January/February 2021 | Vol. 26 No. 1
by Gustavo Dominguez Poo, Director, Latin America, NEMA
Mexico’s 2015 Energy Transition Law stipulates that by 2021, 30 percent of the country’s electricity must come from low-emission sources; 35 percent by 2024; 45 percent by 2036; and 60 percent by 2050. To meet these goals and promote electricity generation from clean and renewable sources, government institutions granted incentives to encourage the private sector to develop needed electricity infrastructure.
Among the most critical incentives are:
- permitting the private sector to use or sell their “energy bank,” which allows the accumulation of surplus energy to producers under a
self-supply scheme;
However, President Andrés Manuel López Obrador (AMLO), elected in 2018, has a different energy outlook. AMLO based his energy policy on strengthening the government energy sector, investing in the rehabilitation of aging thermoelectric and hydroelectric power plants, and stopping the privatization of electricity production in favor of state-owned resources. In particular, his policies impose rules and tariffs on alternative energy companies, requiring them to meet minimum standards and cover fees for using the electricity distribution network.
The president’s plans fly in the face of former president Enrique Peña Nieto’s policies, which he designed to incentivize private investment in renewable generation, and have led to tense disagreements between the Federal government and the private sector. State governments, which also stood to gain indirectly from the incentives, have gotten involved, raising questions about the constitutionality of the current president’s policies.
These disagreements have found their way into the courts. In November, at the request of the governments of Colima, Jalisco, and Tamaulipas, Mexico’s Supreme Court issued a stay against the Ministry of Energy’s efforts to thwart privatization and impose tariffs until the Court decides on the constitutional issues involved.
AMLO reacted to the court’s decision by discussing the possibility of reforming the Constitution to make the State the leading participant in the national energy market.
“We will find another chance to defend the public interest, if necessary proposing constitutional reform so that the national ownership of natural resources prevails and so that the general interest is above personal interests or that of groups, however legitimate,” AMLO said.
While AMLO is trying to defend the control of the energy sector in Mexico by executing public policies, many experts believe that his efforts will ultimately fail because of the low performance/ productivity of the Comisión Federal de Electricidad (Federal Electrical Commission, or CFE) and PEMEX, Mexico’s national oil company. They also think it will be impossible to keep Mexico’s power running and affordable without private sector development. ei