Renewable Energy Reform Pushing Ahead in Mexico

Yesterday in Mexico City President Enrique Peňa Nieto signed into law the much anticipated landmark reform of the energy sector, ending a 76 year state run monopoly and opening the sector to foreign investment.  The energy reform act is one of the key goals of his administration.  “This represents a historic change that will accelerate the economic growth and development of Mexico in the coming years,” the president told hundreds of guests at a ceremony in the capital.

Reform of the energy sector has long been in the works in Mexico.  Restructuring of its state-run electricity market began in December 2013, with the passage of legislation calling for sweeping reforms aimed at increasing competition.  Just last week, the Mexican Senate enacted the secondary legislation that is required to implement these changes.

The energy reforms are intended to end the state monopoly on both the oil and gas industry and the electricity industry.  The electricity reforms allow private parties to develop, own and operate generating assets on the electrical grid.  Comisión Federal de Electricidad (CFE) will remain the sole developer of transmission infrastructure and a new agency, National Energy Control Center (CENACE), will be in charge of the planning and control of the national electrical system.  The stated goal of this sweeping plan is for Mexico to generate at least 35% of its energy from clean energy sources by 2024, while reducing greenhouse emissions by 30% by 2020.

Leaders of the renewable energy industry in Mexico gathered in Mexico City in May for the third annual Mexican International Renewable Energy Congress (MIREC), which was sponsored by K&L Gates.  The K&L Gates delegation consisted of Seattle partners David Hattery and David Benson and Miami partner Christopher Tillson.

Tillson served as the Chairperson of the conference and introduced the keynote address by Senator David Penchyna Grub, President of the Energy Commission of the Senate.  Senator Penchyna gave an impassioned address stressing the transformational change intended by the energy reforms now underway.  In his view, the current state monopoly model was outdated thirty years ago, but only now has the political will emerged in Mexico to implement the fundamental changes necessary to unleash the full potential of clean energy to create jobs and expand prosperity in Mexico.  He stressed that renewable energy project development is one of Mexico’s greatest tools to address energy security, social inequity and economic growth, and he challenged all of the MIREC participants to take an active role in promoting  positive changes in the energy marketplace.

Now the hard work of implementing these sweeping changes can begin.  It will take time for a functioning and efficient wholesale electricity market to develop in Mexico, but the new reforms are certainly good news for independent power producers eager to develop renewable energy projects in Mexico.