Energy Transition: Legality, Sustainability, and Opportunities

(In collaboration with Edmundo Berumen and Arturo Hernández) 

Mexico’s energy sector is undergoing a profound structural and regulatory transformation, driven by recent constitutional and legislative reforms. A pivotal moment came with a constitutional reform published on Oct. 31, 2024, which modified Articles 25, 27, and 28 of the Mexican Constitution. These articles are the cornerstones of the energy industry, and the changes laid the groundwork for a new institutional framework governing the electricity sector.

This transformation was further solidified with the enactment of the new Electricity Sector Law (LSE) and the Energy Planning and Transition Law (LPTE), in March 2025, which redefined key principles of participation within the power sector, and underscores the national commitment to scaling up renewable energy sources. These developments aim to foster a more sustainable, reliable, and competitive energy system in line with Mexico’s long-term environmental and economic goals.

This new regulatory framework primarily seeks to reinforce the state’s role in the planning and control of the electricity system, while allowing collaboration with private actors under new rules. Additionally, this new regulatory transformation does recognize the importance of preserving energy security and self-sufficiency, as well as ensuring the efficiency, quality, continuity, accessibility, safety, reliability, and sustainability of the National Electric System (SEN). This approach is aligned with the principles of the so-called “energy trilemma” proposed by the World Energy Council: energy security, social equity, and environmental impact mitigation.[1]

To do so, the LPTE continues to recognize the importance of renewable energy as one of the main strategies to scale up the energy transition in Mexico. This strategic emphasis is well aligned with the country's projected growth in renewable energy capacity. Mexico’s renewable energy outlook is set to expand significantly. According to the 2025–2030 Plan for Strengthening and Expanding the National Electric System, Mexico aims to add 29,074MW of additional generation capacity by 2030, of which 22,674MW will be developed by the Federal Electricity Commission and the remainder by the private sector. This expansion — spread across technologies such as wind, solar, combined cycles, cogeneration, and battery storage — reflects a significant step toward modernizing the country's generation matrix and accelerating the energy transition.[2]

Nevertheless, significant challenges remain. One of the core issues is that renewable energy, while clean and increasingly cost-competitive, is inherently variable. This variability requires reliable backup systems or flexible generation sources to scale up quickly when renewable supply falls short. In Mexico, this challenge is compounded by the continued growth in electricity demand, particularly in regions experiencing rapid population growth and industrial expansion due to nearshoring. Additionally, the country’s transmission and distribution infrastructure are outdated and insufficient to meet current and future needs. This leads to severe bottlenecks in transporting electricity efficiently across the national grid, limiting the integration of new renewable projects and weakening the overall resilience of the system.

Strategic Opportunities in Mexico

The challenges outlined above are not unique to Mexico. They are common issues faced globally due to the technical complexity of modern electricity systems. Addressing them effectively requires solutions grounded in technical and engineering perspectives, rather than relying solely on regulatory or legal reforms. This includes promoting alternatives on both the supply and demand sides to support the energy transition while upholding the core principles of energy security and affordability. These needs are giving rise to new business opportunities across the energy market.

Among the most promising areas are energy storage technologies and distributed generation, which offer significant potential to enhance system flexibility, reliability, and resilience.

In this context, Battery Energy Storage Systems (BESS) have emerged as a versatile solution not only for generators but for load centers. On the generation side, BESS can be integrated with renewable energy sources to smooth out intermittency, stabilize output, and support grid services, such as frequency regulation or ramping. For load centers, including industrial, commercial, or residential users, BESS offer dual benefits: enhancing supply continuity during grid disturbances or peak demand and serving as an economic asset. By charging during off-peak hours and discharging during high-demand periods, users can engage in energy arbitrage, reduce peak charges, and optimize overall energy costs.

This market-oriented use of BESS has become increasingly viable as a result of the LSE and the publication of the General Administrative Provisions on Energy Storage [3], which recognize storage as an independent activity eligible to participate in the wholesale electricity market. Under this new regulatory framework, storage has been firmly established as one of the most strategic opportunities for the development of the SEN. The framework allows for active participation not only by generators and load centers but also by standalone storage systems — those not tied to a specific generation plant or consumption point. These systems are now authorized to participate directly in the wholesale electricity market, offering energy, capacity, and ancillary services that enhance the SEN’s operational flexibility, accessibility, reliability, quality, safety, efficiency, and sustainability.

On the other hand, distributed generation serves as a complementary and increasingly vital instrument in advancing Mexico’s energy transition. The LSE has expanded the capacity threshold for generation projects exempt from permit requirements — from 0.5MW to 0.7MW — demonstrating the government’s intent to foster the development of smaller-scale, decentralized energy systems that reduce dependence on the SEN.

Like BESS, distributed generation offers strategic value from the supply side, an area where innovation is especially needed to accelerate the transition to a cleaner, more resilient energy system. By producing electricity closer to the point of consumption — through technologies like rooftop solar panels, small-scale wind turbines, or other renewable sources — distributed generation helps reduce transmission and distribution bottlenecks. This localized generation model alleviates stress on grid infrastructure and minimizes technical losses typically associated with long-distance power transmission.

Moreover, distributed generation can serve as a cornerstone for microgrid development, particularly in rural, remote, or underserved regions where extending the national grid is economically impractical. In such contexts, distributed energy systems can deliver reliable, affordable, and clean electricity to communities that have historically lacked consistent access, while also enhancing local energy resilience and self-sufficiency.

Conclusion

Mexico’s legal framework for the power sector and the energy transition is evolving in response to emerging technological opportunities aimed at strengthening energy security, affordability, and sustainability. BESS and distributed generation are transforming how energy is produced, stored, and consumed, helping to relieve pressure on transmission infrastructure and addressing the intermittency of renewable sources. These technologies are paving the way for a more flexible, decentralized, and resilient energy system aligned with the core principles of the energy transition. However, to fully unlock the potential of these projects and ensure their optimal performance, developers need more than technical innovation. They require the implementation of tailored legal and contractual structures that support proper operation, ensure regulatory compliance, risk mitigation, and promote long-term viability. In this context, specialized legal support will be essential to navigate recent energy reforms and evolving regulations, providing the clarity and certainty needed to move projects forward with confidence.

Authors:

Ariel Garfio, Partner, Von Wobeser y Sierra, S.C., Mexico City

agarfio@vwys.com.mx

https://www.vonwobeser.com/index.php/lawyer?l=224

Edmundo Berumen, Associate, Von Wobeser y Sierra, S.C., Mexico City

eberumen@vwys.com.mx

https://www.vonwobeser.com/index.php/lawyer?l=420

Arturo Hernández, Associate, Von Wobeser y Sierra, S.C., Mexico City

ahernandez@vwys.com.mx

https://www.vonwobeser.com/index.php/lawyer?l=436

Sources:

[1] Camacho Parejo, M., & World Energy Council. (2012). Energy Trilemma 2012 [Spanish version]. World Energy Council. from https://www.worldenergy.org/assets/downloads/Trilema-Energ%C3%A9tico-2012-Espanol.pdf

[2] Federal Electricity Commission (CFE); Government of Mexico. (2025, February 5). Strengthening and Expansion Plan for the National Electric System 2025–2030. https://www.proyectosmexico.gob.mx/wp-content/uploads/2025/02/Plan-Fortalecimiento-y-Expansion-Sistema-Electrico-Nacional.pdf

[3] Energy Regulatory Commission (Mexico). (2025, March 7). Acuerdo Núm. A/113/2024: Administrative provisions for the integration of electricity storage systems into the National Electric System (Official Gazette of the Federation). https://sidof.segob.gob.mx/notas/5751230