CENACE canceled Mexico's fourth long-term power auction on 1 February 2019, having suspended the process on 3 December 2018. Nine months on there is no replacement and no published date for one. The channel that placed 1,323 MW of solar under long-term contract at an average of USD 20.57 per MWh bundled with one clean energy certificate is closed.
For a plant director or CFO in Mexico who has been waiting for auction-linked prices to filter into a supply offer, that wait is over. Utility-scale solar is still being built here and it is still cheap. From today the only routes to it for an industrial buyer are bilateral: a power purchase agreement with a Suministrador de Servicios Calificados or a private developer, or generation on the buyer's own site under the generación distribuida regime.
The fundamentals that made Mexican solar competitive have not moved. The resource is excellent, equipment costs have collapsed, and the clean energy certificate obligation keeps rising. What changed is the procurement route, and that is a contracting problem rather than a technology problem.
What the three long-term auctions actually delivered
Mexico ran three long-term auctions and then stopped. The first, SLP-1/2015, was resolved in March 2016 and awarded roughly 1,720 MW, of which about 1,100 MW was solar and 620 MW wind. The second, SLP-1/2016, was resolved in September 2016 and awarded approximately 2,871 MW. The third, SLP-1/2017, was resolved on 22 November 2017 and awarded 2,562 MW across 14 projects: 1,323 MW of solar photovoltaic across nine plants, 689 MW of wind across five, and 550 MW from a single natural gas plant.
The third auction's headline average was USD 20.57 per MWh plus one Certificado de Energía Limpia, reported by pv magazine Latin America on 16 November 2017 and by Energías Renovables on 23 November 2017. Keep the certificate attached to that number. Bidders were pricing a package of energy and one CEL, not energy alone, and stripping the CEL out makes the figure look like a bare energy price that no one actually offered.
The lowest single bid in that auction, roughly USD 17.7 per MWh plus one CEL, went to Enel. Contemporaneous reporting disagrees on the technology. Reuters Events and PV Insider framed it in November 2017 as a world record low solar price. Energía Estratégica reported the same bid as wind, tied to the Energía Limpia de Amistad projects in Coahuila. Both name Enel. We are not aware of a published CENACE fallo table that settles it, so we do not attribute the record to either technology.
Why the channel closed
CENACE suspended the fourth auction on 3 December 2018 and informed participants of its cancellation on 1 February 2019, stating that CFE, SENER and CENACE were reviewing the process objectives and scope. The convocatoria had been published in March 2018. Nothing has replaced it.
Transmission is part of the story. Many of the best solar sites in Mexico sit far from load, and the auction winners created a queue of interconnection work that the Red Nacional de Transmisión was not built to absorb. Enel's 828 MW Villanueva plant in Viesca, Coahuila, contracted in the first auction and fully connected in September 2018, required new grid infrastructure to reach the system. On our read, an industrial buyer should treat transmission availability, not module price, as the variable most likely to move a delivered price in the next contracting round.
The two routes an industrial buyer has left
The first is a bilateral power purchase agreement. A Usuario Calificado, meaning a load with at least 1 MW of demand registered with CRE, can contract supply from a Suministrador de Servicios Calificados or buy directly in the Mercado Eléctrico Mayorista. The price a developer can offer depends on where the plant sits, because the Precio Marginal Local is nodal and carries a congestion and losses component that differs node by node. It also depends on porteo, the wheeling charge for moving energy across the transmission and distribution networks, which is frequently the difference between an offer that beats CFE supply and one that does not.
The second is onsite generation, covered in more depth in our note on distributed generation in Mexico.
What generación distribuida allows, and what it does not
Generación distribuida in Mexico is capped at generating capacity below 0.5 MW. The threshold comes from SENER's Manual de Interconexión de Centrales de Generación con Capacidad menor a 0.5 MW, published in the DOF on 15 December 2016, and from CRE Resolución RES/142/2017, published in the DOF on 7 March 2017. Two details get misstated often enough to break project schedules. The limit applies to the generating capacity of the plant, not to the facility's load, so a 4 MW plant can sit behind a sub-0.5 MW array. And the limit is written in MW of capacity, not in kWp of DC panel rating, which is a different measurement and normally the larger number on a modern system.
Staying under 0.5 MW removes the CRE generation permit. It does not remove the paperwork. The project still requires an interconnection contract with CFE Distribución under the small and medium-scale interconnection regime, and CFE Distribución controls the study, the meter and the energization date. A schedule built on the idea that no permits are required is a schedule built on the wrong risk.
CRE RES/142/2017 sets three contract modalities, and the choice is commercial rather than technical. Under medición neta, exported energy is netted against the site's own consumption and any surplus accrues as energy credits usable for up to 12 months, with only unused credits paid out at the Precio Marginal Local. Under facturación neta, generation and consumption are metered and valued separately, and exports are compensated at hourly market prices. Under venta total, all output is sold at PML values and there is no associated consumption contract at the interconnection point. A generator may migrate between modalities only after one year of operation. Medición neta is not selling power back to the grid. Only venta total is an outright sale.
What the clean energy certificate obligation is worth to you
CELs are the enforcement mechanism behind Mexico's clean energy target, which is 35% of electricity generation by 2024 under Transitorio Tercero of the Ley de Transición Energética, with interim steps of 25% by 2018 and 30% by 2021. The target is for energía limpia as defined in Article 3 of the Ley de la Industria Eléctrica, which includes nuclear and efficient cogeneration alongside wind, solar, hydro, geothermal and biomass. Treating it as a renewables target overstates what the law requires.
Suppliers and qualified users must acquire certificates equal to a rising share of their consumption. SENER set that share at 5.8% for 2019, 7.4% for 2020, 10.9% for 2021 and 13.9% for 2022, published in the DOF on 31 March 2017. A qualified user buying conventional power carries that obligation as a line item. A user generating clean power onsite or contracting it bilaterally can cover part of it with the certificates the generation earns. That is a real cost item on a supply comparison, and it is one the CFO should ask to see priced separately in every offer rather than folded into a single per-MWh number.
Four items to confirm with the developer
- The node. Ask the developer which NodoP the plant settles at and what the congestion and losses components of its PML have done over the last 12 months.
- The porteo assumption. Confirm which transmission and distribution charges the offer assumes and who bears a tariff revision.
- The CEL treatment. Confirm whether certificates transfer to you, how many, and at what assumed value.
- The interconnection position. For a bilateral project, ask for the CENACE interconnection study status. For onsite, ask for CFE Distribución's stated timeline, not the EPC contractor's.
- The measurement basis. Confirm whether quoted capacity is MW of generating capacity or kWp of DC panel rating, because the 0.5 MW threshold is written in the former.
Related reading on this blog covers how a PPA compares with buying at the wholesale spot price and how Mexican renewable projects have performed against their auction schedules. Our work on utility-scale solar and energy procurement sits alongside both.
Assess your options before the next contracting cycle
Mexico Energy Partners can review a solar supply offer or an onsite proposal against your current CFE cost, node by node, and identify which assumptions in it carry the most price risk. The review needs 12 months of CFE billing, interval data where the meter records it, and the draft offer or term sheet.