Projects

General government authorisation

What government authorisations must investors or owners obtain prior to constructing or directly or indirectly transferring or acquiring a renewable energy project?

In order to commence construction works, developers shall obtain:

  • SENER’s authorisation of the project’s social impact assessment;
  • SEMARNAT’s environmental impact authorisation;
  • change of forest land use authorisation;
  • clearance from the National Institute of Anthropology and History;
  • clearance from the National Water Commission; and
  • local land use and construction licences.

In addition, it is advisable to obtain the interconnection studies from CENACE in order to be clear about the feasibility and cost to inter-connect the project to the National Electric System.

The authorisations required to transfer or acquire a renewable energy project will depend on the structure of the transaction and the value of the assets. For instance, the transaction may require clearance from the antitrust agency (COFECE), the Energy Regulatory Commission or authorisations from other agencies for the assignment of the existing permits or rights (if the transaction is focused on the acquisition of assets).

Offtake arrangements

What type of offtake arrangements are available and typically used for utility-scale renewables projects?

The available arrangements depend on the type of offtaker. Basic offtakers (those with a demand below 1MW) are only entitled to purchase energy from basic suppliers (by the end of 2018, in addition to CFE, three private entities hold a permit to act as basic supplier) based on a regulated rate determined by the CRE. Qualified offtakers (those with a demand equal or above 1MW) may either purchase electricity and products from a qualified supplier or directly participate in the WEM. If such off-takers decide to participate in the WEM they may participate in the day short-term market or purchase energy through medium or long-term hedging agreements, either awarded as a result of an auction process or directly negotiated.

Offtakers participating in the WEM are required to satisfy certain capital requirements and to post a number of guarantees supporting their activities as market participants. However, there is no sovereign or third-party credit support available to support the payment obligations.

Procurement of offtaker agreements

How are long-term power purchase agreements procured by the offtakers in your jurisdiction? Are they the subject of feed-in tariffs, the subject of multi-project competitive tenders, or are they typically developed through the submission of unsolicited tenders?

There are three options available to enter into long-term purchase agreements:

• A non-market participant qualified offtaker may agree with a qualified supplier to enter into a long-term agreement. Under this structure, the tariffs are agreed between the parties.• The qualified offtaker may become a market participant and either enter into a hedging agreement directly with a producer or a supplier, or participate in the long-term auctions launched by CENACE. If participating in the auction, such offtaker will be entering into a long-term hedging agreement with the clearing house, which will in turn have an executed hedging agreement with the producer. The tariffs will be determined by CENACE depending on the offers made by sellers.• Transitory provisions of the LIE provide that those offtakers receiving electric energy supply before the enactment of such LIE were entitled to maintain their condition as basic offtakers (despite the amount of their consumption). These ‘grandfathered offtakers’ may enter into PPAs with producers holding a grandfathered project.

Operational authorisation

What government authorisations are required to operate a renewable energy project and sell electricity from renewable energy projects?

The most critical government authorisations required to operate are, among others:

  • the authorisation from CENACE to interconnect the project to the SEN;
  • environmental impact authorisation;
  • the generation permit;
  • the registration as market participant before CENACE; and
  • the municipal operation licence.

Failure to obtain any of the above may result in the facility’s closure, suspension of activities or the imposition of fines. Note, however, that, depending on the type of technology, some additional critical permits may be required for operation.

In addition to the above, owing to the restrictions contemplated in the LIE to sell the energy generated in the producer’s power plants directly to end users (unless such end users have been registered as market participants and the transaction occurs within the WEM), a structure that considers adding a supplier to the equation shall be considered. This supplier shall obtain a supply permit from the CRE and shall become a market participant.

Decommissioning

Are there legal requirements for the decommissioning of renewable energy projects? Must these requirements be funded by a sinking fund or through other credit enhancements during the operational phase of a renewable energy project?

Except for the conditions imposed by SEMARANT in the environmental impact authorisation and those determined by CENACE, jointly with CFE, for the interconnection of the project to the SEN, there are no legal requirements for the decommissioning of renewable energy projects.