Private Renewable Energy Projects Under Attack by Mexican Government, an Industrial Info Market Brief

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Since he took office on December 1, 2018, Mexican President Lopez Obrador's administration reverted the policies of previous administrations favoring the private investment on the power generation. Within its first week, the presidency suspended the Fourth Long Term power purchase agreement (PPA) auction, which was expected to be awarded be the end of that month, and from that moment on several high-ranking officers (including himself) made different statements against the development of privately owned renewable energy projects and in favor of recovering the leading role in the market of public utility Comision Federal de Electricidad (CFE), and more and more projects started to face difficulties obtaining environmental and other permits and authorizations.

In the context of the COVID-19 pandemic, on April 29, CENACE (the wholesale electricity market operator and regulator) released a resolution ordering the immediate stoppage of ongoing and suspension of future commissioning activities of solar and wind projects, arguing the need of securing the grid stability, impacting almost 50 projects with an estimated investment value of $6.4 billion.

Shortly after, the Secretary of Energy released new policy guidelines to secure the reliability, safety and quality of the electricity system, including heavy restriction to the development of new renewable projects, limitations for the emission of new permits and even the prohibition for the construction of new projects on areas with congestion in the transmission infrastructure. These measures originated claims from a wide range of organization (both public and private) denouncing violations on free competition legislation, international agreements and environmental impact concerns. Even a group of 15 governors made a joint declaration against this, and foreign governments like Canada came in defense of national investors affected in Mexico. Legal complaints started, and different judges gave legal protection to an increasing number of investors and finally a judge ordered the suspension of both the resolution and new guidelines.

Finally, last week CFE (owner of the transmission grid of the country) announced that it will increase the tariff to for the use of the grid in 469% for transmission in high voltage, 528% in medium voltage and 811% in low voltage. This will impact operational plants built before the 2014's energy reform and remaining projects still to be built.

Industrial Info is tracking over 300 renewable projects in Mexico, with an aggregated investment of $39.2 billion. Click here for a list.