Private Sector Energy Limited by Mexico’s New Grid Code

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While the lengthy and controversial saga between Mexico’s federal government and private sector energy has been going on for some time now, recently implemented changes to the network code of Mexico’s national power grid will once more see the state-owned Federal Electricity Commission (CFE) given priority upload over the private sector and green energy alternatives.

Mexico’s first network code was introduced in 2016, though the complexities of adapting to the new regulations behind the scenes didn’t see companies’ obligations come into full effect until April 2019. This code went on to expire at the end of 2021 and was replaced by a new code formulated by the administration of Mexican President Andrés Manuel López Obrador’s (AMLO), which has previously tried to introduce legislation that would give constitutional priority to CFE energy on the Mexican grid, though its passage was eventually blocked by congressional opponents.

An analysis performed by third-party firm Von Wobeser concluded that the new changes reduce contracts for renewable, hydroelectric, conventional thermal, geothermal and nuclear energies, which are primarily sourced from the private sector, as the CFE has controversially continued to rely on “dirty” energy.

“The National Energy Control Center (Cenace), derived from extraordinary conditions in the National Electric System, is limiting the dispatch in the first place of the electrical energy generated by renewable sources, mainly from private companies,” said the Von Wobeser report. “Prioritizing the electrical energy generated by plants of the subsidiary companies of the CFE, from conventional and clean sources, such as thermal and hydroelectric, keeps clean energies limited and only for use in extraordinary cases.”

Since the new code was introduced at the beginning of 2022, at least four companies have filed appeals against this new provision, with a definitive suspension granted by the courts to the Mexican Energy Association (AME).

Meanwhile, the northern Mexican city of Monterrey, Nuevo León, has been facing potential blackouts as the summer begins to heat up and demand for energy is on the rise, with some locals reporting power outages and others placing the blame on the Cenace for not being able to supply that same demand.

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