Mexico set ambitious renewable energy goals as part of its 2014 Energy Reform. The regulatory agency in charge of monitoring the energy industry, the Mexican Energy Regulatory Commission (CRE), established a Clean Energy Certificates (CELs) mechanism to further facilitate the growth of renewables, which will help Mexico achieve its goal of 50% renewable energy by 2050. Obligated parties are required to obtain a certain percentage of electricity from clean generators. Mexico recently held its fourth auction for long-term CELs, and its third auction resulted in some of the lowest electricity prices in the world and the construction of 15 renewable projects. While the CELs market has achieved initial success, the CRE aspires for the market to evolve into a more dynamic and complex system. The purpose of our project is to create a benchmark analysis of other international CELs schemes and to evaluate the potential of derivatives as a solution to existing market problems.
The final deliverable--a slide deck that has been presented to the CRE--included an overview of Mexico’s CELs landscape; a summary of the minimum conditions of well-functioning spot and derivatives markets; an assessment of Mexico’s financial sector and the implications of implementing the derivatives market; legal, regulatory, institutional, operational barriers to market implementation; an analysis of the potential interplay with CELs and carbon markets; and a benchmark analysis comparing international experiences of the primary and secondary markets for CELs. The team’s recommendations for the CRE were categorized by the level of involvement that the CRE could undertake. It recommended that the CRE carries out tasks that are of low and medium level of involvement, such as setting clear definitions, educating obligated parties, increasing liquidity in the market, enhancing stakeholder access to information, and specifying penalty definition.