New electricity rules to bolster solar market

Distributed generationIt’s hard to imagine that nearly seven years have passed since we published our last post on net metering in Mexico, but maybe it shouldn’t be surprising considering how painstaking and fraught with challenges the move toward energy market liberalization has been.  For generations, production and sale of electricity in Mexico was reserved for the state and carried out principally by the public enterprise Federal Electricity Commission (CFE).  The current administration’s 2014 energy sector reform, however, sought to modernize energy markets across various sectors such as oil, gas and electricity.  In the electricity market, the proposed changes include not only permitting private companies to generate and sell electricity, but to permit and incentivize distributed generation by independent small-scale producers.  Now, regulatory changes published over the past two months appear to mark an important step forward toward the development of a smart grid and distributed generation.

On February 20, 2017, the Energy Regulatory Commission (Comisión Reguladora de Energía, or CRE) announced that it had approved new regulations and instruments expanding opportunities for distributed generation of electricity by small-scale solar power producers.  The regulations come on the heels of the publication of the Manual for Interconnection of Generation Centers with a Capacity Under 0.5 MW (Manual de Interconexión de Centrales de Generación con Capacidad Menor a 0.5 MW) in the Official Gazette of the Federation (DOF) by the Ministry of Energy (Sener) on December 15, 2016.  According to the Sener DOF publication, the Interconnection Manual sets out the administrative and technical guidelines for connecting a small scale electrical generation site to the national electricity grid.  The February 2017 CRE regulations, according to the CRE announcement, establish the rules and mechanisms for net metering, net billing and sale of electricity as well as model contracts for the connection of small-scale solar generation sites to the grid and terms of sale of the electricity they produce.

The CRE announcement states that prior to the energy reform, individual homes and businesses were permitted to produce photovoltaic (PV) energy only for their own consumption without the possibility of selling the power they produced.  Providing a regulatory framework that allows individual producers to sell their electricity will stimulate the expansion of distributed generation infrastructure, the announcement suggests.  Judging by comments in the media on the topic, PV system installers seem to agree.  Earlier this month local media reported that French electricity utility Engie formed an alliance with Mexican solar energy system installer Enlight to offer smart-grid hookups in the Mexican market.  An Engie press release was quoted as projecting the new alliance will install PV systems for 40,000 homes and businesses over the next five years.  Elsewhere, the director of Mexican solar installer Conermex estimated that the number of home solar installations in Mexico will grow by 150% this year compared to 2016 due in large part to the new regulations.   The Conermex chief estimated this year’s home solar installation market at approximately US$250 million.

As is often the case surrounding regulatory changes in Mexico, the CRE announcement of the new rules leaves some questions unanswered, at least for us.  For example, the February 20 announcement appears to refer specifically to small-scale solar installations, but it does not specify “up to 0.5 MW” as the December 2016 interconnection manual does.  The interconnection manual, for its part, does not refer specifically to solar generation, but presumably covers solar.  The CRE announcement of the new regulations does not provide a link to download the regulations themselves for review, and we were unable to find such a link elsewhere, so perhaps the regulations will be published at a future date.  In any case, the market appears to be reacting as if the new scheme is going forward, so we hope this will mean a new dawn in distributed PV generation in Mexico.  We find Sener’s reported projection that 30% of Mexico’s electricity will come from renewable sources by 2021 to be unlikely to materialize, but certainly the latest regulatory developments are heading in the right direction.

One thought on “New electricity rules to bolster solar market

  1. Timely article. This week, The Economist had feature stories about Europe’s awkward transition to renewable energy. Called “Clean energy’s dirty secret” – the issue details how increased use of renewable energy can begin to warp the price and production of both traditional and clean energies, leaving investors and consumers unsatisfied.

    Europe is much farther down the road in renewables than Mexico or the U.S. and are experiencing problems that could come to the North American market in the near future.

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