Pros and Cons of Increasing Distributed Generation Capacity

Since 2020, there have been several proposals from deputies of the PVEM, PRI y PAN parties in order to modify Article 17 of the Electricity Industry Law (LIE) with the aim to increase the limit of small-scale photovoltaic solar distributed generation (DG) capacity that does not require a permit from the Energy Regulatory Commission (CRE). Rubber stamping this increase would have various benefits, but also some drawbacks.

Nayeli Arlen Fernández, Representative, PVEM, presented an initiative to increase the permit-free installed capacity of DG power plants from 0.5MW to 1MW this past July. According to the deputy, this modification to the LIE seeks to encourage renewable power production in isolated Indigenous communities. Nonetheless, opinions are divided in the solar energy sector as to whether this limit should be changed or not.

Karla Cedano, President, the National Solar Energy Association (ANES), said that increasing the limit of DG might oversaturate the grid. "It is better to have loads of DG throughout the country than to make blocks. From my point of view, the limit is perfect where it is." However, she recognized that the increase could be viable if Mexico had a stronger power grid infrastructure. 

In contrast, some consider that the limit of the DG should grow, at least, to 2MW or 3MW. “Increasing the limit will allow solar to reach many industries that want to generate their own electricity through DG but cannot do so yet because their power needs exceed that what a small 500kW project can provide,” stated Raúl Asís Monforte, President, the Mexican Association of Renewable Energy and Environment (AMER) in an interview with Energía Estrategica.

During Intersolar 2022, Aidana Velázquez, Manager of Institutional Relations, Enlight, said that the 0.5MW restriction holds back Mexico’s potential for DG compared to what is allowed in other countries such as Chile, with 9MW, and Brazil, with up to 5MW. A similar argument was given in 2020 by Héctor Salinas, Representative, PAN, when he claimed that increasing the permitted limit of DG to the level of countries like Brazil or England would boost the use of renewable energy, making it more accessible for users, while having a positive impact on CFE by decreasing its operational load.

Velázquez agreed that enhancing the solar sector’s professionalization and improving electrical infrastructure is necessary if DG is to have this positive impact. She added that one of the challenges is to diversify DG. Six states contain around 50 percent of DG contracts and installed capacity in Mexico, and Jalisco, Nuevo Leon and Chihuahua alone represent 33 percent of it. "It is certainly a challenge, when we talk about DG, to ensure it is actually distributed," she stressed.

DG is a term used when electricity is generated from power sources, often clean energy,  near the point of consumption instead of centralized power plants whose electricity is then transmitted to distant places. DG is not isolated from the public grid, but linked to it, capable of injecting energy surpluses back into the grid when required. DG can help support the delivery of clean, reliable power to more customers and reduce electricity losses along transmission and distribution lines.

As of June 2022, Mexico’s installed DG capacity stood at 2,201MW, which means that it has multiplied 5 times since 2017.