DG Solar Unaffected by Possible Reform

The electric reform sent to congress on Friday, October 1 has caused a lot of noise in the energy sector. And where there is noise, there are rumors. Minister of Energy Rocío Nahle addressed some of the concerns that had sprung up, assuring the public that distributed generation (DG) would be encouraged, not kicked to the curb.

The main source of this noise comes from the proposal itself. “On the one hand, the initiative says that it will end all contracts or forms of generation coming from private initiatives, obviously distributed generation has a private sector origin. However, there is also a part where the same text says that the government will promote distributed generation,” said energy expert Victor Ramirez to Aristegui Noticias.

Nahle took to twitter and responded these doubts. “The [reform proposal] does not propose to eliminate DG, to the contrary,” she said, arguing that the government has been a supporter of the technology since the beginning, even allowing for financing of residential systems through a government-backed trust. “The energy transition is developed further through this type of intermittent technology, which by placing panels on top of homes directly benefits the end user. Energy savings are reflected in a family’s economic savings,” she added.

Still, whether the reform proposal will be voted through and subsequently ratified throughout the country remains to be seen. After President López Obrador and his allies lost some ground to their opposition in 2021’s mid-term elections, many analysts interpreted the division of seats as a positive for the regulatory status quo in the energy sector. Needing to win more seats and hearts for a constitutional reform would have meant a greater need for compromise. But this outlook has changed. The opposition block formed by PAN, PRI and PRD, instrumental to the opposition’s relative victory during the mid-terms, began to show cracks as soon as López Obrador revealed his proposal to congress. PAN and PRD rejected the proposal outright, but the PRI caused tension within its alliance by stating it would be open to debate the subject.

DG, in short, is any type of decentralized energy generation involving many small power producing projects rather than centralized utilities transmitting electricity over longer distances. In the Mexican context, any project below 0.5MW does not need further permits by regulatory bodies. Solar energy is by far the most popular form of DG in Mexico, according to SENER. Solar technology continues to improve as costs drop, so with the country’s excellent solar radiation, the technology is quickly becoming a very attractive option for residences, commercial environments and industrial activity. Industry insiders point out that decentralized resources are a benefit to the grid, removing pressure from utility infrastructure. Nevertheless, some wonder if it could become a major source of competition for CFE and therefore subject to scrutiny from the government.