Environmental Impact II 291

Impact of the subsidy on the electric rate

in the use of renewable energy for
net zero housing in Mexicali, Mexico
R. Gallegos1, E. Tapia1 & S. Romero2
1
Faculty of Architecture and Design, Autonomous University of Baja California,
Mexico
2
Institute of Engineering, Autonomous University of Baja California, Mexico

Abstract
The city of Mexicali, located in the Northwest of Mexico, has a hot extreme
climate, with maximum temperatures of up to 48oC, so the use of air
conditioning systems is a necessity for the realization of human activities. But
the intensive use of these systems brings with it high consumptions of electric
energy, so billing is very expensive for the majority of the population. For this
reason, the city has a subsidy by the State in the electricity tariff, allowing users
to allocate less of their income to pay for the service. In this context, the State
agency that produces and distributes electric power has developed mechanisms
to allow domestic cogeneration using photovoltaic systems of up to 3 kW. This
paper describes the design and simulation of a net zero house interconnected to
the grid for users of middle class. The first task was to reduce energy
requirements for air conditioning through the use of appropriate materials and
construction systems, use of natural lighting, changing the type of lighting
and thermal insulation. Subsequently the photovoltaic system is designed and an
estimate of the recovery time of the investment is done. The results show that
with the levels of subsidy rate, the net zero housing scheme is not able to recover
the investment in the life time of the project. If the rate were not subsidized,
investment is recovered in the fourth part of the life time; approximately five
years. It is concluded that for this sector of the population the State could
allocate the amount of the subsidy for those five years to finance PV systems and
eliminate the subsidy, the amount of which may be used for social works. An
additional benefit would be the incentive to the use of renewable energy in the
country.
Keywords: net zero housing, renewable energy, domestic cogeneration.

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
doi:10.2495/EID140251
292 Environmental Impact II

1 Introduction
The city of Mexicali, capital of the State of Baja California, Mexico, is located in
the Northwest of the country, bordering the United States of North America. It is
located in the Altar desert, which also covers the States of Sonora in Mexico, and
part of California and Arizona in the United States. Its climate is classified,
according to Köppen, as Bwh. The maximum average temperatures in the warm
season range from 37 to 46oC, with historic records of up to 52oC. The solar
energy received at the same time range from 4600 to 8200 Wh/m2 as a daily
average. Due to these climatic conditions, air conditioning becomes a necessity
for the realization of human activities. Formerly, evaporative cooling was
preferably used, but from the decade of 1970 vapor compression systems have
been extensively used. Vapor compression systems consume more electricity
than evaporative cooling, so the billing of electricity represents a significant
proportion of the income of the users. That is why the State has subsidized the
domestic electricity tariff for locations in which the maximum ambient
temperature is superior to 33oC, through the so-called tariff 1F [1]. This tariff
varies from month to month, and the subsidized period is from May to October.
Table 1 shows the 1F rate for the year 2013, with costs expressed in cents of US
dollar, at the exchange rate of January 2013.

Table 1: Tariff 1F for 2013.

OFF-SUBSIDY
Consumption kWh JAN FEB MAR APR NOV DEC
0-75 6.17 6.19 6.20 6.22 6.39 6.41
75-200 7.54 7.56 7.59 7.61 7.78 7.80
Exceeding 22.02 22.10 22.17 22.24 22.76 22.83
SUBSIDY
Consumption kWh MAY JUN JUL AUG SEP OCT
0-300 4.63 4.64 4.66 4.67 4.69 4.71
300-1200 5.84 5.85 5.87 5.89 5.90 5.92
1200-2500 14.04 14.09 14.14 14.19 14.24 14.28
Exceeding 22.32 22.39 22.46 22.54 22.61 22.68
A minimum charge equivalent to 25 kWh is applied.

The magnitude of the subsidy can be appreciated when one considers a

consumption of 201 kWh: in off subsidy period would be charged on average at
$14.47 USD while in period of subsidy, the billing would be $9.38 USD on
average. As for the high consumption rates of the warm season, a consumption
of 2501 kWh would respectively be billed at $528.61 and $251.24 USD,

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
 Environmental Impact II 293

i.e. there is a 54% subsidy. It is seen that the State allocates resources to the
subsidy that could be spent on the promotion of alternative sources of energy in
housing, taking advantage of high levels of solar radiation received.

2 The State’s actions to reduce consumption and promote

renewable energy sources
High consumption of electrical energy in the warm season, causes operational
problems in the producing plants, run by the state-owned Federal Commission
for Electricity (CFE), and generates costs to the State because of the subsidy.

2.1 Programs to reduce consumption

A first approach to the solution of this problem was to encourage users to reduce
their consumption of electricity, through the promotion of thermal insulation of
the houses, a program called FIPATERM, which was created in 1990 by the
federal Government to provide funding for the installation of thermal insulation
in the residential sector, initially in Baja California. FIPATERM showed to be so
successful that currently it operates in fifteen states of the country. A second step
was to promote the acquisition of air conditioning, refrigerators and lighting
systems of higher efficiency, using the program ASI. Both the program
FIPATERM and ASI make loans with a term of three years charged through
electricity bills.

2.2 Interconnection contracts

Until the year of 2007, the State did not allow individuals to generate electric
energy even for self-consumption. From that year on, interconnection contracts
were established. These contracts allow users to generate energy to be delivered
to the net and be taken into their account as bonus turnover. For the residential
sector, the applicable agreement is the contract of interconnection with
renewable energy, or small scale cogeneration system (CIFER-PE). CIFER-PE
establishes that the maximum installed capacity cannot exceed 10 kW for users
in residential rates. This type of contract does not allow the carrying of power to
other centers of consumption. The contract between the generator and the CFE
has an indefinite term and does not require a special permit. The agreement
establishes the net metering between the electric power delivered by the supplier
to the generator and electric power delivered by the generator to the
supplier. The net metering consists of a bi-directional meter, which records both
the amount of electrical energy supplied to the network by the generator, and that
given to the generator. The main feature of this electrical energy compensation
scheme is that the supplier calculates the difference between these two amounts
of energy .If the generator delivers more power than consumed, it is saved as a
credit in favor and can be compensated each month, within a maximum period of
12 months, at the end of which, a new account is started. If the difference
between the power supplied and generated is zero, then the generator will only

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
294 Environmental Impact II

pay the minimum charge established in the normal supply contract.

The investment for the construction of facilities and equipment required for the
generation of electricity through renewable energy sources, as well as the
bi-directional meter, will be provided by the generator. Also, the generator will
take care of any modifications that may be necessary for interconnection, same
that will be carried out under the supervision of the CFE.

3 Net zero housing

Since the institution of interconnection agreements, domestic cogeneration of
electricity is possible thus aiding in its evolution towards the ideal of net zero
housing. A Net Zero Energy Building (NZEB) is a residential or commercial
building with reduced energy needs, accomplished through greater efficiency, in
such a way that the balance of energy needs could be supplied by renewable
technologies [2]. For Voss et al., a NZEB is an energy-efficient building that, in
combination with public electricity infrastructure network, complies with the
annual total primary energy demand, determined from a monthly balance, where
credit of primary energy by the surplus of electricity delivered to the network is
accounted [3]. The electricity generated at the site, is mainly used to meet the
energy demand of the building in question. Seen in these terms, they do not need
fossil fuels for heating, cooling, lighting or other uses, although sometimes it
might be necessary to take some power from the grid. Sartori et al. [4] mention
that a NZEB is one with a reduced power demand that can be compensated by
equivalent electric power on-site from renewable generation.

3.1 Case study design

For the case of study a dwell was designed for a user of the middle-upper class,
with the goals of reducing energy for air conditioning requirements, optimizing
the use of spaces and including the integration of photovoltaic systems since the
design. The premise has a surface of 300 m² and is located in the urban area of
the city of Mexicali. The house was designed for a family of four members.

3.1.1 Identification of requirements

In order to determine energy needs as well as spatial and functional
requirements, a survey was conducted and applied to each of the members of the
family. Needs and requirements were identified based on the conditions of
the house occupied by the family, and the results were taken as a reference to
identify wishes, needs and requirements. The different types and frequency of
activities carried out in each space and by each person were determined in order
to assign the internal heat gain due to occupation. The other components of the
internal thermal load were determined using the results of the survey, which also
included the patterns of use of electric appliances and lighting.

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
 Environmental Impact II 295

3.1.2 House design

The shape of the house is a rectangular prism developed into two levels. The
prism is oriented with his long side facing South, in such a way that
the longitudinal axis of the house is located along the East-West direction. This
shape and orientation were chosen to take advantage of the solar incidence
during the cold period. On the other hand, the East and West side of the prism
was shaped with reduced proportions, to lower the incidence of direct sunlight on
the building in hours with higher temperatures during warm period. The tilted
roof was developed on the East–West axis, generating a collector area to allocate
the photovoltaic system (PVS). The supporting elements of the PVS stand higher
than the built elements in the neighborhood in order to allowed sunlight.

3.1.3 Reduction of energy requirements

According to Docherty and Szokolay [5], for Mexicali the most suitable passive
technique is the use of thermal mass in summer, in combination with natural
ventilation, while in the cold period, it is the thermal mass with direct solar
heating. It was decided to have a combination of materials to create a wall of
0.30 m thick in the envelope of the conditioned areas. Assemblies of materials
for every constructive element of the proposed house envelope are shown
in table 2.
On the ground floor, North, West and South facing walls, are constructed
according to configuration number 1, in order to protect these, while in the East
orientation, the wall chosen was number 3, because spaces in such orientation
are unconditioned (laundry and service room) and are shaded from the early
hours of the morning. Such spaces are devised as a thermal buffer for the
conditioned spaces.

Table 2: Construction assemblies for the envelope.

Element Materials Thermal R

Resistance Value
m2 oC/W
1 Apparent Brick + EPS + Concrete Block + Gypsum 1.60 9.07
Wall Plaster
2 Plastered Mortar + Brick + EPS +Concrete block + 1.61 9.14
Wall Gypsum Plaster
3 Block Wall Mortar + Concrete Block +Gypsum Plaster 0.20 1.16
4 Gable Roof Asphalt Roll + Wood Singles 0.18 1.05
5 Plafond Gypsum Board + Cellulose Fiber 6.78 38.51
6 Flat Roof Asphalt Roll + Concrete 0.12 0.66
7 Doors Birch Wood 0.15 0.85
8 Windows Single Glass 3 mm Clear

Upstairs, the bedrooms, where the most of artificial air-conditioning units are
located, all walls are type 2, in order to protect the spaces against high
temperatures in the warm period, and on the other hand, in the cold period to
keep the heat of the interior spaces. A gable roof was considered, with an internal

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
296 Environmental Impact II

air chamber, and a very thick layer of insulation in contact with the ceiling,
corresponding to assembly number 5, the one with the highest thermal resistance,
since the house receives direct solar radiation practically most of the day in the
warm period, however, in the cold period, the insulating layer keeps the heat in
the interior spaces. To take advantage of the natural ventilation, windows in the
South and North facade are proposed, in the ground floor as well as the upper
story. Location of windows in the South facade was preferred, in order to take
advantage of the incidence of direct solar radiation and increase heat gains
during the cold period. In the West facade, the use of windows was completely
avoided, since in the warm period, from noon and until the sundown, the
combination of high temperatures and direct sunlight, increases heat gain; while
in winter, the Sun completes its travel to the Southwest, and that facade would
not be useful to heat the house trough windows. To keep the South facade
exposed to solar radiation in the cold period and in shade most of the warm
period, pergolas attached to the walls of the first and second level were designed,
to provide shade from May to October. From April to October shading of 80 to
100% was achieved on the South surface of both levels, while in the cold period,
in December and January, a sunlit area of up to 90% can be present. No shading
devices were proposed on West and East facades, due the shading cast by
adjacent buildings and vegetation. On the North surface a side-fin was
implemented in order to block direct sunlight on the early and late hours of
summer.
To reduce power consumption by artificial lighting, compact fluorescent bulb
lights were proposed, 23 W for bedrooms and common spaces and 18 W for
bathrooms, service rooms and outdoor spaces. As a special case, two 17 W
tubular fluorescent bulbs will be used in the kitchen and another pair in the
garage, in order to obtain highest rates of lighting.

3.2 Simulation and system sizing

Once defined the thermal reduction strategies, a simulation was run using Energy
Plus V8.1, for a whole year using a Typical Meteorological Year file developed
for Mexicali. The simulation results allowed to determinate the maximum
thermal load for each of the conditioned spaces as follows:
 Thermal Zone 1 (Kitchen, dining room, TV room and bathroom ):
798.86 W
 Thermal Zone 2 (Bedroom 1): 1,102.16 W
 Thermal Zone 3 (Bedroom 2): 327.44 W
 Thermal Zone 4 (Bedroom 3): 397.93 W
A cooling power of 1 refrigeration Ton (3,517 W) was assigned to each zone,
and due to the different occupancy patterns, split equipment was considered with
a seasonal energy efficiency rating of 13, the highest found in the market at that
moment.
Knowing the energy needed for air conditioning, lighting and appliance
equipment, a photovoltaic system is proposed to provide the total energy demand
and other simulation was run to determine the generation of energy. The system

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
 Environmental Impact II 297

proposed for the NZEB housing according to annual energy demand, is of

3,300 Wp, consisting of 11 photovoltaic modules, placed on a sloping facing
South, at an angle of 32°. The cells are monocrystalline of 300 W nominal power
with efficiency of 15.3% and useful life of 25 years. The total annual power
generation is 6515.36 kWh, with a minimum in December of 453.16 kWh and a
maximum in April of 630.44 kWh.

4 Economic analysis
To evaluate the economic feasibility of the NZEB, it was necessary to develop a
reference base case, to establish an initial investment with respect to which the
proposed NZEB would be compared. The base case has been set respecting
geometry, location, orientation, solar control devices, household appliances,
ceiling fans and artificial lighting devices, as well as usage patterns specified in
the NZEB; the difference is basically in components of the envelope and the
efficiency of the artificial air conditioning equipment. The base case meets with
the Mexican Official Standard NOM-020-ENER-2011 Energy efficiency in
buildings, envelope of buildings for residential use [6]. The proposed air
conditioning appliances have a 10 SEER efficiency and comply with the official
standards of energy efficiency in air conditioners.

4.1 Energy costs and payback time

From a simulation carried out in Energy Plus 7.2, under the same assumptions of
simulation to the NZEB, electrical energy consumption estimates for the base
case and NZEB, as well as the costs according to the rate 1F, subsidized and not
subsidized (table 3).

Table 3: Monthly consumption and cost of electricity for the base case.
Cost (USD)
Consumption Subsidized Not
kWh Subsidized
Jan 232.23 20.81 74.52
Feb 209.76 15.99 75.71
Mar 232.23 20.94 111.21
Apr 224.74 19.37 117.35
May 746.70 39.31 203.03
Jun 921.84 49.52 349.76
Jul 1195.37 65.47 411.89
Aug 1159.41 63.58 394.41
Sep 919.51 49.83 324.24
Oct 679.85 36.02 249.08
Nov 223.94 19.65 122.79
Dec 231.40 21.39 127.48
Year 6976.98 421.87 2561.46

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
298 Environmental Impact II

In Table 4, the projected energy consumption of the NZEB, as well as

generation by the PV system, energy balance, cumulative energy account and
cost of energy are presented, assuming that the interconnection contract begins in
November.

Table 4: Monthly energy consumption, generation and cost for NZEB.

Consumption Generation Balance Cumulative Cost Billing

kWh kWh kWh kWh USD USD
Nov 223.94 473.93 249.99 0.00 0.0 1.15
Dec 231.40 453.16 221.76 249.99 0.0 1.16
Jan 232.23 486.38 254.15 471.75 0.0 1.52
Feb 209.76 476.96 267.20 725.90 0.0 1.52
Mar 232.23 619.29 387.06 993.10 0.0 1.53
Apr 224.74 630.44 405.70 1380.16 0.0 1.53
May 689.34 626.66 -62.68 1785.86 0.0 1.14
Jun 808.65 575.49 -233.16 1723.18 0.0 1.14
Jul 1009.24 556.51 -452.73 1490.02 0.0 1.15
Aug 983.37 533.84 -449.53 1037.29 0.0 1.15
Sep 807.59 540.35 -267.24 587.76 0.0 1.57
Oct 642.64 542.33 -100.31 320.52 0.0 1.58
Year 6295.13 6515.34 220.21 420.83 0.0 16.13

The savings in billing is $405.74 USD with subsidized tariff 1F; however if
the rate were not subsidized, the savings would be $2543.32 USD. Investment
needed, including insulation, photovoltaic equipment and installation is
$10982.72 USD.
The economic indicator used is the simple payback time (PBT) calculated as
the investment divided by the annual savings, at constant dollars [7].
In these circumstances, the PBT with subsidized rate is 27.07 years, while if it
is not subsidized the PBT is 4.07 years.
This shows that the fact that the rate is subsidized, for the economic level to
which the study was conducted makes the Net Zero project economically
unviable, as PBT is greater than the expected life of the project.

4.2 Alternative scenario

If the State, in an effort to encourage the use of renewable sources of energy

decided to grant financing like it did in FIPATERM, with credits to five years
with zero interest rate, payable via the electricity billing, the monthly payment
indicated in table 4 would rise $183.05 USD; and from year 6 the user would
pay as indicated. This alternative scenario would benefit the economic sector of
renewable sources of energy: manufacturers, installers, providers of supplies, etc.
In addition the economy of the user would be benefited and the State could
allocate resources of the subsidy from year 6 to social work and infrastructure.
From an environmental point of view, the reduction in CO2 generation in the

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)
 Environmental Impact II 299

production plant would be 3.71 tons per year, applying a factor of 0.57 tons of
CO2 per MWh generated, according to Molina [8], since power generating plants
are geothermal.

5 Conclusions
The proposal of NZEB house generates 6,515.36 kWh a year, same that are
supplied directly to the grid. With subsidized energy costs, and under the
consideration that the photovoltaic system has a life at maximum power for
25 years, the investment project to achieve an NZEB is unattractive. If the
electricity is paid under unsubsidized cost, the project is economically feasible.
While subsidized rates result in economic and social support for the inhabitants
of areas with dry warm climate, they constitute an inhibitor of the investment for
the promotion and use of renewable energy in the middle class housing sector.
On the other hand, if the Federal amounts intended to subsidize electricity rates,
are used to finance the acquisition of systems for energy generation from
renewable sources, it would represent an opportunity to eliminate subsidies in
future years, in such a way that those saved resources can be used for public
investment in areas with lag, such as social assistance, and infrastructure for
instance. It is necessary to study the economic impacts that would result from
providing public resources, currently used to subsidize electric rates in the
housing sector, to investment in cogeneration from renewable energy systems
instead, as well as the impact that would result in the availability of generation
capacity of the CFE plants and its relationship to CO2 emissions.

References
[1] http://app.cfe.gob.mx/Aplicaciones/CCFE/Tarifas/Tarifas/Tarifas_casa.asp?
Tarifa=DACTAR1&anio=2013
[2] Torcellini, P., Pless, S. & Deru, M. Zero Energy Buildings: A Critical Look
at the Definition. National Renewable Energy Laboratory and Department
of Energy. 2006.
[3] Voss, K. et al. From low-energy to net zero-energy buildings: status and
perspectives. http://task40.iea-shc.org/publications
[4] Sartori, I., Napolitano, A. & Voss, K. (2012). Net zero energy buildings:
A consistent definition framework. http://task40.iea-shc.org/publications
[5] Docherty, M. & Szokolay, S. Climate Analysis. The University of
Queensland Printery, Australia. 1999.
[6] Diario Oficial de la Federacón. Norma Oficial Mexicana NOM-020-ENER-
2011, Eficiencia energética en edificaciones.- Envolvente de edificios para uso
habitacional. 09-Aug-2011.
[7] Kreider , F., Curtis, P. & Rabi, A. Heating and Cooling of Buildings: Design
for Efficiency. Second Edition. Mc Graw Hill 2002.
[8] Molina, M. Inventario de emisiones de gases de efecto invernadero del
Estado de Baja California, 2005. México: Centro Mario Molina. 2007.

WIT Transactions on Ecology and The Environment, Vol 181, © 2014 WIT Press
www.witpress.com, ISSN 1743-3541 (on-line)