The Mexican energy sector has undergone significant changes in recent decades. The 2013-2014 reforms marked a turning point by opening the sector to private investment. Subsequently, the current administration proposed modifications aimed at strengthening the role of state-owned companies, primarily the Federal Electricity Commission (CFE) and Petróleos Mexicanos (PEMEX), in the energy market.
Timeline of Recent Changes:
- 2013-2014: Reforms allowing greater private participation in the sector.
- 2021: Introduction of an initiative to modify the structure of the electricity market.
Main Points: Strengthening of the CFE, modification of self-supply permits, changes in electricity auctions, and clean energy certificates. The initiative was approved by Congress but later declared unconstitutional by the Supreme Court in January 2024.
- February 2024: New reform proposal on state strategic industries.
Key Aspects:
- Emphasis on energy security and self-sufficiency.
- Proposal to limit private investment in electricity transmission and distribution.
- Increased participation of state companies in the energy market.
- Proposal for centralization of regulatory powers in the Ministry of Energy.
Current Status: The February 2024 proposal was not ruled on before the end of the legislative period. Its future discussion will depend on the composition of the new Congress after the elections on June 2, 2024. Since it is a constitutional reform, it will need a qualified majority (2/3 of the chamber) for approval.
Current Overview of the Energy Sector in Mexico
The Mexican energy sector presents a mix of traditional and renewable sources, with a gradual trend towards diversification. Below are key data illustrating the current situation:
Recent Evolution of Renewable Energies
Clean energy was integrated for the first time into the national energy planning strategy after 2013, partly because Mexico decided to sign the Paris Agreement, committing to reducing its greenhouse gas emissions.
- 2017-2022: 48.8% increase in generation from clean sources
- 2021-2022: Slight decrease of 1.8% in energy generated from clean sources
Current Challenges
The sector faces challenges in meeting the growing energy demand. The National Center for Energy Control (CENACE) has declared several states of alert and emergency in 2024:
- An alert state occurs when the electrical capacity above what is demanded is less than 6%, while an emergency state means the Operational Reserve Margin is below 3%. In the latter case, CENACE must perform load shedding in some places to ensure the system does not collapse.
Industrial Implications of Changes in the Energy Sector
Recent developments and proposed changes in the Mexican energy sector could have various implications for the industry. It is important to consider these potential effects from a neutral perspective:
- Energy Supply Capacity
The evolution of the regulatory framework could influence the system's ability to meet the growing energy demand. Any change in the participation of public and private actors could affect investment dynamics in the sector.
- Investment and Finance
Modifications in the energy market structure could impact investment patterns, both public and private. Meanwhile, the distribution of resources for the development of energy infrastructure could experience adjustments.
- Costs and Efficiency
Possible changes in the market structure could influence electricity costs for various industrial sectors, while the evolution of the regulatory framework could affect incentives for operational efficiency in the sector.
- Energy Transition
The pace of incorporating renewable energies could be influenced by the energy policies adopted. Additionally, Mexico's international commitments on climate change could require adjustments in the energy matrix.
- Legal Certainty and Nearshoring
The stability and clarity of the regulatory framework are important factors for investment decisions in the context of nearshoring, as the interpretation and application of international trade agreements, such as the USMCA, could influence commercial and investment relations in the energy sector.
Indeed, Mexico's energy policies are the subject of attention from its trading partners, particularly within the framework of the USMCA. The consultation process initiated by Canada and the United States on Mexican energy policies is ongoing, reflecting the importance of the issue in trilateral relations.
What’s Next?
Claudia Sheinbaum, the president-elect for the 2024-2030 term, has expressed her support for the initiative and shares President Andrés Manuel López Obrador's (AMLO) vision regarding the energy sector, which prioritizes the Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex).
Her energy proposals are based on the principles of sovereignty and energy self-sufficiency. Additionally, her energy advisor has indicated a willingness to collaborate with the private sector to achieve these objectives. Find out more information about the challenges and opportunities Sheinbaum will face in the coming six years.
For Prodensa, it is essential to stay informed and prepared to adapt to these changes, understanding that the stability and clarity of the regulatory framework are crucial for strategic planning and decision-making.
In the global context, trade relations and international commitments play a vital role, so it is essential to address these issues with a neutral and objective perspective, focusing on the implications and opportunities that may arise for the industry and the country.
With this vision, Prodensa positions itself as a key player in the development and growth of the Mexican energy sector, contributing constructively to the dialogue and cooperation between the private sector and government authorities.