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Mexican government plans to open renewables certificates to CFE’s hydro and geothermal plants

Avenida de la Reforma, Mexico City, Mexico (source: flickr/ Enrique Dans, creative commons)
Alexander Richter 10 Oct 2019

A new strategy by Mexico's Ministry of Energy SENER, sees the issuance of clean energy certificates (CELs) also to the hydropower and geothermal plants by state utility CFE. This step is seen as challenging as it would essentially devalue CELs and make it difficult for private sector players to compete with CFE.

As reported yesterday, Mexico’s energy ministry SENER is considering  to fast-track another major regulatory change it proposed that market sources say could dramatically reduce the price of clean energy certificates (CELs) and significantly alter the market for that product, a key differentiator for renewables projects. The proposal has been shared on the website of regulatory reform agency CONAMER on October 1, 2019, with the full strategy available here.

According to the proposal SENER would grant CELs for up to twenty years to legacy generators of clean energy, which would include CFE’s hydropower and geothermal plants, as well as those renewable energy operators that came to Mexico following the country’s energy reform after 2013-2015.

The CELs were set up to incentivise the building of new clean energy plants and hence CFE was not given CELs. This puts them at a disadvantage and was seen as unfair. Under the new strategy CFE would also receive CELs, which is not seen as logic by various market participants.

If made official, the SENER proposal would grant numerous CELs to CFE’s existing hydroelectric and geothermal plants going forward. According to the SENER proposal, CFE’s clean energy plants generated nearly 66% of gross clean energy produced in Mexico in 2018.

This is seen as controversial as it would oversupply the market for CELs and dramatically decrease its price, some say even fall to zero.

With geothermal projects already disadvantaged on a market focused solely on price rather than energy security and supply available, this would further increase the challenges to any potential geothermal development.

Now the only hope by the market seems to be a public consultation, but if this will change things is more than questionable.

Source: ICIS