Suspended Renewable Projects: Private Sector To Take Legal Action

Yesterday, CENACE’s controversial decision to indefinitely suspended tests for new renewable energy projects in Mexico spurred a response from the private sector. The suspended preoperative tests are necessary to bring a project to completion and as to make it operational. Private players identified the measure as a way to provide an advantage to CFE over private initiatives. This issue added to a lingering conflict between the government and the private sector, which enters a new phase as the private sector is planning to initiate legal action.

The Business Coordinating Council (CCE), a non-profit defending the rights of private businesses, announced legal action on May 5, reported Renewables Now. CENACE stated that the suspension was merely aimed to improve stability in Mexico’s electrical grid, now that lower demands were causing issues on power lines accustomed to efficient, high traffic. CCE, however, accuses CENACE’s measure of having no sound technical basis and of not holding up from a legal standpoint, either. The Council worries that CENACE is driving out private investment worth over US$20 billion by building unfair barriers and favoring older, more polluting forms of energy generation in the process.

CCE said that the private energy sector has had to rely on lawsuits to protect their rights before. It used the example of the court-ordered suspension of the measure to allow old CFE plants to receive CELs, which due to strict rules for compliance were, before that point, only attainable by the newest renewable projects. As the measure lies suspended, the application of CELs remains unchanged, at least until the government appeals against the court’s decision.

Other than defending fair competition, CCE said it aims to defend the environment as well. Reforma reports that CFE has plans regarding its older, less efficient and more polluting power plants. The federal government said it wished to make use of the oil surplus created by the oil price crash to generate energy. As the barrels are not easily sold, they could at least benefit national energy generation. CCE, PRI deputies and independent energy analysts criticized the move.

The controversy can be explained by the current government’s desire to reverse the PRI’s liberalization of Mexico’s national industries. López Obrador’s plans for the country include once again strengthening parastatals PEMEX and CFE. While the government has said that it values the private industry and is not out to harm it, private players in the energy sector are now facing legal battles on multiple fronts to protect what they consider to be their rights. López Obrador’s government argues it merely wants to put its state companies back to a position where they can fairly compete.

Government and private sector could strongly benefit from cooperation, argued experts such as Francisco Monaldi, Director at the Baker Institute for Public Policy at Rice University. If legal battles become the norm, however, this option will become ever less likely.