Wind's constraint in Mexico is regulatory, not physical

Five weeks ago, on 17 April 2022, the Cámara de Diputados rejected the constitutional electricity reform. It drew 275 votes in favor, short of the two-thirds majority a constitutional amendment requires. Ten days before that, on 7 April 2022, the Suprema Corte de Justicia de la Nación dismissed acción de inconstitucionalidad 64/2021 against the March 2021 reform of the Ley de la Industria Eléctrica, because none of the challenged provisions drew the eight votes needed for a general declaration of unconstitutionality. For a manufacturer holding or considering a wind-backed supply contract, those two dates set the operating environment. The statute survived. The constitutional overhaul did not pass. Neither outcome gives a private wind project the certainty it needs to reach financial close on ordinary terms.

That is the story of Mexican wind in 2022, and it is not a resource story. NREL's April 2022 assessment, Mexico: North American Clean Energy Powerhouse, puts Mexico's national wind technical potential at 3,669 GW against roughly 7 GW installed. The wind is there. What moved is the rule set around it, and what a plant director needs to price is the rule set.

What the March 2021 reform actually did

The decree reforming the Ley de la Industria Eléctrica was published in the DOF on 9 March 2021. Three changes matter commercially.

• Dispatch order. It replaced strict economic merit-order dispatch with an order favoring CFE's own generation, hydroelectric first, then CFE's nuclear, geothermal, combined-cycle and thermal plants, ahead of private wind and solar.
• Certificados de Energías Limpias. It extended CEL eligibility to clean generation regardless of commercial operation date, allowing CFE legacy plants to receive certificates. That diluted CEL value for post-2014 private renewables, which the mechanism had been built to reward.
• Legacy permits. Transitional provisions directed CRE to revoke self-supply permits obtained through acts constituting fraud against the law, and placed legacy contracts under review.

What the reform did not do is worth stating plainly, because the opposite is frequently claimed. It did not give CFE permission to burn fossil fuels. CFE has always generated from fuel oil, gas and coal, and it remains the largest thermal generator in the country. The reform did not amend the Constitution, did not eliminate the Mercado Eléctrico Mayorista, did not abolish private generation permits and did not remove CENACE as system operator. Through the period since, its application has been widely blocked by amparo suspensions. Saying the reform took effect and reordered dispatch overstates what happened on the ground.

The change that has actually cost private permit holders money is separate and earlier. CRE revised the porteo estampilla transmission tariff applying to holders of legacy interconnection contracts, the autoabasto and cogeneración permits grandfathered from the pre-2014 regime, with the higher charge reported as applying from July 2020. La Jornada reported on 11 June 2020 that CFE Intermediación de Contratos Legados raised those porteo tariffs by 427 to 811% depending on voltage level. Acciona's 250.5 MW Eurus plant at La Venta, Oaxaca, commissioned in 2009 as a self-supply project for CEMEX, is exactly the structure that revision targets. If your site draws power under an autoabasto arrangement, porteo is the line on the invoice to audit first.

How large the fleet actually is, and why sources differ

AMDEE, the Mexican wind association, reported 7,154 MW installed across 68 wind farms in 14 states, with about 3,100 turbines, supplying roughly 7% of national electricity output, as of May 2021. Its president, Leopoldo Rodríguez Olivé, gave those figures at the Mexico Windpower 2021 congress on 18 May 2021 (Infobae, 19 May 2021). NREL carries the same 7,154 MW figure for 2021. SENER's PRODESEN 2022-2036 records 6,977 MW of wind capacity in the Sistema Eléctrico Nacional at 31 December 2021.

Both are defensible. AMDEE counts commissioned wind farms. PRODESEN counts capacity registered in the national system. Quote one, name it, and do not average them. On NREL's 2021 state tables the fleet is concentrated: Oaxaca 2,758 MW, Tamaulipas 1,715 MW, Nuevo León 793 MW.

Mexico also did not start with wind in 2009. CFE commissioned a pilot wind plant at La Venta, Oaxaca, in 1994, seven turbines of 225 kW each, about 1.5 MW in total. La Venta II, at 83.3 MW, entered operation in January 2007 (Revista Digital Universitaria, UNAM, December 2007). Eurus followed in 2009. The country has nearly three decades of operating history in the Isthmus of Tehuantepec, and the social license lessons from that history are part of why community participation now sits in every serious project plan.

What wind costs, on a stated basis

Turbine and project economics improved steadily through the 2010s. IRENA's Renewable Power Generation Costs in 2020, published June 2021, puts the global weighted-average total installed cost of onshore wind at USD 1,355 per kW in 2020, with a global weighted-average levelized cost of electricity of USD 0.039 per kWh. Over 2010 to 2020, IRENA records installed cost down 31% and LCOE down 56%.

Two units get confused here and the confusion is expensive. Installed cost is USD per kW of capacity, in the low four figures. LCOE is USD per MWh of energy, in the tens. Any proposal that quotes a per-kW installed cost anywhere near a per-MWh energy price has a unit error in it, and the rest of that model should be re-checked.

Mexican pricing evidence sits in the long-term auctions rather than in current tenders. The third auction, SLP-1/2017, resolved on 22 November 2017 and awarded 2,562 MW across 14 projects, including 689 MW of wind, at an average of USD 20.57 per MWh bundled with one Certificado de Energía Limpia. That plus-CEL qualifier is part of the price. Dropping it makes the number look like a bare energy price, which it is not.

The auction channel is closed, so procurement runs elsewhere

Advice to "hold more renewable auctions" describes a mechanism that no longer operated when this was written. CENACE suspended the fourth long-term auction on 3 December 2018 and announced its cancellation on 1 February 2019. No long-term auction has been held since. A buyer waiting for the next subasta to reset market prices is waiting on something with no convocatoria behind it.

Four routes remain open to an industrial load, and each carries a different risk profile in the current environment:

• Bilateral PPA with a Suministrador de Servicios Calificados, available to a load registered as a Usuario Calificado with CRE. The threshold is 1 MW of demand, measured as maximum recorded demand in kW over the preceding 12 months per the SENER acuerdo published in the DOF on 1 March 2017, not annual consumption.
• Direct participation in the Mercado Eléctrico Mayorista, which requires 5 MW of demand and at least 20 GWh of annual consumption to sign a Contrato de Participante del Mercado with CENACE. Exposure is to nodal Precio Marginal Local, which varies by node with congestion and losses.
• Onsite generation below 0.5 MW, interconnecting under the SENER Manual de Interconexión (DOF, 15 December 2016) and CRE resolución RES/142/2017 (DOF, 7 March 2017), with no CRE generation permit required. The limit is on generating capacity, not on site load.
• Legacy autoabasto, which is the structure under explicit review, and which carries the porteo exposure described above.

What would change this reading

A CRE decision restoring a workable porteo treatment for legacy permit holders, or a series of amparo rulings that settle the dispatch question rather than suspending it case by case, would restore the conditions private wind needs. So would a new convocatoria for a long-term auction. We do not see any of those as close. The risk to this view runs the other way as well. If the amparo suspensions are narrowed, the March 2021 dispatch order becomes operational, and wind and solar output already contracted at merchant-linked prices takes a curtailment risk that most PPAs written before 2021 do not allocate clearly. Read the curtailment and change-in-law clauses in any wind PPA you hold before assuming the exposure sits with the generator.

Review the regulatory exposure in your wind supply contract

Mexico Energy Partners can read a wind-backed supply or self-supply contract against the current rule set and identify where change-in-law, curtailment, CEL delivery and porteo escalation risk actually sit. The review needs the contract, 12 months of CFE billing and the permit documentation for the supplying plant.

Schedule a review of your wind supply contract

Related: our overview of renewable energy in Mexico, the benefits of utility-scale solar in Mexico, and our work on regulatory and policy risk.