Mexico released new guidelines earlier this month for private power projects. It intends to fast track projects that are included in annual development plans.

The first electric sector development plan was issued on October 17.

The guidelines are in regulations issued to implement the 2025 Electric Sector Law, or LESE. They explain how binding planning, CFE participation and new permitting schemes will govern project development and investment in the sector. (For previous coverage, see “Mexico Enacts New Laws for the Power Sector.”)

Binding Planning

Development of the country’s electricity sector will be guided by an electric sector development plan that incorporates the concept of "binding planning." Binding planning is the notion that Mexico will identify the projects necessary for expansion of the national electric system, and will fast track key projects identified as strategic by providing preferential treatment.

All generation, transmission and distribution activities will have to align with the government’s long-term expansion plan. To be interconnected to the national grid, all new projects, whether public or private, must be aligned with the government plan, including the geographic zones where they are to be built and the technologies chosen.

The development plan published on October 17 will be updated annually by the Mexican Ministry of Energy (SENER) in May of each year.

Strategic Projects

Projects that SENER chooses will benefit from streamlined procedures and priority access to permits and authorizations required to advance to construction.

Developers of private projects can get them designated as strategic by participating in public invitations run by SENER or by the National Energy Commission (CNE). These processes will award generation permits. The government will specify the amount of new generating capacity it is seeking and the geographic zones and technologies as part of each invitation.

Terms for the first invitation were published on October 17. Time frames are tight. Private developers seeking to participate must submit letters of intent by October 24, and the awarded generation permits should be issued by mid-December.

Distributed generation, self-consumption, cogeneration and mixed development projects, meaning projects that are undertaken in joint ventures with the national electric utility (CFE), are not eligible to participate.

Mexico is making room for several types of private projects.

Wholesale Sales

Private parties may develop power plants whose output is sold into the wholesale electricity market so long as such power plants do not conflict with the binding planning criteria issued by the Mexican government.

The independent system operator (CENACE) will disclose the maximum interconnection capacity not requiring reinforcements that is available on the national grid within 20 business day after publication of each annual plan.

Private projects must get social impact assessments, have them approved by SENER and request interconnection surveys from CENACE before construction can start.

Self Consumption

Self-consumption projects are behind-the-meter projects with generating capacities of 0.7 MW or higher that are intended to meet the permit holder’s own power needs, and can, but do not need to be, interconnected to the national grid.

This scheme is mainly intended for industrial parks and large consumers, as well as for the so-called “poles of development,” which are designated regions where the Mexican government aims to concentrate investment and stimulate regional economic growth.

These projects are now allowed to deliver electricity to third-party offtakers through their own private transmission lines. Unlike the previous “isolated supply” projects under the former Electric Industry Law, consumers of a self-consumption project do not all have to belong to the same corporate group.

Self-consumption projects between 0.7 and 20 MW benefit from simplified permitting procedures. Off-grid self-consumption projects within this range are exempted from submitting a social impact assessment. Such assessments are required for all larger utility-scale projects.

If an interconnected self-consumption project plans to sell surplus energy, it may only do so to the CFE. The CFE can choose whether to enter into a surplus sales contract.

The LESE regulations do not specify how surplus prices will be determined. However, market sources suggest the authorities may use a mechanism similar to that used before 2014, where CFE purchased excess generation from private generators at a percentage of the local marginal price.

Self-consumption intermittent projects that intend to sell backup energy to the CFE must have batteries to store electricity and use them to manage ramping, intermittency and variability or must enter into backup contracts with the CFE or third parties.

Electricity Storage

Energy storage systems may participate in the wholesale electricity market in two ways: in roles similar to generators by selling power, or in roles similar to load centers by purchasing power. Both types of participation can occur either as part of a power plant or load center, or as a standalone storage facility.

Energy storage systems operating independently from power plants or load centers and with capacities of more than 0.7 MW require a storage permit from CNE, while battery storage systems that are co-located with power plants can share the generation permit and are not required to obtain a separate permit.

To participate in the wholesale electricity market, standalone storage systems must have storage permits and be represented by a market participant registered as a generator, supplier or storage company.

Storage systems may also be used to import or export electricity outside of Mexico, but this requires an import or export authorization from SENER.

Storage permits will specify the type of services that can be provided by the permit holder. The services may include frequency regulation, system backup, ancillary services or any other services that the CNE authorizes in the future.

CENACE may enter into short-, medium- and long-term contracts, through competitive mechanisms, for the use of storage systems that have been identified in the development plan as a means to strengthen system reliability.

Storage systems are not eligible to receive clean energy certificates (CELs) and are not obligated to acquire them. CELs are certificates issued to generators of clean energy that large electricity consumers are required to purchase and, therefore, are a source of additional revenue for generators.

During system emergencies, all storage systems must make their resources available to CENACE.

Energy storage systems can also be integrated into the provision of transmission and distribution services by the CFE. Such storage systems do not require storage permits and cannot participate in the wholesale electricity market.

Mixed Development Projects

Mixed development projects involving the CFE and private participants must be approved in advance by the CFE’s board of directors.

These projects include long-term production projects, mixed investment projects and any other structures approved by SENER. They can include not only power plants, but also related infrastructure and ancillary works and energy storage systems.

The CFE board must approve proposals and then conduct a selection process to choose the private participants. This process will not necessarily be a public tender, but will follow guidelines issued by the CFE board that will be published in the federal Official Gazette.

Private participants must be Mexican individuals, Mexican legal entities or trusts domiciled in Mexico. Mixed development projects must have defined terms not exceeding 30 years.

The contracts executed for these projects must include exit terms for the parties at any time, as well as asset transfer conditions upon termination. The Mexican government will want the option to take title at the end of the term. This optional transfer mechanism may raise bankability concerns in early termination scenarios.

Long-Term Production Projects

The LESE regulations set out the minimum requirements for long-term production projects under which a private party owns a power plant whose electricity is sold exclusively to the CFE.

The overall contractual structure suggests that these agreements are intended to be bankable similarly to the old independent power producer scheme that existed before 2014.

There will be separate capacity and energy payments.

There will not be any payments for test energy. Payments will begin only after the project reaches commercial operation.

The maximum term of the contract must match the term of the corresponding generation permit. The contracts and permits are expected to run as long as 30 years.

CFE will be the sole offtaker, and no related or excess products may be sold to third parties.

Contracts must include performance guarantees and liquidated damages payable by both parties in case of default. The damage amounts will be based on the cost of replacement energy.

Capacity payments will be adjusted monthly based on the project availability factor.

Mixed Investment Projects

Mixed investment projects are another type of joint project developed between the CFE and private parties.

The CFE must hold at least 54% of the equity in a mixed investment project. The grant of an equity interest must be formalized no later than 180 business days after the project reaches commercial operation. It is unclear whether this means that CFE’s participation may be formalized before or during construction or whether it must necessarily occur within 180 business days after COD. If the latter, it may prove challenging to get lenders comfortable enough to finance such projects. In exchange for the 54% equity participation, we understand that the CFE is willing to accept restricted economic benefits but not restrictions to its voting rights, even though the CFE will not be operating these projects. Corporate governance will probably be a point of contention in these projects.

The CFE may participate by contributing capital, in-kind assets, use or exploitation rights over its property, permits, authorizations, intangible rights or any other form of participation agreed between the parties. It will be challenging to reach the 54% equity interest required by the regulations based solely on in-kind contributions by the CFE.

The CFE may hold the equity interest directly or may do so indirectly through a subsidiary, affiliate, trust or special-purpose vehicle.

The LESE regulations expressly allow power plants and related project assets and rights to be used as collateral to facilitate access to private financing for mixed investment projects.

Transmission and Distribution

With SENER’s authorization, the CFE may explore financing arrangements with third parties to carry out projects for the expansion and modernization of the transmission and distribution grids, provided that ownership of the transmission assets always remains with the CFE.

The financings may be awarded through open, competitive, transparent and non-discriminatory processes.

CNE may establish specific portions of the regulated tariffs dedicated exclusively to covering long-term financing costs of specific projects, as long as those projects are included in the binding plans for grid expansion.

Additional information

The CFE, when supplying electricity as a "basic services supplier" to customers using less than 1 MW, must preferentially procure electricity and associated products from state-owned power plants.

Administrative provisions governing the migration of permits granted under the law in effect before 2014 will be issued within 120 days after publication of the LESE regulations. Thus, they are expected by early February 2026.

Permit holders under pre-2014 law that are currently facing revocation proceedings may avoid revocation by paying a monetary sanction, provided they request the migration of their permits to one of the new permit categories under the LESE before resolution of the revocation process.

SENER will publish the requirements for electricity consumers to buy CELs for the period 2025 through 2028 by early February.

The updated administrative guidelines for electricity storage systems are expected by early April 2026.