This project proposal outlines plans to develop the ESCO and biogas markets in Mexico. It notes Mexico's commitment to reduce GHG emissions by 30% and the potential for energy efficiency and cogeneration projects. While some initiatives have been implemented, like lighting replacement programs, greater potential remains, especially in cogeneration using biogas from 11,000 MW of potential capacity. The proposal recommends making performance contracting mainstream through a financial instrument to fund SME projects, and developing technical expertise. It details initial steps taken through an internship alliance to prove the concept and establish an ESCO company.

1. Project Proposal
Development of the ESCO and Biogas Market
in Mexico

2. Today’s Facts
•30% GHG emissions reduc/on
commitment by Mexico1
•Great poten/al to implement Energy
Efficiency and Cogenera/on Projects
•Investments in Clean Energy have not
been deployed at the necessary pace
1: unfccc.int/files/ mee1ngs/applica1on/pdf/mexicocphaccord_app2.pdf.

3. Today’s Facts
•Industrial and Municipal wastes
remain untreated:
•Vinasse in the Sugar and Tequila
Industry1
•Landfill energy poten/al poorly
exploited
•CFE capacity is being overwhelmed
in some industrial areas
1: http://www.jalisco.gob.mx/wps/portal/!ut/p/
c0/04_SB8K8xLLM9MSSzPy8xBz9CP0os3ifEB8PY68gIwN3Z0tXAyM3M2MDdwNnAwN_I_2CbEdFAOM2uBw!/?
PC_7_LTLH3JR208OG602FL0IEL500G3_WCM_CONTEXT=/wps/wcm/connect/PortalJalisco2009/contenidos/gobierno+del+estado+jalisco/
pj_pccomunicacionsocial/pj_asnoticias/pj_cont+el+gobernador+del+estado+inauguro+la+planta+de+tratamiento+de+casa+herradura

4. The Economic Risk of Climate Change
1% World GDP = USD 702 Billion per annum
USD 70.2 Trillion
20% World GDP = USD 14 Trillion per annum USD 70,210,000,000,000
Cost of
Climate Cost of “Doing
AdaptaGon Nothing” World GDP 2009
Source: Stern Report 2006

5. The Economic Risk of Climate Change
2% World GDP = USD 1.4 Trillion per annum
USD 70.2 Trillion
20% World GDP = USD 14 Trillion per annum USD 70,210,000,000,000
Cost of
Climate Cost of “Doing
AdaptaGon Nothing” World GDP 2009
Source: Stern Report 2008

6. The Opportunity
•Energy Efficiency
•Cofiring Biomass
h"ps://www.mckinseyquarterly.com/A_cost_curve_for_greenhouse_gas_reduc=on_1911

7. Some definiGons
Energy Efficiency
Use of less energy to provide the same level of
energy service1
ESCO (Energy Services Company)
•A company that provides energy efficiency‐related
and other value‐added services
•Performance contracGng is a core part of its
energy efficiency services business2
Performance ContracGng
A means of raising money for investments in Energy
Efficiency that is based on projected savings3
1:”Energy Efficiency”. Wikipedia en.wikipedia.org/wiki/Energy_efficiency
2: “Powering Up: The Investment Poten=al of Energy Service Companies in India”. h"p://www.wri.org/publica=on/powering‐up
3: Interna=onal Ins=tute for Sustainable Development. h"p://www.iisd.org/business/tools/bt_pc.asp

8. The Opportunity
USD
per annum
‐50%
170 billion =Energy Demand
Growth1
Mexico’s
USD 900 billion >
in Savings 1
GDP
17% IRR1
h"ps://www.mckinseyquarterly.com/A_cost_curve_for_greenhouse_gas_reduc=on_1911
1: Source: “How the World should invest in Energy Efficiency”. McKinsey & Company
IRR: Internal Rate of Return

9. The Opportunity in Mexico
Cost of aba1ng a unit of
‐35% energy in developing
countries1
USD 3 billion
per annum
Business
Opportunity2
280 TWh Savings by 20243
h"ps://www.mckinseyquarterly.com/A_cost_curve_for_greenhouse_gas_reduc=on_1911
1: Source: “How the World should invest in Energy Efficiency”. McKinsey & Company
2: Source: Enersave Consul=ng. www.enersave‐is.com
3: Source: Programa Nacional para el Aprovechamiento de Energía Sustentable, 2009

10. What has been done so far?
•Sustainable LighGng
Programme
•“Change your refrigerator”
Programme

11. What has been done so far? (Examples)
Replacement of LighGng Systems in Pabellón Bosques
MXP 433,217 investment
57% Savings on ligh1ng costs
22 months Payback 1me

12. Why?
“Low‐Hanging Fruit”

13. “Low‐Hanging Fruit”
Why?
•Most cost‐effecGve soluGon to
reduce emissions
•Quick Payback
•“Easier” to implement
•RelaGvely simple soluGons

14. AutomoGve Fleet Efficiency?

15. AutomoGve Fleet Efficiency? : NOT FEASIBLE
Technological Cost
Regulatory Framework
Financing
Source: “Programa Nacional de Aprovechamiento Sustentable de Energía”

16. CogeneraGon in Mexico?

17. What is CogeneraGon and Biogas?
CogeneraGon
The producGon of heat and/or power from
the waste energy of an industrial process
Biogas
Gas produced by the biological breakdown
of organic maler in the absence of oxygen
Source: en.wikipedia.org/wiki/Cogenera=on
Source: en.wikipedia.org/wiki/Biogas

18. CogeneraGon in Mexico?: POSITIVE RETURN
11,000 MW
Cogenera1on Poten1al
70% Yet to be exploited
3,000 MW
Biogas Cogenera1on
Poten1al
Cost‐effecGve
Source: “Programa Nacional de Aprovechamiento Sustentable de Energía”

19. What has been done so far? (Example)
Biogas CogeneraGon Facility
Early Adopter
USD 873,900 investment
Savings on electricity
30% costs
Facility’s installed
1 MW capacity

20. How do we replicate?

21. How do we replicate?
Make the Performance ContracGng Model mainstream
Create a financial instrument to enable SMEs to implement Energy
Efficiency and CogeneraGon Projects
Current SituaGon
•Very limited funding capability
ESCO
•Each ESCO is an “island”
P1 P2 P3 •Difficulty to access financing
from a banking insGtuGon

22. How do we replicate?
Make the Performance ContracGng Model mainstream
Development Banks Impact Investors Banking InsGtuGons
$ $ $
Financial Instrument
ESCO 1 ESCO 2 ESCO 3 ESCO 4
P1 P2 P3 P1 P2 P3 P1 P2 P3 P1 P2 P3

23. Challenges

24. Challenges
•InformaGon
•Technical ExperGse
•Capital Flow

25. Next Steps
Proof of
•Market Approach >
Concept
•Bolom‐Up CommunicaGon
•Develop Funding Schemes
•Develop Technical ExperGse

26. Steps accomplished so far:
Alliance with:
•5 months internship by an InWEnt/GIZ ILT parGcipant
•To develop technical experGse and support quickly in
Mexico
•To establish a company that serves as Proof‐of‐Concept

27. “If you build it , they will come”

28. Thank You
Rodrigo Arévalo
Deutsche GesellschaU für
Interna/onale Zusammenarbeit
Proméxico Germany
arevalo.ro@gmail.com
+49(0)176 3244 3279