Renewable energy Opportunities

An Expert's View about Electricity Generation and Distribution in Mexico

Last updated: 17 Jun 2011

With oil reserves rapidly declining and a high vulnerability to climate change effects, Mexico has acquired strong commitments towards the reduction of carbon emissions and thepromotion of renewable energies and energyefficiency measures as part of a long termsustainable development strategy.

Sector briefing Renewable energy opportunities in Mexico Why Mexico? With oil reserves rapidly declining and a high vulnerability to climate change effects, Mexico has acquired strong commitments towards the reduction of carbon emissions and the promotion of renewable energies and energy efficiency measures as part of a long term sustainable development strategy. According to the National Infrastructure Programme, the Mexican Government is planning to increase power generation capacity through renewable resources from 14% to 26%, including hydro power plants, by 2012. A substantial number of projects need to be developed in order to achieve this goal. Considering Mexico?s privileged geographic ?The Mexican Government is location and a stronger legal framework to planning to increase power support renewable energy projects, this generation capacity through represents unprecedented opportunities for British investors. renewable resources from 14% to 26%, including hydro Find general information on the Mexican power plants, by 2012.? market conditions on UKTI?s website. The Doing Business Guide for Mexico gives an overview of Mexico?s economy, business culture, potential opportunities and an introduction to other relevant issues. UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico ? Net metering (small production of solar Opportunities power) ? Small Producer Sales Contract The Strategy for Climate Change is one of the ? Guidance to establish transmission and central themes of the current public policy, distribution costs for self supply defined in the National Development Plan for projects. 2006-2012. The Plan?s Special Programme for ? Access to transmission and distribution Climate Change, reconsidered energy grids to exploit superficial and production and consumption habits and underground hydro resources. It is includes as key activities, the promotion of required to have a usage or exploitation clean technology and R&D in order to reduce permits (SEMARNAT-CAN). Mexico?s dependency on fossil fuels. 1. Renewable Energies As a consequence of this and in accordance with a long term sustainable development According to the Ministry of Energy (SENER), strategy, Mexico has started promoting Mexico?s energy sources are divided into fossil renewable energy (RE) and energy efficiency fuels (73%) and renewable sources (27%). (EE) in an increasingly active way; in Also, 60.7% of the total GHG emissions of the November 2008, a strategic energy reform, country are generated by the energy sector. which included the new Law for the Use of Renewable Energies and the Financing of the The opportunities vary from wind to small Energy Transition (LAERFTE) and the Law for hydro and distributed generation. At the last Sustainable Use of Energy (LASE), was passed. UNFCCC Conference of the Parties (COP 16) in Also, in 2008, the Government of Mexico took Cancun, President Calderon presented the new two major steps towards developing bio-fuels Wind and Solar Renewable Resources Atlas, production and development policy. which states that Mexico has the potential to generate 71 000 MW of clean energy, more Since 2004, some attractive fiscal incentives than the current installed capacity of 50 000 such as zero tariffs for equipment that MW. It is worth mentioning that 22 sites with prevents pollution and promotes technological enough wind capacity for massive generation development and accelerated depreciation for have been identified in the country. infrastructure projects that use RE sources (up to 100% in one year) were established. Specific RE opportunities can be found in the Moreover, there is a fiscal credit of 30% for following areas: research and development in RE activities. Wind power. There is a total estimated Historically, private sector participation in potential of 40,000 MW of which only 2,473 electricity generation in Mexico was limited and MW will be used by 2012. Oaxaca has one of mostly reserved for the State through the the best wind power generation potentials in Comision Federal de Electricidad (CFE) and Luz the world; the wind is strong enough to y Fuerza del Centro (LYFC, this company was generate electricity with a plant factor of declared bankrupt in 2009 and its operations approximately 50%. In Europe, where wind are now handled by CFE). However, even if energy is more developed, it amounts to 30%. activities related to transmission, transformation and distribution, as well as Small hydro power. Of a 3,250 MW potential, power sales, are to be exclusively developed by only 109 MW are in use. CFE, since 1992 the Electric Energy Public Service Law (LSPEE) considers other Geothermal. Mexico?s installed capacity is mechanisms such as cogeneration, close to 1,000 MW, the third largest in the independent power production, small world. production and self supply, and exporting and importing schemes, which are not exclusive to PV systems for rural electrification and the state agencies (718 out of 770 of these pumping. The country has an average daily sun permits are held by the private sector). exposure of 5 KWh/m2 - enough to meet the needs of the average Mexican household. There are also some specific interconnection contracts for the power projects from Solar water heating. Systems for residential renewable sources of energy: and commercial use. Mexico City?s government ? Capacity recognition and energy bank has established that new residential and (self-supply) UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico commercial complexes should use a 30% share ? VER?s (Voluntary Emission Reductions) of solar thermal energy to heat up water. issued under voluntary schemes for the reduction of GHGs; and Waste to Energy. Methane in landfills, farms ? Fiscal incentives: The Income Tax Law and water treatment systems. has an accelerated depreciation rate of 100% in a single tax year for Bio-fuels There is a goal to include 1% of bio investments in machinery and fuels in the fuel mix used by aeroplanes in equipment for RE generation. Mexico by 2015. This would imply the generation of 40 million litres per year. The Mexico?s potential for RE generation and as a Airports and Auxiliary Services Agency (ASA) key supplier in the distribution chain is still has estimated the industry will require and unexploited. This presents great business investment of 480 to 720 million USD in the opportunities to experienced British companies next two years to satisfy the growing demand in a wide range of services. for bio-fuels. The new legislation has paved the way towards According to the CFE Project Development increasing private and international Plan, between 2007 and 2015 CFE will install participation in RE projects and providing and start an operation of 3,160 MW for public support to investors. Private sector services with renewable sources such as the participation has become a key factor to following: 2,390 MW hydro, 158 MW accomplishing the Mexican government?s geothermal and 25 MW solar. Additionally, 150 ambitious goal of providing 25% of the total MW from mini-hydraulic and biomass will come electric installed capacity through renewable into operation for self-supply. resources by the year 2012. These numbers show Mexico?s great potential for the generation of green sustainable energy, 2. Energy Efficiency but given its strategic location, the country also has the ability to become a key global provider Electricity demand in Mexico has grown by of components. In the past few decades, more than 4% a year since 1995. Managing Mexico has signed 44 free trade agreements this growth through energy-efficiency within Europe, Asia and the Americas. In the measures in the end-use sectors will be critical United States - the main destination for to mitigating greenhouse gas emissions. Mexican exports - investments in RE will reach $150 billion USD in the next ten years. More than half of industrial energy use occurs in three subsectors: cement, iron and steel, Some international companies such as and chemicals and petrochemicals. Many of Iberdrola, Hyocera and Vientek are already Mexico?s large-scale basic materials industries, established in Mexico and provide services that including iron, steel and cement, are among range from the manufacturing of wind towers, the most efficient in the world. blades and bearings, distribution and assembly of photovoltaic panels, energy-efficient The problem is that a large portion of the solutions and production of solar heaters to industrial sector is made up of small and power generation from renewable energies. medium enterprises that often use old equipment and lack access to technical know- These and other RE companies have also taken how and financing for upgrades. These advantage of the following financing companies have relatively high energy opportunities: intensity. The main sources of energy savings in the industrial sector come from energy- ? The Infrastructure Investment Fund of efficiency improvements in motor and steam BANOBRAS; systems and in kilns and furnaces, as well as ? Incentives for generation, such as those from cogeneration ? for which more than 85% provided by the Global Environmental of the industrial potential has not been utilised. Facility, the UNDP and the World Bank; ? CER?s (Certified Emission Reductions) Policies to improve efficiency in the residential, issued in accordance with the commercial and public sectors ? including regulations of the Clean Development tightening and enforcing efficiency standards Mechanism of the Kyoto Protocol; for lighting, air conditioning, refrigeration, and buildings ? will be critical to limiting UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico greenhouse gas emissions. As the analysis will be lead by 24 developed and developing shows, the investment required in all countries. electricity-efficiency interventions is significantly less than the investment in power Because of the high carbon intensity of its plants that would otherwise be needed. energy supply, there is still considerable scope for reducing greenhouse gas emissions in the 3. Green House Gas Capture and Storage operating segments of the state-run petroleum PEMEX and the national power supplier CFE. The National Ecology Institute (INE) estimates There are extensive prospects for reducing that Mexico could reduce its GHG emissions emissions, for example in power and heat between 111 and 261 MtCO2e by 2020 (which cogeneration or in using the gas that occurs during the petroleum production. represents 13-30% the projected baseline for 2020), depending on the support provided by 4. Carbon Trading developed countries in compliance with international agreements. Mexico is the fourth most active country in the CDM accounting for 125 projects out of 2,732 It is estimated that to comply with the 13% CDM projects worldwide (4.58%) (CDM stats, emission reduction basic target, the required Jan 2010) as registered by the United Nations investment between 2010 and 2020 would Framework on Climate Change (UNFCCC), amount to 36 000 million USD. An additional falling behind only China, India and Brazil. 74 000 million USD would be required to achieve the 30% GHG emission reduction Mexico hosted the first registered Programme target. of Activities (PoA) project and has over 40 projects in the validation pipeline. On closer ? Special Programme for Climate inspection, the vast majority of Mexico?s CDM Change projects are methane recovery projects from pig farms, developed by Ecosecurities or Agcert Climate change is a priority for the Mexican during the early years of CDM. Many of these government, which has made it a cornerstone projects have not delivered their predicted CER of its 2007-2012 National Development Plan volumes and Mexico has less than a 1.5% (the basis for all the current administration?s share of the issued CER volume under CDM. policies). Mexico is one of the first developing countries to commit to a voluntary carbon The UK is currently participating in 100 of the reduction target to combat climate change. The 125 CDM projects in Mexico, the majority of goal is to reduce 51 million tonnes of CO2 by these projects with British participation relate 2012; however, according to SEMARNAT, by to GHG mitigation and Methane recovery. 2010 the country had already reduced 21 million, which represents more than 40% of The 2010 Fourth Governmental Report states the total. that the largest cogeneration plant (300 MW) will be built from 2012-2015 in the country. The Plan foresees far reaching reforms in the The project will be registered with the UNFCCC sectors with the highest potential for GHG as a CDM. emission reduction, such as transport (14%), forestry (22%) and energy (23%). Such sector So far, PEMEX, the State National Oil emissions reductions are embedded in the Company, has identified some 60 opportunities Government of Mexico?s new Special Climate for CDM projects, which include projects to: Change Programme (PECC, 2009), which provides an accounting of emissions by sector, ? Eliminate Methane emissions; including a creates a framework for monitoring gas flaring project (these projects will improvements and establishes a blueprint for reduce emissions by an estimated 761,000 emission reduction initiatives. Also, a new bill tonnes of CO2 per year). on climate change is currently being discussed ? To improve energy efficiency (estimated to in the Mexican senate. It considers schemes reduce CO2 emissions by 495,000 tonnes such as the UNFCCC Green Fund, the creation annually). of a cap-and-trade system and a GHG emission ? Reduce CO2 emissions by 1 million tonnes registration, and the payment of taxes by per year through cogeneration projects. those that emit GHG. The Green Fund of 100 billon USD was approved at the COP 16 and UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico CDM has been slow to develop in Mexico. Industrial energy efficiency projects have been implemented although the driver has predominantly been the cost savings from reduced energy demand rather than carbon finance. Potential for upscaling of industrial efficiency carbon crediting is possible only if incentives can be structured which overcome the additionality issues. Greater use of standardised baselines or sectoral crediting mechanisms may provide this incentive. Other areas with potential for greater uptake of CDM include: landfill gas capture, mass transit systems, CFL (PoA). Crediting through the REDD+ mechanism is likely to attract attention once the market matures.  In general, the renewable energies sector in Mexico offers some of the most exciting and realistic opportunities for cooperation with suitable UK companies and organisations. There are interesting opportunities for UK potential investors, project originators, consultants and low-carbon technology exporters in the following areas: energy efficiency, renewable energy, energy switch, waste to energy and alternative fuels. If you have any questions about the opportunities listed above, contact the UKTI Renewable Energy contacts named in this report. Business opportunities aimed specifically at UK companies are added daily to UKTI?s website. These leads are sourced by our staff overseas in British Embassies, High Commissions and Consulates, across all sectors and in over 100 markets. You can be alerted to business opportunities on a regular basis by registering on the UKTI website. Find out more on UKTI?s business opportunities service on the UKTI website. UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico Major events and activities UKTI contacts The GREEN Expo (The Global Renewable Irasema Mendoza Environmental & Energy Network) Head of Energy and Environment Contact: UKTI Energy and Environment Team British Embassy Mexico Email:, Tel. +52 (55) 1670 3234 Fax +52 (55) 1670 3222 Time: 27 ? 29 September 2011 Email: This trade show will also have the participation of other expos such as: Alejandra Espinosa Trade & Investment Officer -Waste and Recycling Expo Mexico British Embassy Mexico -Enviro Pro Tel. +52 (55) 1670 3274 -Power Mex, Clean Energy & Efficiency Fax +52 (55) 1670 3222 -Water Mex Email: -Green City Semana Nacional de Energía Solar (Solar Jacqueline Sanchez Energy Week) Trade and Investment Research Officer Contact: UKTI Energy and Environment Team British Embassy Mexico Email:, Tel. +52 (55) 1670 3252 Fax +52 (55) 1670 3222 Time: October 2010 Email: Find full details of all events in this country and sector on the UKTI website. New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico Next steps - ? Arranging appointments How UKTI can help ? Organise seminars or other events for you to meet contacts and promote your British companies wishing to develop their company in the Mexican market business in the Mexican market are advised to undertake as much market research and This work is available via our Overseas Market planning as possible in the UK. UKTI?s team in Introduction Service (OMIS) a chargeable Mexico, with its wide local knowledge and service which assists British-based companies experience, can provide a range of services to wishing to enter or expand their business in British-based companies wishing to grow their overseas markets. business in global markets. To find out more about commissioning this This can include: work, or accessing other UKTI services and ? Provision of market information specialist advice, please visit the UKTI website ? Validated lists of agents/distributors to find contact details for your local UKTI ? Key market players or potential office. customers in the Mexico market ? Establishment of interest of such contacts in working with you Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2011 by UK Trade & Investment. Crown Copyright © You may reuse this information (not including logos, images and case studies) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: This publication is also available from our website at or for more information please telephone +44 (0)20 7215 8000. UK Trade & Investment Sector briefing: Renewable energy opportunities in Mexico
Posted: 16 June 2011, last updated 17 June 2011

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