Renewable energy and carbon capture in Mexico
According to the 2019–2033 National Electric System Development Programme (PRODESEN 2019–2033), in 2018 renewable energy production in Mexico accounted for approximately 16.7 per cent of the total generation output countrywide (equal to 53,019GWh). Hydropower is still the main renewable energy resource (based on the fact that the Mexican government classified, for the purposes of PRODESEN 2019–2033, big hydropower plants as clean/renewable energy assets despite their environmental impacts). That said, solar has had the most significant increase (by 523.2 per cent from 2017 to 2018) among clean energy technologies in Mexico.
The Power Industry Law (LIE), passed by the Mexican Congress in 2014, provides the fundamental legal framework for the power sector in Mexico. Furthermore, the LIE sets forth the key principles of clean energy-related obligations. Additionally, the Energy Transition Law, enacted in 2015, establishes that the share of clean energy assets in the production of energy shall be at least 35 per cent by 2024.
The LIE also defines ‘clean energy’ as those energy sources and electricity generation processes that allow emissions or waste, when applicable, not to exceed the thresholds set forth by the relevant regulations. As such, clean energy includes wind, solar, wave, tidal, geothermal, hydro (essentially, mini-hydro – that is, hydropower plants with an installed capacity that does not exceed 30MW), nuclear and waste-to-energy sources.
More importantly, the LIE and its regulations set forth an obligation for power suppliers, qualified users participating in the Mexican Wholesale Electricity Market (MEM), final users who receive energy under an isolated supply scheme and holders of grandfathered interconnection agreements whose load points do not consume their total energy from clean energy resources, so that such entities and users acquire a certain amount of clean energy certificates (CELs) on a yearly basis. The number of CELs that shall be acquired by these load serving entities, users and holders of grandfathered interconnection agreements is based on a percentage of the energy consumption of the load points associated with such persons and companies. The percentages determined by the Ministry of Energy (SENER) for purposes of complying with this obligation to acquire CELs are:
2020: 7.4 per cent;
2021: 10.9 per cent; and
2022: 13.9 per cent.
The regulatory body responsible for the administration of these clean energy-related obligations is the Energy Regulatory Commission (CRE). CELs are awarded by the CRE to clean energy generators on a monthly basis pursuant to the energy generation information collected, mainly, from the National Centre for Energy Control (CENACE), the Mexican ISO. Overall, the CRE grants a CEL for each MWh injected into the Mexican grid. Furthermore, CELs are traded either at the yearly CELs market operated by CENACE (such CEL spot market is pending implementation by CENACE) or through bilateral contracts (including those contracts awarded as a result of the long-term auctions organised by CENACE). In the context of bilateral contracts, CELs are transferred by means of the execution of bilateral transactions. The CRE has implemented an Electronic System for the Management of CELs and Compliance of Clean Energy Obligations for the purposes of handling the granting, processing and transfer of CELs among clean generators, power suppliers, qualified users that participate in the wholesale electricity market, final users under an isolated supply scheme, holders of grandfathered interconnection agreements that have the obligation to acquire CELs and other entities or individuals who voluntarily want to purchase or sell CELs.