Cape Town, May 2010 Luz Aurora ORTIZ SALGADO Ministry of Energy MÉXICO Energy efficiency in Mexico A Program for the Replacement of Home Appliances.

Cape Town, May 2010

Luz Aurora ORTIZ SALGADOMinistry of Energy

MÉXICO

Energy efficiency in Mexico

A Program for the Replacementof Home Appliances

I. Why replacing home appliances?

II. Program Design and Operation

III. Regulatory decision-making

IV. Program Results (2009-2010)

V. Further steps

ContentContent

What prompted the effort?What prompted the effort? Power generation Power generation

In Mexico, more than 70% of power comes from fossil fuels.

What prompted the effort? What prompted the effort? Electricity Tariffs and SubsidiesElectricity Tariffs and Subsidies

• Around 98.5% of electricity consumers receive subsidies. • People with higher income receive higher subsidies.

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Subsidies per income deciles

Fuente: Banco Mundial

Source: World Bank

What prompted the effort?What prompted the effort?

• November 2008: New legal framework to foster energy efficiency and renewable energies.

• January 2009: Announcement of measures to improve the economy of households and decrease unemployment. The program to replace home appliances was considered among those measures

The Program was also included in the Special Program for Climate Change.

• March 2009: Program is launched by the Ministry of Energy.

What prompted the effort?What prompted the effort?

The Program benefits:

– Families: By buying an efficient appliance, they will have lower energy consumption and an increase in their disposable income.

– Energy Sector: Less demand for energy resulting in lower fuel demand and additions in generating capacity.

– Environment: Greenhouse gas emissions will decrease.

– Government: Reduction of electricity subsidies.

– Home-appliances Industry: Less unemployment.

The Program Design and OperationThe Program Design and Operation

• Target: The improvement of energy efficiency in the residential sector, through the replacement of inefficient home appliances by new efficient models.

• 29.45 million of residential electricity users (88.2 % of total users) in Mexico, who consumed 48.5 million of MWh (26.7% of total power sales).

• The Program is based on a solid and good functioning network of distributors of electrical appliances, the provision of financings via the operator and the recollection of loans provided via the national electricity supplier (CFE) using its system for electricity bill payment.

The Program Design and Operation: The Program Design and Operation: Types of AssistanceTypes of Assistance

To replace their inneficient home appliance, households are offered two types of support from the Mexican government :

• Financial assistance - Loan to cover:

the remaining cost of the purchase costs related to the replacement (in the third level of consumption) At preferential rate (12%) Repaid through the electricity bill for a four year period.

• Direct assistance – Grant that covers:

a part of purchase costs related to the home appliance replacement

The Program Design and Operation: The Program Design and Operation: Amounts of Assistance per Level of ConsumptionAmounts of Assistance per Level of Consumption

• Should lighting be included in the Program? Which appliances should be replaced and which energy efficiency criteria should they meet?

• What should the government offer in order to get people to replace their home appliances (should it be a grant or a loan), given the maintenance culture of Mexican people and the economic crisis.

• What should be the amount of the assistance?

• Who could get into the Program: every household, no matter their income, or only low-income households? Would households experience an income effect?

Regulatory Regulatory decision-makingdecision-making

Regulatory decision-makingRegulatory decision-making

In households with air-conditioning, lightening, air-conditioner and refrigerator add up to 85% of electricity consumption.

Electricity consumption per home appliance

Lightening 40%

Refrigerator29%

TV13%

Iron6%

Washing machine

5%

Other home appliances

7%

• Should lighting be included in the Program? Which appliances should be replaced and which energy efficiency criteria should they meet?

• What should the government offer in order to get people to replace their home appliances (should it be a grant or a loan?), given the maintenance culture of Mexican people and the economic crisis.

• What should be the amount of the assistance?

• Who should get into the Program: every household, no matter their income, or only low-income households? Would households experience an income effect?

Regulatory decision-makingRegulatory decision-making

• Should lighting be included in the Program? Which appliances should be replaced and which energy efficiency criteria should they meet?

• What should the government offer in order to get people to replace their home appliances (should it be a grant or a loan), given the maintenance culture of Mexican people and the economic crisis.

• What should be the amount of the assistance?

• Who should get into the Program: every household, no matter their income, or only low-income households? Would households experience an income effect?

Regulatory decision-makingRegulatory decision-making

• Should lightng be included in the Program? Which appliances should be replaced and which energy efficiency criteria should they meet?

• What should the government offer in order to get people to replace their home appliances (should it be a grant or a loan), given the maintenance culture of Mexican people and the economic crisis.

• What should be the amount of the assistance?

• Who should get into the Program: every household, no matter their income, or only low-income households? Would households experience an income effect?

Regulatory decision-makingRegulatory decision-making

Program ResultsProgram Results

During 2009, we replaced 250,000 home appliances

Up to May 17, 2010, we have registered more than 500,000 home appliances to be replaced.

By the end of 2012, we expect to replace 1.9 million home appliances.*

With the replacements achieved by 2012, we estimate 2.5 million MWh on electricity consumption savings, as well as 2.2 million tons of CO2 avoided emissions.

92%

8%

Refrigeradores

Equipos de aire acondicionado

RefrigeratorsAir conditioners

*If there are enough financial resources.

This Program aims at promoting a energy efficiency, improving the This Program aims at promoting a energy efficiency, improving the welfare of households and taking care of the environment. welfare of households and taking care of the environment.

The Program is constantly monitored, in order to implement as The Program is constantly monitored, in order to implement as many improvements as necessary for its optimal performance.many improvements as necessary for its optimal performance.

Further stepsFurther steps

We are analyzing a CDM to finance the Program.We are analyzing a CDM to finance the Program.

Cape Town, May 2010

Luz Aurora Ortiz SalgadoDirector-General for Electricity Distribution,

and Nuclear ResourcesMinistry of Energy

MÉ[email protected]

Energy efficiency in Mexico

A program for the replacementof home appliances