Image credits: Devin Avery
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News Article

Hanging in Suspension: Mexico’s Energy Sector

By Cinthya Alaniz Salazar | Fri, 09/03/2021 - 16:58

The federal government may have failed to pass legislation to reconfigure the country’s energy sector with the Federal Electricity Commission at the top, but after realizing that Energy Regulatory Commission (CRE) has not granted private energy producers operating permits since last year, it becomes clear that they have already succeeded through indirect means.

"The sector is paralyzed, investments have stopped, there is no issuance of new generation permits by the CRE, nor new generation plants, auctions, in short, the balance of the last year is that everything has been frozen," said Paolo Salerno, managing partner of Salerno y Asociados.

The last time the regulatory commission awarded a private producer with an electricity generation permit was on October 29, 2020 to Veolus Servicios Energeticos II. Since then, the regulatory body has denied the petitions of five private energy producers starting with Hive Solar Baja California Norte 1 and Hive Solar Tres Manatiales in July 2021. Just last month three companies had their applications rejected including: Flex America, Hidroelectrica Mizu and Saturno Solar.

According to energy coordinator for the Mexican Institute for Competitiveness (IMCO), Oscar Ocampo, under the guise of market saturation, this clear violation comes at the direction of President López Obrador who directed the regulatory body to do so in a memorandum issued in the summer of 2020.

The relevant text in the memo reads as: “the granting of permits or concessions to individuals in the energy sector should be stopped due to an oversupply of oil and electricity for the medium and long term.”

The memo outlines that this guidance is borne from a desire to strengthen PEMEX and CFE and prevent them from loosing any more market control. In practical terms, by barring the entry of new market actors gives the state companies time to increase their energy generation and distribution capacities, thereby ensuring market capture.

The CRE has evidently complied, granting PEMEX the authorization to generate energy for the Felipe Ángeles International Airport in July. Moreover, CFE has so far been granted three permits for three different projects in San Luis Rio Colorado, Valley of Mexico and Tula. "This is the position of the CRE and there is no reason to think that this will change in the near future," added the IMCO specialist.

In the meantime, more than 100 requests from private energy producers wait for their permits to be approved according to the CRE website.

The data used in this article was sourced from:  
CRE, IMCO, Salerno y Asociados
Photo by:   Devin Avery
Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst