Mexico: A brighter future for energy from waste?

In August 2014 a package of energy law reforms in Mexico may have the effect of incentivising new energy from waste infrastructure in Mexico.

Energy Reform

A package of reforms relating to Mexico’s secondary energy laws (the “Energy Reform”) were published in August last year. One of reforms was the introduction of the Electric Industry Act (the “EIA”). This substantially modified the pillars of the electrical industry in Mexico by allowing private enterprises to participate in the generation and marketing of electricity. In terms of generation of electricity from combustion of waste the EIA establishes that provided the emissions from such a project do not surpass certain regulatory thresholds, the project will be considered a “clean energy” project. A private enterprise operating a clean energy project will be entitled to acquire “clean energy certificates” which are negotiable instruments that may be bought and sold between other participants through a wholesale electricity market.

This reform has created new opportunities for such energy from waste projects few of which have been developed in Mexico to date. One of the underlying historic impediments in Mexico to energy from waste projects has been the lack of an adequate legal framework governing waste management. This is a municipal matter and, therefore there are hundreds of different waste management codes throughout the country. Also concessions for municipal waste management have always been too short term (usually about 3 years) to make energy from waste a viable option.

Comment

It is now quite likely that municipalities in Mexico will begin to seriously consider modifying their legal frameworks to make the most out of the Energy Reform. This will most likely include modernising waste management regulations to take advantage of the reforms and increasing substantially the length of municipal waste management concessions. Having a wholesale electricity market in which to sell the output with incentives for promoting clean energies, is likely to facilitate the existence of this kind of projects.