Status of the Energy Transition

The concepts of energy transition, efficiency, decrease in greenhouse emissions, reduction of carbon footprint and 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 away from fossil fuels to a wider use of renewables. Significant progress was made in the energy transition until the López Obrador administration, when the trend was stalled through a series of actions, policies and legal amendments that particularly impacted the development of clean energy generation sources.

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this time, Mexico’s energy sector experienced high uncertainty since rules were constantly at risk of being modified or repealed, thus effectively limiting the participation of private investment in the sector.

Contrarily, the current 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 Sheinbaum administration implemented a constitutional reform and enacted eight general laws to replace entirely the then-existing energy legal framework (the “2025 Energy Reform”).

The 2025 Energy Reform emphasised the relevance of transitioning to clean energy generation sources and included rules for the participation of private investment in the sector.

International Commitments and Targets

In 2016, Mexico ratified the Paris Agreement and committed to a 22% reduction in greenhouse gas emissions by 2030, together with a 51% reduction in black carbon emissions, also by 2030.

At the United Nations Climate Change Conference (COP) 27, Mexico reaffirmed its commitment to zero greenhouse emissions by 2050, pledged to eliminate routine flaring and venting across oil and gas operations (including via the national oil company) and confirmed the intention to deploy more than 30 additional gigawatts of combined wind, solar, geothermal and hydroelectric capacity by 2030.

At COP 28, Mexico signed an initiative to triple the capacity of renewable energies and double energy efficiency rates by 2030. At COP 30, Mexico reaffirmed these commitments and presented its third Nationally Determined Contribution (“NDC 3.0”), setting, for the first time, an absolute net emissions cap ranging between 364 and 404 million tonnes of CO₂ equivalent for 2035 and targeting a 38.5% of electricity generation from clean sources by 2030.

The Electricity Sector Development Plan for 2025–39 (Plan de Desarrollo del Sector Eléctrico or PLADESE), issued by the Secretariat of Energy (Secretaría de Energía – SENER) on 17 October 2025, includes 75,559 MW of new generation capacity over a 15-year horizon, out of which 78% is expected to come from clean technologies.

Mexico nonetheless remains rated very low on renewable energy in the Climate Change Performance Index, and independent assessments consider that meeting net zero by 2060 would require solar capacity to grow from 6 GW to 27 GW and wind from 7 GW to 18 GW.

Mexico has considerable potential to continue growing clean generation sources. According to the Mexican Association of Solar Energy, 85% of the territory is suitable for the development of solar energy projects. The Mexican Wind Energy Association also recognises Mexico’s potential to install more than 50,000 MW of generation capacity from wind power. To put this in perspective, only an additional 17,000 MW generated from these sources would be required to reach 35% of the clean energy production goal.

Other Technologies

Although photovoltaic (PV), hydroelectric and wind energy represent almost 90% of the energy produced through clean energy sources in Mexico, the current legal framework is sufficient to allow the development of other clean energy sources, including hydrogen, biofuels and geothermal.

Hydrogen

Green hydrogen is not yet produced at scale, and there is no unified framework: rules remain fragmented across energy, environmental, mining and bioenergy legislation, so projects are structured by combining general energy regulation with international technical standards. Nonetheless, a pipeline of some 24 to 28 projects across 13 states exists, targeting green hydrogen, ammonia and methanol, with participation from Mexican Petroleum (Petróleos Mexicanos – PEMEX), the Federal Electricity Commission (Comisión Federal de Electricidad – CFE) and private developers. Oasis BCS, pairing solar, storage, electrolysers and fuel cells to supply the isolated Mulege grid in Baja California Sur, is the CFE’s first generation project to be developed around green hydrogen.

Biofuels

The 2025 Energy Reform included a Biofuels Law regulating production, storage, marketing, transport, distribution and retail, with permits issued by SENER and tax incentives available for the use of biomass. Its regulations, issued in October 2025, complete the permitting regime and, for the first time, authorise its retail sale and adopts specific rules for aviation biofuels. Mexico generates roughly 120,000 tonnes of solid urban waste a day, around half of it organic and suitable for biogas, and pilot projects are already operating.

Geothermal

A new Geothermal Law, with regulations issued in October 2025, introduces small-scale exploitation of geothermal resources for uses such as heating, drying, aquaculture and industrial processes, and empowers SENER to co-ordinate the conversion of oil wells for geothermal use. Geothermal has the most complete legal framework among the emerging technologies and concessions are already being granted: the first under the new law, a 30-year exploitation concession over the Celaya Geothermal Area in Guanajuato, granted in September 2025 with an estimated investment of USD 80 million. The constraint in this sector is not regulatory but investment and exploration risk.

Overall Market

The 2025 Energy Reform, and the issuance of its secondary regulation, stands as the most important recent development in Mexico’s energy sector.

In addition, the federal government has issued the following plans to outline the sector’s strategy and priorities:

• the National Electricity Sector Strategy (Estrategia Nacional del Sector Eléctrico);
• the Strengthening and Expansion Plan of the National Electricity System 2025–2030 (Plan de Fortalecimiento y Expansión del Sistema Eléctrico Nacional 2025–2030);
• PLADESE; and
• PEMEX’s Strategic Plan 2025–35.

One of the most important principles of the 2025 Energy Reform is that it mandates federal government predominance, requiring the CFE to supply at least 54% of the energy injected into the grid each year. This means that, although the Electricity Sector Law (Ley del Sector Eléctrico – LSE) provides that cheaper energies are to be dispatched first, the National Energy Control Centre(Centro Nacional de Control de Energía – CENACE) is to always guarantee the predominance of the federal government. There have been concerns this may result in a preference to dispatch the energy generated by the CFE first based on reliability and security arguments. Such concerns have not been fully clarified in the secondary regulations, and the issue is expected to be addressed in the update to the wholesale electricity market (Mercado Eléctrico Mayorista – MEM) Rules.

The predominance of the CFE is to be secured by the government through guidelines and policies directing investments and activities in the sector (“binding planning”). SENER issued general administrative provisions for binding planning in generation, under which the National Energy Commission (Comisión Nacional de Energía – CNE) must assess seven criteria before granting a permit for sale into the MEM or for mixed-development regimes, including demand contribution, system reliability, energy-transition alignment, state predominance and energy justice.

Failure on any criterion results in denial of the permit. Self-consumption and cogeneration permits are excluded. Binding planning is examined further in 6.3 Project Finance.

As reported by Ember Energy in May 2026, only 26% of Mexico’s electricity in 2025 came from low-carbon sources: solar (7.38%), wind (5.99%), hydro (8.05%), bioenergy (1.67%) and nuclear (2.85%). The remaining 74% was fossil fuel-based, placing Mexico among the most fossil fuel-dependent OECD countries.

The CFE supplies 45,117 MW of the 92,014 MW effective capacity of the National Electricity System (Sistema Eléctrico Nacional – SEN), of which clean capacity represents 16.4% of the national total. The CFE targets 22,000 MW of additional capacity by 2030, a quarter of it renewable, raising its clean share to 38%. To that end, it proposes 51 projects with private participation. The National Electric Sector Strategy contemplates a further 6,400 MW to 9,550 MW of private renewable capacity by 2030.

The CFE’s expansion is being executed on two parallel tracks with specific actions. On the public investment side, the CFE reported 8,726.49 MW of new generation capacity already in progress across construction, testing and tendering phases, nearly 10% of the country’s installed base.

On the private investment side, the first tender for mixed-development regimes (the flagship mechanism of the 2025 Energy Reform for public-private generation) closed in June 2026 with the CFE awarding 7,411 MW across 37 solar and wind projects (114% of the 6,500 MW originally sought). A second tender is already being prepared to cover the remaining balance (16,500 MW target). This confirms that the mixed-investment model is functioning as intended: renewable capacity is being added at scale, under majority state control and with bankable, CFE-backed offtake structures that are proving attractive even amid the financing and interconnection risks inherent in a still-maturing regulatory framework.

In Mexico, the Constitution sets forth the legal principles for the development of the sector, while supplementary federal laws provide the foundations 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 are to further regulate activities and procedures throughout the sector.

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

As a consequence of the 2025 Energy Reform, the energy laws enacted back in 2013 were repealed, and eight new laws were enacted, including:

• the Law of the State-Owned Enterprise, CFE (Ley de la Empresa Pública del Estado, CFE – the “CFE Law”);
• the Law of the State-Owned Enterprise, PEMEX (Ley de la Empresa Pública del Estado, PEMEX);
• the LSE;
• the Hydrocarbons Sector Law (Ley del Sector Hidrocarburos – LSH);
• the Energy Planning and Transition Law (Ley de Planeación y Transición Energética – LPTE);
• the Biofuels Law;
• the Geothermal Law; and
• the CNE Law (Ley de la Comisión Nacional de Energía).

To implement the new framework, SENER and the CNE have issued a substantial body of general administrative provisions (Disposiciones Administrativas de Carácter General, or DACGs). For renewable-energy projects, the most relevant are as follows:

• SENER’s provisions on binding planning and its successive priority-attention calls for generation and interconnection;
• the Guidelines for the CFE’s Mixed Development Schemes; and
• the CNE’s provisions on self-consumption, generation and storage permits of 0.7 MW or more, and electric energy storage systems, among others.

The CNE has also issued a model interconnection contract replacing the one in force since 2016.

Several of the existing rules are yet to be updated to conform with the new regulations, including the Electricity Market Rules, the interconnection and connection manuals, the methodologies for interconnection and reinforcement works and CENACE’s variability-analysis methodology.

As part of the 2025 Energy Reform, the former Energy Regulatory Commission (Comisión Reguladora de Energía – CRE), was dissolved and replaced by the CNE, a unit sectorised to SENER.

The CNE is now responsible for the following:

• implementing the national strategy of the sector;
• issuing generation permits and tariff regulations;
• overseeing the MEM;
• monitoring compliance with Clean Energy Certificates (Certificados de Energía Limpia, or CELs) obligations;
• authorising technical specifications for the interconnection of new plants and the connection of load centres;
• maintaining the registry of qualified users; and
• determining suppliers exempt from permit requirements.

The CNE has cautiously resumed the issuance of generation permits, including for self-consumption and mixed-investments regimes.

SENER remains the authority responsible for designing, co-ordinating and evaluating the national energy strategy, with the authority to issue regulations. It is responsible for geothermal and biofuels permits, social impact assessments, issuing resolutions and recommendations on human rights, land use, and collaboration agreements with the private sector. Through the issuance of PLADESE, SENER will also direct the CNE’s permit issuance, the expansion of transmission and distribution networks, mixed investments and CELs.

CENACE remains a decentralised public entity responsible for the operational control of the SEN and the MEM. It continues to safeguard impartial access to the transmission and distribution grids. It has the authority to guarantee safety of dispatch, reliability, quality and continuity of the SEN. Its status as a decentralised entity affords CENACE a degree of operational autonomy.

This redistribution of authority consolidates SENER’s role in strategic planning and the CNE’s role in technical and operational regulation, strengthening the state’s control over the energy sector.

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) centralising all the authorities previously 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 transmission and distribution, generating nuclear energy and the basic supply of electricity.

Generation is another activity that remains regulated, with the additional consideration that, since the CFE is given a pre-emptive right to annually inject at least 54% of the total energy into the grid, participation of private generation is now limited to the remaining 46%. Secondary regulation will regulate how these percentages are to be implemented, for example through the Guidelines for the Mixed-Development Regimes of the State Public Enterprise, CFE (Lineamientos de los Esquemas para el Desarrollo Mixto de la Empresa Pública del Estado, Comisión Federal de Electricidad).

Generation

The generation of electricity in Mexico may be carried out by the CFE, private parties, or the CFE and private parties jointly.

Without prejudice to SENER’s authority to determine additional structures, two main partnership structures between the CFE and private parties are regulated under the LSE.

• Long-term production, whereby 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 at its election 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 investments, whereby the CFE and private parties are to develop jointly a generation project and the CFE is to own at least 54% of such project. As mentioned previously, its implementation has been further regulated in the Mixed Investments Guidelines. Different from the long-term production, under this structure, the CFE may or may not acquire the output of the project and is not required to represent the project in the MEM. The 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.

As mentioned previously, the CFE completed its first mixed-investment tender, awarding 37 solar and wind projects, while 46 tenders were declared void. Solar dominated (6,710 MW versus 700 MW for wind), with awards concentrated in the Yucatán Peninsula and northeast regions. In all projects, the CFE holds a minimum 54% stake (by contributing land, permits and the PPA) while private partners hold 46% and fund 100% of capital and debt financing; the CFE commits to purchasing 70% of output, with the remaining 30% sellable into the MEM. Mixed investment contract signing began in June 2026, with a target financial closing date of April 2027. Contracts with several sponsors have been executed, including with Polaris Renewable Energy and Cubico Sustainable Investments.

On 15 May 2026, SENER published the Call for Strategic Electric Power Generation and Storage Projects Aligned With Binding Planning, a fast-track mechanism for permitting new generation and storage capacity. It is aimed at renewable generation plants and standalone battery electric energy storage systems (BESS), each with a capacity of 0.7 MW or greater, and excludes distributed generation, self-consumption, cogeneration and projects already covered by a valid prior permit. Projects may be developed in partnership with the CFE under mixed development regimes.

For standalone storage, SENER set a reference capacity of 935 MW across seven regions with a three-hour duration, prioritising projects reaching commercial operation before 2030. Following the second amendment published on 10 July 2026, the registration window remains open through 2 September 2026, and simultaneous participation in other calls is now permitted.

Generation projects may adopt any of the modalities described in 3.1 Electricity. Regardless of the generation technology used, all power plants with a generation capacity equal to or over 0.7 MW require a generation permit issued by the CNE (“power generation permit”). Generators with a lower capacity are exempt from such requirement (“exempt generators”) and are not allowed to sell surpluses or buy shortages to or from the MEM without the involvement of a supplier. Generators are entitled to commercialise in the MEM the energy and associated products directly produced, including power and CELs.

Renewable energy generators (solar, wind and biomass) will be entitled to receive one CEL per 1 MWh of renewable generation, while clean generators (hydroelectric, efficient cogeneration, conventional thermal, hydrogen and distributed energy) will receive a percentage of CEL based on their fuel-free generation. Suppliers and users are bound to acquire CELs equivalent to a percentage of their total consumption as such percentage is determined by SENER each year, and they can do so through the MEM or directly with the generators. CEL’s 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 these activities.

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

The CFE must interconnect power plants and load centres upon request, when technically feasible. On 17 March 2026, the CNE issued a unified interconnection/connection contract model applicable to power plants, ESS and load centres (contrary to the former practice of the CRE of separating these contracts), including for the first time the ESS within the contracting regime.

The new model ties its term to the underlying generation or storage permit, tightens CENACE timelines, introduces stricter termination triggers for construction and commercial-operation delays, and enables electronic execution. The 2015 interconnection criteria and the interconnection manual remain the operative basis for interconnection studies pending their replacement.

Important investments have been announced in the coming years to upgrade transmission and distribution networks. Under the Plan for the Strengthening and Expansion of the National Electricity System 2025-2030 (Plan de Fortalecimiento y Expansión del Sistema Eléctrico Nacional 2025–2030), the CFE will invest USD8.177 billion to strengthen the National Transmission Grid through the construction of 275 new transmission lines and 524 new substation works, benefiting 50 million users nationwide, together with USD3.6 billion for distribution infrastructure such as substations and transformers.

Commercialisation

Commercialisation activities include:

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

There are three types of supply:

• basic supply, now reserved exclusively to the CFE and provided to any party other than qualified users;
• qualified supply, provided under free competition to qualified users; and
• last-resort supply, provided temporarily at capped prices to secure continuity. Any modality requires a CNE permit, registration in the MEM and a market participant agreement.

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 that must be applicable on a general and non-discriminatory basis, and such agreements will have to be registered with the CNE. Prices and tariffs must include all concepts and charges. The CNE has already exercised its tariff powers under the LSE, setting the 2026 regulated tariffs for transmission, distribution and CENACE operation and authorising the CFE’s basic supply tariffs for the same period.

The following activities are not considered commercial 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 upon prior written notice to the CNE. Power generation permits issued pursuant to the 2025 Energy Reform require obtaining prior written consent from the CNE to assign the rights thereunder.

Market participant and interconnection agreements are not transferable without the consent of CENACE or the CFE, except for 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 and encumbrance of the PPA, and
• the sale, transfer or lease any rights over 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 assignment is within the same corporate group as the original holder, a written notification to SENER will suffice.

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 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 to the grid. A favourable resolution of 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 such commission (currently approximately USD1.5 billion).

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

Electricity generation in Mexico may be performed 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, Distributed Generation and Self-consumption.

Cogeneration was regulated in detail in the 2025 Energy Reform; this is limited to electricity produced from thermal energy not used in industrial processes. On 16 April 2026, the CNE issued the DACGs, governing power generation under cogeneration (Disposiciones Administrativas de Carácter General para la generación de energía eléctrica en la modalidad de Cogeneración), covering both self-consumption and MEM generation.

The provisions recognise three cogeneration types (topping cycle, bottoming cycle and generation from residual industrial fuels, with the latter requiring clean technology), cap installed capacity by reference to actual thermal demand and introduce “mandatory electricity” (tied to thermal demand and subject to must-run dispatch) versus “dispatchable electricity” (subject to economic dispatch). A permit’s cogeneration purpose is deemed to lapse if mandatory electricity offered into the market exceeds the industrial process’s actual thermal-demand-linked energy for six continuous months without CNE-accepted justification. Efficient cogeneration retains clean-energy treatment and CELs eligibility pending the CNE’s forthcoming technical criteria, and legacy permit-holders migrating to the new MEM cogeneration permit retain their original dispatch conditions for the remainder of their permit term.

On 18 June 2026, SENER published guidelines for the voluntary and expedited migration of self-consumption and cogeneration permits (0.7 MW+) granted under the repealed Electricity Public Service Law (Ley del Servicio Público de Energía Eléctrica – LSPEE) to the LSE framework, running from 19 June 2026 to 6 October 2028, with six migration modalities and permit terms tied to the remaining legacy contract term (extendable for up to 30 years in total).

Migration carries a strong economic incentive: permit-holders who fail to register interest by 18 September 2026, become subject, as of 19 October 2026, to a new (and less favourable) transmission methodology replacing the historical “postage stamp” wheeling rate, whereas timely migrants retain the current wheeling regime until 6 October 2028. This incentive, however, may not compensate for the increase in transmission costs in most cases. Now, the cogeneration modality has specific and complete operative rules non-existent under the prior regime.

MEM generation is production from a power plant with 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 of the public-private structures may include these modalities of electricity generation.

Please refer to 2.3 Regulated Activities-Generation on the generation of electricity and 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, the Ministry of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales – SEMARNAT), the Ministry of Economy and the Ministry of Finance and Public Credit.

Heat from renewable sources is not separately regulated. Geothermal resources are governed by the Geothermal Law and its regulations, which establish a unified procedure before SENER for exploration permits, diverse-use permits and exploitation concessions, and by the National Waters Law: since geothermal fluids are national waters, the National Water Commission (Comisión Nacional del Agua – CONAGUA) must rule on possible interference with adjacent aquifers, a separate water concession is required and a reinjection programme must be submitted. SENER may not grant titles in protected natural areas and other zones critical to biodiversity.

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

Small-scale production in Mexico, such as rooftop solar PV 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”). As a result of the 2025 Energy Reform, the generation capacity to be considered distributed generation was increased from 0.5 MW to 0.7 MW. This adjustment will definitely contribute to achieve Mexico’s sustainability goals, since it is one of the most promising solutions to improve the efficiency and resilience of the energy sector, particularly to address the increasing demand for energy in the country for small and medium-sized commercial and industrial use.

Distributed generation 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 such manual was issued prior to the 2025 Energy Reform, and will remain in effect to the extent 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 and through a basic services supplier or for self-consumption. For these purposes, the CNE must issue model agreements and compensation calculation methodologies. Compensation may be structured as net metering, net billing or total energy sale. The CNE must issue the corresponding model agreements and compensation methodologies.

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

The CNE has issued comprehensive provisions governing self-consumption. They create self-consumption groups, allowing several users under different corporate identities to:

• share one generating facility through a private network;
• recognise a micro-grid regime between 0.7 MW and 5 MW for underserved rural and community projects;
• adopt an official CFE surplus-sale contract model, with compensation pegged to the lower of 90% of the hourly local marginal price and 90% of the levelised cost from the last long-term clean-energy auction; and
• establish a mandatory registry, with revocation triggers for underuse or unauthorised grid injection.

A one-stop window integrates the SENER, CNE, CENACE and CFE procedures under capped review periods.

Under the repealed Electricity Industry Law (Ley de la Industria Eléctrica – LIE), the isolated supply regime was limited by an interpretation of own needs that required the generator and consumer to belong to the same economic interest group, which made supply to third parties impractical. The current regulation does not impose this requirement.

Similar to isolated supply, self-consumption projects may be ring-fenced or interconnected to the grid. However, different to the provisions of the former LIE, energy surpluses may only be injected to 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 such storage. For these purposes, the CNE is to issue model contracts and calculation, as well as guidelines for the obtention of corresponding generation permits. The LSE prefers this kind of project to be developed with renewable energy; however, it does not mention whether this implies any benefit to the project or its developers.

Isolated and interconnected self-consumption power plants may purchase energy and associated products from the grid whenever such are unable to meet the energy requirements of the permit-holder. Self-consumption will be a crucial tool 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. Now, under the LSE, ESS are defined 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. An intermittent generator under the interconnected self-consumption regime that injects electricity into the grid must have ESS or pay the CFE for the service. The storage requirements will be determined on a case-by-case basis by CENACE through a variability study.

Through the Storage Guidelines, the CNE establishes general conditions and five participation modalities under which ESS may be integrated into the grid:

• ESS associated with a renewable-energy power plant holding a generation permit, where the ESS is treated as an integral part of the plant and requires no separate storage permit;
• ESS associated with a load centre, requiring no separate storage permit, with the stored energy reserved exclusively for the load centre’s own needs and barred from injection into the grid or sale;
• ESS associated with self-consumption, under which a self-consumption user or permit-holder may integrate an ESS without a separate storage permit – provided the ESS capacity is not added to the installed capacity stated in the self-consumption generation permit, with the specific rules varying depending on whether the self-consumption permit is isolated or interconnected and whether it includes surplus sales;
• ESS associated with transmission and distribution infrastructure owned exclusively by the corresponding transporter and distributor, dedicated to system reliability purposes, never forming part of a private network or associated with a power plant or load centre, and not being subject to payment or consideration for the energy it charges or discharges; and
• non-associated ESS, which are not tied to any power plant, load centre or transmission/distribution infrastructure – any non-associated ESS seeking to participate in the MEM must obtain a storage permit from the CNE.

Existing power plants holding a valid generation permit under the repealed LSPEE or the LIE that seek to integrate an associated ESS must first migrate their generation permit to the LSE regime.

If CENACE determines that the ESS does not increase the installed capacity of a power plant or does not alter the capacity set in its interconnection agreement, the migration process may be resolved together with the corresponding amendment to the generation permit. If CENACE determines that the installed capacity increases, the migration process must first be concluded, and only afterwards can the modification of the generation permit may be requested. Once that modification is authorised, permit-holders must request CENACE to amend the existing interconnection agreement and obtain the Commercial Operation Declaration of the ESS.

CENACE co-ordinates and regulates the operation of the SEN and the MEM based on 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 and flexible sources that can increase and decrease generation rapidly, to stabilise the system when necessary (eg, combined cycles).

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

The storage framework is a decisive step towards mitigating intermittency, alongside off-grid solutions such as self-consumption and distributed generation.

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 regulation 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 its plants in accordance with the parameters of reference established for each of the said plants.

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

In addition, the Regulations to the Biofuels Law (Reglamento de la Ley de Biocombustibles), published on 3 October 2025, expressly contemplate the injection of biofuels into the existing gas pipeline network. Obtaining a biofuel pipeline transportation permit requires the authorisations issued by SENER, pursuant to the guidelines it must issue for the injection of biofuels into the existing pipeline network. SENER has not issued such guidelines; thus, technical implementation is pending. However, it is understood that the 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 for storage in 4.1 Electricity-Storage. As of the date of this writing, 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-Storage; 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. The National Electric System Development Programme (Programa de Desarrollo del Sistema Eléctrico Nacional – PRODESEN) mentions that the initial proposal to transport green hydrogen as gas entails the 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 for participants to 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, the market for capacity (potencia) and the CELs 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 generation 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 at regulated tariffs by the CFE. Qualified users are large consumers whose energy demand is equal to or greater than 1 MW and 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 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 of at least 20 GWh.

Market participants must register and then certify with CENACE before operating in the MEM, demonstrating minimum capital, technical capacity and adequate equipment, and posting a performance guarantee within 120 days of executing the market participant agreement.

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

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

As of the date of writing, 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 additional 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 and issue the regulation to validate its ownership and verify compliance with CEL obligations.

CELs are negotiable through the MEM, and instruments from other markets may be admitted as approved by SENER. For example, applicable regulations do not restrict 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 at a global level. 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 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 so 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 under free market conditions with generators.

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, with that, a more dynamic CELs market.

PPAs

PPAs are customary in Mexico to commercialise electricity, either with the CFE or among private parties. With the change in regulation, mandatory auctions are 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 the SENER. The new PPA model contracts are expected to be issued by the CFE.

Currently, and as a result of the mixed investments tenders mentioned in 2.3 Regulated Activities, the CFE will be executing PPAs to acquire up to 70% of the energy generated by the projects awarded, for up to 25 years. 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 to 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

Developers secure land through purchase, lease, usufruct or easement, negotiated directly with the owner except on agrarian land. Under the repealed LIE, the surface use and occupation formalities applied only to geothermal and hydro projects. The LSE extends them to those projects and to any others determined by further regulation, without expressly including or excluding wind and photovoltaic projects. Secondary regulation should resolve the point, which bears directly on project cost and timing. In connection with agrarian land, these 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 relevant project. This often involves constructing social infrastructure.

Construction and Operation

These phases can be implemented and co-ordinated through a standard structure of project contracts that include engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements, among others, customary for the development of this kind of project (ie, asset management agreements, interphase agreements, offtake agreements).

All of these are generally negotiated between private parties. The use of international models, such as that of the International Federation of Consulting Engineers (Fédération Internationale des Ingénieurs-Conseils – FIDIC), is also possible but not common.

Contractors are usually Mexican entities with 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 at federal, state and/or municipal level are required depending on the project’s location, size, development stage (ie, greenfield, brownfield), water requirements, activities to be performed, etc. 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, or an energy specific social assessment under the new LSE, as detailed in the following, environmental impact authorisation, use of land permits, construction and operation licences, water concessions and approvals from the National Institute of Anthropology and History.

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, this social impact manifestation must remain in effect for the term of the project; thus, any amendments to the project will require an amendment to this instrument.

While obtaining permits in Mexico can be a time-consuming process, delays can be particularly significant when it comes to obtaining permits from the CNE and 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 aggravated by the ongoing transfer of authorities and responsibilities from the former CRE to the recently created CNE. However, the CNE resumed 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, can be transferred to security trusts established for the benefit of senior lenders, subject to prior approval of the CNE. However, any subsequent transfer of these permits in the event of foreclosure would still necessitate authorisation from the relevant authority.

Key Parties

Projects are generally developed through a special purpose vehicle that holds the permits and is party to the project contracts, alongside independent engineers, environmental, insurance and tax advisers, trustees, notaries, the affected communities and the relevant authorities.

The development of offshore projects is similar to the process 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 in 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, 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.

The standard project finance structure will have to be reviewed and tailored for the implementation of the mixed investment regimes (mainly due to the participation of the CFE in such structure and the documents executed for its implementation, as described in 2.3 Regulated Activities), particularly in connection with the assets to be contributed to the collateral package and its execution. Other commercial aspects will also have to be considered, including the timing for recovering the internal rate of return within 25 years of the PPA, transferring the assets to the CFE upon achieving such return even if it is before the expiration of the PPA and the specific termination payments.

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

• The secondary regulations establish that SENER must annually assess the federal government’s participation in electricity generation and, if necessary, identify and plan additional state-owned generation and transmission capacity to ensure compliance with the state predominance requirement. The implementation of this framework may affect project bankability and investor certainty.
• Bankability of renewable projects usually requires a PPA. Although a merchant portion is not uncommon, fully merchant projects are not usual. It is currently being witnessed that CFE affiliates are considering executing PPAs with privates, which may be a viable option for these projects.
• The financial viability of mixed investment generation projects will depend on (i) the terms agreed upon in long-term PPAs with the CFE, and (ii) flexible corporate agreements that, at least, give private investors and the CFE fair conditions.
• 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; the current lack of storage and transmission infrastructure makes these projects subject to curtailment risks.
• New storage regulation requires new renewable energy projects to be developed jointly with storage systems; thus, financial models must start considering these additional costs. In this regard, it is important to mention criteria have been issued yet regarding how power (potencia) will be credited to storage systems.
• 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.
• Binding planning operates as a mandatory, project-by-project filter on both permitting and available interconnection capacity, assessed against the annually updated PLADESE and CENACE capacity studies. It is applied through two tracks: an ordinary process open on a rolling basis and a priority track implemented through periodic calls tied to specific capacity blocks, which grant preferential timing.

Plan Mexico promotes nearshoring through industrial corridors, local supply chains and dual education. A January 2025 decree grants tax incentives to that end, principally the immediate deduction of investment in new fixed assets acquired and used until 30 September 2030, plus an additional deduction for dual training and innovation, capped in aggregate at MXN30 billion and available to domestic and foreign companies alike.

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

For the purposes of determining 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 of 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 was published on 22 May 2025 granting a similar 100% immediate deduction for new fixed assets acquired and used within the officially declared 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 (“Green CUFIN”)

Under the MITL, taxpayers engaged exclusively in the generation of energy from renewable energy or in high-efficiency electricity cogeneration systems (at least 90% of total income 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 calculated under the same rules as the net profit after tax account (cuenta de utilidad fiscal neta – CUFIN) of the MITL, but replacing the net tax profit of the year with the “renewable energy investment profit” of the year.

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.

Electromobility Incentives

A tax credit of 30% of the investment is available for electric vehicle charging equipment installed in public places, creditable against CIT and carried forward for up to ten years. Electric and plug-in hybrid vehicles are exempt from the federal new vehicle tax, and most states exempt or reduce the annual vehicle ownership tax.

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

PLADESE replaced PRODESEN, and its equivalent instrument, the Binding Programme for Installation and Decommissioning of Power Plants 2025–39, identifies 76,000 MW of additional capacity and 1,800 MW of substitutions through 2039. It addresses decommissioning only as capacity planning: it sets no dismantling, site remediation, financial guarantee or timeline requirements, so the regulatory gap identified under PRODESEN persists.

The 2025 Energy Reform aligns Mexico’s energy policy with the objective of reinforcing the development of these renewables. 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;
• through the new storage regulation, provides the mechanisms to make these projects reliable, addressing, to a certain extent, the risks related to its dispatch;
• allows the private sector to join forces with the CFE and the federal government in the development of new generation structures, under competitive conditions, and
• sets the basis to continue research and development on uncommon renewables generation sources in Mexico, such as green hydrogen, solar thermal, geothermal and biofuels.