Market Opportunities for the Renewable Energy Sector

An Expert's View about Energy in Mexico

Posted on: 24 Oct 2011

Summary
Two important changes in Mexico’s regulation of electricity opened up various opportunities for the renewable energy sector, particularly for the mini hydro-electric technology, wind energy, and solar energy industries. These changes are found in Article 36 BIS of the Public Electricity Service Law and Article 3 of the Renewable Energy Development & Financing for Energy Transition Law.

Market Demand
According to the latest report of the energy information systemi (July 2011), the nation’s electric system has an effective capacity of 52,513.226 MW. Mexico’s electricity demand has reached 206 GWh per year. Demand exceeding electricity capacity is supplied by foreign companies with interconnection along the U.S. Mexico border. Renewable energy sources account for 22% of the installed capacity national electric system. Hydrolectric facilities account for 18% while other renewable energy sources such as small hydro, geothermal, and wind energy produce 4%ii.

Market Data
Two important changes in Mexico’s regulation of electricity opened up opportunities for the renewable energy sector, particularly for mini hydro-electric, wind energy, and solar energy.

These changes are found in Article 36 BIS of the Public Electricity Service Law and Article 3 of the Renewable Energy Development & Financing for Energy Transition Law.

Article 36 BIS of the aforementioned Public Electricity Service Law (December 23, 1992)iv establishes that the generation of electricity in the short and long term should come from resources that represent the lowest cost for the Federal Electricity Commission (CFE). In addition, these resources should be optimal by offering the best quality and security for the national electric system.

Article 36 BIS of the Public Electricity Service Law (June 1, 2011)v, establishes that electricity generation in the short and long term should come from resources that represent the lowest cost for the Federal Electricity Commission (CFE). However, environmental externalities must be considered for each technology. In addition, these resources must provide optimal stability, quality, and security for the national electric system.

The principal change between the 1992 version and the 2011 version of Article 36 BIS of the Public Electricity Service Law is the mandatory consideration of environmental externalities for each technology and its optimal stability, quality, and security for the national electric system. This is an important change as it opens competition opportunities for companies within the renewable energy sector, which will have positive impact in the long term as they would result in a low electricity generation cost for the Federal Electricity Commission (CFE).

The recent revision to Article 3 of the Renewable Energy Development & Financing for Energy Transition Law (June 1, 2011)vi removed the 30-megawatt limit for renewables in the national electric system, with the exception of mini hydro-electric technology, which must still remain under 30 megawatts. In accordance to this regulation, alternative sources of energy may supply and participate in the electricity system without limits on self-supply and cogeneration permits.

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Posted: 24 October 2011

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