Luis Fernández
Senior Associate
Woodhouse Lorente Ludlow
/
Insight

Law Firm Helps Regulate Geothermal Energy

Wed, 02/24/2016 - 18:01

During the drafting of the Reform, law firm Woodhouse Lorente Ludlow was involved in the creation of the law and regulations for the geothermal sector. As a result, the firm’s services have experienced an unprecedented demand from companies like Enel, the largest producer of electricity in this particular sector. “In Mexico there are few law firms that specialize in geothermal; in that sense we have a decided advantage,” says Luis Fernández, Senior Associate at Woodhouse Lorente Ludlow.

Fernández says the Ministry of Energy and the Inter- American Development Bank encouraged the firm to participate in the drafting of the legislation, and then in the drafting of the regulations. “We tapped into the expertise of CMS Cameron McKenna, which is active in other geothermal markets around the world, so it was easy to become experts in the geothermal sector in a matter of months.” In order to prepare for the task, the firm studied other markets like Chile, Indonesia, and Iceland. “From this we were able to develop a first class legal framework. So far the feedback from the industry has been positive because the legislation has provided the certainty it needs.”

In the geothermal sector, explains Fernández, there is a recognition period, which is then followed by exploration and exploitation periods. This sequence is similar to that of the oil industry. A company obtains exclusivity permits for the exploration of a particular region, and if it is able to locate resources after drilling a couple of wells, then it obtains a long-term concession. “This was not possible in the previous legal framework and as a result, it was difficult to develop a geothermal project. Amazingly, Mexico has 10,000MW of potential geothermal energy that can be capitalized on in the short term,” Fernández comments. Geothermal is a renewable source that can act as a constant energy source, and it is relatively cheap over the long term, making it an extremely competitive sector. In the past, CFE was the only one that was in a position to take advantage of Mexico’s plentiful geothermal resources and, although it carried out several projects, its interest was in other sectors. “Now with the clean energy certificate program, it will be a matter of time before we see more geothermal projects in the market,” says Fernández, and adds that the private sector will be able to establish projects of its own. Companies will also be able to collaborate with CFE. “These partnerships will prove beneficial to CFE since these companies have acquired a long history of knowledge that they can share.”