Latin America Advisor

Energy Advisor

A Publication of The Dialogue

Will Mexico Make Big Strides Toward Renewable Energy?

López Obrador

Discussion relating to the energy sector ahead of Mexico’s July 1 presidential election has focused mainly on front-runner Andrés Manuel López Obrador’s potential changes to the country’s oil sector reform. However, López Obrador, widely known as AMLO, also has offered several proposals regarding renewable energy, such as expanding hydro energy in order to eliminate imports of U.S. natural gas and introducing more electric vehicles. Meanwhile, AMLO’s closest competitor in the race, National Action Party presidential candidate Ricardo Anaya, has proposed setting pollution limits for businesses and incentivizing electric transportation and the use of solar energy by small- and medium-sized enterprises through fiscal stimulus. Do any of the candidates offer a better vision for Mexico’s renewable energy future? What economic realities does Mexico face when planning for the expansion of renewable energy, and will these proposals win support and attract necessary investment? How likely is it that the candidates’ policies will be implemented, and who would be the winners and losers if they are enacted?

Tabaré A. Currás, honorary member of the Climate Change & Renewable Energy Commission at World Peace Builders: “A sustainable energy regime is the best vision candidates can offer to Mexico. The country needs one that, beyond any rhetoric on sustainability, truly ensures consistency and fairness. Candidates show no sustainability consistency when they talk about ‘accelerating the transition to renewable energy’ on the one hand and propound to ‘rehabilitate thermoelectric plants’ on the other. Mexico’s thermoelectric production accounts for a third of the country’s total carbon dioxide emissions. There is no serious, cohesive sustainability policy when candidates talk about ‘promoting the mobility of people in a non-motorized, electric way’ while proposing to ‘reconsider the gasoline tax.’ The latter is a measure that would encourage further expansion of polluting motorized mobility while overlooking the related social and environmental externalities. Ultimately, there is no sustainability consistency when candidates endorse ‘the development and incorporation of clean and renewable energies in the country’s energy matrix’ while regarding natural gas as a ‘clean’ energy source. Mexico’s fossil-based economy must transition faster to a decarbonized energy paradigm, one that would surely bring about positive results to all stakeholders embracing the transition. Candidates should not lose the chance to put forward a compelling case for this much-needed transformation, based on both the public interest and realistic alternatives for groups affected. Alternatives that respect, promote and realize the rights of workers and communities and introduce efficient practices in the use of energy and resources. The three leading candidates in the election need to widen their perspective through a holistic outlook and understanding of sustainable development, climate change and the conservation of biological diversity.”

Lisa Viscidi, member of the Energy Advisor board and director of the Energy, Climate Change & Extractive Industries Program at the Inter-American Dialogue: “Mexico has been a leader in international climate change negotiations—yet less than a quarter of its installed power capacity comes from renewable sources, well below the Latin American average of about 50 percent. AMLO has ambitious plans to increase renewable power generation from large hydroelectric dams and small, decentralized energy systems like residential solar projects. He also wants to see 100,000 electric cars on Mexican streets. Other candidates have also called for increased incentives for distributed energy and electric mobility. These are the right areas of focus to accelerate Mexico’s transition to low-carbon energy. But they will require the next government to build on the energy reform that President Enrique Peña Nieto signed into law. In fact, the energy reform has created a strong framework and important incentives to increase renewable energy in Mexico, including a wholesale power market and system of clean energy certificates. Nevertheless, renewable energy developers still face a number of challenges, including decrepit electricity infrastructure, competition from cheaper natural gas and opposition from local communities. It’s unclear that the large investment pledges for new wind and solar projects awarded in Mexico’s three auctions will all result in actual construction. As noted in my recent working paper, to overcome these hurdles, the new government should focus on three areas: 1) Improving grid management by increasing the capacity and efficiency of the transmission and distribution system, improving demand-side management and incentivizing distributed energy; 2) Making renewable energy more cost-competitive by expanding fiscal incentives for certain clean technologies and building the local industry; and 3) Garnering local community support for renewable-energy infrastructure by improving the process for land consultation and disputes and developing community energy systems.”

David Shields, independent energy consultant based in Mexico City: “The good news is that renewable energy, cleaner fuels and a commitment to climate change are on the agenda of Mexico’s three leading presidential candidates: Andrés Manuel López Obrador, Ricardo Anaya and José Antonio Meade. All three of them have good, visionary, knowledgeable, sensitive people working on these topics. All three seek to achieve, or even improve upon, the goal, set out in Mexico’s Energy Transition Law, of having 35 percent of power generation in Mexico coming from clean, zero carbon-emission sources by the year 2024. AMLO’s hydro power and refinery proposals are part of a vision of making better use of existing infrastructure and achieving energy self-sufficiency, but he also has a team with exciting ideas about getting people involved at the community level in renewable energy projects. This is part of an integral development policy that includes aspects such as jobs, education, health, the environment and communications. It certainly sounds like a good idea. At the same time, the transition to clean energy is not a big issue in the election debate. Discussions about the future of state-run oil company Pemex, the supply and price of gasoline, and Mexico’s energy security in the face of low refinery output and major imports of U.S. natural gas and gasoline are the topics that take center stage in the energy debate in what always has been a fossil fuel-oriented economy.”

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