There is good news for investors in Mexico’s energy industry: the government has lengthened its CELs commitment, providing stability over a longer time frame that should bolster confidence.
The Ministry of Energy published on March 31 the CEL yearly minimum targets for up to 2022 in the DOF. Originally, the ministry had committed to establishing the minimum CELs targets for up to just three years from any given year, meaning that in 2017 it needed to establish the targets up to 2020. Therefore, it comes as a pleasant surprise to have the targets published as far as 2022. The key takeaway is that in the following years these targets can only be increased. With this measure, the ministry expects to bring more stability and confidence to investors, therefore increasing capital and human investment.
The CEL targets published by the DOF represent the minimum percentage of consumed energy that must come from clean energy sources for the obliged participants of the energy market. If these targets are not fulfilled by obliged participants, they will then face administrative and economic sanctions.
As defined by the DOF, a CEL is a certificate granted by CRE for the quantity of 1MWh of electric energy produced by a plant put into operation after Aug. 11, 2014 and that runs on clean energy sources such as hydro, wind, solar, nuclear and natural gas. For installations built before this date, special conditions apply.
The established CELs targets are 7.4, 10.9 and 13.9 percent for the year 2020, 2021 and 2022, respectively. Compared to the 5.8 percent target fixed for 2019, the 2022 percentage represents an increase of almost 250 percent of the amount of CELs for the obliged participants. With these sharp increments, Mexico expects to achieve its commitment of having 35 percent of electric energy produced to be clean by 2024. But the question remains, how feasible is this goal?
|Obliged participants’ required percentage of CELs from total energy consumption||0 %||5%||5.8 %||7.4 %||10.9 %||13.9 %||TBD|
|Target percentage of national green energy consumption||20.34%||25%||26.7 %||28.3 %||30 %||31.7 %||35 %|
Source Data: DOF
Taking into account that as of 2015 Mexico produced 63TWh of clean energy, 20.34 percent of the national total, and that Mexico has only installed 0.5 percent of its total renewable energies production potential, the targets should be feasible.
Maps Source: Prospectivas de Energías renovables 2012-2026
With Engie and Iberdrola stating that they are on schedule with their solar parks and do not expect any problems to arise in upcoming phases, and Enel recently starting the construction of a 238MW solar plant, the 2024 goals seem to be a piece of cake. But this depends on technological measurements. Mexico also still has some regulatory obstacles to overcome. The problem is not setting goals but actually achieving them, and we have yet to see how regulations will affect the implementation of the projects throughout their lifetimes.
Mexico still has a long way to go in clean energy development and nobody said it would be an easy journey. Everyone understands how fast this new bidding system was implemented. Handling it together with the restructuring of a giant like CFE is not an easy task at all. It is reassuring to see that the country plans to achieve its goals but it is vital to remember that Mexico should avoid resting on its laurels, as planning is just the beginning of the transition.