The Current Concerns of Energy Investors in Mexico
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The Current Concerns of Energy Investors in Mexico

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Karin Dilge By Karin Dilge | Journalist and Industry Analyst - Mon, 03/13/2023 - 09:00

In recent years, Mexico’s renewable energy sector has experienced significant changes in its business models due to shifts in public policy in the energy sector, causing concerns for energy investors.

Some of these changes include the cancellation of auctions for the sale and purchase of electricity and power, the criteria in the emission and accreditation mechanism for Clean Energy Certificates (CELs), reforms to the Electricity Industry Law (LIE) as well as the slowdown of activities of regulator CRE, grid operator CENACE and the Ministry of Energy (SENER).

"Due to the turn in the sector, the main concerns of clients are changes in electricity sector legislation, challenges in integrating into the electricity grid, ESG criteria and access to financing," said Edmond Grieger and Ariel Garfio, Partners, Von Wobeser and Sierra.

In addition, the government has implemented changes in the sector’s applicable legislation, including the reforms to the LIE published in March 2021, as well as the publication of various resolutions, agreements and criteria by the CRE, CENACE and SENER.

Von Wobeser highlighted that the government modified the dispatch rules for power plants to give priority to CFE power plants, even if they were not producing renewable power. "These changes have generated a lot of uncertainty about the rights and expectations of renewable energy generation permit holders," added Grieger.

"Our clients have been forced to implement and exercise different legal protection measures and mechanisms, contemplated both in Mexican legislation and in international treaties, that allow them to safeguard their rights, as well as the economic ecasts of their renewable energy projects," he added.

Challenges in Connecting to the Grid

According to Von Wobeser and Sierra, one of the fundamental pillars of the change in the country's energy policy has been to strengthen the CFE so that it retakes a relevant role in the electricity generation matrix.

"A very important, irrational preference has been given to CFE in obtaining permits, licenses and authorizations, to the detriment and discrimination of privately-owned power plants, including plants that were already ready to start commercial operations," Garfio said. "This meant that the integration of privately-owned power plants into the National Electricity System has been meager in recent years," he added.

ESG criteria

Considering the growth in the implementation of ESG policies, investors have redoubled their efforts to ensure that social and environmental aspects in the development, construction and operation of a renewable energy project coexist harmoniously with the environment and communities.

Access to financing

The changes form a barrier to developers in their quest to obtain financing for their projects or drastically change earlier economic projections.

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