Electricity costs in Mexico: rates and how to reduce your bill

For companies with energy-intensive processes in Mexico, the cost of electricity represents a significant component of operating expenses, as well as their competitiveness and energy efficiency objectives.

Therefore, understanding the factors that affect electricity rates and knowing the strategies available to optimize energy use and storage has become a priority for industrial leaders seeking to generate significant savings in their business models.

Why does the cost of electricity in Mexico vary so much?

Unlike other rate systems, Mexico applies pricing structures that include hourly and seasonal rates, designed to more accurately reflect the variable costs associated with the generation, distribution, and transmission of electricity.

In addition, Mexico has a differentiated tariff structure that responds to multiple variables: the type of user with different operating load patterns, the geographical area, seasonality, and the time of consumption.

The more electricity a company demands during peak hours, the higher the cost of its electricity bill.

Learn more How to read your CFE electricity bill in Mexico and how to calculate a company’s electricity consumption in kWh.

Factors that influence the cost of electricity in Mexico

The price of electricity in Mexico is not fixed and is subject to various variations that may result from factors such as:

1. Generation cost: depends on the type of technology (thermal, hydroelectric, renewable) and the price of fuels.
2. Natural gas price: power plants that use natural gas as their main fuel directly influence the cost of electricity. In addition, these plants pay for the CO2 emissions they generate, which impacts the final price per kWh.
3. Transmission and distribution: involves the transfer of electricity from generation centers to consumption points, including technical losses.
4. Hourly and seasonal rates: the Energy Regulatory Commission (CRE) establishes different rates by time of day (peak, intermediate, and base) and in winter and summer, consumption peaks also change, especially in the hottest seasons.
5. Government subsidies or support: households and small businesses receive subsidies, while industries pay higher rates to compensate.

Types of electricity rates in Mexico and how they impact businesses and households

The Federal Electricity Commission (CFE) offers different rate plans for both households and businesses, which are divided into the following groups:

• Domestic rates: These are divided into several types according to location or city (1, 1A, 1B, 1C, 1D, 1E, and 1F) and also vary according to the average minimum summer temperature in the locality. Prices are structured by consumption tiers: basic, intermediate, and surplus.
• Business rates: there are specific rates for small and large low-voltage demands (PDBT and GDBT, respectively) for companies such as agricultural irrigation and public lighting, among others.
• Rates for industrial companies: there are two rates determined by contracted demand and consumption history: Large Demand in Ordinary Medium Voltage (GDMTO) and Large Demand in Hourly Medium Voltage (GDMTH). In this category, charges are based on consumption during base, intermediate, and peak hours.

Strategies to reduce electricity costs in Mexico

In the case of electricity rates that directly impact industrial operations, the cost is not the same for everyone. For example, a plant that operates mainly during peak hours may face higher rates than one that concentrates its operations during base or intermediate hours.

That is why the National Commission for the Efficient Use of Energy (CONUEE), recommends the following strategies for industries:

1. Electricity demand management: shift non-critical loads off peak hours and use automatic cut-off or consumption regulation systems. In other words, adopt load shifting and peak shaving strategies. To effectively implement these activities, the use of an advanced consumption simulator can help identify the most critical times and loads.
2. Self-generation with renewable energies: the installation of industrial solar panels can reduce dependence on the CFE. According to the Institute of Renewable Energies (IER) of the UNAM, photovoltaic solar energy has a return on investment (ROI) of 3 to 5 years in Mexico.
3. Periodic energy audits: these allow energy leaks to be detected, obsolete equipment to be identified, and low-cost improvements to be proposed.
4. Adopt battery energy storage systems: use technologies that allow energy to be stored and consumption to be monitored in real time. BESS systems are the right technology as they can manage how batteries are charged and discharged, at what optimal times, and also in what proportion.

Comparison of alternatives to reduce electricity costs in Mexico

Ultimately, understanding the factors that influence prices and proactively implementing solutions such as self-generation, energy storage through BESS, and energy efficiency will define the competitive advantage of companies determined to optimize their operating costs and strengthen their sustainability profile.

That is why at Industronic we have extensive experience in helping companies that need to optimize their costs and energy efficiency. Contact us!