Where the auctions stand
The fourth long-term auction, the process most industrial buyers in Mexico were quoting against, is gone. CENACE suspended the SLP 2018 process on 3 December 2018 and told participants on 1 February 2019 that it was canceled, while CFE, SENER and CENACE reviewed the objectives and scope of the mechanism (Global Energy, and La Jornada, 2 February 2019). SENER has convoked no replacement. For a plant director or CFO negotiating supply for 2021, the practical effect is the loss of the public reference price the whole market had been pricing against.
Two private processes moved into that gap. Bravos Energía has been running a private auction, and its director said in March 2020 that the process was close to completion. Grupo Vitol is offering ten-year contracts through its mexicoelectrico.com platform to projects that had prepared bids for the canceled fourth auction (pv magazine México, 17 March 2020). Both are commercial platforms. Neither sets a regulated price, and neither places CFE on the other side of the contract.
On 29 April 2020 CENACE issued its Acuerdo para garantizar la eficiencia, Calidad, Confiabilidad, Continuidad y Seguridad del Sistema Eléctrico Nacional, which suspended pre-operational tests for photovoltaic and wind plants and barred new test requests. The question in front of an industrial offtaker, by our reading, is no longer whether to wait for the next public auction. It is whether to contract now, at a price with no public benchmark behind it, from a developer whose plant may not be allowed to energize on the schedule the contract assumes.
What the market is and is not open to
The 2013 and 2014 reform opened generation and qualified supply. It did not open basic supply, transmission or distribution, and it is six years old, so calling this a newly deregulated market misdescribes what a buyer is actually buying. CFE Suministro Básico still serves regulated customers at CRE-approved tariffs. CFE Transmisión and CFE Distribución still own the networks. CENACE still dispatches and runs the Mercado Eléctrico Mayorista.
A facility moving to the free market is changing the supplier of its energy and capacity, nothing else. Its porteo, the wheeling charge for using the transmission and distribution networks, remains a regulated cost set through CRE, and it moves independently of whatever discount a developer offers on the energy component. Any comparison of a private offer against a current CFE bill that nets the two together will flatter the offer.
What the three completed auctions actually delivered
SENER set the policy for the subastas de largo plazo, CENACE administered them and published the results, and CRE regulates the permits and tariffs around them. CFE was the buyer, not the referee. The awards, by fallo date:
- First auction, SLP-1/2015, results March 2016: 1,720 MW awarded, roughly 1,100 MW solar and 620 MW wind.
- Second auction, SLP-1/2016, results September 2016: approximately 2,871 MW awarded.
- Third auction, SLP-1/2017, results 22 November 2017: 2,562 MW across 14 projects, being 1,323 MW of solar PV at nine plants, 689 MW of wind at five plants, and 550 MW of natural gas at one plant.
Sources: Energías Renovables, 23 November 2017, Energía Estratégica, and Proyectos México project records.
The price that matters is the third auction's. Its average for the most economical package was USD 20.57 per MWh bundled with one Certificado de Energía Limpia, in nominal 2017 dollars (pv magazine Latin America, 16 November 2017, and Energías Renovables, 23 November 2017). The CEL is part of the bid, not a separate freebie. Quoting 20.57 as a bare energy price overstates how cheap the energy alone was, and buyers who did that in 2018 and 2019 built PPA expectations no developer could actually meet. CFE's director stated the third auction cleared roughly a third below the second and about half the first (Energías Renovables, 23 November 2017). The lowest single bid, near USD 17.7 per MWh plus one CEL, went to Enel. Contemporaneous reporting disagrees on whether that bid was solar or wind, and we do not resolve it here.
What this does to a procurement budget
Three effects, in the order they reach the P&L.
Price discovery goes first. Auction results were the only public, technology-specific, audited price series in this market. With no fourth auction there is no 2019 or 2020 print. A buyer comparing two PPA offers today has the November 2017 result and nothing newer, and 2017 module and turbine costs are not 2020 costs. Budget for wider bid-ask spreads, longer negotiations, and the internal cost of running a competitive process yourself instead of reading a clearing price off a CENACE publication.
CEL supply is second. The auctions were the main instrument creating new CEL volume against the obligation CRE places on load. SENER modified the CEL issuance guidelines by acuerdo published in the DOF on 28 October 2019, extending eligibility to CFE's legacy clean plants, and a district judge granted a provisional suspension of those guidelines on 12 December 2019. No new auction plus an unsettled issuance rule makes CEL cost a live line item in a 2021 supply contract rather than a rounding error. Require every supplier to price the CEL component separately from energy.
Deliverability is third and the most immediate. The 29 April 2020 acuerdo bites on plants that are built but not yet commissioned. A PPA assuming a 2020 commercial operation date from a plant still awaiting pre-operational tests carries a delivery risk the quoted price does not reflect. Read the force majeure and delay clauses before the price.
What the cancellation does not touch
Contracts awarded in the first three auctions were signed and stand. The cancellation applied to the 2018 process, not retroactively to earlier awards. A facility supplied today under a contract traceable to a 2016 or 2017 award is not exposed through that route. The exposure sits with new procurement, and with projects developed on the expectation of a fourth-auction offtake that now have to find a private buyer.
The counter-case
The private auctions may prove better for industrial buyers than the public ones were. A private process can be structured around an industrial load profile rather than around CFE Suministro Básico's requirements, and it can bundle firm power with intermittent renewables in a single contract, which the public auctions did not do for individual offtakers.
The downside is plain. There is no regulated counterparty and no state credit behind the award, so the buyer takes developer credit risk directly. There is no obligation on anyone to publish the results, so the price discovery problem is not solved, only privatized. And a private award is worth nothing if the plant cannot pass pre-operational tests, which is now a matter of CENACE discretion with no stated end date. If the tests resume quickly, the private route works. If they do not, contracted volume from projects still in construction is the wrong thing to be holding.
Diligence on a private-auction offer
- Commercial operation date, the plant's current permit and interconnection status, and whether it has completed pre-operational tests or is still waiting.
- Whether the price is quoted with or without CELs, and at what assumed CEL cost.
- Which party absorbs a change in porteo or in regulated network charges over the contract term.
- The developer's credit, its parent guarantee, and what happens on delay or non-delivery.
- Your own facility's demand in MW against the 1 MW threshold for Usuario Calificado status, and whether the contract assumes a status you do not yet hold.
- Curtailment and dispatch risk allocation, given that CENACE controls dispatch and the contract does not.
For background on how the supply route itself is chosen, see our note on energy procurement for industrial facilities in Mexico, and on the regulatory direction behind these changes, our regulatory policy analysis. We also examine the commissioning suspension and its cost consequences in our assessment of rising risk in Mexico's power market.
Test a supply offer against a real benchmark
Mexico Energy Partners reviews private-auction and bilateral PPA offers against a facility's actual load, comparing the delivered cost per MWh with the current CFE tariff line by line, including porteo and CEL cost. An initial review needs 12 months of CFE billing, interval data where the meter records it, and the draft term sheet. No review guarantees a saving or a particular price.