In the framework of implementing its Energy Reform and National Climate Change Strategy, Mexico has established clean energy and emission reduction goals as well as requirements to acquire clean energy certificates starting in 2018.
Through the enactment of the General Law of Climate Change on June 6, 2012, Mexico set out a roadmap to: (i) adopt renewable energy resources; (ii) become more sustainable; and (iii) reduce carbon emissions. Mexico committed to reduce greenhouse emissions 30 percent by 2020 and 50 percent by 2050 from 2000 levels. Additionally, by 2024, 35 percent of energy generation must be from clean energy sources. (See Jones Day Commentary, " Mexico Pursues Comprehensive Legal Framework to Address Climate Change.")
In 2013, Mexico reformed the energy sector through a constitutional amendment and the enactment of the Electric Industry Law, its corresponding regulations, and the enactment of the Law on Energy Transition and the Wholesale Electricity Guidelines in 2014 and 2015 (collectively, "Energy Reform"). (See Jones Day Commentaries, " Mexico's New Electricity Market Guidelines," " New Electricity Legal Framework in Mexico," and " Mexican Congress Approves Bill to Open Mexico's Electricity Industry to Private Investors.")
The Energy Reform overhauled the existing legal framework, allowing the private sector participation in the generation and sale of electric power, creating a wholesale electricity market, and promoting the transition to clean energy. In particular, the Law on Energy Transition provides that by 2018, at least 25 percent of energy generation will be clean energy; by 2021, at least 30 percent will be clean energy; and by 2024, at least 35 percent will be clean energy.
Further, under the new legal provisions, electricity suppliers and users must consume or purchase clean energy certificates ("CECs") for the following percentage of annual energy consumption: 5 percent in 2018, 5.8 percent in 2019, 7.4 percent in 2020, 10.9 percent in 2021, and 13.9 percent in 2022.
Clean energy power generation plants have the right to receive a CEC for each additional megawatt-hour generated without fossil fuel, which can then be sold to electricity suppliers and users through purchase agreements, through the clean energy certificates market, or through auctions of long-term purchase agreements for clean energy.
The auctions for long-term purchase agreements were developed to allow the electricity supplier to sign 15-year contracts for clean energy and power, and 20-year contracts for CECs in order to comply with its clean energy obligations.
The first auctions of long-term agreements took place in March 2016, September 2016, and November 2017, with results that, at the time, were the lowest price for renewable energy in the world.
Now, the clean energy certificates market is set to begin operation in 2018. It will be an annual spot market for the purchase and sale of CECs between those who do not cover their clean energy consumption obligations and those who have surpluses to sell. This presents yet another opportunity for low-price renewable energy.
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