MEXICO Law and Practice Contributed by: Bernardo Cortés and Fernando Quesada, Cortés Quesada Abogados, S.C.
or strategic control mechanisms, without a strict statutory equity threshold at project level, provided the overall State prevalence principle is preserved). In addition, storage facilities associated with a power plant or those “isolated” – ie, operating independently to a load point or power plant – are considered gen- eration assets and, therefore, require a permit from the CNE. The new storage regulations distinguish multi- ple storage modalities, including standalone storage, storage associated with power plants, storage linked to load centres and storage supporting transmis- sion and distribution activities. Not all storage assets require a permit, particularly where they are ancillary to existing facilities and do not participate indepen- dently in the WEM. From an environmental standpoint, the LGEEPA gov- erns the requirements of the projects, including their environmental impact assessments and authorisa- tions. Other federal laws may apply, depending on the specifications of the generation projects, such as those related to waste management, forestry land use and water resources. Local (state and municipal) envi- ronmental and zoning regulations may also be relevant and must be considered. Key project agreements – including Development Agreements, EPC, O&M, financing agreements, PPAs and EHAs – are subject to commercial and civil con- tract laws, which generally support freedom of con- tract and a choice of law doctrine. However, mixed participation schemes involving CFE may also require compliance with specific public-sector procurement rules, CFE internal approval processes and the guide- lines applicable to long-term production and mixed investment structures with CFE. 3.2 Obtaining Approvals to Construct and Operate Generation Facilities Generation facilities are subject to several regula- tory requirements at the federal, state and municipal levels. The main governmental authorisations for the construction and operation of power generation facili- ties include the following. • Generation permit: facilities exceeding 0.7 MW of capacity require a generation permit granted by
the CNE, the application for which requires the submission of comprehensive technical, financial and legal documentation and information of the project, shareholder disclosure, audited financial statements, financing structure, internal rate of return projections, construction schedules and the corresponding CENACE impact study. The LSE now mandates that generation permits align with PLADESE, so permit applications for projects fall- ing outside the scope of such plan may be denied. The process to obtain such permit currently takes from six to 12 months, although in practice the timeline may change depending on technical studies, requests for additional information and interconnection complexity. Interconnected self- consumption projects between 0.7 MW and 20 MW are subject to a simplified permitting process. • Interconnection agreement: although the grids of the NES are owned by CFE, CENACE oversees grid operation and interconnection procedures. Any interested party seeking to interconnect its gen- eration facilities to the NES must follow a phased technical process administered by CENACE to determine the necessary grid reinforcement and interconnection requirements. The second stage of this process includes the formal impact study issued by CENACE, which is a mandatory require- ment for the generation permit itself. Once the technical studies are concluded, CENACE directs CFE to execute the relevant interconnection agree- ment with the generation permit holder. • Market participant agreement: during the opera- tional phase of the project, generation assets are required to execute a market participant agreement with CENACE to represent those assets in the WEM. Financial guarantees shall be posted in order to perform sales of energy products in the WEM. • Environmental Impact Authorisation: the construc- tion and operation of power generation facilities require a federal environmental authorisation from the Ministry of the Environment and Natural Resources (SEMARNAT), which evaluates the envi- ronmental, safety and health aspects of the project. • Social Impact Authorisation (MISSE): generation facilities are also required to obtain clearance from SENER on the social impacts of the project. Filing this application is necessary to obtain a generation permit, while the operation of the project depends
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