Mexico - I. Electricity SectorMexico - Electricity Sector
Overview
From 2013 through 2018, Mexico embarked on a reform of its power sector. These reforms continue in force, and the López Obrador Administration has been developing a set of priorities and principles for operation of the market from 2019 through 2033. Below we summarize the changes already implemented and those anticipated in coming years. The market for power generation equipment in Mexico is estimated to grow by 1.75 percent from 2019-2020. The growth is driven by Mexico’s demand for efficient and cost-effective electricity. Exports from the United States to Mexico are expected to stay flat or increase slightly in the near term.
Energy Reform 2013-2018
In 2013, energy reforms became constitutional reforms and entered into force. In 2014, the secondary reforms were officially published with the corresponding laws and regulations. The reform objectives included favoring the lowest cost provider and decreasing electricity prices. The reform planted the seeds for a competitive wholesale market, with the aim of creating a modern, productive, efficient, and competitive electric power industry capable of reducing overall electricity supply costs. A key focus is attracting investment, particularly in power generation projects serving power-heavy manufacturing and commercial industries.The 2013/2014 reform mandated the transformation of the Federal Electricity Commission (Comisión Federal de Electricidad or CFE), the state-owned monopoly of the electric power sector, into a state productive enterprise with technical, management, and budgetary autonomy. CFE became a fully competitive entity, retaining its electric power plants and transmission facilities. CFE was structured into nine subsidiaries, including five for power generation, one for Independent Power Producer (IPP) contracts, one for transmission, one for distribution, and one for basic electricity supply (residential users). In addition, CFE has four affiliated companies, one for natural gas, one for international affairs, one to manage interconnection contracts signed before the energy reform, and one to sell electricity to “Qualified Users” (industrial and commercial buyers of electricity that require large amounts of electricity and have a load center of at least 1 MW).
The 2013/2014 energy reform promoted compliance with national goals of sustainable development and emissions reduction included in Mexico’s General Climate Change Law. The law, known as Ley General de Cambio Climático in Spanish, is Mexico’s guiding instrument for climate change policy for the medium- to long-term with 10-, 20-, and 40-year goals. The specific objective for the power sector is to generate at least 35 percent of electricity from clean energy sources by 2024, and 50 percent by 2050. To accomplish its clean energy goals, the Mexican Government created Clean Energy Certificates (Certificados de Energías Limpias or CELs), which is the mechanism through which the Secretariat of Energy (Secretaría de Energía or SENER) established the requirements to use a percentage of clean energy in power generation projects. CELs are used to promote new investments in clean energy and advance national goals of generating clean energy efficiently and at the lowest cost for the country.
Wholesale Electricity Market. To ensure open access for private companies to the national transmission network, the National Center of Energy Control (Centro Nacional de Control de Energía or CENACE) was transferred from CFE to SENER in November 2014. CENACE became responsible for managing the Wholesale Electricity Market. Known as Mercado Eléctrico Mayorista (MEM) in Spanish, you can learn more about the Wholesale Electricity Market in the official electricity market rules (Bases del Mercado Eléctrico published in the Mexican Gazette (Diario Oficial de la Federación or DOF) on September 8, 2016. CENACE guarantees open and non-discriminatory access to the national transmission grid and distribution grids, and it regulates the delivery of electricity from power plants to load points. CFE’s transmission and distribution infrastructure continues to be used. In addition to CFE, private power generators were authorized to install and manage interconnections with the existing state-owned distribution infrastructure.
The objective of the Wholesale Electricity Market is to achieve a harmonious development of the electricity grid with sufficient diversity of generation sources, competitive prices, optimized generation capacity, development of clean energy, and compliance with reliability standards. The participants of the Wholesale Electricity Market are categorized as Generators, Qualified Users, Qualified Service Providers (companies that buy the electricity from the Wholesale Electricity Market and sell it to Qualified Users), the Exempt Generators (generators with small power plants with an electricity production of less than 0.5 MW), and Basic Service Suppliers (who provide service to users who don’t require large amounts of electricity).
All Wholesale Electricity Market participants are required to register or have a permit with Mexico’s Energy Regulatory Commission (Comisión Reguladora de Energía or CRE). The prices of the Wholesale Electricity Market are nodal prices, calculated in each node of the system based on generation cost, electricity grid congestion, and transmission losses. The Wholesale Electricity Market promotes contractual freedom between all the participants through an instrument known as Electric Coverage Contracts, which sets future dates and agreed-upon prices for the purchase and sale of electricity and associated products.
You can learn more about CENACE’s approach to grid development in the CENACE Presentation from the April 2017 Mexican Geothermal Opportunities Workshop. On January 9, 2017, the U.S. Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC), along with SENER, CRE, and CENACE, signed an MOU on the principles to promote the reliability and security of the interconnected power systems of the United States and Mexico. The DOE announced it in this news release. It may also be useful to review the CRE’s Frequently Asked Questions or Preguntas Frecuentes Sobre la Nueva Regulación de Electricidad.
Long-Term Auctions. Long-term auctions were a mechanism that allowed the basic electricity service providers to enter into contracts competitively in order to satisfy the demands for Power and Cumulative Electric Power (Energía Eléctrica Acumulable or EEA) and CELs. Those demands must be covered through long-term contracts according to the requirements established by CRE. The long-term auctions were considered an important channel to attract investment, promote competition, and ensure efficiency for the buyer. The contracts awarded through the long-term auctions were designed to have a duration of 15 years for EEA, and 20 years for CELs. Three long-term auctions took place between 2015 and 2018 in the open electricity market in Mexico. The Lopez Obrador Administration cancelled the planned power auctions in February 2019, emphasizing instead government investments in CFE-owned generation projects.Some U.S. companies were successful in these auctions when they partnered with Mexican firms and presented their offers as part of a consortium.
Development Program of the National Electrical System 2019-2033
On May 31, 2019, SENER published an updated Development Program of the National Electrical System (Programa de Desarrollo del Sistema Eléctrico Nacional or PRODESEN) for 2019–2033. This document contains the planning for the National Electric System (Sistema Eléctrico Nacional or SEN) for electricity generation, transmission, distribution and commercialization. The López Obrador Administration intends not only to meet electricity demand, but also to maximize power generation, transmission, and distribution practices to contribute to sustainable economic growth.According to the PRODESEN, there are eleven priorities for the development of the electric power industry over the next 15 years:
- Apply the same regulations to CFE as have been applied to private power producers to secure the same conditions of competition, equity and equality.
- Rehabilitate transmission and distribution capabilities.
- Treat state productive enterprises as public service companies.
- Secure the profitability and return on investment of all the companies that participate in the electricity market.
- Establish transparency and better industrial practices for all the participants of the SEN.
- Increase power generation from clean energy sources and renewables and comply with international sustainability and emissions reduction commitments.
- Comply with the efficiency, quality, reliability, continuity, security and sustainability of the electricity system.
- Coordinate between SENER and CRE the criteria for new permits and authorizations based on the existing energy policy.
- Establish a responsible balance in electricity tariffs in relation to the costs, considering transmission-distribution, back-up power generation, and the cost of fuels.
- Guarantee open and non-discriminatory access to the General Distribution Lines (Redes Generales de Distribución or RGD) and consider reinforcements to the RGDs and related costs for any new applicants for power generation plants.
- Develop a complementary photovoltaic-distributed power generation system for battery charging of electrical vehicles in the medium and long-term.
The PRODESEN specifically includes provisions concerning the modernization of the electrical system that allows for increased use of electrical vehicles and electrical transportation, energy efficiency, distributed generation, and energy storage.
As part of the modernization process for the national electrical infrastructure, CENACE has identified 13 expansion projects for national transmission lines. These projects include capacity increase, power compensation, interconnection, reduction of the electricity network, and limitation of the transmission capacity. The projects are located throughout the country. To learn more about the projected projects for 2019-2033, specific location, and estimated date, please see the PRODESEN planning document.
Mexico Power Generation Equipment
(Figures in USD Billions, HS Codes 8501, 8502, 8503)
| 2016 | 2017 | 2018 | 2019 (Estimated) | |
| Total Local Production | 10.21 | 10.42 | 10.82 | 11.0 |
| Total Exports | 3.27 | 4.22 | 4.36 | 4.44 |
| Total Imports | 4.04 | 4.51 | 7.15 | 7.28 |
| Imports from the U.S. | 1.43 | 1.30 | 1.63 | 1.78 |
| Total Market Size* | 10.98 | 10.71 | 13.61 | 13.84 |
| Exchange Rates | 18.68 | 18.91 | 19.22 | 19.15 |
Source: Banco de México, PROMEXICO, INEGI, SENER, U.S. International Trade Administration, World Trade Atlas and interviews with importers, distributors, and end-users of electrical equipment and power generation equipment and services.
Leading Sub-Sectors
Key sub-sectors relevant for U.S. exporters include the following:
- Clean energy and renewables
- Energy efficiency
- Transmission and distribution equipment
- Charging stations for electromobility
- Distributed generation
- Energy storage technologies
Opportunities
Mexico’s electrical power industry offers opportunities for U.S. products, services, and technologies in all the leading sub-sectors outlined above. The U.S. Commercial Service Mexico is happy to assist you in exploring these opportunities.For the electrical power sector, there is an emphasis in Mexico on diversifying the sources of power generation. The highest-potential power generation technologies are combined cycle, gas turbine, wind and solar. The focus of the Mexican Government is to gradually increase the use of clean energy and renewables, refurbish outdated or inefficient power plants, and modernize transmission and distribution networks to secure a reliable electrical power system.
Another area of opportunity for U.S. companies is in offering electricity supply alternatives for large industrial and commercial users of electricity (known as qualified users or usuarios calificados), as they are being impacted by high electricity rates. Qualified users of electricity tend to evaluate among different proposals before signing the required PPA with a supplier of electricity (known as a qualified supplier or suministrador calificado). Most competitive alternatives offer a tailored package of power, capacity, cost-effectiveness, energy efficiency and clean energy certificates, according to the manufacturing or business needs of the qualified user.
Web Resources
| Mexican Secretariat of Energy (SENER) | www.sener.gob.mx |
| National Control Center for Energy (CENACE) | www.cenace.gob.mx |
| Federal Electricity Commission (CFE) | www.cfe.gob.mx |
| Energy Regulatory Commission (CRE) | www.cre.gob.mx |
| Mexican Electric Research Institute (IIE) | www.iie.org.mx |
| Trust for Electric Energy Saving (FIDE) | www.fide.org.mx |
| National Commission for Energy Efficiency (CONUEE) | www.conuee.gob.mx/wb |
| Federal Commission for Regulatory Improvement (COFEMER) | www.cofemer.gob.mx |
Events
- Power-Gen International, November 19–21, 2019, New Orleans, Louisiana
- Energy Mexico – Expo and Congress, January 28–30, 2020, Mexico City
Contacts
For more information on the electricity sector in Mexico, please contact:
Claudia Salgado
Commercial Specialist
U.S. Commercial Service—Mexico City
Tel.: +52 (55) 5080-2000 ext. 5224
Claudia.Salgado@trade.gov