Mexico’s capacity market settlement 2023: The age of uncertainty

The 2023 capacity market annual settlement closed at 1.87x, approaching its 2x market cap and continuing a three-year trend of sharp increases. This rise was driven by demand and supply shocks. The year was marked as the hottest and driest on record, compounded by the cessation of daylight-savings time and an economic upturn that pushed average energy demand higher than usual. From June to October, encompassing 95 of the year's critical hours, the monthly peak demand surged by an average of 10%. Furthermore, 2023 saw no significant new capacity additions to the system, while hydroelectric generation significantly decreased, falling by 42% for the year, with some months experiencing declines of up to 60%. This insight delves into the factors influencing Mexico's Capacity Market and its results.