Frequently Asked Questions About PPAs
The threshold that decides whether any of this applies to your plant
A facility in Mexico can buy power under a bilateral contract only once it holds Usuario Calificado status, and the entry test is 1 MW of demand. Not 1 MW of annual consumption. SENER set out how that demand is measured in its acuerdo published in the DOF on 1 March 2017: for a medium or high tension site with recent service, it is the maximum demand in kW recorded over the preceding 12 months, normally in 15-minute intervals.
That single number determines whether a plant director or CFO is choosing between suppliers or staying on CFE Suministro Básico at CRE-approved tariffs. The questions below are the ones we are asked most often by industrial and multinational buyers weighing that migration, and the answers say what the evidence supports and where it does not support anything.
What is a power purchase agreement?
A PPA sets the terms of a bilateral agreement in which one organisation buys energy from another. The commercial elements are the price for capacity, the price for energy, the volume committed and the number of years the contract runs. Developers get stable cash flow, which lowers their cost of capital. Buyers get a price they can budget and, where the generation is clean, evidence of compliance with clean energy policy.
What a PPA does not do is fix the whole bill. The price usually covers energy. It does not automatically cover porteo, the wheeling charge for moving power across the Red Nacional de Transmisión and the Redes Generales de Distribución, and it does not cover capacity, ancillary services or Certificados de Energía Limpia unless the contract says so.
How are PPAs different in Mexico?
In much of the world the standard arrangement is a private plant selling to a state utility. Under the Ley de la Industria Eléctrica, Mexican industrial buyers contract directly with private generators or with suppliers, and a CFE affiliate competes for that business alongside private firms. A private clean generator selling to an automotive plant is an ordinary transaction here.
Who can actually sell you power?
This is where buyers lose time. Only a Suministrador de Servicios Calificados can supply a Usuario Calificado under a supply contract. A generator that is registered only as a Generador cannot. CENACE publishes the register in its Lista de Participantes del Mercado, and the same corporate group frequently appears twice in it under different entities, one registered as a Generador and one as a Suministrador de Servicios Calificados. Only the supply entity can sign a supply contract with your site.
Before signing anything, check the counterparty's exact registered entity name and its registered category against the current CENACE list, not against the brand on the proposal.
What is CFE Calificados?
CFE Calificados, S.A. de C.V. is the CFE affiliate that acts as a Suministrador de Servicios Calificados, competing to supply Usuarios Calificados under negotiated contracts. It is a market participant, not a regulator. CFE Suministro Básico is the separate subsidiary that serves regulated retail customers at CRE-approved tariffs. Multinationals do contract with CFE Calificados: Jones Day recorded advising Toyota Motor Manufacturing de Guanajuato as offtaker on a power purchase agreement with CFE Calificados in May 2018.
What savings do PPAs deliver?
In the mandates Mexico Energy Partners has run, PPAs have reduced monthly power costs by 15 to 40 percent depending on the source of generation and the tenor of the agreement. Savings in this range are measured against current CFE supply and vary materially with tariff class, region, load factor and consumption profile. Those figures are illustrative rather than committed, and no range can be confirmed for a specific facility without a review of interval data and 12 months of billing.
The comparison that matters is delivered price at the meter, on the same basis as the current CFE invoice. An offer quoted against the energy line alone will overstate the saving once porteo, capacity and certificate costs are added back. Our post on PPAs compared with nodal spot exposure sets out which components move and which do not.
How long does switching take, and what gates it?
In our own project experience, moving a site from basic supply to a PPA runs six to nine months end to end. Selecting a supplier through a disciplined RFP and negotiating the agreement takes 30 to 60 days of that. Physical installation of metering is usually two to four weeks.
The step buyers underestimate is the registration. CRE maintains the Registro de Usuarios Calificados and issues the registration, under the disposiciones administrativas published in the DOF on 6 December 2017. CENACE does something different: it registers the Centro de Carga in the Mercado Eléctrico Mayorista and signs the Contrato de Participante del Mercado with buyers who trade directly. Those two are routinely confused, and confusing them costs weeks. Direct market participation is a higher bar again, which CRE's published guidance puts at 5 MW of demand and at least 20 GWh of annual consumption, which is why most industrial sites contract through a supplier instead.
What does the physical migration cost?
New revenue-grade metering is required, and a new transformer is usually required as well. Get written quotations for the specific site, because transformer pricing turns on voltage, capacity and site configuration.
Plan the lead time. Transformers for industrial sites are built to order, and in the projects we have run the purchase order to delivery cycle has run to about six months. That lead time, not the contract negotiation, is usually what sets the start date of supply.
How is the wholesale spot price set?
CENACE dispatches the least expensive offers first and works up the merit order until demand is met, with the clearing price set by the last unit dispatched. The resulting Precio Marginal Local is a nodal price and decomposes into three components: marginal energy, marginal losses and marginal congestion (CENACE, Diccionario de Datos Abiertos, referencing the DOF note of 4 July 2016).
Day-ahead prices and real-time prices come from two different markets and are not interchangeable. The Mercado del Día en Adelantado is the day-ahead market and clears before the operating day. The Mercado de Tiempo Real settles actual dispatch during the operating day and reconciles deviations from day-ahead positions. CENACE publishes the two price series separately, and an offer indexed to one is not an offer indexed to the other. Check which index a supplier is quoting.
What do Mexico's clean energy targets mean for a buyer?
The statutory target is for clean energy, not renewable energy, and the two are not synonyms. The Ley de Transición Energética, in Transitorio Tercero, sets a minimum 35 percent clean energy share of electricity generation by 2024, on a path of 25 percent by 2018 and 30 percent by 2021. Under the Ley de la Industria Eléctrica, energía limpia includes nuclear generation and efficient cogeneration alongside wind, solar, hydro, geothermal and biomass.
Certificados de Energía Limpia are the compliance instrument, awarded to qualifying clean generation and acquired by Entidades Responsables de Carga, under the lineamientos published in the DOF on 31 October 2014. They are a separate product from the energy itself. If a buyer wants the certificates, the contract has to say so and price them.
How do political changes affect PPAs?
CENACE suspended the fourth long-term auction on 3 December 2018 and announced its cancellation on 1 February 2019, ending the programme that had produced the market's public reference price. The third auction, resolved on 22 November 2017, had cleared at an average of USD 20.57 per MWh bundled with one Certificado de Energía Limpia across 2,562 MW.
Existing private contracts have continued to operate through that change. We read the practical consequence for a buyer as narrower than the headlines suggest, and as specific: without an auction benchmark, an offer can only be tested against competing offers, so run a real competitive process and keep tenor inside a horizon the business can defend. What would change our view is a statutory change to the Ley de la Industria Eléctrica itself, rather than a policy decision about auctions.
What else belongs in the contract review?
All legally binding agreements are executed in Spanish. English translations circulate, and the Spanish text is the one that binds. Use Mexican counsel on the negotiation, and put the same attention into termination events, the termination payment formula and the credit support each side posts as into the headline price. A virtual PPA settled financially shifts which of those terms matter, and the wider set of procurement routes is worth mapping before an RFP goes out.
Test your site against the qualified user threshold
Mexico Energy Partners reviews whether a facility clears 1 MW of demand, what its delivered cost would be under competing supply offers, and what the migration would require physically. The review needs 12 months of CFE billing, interval demand data for each Centro de Carga and a single-line diagram. Our energy procurement page describes the process.