Mexico: An Energy & Natural Resources: Power Overview

Power Demand Is Growing Faster Than Infrastructure

Mexico’s electricity planning diverges from its economic growth targets. The Mexican Institute for Competitiveness (IMCO) projects annual demand growth at 2.5% through 2030 – half the 4.5% required under Plan México – yielding an 11.9 GW generation deficit alongside transmission underspending, a gap further exacerbated by persistent underspending on transmission infrastructure (IMCO, 2026).

Furthermore, Mexico currently lags behind its Latin American peers in energy transition readiness. According to the World Economic Forum, Mexico holds a readiness score of just 41, compared to Brazil’s 60 (World Economic Forum, Energy Transition Index 2026). This disparity evidences a critical lack of the infrastructure necessary for companies to adopt clean energy and meet international ESG standards. Moreover, while the International Energy Agency (IEA) notes that Mexico’s renewable electricity generation almost tripled between 2015 and 2022, decisive, cross-sector action remains essential to reduce the country’s reliance on fossil fuels and lower carbon emissions (IEA, Mexico Country Profile). Notably, recent regulations kept the prior Clean Energy Certificate requirements frozen at the 2022 rate of 13.9%, undermining the regulatory incentives necessary to drive further renewable acquisitions and lower carbon emissions.

For companies committing to long-term capital investments, power availability rather than broader energy policy is fast becoming the primary operational bottleneck. To secure supply continuity and comply with ESG standards, businesses are increasingly forced to divert capital expenditure towards self-supply power facilities, distributed generation, and energy storage systems. Furthermore, developers executing large-scale projects face significant CAPEX exposure to grid reinforcement works, often under regulatory frameworks that ultimately require donating these assets back to the state grid operator.

Grid Constrains Are Reshaping Private Investment

Market activity is increasingly driven by private solutions to grid constraints. As public transmission infrastructure remains undeveloped, commercial and industrial off-takers are prioritising energy security through direct investments in distributed generation, isolated supply schemes, and energy storage systems.

Power Purchase Agreements (PPAs) are adapting to these realities, with negotiable terms focusing heavily on delivery guarantees, conventional penalties, and risk allocation for curtailment. Additionally, deal flow is centering around asset restructuring and regulatory compliance, as legacy permit-holders evaluate strategic options ahead of the newly established migration windows. A self-supply scheme, whether isolated or interconnected, is positioned as one of the most popular solutions for industrial developers as it allows energy to generate behind the private grid above 0.7 MW.

Electromobility is an accelerating market trend in Mexico, from electric bus and freight pilots to domestic EV manufacturing projects such as Olinia and Taruk (Mexico, NDC 3.0, 2025). However, the more Mexico electrifies transport, the more it will depend on the grid: transport is already the country’s single largest emitting sector, responsible for 23% of total emissions according to the government’s own NDC 3.0, which places electrification at the centre of the plan to reduce carbon emissions. Implementation has not kept pace with that plan. According to Dialogue Earth, Mexico’s target is for 50% of new car sales to be electric by 2030; the actual 2025 figure is 7%, a 43-percentage-point shortfall with five years left (Dialogue Earth, 2026). Additionally, NOM-163 (the CO2 emissions standard) was due in 2019 but only took effect in January 2024. These delays reflect the exact vulnerabilities identified by the IEA (IEA, Mexico Country Profile).

Storage and Permit Migration Are Opening New Paths

In April 2026, the National Energy Commission (CNE) issued new administrative provisions for the integration of storage systems into the national grid, replacing the 2025 framework. The regulation sets out the requirements for grid integrating storage systems, the services they provide, the ways in which developers can participate, and the conditions under which storage facilities may be grouped together. Its stated aim is to ensure that integration and operation proceed in an orderly, safe and efficient manner, while reinforcing the grid’s accessibility, reliability, quality, security, efficiency and sustainability.

This regulation is particularly significant for companies that rely on intermittent or renewable energy sources, as it allows them (and forces them) to offset the variability associated with such sources. It also creates opportunities for cost savings in energy consumption through mechanisms such as peak shaving and load shifting.

Separately, companies still operating under permits issued before Mexico’s Electricity Sector Law (LSE) now have a clearer, time-bound route into the new regime, rather than simply waiting for their existing permits to elapse. New guidelines issued in April opened this path for independent power producers, which are mostly older wind and combined-cycle plants nearing the end of their term. Also, migration processes for holders of self-supply and cogeneration permits started in June with applications accepted through October 2028.

Renewable generators migrating to the LSE’s permits can also add a storage system as part of the same application, rather than filing separately. Migration remains optional: companies that prefer to continue under their existing permits may do so until they expire naturally. For companies planning long-term operations, migrating now allows them to secure updated regulatory status proactively on their own terms, rather than making an abrupt transition when legacy permits elapse.

The CNE also introduced updated regulations for cogeneration plants, which simultaneously generate electricity alongside industrial heat or steam. The new rules establish clear criteria for permitting generation capacity based on a facility’s actual thermal requirements, while clarifying the regulatory path for selling surplus power into the wholesale electricity market. This regulatory certainty simplifies project planning and financing for industrial off-takers seeking to reduce fuel consumption, lower operational costs, and decrease emissions compared to standalone power generation.

Legacy Transmission Costs Will Test Existing PPAs

Further development is likely to impact legacy contracts issued under the Public Electricity Service Law. In June 2026, the CNE announced that from October 2026 it will retire the preferential “postage stamp” transmission charge that has applied since 2010 to generators with renewable or efficient cogeneration permits under the previous electricity law. Affected generators will instead face a charge calculated from actual wholesale market settlement amounts each month: variable, and potentially higher than the flat rate it replaces.

For companies whose long-term supply agreements were priced around the old rate, this could compress margins and raise questions over which party absorbs the increase. The regulation does offer a practical way to manage the transition: generators that begin the voluntary migration process described above before the new charge takes effect can retain the previous methodology until migration concludes or October 2028.

Nonetheless, companies with legacy contracts would be well advised to review both their migration timeline and their agreements’ change-in-law provisions well ahead of that date. This is expected to significantly affect companies that pass transmission charges through to clients under their PPAs. With a new variable and potentially higher transmission charge, renewable energy companies will have to analyse legal and financial risks to prepare for negotiation in cases of opting for invoking change in law or possible settlement agreements.