Electricity sector in Mexico - AbsoluteAstronomy.com

Mexico: Electricity sector

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|-
!align="center" bgcolor="lightblue" colspan="3"|Data
|-
!align="left" valign="top"|Electricity coverage (2005)
|valign="top"| 96%(total),(LAC average in 2005: 94.6%)
|-
!align="left" valign="top"|Installed capacity (2006)
|valign="top"| 58 GW
|-
!align="left" valign="top"|Share of fossil energy
|valign="top"| 75.3 %
|-
!align="left" valign="top"|Share of renewable energy

Renewable energy

Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...

|valign="top"| 23.6 % (hydro, wind & geothermal)
|-
!align="left" valign="top"|Share of nuclear energy

Nuclear power

Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...

|valign="top"| 2.4 %
|-
!align="left" valign="top"|GHG

Greenhouse gas

A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...

Comisión Federal de Electricidad

The Comisión Federal de Electricidad is the Mexican state-owned electric widely known as CFE. It is the dominant electric company and the second most powerful state-owned company in Mexico after Pemex. The Mexican constitution states that the government is responsible for the control and...

), 32% (LFC); (LAC average in 2005: 13.6%)
|-
!align="left" valign="top"|Average residential tariff (US$/kWh, 2008)
|valign="top"| 0.106; (LAC average in 2005: 0.115)
|-
!align="left" valign="top"|Average industrial tariff (US$/kWh, 2008)
|valign="top"| medium: 0.153, large: 0.118 (LAC average in 2005: 0.107)
|-
!align="left" valign="top"|Average agricultural tariff (US$/kWh, 2008)
|valign="top"| 0.051
|-
!align="left" valign="top"|Annual investment in electricity
|valign="top"| n/a
|-
!align="left" valign="top"|Share of self-financing by utilities
|valign="top"| n/a
|-
!align="left" valign="top"|Share of Government financing
|valign="top"| n/a
|-
!align="center" bgcolor="lightblue" colspan="3"|Institutions
|-
!align="left" valign="top"|Sector unbundling
|valign="top"| No
|-
!align="left" valign="top"|Share of private sector generation
|valign="top"| 25%
|-
!align="left" valign="top"|Share of private sector in distribution
|valign="top"| 0 %
|-
!align="left" valign="top"|Competitive supply to large users
|valign="top"| No
|-
!align="left" valign="top"|Competitive supply to residential users
|valign="top"| No
|-
!align="left" valign="top"|Number of service providers
|valign="top"| dominating 2: CFE & LFC
|-
!align="left" valign="top"|Responsibility for transmission
|valign="top"| CFE (Comisión Federal de Electricidad)
|-
!align="left" valign="top"|National electricity regulator
|valign="top"| Yes (CRE)
|-
!align="left" valign="top"|Responsibility for policy setting
|valign="top"| SENER
|-
!align="left" valign="top"|Responsibility for renewable energy
|valign="top"| SENER
|-
!align="left" valign="top"|Responsibility for the environment
|valign="top"| SEMARNAT
|-
!align="left" valign="top"|Electricity Sector Law
|valign="top"| Yes (1976, last revision 1992)
|-
!align="left" valign="top"|Renewable Energy Law
|valign="top"| Yes (2008)
|-
!align="left" valign="top"|CDM transactions related to the energy sector
|valign="top"| 47 registered CDM project; 3.7 million tCO₂e annual emissions reductions
|-
|}

The energy sector in Mexico has certain limitations in terms of private participation and foreign companies are allowed to operate in the country only through specific service contracts. As required by the Constitution, the electricity sector is federally owned, with the Federal Electricity Commission (Comisión Federal de Electricidad

Comisión Federal de Electricidad

or CFE) essentially controlling the whole sector. Attempts to reform the sector have traditionally faced strong political and social resistance in Mexico, where subsidies for residential consumers absorb substantial fiscal resources.

The electricity sector in Mexico relies heavily on thermal sources (75% of total installed capacity), followed by hydropower generation (19%). Although exploitation of solar, wind, and biomass resources has a large potential, geothermal energy is the only renewable source (excluding hydropower) with a significant contribution to the energy mix (2% of total generation capacity). Expansion plans for the period 2006-2015 estimate the addition of some 14.8 GW of new generation capacity by the public sector, with a predominance of combined cycles.

Installed capacity

Installed electricity capacity in 2008 was 58 GW. Of the installed capacity, 75.3% is thermal, 19% hydro, 2.4% nuclear (Mexico has a single nuclear power plant, the 1,400 MW Laguna Verde nuclear reactor

Laguna Verde nuclear power plant

Laguna Verde Nuclear Power Plant is located on the coast of the Gulf of Mexico, in Alto Lucero, Veracruz, Mexico. It is the largest nuclear power plant in Mexico and produces about 4.5% of the country's electrical energy. LVNPP has an original installed capacity of 1,365 megawatts...

in Veracruz

Veracruz

Veracruz, formally Veracruz de Ignacio de la Llave officially Estado Libre y Soberano de Veracruz de Ignacio de la Llave , is one of the 31 states that, along with the Federal District, comprise the 32 federative entities of Mexico. It is divided in 212 municipalities and its capital city is...

, which is operated by CFE

Comisión Federal de Electricidad

(Comisión Federal de Electricidad) and 3.3% renewable other than hydro. The general trend in thermal generation is a decline in petroleum-based fuels and a growth in natural gas and coal. Since Mexico is a net importer of natural gas, higher levels of natural gas consumption (i.e. for power generation) will likely depend upon higher imports from either the United States of via liquefied natural gas(LNG).

Gross generation was 234 TWh that same year (not including cogeneration and autogeneration), with 79.2% coming from conventional thermal sources, 16.6% from hydroelectricity, 4.2% from nuclear power and 3% from geothermal sources.

The expansion program contemplated by SENER for the period 2008-2017 includes the addition of 14,794 MW by the public service: 14,033 MW by CFE and 761 MW by LFC (Luz y Fuerza del Centro). Self –supply and cogeneration will add another 2,490 MW in new capacity. Total public installed capacity in 2017 is estimated at 61,074 MW, 40% and 21% of which would be combined-cycles and hydroelectric plants respectively. However, the deactivation of LFC on October 10, 2009 is likely to change this figure.

In 2009, 4,000 MW were already compromised (i.e. with secured financing). The table below summarizes the projects that are currently (September 2009) under construction:

	ENERGY SOURCE		LOCATION		TECHNOLOGY		TOTAL EXPECTED CAPACITY (MW)
External Energy Producers			450		450
CCC Norte	Durango	Combined Cycle		450		450
Financed Public Works			1,789		388	651	750
CC San Lorenzo Conversion from GT to CC	Puebla	Combined Cycle	116		116
CCC Baja California	Baja California	Combined Cycle	272		272
CCE Pacífico	Guerrero	Coal	651			651
CH La Yesca	Nayarit	Hydroelectric	750				750
Budget Implementation (LFC)			160	160
Distributed generation	D.F. and Mexico State	Gas turbines	160	160
Total			2,399	160	838	651	750

Source: SENER Statistics

Effective Energy Generation

Years	Hydro electric	Thermal ¹	IPP's ²	Dual ³	Coal- fired	Nuclear	Geo thermal	Wind- driven	Total
2010 ^P	11,503	21,742	11,907	2,778	2,600	1,365	965	85	52,945
2009	11,383	21,731	11,457	2,100	2,600	1,365	965	85	51,686
2008	11,343	21,191	11,457	2,100	2,600	1,365	965	85	51,105

Source: Secretaría de Energía with data from Comisión Federal de Electricidad and Luz y Fuerza del Centro

¹ Thermoelectric power plants (residual fuel oil, natural gas and diesel)

² Installed capacity of Independent Power Producers.

³ Dual power plants can operate with coal or fuel oil

^P Preliminary

Imports and exports

The external electricity trade is carried out through nine interconnections between the United States and Mexico and one interconnection with Belize

Belize

Belize is a constitutional monarchy and the northernmost country in Central America. Belize has a diverse society, comprising many cultures and languages. Even though Kriol and Spanish are spoken among the population, Belize is the only country in Central America where English is the official...

. These connections have primarily been used to import and export electricity during emergencies. In 2007, Mexico exported 1.3 TWh of electricity to the United States, while importing 0.6 TWh.

Companies have built power plants near the United States - Mexico border with the aim of exporting generation to the United States. There are also plans to connect Mexico with Guatemala

Guatemala

Guatemala is a country in Central America bordered by Mexico to the north and west, the Pacific Ocean to the southwest, Belize to the northeast, the Caribbean to the east, and Honduras and El Salvador to the southeast...

and Belize as part of the Central American Interconnection System

SIEPAC

SIEPAC is a planned interconnection of the power grids of six Central American nations...

. The 400 kV interconnection line Mexico - Guatemala was commissioned in April 2009 and has an estimated transmission capacity of 200 MW from Mexico to Guatemala and 70 MW in the opposite direction.

CFE is not a part of the North American Electric Reliability Corporation, though its transmission system in northern Baja California

Baja California

Baja California officially Estado Libre y Soberano de Baja California is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is both the northernmost and westernmost state of Mexico. Before becoming a state in 1953, the area was known as the North...

is part of the Western Electricity Coordinating Council

Western Electricity Coordinating Council

The Western Electricity Coordinating Council was formed on April 18, 2002, from the merger of the Western Systems Coordinating Council which itself was formed on August 14, 1967, the Southwest Regional Transmission Association , and Western Regional Transmission Association...

, and it also has a few other interconnections across the border with the United States.

Demand

Consumption of electricity in 2008 was 184 TWh, which corresponds to 1,655 kWh per capita. Consumption share by sector was as follows:

Residential: 26%
Industrial: 59% (38% for mid-sized industry and 21% for large industry)
Commercial: 7%
Agriculture: 4%
Services: 4%

Demand and supply projections

Electricity demand has grown steadily in the last decade and the Energy Secretariat (SENER) forecasts that consumption will grow by 3.3% a year for the next ten years, reaching 281.5 TWh in 2017. Demand growth forecasts have been revised down, from an estimated 4.8% a year in the projections from 2006, due to the expected effects of the economic crisis on energy demand.

Reserve margin

In 2008, the reserve margin (RM) in the National Interconnected System (SIN) was 45.8%, while the operating reserve margin (ORM) was 21.3%. It is estimated that both reserve margins will remain high during the 2009-2013 period. However, from 2014, the RM is expected to decrease to 29.2%, with the ORM reaching an 8.3%. Those values would be about 25% and 6% respectively in 2017. The commissioning of the Agua Prieta II, Norte II, Norte III, Noreste and Valle de Mexico II and III is essential to avoid power deficits in the northern and central parts of the country. However, irrespective of the reserve margins in the SIN, there are restrictions in transmission capacity that generate bottlenecks or the need to import power.

Access to electricity

Total electricity coverage in Mexico is 97% (2006), being almost 100% in urban areas and around 95% in rural ones.

Interruption frequency and duration

In 2008, the average number of interruptions per subscriber was 2.3 for CFE and 4.2 for LFC. Duration of interruptions per subscriber was 2.2 hours for CFE and 3 for LFC.

Policy and Regulation

The Energy Secretariat (SENER) is in charge of defining the energy policy of the country within the framework defined by the Constitution. The Energy Regulatory Commission (CRE) is, since 1995, the main regulatory agency of the electricity and gas sector. However, CRE's attributions are limited since CFE (Federal Electricity Commission) and LFC (Central Light and Power) are outside its scope.

Generation

The generation sector was opened to private participation in 1992. However, the Comisión Federal de la Electricidad (CFE), the state-owned utility, is still the dominant player in the generation sector, with two-thirds of installed capacity. As of the end of 2008, private generators held about 23 GW of generation capacity, mostly consisting of combined-cycle, gas-fired turbines (CCGFT). Private generators have to sell all their output to CFE since they are not allowed to sell directly to users. There is indeed a commercialization monopoly controlled by CFE.

In the period between 1997 to 2009, CRE has awarded 22 permits for Independent Power Producers (IPP), for a total of 13 GW. Total private generation permits awarded by CRE as of September 2009 are summarized in the table below :

	589	6,102	6%
Cogeneration	57	3,255	4.5%
Independent Power Production (IPP)	22	13,250	19.5%
Small Generation	19	3	0%

Transmission and Distribution

CFE holds a monopoly on electricity transmission and distribution outside of Mexico City and some other municipalities, where another state-owned company, Luz y Fuerza del Centro (LFC) holds the monopoly on distribution activities.
CFE operates the national transmission grid, composed of 27000 miles (43,452.2 km) of high voltage lines, 28000 miles (45,061.5 km) of medium voltage lines, and 370000 miles (595,455.8 km) of low voltage distribution lines, through one of its departments, the Centro Nacional de Control de la Energía (CENACE).

Renewable Energy Resources

The two main government agencies in charge of developing renewable energy resources are SEMARNAT and SENER. The Environment and Natural Resources Secretariat (SEMARNAT) is responsible for environmental policy and the preservation of renewable and non-renewable resources, while SENER defines the national energy policy. CONAE, the National Commission for Energy Savings, is responsible for promoting energy savings and energy efficiency. Finally, SEDESOL, the National Secretariat for Social Development, includes the promotion and use of renewable energy in some of their projects.

The Renewable Energy Development and Financing for Energy Transition Law (LAERFTE), which entered into force on November 28, 2008 mandated SENER to produce a [National Strategy for Energy Transition and Sustainable Energy Use and a Special Program for Renewable Energy. The Special Program contains tentative targets for renewable generation for different technologies. Those targets will be revised as SENER and CRE advance in the completion of the activities included in the law.

Hydro

About 19% of the electricity produced in Mexico comes from hydroelectric resources. The largest hydro plant in Mexico is the 2,400 MW Manuel Moreno Torres in Chicoasén, Chiapas

Chiapas

Chiapas officially Estado Libre y Soberano de Chiapas is one of the 31 states that, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 118 municipalities and its capital city is Tuxtla Gutierrez. Other important cites in Chiapas include San Cristóbal de las...

, in the Grijalva river

Grijalva River

Grijalva River, formerly known as Tabasco River. is a 480 km long river in southeastern Mexico. It is named after Juan de Grijalva who visited the area in 1518. The river rises in Chiapas highlands and flows from Chiapas to the state of Tabasco through the Sumidero Canyon into the Bay of...

. This is the world's fourth most productive hydroelectric plant. The 750 MW El Cajon hydroelectric plant in Nayarit

Nayarit

Nayarit officially Estado Libre y Soberano de Nayarit is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 20 municipalities and its capital city is Tepic.It is located in Western Mexico...

, which started operations in November 2006, is the latest completed large project.

The country has an important mini-hydro potential, estimated at 3,250 MW (in the states of Chiapas

Chiapas

, Veracruz

Veracruz

, Puebla

Puebla

Puebla officially Estado Libre y Soberano de Puebla is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 217 municipalities and its capital city is Puebla....

and Tabasco

Tabasco

Tabasco officially Estado Libre y Soberano de Tabasco is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 17 municipalities and its capital city is Villahermosa....

) In 2009, there were 22 private mini-hydro installations (12 in operation, 2 inactive and 8 under construction), adding up to a total of 83.5 MW in operation, with 105 MW under development. The number of publicly-owned hydro plants in 2009 was 42: 31 of them (270MW) belong to CFE, while the remaining 11 (23.4MW) belong to LFC.

Solar

Mexico is the country with the world's third largest solar potential. The country's gross solar potential is estimated at 5kWh/m2 daily, which corresponds to 50 times national electricity generation. Currently, there is over 1 million square meters of solar thermal panels installed in Mexico, while in 2005, there were 115,000 square meters of solar PV (photo-voltaic). It is expected that in 2012 there will be 1,8 million square meters of installed solar thermal panels.

Wind

Wind power

Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....

production is still very limited in Mexico, although the country's potential is estimated to be very high. Three main areas for wind generation have been identified: the Isthmus of Tehuantepec

Isthmus of Tehuantepec

The Isthmus of Tehuantepec is an isthmus in Mexico. It represents the shortest distance between the Gulf of Mexico and the Pacific Ocean, and prior to the opening of the Panama Canal was a major shipping route known simply as the Tehuantepec Route...

,in the state of Oaxaca

Oaxaca

Oaxaca , , officially Estado Libre y Soberano de Oaxaca is one of the 31 states which, along with the Federal District, comprise the 32 federative entities of Mexico. It is divided into 571 municipalities; of which 418 are governed by the system of customs and traditions...

; La Rumorosa, in the state of Baja California

Baja California

; The area of the Gulf of California

Gulf of California

The Gulf of California is a body of water that separates the Baja California Peninsula from the Mexican mainland...

, which includes Baja California

Baja California

, Baja California Sur

Baja California Sur

Baja California Sur , is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. Before becoming a state on October 8, 1974, the area was known as the South Territory of Baja California. It has an area of , or 3.57% of the land mass of Mexico and comprises...

, Sonora

Sonora

Sonora officially Estado Libre y Soberano de Sonora is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided into 72 municipalities; the capital city is Hermosillo....

and Sinaloa

Sinaloa

Sinaloa officially Estado Libre y Soberano de Sinaloa is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 18 municipalities and its capital city is Culiacán Rosales....

, the Yucatán Peninsula

Yucatán Peninsula

The Yucatán Peninsula, in southeastern Mexico, separates the Caribbean Sea from the Gulf of Mexico, with the northern coastline on the Yucatán Channel...

. and the states of Zacatecas

Zacatecas

Zacatecas officially Estado Libre y Soberano de Zacatecas is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 58 municipalities and its capital city is Zacatecas....

, Hidalgo, Veracruz

Veracruz

.

In 2012, according to SENER, CFE will have 593MW of installed wind generation capacity in Mexico. Currently, there are several projects in operation and under development. The tables below show both the wind farms that have already been committed and some of the potential ones:

	COMMITTED PROJECTS
	PROJECT		DEVELOPER		REGION	MODALITY	CAPACITY (MW)	COMMISSIONING DATE
La Venta	CFE	Oaxaca	Public Service	1.35	11/1994
Guerrero Negro	CFE	Baja California	Public Service	0.6	03/1999
La Venta II	CFE	Oaxaca	Public Service	83.3	01/2007
Eurus	Acciona	Oaxaca	Autogenerator	250	12/2009
Parques Ecológicos de México	Iberdrola	Oaxaca	Autogenerator	79.9	01/2009
Fuerza Eólica del Istmo	Fuerza Eólica-Peñoles	Oaxaca	Autogenerator	30	2010
Eléctrica del Valle de México	EdF Energies Nouvelles-Mitsui	Oaxaca	Autogenerator	67.5	2009
Bii Nee Stipa Energía Eólica	CISA-Gamesa	Oaxaca	Autogenerator	26.3	2009
La Venta III	CFE	Oaxaca	IPP	101.4	11/2010
Oaxaca I	CFE	Oaxaca	IPP	101.4	2010
Centro Regional de Tecnología Eólica	Instituto de Investigaciones Eléctricas	Oaxaca	Small generator	5	N/A
Desarrollos Eólicos Mexicanos	Demex	Oaxaca	Small generator	227.5	2011
Eoliatec del Pacífico	Eoliatec	Oaxaca	Autogenerator	160.5	2011
Eoliatec del Istmo (2nd phase)	Eoliatec	Oaxaca	Autogenerator	142.2	2011
Gamesa Energia	Gamesa	Oaxaca	Autogenerator	288	2011
Vientos del Istmo	Preneal	Oaxaca	Autogenerator	180	2012
Energía Alterna Istmeña	Preneal	Oaxaca	Autogenerator	215.9	2012
Unión Fenosa Generación México	Unión Fenosa	Oaxaca	Autogenerator	227.5	2010
Fuerza Eólica del Istmo (2nd phase)	Fuerza Eólica	Oaxaca	Autogenerator	50	2011
Oaxaca II-IV	CFE	Oaxaca	IPP	304.2	09/2011
Total				2,565

Source: SENER 2009b

	POTENTIAL PROJECTS
	PROJECT		DEVELOPER		REGION	MODALITY	CAPACITY (MW)	COMMISSIONING DATE
Fuerza Eólica de Baja California	Fuerza Eólica	Baja California	Export	300	N/A
Mexico Wind	Unión Fenosa/Geobat	Baja California	Export	500	N/A
N/A	Cannon Power	Baja California	Export	200	N/A
Baja Wind	Sempra Energy	Baja California	Export	250	2011
Baja California	Fuerza Eólica	Baja California	Autogeneration	10	N/A
N/A	State Government	Baja California	Autogeneration	300	N/A
Los Vergeles	SEER	Tamaulipas	Autogeneration	160	2010
Eólica Santa Catarina	Econergy	Nuevo León	Autogeneration	20	N/A
Total				1,450

Source: SENER 2009b

Geothermal

Mexico has a large geothermal potential due to its intense tectonic and volcanic activity. This potential has been estimated at 1,395 MW by CFE, although this figure is likely to be much higher. It ranks third in geothermal power

Geothermal power

Geothermal energy is thermal energy generated and stored in the Earth. Thermal energy is the energy that determines the temperature of matter. Earth's geothermal energy originates from the original formation of the planet and from radioactive decay of minerals...

production worldwide. In 2009, geothermal installed capacity was 964.5 MW and total production was 7.1 TWh. There are four geothermal fields under exploitation: Cerro Prieto, Los Azufres, Los Humeros and Las Tres Vírgenes.

	PROJECT		MUNICIPALITY		ENTITY
Cerro Prieto Cerro Prieto Cerro Prieto is a small rural town located in the county of La Misión in the northwestern part of the Mexican state of Hidalgo....	Mexicali Mexicali Mexicali is the capital of the State of Baja California, seat of the Municipality of Mexicali, and 2nd largest city in Baja California. The City of Mexicali has a population of 689,775, according to the 2010 census, while the population of the entire metropolitan area reaches 936,826.The city...	Baja California	13	720	5,176
Tres Virgenes Tres Virgenes Tres Virgenes is a complex of volcanoes located Mulegé Municipality in the state of Baja California Sur, on the Baja California Peninsula in northwestern Mexico...	Mulegé Mulegé Mulegé is an oasis town in the Mexican state of Baja California Sur, situated at the mouth of the Río de Santa Rosalía. It is the fourth-largest community in Mulegé Municipality...	Baja California Sur	2	10	42
Azufres	Cd. Hidalgo	Michoacán	15	194.5	1,517
Humeros	Chignautla	Puebla Puebla Puebla officially Estado Libre y Soberano de Puebla is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 217 municipalities and its capital city is Puebla....	8	40	7,055
Total			38	965	7,056

Source: SENER 2009b

Biomass

Mexico also has a large potential to produce energy from biomass. It is estimated that, taking into account agricultural and forest waste with energy potential and solid urban waste from the ten main cities, the country has a potential capacity of 803MW and could generate 4,507 MWh per year. In the sugarcane industry, the estimated power generation protential from bagasse is over 3,000 MWh per year.,

Early history

The electricity sector in Mexico underwent its first serious process of reorganizations during the 1930s, under the mandate of the Institutional Revolutionary Party

Institutional Revolutionary Party

The Institutional Revolutionary Party is a Mexican political party that held power in the country—under a succession of names—for more than 70 years. The PRI is a member of the Socialist International, as is the rival Party of the Democratic Revolution , making Mexico one of the few...

(PRI). The National Electricity Code was created and the Federal Electricity Commission (CFE), a newly create state-owned and state-financed enterprise, came to dominate all investment in new capacity. Later, in 1960, a constitutional amendment nationalized the electricity industry and formally gave the government exclusive "responsibility" for generating, transmitting, transforming, and distributing electricity. During that decade, the government also created the Compañía de la Luz y Fuerza del Centro (LFC) to supply electricity to Mexico City and the neighboring states. During the 1960s and the 1970s, Mexico alienated private investment and decided to prevent market forces from entering the power system. In addition, the surge in oil prices of the 1970s provided a windfall to oil-rich Mexico, which allowed the country to maintain substantial subsidies for electricity generation. During the late 1980s and the early 1990s, the Mexican government implemented market reforms in several economic sectors, including electricity. In 1992, President Carlos Salinas reformed the electricity law, establishing that private electricity production was not a public service. This modification, which allowed for private participation in generation, was and is still debated as unconstitutional (in 2002, the Mexican Supreme Court ruled that the 1992 law might be unconstitutional ). The Energy Regulatory Commission (CRE) was created in 1993 as an autonomous agency in charge of regulating the natural gas and electricity industries. However, its functions are only related to private power producers (e.g. award of permits, arbitration, tariff studies) and do not cover CFE and LFC. To date, CRE's functions have been mainly focused on the gas sector and not so much on electricity.

Reform attempts

Attempts by president Ernesto Zedillo

Ernesto Zedillo

Ernesto Zedillo Ponce de León is a Mexican economist and politician. He served as President of Mexico from December 1, 1994 to November 30, 2000, as the last of the uninterrupted seventy year line of Mexican presidents from the Institutional Revolutionary Party...

in the late 1990s, by the National Action Party

National Action Party (Mexico)

The National Action Party , is one of the three main political parties in Mexico. The party's political platform is generally considered Centre-Right in the Mexican political spectrum. Since 2000, the President of Mexico has been a member of this party; both houses have PAN pluralities, but the...

(PAN) in 2000, and more recently by former president Vicente Fox

Vicente Fox

Vicente Fox Quesada is a Mexican former politician who served as President of Mexico from 1 December 2000 to 30 November 2006 and currently serves as co-President of the Centrist Democrat International, an international organization of Christian democratic political parties.Fox was elected...

to carry out a comprehensive reform of the electricity sector in Mexico have faced strong political resistance. In 1999, President Zedillo sent an ambitious bill to Congress requesting a change of the Constitution and allowing for the unbundling of the sector, including the creation of distribution companies under 3-year concessions. Existing power plants would also be sold, except for nuclear and hydro power plants. In 2001, President Fox issued a reform decree that would allow Independent Power Producers to sell directly to industrial customers and would also allow the sale of private power to CFE under long-term contracts without competitive bidding

Procurement

Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...

. Among other issues, the decree also specified that electricity is not a public service of general interest but a commercial service. Both reform attempts failed, opposed on grounds that the electricity and, more broadly, the energy sector is strategic for national sovereignty. As required by the Constitution, the electricity sector remains federally owned, with the Comisión Federal de Electricidad (CFE) essentially controlling the whole sector.

Among the different proposals for the institutional reform of the electricity sector, the main ones are the creation of the CFE (Federal Electricity Commission) 's Fundamental Law and the modification of this firm's operations and the extension of CRE (Electricity Regulatory Commission) 's competencies. Also important is the promotion of private independent power production and the discussion of the role played by Pidiregas (see Financing below) in the financing of large projects.

Renewable Energy Law

The Renewable Energy Development and Financing for Energy Transition Law (LAERFTE) entered into force in November 2008 and mandated SENER to produce a National Strategy for Energy Transition and Sustainable Energy Use and a Special Program for Renewable Energy. The main objective of the Law is to regulate the use of renewable energy resources and clean technology, as well as to establish a national strategy and financing instruments to allow Mexico to scale-up electricity generation based on renewable resources. SENER and CRE are responsible for defining those mechanisms and establishing legal instruments to allow Mexico to increase renewable power generation.

The following functions are the responsibility of SENER, among others: (a) defining a national program for ensuring a sustainable energy development both in the short and the longer term, (b) creating and coordinating the necessary instruments to enforce the law, (c) preparing a national renewable energy inventory, (d) establishing a methodology to determine the extent to which renewable energies may contribute to total electricity generation (such a contribution must be expressed in terms of minimum percentages of installed capacity and minimum percentages of electricity, and should take into account different kinds of renewables and regional available sources), (e) defining transmission expansion plans to connect power generation from renewable energy to the national grid, and (f) promoting the development of renewable energy projects to increase access in rural areas.

The CRE is responsible for developing rules and norms regarding the implementation of the Renewable Energy Law, including provisions for promotion, production, purchase and exchange of electricity from renewable sources. CRE, in coordination with the Secretary of Finance (SCHP) and SENER, will determine the price that suppliers will pay to the renewable energy generators. Payments will be based on technology and geographic location. In addition, CRE will set rules for contracting between energy generators and suppliers, obliging the latter to establish long-term contracts from renewable sources.

Energy Efficiency Law

In November 2008, the Sustainable Use/Energy Efficiency Law was signed into law. The objective of this law is to provide incentives for the sustainable use of energy in all processes and activities related to its exploitation, production, transformation, distribution and consumption, including energy efficiency

Efficient energy use

Efficient energy use, sometimes simply called energy efficiency, is the goal of efforts to reduce the amount of energy required to provide products and services. For example, insulating a home allows a building to use less heating and cooling energy to achieve and maintain a comfortable temperature...

measures. More specifically, the law proposes:

The creation of the Programa NAcional para el Usos Sustentable de la Energía, which targets energy efficiency. Multiple actions are being developed by the Program focusing on electricity consumption activities in the industrial, residential, commercial and public sectors (e.g. replacement of incandescent bulbs by CFLs, replacement of old refrigerators and appliances, energy efficiency investments in municipalities, industrial motors energy efficiency, cogeneration in the cement, steel and iron industries, water pumping energy efficiency, etc.).

The establishment of the Comisión Nacional para el Uso Eficiente de la Energía (CONUEE) as a decentralized body of SENER that (i) will advise the National Public Administration and (ii) promote the implementation of best practices related to EE. The Commission replaces the former Comisión Nacional para el Ahorro de Energía (CONAE), which has been the leading government energy efficiency body.

The creation of a Consejo Consultivo para el Aprovechamiento Sustentable de la Energia as part of the above mentioned Commission to evaluate the compliance of objectives, strategies, actions and goals of the Program. This Council will consist of the Minister of Finance and six researchers with extensive experience in the area.

The creation of the Subsistema Nacional de Informacion on energy efficiency to register, organize, update and disseminate information about energy consumption and its end-uses in (i) sectors that use this energy, (ii) distinct geographical regions of the country, (iii) factors that impel these uses and (iv) indicators of EE.

In this context, the Government is carrying out the following specific activities: (i) a program aimed at replacing incandescent bulbs (IBs) for Compact Fluorescent Lamps (CFLs) in the residential sector targeting over 200 million CFLs over a five year period, (ii) an appliances replacement program targeting over 5.5 million appliances over a 5-year period, (iii) the modernization of the public transport system for long distances and surroundings, (iv) a program for EE in municipalities including lamps substitution for more efficient public lighting, (v) industrial and commercial energy efficiency programs, (vi) supply side energy efficiency in the electricity sector, and (vii) energy efficiency in PEMEX.

Takeover of Luz y Fuerza del Centro

On 12 October 2009, the police seized the offices of the state-owned Luz y Fuerza del Centro, dissolving the company, laying off the workers, and putting its operations, which supply power to 25 million Mexicans, under the control of the CFE. According to the government, spending at the company was increasingly outpacing sales

Tariffs

During the last decade, average electricity tariffs in Mexico have been held below cost with the aim of maintaining macroeconomic and social stability. For all tariffs, an interagency group composed of CFE (Federal Electricity Commission, or Comisión Federal de Electricidad), LFC (Central Light and Power, or Luz y Fuerza del Centro), SHCP (Ministry of Finance and Public Credit, or Secretaria de Hacienda y Crédito Público), SENER (Ministry of Energy, or Secretaria de Energia), CRE (Regulatory Commission of Energy, or Comisión Reguladora de la Energía), and CNA (National Water Commission, or Comisión Nacional del Agua) meet regularly and once a year they prepare a tariff proposal for the subsequent year. Tariffs are approved by SHCP and not by the energy sector regulator.

Except for the tariff set for the agricultural sector, average electricity prices have followed an upward trend since the year 2002. In 2008, average tariffs for the different sectors were :

Residential: US$ 0.106/kWh
Commercial: US$ 0.255/kWh
Services: US$ 0.172/kWh
Agriculture: US$ 0.051/kWh
Industrial: medium industry US$ 0.153/kWh, large industry US$ 0.118/kWh

The average tariff, US$ 0.137/kWh, was 16.5% higher in 2008 when compared to 2007.

Subsidies

For the industrial and commercial sectors, electricity supply is priced on a rational cost basis for large firms. As a result, they receive no government subsidy, while subsidies for small firms are relatively small. On the other hand, agricultural and residential customers have traditionally received large subsidies since the electricity they consume is significantly underpriced. Extensive subsidies have contributed to a rapid growth in demand. In 2000, the average residential tariff covered only 43% of the costs, while the average tariff for agricultural use covered 31%. Total subsidies amounted to 46% of total electricity sales. In addition, residential subsidies were mostly captured by medium and high income classes as the amount of the subsidy raised with consumption.

In 2002, a restructuring of residential tariffs significantly raised the infra-marginal tariffs paid by middle and especially high consumers of electricity. Currently, billing schedules vary by temperature, season and consumption level. In spite of this reform, price/cost ratio was still under 40% in 2002, even after the 21% increase in price due to the reform. In addition, the share of subsidies going to the non-poor population remained high, estimated at 64%. Agricultural tariffs were also modified in 2003, when a fixed price per kWh was fixed. These new tariffs sought charging higher prices for excess energy use.

The low tariffs, together with LFC's inefficiencies, absorb a large amount of fiscal resources. For 2008, it was estimated that the subsidies paid through electricity tariffs to final CFE and LFC consumers by the Federal Government amounted to US$10 billion (close to 1% of GDP).

Investment by sub-sector

Necessary investment to carry out the 2008-2017 expansion plan amounts to MXN 629,106 million (US$47 billion). The breakdown of the investment is: 41.2% for generation, 21.2% for transmission, 23.9% for distribution, 11.8% for maintenance and 1.9% for other needs.

From the required total, 33.9% corresponds to OFP (Obras Públicas Financiadas or Financed Public Works), 8.8% to Independent Power Production, 51.5% to budgeted works and the remaining 5.9% to financial schemes still to be defined.

Pidiregas

In 1995-1996 the Mexican government created Pidiregas ("Proyectos de Inversión Diferida En El Registro del Gasto " – Investment Projects with Deferred Expenditure Registration) to finance long-term productive infrastructure projects. Due to budgetary restrictions, the government realized that it could not provide all the resources needed and decided to complement the public sector's efforts with Pidiregas, a deferred financing schedule. This mechanism, which only applied to investments carried out by PEMEX

Pemex

Petróleos Mexicanos or Pemex is a Mexican state-owned petroleum company. As of 2010, with a total asset worth of $415.75 billion, it is the second non-publicly listed largest company in the world by total market value, and Latin America's second largest enterprise by annual revenue as of 2009...

(Petróleos Mexicanos) and CFE aimed to create the conditions for the penetration of private initiatives in hydrocarbon exploration and electricity generation. Pidiregas have been extended and have also grown in amount (PEMEX

Pemex

uses them for as much as four times the amount of CFE), although the original motivation for their existence is gone.

Following a project finance

Project finance

Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors...

scheme, for a project to be executed under Pidiregas, the resources that it generates from the sale of goods and services have to be enough to cover the incurred financial obligations. Projects are paid with the revenues generated during their operation and require the signature of a contract in which a product or work is involved. The State assumes the risk since PEMEX or CFE sign the contract as guarantee, while the investors recover their investment in the agreed time. As a result, Pidiregas cannot be considered as true private investment since, under true private sector participation, firms would make investment decisions and bear the full risk. The viability of the program has been questioned as its effect in the public budget is similar to the emission of public debt. Furthermore, until 2006, the Pidigeras scheme resulted in losses.

Grid extension

Since 1995, states and municipalities hold the responsibility for the planning and financing of grid extension and off-grid supply. A large part of the investment is financed through FAIS (Fund to Support Social Infrastructure). The National Commission for Indigenous People and SEDESOL (Secretariat for Social Development) also finance an important share of grid extension. Once a particular system has been constructed, its assets and operational and financial responsibility are transferred to CFE.

Recent studies have concluded that interconnecting Baja California

Baja California

with the National Interconnected System (SIN) would be both a technically and economically sound decision. This interconnection would allow to serve peak demand in the Baja California system with generation resources from the SIN. Conversely, in period of low demand in Baja California, surplus electricity and base load (i.e. geothermal and combined cycles) could be exported to the SIN. As a result, there would be a reduction of investment costs in generation infrastructure and of total production costs. In addition, the interconnection would open new opportunities for electricity exchanges with power utilities in Western United States through the existing transmission links with California. It is expected that the interconnection will be commissioned in 2013.

Renewable energy

The Renewable Energy Law creates a Fund for the Energy Transition and the Sustainable Use of Energy. This fund will assure the finacing of projects evaluated and approved by the Technical Committee, chaired by SENER. The fund will begin with US$200 million for each year between 2009 to 2011.

Summary of private participation in the electricity sector

As required by the Constitution, the electricity sector in Mexico remains federally owned, with the Comisión Federal de Electricidad (CFE) essentially controlling the whole sector. Although generation was opened to private participation in 1992, CFE is still the dominant player, with two-thirds of installed capacity.

Climate Change Strategy.

Greenhouse gas emissions

According to Mexico's Third National Communication to the UNFCCC, the country emitted 643 million tons of carbon dioxide equivalent (Mt CO2e) in 2002, of which almost 400 Mt CO2e resulted from the combustion of fossil fuels (over 60 percent of total emissions). The sources of Mexico's GHG emissions are energy generation (24%), transport (18%), forests and land-use change (14%), waste management (10%), manufacturing and construction (8%), industrial processes (8%), agriculture (7%), fugitive emissions (6%), and other uses (5%).

Climate change mitigation

Although the Kyoto Protocol

Kyoto Protocol

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...

does not require Mexico to reduce its GHG

Greenhouse gas

emissions, the country has committed to reduce its emissions voluntarily. In May 2007, President Calderón

Felipe Calderón

Felipe de Jesús Calderón Hinojosa is the current President of Mexico. He assumed office on December 1, 2006, and was elected for a single six-year term through 2012...

announced the National Climate Change Strategy (Estrategia Nacional de Cambio Climático – ENACC) which focuses on climate change as a central part of Mexico's national development policy. The ENACC sets the long-term climate change agenda for the country, together with medium to long-term goals for adaptation and mitigation. In December 2008, Mexico announced that it would reduce its GHG emissions by 50% below 2002 levels by 2050.

In June 2009, the Government of Mexico formally committed itself to a detailed long-term plan for emission reductions embedded in the Special Climate Change Program (Programa Especial para Cambio Climático, or PECC) that provides an accounting of emissions by sector, creates a framework for monitoring improvements and establishes a legally binding blueprint for emission reduction initiatives, sector by sector. The PECC sets out a four pillar program that includes (i) a long-term vision for government action; (ii) sectoral plans for GHG mitigation; (iii) plans for adaptation; and (iv) cross-cutting policy initiatives.

CDM projects in electricity

Currently (September 2009), there are 47 energy-related registered CDM projects in Mexico with a total emission reduction potential of about 3.5 million tons of CO2 equivalent. The table below presents the number of projects by type:

Project type	Number	Estimated annual emission reductions (ktons CO2e)
Hydro	3	119
Cogeneration	1	261
Methane recovery and electricity generation	32	899
Wind	8	2,242
Wastewater treatment	2	19

Source: UNFCCC

World Bank

Currently, the World Bank

World Bank

The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

is contributing funds and assistance through several projects related to the energy sector in Mexico.

A Rural Electrification Project with a US$15 million grant from GEF
Global Environment Facility
The Global Environment Facility unites 182 member governments — in partnership with international institutions, nongovernmental organizations, and the private sector — to address global environmental issues....

and a US$15 million World Bank loan is currently in the pipeline. This US$110 million project is focused in the design and implementation of sustainable energy models for areas without access to the electricity network. The project includes 50,000 households in Oaxaca, Guerrero
Guerrero
Guerrero officially Estado Libre y Soberano de Guerrero is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 81 municipalities and its capital city is Chilpancingo....

and Veracruz
Veracruz
Veracruz, formally Veracruz de Ignacio de la Llave officially Estado Libre y Soberano de Veracruz de Ignacio de la Llave , is one of the 31 states that, along with the Federal District, comprise the 32 federative entities of Mexico. It is divided in 212 municipalities and its capital city is...

.

In October 2006, GEF
Global Environment Facility
The Global Environment Facility unites 182 member governments — in partnership with international institutions, nongovernmental organizations, and the private sector — to address global environmental issues....

financing was approved for the US$49.35 million Agua Prieta Hybrid Solar Thermal Power Plant. This project, located in the northern state of Sonora
Sonora
Sonora officially Estado Libre y Soberano de Sonora is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided into 72 municipalities; the capital city is Hermosillo....

, will contribute to reduce GHG emissions through the installation of an Integrated Solar Combined Cycle System (ISCCS) using solar parabolic technology.

A Large-Scale Renewable Energy Development Project was approved in June 2006. This two-phase project will receive a US$25.35 million grant from GEF, while the remaining $US 125 million will be financed by local and private sources. The project seeks to assist Mexico in developing initial experience in commercially-based, grid-connected renewable energy applications. It will do so by supporting the construction of an approximately 101 megawatt independent power producer (IPP) wind farm, designated as "La Venta III".

The Prototype Carbon Fund approved in December 2006 a US$12.29 million investment loan for a Wind Umbrella Project.

A US$5.8 million GEF grant was approved in October 2002 for the Introduction of Climate Friendly Measures in Transport. The project, with a total budget of US$12.2 million, has will contribute to the establishment of policies that will assist towards a long-term modal shift in a climate-friendly, more efficient and less polluting, less carbon intensive transport for the Mexico City Metropolitan Area (MCMA).

IDB

Currently, four IDB financed energy activities are under implementation in Mexico.

In August 2009, a US$1 million non-reimbursable technical cooperation support to the National Program for Sustainable Energy Use

In September 2008, a US$749,000 non-reimbursable technical cooperation was approved to support the implementation of a pilot initiative to use alternative energy sources and implement energy efficiency measures. This technical cooperation is still awaiting implementation.

In May 2007, US$200,000 was approved to finance a project that aims at providing Assistance to CFE on Environmental and Social Aspects of Hydroelectric Projects. This US$1,168,000 project aims to assess CFE performance and management capability in dealing with environmental and social impacts of large hydroelectric projects.

Financing for the Support for the Energy Secretariat on the Feasibility of Bio-Ethanol as Fuel was approved in August 2005. The US$146,000 provided by the IDB are complemented with US$30,000 from the country. The broad objective of the project is assessing the competitiveness of ethanol as a fuel.

Sources

Carreón et al., 2003. The Mexican Electricity Sector: Economic, Legal and Political Issues. Working paper.

ESMAP, 2004. Energy Policies and the Mexican Economy

SENER, 2006. Prospectiva del Sector Eléctrico 2006-2015.

SENER, 2009. Prospectiva del Sector Eléctrico 2008-2017.

SENER, 2009b Programa Especial para el Aprovechamiento de Energías Renovables.

SENER & GTZ, 2006. Renewable Energies for Sustainable Development in Mexico

World Bank, 2004. Mexico Public Expenditure. Volume II: Main Report.

World Bank, 2005.Mexico: Infrastructure Public Expenditure Review (IPER).

External links

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Installed capacity

Effective Energy Generation

Imports and exports

Demand

Demand and supply projections

Reserve margin

Access to electricity

Interruption frequency and duration

Policy and Regulation

Generation

Transmission and Distribution

Renewable Energy Resources

Hydro

Solar

Wind

Geothermal

Biomass

Early history

Reform attempts

Renewable Energy Law

Energy Efficiency Law

Takeover of Luz y Fuerza del Centro

Tariffs

Subsidies

Investment by sub-sector

Pidiregas

Grid extension

Renewable energy

Summary of private participation in the electricity sector

Greenhouse gas emissions

Climate change mitigation

CDM projects in electricity

World Bank

IDB

Sources

See also

External links