By Sonia Mancera and Jesús Carrillo *
Every year Mexico’s Ministry of Energy publishes a document outlining plans for the energy sector including expansion prospects for the country’s electricity generation capacity and proposals for the modernization of power transmission and distribution networks. The newest version of PRODESEN -published on May 31st- compromises electricity generation investment in Mexico, postpones the fulfillment of clean power generation goals (going against Mexico’s domestic and international commitments) and delays energy transition.
Until the beginning of the López Obrador administration, previous versions of this document contemplated investments by private actors in the Mexican electricity sector. Since 2019, however, PRODESEN established that Mexico’s state-owned utility (CFE) will be solely responsible for expanding electricity generation capacity in the country. Between 2022 and 2025, CFE plans to expand its capacity by 8,262 MW, where only 951 MW would come from renewable sources. To put this into perspective, this would mean that Mexico’s clean energy generation matrix would only grow 12.5 percent of what it grew between 2015 and 2017. Back in 2016 and 2017, Mexico held three long-term power generation auctions under new rules stemming from the 2013 constitutional reform of the country’s electricity sector. Since the arrival of the López Obrador administration no new auctions have been carried out.
How will the expansion in Mexico’s electricity generation matrix be financed after 2026? According to the Mexican Business Coordinating Council, private investment in Mexico’s power generation sector totals US $44 billion. No single company in the world should have enough resources to meet electricity demand of an entire country as big as Mexico, nor to bear the risk of such investments. Mexico’s CFE does not have the operational or financial resources to carry out this investments. Moreover, these investments would also represent a high cost for CFE’s own distribution and transmission capacity where by law it holds legal monopolies. In short, Mexico’s entire energy security would be jeopardized.
Moreover, the newest version of PRODESEN also cancels the phasing-out of Mexico’s least efficient power plants with the highest carbon footprint. The document does away entirely with the Program for Power Plant Installation and Decommission (PIIRCE in Spanish) which guided the process. The cost of not decommissioning these older power plants can be high in monetary, environmental, and health terms for the Mexican public given that they run on fossil fuels they are comparatively more obsolete and polluting.
Even more concerning, Mexico’s newest plan delays 7 years its commitment to reach 35 percent of clean electricity generation. This was a goal that the country committed both in international treaties and in its own domestic legislation. To be clear, the delay in fulfilling this commitment cannot not be attributed to technical, economic or social factors. It is rather due to ideological considerations by the current Mexican government placing the strengthening of state-owned power and oil companies at the center of its energy policy. Under this vision, the concepts of energy security, sustainability and competitiveness are left behind.
Mexico needs to move swiftly to reduce its carbon footprint. It is not only that the climate emergency requires the determined commitment from all countries to overcome it but also because energy transition opens an opportunity for Mexico to become a more competitive country that takes advantage of new technological changes. Instead of maintaining a commitment to hydrocarbons, public investment in Mexico should be geared towards improving electricity transmission and distribution networks, expanding natural gas storage and transportation capacity, as well as improving and promoting demand-side energy efficiency in public infrastructure and the productive sectors.
* Sonia Mancera is a research intern and Jesús Carrillo is director of sustainable economy at the Mexican Institute for Competitiveness (IMCO), an independent think tank that produces research and public policy analysis to improve Mexico’s standing in the global economy. Twitter: @IMCOmx