Currents Podcast: Ep325 – New Rules for Private Power in Mexico

Host: Todd Alexander, Norton Rose Fulbright
Guest: Raquel Berzwinsky, Partner
Date: November 20, 2025

Overview

This episode explores the latest regulatory reforms affecting private investment in Mexico’s power sector. Host Todd Alexander interviews Raquel Berzwinsky about the history, current policy shifts, and future prospects for energy projects under President Claudia Sheinbaum’s administration. They discuss why Mexico’s market is reopening after several years of closure and what new rules mean for domestic and international players looking to invest in Mexican electricity generation.

Key Discussion Points & Insights

1. Historical Context: From Boom to Standstill

• 2013 Energy Reform: Major market liberalization, private sector flourished with new laws, creation of a wholesale electricity market, and government-led auctions.
  • "There was a wholesale electricity market that was created. You could sell bilaterally to private off takers. You could sell into the market. There were auctions by the government." – Raquel (01:03)
• 2019-2024 (AMLO’s Administration): Market closure; halted private permits and project development. Renewed state dominance via utility CFE.
  • "He [AMLO] was not a fan of private investment … they basically put a stop into the issuance of generation permits." – Raquel (01:29)
• 2024 Change in Administration: Claudia Sheinbaum elected; opens discussion for renewed private participation despite being from same party as AMLO.

2. Current Drivers for Change

• Nearshoring Trends: Industries relocating to Mexico need reliable power and water.
• USMCA’s Role: Despite possible renegotiations and tariff uncertainties, growth in high-energy industries (e.g., data centers) propels energy demand.
  • "If you bring industry to a country, then what will they need? They’re going to need power." – Raquel (03:13)

3. Key Features of New Power Regulations (Oct 2025)

• Maintains Market Structure: Private projects & wholesale market remain, but under stricter planning.
• Binding Planning: Annual government plans will specify locations, technology types, and amounts of new capacity.
  • "Now the development of power projects is going to be more organized and has to follow a certain development plan issued by the country." – Raquel (05:09)
• State’s Priority in Power Generation: 54% of annual power injected into the grid must come from sources where the government holds an interest.
  • "54% of energy, average annual energy injected into the grid must come from … the Mexican government or the Mexican government has to have some interest in that." – Raquel (06:16)
  • Current percentage: ~70% state, so target allows private sector growth. (07:43)
  • "So there’s room for private sector growth." – Todd (07:45)

4. Mechanisms for Private Sector Participation

• Mixed Development Schemes:
  • Modern IPPs: Similar to older independent power projects—private builds/finances, long-term CFE contracts, capacity/variable payments, purchase/transfer options at end of term.
    • "…follows the, I’m not going to say exact same, but very, very similar scheme that we had back in the early 2000s…" – Raquel (09:46)
  • Equity Partnership Model: CFE holds 54% equity, possibly via in-kind contributions (land, permits), but without putting up matching cash. Raises questions of corporate governance.
    • "The question there is that’s tricky because CFE and the Mexican government don’t have money…they’re not going to contribute cash, but they can make contributions in kind." – Raquel (11:26)
• Bilateral & Behind-the-Meter Sales: Corporate PPAs and direct supply to industrial clients/data centers remain available, not necessarily counting toward the "state’s 54%" target. - "Private sector can participate and generate into the wholesale electricity market. You can have bilateral sales… behind the meter…" – Raquel (08:25)
• Recognition for Sales to CFE: Any private project selling 100% of its energy to CFE can count toward the 54% quota, even with full private ownership. - "…they will take into account for purposes of this 54%, any private projects that actually sell all of their energy to CFE." – Raquel (15:31)

5. Market Sentiment & Investor Reaction

• Pent-up Demand: Many international investors remained in Mexico, quietly developing projects or waiting for regulatory clarity.
  • "…everyone who has done business in Mexico will come back…they were just, you know, quietly developing projects or quietly or just…staying under the radar." – Raquel (17:15)
• Optimism: Strong bullishness across the market for new investments, especially with long-term CFE contracts and self-consumption (behind-the-meter) models for industrial clients and data centers.
• Storage Regulatory Clarity: New guidelines for storage—including requirements and incentives for battery integration—spur further investment, particularly for renewables.
  • "…finally after I don’t know how many years, maybe over a decade, we have specific guidelines on storage projects." – Raquel (20:01)

Notable Quotes & Memorable Moments

• "If you bring industry to a country, then what will they need? They’re going to need power and they’re going to need water. And so you need investment in those two things." – Raquel (03:13)
• "This new law...has maintained the possibility of private parties developing power projects in Mexico. It maintains the wholesale electricity market..." – Raquel (04:20)
• "Central planning…determine[s]…specific regions where they need…power…for the next six, 15, 30 years." – Raquel (09:13)
• "CFE and the Mexican government don’t have money. And so they’re not going to contribute cash, but they can make contributions in kind." – Raquel (11:34)
• "Finally…we have specific guidelines on storage projects." – Raquel (20:01)
• [Todd, joking] "Maybe I gotta get my passport and reacquaint myself with the Mexican…airport, Mexico City airport, and see you down there." (21:16)
• [Raquel, joking] "Well, if anything, you’ll have to plan for World Cup for next year." (21:28)

Key Timestamps

• 01:03 – Pre-2019 market history and reforms
• 03:13 – Nearshoring/industry demand for energy
• 05:09 – Structure of new regulations, binding planning
• 06:16 – 54% state energy quota explained
• 09:46 – "Mixed development"/IPPs return
• 11:34 – CFE’s equity and in-kind contributions
• 15:31 – Private projects selling to CFE count toward quota
• 17:15 – Market sentiment: international investors’ interest
• 20:01 – Storage rules and new investment opportunities

Final Takeaways

• Mexico is “open for business” again but under new, more centrally planned rules designed to ensure a state majority in grid-injected power.
• Private sector opportunities are significant: especially through mixed development projects, long-term PPAs with CFE, direct corporate sales, and now, energy storage.
• Market sentiment is optimistic, with expectations for robust deal activity in coming years—tempered by close watch over regulatory and commercial implementation.

Summary provided for informational, non-promotional purposes.