• Service: Tax
  • Type: Regulatory update
  • Date: 9/24/2014


Taxes and Incentives
Mexico Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

The New Mexico’s Income Tax Law (ITL) provides a 100 percent deduction incentive for taxpayers who carry out investments in renewable energy equipment or cogeneration systems of efficient electricity. Qualifying sources like sun, wind, water and geothermal energies, as well as biomass fuel equipment, are eligible for this incentive.

It is important to mention the country is currently undergoing discussions of new Energy Reforms. Its’ potential effects would be important to Mexico in the mid and long term as well as for potential investors, from the social and economic point of view. Therefore, new information and business opportunities can be expected, both in terms of significant changes in renewable energy regulations and available funds to promote the creation and development of alternative energy projects.

This proposed legal reforms consist on allowing production gains sharing contracts looking forward to secure investment from the private sector, sharing gains and risks related to such activity. In this sense, drilling, processing, transport, storage and marketing of hydrocarbons could be performed either by the government or a private party. In consequence, this would lead to greater integration in the upstream value chain, allowing sufficient supply of gasoline, methane gas and liquefied petroleum gas at competitive prices.

Additional information

FIDE (Fideicomiso para el Ahorro de Energía Eléctrica) energy efficiency

Through this Trust for energy saving projects are funded for the installation of new high efficiency technologies by micro, small and medium enterprises, municipalities, industries and service sector companies. These technologies are also tax deductible as investments. The following equipment is included in this program: air conditioners, water pumps, air compressors, high-pressure sodium vapour (HPSV) lamps, light-emitting diode (LED) lighting, fluorescent compact lamps, electric motors, electronic ballasts, energy generators on a small scale with alternative sources, transformers, processing equipment, remote monitoring systems, presence detectors, renewable energy systems for refrigeration, ventilation, speed control, thermal insulators, and other energy efficiency equipment. Applicants must file a request for the fund and be approved.

FIDE business Eco-credit

Projects up to 27,000 United States dollars (USD) are funded for replacing obsolete equipment with high efficiency equipment. The program applies to companies of any size in the private sector. Besides the funding, the companies are awarded a 10 percent scrapping bond. Technologies financed under this program include air conditioning, commercial refrigeration systems, electric motors, LED lighting, high efficiency lighting and electrical substations. Applicants must file a request for the fund and be approved.

Fund for hydrocarbon projects

In 2012, the Ministry of Energy (SENER) and the National Council of Science and Technology (CONACYT) released a fund oriented to R&D and the adoption of new technology related to hydrocarbon sources of energy. The fund aims to increase efficiency in the use of hydrocarbon sources of energy, prevent pollution, and repair environmental damages derived from the oil industry activities. The official bid for 2012 called for universities, research centers and private entities to propose projects related to exploration, production, refinery and oil chemistry studies. A new bid is expected for 2014.

Fund for hydrocarbon projects

The Renewable Energies Exploit and Energy Transition Financing Law (LAERFTE: Ley para el Aprovechamiento de Energías Renovables y el Financiamiento de la Transición Energética in Spanish) allows industrial, commercial and residential installation of renewable technologies for the generation of electricity for private consumption only. According to Mexican legislation, only the Electricity Federal Commission (CFE) is allowed to sell electricity. If the energy production exceeds the amount used by an entity during a given month, the excess can be fed into the CFE’s grid and becomes a credit that can be applied against the entity’s electricity bills in the future. Alternatively, contracts may be signed with the CFE stating different means of consideration for the sale of this excess production.

Fund for energy transition and sustainable exploit of energy

In 2008, LAERFTE was released. It establishes Mexico’s strategy to support policies, programs, actions and projects oriented to increase the usage of renewable energy sources and clean technologies, promote energy efficiency and sustainability, and decrease oil dependency as the main source of energy.

To finance sustainability projects, the Fund for Energy Transition and Sustainable Exploit of Energy was created in 2009. The Federal Expenditure Budget for the mentioned fiscal year assigned 3.1 billion Mexican peso (MXN) (USD260 million) to the fund. An amount has since been budgeted each year for the fund. For fiscal year 2014, the Federal Expenditure Budget allocated (MXN) 1.53 billion (USD117 million).

Companies or individuals compete for cash incentives from the fund by submitting proposals for projects that involve renewable energies and energy transition. The bid for 2010, ‘Bioeconomy’ called for projects that promote the production and use of alternative fuels in primary sectors.

Since the government is currently undergoing through new energy reforms discussions, this fund may not publish future bids in the short term, however, a boost could be expected once these reforms take place in the midterm

Fund for energy sustainability

Every fiscal year SENER and the CONACYT establish a special fund for energy sustainability projects oriented for universities and research centers. The bid in force calls for projects of universities and/or research centers along with public or private companies interested in creating a Mexican Geothermal Energy Investigation Center. This center must be responsible for addressing existing scientific and technologic challenges, develop new projects related to geothermal energy, promote the development of specialized human resources and serve as a connection between the academic and the industrial sectors. The project will have duration of 48 months, and will be funded for the corresponding expenses biannually.

Fund for R&D in energy

The CFE and the CONACYT created a fund to provide resources for R&D projects in the electric sector. The distribution of resources was carried out by a competition among participants, and the CONACYT released one program in 2010, which ended in February 2011. This program involved seven types of projects related to specific categories such as ocean waves, ocean currents, hydraulic equipment, nuclear energy and the measurement of gas emissions. No official bids were published during 2012 and 2013, nor has a public bid been released for 2014.

Some of the main government projects funded include the following:

  • Municipal Street Lighting National Program: For 2011, the Fund has authorized MXN120 million (USD10 million) for the execution of projects for energy-efficient street lighting.
  • Sustainable Light Program: This program aims to decrease the energy consumption in homes by substituting 45.8 million lights during 2011 and 2012. The first stage of the program is to be concluded within the first months of 2012. The second stage aims to double the number of lights by the end of this year.
  • Integral Energy Services Program: This program is designed to provide a greater percentage of rural populations in Mexico with electricity through renewable energy and small-scale energy generation. The program will be supported by the Global Fund for the Environment (GFE), the Bank of Reconstruction and Promotion (BIRF) and the National Committee for Indigenous Towns Development (CDI).
  • National Sustainable Energy Exploit Program: A review carried out by the National Sustainable Energy Exploit Program (PRONASE) identified several areas in which energy efficiency might be increased over a medium to long-term period. These areas include transportation, lighting, industrial motors and home equipment. PRONASE will continue to define new strategies to encourage the use of renewable energy in these areas for Mexico.

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