Renewable Energy 2025 Comparisons

Status of the Energy Transition

The concepts of energy transition, efficiency, lower greenhouse emissions, a reduced carbon footprint and the use of clean energy sources were introduced to the Mexican energy legal framework over a decade ago, with the purpose of guiding and promoting the country’s transition from fossil fuels to the wider use of renewables. During the subsequent years, significant progress was made in the energy transition, but the López Obrador administration then stalled this trend through a series of actions, policies and legal amendments that particularly impacted the development of clean energy generation sources.

During that period, Mexico’s energy sector experienced high uncertainty since existing rules were constantly at risk of being modified, replaced or repealed, effectively limiting the participation of private investment in the sector.

The new administration led by President Claudia Sheinbaum has continuously expressed its commitment to reinstate and promote carbon-neutral and renewable energy policies. After taking office at the end of 2024, the new administration immediately implemented constitutional reform and enacted eight general laws to replace, in its entirety, the energy legal framework that existed at the time (the “2025 Energy Reform”).

The 2025 Energy Reform emphasises the relevance of transitioning to the use of clean energy generation sources, setting forth new rules for the participation of private investment in the development of the sector.

International Commitments and Targets

In 2016, Mexico ratified the Paris Agreement and committed to reduce greenhouse gas emissions by 22%. Then, during the United Nations Climate Change Conference (Conference of the Parties (COP)27), commitments were made regarding 35% and 51% decreases in greenhouse gas and black carbon emissions, respectively, by 2030. During COP27, Mexico also reaffirmed its commitment to zero greenhouse emissions by 2050, pledged to eliminate routine flaring and venting across oil and gas operations (including at the national oil company) and confirmed its intention to increase the country’s combined wind, solar, geothermal and hydroelectricity capacity by more than 30 GW by 2030. During COP28, Mexico signed an initiative to triple the capacity of renewable energies and double energy efficiency rates by 2030. Further to its previous commitments, during COP29, Mexico reaffirmed that it was working towards a net-zero economy by 2050.

The progress report for 2024 issued by the Ministry of Energy (Secretaría de Energía; SENER) (the “SENER Report 2024”) shows a constant increase since 2019 in the total net generation of clean energy and a decrease in the gap between Mexico’s targets and the actual proportion of clean energy. However, Mexico still ranks 39th out of 67 countries in the Climate Change Performance Index for 2025, dropping one place against the 2024 Index. The Index also classifies Mexico as a low-performing country, highlighting its position as one of the world’s largest producers of oil, gas and coal.

According to the Mexico Climate Initiative, for the country to reach net zero emissions by 2060:

• no new fossil fuel generation plants should be installed from 2027 onwards;
• more than 50% of electricity generation nationwide should come from renewable energies from 2030 onwards;
• the amount of solar energy generated must increase from 6 GW to 27 GW by 2030, and then to 63 GW by 2060; and
• the amount of wind energy generated must increase from 7 GW to 18 GW by 2030, and then to 82 GW by 2060.

As of September 2025, reaching such targets seems challenging.

Mexico has considerable potential to develop clean generation sources. According to the Mexican Association of Solar Energy, 85% of the territory is suitable for the development of solar energy projects. Furthermore, according to the Mexican Wind Energy Association, Mexico has the potential to install more than 50,000 MW of wind power generation capacity. To put this in perspective, only an additional 17,000 MW generated from these sources would be required to reach the goal of 35% clean energy. The National Electric Sector Strategy outlines four scenarios in which clean energy generation could range from 32% to 45%.

Other Technologies

Although photovoltaic, hydroelectric and wind energy represent almost 90% of the energy produced through clean energy sources in Mexico, the country’s legal framework allows for the use of other clean energy sources.

The updated Transition Strategy to Promote the Use of Cleaner Technologies and Fuels published by SENER in January 2024 (the “2024 Clean Technologies National Strategy”) contemplates electricity generation from diverse bioenergy sources and sets specific goals for clean energy participation, air emission reductions and energy efficiency in line with national climate commitments. The strategy also promotes the use of ocean energy, which holds significant potential given Mexico’s extensive coastline. According to the National Inventory of Clean Energy, viable sites for wave energy production include northern Baja California and the coastal region of Oaxaca, where power density reaches 15 kW/m.

Hydrogen

Green hydrogen is not yet being produced in Mexico on a large scale; however, the authors are witnessing a growing appetite in the sector. According to H2V2, a company that has developed hydrogen projects and commenced operations in Mexico, the country could become a global producer of hydrogen given its potential regarding large-scale renewable energy. As of July 2025, 17 new projects were being developed, with an investment of more than USD21 billion. One of the largest hydrogen projects currently under development in Mexico is financed by the Danish investment fund Copenhagen Infrastructure Partners, which seeks to produce green hydrogen and green ammonia for large-scale industrial use in the Isthmus of Tehuantepec.

In addition to private investment, the state-owned enterprises Mexican Petroleum (Petróleos Mexicanos, or PEMEX) and the Federal Electricity Commission (Comisión Federal de Electricidad, or CFE) are also participating in green hydrogen projects. According to PEMEX’s sustainability plan, its consumption of grey hydrogen could be replaced with green hydrogen. Furthermore, PEMEX’s plan contemplates a pilot project for blue and green hydrogen at the Deer Park refinery, the import of green hydrogen from the US Gulf Coast to Nuevo León, and the domestic production and export of surpluses of hydrogen as short-, medium- and long-term goals. The CFE and PEMEX are also contemplating a strategic alliance to develop a green hydrogen project at PEMEX refineries, and the CFE is developing a green hydrogen pilot project to cut reliance on natural gas and curb emissions, testing blends of up to 20% hydrogen in its power plants.

Although there is no specific regulation for the production, distribution, transportation or sale of hydrogen, it has been expressly included as a green technology in the recently enacted Planning and Transition Energy Law (Ley de Planeación y Transición Energética, or LPTE). Accordingly, the recently enacted Electric Sector Law (Ley del Sector Eléctrico, or LSE) indicates that energy generated from the use of hydrogen, whether through combustion or in fuel cells, is considered clean energy provided that it meets the minimum standards of the newly created National Energy Commission (Comisión Nacional de Energía, or CNE) and the life-cycle emissions criteria to be established by the Ministry of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales, or SEMARNAT).

The National Electric System Development Program (Programa de Desarrollo del Sistema Eléctrico Nacional, or “PRODESEN”) 2024 contemplates converting 5,789 MW of combined cycle capacity into clean production between 2033 and 2036 by operating existing facilities with a blend of 75% natural gas and 25% green hydrogen, with an additional 1,829 MW to be generated by new facilities operating with such a blend. Important challenges to the implementation of this project include the transportation of green hydrogen, which requires adjustments of and investment in infrastructure.

The 2025 Energy Reform also acknowledges the relevance of promoting other sources of clean energy. In 2024, the 160 CFE power plants had a capacity of 44,000 MW. Of this amount, which represents nearly half of the total effective capacity of the National Electricity System (Sistema Eléctrico Nacional, or SEN), 808 MW came from geothermal sources, while 12,156 MW came from hydroelectric sources. This alone represents 29.5% of the CFE’s total capacity.

The 2025 Energy Reform includes a new Biofuels Law (Ley de Biocombustibles), which regulates and promotes the sustainable development of biofuels as part of the energy diversification and transition process.

The new law expressly outlines the activities of producing, storing, marketing, transporting, distributing and selling biofuels, and grants SENER the authority to provide tax incentives for the use of biomass as biofuel and related activities. Key changes include authorising the sale of biofuels, adopting specific regulations for aviation biofuels and establishing a registry of permits.

Additionally, the 2024 Clean Technologies National Strategy sets out actions to promote biofuels, including updating standards on waste management for biofuel production, assessing consumption and demand across sectors, and conducting regional life-cycle analyses.

Although the amount of energy generated through bioenergetics has been erratic since 2019, Mexico has a solid foundation for its development through the use of urban solid waste. There are public programmes already in place, such as the Sustainable City Program of the Mexico City Government 2019–24, which finances a trust for the operation of the Mexico City market (Central de Abastos) – where, among other things, a biodiesel production plant was developed to transform used vegetable oil into diesel, with a capacity of up to 3,000 litres per day. A mix of this biodiesel and regular diesel is being used to operate two lines of the Mexico City tram, with the expectation of expanding the blend to the rest of the tram system.

Furthermore, the new Hydrocarbons Sector Law (Ley del Sector Hidrocarburos, or LSH) and a statute of PEMEX require state-owned enterprises to participate and invest in biofuels (including biodiesel and sustainable aviation fuel), hydrogen, geothermal energy and renewable generation. In its 2025–30 Strategy and Plan for the Strengthening and Expansion of the SEN, the current administration announced that PEMEX has created a new energy division on renewable energy, natural gas and electricity.

Similarly, a new Geothermal Law (Ley de Geotermia) was included in the 2025 Energy Reform, which introduces the concept of small-scale exploitation of geothermal resources for diverse uses such as heating, product drying, balneology, aquaculture, food preservation, de-icing, industrial processes and metal recovery.

SENER’s authority now includes evaluating and, as appropriate, co-ordinating projects for the conversion of oil wells for geothermal use. Although the new law includes provisions to continue enhancing geothermal generation, there is no clear strategy or targets at a national level. Mexico has considerable potential for geothermal energy, both onshore and offshore, with proven reserves of 286 MW, probable reserves of 5,730 MW and possible reserves of 7,422 MW as of 2015, which could represent an annual generation of 47,561.65 GWh.

There are signs of growing interest in geothermal projects in Mexico. For example, the International Institute for Electricity and Clean Energy awarded GSM Bronco a contract to drill four exploratory geothermal wells – three at Cerro Prieto and one at Las Tres Vírgenes, Baja California – under a USD51.5 million financing programme to be granted by the Inter-American Development Bank and Nacional Financiera. Furthermore, on 1 September 2025, the federal government granted the first concession under the new Geothermal Law for the exploration of geothermal resources in Guanajuato and energy generation for 30 years.

Overall Market

The 2025 Energy Reform stands as the most important recent development in Mexico’s energy sector, restructuring the market and redefining the role of the CFE and private participants. As a result, the federal government has issued the following plans and strategies relevant to the renewable energy market:

• the National Electricity Sector Strategy and the Strengthening and Expansion Plan of the SEN 2025–30;
• the PEMEX Expansion Plan; and
• the Strategy for Strengthening the SEN and meeting demand (which includes the construction of new transmission lines).

In addition, a CNE regulation established the requirements for permits for interconnected self-consumption generation for power plants with a capacity between 0.7 and 20 MW, and the Energy Regulatory Commission (Comisión Reguladora de Energía, or CRE) enacted the General Administrative Provisions on Energy Storage Systems.

As reported by Ember Energy in April 2025, only 25% of Mexico’s electricity in 2024 came from low-carbon sources, namely solar (7.7%), wind (5.8%), hydro (6.5%) bioenergy (2%) and nuclear (3.4%). The remaining 75% was fossil fuel-based, placing Mexico among the most fossil fuel-dependent OECD countries. Clean energy generation has stagnated despite rising demand, driving higher emissions due to increased reliance on imported US natural gas. Mexico’s 2030 target of 33% renewable electricity falls well below the IEA’s 60% Net Zero benchmark.

According to the SEN’s Strengthening and Expansion Plan (Estrategia para el Fortalecimiento del Sistema Eléctrico Nacional), published on 5 February 2025, the CFE’s clean generation capacity includes 86 MW of wind, 433 MW of photovoltaic, 12,156 MW of hydroelectric and 808 MW of geothermal energy. Pursuant to this plan, the CFE supplies 45,117 MW of effective capacity to the SEN, out of a national total of 92,014 MW. It therefore accounts for 16.4% of the country’s total clean generation capacity.

The CFE has set a target of increasing its generation capacity by 22,000 MW by 2030, of which approximately 25% will come from renewable sources. This expansion is expected to raise the CFE’s share of clean energy production for the SEN from its current 16.4% to 38%, equivalent to a total of 29,074 MW of clean energy capacity, including cogeneration. To this end, the CFE proposes the development of 51 projects with private sector participation, representing an investment of USD 22.377 billion, with operations scheduled to begin between 2025 and 2030. Additionally, the National Electric Sector Strategy contemplates that private investment will contribute between 6,400 MW and 9,550 MW of renewable generation capacity by 2030.

Significant Judgments

The Mexican energy sector experienced a highly litigious period between 2018 and 2024, where various legal proceedings, including constitutional injunctions (amparos), were filed by affected companies to block the actions being taken by the former administration against the 2013 energy reform. Several of these constitutional injunctions were resolved and have resulted in the granting of generation permits, or in the ability of certain companies to resume or commence operations; however, with the constitutional reform being part of the 2025 Energy Reform, these pending proceedings are to be dismissed.

The 2025 Energy Reform repealed the energy laws enacted back in 2013 and enacted eight new laws, including:

• the Law on the State-Owned Enterprise, CFE (Ley de la Empresa Productiva del Estado, CFE; the “CFE Law”);
• the Law of the State-Owned Enterprise, PEMEX (Ley de la Empresa Productiva del Estado, PEMEX);
• the LSE;
• the LSH;
• the LPTE;
• the Biofuels Law;
• the Geothermal Law; and
• the CNE Law (Ley de la Comisión Nacional de Energía).

The new administration is yet to issue the regulations for these laws or update several other existing rules, including the Wholesale Electricity Market Rules (Reglas del Mercado Eléctrico Mayorista, or “MEM Rules”), manuals, interpretative criteria and other general administrative provisions.

One of the most important principles of the 2025 Energy Reform is that it mandates predominantly federal government control, requiring the CFE to supply at least 54% of the energy injected into the grid each year while also maintaining a dominant role in commercialisation – and a monopoly in basic energy supply. Under the new regulation, cheaper energy types are to be dispatched first; however, the National Center for Energy Control (Centro Nacional de Control de Energía, or CENACE) is to always guarantee predominantly federal government control. There have been concerns that this may result in a tendency to dispatch energy generated by CFE power plants first, based on reliability and security arguments. Such concerns are expected to be addressed in the secondary regulations to be issued in the coming weeks (as of September 2025).

The predominance of the CFE and federal government will be ensured by the government through guidelines and policies that will direct investments and activities that may be undertaken by all parties involved in the sector (“binding planning”), such that the goals of the 2025 Energy Reform can be achieved.

This new and comprehensive legal framework regulates all activities throughout the power sector. The Constitution sets forth the legal principles for the development of the sector, while supplementary federal laws provide the foundation for its organisation and operation, as well as a path for Mexico’s transition to a sustainable energy model. Several secondary regulations, guidelines, interpretation criteria and technical norms (all of which will be updated to conform to the 2025 Energy Reform) further regulate activities and procedures throughout the sector.

Renewable and clean energy sources, while clearly identified, are not individually regulated in detail, but rather integrated into this general framework, while specific components, treatments and incentives thereof are regulated through secondary rules.

As part of the 2025 Energy Reform, the CRE was dissolved and replaced by the newly created CNE, a unit attached to SENER. During the transition period, the responsibilities of the CRE were temporarily delegated to SENER.

The CNE is now responsible for:

• implementing the national energy strategy, issuing generation permits and formulating tariff regulations;
• overseeing the wholesale electricity market (mercado eléctrico mayorista, or MEM);
• monitoring compliance with the obligations of clean energy certificates (certificados de energía limpia, or CELs);
• authorising technical specifications for the interconnection of new plants and the connection of load centres; and
• maintaining a registry of qualified users and identifying suppliers exempt from permit requirements.

However, the CNE will not resume the issuance of new energy generation and fuel permits until the new secondary regulation comes into effect. SENER remains the authority responsible for designing, co-ordinating and evaluating the national energy strategy, with the authority to issue regulation. It is responsible for geothermal and biofuels permits, social impact assessments, and issuing resolutions and recommendations on human rights, land use and collaboration agreements with the private sector. Through the Electric Sector Development Plan, SENER will direct the CNE’s issuance of permits, and its expansion of transmission and distribution networks, mixed investment and CELs.

CENACE remains the decentralised public entity responsible for the operational control of the SEN and the MEM. CENACE continues to safeguard impartial access to transmission and distribution grids. It has the authority to guarantee the safety of dispatch, reliability, quality and continuity of the SEN. Being independent from the federal government provides CENACE with greater autonomy to take decisions.

This redistribution of authority consolidates SENER’s role in strategic planning and the CNE’s role in technical and operational regulation, strengthening state control over the energy sector and aligning regulation with the principles of sovereignty, security and self-sufficiency, while also advancing the transition to cleaner energy with more centralised and co-ordinated oversight.

As part of the 2025 Energy Reform, the CFE became a state-owned enterprise rather than a “state-productive enterprise” (its former status) and undertook an internal restructuring that included re-absorbing its subsidiaries (including CFE Transmission and CFE Distribution), thereby centralising all the authority that had been distributed amongst its subsidiaries since the 2013 reform.

Pursuant to the 2025 Energy Reform, certain activities remain exclusive to the Mexican government, including planning and control of the SEN, rendering the public service of transmitting, distributing and generating nuclear energy, and now also the basic supply of electricity.

Furthermore, since the CFE has a pre-emptive right to inject at least 54% of its generated energy into the grid on an annual basis, participation in private generation is now limited to the remaining 46%. Pending secondary regulations should further clarify how these percentages are to be realised and monitored, which will provide certainty to investors that intend to develop energy generation projects.

Generation

The generation of electricity in Mexico may be carried out by the CFE, private parties or both in partnership. Two partnership structures between the CFE and private parties are regulated under the new legal framework.

• Long-term production: Private investors develop an energy generation project, and the CFE acquires all of its output and associated products. In this structure, the federal government has no obligation to contribute capital, the project is represented in the MEM by the CFE and project assets may be transferred to the CFE upon termination of the power purchase agreement (PPA; Contratos de Cobertura Eléctrica) without payment of any additional consideration. The private operator is prohibited from holding other permits, contracting under other structures or commercialising excess capacity with parties different from the CFE.
• Mixed investment: The CFE and private parties are to jointly develop an energy generation project, and the CFE is to own at least 54% of the project. As of September 2025, it is unclear how this percentage is to be realised, nor how the main corporate governance terms and conditions will be negotiated with the CFE. Different from long-term production, under this structure, the CFE may or may not acquire the output of the project, the CFE is not required to represent the project in the MEM, energy and associated products not acquired by the CFE may be sold through the CFE in the MEM and assets of the project are not to be transferred at the end of the PPA.

The foregoing does not prejudice SENER’s authority to determine additional structures.

Generation projects may adopt any of modalities described in 3.1 Electricity. As a rule, and regardless of the generation technology being used, all power plants with a generation capacity equal to or over 0.7 MW require a power generation permit issued by the CNE. Generators with less capacity are exempt from such requirement and are not allowed to sell surplus energy to – or buy energy from – the MEM without the involvement of a supplier. Generators are entitled to directly sell energy and associated products on the MEM, including power and CELs.

Renewable energy (solar, wind, geothermic, nuclear and biomass) generators will be entitled to receive one CEL per MWh of renewable energy generated, while clean (hydroelectric, efficient cogeneration, conventional thermal, hydrogen and distributed energy) generators will receive a percentage of a CEL based on the proportion of generated energy that is free from fossil fuels. Suppliers and users are bound to acquire CELs equivalent to a percentage of their total consumption, as determined by SENER each year, and they can do so through the MEM or directly from the generators. CEL price will vary depending on supply and demand.

Transportation and Distribution

In Mexico, the transmission and distribution of electricity is a strategic activity of the state. Therefore, the CFE holds exclusive rights to provide these essential services. However, the government may subcontract private entities to assist in this regard. The CNE and SENER are responsible for issuing the general terms and conditions for rendering these public services.

Transmission and distribution services are rendered through the SEN. The national transmission network transports electricity to the distribution grid, and the general distribution network (a low/medium-voltage grid) distributes energy to the public. The CFE, which is responsible for these grids (including their expansion and modernisation), follows CENACE’s instructions and may not agree to terms and conditions different from those approved by the CNE or SENER – unless they are expressly identified as negotiable, in which case such conditions will have to be offered to users in similar circumstances.

The CFE must interconnect power plants and load centres upon request from their owners or operators, when technically feasible. CENACE will instruct the CFE to execute the interconnection or connection agreements based on the models approved by the CNE and SENER. Amendments to the interconnection framework for power plants and load centres remain pending and are expected to be updated in line with the new laws. These changes are intended to align interconnection rules with the binding planning regime and the federal government’s objectives.

The new administration has announced important investments in the coming years to upgrade transmission and distribution networks. For instance, the National Electricity Plan allocates USD7.4 billion to strengthen the National Transmission Network and USD3.6 billion for distribution infrastructure, such as substations and transformers.

Commercialisation

Commercialisation activities include:

• providing an electric supply;
• representing exempt generators in the MEM;
• transactions in the MEM;
• execution of agreements between generators, suppliers and qualified users of the MEM;
• acquisition of transmission and distribution services at regulated tariffs; and
• purchase and sale of associated services (Servicios conexos).

There are three types of supply:

• basic supply – now reserved exclusively for the CFE, basic supply is provided to any party upon request, except for qualified users (ie, those final users with a demand equal to or greater than 1 MW who are registered with the CNE to acquire supply directly from a qualified supplier);
• qualified supply – provided pursuant to a free competition regime to qualified users; and
• last-resort supply – provided to qualified users for a limited period of time at capped prices to secure continuity when the qualified supply is not available.

Supply of any type requires a permit from the CNE, registration before the MEM and execution of a market participant agreement. Basic supply may only be provided by the CFE, as stated in the foregoing. Last-resort supply is regulated in the relevant qualified service agreement and market participant agreement. If the type of supply needs to be changed, the issuance of a new permit is required.

The now-dissolved CRE issued general guidelines on prices and tariffs for basic supply, last-resort supply and associated products; however, generators, transporters, distributors and regulated suppliers may agree to discounts, which must be applicable on a general and non-discriminatory basis, and such agreements will have to be registered with the CRE (now the CNE). Prices and tariffs must include all concepts and charges. These rules may be amended to adjust to the 2025 Energy Reform; however, in the meantime, provisions not contradictory to the LSE will remain in effect.

The following activities are not considered to reflect commercialisation, and thus do not require a permit or registry:

• the sale of electricity from an end user to a third party, provided the electricity is used within a private network; and
• the sale of electricity from a third party to an end user, provided it is generated through distributed generation within the end user’s facilities or private network on the same site.

Existing power generation permits and authorisations for import and export may be transferred only upon joint request by the assignor and the assignee, and with authorisation from SENER (previously from the CRE). Power generation permits to be issued pursuant to the 2025 Energy Reform will have to be reviewed to identify any restrictions.

Market participant and interconnection agreements are not transferable without the consent of CENACE or the CFE, except for any collection rights thereunder, which may be assigned upon notice to CENACE.

PPAs awarded by the CFE include restrictions related to change of control and change in the corporate structure of the seller, assignment of contract and the sale, transfer or lease of the relevant power plant.

Concessions for the exploitation of geothermal deposits may be assigned only to entities that meet the same requirements fulfilled by the original assignee, and upon prior authorisation from SENER. If the assignment is within the same corporate group as the original holder, written notification to SENER will be sufficient.

When acquiring or transferring energy assets with a certain value or market significance, it may also be necessary to obtain authorisations from, or provide notifications to, the Federal Antitrust Commission (now the National Antitrust Agency).

As mentioned in 2.3 Regulated Activities, the CFE has exclusive rights over certain activities, and participation of private investment in the sector is limited to 46% of the total annual energy supplied to the grid. Furthermore, a favourable resolution from the Foreign Investment National Commission is required if foreign investment intends to participate, directly or indirectly, in more than 49% of the capital stock of a company, whenever the total value of the assets of the company at the time of submitting an acquisition application exceeds the amount determined annually by the Commission (currently, approximately USD1.4 billion).

Please refer to 2.3 Regulated Activities regarding the generation of electricity in Mexico. Specific technical requirements applicable to different technologies may be further regulated under the Mexican Official Standards, environmental regulations and the MEM rules.

Electricity generation in Mexico may be accomplished under four different modalities:

• distributed generation;
• self-consumption;
• cogeneration; and
• MEM generation.

For self-consumption generation and distributed generation, please refer to 3.5 Local and Domestic Production. Cogeneration is limited to electricity produced from thermal energy not used in industrial processes. MEM generation is accomplished via a power plant with a capacity equal to or greater than 0.7 MW, for sale through MEM mechanisms, and may be developed by the federal government or private parties – or through mixed-investment structures. Any public-private structure may include these modalities of electricity generation.

Please refer to 2.3 Regulated Activities regarding the generation of electricity, and to 1.2 Renewable Energy Technologies. Specific requirements for bioenergy are included in the Biofuels Law.

The development and implementation of bioenergy involves the co-ordinated effort of several authorities, including SENER, the Ministry of Agriculture and Rural Development, SEMARNAT, the Ministry of Economy and the Ministry of Finance and Public Credit.

Please refer to 2.3 Regulated Activities regarding the generation of electricity, and to 1.2 Renewable Energy Technologies. Development of this technology is regulated in detail through different legal provisions, including the Mexican Constitution, the Geothermal Law and the National Waters Law.

Pursuant to the Mexican Constitution, ownership of subsoil waters is always retained by the Mexican federal government, and thus its exploitation requires a concession granting the right to exploit a specific area, use its resources, and continuously and exclusively exploit a geothermal deposit.

Please refer to 1.2 Renewable Energy Technologies and 2.3 Regulated Activities.

Distributed Generation

Small-scale renewable energy production in Mexico, such as by rooftop solar photovoltaic (PV) systems for domestic use, is currently implemented through distributed generation, which is electricity generated by an exempt generator and produced in a power plant interconnected to a private network (“distributed generation”). It is contemplated within the general electricity framework, but specifically regulated in administrative guidelines and the interconnection manual applicable to power plants with a capacity below 0.5 MW (now 0.7 MW; please note the manual was issued prior to the 2025 Energy Reform, and will remain in effect to the extent that it is not contradictory to the LSE or until repealed by a new or amended manual).

Distributed generators may sell electricity and associated products in the MEM when technically feasible, through a basic services supplier or for self-consumption. For these purposes, the CNE must issue model agreements and compensation calculation methodologies.

Under the former regulation, the price for the electricity delivered to the distribution grid will be contractually agreed between the exempt generator and the supplier, using any of the following:

• net metering, which considers the exchange of energy flows with the distribution grid, offsetting the energy delivered by the exempt generator against the energy received by the end users in the corresponding period;
• net billing, which considers the flows of energy received and delivered to and from the distribution grid, and assigns a value that may vary on purchase and sale; or
• total energy sale, which considers the flow of energy delivered to the distribution grid and assigns a sale value.

A draft of the general administrative provisions on power plants with net installed capacity of less than 0.5 MW (Distributed Generation and Distributed Clean Generation) is currently under discussion and contemplates relevant changes, including elimination of the net metering option for medium-voltage systems.

As a result of the 2025 Energy Reform, the generation capacity to be considered as distributed generation was increased from 0.5 MW to 0.7 MW. This adjustment will definitely facilitate achievement of Mexico’s sustainability goals, standing as one of the most promising solutions to improve the efficiency and resilience of the energy sector – and particularly to address the increasing demand for energy in the country from small and medium-sized commercial and industrial entities.

Self-Consumption

Energy generation for self-consumption (autoconsumo) replaced the isolated supply (abasto aislado) regime in effect prior to the 2025 Energy Reform. Under the LSE, "self-consumption” is defined as a power plant with a generation capacity equal to or greater than 0.7 MW whose energy is produced to satisfy the on-site needs of the holder of the generation permit.

Under the former Electric Industry Law (Ley de la Industria Eléctrica, or LIE), the CRE issued interpretative criteria for the concept of “own needs” that characterised the isolated supply regime. Such interpretation limited the generation or import of energy for consumption by load centres belonging to the same entity, or to a group of entities within the same economic interest group – ie, under common control.

This definition posed a significant challenge to implementing isolated supply, as it required the generator and consumer to be the same entity, or to be related through subsidiaries or affiliates, making it difficult to supply entities outside this group. It is expected that implementing regulations and interpretative criteria from the LSE will not impose this requirement on self-consumption projects.

Similar to isolated supply, self-consumption projects may be ring-fenced or interconnected to the grid. However, different from the provisions of the former LIE, energy surpluses may only be injected into the SEN without consideration, or sold exclusively to the CFE. For intermittent generation, the power plant must own a storage system or pay the CFE for storage. For these purposes, the CNE is to issue model contracts, calculation methodologies and criteria to determine and adjust the applicable considerations, as well as guidelines for the obtention of corresponding generation permits.

The LSE prefers that these kinds of project be developed with renewable energy; however, it does not mention whether this implies any benefit to the project or its developers.

Interconnected self-consumption with a generation capacity of between 0.7 MW and 20 MW will be subject to an expedited process to obtain a generation permit, where this process is to be determined by the pending CNE guidelines.

Isolated and interconnected self-consumption power plants may purchase energy and associated products from the grid whenever they are unable to meet the energy requirements of the permit holder. Self-consumption will be crucial for meeting the energy demands of large consumers, such as data centres, industrial parks and manufacturers.

Transportation is detailed in 2.3 Regulated Activities.

Storage

Before the 2025 Energy Reform, there was no specific regulation for the storage of energy except for a few provisions applicable to distributed generation and certain provisions included in the grid code. The new LSE categorises storage as an activity of the electricity sector and part of the electricity network.

The LSE defines “electricity storage system” as a system of components and equipment that enables electricity extraction from a grid or energy source, for storage for later use or grid injection. Pursuant to the LSE, an intermittent generator categorised under “interconnected self-consumption” injecting electricity into the grid must have a storage system or pay the CFE for this service. The storage requirements will be determined by CENACE on a case-by-case basis through a variability study.

SENER has the authority to determine the conditions and modalities of storage systems, while the CNE may establish compensation methodologies. Storage systems may be installed by market participants and permit holders to offer electricity and associated products, in order to increase operational flexibility and contribute to the SEN in accordance with the MEM Rules. However, the same available capacity or energy may not participate in more than one service and must be offered in full to CENACE.

In March of 2025, the now-dissolved CRE issued the General Administrative Provisions for the Integration of Storage Systems into the SEN, establishing modalities, interconnection requirements and market participation rules. This regulation applies to CENACE, generators, suppliers, transmission and distribution utilities, load-serving entities and end users. Storage systems may be associated with a power plant, load centre, isolated supply scheme (now known as the “self-consumption scheme”) or exempt generators. Certain modalities are treated as power plants for regulatory purposes. Storage systems may provide ancillary services under the MEM Rules, but clean power plants may not receive additional CELs for stored energy. These regulations will also need to be updated by the CNE to conform to the 2025 Energy Reform.

Legacy interconnection agreements must fully migrate to the current regime to integrate storage systems.

CENACE co-ordinates and regulates the operation of the SEN and the MEM based on the principles of reliability and continuity. It analyses demand and determines the amount of energy that may be injected into the grid without putting the system at risk, to then be dispatched based on economic efficiency. CENACE is responsible for ensuring that supply is guaranteed, including from clean energy and renewables, but also from non-intermittent sources and flexible sources that can increase and decrease generation rapidly in order to stabilise the system when necessary (eg, combined cycles).

With the new LSE chapter and storage systems regulations, mechanisms are now in place to manage intermittency, particularly in relation to renewable power plants. This may increase interest in developing clean energy-generating projects. Because storage systems reduce the extent of curtailment of renewable output, the dispatch order is not jeopardised, making clean energy more reliable.

In the event of an unforeseen event or force majeure that jeopardises the integrity of the SEN, CENACE may suspend the operation of the MEM in accordance with the MEM Rules, and may also issue extraordinary instructions to recover its regular operating status. These instructions shall prevail over any criteria in the applicable regulations and must be complied with by transporters, distributors, market participants and other users of the SEN. In any case, the suspension must be exceptional, and CENACE will remunerate affected generators for the estimated production costs of their plants in accordance with the parameters of reference established for each plant.

As discussed in 4.1 Electricity, Mexico is actively developing regulatory frameworks for energy storage systems. This is a crucial step towards mitigating the challenges posed by the intermittent nature of renewable energy sources. Furthermore, off-grid solutions like self-consumption and distributed generation are available. However, as discussed in 4.1 Electricity, these options face certain limitations that hinder their widespread and efficient implementation.

The transportation and storage of gas from renewable sources are regulated pursuant to the general framework discussed in 3.2 Gas.

There is no specific regulation for the injection of gas from renewable sources into the public grid. However, the authors understand that adjustment of transportation infrastructure will be a relevant challenge, as further discussed in 4.5 Hydrogen and Other Biofuels and Renewables.

The main features of the sector for transportation are detailed in 2.3 Regulated Activities, and those for storage are in 4.1 Electricity. As of September 2025, there is no specific regulation for the transportation or storage of heat from renewable sources.

The main features of the storage sector in Mexico are detailed in 4.1 Electricity; to date, there are no specific provisions applicable to the storage of hydrogen. Similarly, there is no specific regulation in place for the transportation of hydrogen; however, according to PRODESEN, the initial proposal to transport green hydrogen as gas entails adaptation of the current natural gas transportation infrastructure, including the northeast network of pipelines (Sonora, Sinaloa and Tamaulipas), the Tehuantepec Isthmus, Baja California and the Yucatán Peninsula.

The MEM was created in 2013 with the purpose of delivering energy at competitive prices and providing alternatives for energy supply in Mexico. It is operated by CENACE, following the MEM Rules by which participants can sell and buy electricity, power CELs and other associated products required for the operation of the SEN. The MEM is comprised of a short-term energy market, a market for capacity (potencia) and a CEL market.

Generators inject electricity into the MEM, and consumers acquire energy according to their needs; thus, prices are shaped by supply and demand. Offer prices are determined by variable costs, so energy generated with lower variable costs is dispatched first. CENACE oversees this dispatch.

Aside from generators, market participants include qualified suppliers (suministradores calificados), who obtain energy directly from generators and sell it to qualified users (usuarios calificados) under arm’s length conditions – as opposed to basic supply, which is provided according to regulated tariffs by the CFE. Qualified users are large consumers whose energy demand is equal to or greater than 1 MW and who are registered in the Registry of Qualified Users of the CNE.

Qualified suppliers play a key role in the MEM as they allow qualified users to purchase energy directly from the MEM, and to access more competitive rates while opting for specific energy generation sources.

A qualified user may also become a market participant to acquire energy directly from generators. This requires an aggregate demand of at least 5 MW and an annual consumption amount of at least 20 GWh.

The MEM Rules and applicable manuals regulate market participants. An entity must complete the registration process with CENACE to determine whether it complies with certain requirements (such as having a minimum capital stock) in order to execute a market participant agreement. Once registered, such entity must complete a certification process with CENACE before commencing operations in the MEM. This process involves CENACE confirming the submission of a performance guarantee within 120 days of executing the market participant agreement. Additionally, the participant’s personnel must demonstrate adequate technical capacity and equipment to participate in the MEM. The process also includes registering bank accounts and ensuring the reliability of communication mechanisms with CENACE.

As of September 2025, there is no specific regulation or structure for the trade and supply of gas from renewable sources.

As of September 2025, there is no specific regulation or structure for the trade and supply of heat from renewable sources.

As of September 2025, there is no specific regulation or structure for the trade and supply of hydrogen from renewable sources.

In the first quarter of each calendar year, SENER will determine the CEL requirements to be met during the following three years (or subsequent years) by suppliers, qualified market participants and end users supplied through self-consumption, as well as holders of legacy interconnection contracts (legados). CEL requirements, once published for a specific year, may not be reduced.

The CNE will grant the corresponding CELs, issue the regulation to validate ownership and verify compliance with CEL obligations.

CELs are negotiable through the MEM, and instruments from other markets may be admitted when approved by SENER. For example, applicable regulations do not restrict the coexistence of CELs and International Renewable Energy Certificates (I-RECs), which are certificates issued exclusively by international issuers with the purpose of securing renewable energy generation on a global scale. Such certificates are recognised by the Renewable Energy 100 (RE100), an international initiative created to collaborate with the Carbon Disclosure Project, which surveys progress in the targets and practices of some of the most important companies in the world in connection with the use of renewable energy.

Pursuant to the MEM Rules, CENACE operates a spot CEL market, such that market participants who are legally bound to acquire CELs may do so from generators offering such CELs at a price that will be determined by supply and demand. CELs may also be acquired outside of the market through hedge agreements negotiated bilaterally with generators under free market conditions.

The 2025 Energy Reform may affect the CEL market. Under the new legal framework, any clean power plant can claim CELs with a validity period of 30 months, regardless of the date of commencement of operations. Before these amendments were introduced, CELs promoted the development of new plants, and legacy plants were not entitled to receive CELs. CELs are one of the most important mechanisms implemented by the Mexican government to reach clean generation and air emissions reduction targets. It is expected that the 2025 Energy Reform will trigger the development of new clean energy generation projects and, by extension, a more dynamic CEL market.

PPAs

PPAs are customary in Mexico to commercialise electricity, either with the CFE or among private parties. With the change in regulations, mandatory auctions have been eliminated, and the CFE may only enter into contracts directly with any generator under any modality determined by its board, or through competitive mechanisms for acquiring energy and associated products in the MEM. These mechanisms may include ascending auctions, descending auctions or first-price sealed-bid auctions, as well as restricted invitations or direct awards, among others. CENACE may acquire capacity, energy, associated products and ancillary services through competitive mechanisms, when deemed necessary to ensure the reliability of the SEN (subject to authorisation from SENER). The new PPA model contracts are expected to be issued by the CFE.

In the past, clean energy generators have entered into PPAs with bankable conditions very similar to those used in other jurisdictions. PPAs entered into with the CFE as offtaker were granted for periods of up to 15–20 years; however, such periods may not be achieved with private offtakers, considering market conditions that make energy prices uncertain and other factors such as variable transmission costs. Take-or-pay is an acceptable structure for these contracts.

Location

In Mexico, developers may secure land through direct acquisition, lease, usufruct or easements, among other routes. Negotiations are undertaken directly with the owner, aside from when dealing with agrarian land. The LIE included specific provisions regulating the use and exploitation of land for activities related to the electricity sector, intended to protect the owners of such land by establishing formalities and minimum requirements for contracts – including land valuation and the involvement of relevant authorities to ensure fairness. Under the LIE, such formalities applied exclusively to geothermal or hydro projects and excluded wind and photovoltaic projects.

Now, the LSE provides that surface use and occupation obligations apply to power plants using geothermal or hydro resources, as well as to any other power plants covered by additional regulations. In other words, the LSE expands the scope of application of these obligations relative to the scope under the former LIE.

There is currently no provision that specifically exempts wind or photovoltaic projects from compliance with surface use and occupation obligations, but there is also none that expressly includes them.

Secondary regulation should clarify this matter, as it could have an impact on the development of these projects given that it has direct consequences for costs and timing.

Concerning agrarian land, contracts require approval from the agrarian assembly. Furthermore, if a parcel of agrarian land is to be transferred to a third party outside the ejido, it requires a change of legal regime from agrarian property to private property, which requires approval from a special ejido assembly.

During development, it is customary for contractors to assist the communities being impacted by the project; this often involves constructing social infrastructure.

Construction and Operation

These phases can be implemented and co-ordinated through a standard structure involving project contracts such as EPC and O&M agreements, as well as other agreements that are customary for the development of renewable energy projects (ie, asset management, interphase and offtake agreements). All of these contracts are generally negotiated between private parties. International models, such as that of the International Federation of Consulting Engineers (Fédération Internationale des Ingénieurs-Conseils; FIDIC), may also be followed but are not widely used.

Contractors are usually Mexican entities (taxable in Mexico/having an official Mexican tax ID number) for tax purposes. Particular attention must be paid to labour provisions, as outsourcing structures are permitted exclusively for specialised services or works that fall outside of the corporate purpose or main economic activity of the contracting party.

Different permits are required at the federal, state and/or municipal level depending on the project’s location, size, development stage (ie, greenfield, brownfield) and water requirements, as well as on the activities to be performed, among other things. However, generally, power-generating projects will require a power generation permit, an interconnection agreement and a MEM participation agreement (as detailed in 2.3 Regulated Activities), social impact assessments (or an energy-specific social assessment under the new LSE, as detailed in the following), environmental impact authorisation, land permits, construction and operation licences, water concessions and approvals from the National Institute of Anthropology and History.

Regarding permitting, the LSE now requires a social impact assessment, which entails the issuance by SENER of an actual resolution – which may be favourable, negative or conditional – rather than a recommendation, as was the case with the former social impact assessment under the LIE. Most importantly, the social impact assessment must remain effective for the term of the project; any amendments to the project will thus require an amendment to this assessment.

While obtaining permits in Mexico can generally be a time-consuming process, delays can be particularly significant when it comes to obtaining permits from the CNE and the National Water Commission (Comisión Nacional del Agua; CONAGUA). These agencies are grappling with a significant backlog, leading to delays that often exceed the legally mandated timeframes for processing applications. This may be exacerbated by the ongoing transfer of authorities and responsibilities from the CRE to the recently created CNE. However, Mexican authorities have communicated that once the regulations are in place to implement the 2025 Energy Reform, the CNE expect to resume the granting of permits within the timeframes required by law.

It is worth noting that, in general, permits in Mexico are non-transferable and cannot be subject to liens. However, there are exceptions to this rule. Certain permits, including power generation permits (at least those issued under the former LIE), can be transferred to security trusts established for the benefit of senior lenders. However, any subsequent transfer of these permits in the event of foreclosure would still necessitate authorisation from the relevant authority.

Key Parties

Similarly to international practice, the development of renewable energy projects is generally undertaken through a special-purpose vehicle (SPV) to ring-fence the asset and isolate liabilities for bankability and other purposes. This SPV plays a central role as a party to the project contracts and holder of permits. Other key parties include independent engineers, environmental and insurance advisors, tax advisers, trustees, public notaries, communities being affected by the project (and who are legally entitled to be involved in it) and several authorities, varying depending on the type of development (the CNE, CENACE, SENER, the CFE, SEMARNAT, CONAGUA, federal or local courts, public registries, etc).

The development of offshore projects follows a similar process to that described in 6.1 Onshore Project Development, except for the acquisition of land. Since these projects will be located either very close to the seashore or directly within the territorial sea, contiguous area or economic exclusive zone, specific permits or concessions may be required to occupy and exploit such areas. Furthermore, the intervention of additional authorities, such as CONAGUA, the Ministry of the Navy or the Ministry of Communications, Infrastructure and Transport, may be required.

It is important to recognise that, at present, offshore projects in Mexico primarily pertain to the hydrocarbons sector.

Renewable energy assets in Mexico are generally financed through a standard project finance structure, comprising a loan agreement (Mexican or subject to foreign law) granted by national and/or foreign financial institutions and secured through a collateral package that conveys all the assets of the SPV to a security trust or pledge for the benefit of the lenders. It is accompanied by an equity component and generally negotiated in parallel with a facility to finance the value-added tax.

In addition to what was discussed in 6.1 Onshore Project Development, the following legal considerations are relevant when financing renewable projects in Mexico.

• As of now, secondary regulations should clearly define how CENACE will implement the obligation of federal government dominance in the dispatch of generation plants. This will impact the bankability of projects and the certainty for investors.
• For bankability, renewable projects usually require a PPA. Although a merchant element is not uncommon, fully merchant projects are unusual.
• The financial viability of mixed-investment generation projects depends on (i) the terms agreed upon in long-term PPAs with the CFE, and (ii) flexible corporate agreements that – at least – provide fair conditions for private investors and the CFE.
• As mentioned in 6.1 Onshore Project Development, securing land in Mexico is time-consuming and capital-intensive for developers. This represents a particular hurdle for solar and wind plants, since they require large land surfaces.
• Mexico has the environmental conditions to produce renewable energy at very low cost; however, the current lack of storage and transmission infrastructure renders renewable energy projects subject to curtailment risks.
• New regulations require renewable energy projects to be developed jointly with storage systems; thus, financial models must start considering these additional costs.
• The revenue that generators obtain per CEL will not be factored into the modelling for financing unless such CELs are contractually committed to a party.
• The transfer of authority from the CRE to the recently created CNE may result in administrative problems, thus increasing delays to the resolution of procedures. Additionally, it is yet to be clarified how the new concept of binding planning included in the LSE will influence the projects to be developed, or the permits to be granted.

Plan México, launched by the federal government, sets forth strategies to promote nearshoring, including strengthening industrial corridors and “wellbeing hubs” (Polos de Bienestar), developing local and regional supply chains, increasing investment and export flows, doubling the number of dual-education programmes, promoting certifications and technical careers and strengthening scientific development, technological development and innovation. A decree issued on 21 January 2025 grants tax incentives to accelerate such initiatives, consisting of the immediate deduction of investments in new fixed assets acquired and used up to 30 September 2030, as well as an additional 25% deduction for incremental expenses associated with dual training (subject to collaboration agreements with the Ministry of Education) and innovation projects linked to patents or initial certifications. The total budget is capped at MXN30 billion (of which MXN28.5 billion is allocated to fixed assets and MXN1.5 billion to training and innovation, including a minimum of MXN1 billion earmarked for taxpayers with annual revenues of up to MXN100 million), applicable without distinction between domestic and foreign companies.

Accelerated Tax Depreciation for Machinery and Equipment for Renewable Energy Generation or High-Efficiency Electricity Cogeneration Systems

To determine corporate income tax (CIT), taxpayers may deduct 100% of the cost of the machinery and equipment used for renewable energy generation or high-efficiency electricity cogeneration systems in a single tax year, under the Mexican Income Tax Law (MITL), provided the assets remain operational for at least five consecutive years; otherwise, the corresponding tax must be recalculated and paid. In addition, a decree published on 22 May 2025 grants a similar 100% immediate deduction for new fixed assets acquired and used according to the Poles of Economic Development for Wellbeing (Polos de Desarrollo Económico para el Bienestar), applicable for tax years 2025 to 2030, with a minimum holding period of two years (and subject to specific location and compliance requirements).

Net Profit After Tax Account Derived From Renewable Energy Investments

Under the MITL, taxpayers engaged exclusively in the generation of renewable energy or energy from high-efficiency electricity cogeneration systems (with at least 90% of their total income coming from such activities) may, in the fiscal year in which they apply the deduction under the MITL, create a renewable energy investment profit account (cuenta de utilidad por inversión en energías renovables). This account is subject to the same rules as the net profit after tax account (cuenta de utilidad fiscal neta, or CUFIN) of the MITL, but replaces the net tax profit of a given year with the “renewable energy investment profit”.

Dividends or profits distributed from this account are not subject to CIT, except for the tax provided under Articles 140 (2) and 164 (I, fifth paragraph, and IV) of the MITL. Taxpayers must keep a cumulative record of such distributions, and once a CUFIN balance is generated, the remaining undistributed balance of the renewable energy investment account may no longer be distributed.

Corporate Income Tax Credit for Electric Vehicle Charging Equipment

A tax incentive is available under the MITL for income taxpayers who invest in electric vehicle charging equipment that is fixed and installed in public places. This incentive consists of a tax credit equal to 30% of the investment amount, which can be applied against the CIT payable for the fiscal year in which the investment is made. If the credit exceeds the taxpayer’s payable income tax, the remaining balance may be carried forward and credited in the following ten fiscal years until fully used. If the credit is not applied in the fiscal year in which it becomes available, the right to apply it in subsequent years is forfeited for the unused amount.

Local Taxes

Most states in Mexico offer exemptions or reductions on local taxes for taxpayers whose corporate purpose, main activity or investment is focused on high-technology or renewable energy projects. For instance, Mexico City grants newly incorporated businesses in high-technology sectors, including renewable energy, a 30% reduction in property tax, a 55% reduction in payroll tax and an 80% reduction in the tax on real property acquisitions for newly incorporated businesses dedicated to innovation and the development of goods and services related to renewable energy. In contrast, the State of Mexico offers a tax credit equal to 30% of the investment in renewable energy, which can be applied against the local tax on gas emissions.

Exemption From the Federal Tax for New Vehicles

Electric vehicles powered solely by rechargeable batteries, as well as electric vehicles equipped with either a combustion engine (plug-in hybrids) or a hydrogen-powered motor, are exempt from paying the federal New Automobile Tax (Impuesto Sobre Automóviles Nuevos, or ISAN).

State Vehicle Tax

Most states in Mexico offer exemptions from or reductions in the annual vehicle ownership tax for electric or hybrid vehicles. For instance, Mexico City exempts these vehicles from the vehicle tax, while the State of Mexico grants a 100% exemption for the first five years, followed by a 50% reduction thereafter, as set forth in its Tax Code.

As mentioned in 1.1 Energy Transition, although regulation requires an annual plan for decommissioning, PRODESEN 2024 does not include any specifics.

The 2025 Energy Reform aligns Mexico’s energy policy with the objective of reinforcing the development of renewable energy. Among other things, the new legal framework:

• promotes the use of renewable energy (commercial and domestic) by increasing the generation capacity of distributed generation and facilitating the granting of permits for self-consumption;
• provides mechanisms through the new storage regulation to make renewable energy projects reliable – addressing, to a certain extent, the risks related to dispatch;
• allows the private sector to join forces with the CFE and the federal government with respect to the development, under competitive conditions, of new generation plants; and
• provides a basis for continued research and development of uncommon renewable generation sources in Mexico, such as green hydrogen, solar thermal, geothermal and biofuels.