June 2020

Policy Shift to Impact Renewable Energy Projects in Mexico

Between April and May 2020, the Mexican federal government, through the Ministry of Energy, the Energy Regulatory Commission, and the National Center for Energy Control, issued a new set of regulations that reflect a major change in policy concerning the participation of the private sector in Mexico’s electric industry. Contrary to the international trend to accommodate and suppor renewable sources of electricity, Mexico’s current administration’s policy is to advance the interests and market share of the state-owned Federal Electricity Commission, whose generation plants are primarily conventional. From indicating that the dispatch of wind and solar electric generation plants in operation could be subordinated to thermoelectric and hydroelectric plants to the unjustified suspension of operational testing of wind and solar electric generation projects, the regulations stand as the latest significant offensive by the current administration against the 2013 Energy Reform. The new policies endanger investments of billions of dollars and the creation of thousands of jobs and may cause additional emissions of thousands of tons of CO2 per month. Claiming the new regulations are illegal and constitutionally void, developers and NGOs have initiated legal actions before federal courts in Mexico. Additional injunction (amparo) trials are expected. Also, developers and investors around the world are discussing potential investment arbitration claims under the more than 20 bilateral investment treaties ratified by Mexico and under multilateral investment treaties including NAFTA – USMCA and the CPTPP. The story is still unfolding.