Mexico’s energy reform will have far-reaching effects on how people produce and consume electricity in the country. Market liberalization will open the door to an increasing number of options for Mexican residential, commercial, and industrial consumers, and will encourage the adoption of distributed generation (DG), which for Mexico includes generators of less than 500 kilowatts (kW) of capacity connected to the distribution network. This report, published by the National Renewable Energy Laboratory, seeks to provide guidance to Mexican officials on designing DG economic and regulatory policies.

The report summarizes the current energy policy context in Mexico and describes opportunities and barriers for DG in the country. It surveys DG policies that have been implemented in other countries and outlines the sources of value that should be considered in evaluating mature “DG 2.0” policies, including their cost-effectiveness and alternative rate designs. Finally, it examines the central role of rate design and pricing in developing a set of policy options to encourage expanded and cost‐effective DG adoption.