Executive Summary
In 2019, the power generation in Mexico accounted for 327,965 GWh (Gigawatt hours), of which 26.6% was generated with clean energy sources including renewables, nuclear and efficient cogeneration. In 2020, it is estimated that the power generation will account for 340,162 GWh (Gigawatt hours), with 31.6% projected from clean energy sources.
In January 2020, the Secretariat of Energy (Secretaría de Energía or SENER) published the Energy Transition Strategy to Promote the Use of Clean Fuels and Technologies on the Official Federal Gazette (Diario Oficial de la Federacion), which will be the guiding document for medium- and long-term clean energy obligations. This document outlines the administration’s objective to have an energy sector based on clean technology that promotes productivity, sustainable development and social equality by 2050.
According to an International Renewable Energy Agency (IRENA) publication, Mexico has significant and diverse resource potential and could attract large-scale investments to diversify its energy supply. If market conditions are favorable, Mexico could continue to attract investment for renewable energy projects,evidenced by three long-term auctions between 2015 and 2018. However, recent policy changes are creating challenges for companies interested in participating in current and new renewable energy projects.
Electricity Market Framework
To understand the electricity market, it is important to take into account the country’s 2013-14 constitutional energy reform. This reform focused on increasing investment and growth by creating a wholesale electricity market to facilitate competition and reduce costs. The energy reform also aimed to increase electricity coverage and stimulate the use of clean energy.
Clean Energy Certificates
In order to comply with national sustainable development and emissions reduction goals outlined in Mexico’s General Climate Change Law, the Mexican Government created Clean Energy Certificates (Certificados de Energías Limpias or CELs) in 2018.
A CEL is granted per each MW/h of electricity produced by a generator using clean energy technologies. Large consumers of electricity (primarily industrial and commercial, also known as Qualified Consumers) are required to consume electricity generated from clean energy sources. In 2020 the requirement demands that 7.4 percent of electricity generated originates from clean energy sources.
In October 2019, the Mexican Ministry of Energy (Secretaría de Energía or SENER) modified the regulation so that clean power plants which began operations after August 11, 2014 as well as legacy power plants could also receive CELs. This change in the regulation alters the original purpose of the CELs, which was to promote new investments for renewable energy projects to support national clean energy targets of 25% by 2024 and 43% by 2030. A number of private sector companies filed legal injunctions against this regulatory modification and the initial court decisions have ruled in favor of the claimants.
The Federal Commission of Economic Competition (Comisión Federal de Competencia Económica or COFECE) invited electricity sector decision makers, public institutions, associations, users and permit holders, civil society organizations, business chambers and all interested parties to answer a questionnaire on CELs in order to evaluate market competitiveness and issue recommendations.
Development Program of the National Electrical System 2019-2033
On May 31, 2019, SENER published the 2019-2033 Development Program of the National Electrical System (Programa de Desarrollo del Sistema Eléctrico Nacional or PRODESEN). This planning document addresses electricity generation, transmission, distribution and commercialization of the National Electric System (Sistema Eléctrico Nacional or SEN). The 2019 PRODESEN outlined the process to not only meet electricity demand, but to maximize power generation, transmission, and distribution for sustainable economic growth.
PRODESEN emphasizes Mexico’s commitments to sustainable development in several international agreements, including the United Nations Framework Convention on Climate Change, the Kyoto Protocol, the United Nations Climate Change Conference (COP 21) in Paris, the 2030 Agenda for Sustainable Development, and the Intergovernmental Panel on Climate Change.
New Electricity Market Rules
On April 29, 2020, CENACE announced an Agreement to guarantee the efficiency, quality, reliability, continuity and security of the National Electric System in recognition to the COVID-19 pandemic. According to this agreement, due to the intermittency of wind and solar plants affects, the reliability, quality and continuity of the National Electric System is affected. Therefore, since May 3, the pre-operative tests from wind and solar plants were suspended. According to recommendations published by Mexico’s Federal Economic Competition Commission (Comisión Federal de Competencia Económica or COFECE), the actions indicated in CENACE’s agreement could run contrary to free competition and could increase electricity rates. It is unclear how these actions will be applicable and at which time of they will be current. In addition, it introduces uncertainty over power generation from wind and solar plants that are currently operating and that typically cost less than conventional power plants.
On May 15, 2020, SENER published a resolution in Mexico’s Official Gazette that establishes the planning and control of the National Electric System, as well as the transmission and distribution of electricity, as a public service. This includes power generation, transmission, distribution and commercialization of the National Electric System, as well as the operation of the Wholesale Electric Market. Private sector participants believe that this policy will allow CENACE to dispatch costly CFE-owned plants ahead of more economically efficient private renewable generation and have filed legal injunctions against the policy. These measures, along with permit delays, and the administration’s broader energy policy, have introduced greater investment uncertainty into the sector.
The U.S. Commercial Service is closely following policy developments and their impact on current and future business opportunities in the electricity sector for U.S. exporters.
Renewable Energy Opportunities
Another important element for renewable energy development in Mexico which is expected to contribute to emission reductions is electromobility. The Lopez Obrador administration is interested in further exploring opportunities and designing a strategy to promote the use of hybrid and electric cars and other transportation. The Mexican Secretariat of Environment (Secretaría del Medio Ambiente y Recursos Naturales or SEMARNAT) has the lead for developing an electromobility strategy and is working with other government agencies and stakeholders.
CFE has been working on the deployment of electric charging stations for some time. In early 2020, CFE made an announcement for the Service, Installation, Supply, Commissioning and Integral Support of Electric Station Modules for Recharging Electric Vehicles in the Official Federal Gazette.
At the local level, in May 2019 the Mexico City government presented its Solar City initiative (Ciudad Solar). Solar Energy is the renewable energy source with the highest potential in Mexico City with an annual average value of 5.7 kWh/m2/day (kilowatt-hours per square meter per day). Ciudad Solar includes, several small- to medium-scale solar projects, such as photovoltaic roofs in public buildings, a program for small and medium size companies, and training. The Solar City initiative is aligned with Mexico City’s goal to reduce 30 percent of contaminant emissions by 2024. The utilization of solar energy for power generation and water heating is critical for the transition to renewable energy.
Leading Sub-Sectors
The renewable energy sub-sectors with the most potential for U.S. exporters are small scale solar, wind and hydro. Other relevant technologies that offer potential include energy storage, distributed generation and electromobility.
Export Opportunities
U.S. expertise in small scale renewable energy, energy storage, distributed generation and electromobility technologies is highly valued. We encourage companies to connect to the U.S. Commercial Service Mexico to discuss the best strategy to explore opportunities in the Mexican market.
Contacts
Claudia Salgado
Commercial Specialist
U.S. Commercial Service—Mexico City
Tel: +52 (55) 5080-2000 ext. 5224
Claudia.Salgado@trade.gov
