Clean Energy in Mexico attracts FDI


By enacting the secondary laws to constitutional energy reforms back in August, Mexican President Enrique Peña Nieto detailed the opening of energy sector. However, while the press has been focusing on the reforms’ implications for the oil and natural gas sectors, the clean power market did not receive the attention it deserved, especially considering that Mexico has set the objective to generate 35% of electricity with clean power by 2025.

One of the reasons is that green infrastructure has been growing for a decade outside the political debate of oil and gas. Many plants in Mexico migrated to clean energy to replace natural gas generation. So, secondary laws for clean power were not amended per se, but were boosted with the opening of the sector to private companies. Unlike hydrocarbons infrastructure, clean infrastructure is ready to take off without big investments.

The new Power Industry Law will allow private actors to contribute to power generation with a legal framework that ensures fair competition. Regulations to that Law are in process of discussion among the industry and regulators. As private generators will be given access to the power transmission and distribution infrastructure, solar and wind energy projects are bound to increase where both sun and win are abundant. As for transmission and distribution, the Federal Electricity Commission (CFE) will be capable of performing power market planning as an independent system operator. As a result, it will be able to accommodate the growing numbers of clean energy generators and provide them with better cost-based access to the power market. Finally, private traders will contribute the green power they produce, allowing others to consume clean electricity.

Aside from these implications, the Power Industry Law creates a Clean Energy Certificate (CEC) system. The Ministry of Energy has been entrusted with setting a percent threshold for clean-to-conventional power production per annum. Power suppliers and consumers will have to uphold this threshold, allowing the government to enjoy a demand for its renewable power and the income it makes once the initial investment costs are paid off.

In addition to the Power Industry Law, other statutes are bound to fortify the production, distribution and trade of clean power. First off is the Coordinated Regulatory Bodies Law, which will support the power sector regulator Energy Regulatory Commission (CRE) and provide it with the technology, financing and operational autonomy it needs to tackle the more competitive power market in Mexico. Another law is the Geothermal Energy Law, which aims at prospecting, exploring and ultimately using geothermal resources for generating electricity and other uses.

With so many changes taking place in the Mexican power market, more global energy firms are focusing their attention towards the Latin American country. In June, Spanish utility Iberdrola announced that it would be investing $5 billion between 2014 and 2018. Following its footsteps was U.S. based power generator AES, which told Reuters in August that it plans to double its capacity in Mexico for $1 billion over three to five years.

The U.S. especially has shown interest in partnering with Mexico, even for its clean energy production efforts. After visiting the Mexican President in July and hosting him a month later, California’s Governor Jerry Brown has expressed his interest in Mexico’s energy industry. As many Californian companies are focusing on renewable energy goals, state energy officials have faith that they can help Mexico, especially when it comes to reducing its emissions and further promoting the use of renewable energy sources. However, other companies from Utah and Colorado have been scouting and developing solar projects even before the Reform.

Despite the challenges facing the Mexican power sector, especially its inability to access natural gas from the U.S. and the widespread theft of electricity, international firms are very optimistic and believe these problems to be some of the “vast and varied” opportunities they believe they can avail. Now, maybe it is time for PV companies to start evangelizing the home market as “everyday appliances”.

Photo credit: Wind turbines, eco energy by majeczka-majeczka –

About the author

Alberto Esenaro

I am a Mexican lawyer with experience in technology, energy, automotive, infrastructure and business. Worked for law firms, international companies and Government bodies on business advice, regulatory compliance and litigation.

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By Alberto Esenaro

About Author

Alberto Esenaro

I am a Mexican lawyer with experience in technology, energy, automotive, infrastructure and business. Worked for law firms, international companies and Government bodies on business advice, regulatory compliance and litigation.

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