Mexico’s Reform Offers Hope for a New Renewable Energy Market


The Journal of Energy & Natural Resources Law gave Mexico’s energy reform the number two spot on the Top Ten Energy and Natural Resources Issues of 2015, and here’s why. [1]

Seventy-seven years ago Mexico created a state-owned monopoly system and “sent foreign competitors packing.” [2] In August of 2014, Mexico’s President, Enrique Peña Nieto, signed a new law that opened its oil and natural gas markets to foreign investments. [3] As a result of this drastic reform, some investors are naturally apprehensive. [4]

On September 8, 2015, Mexico’s national energy regulator, Comisión Reguladora de Energía (CRE), published in the country’s official federal gazette the regulatory framework for the new power market that came into effect on September 9, 2015. [5] The regulation is a timeline for the various elements of the new wholesale power market. [6] Under the reform, Mexico has reserved responsibility for the transmission and distribution of electricity, meaning it will maintain operational control of the electricity grid by a state-owned agency – Centro Nacional de Control de Energía (CENACE). [7] CENACE is a unit within the Comisión Federal de Electricidad (CFE), which will additionally be responsible for holding auctions for the different contract types authorized in the regulatory framework. [8] Through contracts with the state, private entities can participate along the electric power value chain to create a more perfect market. [9] The new law divides the market participants into generators, retail service providers, traders, basic service users (users of less that five megawatts), qualified users (users of over five megawatts), transmission providers, and distributors. [10]

One of Mexico’s objectives with this new reform is to transition the state energy monopoly, Petróleos Mexicanos (PEMEX) and the CFE, into a productive state enterprise that can compete with the private sector investors. [11] This transformation and redefinition of roles in Mexico’s energy market is meant to ensure fair and equitable treatment of the new private sector participants. [12] In addition, the reform is expected “to open up power generation to all participants and guarantee nondiscriminatory access to the electric grid.” [13]

The Mexican government has set a goal of 35% clean energy by 2024. [14] The regulations incorporated clean energy certificates, which companies can trade to ensure that providers comply with government regulations. [15] The certificates will be given out for a twenty-year duration and only to clean energy generation projects through long-term contracts. [16] For example, solar energy companies can utilize the reform’s new clean energy certificates to help fund new projects. [17] Natural gas units, which generate both heat and power, will also qualify as clean energy under the new reform. [18] This inclusion of natural gas lowers the value of the clean energy certificates that are given to smaller developers. [19] Still, qualified electricity users can purchase power directly from the independent generators, including renewable sources. [20] This purchase power opens a “big opportunity for solar companies,” because of Mexico’s large industrial demand. [21] However, the reforms do not discount transmission fees for the purchase of renewable power, so there is no price incentive for the buyer. [22]

This is an example of how Mexico’s market incentives aim “to promote energy efficiency and renewable energy,” or at least the potential for renewables. [23] This potential is especially true since there are opportunities for participants throughout the system. [24] However, environmental groups, like Greenpeace, “have expressed concern over increasing oil and gas exploitation in Mexico.” [25] The U.S. Energy Information Administration revised its expectations of Mexico’s oil production, based on the new reform, and concluded that rather than a decline in production, oil production will more than likely rise. [26] The first energy auction is expected for October of this year, and will be open to the possibility of renewable energy projects. [27] In spite of the uncertainty of how this new regulation will unfold, solar companies are still increasingly interested in Mexico, and several other renewable energy companies have expressed interest in participating in the first auction. [28]

President Peña Nieto justifies this reform as a structural change throughout Mexico in order to achieve a more equitable and just society. [29] Ultimately, the energy reform is meant to “open greater opportunities for social development and economic growth,” according to President Peña Nieto. [30] The economic growth, managed by Mexico’s central bank, is expected to support “pensions, science and technology, infrastructure, investments, and scholarships.” [31] The best partners for Mexico will chose responsible, social, and sustainable practices over choosing practices that will be detrimental to the environment. [31] Hopefully, Mexico’s expected economic growth will not come at the expense of the environment.

One thought on “Mexico’s Reform Offers Hope for a New Renewable Energy Market

  1. Louma

    I’ve driven past what I asusme is the exact location of these windmills countless times on US Route 30 as you shift from eastern Indiana to western Ohio. Because the earth is literally flat as a pancake in this region you can literally see them from miles away. Once again you’ve succeeded in describing what I’ve often felt: these windmills both fascinate and repulse, often at the same time. This part of the country just aggravates the daylights out of me because they never leave enough trees to soak up the rain and snow and fields are often flooded for weeks at a time. I’m going home and watch Hoosiers .


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