José Antonio Prado Carlos A. Ochoa Valenzuela are partners and Alberto Esenaro is an attorney in Holland & Knight's Mexico City office.
Under Mexico's Energy Reform of 2013, the private sector may participate and invest in a number of energy-related activities. One of the most attractive activities is power generation, especially considering that distributed generation systems, also known as on-site or decentralized generation (DG), have reached technology maturity for execution by the private sector, eliminating the costs and complexity of using infrastructure for transmission and distribution.
Under the Power Industry Law, DG will have open and non-discriminatory access to general distribution networks, as well as to markets where the power may be sold.
Mexico's Energy Regulatory Commission, or Comisión Reguladora de Energía (CRE), has identified three stages for integrating the DG into the power market.
- First Stage: Modernization of power network, identifying the capacity of general distribution networks and upgrades needed for connecting DG systems. According to 2015 statistics, DG in Mexico has a capacity of 151 megawatts (MW), which is 0.22% of total installed capacity and .07 percent of generated power.
- Second Stage: Integration of DG systems, as long as they reach a 5 percent threshold, and development of the corresponding infrastructure.
- Third Stage: Development of energy markets through DG, including the distribution for multilateral transactions.
General Legal Provisions for Distributed Generation
To implement the DG, CRE has issued the general legal provisions ruling distributed generation (conventional and clean), including the following highlights:
- voiding of the following model contracts: Interconnection Contract for Renewable Energy or Small Cogeneration Systems, as well as the Interconnection Contract for Renewable Energy or Med-size Cogeneration Systems (RES/054/2010)
- establishing the general provisions for DG, including technical specifications
- defining the model contract to be executed between distributors and buyers for the interconnection of small generation (0.5 MW or less) to general distribution networks
- authorizing the model contract to be executed between basic power suppliers and exempt generators to determine the applicable consideration for power delivered to general distribution networks
- developing the methodology for determining the applicable consideration for power delivered
- regulating the following activities by exempt generators and their representatives at the Wholesale Power Market (MEM): use of the power load centers, sale of surplus and sale of power to a basic power supplier
- CRE may establish limits, regional or by isolated system, for interconnecting DG plants to the corresponding circuits
- CRE will issue general legal provisions for solving controversies regarding DG
As indicated, DG systems are still developing in Mexico and the world, but it is important to keep up with the applicable regulation. As the Mexican government continues to promote clean energy, private generation and DG systems with specific public policies, the markets for renewable and private generation have been responding with investments.
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