048 0.015 0.070 0.324

I 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167 I I 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167

III 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167 IV 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167

V 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167 VI 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167

Table 8. Overall priorities for three sets of judgments (in percent).

OPINION

SOURCE A B C

Co.3 I a.5 37.6 16.8 Geo 10.6 4.1 16.8 Hydra 20.0 12.7 16.8 Nuclear 5.9 37.6 16.8 Solar 41.5 4.1 16.8 Wind 13 4 41 16.8

CONTRIBUTING ALTERNATIVE ENERGY SOURCES

The possible contribution of the different energy sources to cover the electricity demand for the year 2000 depends on three main factors: the precise electricity demand, the indicated set of priorities and the size of the proven reserves. Between 40 and lOOTWh/yr will have to be generated with alternative sources in the year 2000, as described before.

If the low figure of 40 TWh/yr is considered, then the source participation depends first on the priority set taken and second on the availability of energy sources.

For Opinion A, the direct contribution from each source is as follows: 16.6 TWh/yr of solar energy, 8.0 of hydroelectric energy, 5.4 of wind energy, 4.2 of geothermal energy, 3.4 of coal, and 2.4 of nuclear energy. If the amounts of proven reserves are considered, then it is obvious that solar and wind energies can not provide their required shares. Therefore, it is assumed that the amount not given by these two sources could be supplied by the others according to the same judgment given in Opinion A, but normalized to unity after not taking into account the solar and wind energies. This assumption is appropriate because the only factors to be considered are those of level two in the hierarchy and they are not modified. The additional contributions from these four sources are 7.4TWh/yr of hydroelectric energy, 3.9 of geothermal energy, 3.1 of coal, and 2.2. of nuclear energy. The final contributions become 5.0 TWh/yr of solar energy, 15.4 of hydroelectric energy, 0.2 of wind energy, 8.1 of geothermal energy, 6.5 of coal, and 4.6 of nuclear energy.

For Opinion B, the direct contribution from each source could not be met by nuclear and wind energies. Using this assumption and following the indicated procedure, the final contributions become 21.2TWh/yr of coal, 5.9 of nuclear energy, 7.2 of hydroelectric energy, 2.3 of geothermal energy, 2.3 of solar energy, and 0.2 of wind energy. For Opinion C, the final contributions are 9.4TWh/yr of hydroelectric energy, 9.4 of coal, 9.4 of geothermal energy, 6.8 of nuclear energy, 5.0 of solar energy, and 0.2 of wind energy.

If the large figure of lOOTWh/yr is considered, then the contributions from alternative sources depend again on the set priority and the size of the proven reserves. For Opinion A, we find 5.0TWh/yr of solar energy, 47.5 of hydroelectric energy, 0.2 of wind energy, 22.2 of geothermal energy, 17.8 of coal, and 6.8 of nuclear energy. For Opinion B, 28.0TWh/yr of

Mexican electrical energy diversification priorities 795

Table 9. Electricity provided by alternative sources, in the year 2000 (TWh/yr).

Low Needs/40 TWh Large Needs/100 lWh

Source 0p.A 0p.B 0p.c 0p.A Op.6 0p.c

Hydro 15.4 7.2 9.4 47.5 45.5 34.8 Coal 6.5 21.2 9.4 17.8 28.0t 28.ot Nuclear 4.6 5.9 6.8 6.0 6.8t 6.8t Geo 8. I 2.3 9.4 22.2 14.7 26.ot Solar 5.0t 2.3 5.0t 5.0t 5.0t 5.0t Wind 0.2t 0.2t 0.2t , 0.2t 0.2.f 0.2t

t AU proven reserves used.

coal, 6.8 of nuclear energy, 45.5 of hydroelectric energy, 14.7 of geothermal energy, 5.0 of solar energy, and 0.2 of wind energy. Finally, for Opinion C, 34.8 TWh/yr of hydroelectric energy, 28.0 of coal, 6.8 of nuclear, 26.0 of geothermal energy, 5.0 of solar energy, and 0.2 of wind energy. A summary of the contributions alternative energy sources in the year 2000 is shown in Table 9. Hydroelectric generation is by far the most important source in any program to diversify energy sources. All of the presently proven reserves of nuclear, solar and wind energies are consumed in most cases. Coal and geothermal energy will have to be used to make up the gap, especially for base-load generation.

ECONOMIC CONSIDERATIONS

In order to consider the economic factors involved in diversification schemes, a reduced net present value analysis was performed. A reference cost of electricity was first obtained for the present technical and economic conditions involving the use of hydrocarbons and, secondly, a break-even capital cost was obtained for each alternative source after considering their present status.

Martinez and Fernandez’ described a reduced NPV method, which has been selected for this study. This procedure accounts for the costs of capital, energy, operation and maintenance, large replacements, interest on the capital, and retirement of the system. All of the costs, with the exception of annual energy costs, are given as a fraction of the capital cost. This simplification is justified by the lack of sound data on implementation and operation of these alternative systems.

The base conditions refer to Mexico in 1985 for electricity generated with oil and natural gas. The net generation was 85,352 GWh/yr from an installed capacity of 20,806 MW. The capacity associated with hydrocarbons was 12,949 MW. The net generation during 1986 increased ,by about 7%.

The economic parameters chosen for the near future are 25% for general and energy- inflation rates and 35% for the discount rate. These are reasonable assumptions in view of the presently very large inflation rates. The evaluation period was taken to be 40yr, which is the lifetime of an oil-fired facility.

Summaries of the main technical and economic factors are shown in Table 10. Costs are expressed in 1986 US dollars, c is the electricity cost per kWh, W2 is the annual amount of electricity generated by each system, KO is capital cost, Fl is cost of the primary energy used in the non-renewable systems expressed in dollars per kWh, PC is plant capacity, F2 operation and maintenance cost, N the number of large replacements or new systems, and F retirement cost.

A busbar electricity cost of $0,064 kWh was obtained for oil-fired systems. The break-even capital costs are $4200 kW for geothermal systems, 2400 for hydroelectric systems, 1900 for solar systems, and 1400 for wind systems.

7% MANUEL MARTINEZ

Table 10. Factors considered in the NPV analysis. The parameters are defined in the text.

I I c($/kWh) WZ(kWh/y) KO(S/kW Fl($/kW) PC

OilbNG - Hydro 0.064 Coal 0.064 Nuclear 0.064 Geo 0.064 Solar 0.064 Wind 0.064

5.1E9 15.4E9

z; 8:lEg 5.OE9 0.2E9

1200 ? ? ? ? 7 ?

0.45

0.05 0.05

0.45 0.35 0.80 0.60 0.75 0.25 0.20

T-/-q7 0.10 - 0.20 0.05 - 0.05 0.20 1 0.40 11 0.10 1 1.00 0.10 1 0.10 0.01 1 0.05 0.01 3 0.05

The results obtained show that, for near-term conditions in Mexico, geothermal, hydro- electric and coal energy sources are technically and economically viable, The required techno-economic developments for nuclear, solar and wind systems should be possible to achieve in the near future.

CONCLUSIONS

Priorities have been established for the selection of alternative energy sources for Mexico in the year 2000. The main factors considered were energy demand, amounts of proven alternative energy reserves, and industrial and social guidelines.

Hydroelectric systems are by far the most important power plants in any applicable program to diversify the primary sources of energy. In most cases, the presently proven reserves of nuclear, solar and wind energies are all utilized. Geothermal and coal systems will have to be used to make up the gap between demand and supply, especially for base-load generation.

For the year 2000, a reasonable contribution from alternative sources could be the following: between 15.4 and 47STWh/yr of hydroelectric energy, between 8.1 and 22.2 of geothermal energy, between 6.5 and 17.8 from coal, between 4.6 and 6.8 of nuclear energy, 5.0 of solar energy, and 0.2 of wind energy. The ranges of numbers refer to low and large electricity requirements, respectively.

Our study shows that hydroelectric, geothermal and coal power systems are viable alternatives to oil-fired plants. Nuclear, solar and wind systems should become feasible in the near future.

REFERENCES

1.

2. 3.

4. 5.

J. Viquiera, Proceedings of the “Seminario sobre el petroleo y sus perspectivas en Mexico,” p. 13, organized by PUJS-UNAM, Mexico City (1983). A. Ponce, p. 43 of Ref. 1. A. Alonso and L. Rodriguez, “Alternatives Energeticas,” Conacyt-Fondo de Cultura Economica, Mexico City (1985). M. Martinez, Proceedings of the “VII Reunion National de Energia Solar,” p. 56, Mexico City (1984). “Programa National de Energeticos 1984-1958,” Mexican Government Publication, Mexico City (1984).

6. T. L. Saaty, IEEE Trans. Engng Mgmt EM-30, 140 (1983). 7. M. Martinez and J. L. Fernandez, Ciencia 37, 135 (1986).