Energy storage regulation in Mexico

1. What electricity storage projects have been commissioned in your jurisdiction to date?

There are currently no major energy storage projects in Mexico. The following examples are a selection of projects which have received press coverage:

  • A hybrid electricity project, including lead-acid batteries, was installed in San Juanico, Baja California Sur in 1999 by a consortium of local utility companies and other organisations. The system comprised 17 kW photovoltaic cells, ten wind turbines with a capacity of 70 kW, an 80 kW diesel generator and a flooded lead-acid battery bank. The original batteries lasted only two and a half years before they needed to be replaced as their capacity had declined to less than 80%.1
  • More recently, in 2014, Benito Juarez International Airport in Mexico City purchased three kinetic energy storage flywheel systems to use as backup power. The flywheel system was installed with the aim of safeguarding runway lighting and other critical navigation systems.2
  • As part of the city’s commitment to generating all of its energy from clean sources, Grupotec began installing a 25MW solar park in La Paz, Baja California Sur in January 2015, as part of a 20 year power purchase agreement with the Federal Electricity Commission (CFE). The project includes 11 MW of battery storage.3

2. What electricity storage projects are anticipated in your jurisdiction in coming years?

Presently, there is not a strong demand for energy storage in Mexico. However, after the electricity reform and the commencement of operations of the Wholesale Electricity Market has opened up the market to private investments, other electricity trading alternatives may be developed in Mexico.

The main topic in Mexico is the State’s obligation to obtain 35% of its energy from clean sources by 2025. To ensure future energy security alongside the clean energy reforms, there is an increased need for systems that can provide stability to offset the variability of wind and solar power production, which are the focus of Mexico’s clean energy reform.

Furthermore, the enactment of the new Grid Code will modify the current behaviour of market participants and will force the operators and regulators to find new alternatives to provide reliability for the Mexican grid.

These new requirements for the reliability of the Mexican electricity system may force CENACE (the National Centre for the Control of Energy) to launch several auctions to purchase ancillary services that may have a positive impact for electricity storage projects.

Finally, the creation of the new Capacity Balancing Market (an ex post market that may take place under the 100 most critical hours in a regular year) might force the market participants to increase their reserve capacity to avoid any risk arising from price volatility. Likewise, this market might give electricity storage projects developers more options and incentives to develop projects in the future.

3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?

Mexican law does not currently specifically consider energy storage. However, it is anticipated that upcoming business practice manuals that are being drafted will include several provisions in connection with energy storage. Such upcoming rules are anticipated to consider energy storage providers as either “generators”, which will need to obtain a generation permit, and/or as “end-users” as storage devices will import electricity from the distribution or transmission system.

As there are no particular regulations under Mexican law, we anticipate that energy storage technology will be commercialized as an ancillary service under the Wholesale Electricity Market and frequency response will be a key factor in the industry’s development in Mexico.

4. please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.

Energy storage projects are still considered as a luxury in Mexico as currently they are too expensive to be financially viable. Energy storage infrastructure will require private sector financing. These investments will require a coordinated effort from different stakeholders, including research institutions (i.e. Instituto de Investigaciones Eléctricas), policy makers and commercial banks to design financing programs and instruments to ensure that funding and technical assistance is available for energy storage projects.

As is the case in many other countries, finance is available in Mexico but more work needs to be done to systematically channel those funds to the most appropriate projects. Providing technical support to help financers evaluate storage projects will certainly help to overcome these challenges.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?

The main government entities involved in the electricity sector are:

  • Secretaría de Energía (Ministry of Energy): responsible for nationwide energy policy and for drafting the first Market Rules for the implementation of the Wholesale Electricity Market. It is likely to take on the principal responsibility in relation to energy storage as it implements policies required for the sector.
  • Comisión Reguladora de Energía (Energy Regulatory Commission): the regulator of the sector. It is responsible for regulating and granting generation permits, as well as transmission and distribution supply tariffs and monitoring the behaviour of the electricity participants. Furthermore, the regulator is responsible for amending the Market Rules enacted by the Ministry of Energy in the manner it deems proper. Therefore, if electricity storage projects become important in the Mexican sector, it may have the authority to amend such rules accordingly.
  • Centro Nacional de Control de Energía (independent system operator): responsible for the operation of the Mexican energy sector and the Wholesale Electricity Market, and responsible for facilitating the connection and interconnection of power plants and load centres to the transmission and distribution systems.
Derek Woodhouse
Luis Fernández Lagunas