Increased renewable energy penetration mexico city
The writer is professor at the University of Southern California and an adviser at Monarch Global Strategies Contact online >>
The writer is professor at the University of Southern California and an adviser at Monarch Global Strategies
When Mexican president Andrés Manuel López Obrador met his US counterpart Joe Biden in Washington for bilateral talks earlier this month, there was one major energy-related breakthrough: López Obrador at last publicly recognised the inevitability of the coming energy transition.
For a politician long devoted to the centrality of fossil fuels in Mexico''s national energy matrix, this is a very important shift. The president dreams of a return to the 1970s, when a huge oil find translated into energy sovereignty and significant income. The collapse in petroleum production over a generation has increased Mexico''s reliance on energy imports from the US, and prompted reforms to promote private investment in energy. López Obrador''s policies are designed to reverse both these trends.
Even though the president has acknowledged the need to plan for a greener future, this turnaround has its limits. It does not mean he will change his determination to rebuild Mexico''s state-owned petroleum and electricity companies, Pemex and the Federal Electricity Commission. Nor does it mean he is backing down from his demand that private energy investment should only take place in association with Pemex and the commission and that the state-owned firms control any such strategic alliance.
However, López Obrador''s new view on clean energy should open the door to more investment in renewables. It should also help Mexico to attract investment from foreign firms with commitments that require them to source an increasing percentage of their electricity from renewables.
This increased opportunity for renewables in Mexico may not extend to energy companies worldwide, however. López Obrador''s call in Washington for increased North American economic integration will deepen Mexico''s already overwhelming economic reliance on the US. This, alongside nationalist energy policies that directly contravene the terms of the United States-Mexico-Canada free trade agreement, helps explain his decision to negotiate directly with US energy firms.
No similar logic holds for European firms. Even as López Obrador is meeting the heads of US firms to resolve the operational challenges of Mexico''s energy nationalism, the country''s energy regulator continues to deny operating permits for European wind and solar facilities. This nationalism combined with the free trade agreement seem to be creating favouritism for US energy firms and, in the process, a deepening of North American regionalism.
At the same time, López Obrador''s mere acceptance that an energy transition is under way is unlikely to resolve Mexico''s electricity bottleneck by itself. Any increase in clean energy investment will inevitably be limited by the requirement that private investors operate with the Federal Electricity Commission. It will also be constrained by a profound lack of confidence in the broad investment climate in Mexico.
The president''s repeated rhetorical excesses, and history of changing the terms of private contracts — such as the cancelled $13bn Texcoco airport, after construction had started — will continue to undermine investor enthusiasm.
López Obrador''s revised approach to renewable investment may allow him to avoid direct US challenges to his energy strategy under the provisions of the free trade agreement. But it will not translate into enough investment to produce a sufficient supply of reliable, cheap and clean electricity to meet the needs of a growing economy.
The US-Mexico meeting generated some hope: for better bilateral relations and increased investment opportunities for American renewables. Implications for European energy companies and for Mexico''s broad economic future, however, are far less bright.
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"Mexico can be a clean energy powerhouse," said NREL Laboratory Director Martin Keller, "and a vital part of maintaining North America''s competitive edge around the world. Realizing this potential will require energy policies that facilitate private investment and support our joint efforts on clean energy, climate, and supply chains."
Among the key findings of the report:
The findings in this study underscore that private sector investment is critical for Mexico to achieve its clean energy goals. The investments needed to achieve these gains, however, would have a very low probability of occurring if changes are made to Mexico''s current legal, regulatory, and electricity market frameworks that would result in significant barriers to market entry.
The NREL report reinforces the critical role that Mexico can play as a clean energy leader to propel North American competitiveness, a message that U.S. Secretary of Energy Jennifer M. Granholm expressed during her visit to Mexico in January 2022.
Read the complete NREL report on Mexico''s Clean Energy Potential at https://
NREL is the U.S. Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. NREL is operated for the Energy Department by the Alliance for Sustainable Energy, LLC.
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