Mexico's New Electricity Law Reshapes the Energy Sector

The transformation of the electricity sector in Mexico is a complex and multifaceted process derived from the combination of multiple internal and external factors. The transformation significantly began with the Energy Reform of 2013, a constitutional reform that in its secondary legislation opens the participation of the domestic and foreign private sector, breaking the decades-long monopoly held by the Federal Electricity Commission (CFE). Under this market model for the purchase and sale of electricity, the aim was to promote competition, efficiency and cost reduction, the separation in the value chain of its main activities (generation, transmission, distribution and supply), along with the establishment of goals and mechanisms for generation from renewable sources were key points of this reform.

August 2025 marks the beginning of a new era for the electricity sector in Mexico with the presentation of a new legal framework, the new Electricity Industry Law (LIE), and structure of the sector by establishing the basis for the sector's organization and operation. With the creation of the National Energy Commission (CNE), it will assume the regulatory and supervisory functions for the sector, including the power to grant generation and commercialization permits. The Federal Electricity Commission (CFE) is strengthened as it is now an autonomous public agency of the Ministry of Energy (SENER), which will have greater operational flexibility by eliminating the legal separation between its different main activities and granting a preferential participation in the planning, transmission, and distribution of electricity to the private sector. The participation remains in a limited scheme: in long-term production, CFE acquires the totality of the energy generated, and for mixed investment projects CFE must have at least 54% of the participation.

Changes were announced for distributed generation in its permit-free limits, while for interconnected self-consumption, new regulations are established that include stricter technical and administrative requirements. The National Energy Commission has established new guidelines for obtaining permits for interconnected self-consumption generation in a range of 0.7MW to 20MW. Considerations regarding the increase in the threshold for residential projects smaller than 0.7MW will follow a simple process, while commercial and industrial projects of larger size will need to comply with more demanding technical and administrative requirements, including the presentation of detailed interconnection studies of impact on the grid, which seek to prove that the project will not have a negative impact on the quality and reliability of the National Transmission Network (RNT) or the General Distribution Networks (RGD).

Regarding storage, specific provisions were issued that make it mandatory to integrate energy storage systems (Battery Energy Storage Systems, or BESS) in certain projects to increase the stability and reliability of the National Electric System both on a large scale (utility scale) as well as larger interconnected self-consumption schemes. The 30% solar storage rule is integrated, a parameter that seeks to mitigate the intermittency of solar generation and improve the system's response capacity by accumulating at least 30% of the solar energy generated in interconnected solar projects. Storage provides benefits to ensure operational continuity in the event of grid interruptions or failures. Energy can be discharged when there is greater demand, reducing the impact on CFE's infrastructure and improving the quality of energy by regulating the frequency and voltage of the system, which is essential for the proper functioning of industrial equipment and the grid in general.

State participation will also play a crucial role in promoting investment in renewable energies and decarbonization, leading to a significant increase in the generation of clean energy in the coming years. The CNE will streamline the process for granting permits even with the demand for more documentary and technical requirements through digital platforms, helping to make the procedures more standardized so that the technical and financial accreditation is solidified in accordance with the new guidelines for the electricity sector.

The new regulatory framework for distributed generation, self-consumption, and storage will seek to maintain a balance between the promotion of clean energy and the control of electricity infrastructure. August 2025 has set a new course for the National Electric System in Mexico.