The Success of Energy Auctions in Mexico, Paola Moreno - Latam Energy Advisors
Energy auctions are a powerful instrument resulting from the Mexican Energy Reforms. These auctions incentive investment to achieve the national clean energy targets. The goal is to achieve a share of 24% of renewable energy by 2018, increasing to 35% by 2024.
Clean Energy Certificates and CENACE
The National Center for Energy Control (CENACE) was created from the energy reforms and is the organization in charge of auctions for the three categories: energy, capacity, and Clean Energy Certificates (CELs).
Capacity and energy auctions are intended to select the generators that will supply basic users in the future, with the awarded generators signing Power Purchase Agreements (PPAs). The main offtaker in Mexico will ultimately be CFE, the state-owned utility. The CELs are auctioned according to the annual CEL quota, with each CEL representing 1 MWh of clean energy.
Clean Energy Certificates (CELs) Are a Key Incentive for Project Developers
The reform also introduced Clean Energy Certificates (CEL). CELs are a great incentive for renewable energy developers. One of their valuable characteristics is that they are “bankable” and won’t expire for a period of 20 years. New clean energy developers will be granted a CEL for each MWh they generate.
Mexico has also secured its CEL market by mandating all electricity consumers to buy a CEL quota. The biggest piece of the pie is the one corresponding to basic users, all residential and small consumers, whose quota will be acquired by CFE – Basic Users. We expect significant growth for the CEL market in Mexico.
The government sets the CEL quota three years in advance, and it is set to increase progressively. In 2015, Sener set the CEL quota at 5% for 2018, and at 5.8% for 2019. Penalties for non-compliance are between 6 and 50 minimum salaries per MWh. So far there have been three successful auctions and new participants are expected in the upcoming ones.
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