Home Mexico Energy Insights Sizing onsite and offsite renewables for Mexican plants

Sizing onsite and offsite renewables for Mexican plants

Onsite versus offsite renewables in Mexico: a sizing decision

A Mexican site that wants renewable power meets one threshold before it meets any commercial question. Article 17 of the Ley de la Industria Eléctrica, published in the DOF on 11 August 2014, exempts generation below 0.5 MW from holding a CRE generation permit. Below that line a plant signs an interconnection contract with CFE Distribución and can use net metering. Above it, the project needs a permit, a CENACE interconnection study and a separate supply structure. Usable roof area, not preference, decides which side of the line a site falls on.

The second question is which charge on the CFE bill each route moves. Energy generated behind the meter removes an energy charge and the per kilowatt hour network components attached to it. Energy bought from an offsite plant still pays wheeling. CRE set the 2024 transmission tariffs in Acuerdo A/069/2023 of 13 December 2023, published by CFE Transmisión in the DOF on 30 January 2024. Below 220 kV they run 0.1085 pesos per kWh on injection and 0.1769 pesos on extraction.

That makes this arithmetic rather than preference. Two calculations decide it. How much of annual consumption the roof can physically carry, and whether a utility-scale plant's cost advantage clears roughly 0.2854 pesos per kWh of transmission toll and the charges behind it.

What the 0.5 MW line exempts, and what it does not

The exemption covers the CRE generation permit and nothing else. A rooftop system under the threshold still needs an interconnection contract with CFE Distribución, municipal construction and land use approvals, and structural and electrical sign off at most sites. SENER published the Manual de Interconexión de Centrales de Generación con Capacidad menor a 0.5 MW in the DOF on 15 December 2016. It sets a maximum of 13 days to process a request that needs no interconnection study, and 18 days where a study is required, measured from registration of the request to the interconnection being made. Where the distributor requires specific works, the manual adds the time needed to pay the aportaciones and build them on top of those windows. Those are published windows, not observed averages, and the municipal steps run outside them.

Above 0.5 MW the project changes category. CENACE runs the interconnection study under SENER's Manual para la Interconexión de Centrales Eléctricas y Conexión de Centros de Carga, published in the DOF on 9 February 2018. That manual sets different study sets for plants of 0.5 to 10 MW and for plants above 10 MW, covering steady state, transient stability, short circuit, protection coordination and power quality. Each added study lengthens the cycle before a connection date is fixed.

The incentives that exist, and one that never did

Mexico has never operated a feed-in tariff for renewable generation. CRE's distributed generation rules, issued as RES/142/2017 and published in the DOF on 7 March 2017, provide three interconnection schemes and no fourth.

Under medición neta, exported energy is credited in kilowatt hours against later consumption, and credit unused after twelve months is liquidated at the local marginal price of the node. Under facturación neta, injections are paid at that nodal price, which sits below the retail tariff. Under venta total the whole output is sold and nothing is self consumed. None of the three pays a premium for exports, and none is a sale back to the grid at the tariff the site pays for its own supply. Our note on distributed generation in Mexico sets out how the schemes work in practice.

The tax incentive is real and specific. Article 34, fraction XIII of the Ley del Impuesto sobre la Renta allows a 100% deduction in the year of investment for equipment used to generate energy from renewable sources, provided it stays in operation for at least five years after that year. The benefit belongs to whoever owns the asset. Under a power purchase agreement the developer holds the equipment, so the deduction is priced into the tariff rather than into the offtaker's return.

Zero upfront capital is not zero cost

A solar PPA removes the capital outlay and not the cost. Design, engineering and installation are recovered through the energy tariff across the contract term, so the offtaker buys the same equipment on a deferred schedule with the developer's cost of capital inside it. Three numbers settle the case. The PPA tariff, the CFE tariff it displaces, and the levelized cost of a system bought outright and deducted under Article 34. Only the first two appear in a PPA proposal. Our note on corporate power purchase agreements in Mexico covers the terms that decide which one wins.

Which charge each route moves

CRE approved the final basic supply tariffs for 2024 in Acuerdo A/073/2023, published in the DOF on 29 January 2024. The tariff is built from six components: transmission, distribution, the basic supply company's own operation, CENACE operation, ancillary services outside the wholesale market at 0.0062 pesos per kWh for 2024, and generation, which itself splits into energy and capacity. On GDMTH the energy charge splits into base, intermedio and punta periods, and the capacity charge is set by demand measured in the peak period.

That structure decides what onsite solar saves. Self consumed output removes the energy charge for those kilowatt hours and the network components attached to them. It does not reduce the capacity charge unless generation coincides with the punta hours the tariff schedule defines for that region and season. Size the case on the energy blocks first, and treat a capacity reduction as a separate claim to be proved from interval data.

The offsite route moves a different set. A site buying from a utility-scale plant does so as a Usuario Calificado or through a qualified supplier, and the delivered price carries the wheeling charge above plus distribution where the site connects below transmission voltage. IRENA reported a global weighted average levelized cost of 0.049 US dollars per kWh for utility-scale solar PV commissioned in 2022, in Renewable Power Generation Costs in 2022, published in August 2023. Whether that advantage survives the toll turns on connection voltage.

How much of the load a roof can carry

This is the calculation the comparison usually skips. The World Bank and ESMAP placed Mexico among the countries whose long term daily photovoltaic output exceeds 4.5 kWh per installed kWp, in Global Photovoltaic Power Potential by Country, published in 2020. At that level one kWp yields roughly 1,640 kWh a year. The World Bank figure is already net of the report's assumed 3.5% soiling loss and 7.5% of inverter, cabling, mismatch and inter-row shading losses, so it is a system output, not a module output. Assume a module of about 500 Wp measuring roughly 2.1 by 1.05 meters, so about 2.2 square meters each. On that assumption one MWp of modules covers about 4,400 square meters of module surface. Usable roof has to be larger again once walkways, skylights and setbacks come out.

Run those figures as an illustration on a 20,000 square meter roof. If half is usable, the area supports something near 2.3 MWp and roughly 3.7 GWh a year. Against annual consumption of 20 GWh that covers under a fifth. Against 6 GWh it covers about three-fifths. The ratio tells a plant which route to price first. The onsite economics behind it are set out in our note on the case for rooftop solar in Mexico.

One consequence catches large roofs. The 2.3 MWp array in that illustration is more than four times the exemption, so a system of that size would not be a distributed generation project. It needs a CRE permit and a CENACE study, and medición neta does not apply to it. Sites that want to stay inside the distributed generation regime cap the array below 0.5 MW and accept a smaller share of load. That trade is the real content of the onsite versus offsite question.

What neither route delivers

A grid tied solar system without storage does not keep a plant running through an outage. SENER's 2016 manual requires anti-islanding protection, so inverters disconnect when the network fails. Continuity of supply is a separate purchase needing storage or generation designed to island. Offsite contracts carry the mirror limitation. A geographically diverse portfolio smooths the generation profile behind the contract, and physical supply still arrives over the same CFE lines and stops when they stop.

Permitting responsibility is worth stating correctly, because sending a file to the wrong institution costs months. CENACE runs the interconnection studies and the queue. Environmental impact authorization sits with SEMARNAT under the Ley General del Equilibrio Ecológico y la Protección al Ambiente. The social impact evaluation under Article 120 of the Ley de la Industria Eléctrica is filed with SENER.

The carbon claim deserves the same care. Under the Ley de la Industria Eléctrica the clean attribute of generation is embodied in Certificados de Energías Limpias, issued to the generator. Self consumption behind the meter cuts grid purchases, and the Scope 2 reduction follows from the metered kilowatt hours. An offsite contract carries a clean attribute only if the contract transfers it.

The decision rule

Size the roof first, because it is the only input that cannot be negotiated. Convert usable area to kWp, multiply by the yield above, and divide by annual consumption from twelve months of CFE bills. On our read, a roof covering less than about a third of load rarely justifies being the only route priced. Then apply the threshold. Above 0.5 MW, put the CRE permit and the CENACE study on the critical path from day one. Below it, the interconnection contract with CFE Distribución is the only federal step, with municipal approvals running alongside.

Find out which route your site qualifies for

Send twelve months of CFE bills, the tariff class, the connection voltage, the usable roof and yard area in square meters, and the site address. Mexico Energy Partners will return the installable kWp on that area, the share of annual consumption it would cover, whether the system falls under or over the 0.5 MW permit exemption, and what the offsite alternative costs once transmission and distribution charges are added. If the roof cannot carry enough load to matter, that appears on the first page. Nothing is promised about savings or eligibility before the bills are read.

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