Renewable Energy: To be, or not to be, that is the question

Some weeks ago, an important discussion was held on the effect of the two resolutions issued by the Department of Energy and the National Energy Control Center (CENACE):

• “Resolution to guarantee the Efficiency, Quality, Reliability, Continuity and Security of the National Electric System, by reason of the recognition of the epidemic of the disease caused by SARS-CoV2 (COVID-19) virus” (CENACE, April 29, 2020).

• “Resolution whereby the Policy of Reliability, Security, Continuity and Quality of the National Electric System is issued”, (Department of Energy, DOF, May 15, 2020).

These resolutions have attracted a lot of attention, insofar that they make adjustments to the electricity market. In first place, it seemed that this was a temporary measure, insofar that the agreement issued by the CENACE indicates that it responds to the health contingence. However, the provisions issued by the Department of Energy indicates that these policies will continue, even after the contingence of COVID-19 has ceased.

Beyond the temporality, the resolution of the CENACE suspended the pre-operation tests for the connection of wind and photovoltaic (solar) electric power stations. This means that the resolutions make difficult, and even prevent, the acquisition of energy coming from centers that generate renewable energy, even when this could imply less costs for the State and greater benefits for the people.

Because of these circumstances, diverse corporation and, at least, an environmental organization, had obtained suspensions in "amparo" proceedings, which evidence that the constitutionality of these Resolutions is questionable. These suspensions favor an atmosphere for the opening of negotiations with the Federal Government on the relevance and advisability for Mexico to have renewable energy. It would be best to avoid litigations and confrontations, so as to prepare a renewable energy policy for Mexico.

Should the negotiations and approaches fail to succeed, it is essential to bear in mind that the corporations that have not filed "amparo" proceedings have been left unprotected. The suspensions obtained only benefit the corporations that filed the proceedings; should the resolutions be declared as unconstitutional, the corporations that do not resort to "amparo" proceedings will continue to be affected by them.

We observe that both the corporations engaged in renewable energy (e.g. electric or photovoltaic power stations), as well as those related to the renewable energy value chain, may obtain benefits from good negotiation and challenging strategies. Furthermore, corporations with foreign investment could resort to the dispute resolution mechanisms provided for by international treaties so as to protect investors from the decisions of the State.

If you require any further information on the best negotiation and challenge strategies, feel free to contact us.