SENER Publishes Controversial Policy, Private Players Respond

SENER published its controversial measure, titled the ‘Policy for Reliability, Safety, Continuity and Quality in the National Electric System’ on Friday, May 15 in the official state gazette. César Hernández Ochoa, former commissioner of the National Commission for Regulatory Improvement (CONAMER), presented his resignation after he tried to block the policy, reported both Energía a Debate and Bloomberg. CONAMER attempted to put a pause to the process to request further regulatory impact studies in terms of costs for company compliance.

With this measure, Mexico’s SENER has gained the power to impose new tests and limitations on renewable projects such as solar and wind. Furthermore, CENACE can now disallow new plant study requests and prioritize state company CFE. The tests are crucial for plants to be connected to the grid and thus go online. With the measure published, opinions from both sides ought to be examined.

The situation is developing rapidly, reported Expansión earlier today. A district court in matters of Economic Competition and Telecommunications looked into a complaint coming from Spanish company Mexsolar XI, which is building a solar park called Perote, in Veracruz. The court granted a provisional suspension against the effects of this agreement, meaning that the measure is, for now, stalled.

EnergíaHoy reported SENER’s point of view on the issue. According to the Ministry, the measure is necessary to guarantee the stability of the grid and protect Mexico’s energy independence. Mexico is suffering from the COVID-19 pandemic, which has severely affected energy demand. SENER argues that the intermittent nature of renewables, meaning that they are not generated at all times due to lower winds or the sun going down, increases the already existing imbalance between generation and demand. This threatens the reliability and continuity of Mexico’s energy supply, which cannot be at risk as it provides energy to hospitals during the health emergency.

SENER furthermore said that Mexico’s grid is one of the most complicated in the world. It provides services to 128 million Mexicans across over 2 million km².  At the moment, the installed generation capacity of 80GW exceeds the current demand of 30GW, which is down 20GW compared to 2019. Finally, SENER stresses that installed renewable energy reached 11.86 percent of the installed capacity as of December 31, 2019. The effective installed capacity and testing of energy originating from the actions had advanced 67 percent in terms of installation, by the end of January 2021. Importantly, SENER stated that the program of allowing further installation would still continue in 2020 and 2021, suggesting a slowdown rather than a full stop. CENACE subscribed to this part of the message, affirming their commitment to new renewable players in the market but confirming what SENER had said, as well. Another press release coming from CFE followed the same lines, stating that the policy was created to ensure the reliability and safety of the national electricity system, as well as foster the participation of the CFE in the Wholesale Electricity Market in an equitable and competitive manner, all for the benefit of end users.

Nonetheless, various entities representing the interests of privately owned renewables reacted negatively to the measure, reported Energía a Debate. The Business Coordinating Council (CCE), the American Chamber in Mexico and the Executive Council of Global Companies urged to recall the policy, which they say was illegally imposed by SENER. They affirm that the measure threatens the legality, legal certainty and free economic competition of the country's energy sector. CCE estimated that US$30 billion has been put at risk because of the measure. Furthermore, COPARMEX and CONACMIN argue that the policy is against the law, in violation of USMCA and that it will collapse foreign investment into the country. The Mexican Institute of Finance Executives (IMEF) supported the notion in a statement, warning that the negative effects of changes in clean energy could further deepen the economic recession in Mexico.  

Further adding to the list of critics are the Canadian Ambassador to Mexico, Graeme C. Clark, as well as a delegation of 19 countries of the European Union. Clark writes that the policy “puts at risk (Canadian) investments of approximately US$450 million, as well as the creation of more than 1,000 jobs.” Canadian companies such as ATCO, Canadian Solar, Cubico Sustainable Investments and Northland Power had trusted their investment in the country. Both the EU and Canada had earlier expressed concern of the government’s attempt to award CELs to older, polluting state-owned plants, as well as the cancellation of further long-term energy auctions. They requested a meeting with Minister of Energy, Rocío Nahle to further discuss the measure and its impact on foreign investment.

In an interview today with journalist Joaquín López Dóriga, Nahle assured that this measure would not deter foreign and private investment in Mexico’s energy sector. The Minister also assured she would meet with Canadian ambassador to address his concerns.