Regulatory Changes to Distributed Generation in Mexico
This article is focused on the evaluation of the current market and key barriers for further development of clean energy under DG scheme – a very relevant aspect of the national policy & plan for the development of clean energy resources in the country. Specifically, the 2nd objective of the 2016 national energy plan (PRODESEN) calls for extending the distribution network to foster DG development & integration.
The policy & institutional framework is favourable, and the new rules for DG issued earlier this year [January 2017] are further support, specifically:
- The net metering program is maintained, and in addition net billing models are introduced, under which the user meets their own consumption and sells the electricity generated to supplier company.
- A net sales model is introduced, under which the producer simply sells electricity to supplier company.
Next figure shows how this framework has evolved in certain areas.
Source: Translated / Adapted from CRE
According to the law, exempt generators are allowed to supply their own consumption (self-consumption) or to sell all or part of their output to the market by means of a supplier.
Suppliers can supply energy to final consumers and/or represent Exempt Generators within the wholesale power market. A licence, issued by CRE, is required. The following exemptions apply:
- Sales of electric power from a final user to a third party, in case that power is used within the facilities of the final user;
- Sales of electric power from a third party to a final user, in case that power was generated using DG technologies within the facilities of the final user.
Hence DG generators have the ability to sell by means of a Supplier (either Basic Service Supplier of Qualified Supplier) and to sell directly to final users, in case its unit is located within the facilities of the final user.
Sales Diagram for EG
Source: Own Elaboration
MRC can assist for business development opportunities arising from current market regulations. The following paragraphs present examples of business opportunities identified at an initial review.
Qualified users may enter into contracts with one/several different distributed generators operating by means of a supplier. They can thus establish prices independently of the Wholesale Market. This option could be interesting for large industrial/commercial customers who do not wish to enter into the development of DG.
However, this option includes a requirement: DG shall be located within grid nodes in which most of the industry is concentrated. This does not necessarily constitute a problem, but may limit the availability of connection capacity and/or land availability.
Other main issue regarding the economic profitability of DG units are the eventual development of a commercial market for storage, both in terms of a complete supply chain for equipment and in terms of a price for flexibility, based on the costs of ancillary services in the market (a price for flexibility). The ability of ESCOs to provide those services may enhance DG efficiency and its market value. MRC may support exploring the market of these companies and the services they offer for DG solutions.
For further information please contact Jose Maria Lopez (email@example.com)
 So far, CFE is the only Basic Service Supplier operating in Mexico.