CRE Makes Natural Gas Eligible for CELs, Sparking Concerns

The Ministry of Energy (SENER) recently released the National Electric System Development Program (PRODESEN) for the period 2023-2037, outlining the country's energy goals and strategies for the coming years. However, a decision by the Energy Regulatory Commission (CRE) prior to the publication of PRODESEN has sparked controversy within the industry and raised concerns about the integrity of Mexico's clean energy program.

The CRE's decision involved categorizing natural gas generation in combined-cycle power plants as fuel-free energy, making it eligible for Clean Energy Certificates (CELs). CELs are awarded to power plants that generate electricity from renewable or clean energy sources, and they play a crucial role in promoting cleaner energy and achieving Mexico's climate change goals.

The Mexican Solar Energy Association (ASOLMEX) and the Mexican Wind Energy Association (AMDEE) have objected this decision, claiming that including natural gas as fuel-free energy could inaccurately represent the true carbon footprint associated with these generation methods. They argue that this move may undermine the integrity of the clean energy program by artificially inflating the proportion of clean energy in the electricity system.

ASOLMEX and AMDEE say that considering natural gas as clean energy and awarding it CELs could lead to a misleading perception of Mexico's progress in transitioning to renewable sources. It is essential to accurately measure and account for the environmental impact of energy generation to ensure that the country's clean energy goals are met effectively.

Adding to the concerns, the Institute for Competitiveness (IMCO) recently reported that the PRODESEN for 2023-2037 artificially increases the reported levels of clean energy through regulatory modifications. According to IMCO, changes in the methodology led to the inclusion of 8,428GWh of electricity as clean energy in 2022, which would not have been considered as such under the previous calculation methodology.

If this energy were not accounted for as clean, the proportion of energy from clean sources would only reach 28.7%, falling short of the target set by the Energy Transition Law of generating 30% of energy from clean sources by 2021. This would mark the second consecutive year in which the Mexican government fails to meet its clean energy goals, raising concerns about its commitment to combating climate change.

The Employers' Confederation of the Mexican Republic (COPARMEX) also criticized the CRE's resolution, stating that it contradicts international standards and undermines Mexico's commitments to address climate change. While acknowledging the importance of natural gas for national economic growth and development, COPARMEX says that the decision hinders efforts to fight climate change and further strains certainty in attracting private investment.

The regulatory paralysis within the Energy Regulatory Commission (CRE) has not only triggered controversy but has also resulted in significant financial losses for companies in the sector. According to data from Mexico Evalúa, the lack of progress and clear guidelines from the CRE has cost companies in the energy sector over MX$49 billion (US$2.8 billion).

As Mexico strives to transition to cleaner and more sustainable energy sources, it is crucial for regulatory bodies and stakeholders to ensure transparency, measure clean energy generation accurately and adhere to international standards. Addressing the concerns raised by industry associations, think tanks and employers' confederations will be essential for maintaining the integrity of Mexico's clean energy program and achieving its climate change targets.