DAC rate is the one to avoid. DAC rate is the one to avoid.

Electricity costs up, will continue to rise

Solar makes a lot of sense, even as a Mexico-US border wall

Mexicans are reminded on a daily basis of the recent 20% hike in the price of fuel at the pumps. The so-called gasolinazo – as the gasoline price hike is known – resulted in blockaded highways and looting and forced service stations to close across Mexico in a wave of angry protest.

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However, what few people noticed was that in 2016 the price of electricity increased even more dramatically.

Electricity is expensive in Mexico. On average electricity prices are 25% higher than in the United States and Canada for commercial and non-subsidized residential users.

In 2016, the cost of electricity for businesses increased substantially, between 22 and 35%. Similarly, the residential rate for high-consumption users increased by 22%. If you have ever received a monthly power bill for many thousands of pesos you will know what Tarifa DAC is. It stands for Doméstica de Alto Consumo, or high domestic consumption.

Mexico employs a progressive rate structure for residential power consumption to encourage energy conservation and penalize high consumption. The more power you consume, the more you are charged. Residential rates are broken down into three categories: subsidio, excedente and DAC.

DAC must be avoided at all costs. It is the most expensive utility rate in Mexico and remains one of the highest utility rates in all of North America. Last month, the DAC rate reached 5 pesos per kilowatt hour (kWh), or about US $0.25 per kWh, when IVA (the 16% sales tax) and the fixed monthly fee are included.

Over the past decade, DAC and electrical rates for commercial and industrial users have increased steadily and are anticipated to keep going up.

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Renewable energy has reached a tipping point globally and is now the same price or cheaper than fossil-fuel generated electricity in more than 30 countries according to the World Economic Forum. This is known as reaching “grid parity.” Consequently, global investment in renewable energy is growing rapidly.

Mexico is one of the sunniest countries in the world. The overall cost to install a solar system in Mexico is about 35% less compared to the U.S. and Canada. This, combined with rising power prices, makes generating and consuming clean, solar energy less expensive than purchasing it from the grid.

2016 was a ground-breaking year for Mexico’s renewable energy sector. Last year the country held its first-ever private power auctions after the government ended a decades-long state electricity monopoly in 2013. Mexico awarded long-term power contracts to private developers, who will develop 4,731 MW of new renewable energy capacity (60% solar, 40% wind) that is expected to generate US$6.1 billion of investment.

For homeowners and small businesses, Mexico’s net metering laws allow you to generate your own electricity for self-consumption and accumulate credits to reduce or offset 100% the amount of electricity purchased from the grid. Therefore, the electricity produced by your solar system can be valued at the high retail price of power.

In January, Mexico’s energy secretariat announced measures to reduce red tape for small-scale solar installations with the goal of increasing distributed generation. This makes investing in solar energy a no-brainer. It is a high-return investment that provides decades of savings, not to mention the important environmental and social benefits.

In related news, it was recently suggested that the wall U.S. President Donald Trump wishes to build should instead be a “border wall of solar panels” built by Mexico. That way “Mexico and the U.S. would be connected by a truly beautiful wall, a symbol of progress and unity, visible even from space.”

Since construction and maintenance costs for solar plants in Mexico are substantially lower, building a wall of solar panels on the Mexican side of the border could power cities on both sides faster and more cheaply than similar arrays built north of the border.

This would create jobs for Mexicans and benefit both countries by alleviating a range of binational problems, including border security and climate change, something I think we can all agree on.

Jarrett Leinweber, M.Sc., is an entrepreneur and environmental and sustainable energy specialist. He provides consulting services and is a developer of solar energy and electrical infrastructure projects. He can be reached at jleinweber@electrifica.com.mx.

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  • cooncats

    CFE is the Pemex of electricity. Full of graft and inefficiency. And like Pemex, they deliver high prices and poor service. When Mexico gets out of the energy business they’ll have affordable energy and a boost to their economy. As long as they insist on operating both as government and union feedbags, they’ll get what they are getting now.

    • Charliej

      What do you call affordable energy? I have a three bedroom house and my electricity bill runs about twenty dollars per month. In the US, in South Alabama, my electric bill ran over one hundred fifty dollars per month, even with annualized billing. Much cheaper in Mexico.

      • Clarke

        Exactly my 2000 ft house in Cabo no air is $23 a month my tiendas are $50 a month mini splits in aug to nov my house gos up $20?

      • cooncats

        Read the article: “Electricity is expensive in Mexico. On average electricity prices are 25% higher than in the United States and Canada for commercial and non-subsidized residential users.

        Your personal experience living in an area where you don’t need AC is not generally indicative of the CFE cost picture. I have solar and even with two ponds and a pool my CFE cost now is about $2 per month. However that took a $13K investment, a good one because at the DAC rate I was at, over 30 cents per kWh U.S. this solar system will payout in less than 4 years. Remember that DAC is applied to every kWh used once that level is reached. That level BTW is about what a 2BR apartment would use in the U.S.

        Read your bill and understand it. The DAC rate is the unsubsidized rate and it is over 30 cents per kWh. Why can’t Mexico make power cheaper than this? In Texas, free utilities deliver power for 10 cents US per kWh or less.

        Note the word “unsubsidized” in the above quote. You are being subsidized by other taxpayers and rate payers but that is not at all indicative of how expensive CFE’s power is.

    • Oh, pooh. I find CFE’s service excellent, and the prices dirt cheap. Love it.

  • Jose Yates

    The high rates in Mexico make Miami condos affordable.

    • MortimerSnerd

      …not if you leave the air-con on all day they are not…

  • MortimerSnerd

    Grid tied/net metering is the way to go. The cost of solar panels in the USA is now below .50c/watt and the number of panels just to offset high usage rates, which should be your first priority, is only 1500 watts for the average household consumer in this sunny climate. They are easy to install, DIY is possible, and the price of 300 watt panels is often sub $200 from USA wholesalers. The inverters are cheap and reliable…Stay away from the overpriced 5 figure giant turnkey plants the dealers want to sell you… most are so overpriced the payback is in the decades.. Do your homework.

  • CasaAlux

    I lived in Miami until 2008. I never had an electric bill below US$250 a month in a 2 bedroom condo. Now, living in Mexico (Yucatan, where we need AC most of the year at least to sleep) I rarely have a bill over 1500 pesos for TWO months, i.e. around US$35 – 40 per month. Not sure what this proves, but just pointing out that your electric bill in Mexico doesn’t have to be high. If you have central air and run it on 18° 24 hours a day, then yes, you will hit DAC very fast. But it doesn’t have to be like that!

    • It amuses me that so many Gringos run up sky-high electricity bills with all their gadgets and gizmos. Mine is low, and has been low for 17 years. I gotta TV, a computer, and overhead lights. Period.

      • CasaAlux

        Indeed. I also have a fridge, and AC which is needed most of the year in Yucatan for sleeping. I’m always amazed how often I read online about Gringos with 5000 + peso electric bills.

      • David Nichols

        Really Felipe…? It amuses me how some Mexicans, or should I say “beaners”, since you like to throw around negative appellations, you have No refrigerator, no washing machine, no fans…?
        Somehow I seriously doubt that…

        • Well, dang, David, you are right. I do have a fridge. I do have a washing machine, but I do not have a dryer. And I do have low CFE bills.

          I guess you think that Gringo is a “negative appellation.” Actually, it’s how 100 percent of the natives refer to us when we’re not within earshot. That’s because they think we might think it’s a “negative appellation.” They do call us Gringo if they know us well. Fact is that it is not a negative appellation at all. It can be, or it cannot be. It depends on how it’s used, tone, etc. It’s also how 98 percent of the Gringos who live in Mexico refer to one other. You must be in that 2 percent.

          Fact is, it’s a perfectly acceptable word, and a far cry better than the mouthfuls of norteamericano (of course, Mexicans are norteamericanos too) or the horrendous estadounidense. Yipes.

          • David Nichols

            Of course you are right about how a word is used and the tone expressed will usually make it easy to know if the intent is perjorative…
            Unfortunately, a failing of the written word is that we don’t have any tonal punctuation, so one has to attempt to devine the intended meaning from context…
            I interpreted your comment to be a criticism of the American penchant for having “gadgets and gizmos”, so I assumed in that context “gringo” was meant to demean…
            If I was wrong, it certainly wasn’t the first time for me..!
            BTW, don’t you find this having more and more electrical gadgets, like microwaves, crock pots, toasters, blenders etc, to be more of a indicator of economic stature, rather than unique to “Gringos”… I know my middle to upper economic class Mexican friends tend to have every new appliance/gadget on the market…

        • Bex vanKoot

          In our household we have a large fridge, a big screen TV which is often used as a stereo, a Roku and an Apple TV, two desktop computers, two laptops, two cell phones, a few small kitchen appliances, and several fans. We have not once gone over the DAC threshold.

  • K. Chris C.

    One has to love the automatic welfare, and associated welfare trap, on one’s CFE bill. Use more electricity than the government permits (rationing) one to, and you’ll quickly find the “government paid portion” eliminated. The result being the more than doubling of one’s bill.

    Similar is heading for the subjects of the US tyranny in the form of “Smart Meters.” “You used your fridge, lights, and computer during ‘peak times,’ so we doubled your rate. Try doing those things between the hours of 6:30am and 7:30am. We’re here to help.”

    An American citizen, not US subject.

    • Charliej

      Chris, isn’t it hard to breathe with your head so far up your ass? All I ever see from you is whining and crying. If you are so unhappy, why not just go ahead and end it all. You would then find peace, and so would the rest of us.

      • cooncats

        Why don’t you try addressing the man’s point, which is valid? The subsidized portions of the rate schedule are a form of welfare. Receiving this welfare because of lower usage does not change the fact that CFE’s costs and unsubsidized rates are ridiculous and a drag on the economy.

  • Pesobill

    In Los Cabos the electric bills were nuts and if you lived in a ‘Gringo Area’ even higher . Controlled by one company and the crooks won’t even check a faulty meter , the consumer has near zero protection in this third world country . So glad to be back in the USA… Feel sorry for the ones who bought properties down there and now are losing cash to sell it .. Adios Mexico .

    • CasaAlux

      I assume Mexico doesn’t miss you either.

  • Güerito

    “Electricity is expensive in Mexico. On average electricity prices are 25% higher than in the United States and Canada for commercial and non-subsidized residential users.”

    This is a grotesque lie.

    I pay about 5 dollars a month for power, and this includes a home office. Power, water and LP gas (cooking, hot water) are extremely cheap in MX.

    MND, this a new low point.

    Please identify Jarrett Leinweber as an advertiser, not as an opinion writer.

  • SickofLiberalbs9999

    This article wants to make the case that electricity is expensive in Mexico.
    BUT IT ISN’T. Compared to the United States, for average residential consumers (not rich hacienda owners) the cost of electricity is less than 1/2 the cost of comparable US energy customers. Most consumers are subsidized by the government, so this article applies primarily to wealthy consumers. But who cares if they pay more, they can afford it.

    • Güerito

      My power bill is less than one-tenth what it was in the US. About 5% of what I paid in the US would be even closer.

  • Jarrett

    Thanks to everyone for reading the article. Happy to see it has generated a lot of interest, comments and debate…

  • Jarrett

    Thanks to everyone for reading the article. Happy to see it has generated a lot of interest, comments and debate…

  • Jarrett

    The goal for most homeowners, who install a residential solar system in Mexico is to off-set and eliminate the purchase of power at the expensive rates. Exceedance (Excedente) and DAC. That way you only purchase the cheap subsidized electricity from the CFE and maximize your ROI.

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