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News Article

Energy Reform Would Affect Automotive Industry: AMIA

By Antonio Gozain | Tue, 01/25/2022 - 13:01

The energy reform, proposed by President Andrés Manuel López Obrador, would negatively impact the Mexican automotive industry, said AMIA.

“(We) recognize that the National Electric System and its regulatory framework have areas for improvement that could be solved by modifying the secondary legislation; they share the disadvantages that the constitutional reform initiative proposed by the president would have due to the negative effects it can bring to the productive plants of the Mexican automotive industry and the international commitments signed by Mexico, such as USMCA and the Agreement of Paris, among others," said AMIA in a statement.

Discussions surrounding the López Obrador administration’s prized energy reform have opened in Mexico’s parliament. Featuring profound changes, the reform would drastically alter the status quo set in the constitutional 2014 energy reform. With the future of the electricity sector at stake, the battle lines between supporters and detractors are being drawn.

If passed, private participation in general would be capped at 46 percent, though all privately produced power would be sold to CFE, which would recover its legal monopoly in commercializing Mexico’s energy. The economically focused electricity dispatch, now in hands of grid operator CENACE, would be run by the state and actively favor CFE’s plants. Independent energy regulators are to disappear entirely, reported MBN.

From Jan. 2021 to Sep. 2021, a total of 244.8 TWh were produced in the country, from which CFE generated 98.6 TWh and the private sector 146 TWh, a 40-percent and 60-percent share, respectively, highlighted AMIA. The association questioned: “How will CFE develop the additional capacity equivalent to 14 percent to reach 54 percent of the total established by this reform?”

In addition, the limited capacity of CFE in renewables would force it to use fossil fuels, “increasing electricity costs by 31 percent and carbon dioxide emissions by 32 percent,” said AMIA, and added that in 2021, the average price of electricity sold the CFE in medium voltage was MX$1.22 per kilowatt hour, while private companies offered an average price of MX$0.42 per kilowatt hour.

Abolishing clean energy certificates would limit automakers’ use of renewable energies, which, in turn, would affect the fulfillment of corporate obligations regarding decarbonization commitments derived from international agreements signed by Mexico, such as the Paris Agreement, SDGs and COP 26. Vehicle exports could be subject to trade reprisals, such as carbon taxes on manufacturing, making Mexico less attractive as an investment destination and affecting job creation, warned AMIA.

"The commitment to less clean and more expensive energies would have a negative impact on Mexico's competitiveness, which could discourage future investments and redirect them to other countries," said José Zozaya, president, AMIA.

Antonio Gozain Antonio Gozain Journalist and Industry Analyst