New Regulations on Distributed Generation, by José María Lujambio

In 2010, the Energy Regulatory Commission (“CRE”) published in the Official Journal of the Federation (“DOF”) the Models of interconnection contracts for medium and small-scale renewable energy sources, based on its role promoting of the use of such sources, derived from the  2008 energy reform. The main contribution of this regulatory instrument was the introduction in Mexico of the figure of net metering, by which generators of electricity with a capacity of up to 0.5 MW, especially those using photovoltaic panels, had the ability to carry out a monthly compensation between the energy received from the Federal Electricity Commission (“CFE”) and their own production. This measure, coupled with the dramatic reduction in technology costs in the past decade, helped the country move from 0.8 MW of installed capacity in 2010 to more than 151 MW in 2016.

The Electricity Industry Law of 2014 and the Energy Transition Law of 2015 gave new powers to the sector’s authorities to boost the strong momentum for “distributed generation,” under the principle of open and not unduly discriminatory access for these types of power plants to the distribution networks and the markets. There are provisions about its consideration in the system’s expansion planning, the necessary administrative simplification, the features of the installation methods, as well as the promotion of financing and training schemes.

On December 15, 2016, the Department of Energy (“SENER”) published in the DOF the Manual for the interconnection of power plants with a capacity of less than 0.5 MW. A significant achievement of this Manual is the establishment of an administrative procedure for interconnection, which is obligatory for CFE Basic Supply, CFE Distribution and the applicants. Despite the extraordinary progress made under the previous regime, a constant problem had been the bureaucratic obstacles imposed by the regional offices of the CFE, which impeded speedy interconnections. From now on, the total time from the filing of an application until the physical interconnection, shall be no longer than 13 business days, or up to 18, if it requires a study. If this term is exceeded, the request shall be deemed accepted. Rules are also included for the cases in which certain works would be needed for the interconnection, although it is estimated that this would only occur in 5% of the cases. The National Center for Energy Control (“CENACE”) will formally instruct on the signing of contracts and will follow up on regional developments and projections of distributed generation for planning purposes. In addition, the Manual contains the typical interconnection diagrams and general technical specifications.

In addition, in December the CRE began the public consultation as to a draft of general administrative provisions on distributed generations. Net metering is maintained as it has been since 2010, but net billing and even the sale of energy will be available as options to be chosen by generators in order to determine the amount they will be paid from CFE Basic Supply. During the public consultation, CFE Distribution presented more than 50 comments, and CFE Basic Supply strongly questioned net metering on the grounds that it constitutes a disguised subsidy that affects their finances as State productive enterprise. Support for the project has come from the Mexican Association of Solar Photovoltaic Energy (“Asolmex”) and companies like SolarCity, a leading provider of comprehensive small-scale solar energy services in the U.S. and now part of the Tesla group. These parties sought to push specific improvements, especially in the matters of contract assignment and power storage. This regulatory discussion has been similar to the ones that have taken place in recent years in several jurisdictions of the U.S., Canada and Europe, among the electric utilities seeking to protect their billings and the new technologies that are appearing. This reflects the tension of the beginnings of a true shift in electrical systems.

On February 20, 2016,m , the CRE announced the approval of the new regulations with arguments about the empowerment of consumers, the reduction of electricity demand at peak hours, lower infrastructure requirements and, fundamentally, the decrease in the use of fossil fuels. It is expected that by 2022, Mexico could reach 2.1 GW of distributed generation capacity, which would certainly contribute to the efforts taken in order to achieve the ambitious national goals on clean energy deployment.

 

Sources of information and disclaimer: The following sources of information, among others, have been used in preparing this document: Official Journal of the Federation, the Bank of Mexico, Supreme Court of Justice of the Nation, Department of Finance and Public Credit. The CCN MéxicoReport ™ does not constitute legal or tax advice and should not be used for purposes other than as purely informative for the general public. For more information on the CCN MéxicoReport ™, any of the issues mentioned therein or to inquire about legal services, please contact Rob Barnett (rbarnett@ccn-law.com) or Mario Melgar (mmelgar@ccn-law.com), phone (210) 222-1642.

 

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