Mexico's competition watchdog opposes Cenace move against renewables

Mexico’s competition watchdog (Cofece) weighed in heavily against the recent decision by the electrical grid operator (Cenace) to deny future connection permits to new solar and wind projects, ostensibly to ensure continuity of power supply through the COVID-19 crisis. 

The Cenace action has sent shockwaves through the sector, threatening new projects in the pipeline and shaking nerves just weeks before the planned May 27 adjudication of Mexico’s first private sector energy auction, which is being organized by Bravos Energía. 

“The agreement has created a new source of uncertainty for participants in our auction,” Bravos’ CEO Jeff Pavlovic told BNamericas. “We’re going to wait a few weeks for everyone to analyze and size their impacts before publishing a final schedule for the auction.” 

While legal action from private companies now seems inevitable, Cofece has become the first public entity to take issue with the policy. 

Responding to the Cenace action, Cofece issued a strongly worded opinion Thursday directed to the energy ministry, Cenace and the sector regulator (CRE), arguing that the policy change is a clear violation of the operator’s mandate to provide unbiased access to the system. 

By not establishing a clear time-frame for the pandemic-related policy, Cofece said Cenace was risking “indefinitely preventing new wind and photovoltaic plants from participating in the market, by suspending the pre-operational tests that are required for them to come into operation.” 

The watchdog also said that Cenace had failed to clarify how the measure would contribute to the stability of the national electric system (SEN) in the context of the low demand generated by the pandemic crisis.

“Even temporarily displacing the most efficient electricity generators could favor conventional generating plants, which are mostly owned by the [state-owned utility] CFE, which would be contrary to article 108 of the electricity industry law,’” read the Cofece statement.

Cofece also took issue with the impact on consumer rates by taking offline potentially cheaper energy sources. Relying on conventional generation with CFE “may unreasonably cause higher generation costs, which could imply increases in electricity rates or, in the case, an increase in federal government subsidies in a context of budget constraint,” said the watchdog.