The Status of Energy Auctions in Mexico
The status of energy auctions in Mexico has become increasingly complicated, but private auctions still promise to help Mexico transition to clean energy
The Mexican government appeared to cancel the previously scheduled fourth public renewable energy auction. However, there was still demand for energy auctions because of the continuing need to meet clean energy targets. Companies, including Bravos Energía and Vitol, stepped in and proposed private auctions.
There have been even more changes during the last year. The Mexican government later clarified that the public renewable energy auction was merely delayed rather than canceled. Then, the private auctions were also delayed because of the coronavirus pandemic. Fortunately, the private auctions managed by Bravos Energía are now expected to conclude in May of 2020.
The immediate impact of private auctions will mostly be on existing projects, but they could lead to additional renewable energy development in the future. Some generators under construction were unable to contract all their energy or received overly low prices at previous auctions.
Private auctions will provide an opportunity to address these issues. Market conditions have shifted considerably, so there is a growing need for these new private renewable energy auctions. Contact us to learn more about the newly-deregulated power market in Mexico.
Regulatory Uncertainty Raises Risks
There are also several other areas where regulatory uncertainty is a significant issue. Firms may encounter challenges when attempting to obtain permission to connect with the electricity transmission grid. Subsidies and tax breaks for renewable energy projects could be reduced now that budgets are under pressure in Mexico. Attempts by the government to strengthen the state-owned electric utility, CFE, could also undermine the impartiality of regulators. Contact our consultants to learn more about the fluid situation in Mexico's power sector.
Also in Mexico Energy Insights
The coronavirus crisis placed many businesses in the unusual position of being able to save significant amounts of money through improved energy efficiency during protracted shutdowns. There are specific best practices that firms can use to determine how much they can save, safely make the changes, and then reverse the process when business starts up again.
Specific programs were created to assist firms and households in making the transition to power-saving technology. The Eco-Crédito Empresaria is perhaps the most important for small and medium-sized businesses. This credit helps firms upgrade their equipment to more energy-efficient technology.
Businesses and other organizations use 76% of the energy produced in Mexico, and they are increasingly interested in procuring renewable energy. Over 1,500 firms already use renewables, and capacity keeps rising. Mexico reached over 24,000 MW of sustainable energy capacity in 2019. As the number of market participants rises and the depth of the market increases, renewable power becomes more reliable and cost-effective.