The Charge Towards a Clean and Efficient Energy Future

Mexico's energy transition stands at a pivotal moment. As energy demand, especially for clean energy, continues to rise, it is crucial for attracting investments and stimulating economic growth. However, the previous administration faced hurdles related to the energy grid and concentrated efforts on bolstering state-owned companies, PEMEX and CFE, leading to a slowdown in renewable energy initiatives. This creates a new challenge for Mexico as it pursues clean energy generation.

Experts foresee a favorable environment for the deployment of cleaner, more efficient, and cost-effective energy sources over the coming years. Daniel García, President-CEO, FAMERAC-Modulo Solar, emphasizes the necessity of addressing the carbon footprint of the energy sector. “This poses a significant challenge given the need for reliable energy sources, particularly to support economic development”.

A major obstacle in the shift to clean energy is the difficulty in fostering effective collaboration between public and private sectors. Projects in the public sector often encounter bureaucratic delays and inefficient processes, which can deter private investment. Conversely, while private companies possess technological expertise and financial capacity, they face challenges related to regulatory uncertainty and slow government approvals.

In terms of the regulatory and industry landscape, Alfredo Bejos, Vice President, AMGN, anticipates that Claudia Sheinbaum’s National Energy Plan will address pressing challenges that energy stakeholders have awaited resolution on during López Obrador’s tenure. “The cap on national oil production and the establishment of PEMEX Energía to support CFE indicate a promising administration committed to tackling Mexico’s energy issues.” Additionally, he points out that Sheinbaum’s cabinet appointments and her previous experience in the sector are positive indicators of her understanding of industry needs.

However, experts also foresee numerous challenges in meeting the demands for clean energy while addressing increasing energy needs. Sergio Villalón, Senior Vice President & General Manager for Mexico and Central America, Signify, states that Mexico's regulatory environment lags behind other regions where significant projects are progressing. He further notes that Mexico holds substantial potential for energy development from renewable and natural gas sources.

Tackling these collaboration challenges will require a multi-faceted approach. Open dialogue between government agencies and private enterprises is essential. Establishing public-private partnerships (PPPs) that harness the strengths of both sectors can help accelerate project timelines and ensure more effective resource allocation. Nevertheless, President Claudia Sheinbaum’s position on private sector collaboration remains somewhat ambiguous. While she has indicated that PPPs are currently off the table, she has assured the private sector that alternative forms of collaboration could be explored to further enhance the industry.

According to Treviño, regulations must be clear and consistently enforced. However, the government’s strategy for CFE to generate 54% of Mexico's energy could pose challenges. “If CFE does not grow independently, this could result in less growth for the private sector, which is responsible for the remaining 46%,” Treviño explains. “It is clear that the public sector cannot tackle energy challenges alone, but neither can the private sector,” adds Abraham Zamora, President, AME.

The lack of adequate infrastructure and regulatory support severely hampers the speed of Mexico's energy transition. Renewable energy projects necessitate significant upfront investment in infrastructure, including grid modernization and storage solutions, to ensure reliable and efficient energy distribution. Furthermore, the absence of comprehensive regulations and incentives can impede the adoption of clean technologies.

Moreover, while nearshoring presents substantial economic opportunities for Mexico, energy remains one of the most critical issues that need addressing. Zamora emphasizes the scale of this challenge, noting that for nearshoring to be viable, an additional 37 GW of energy is required. This figure matches the capacity that Mexico has deployed over the past 15 years and must now be realized within the next five to six years.

Energy efficiency is also key to fulfilling the country’s energy needs. “Discussing energy transition is futile without considering energy efficiency. In general terms, we should first prioritize energy efficiency and then focus on energy generation,” García states. 

Héctor J. Treviño, Executive Director, AMDEE, points out that grid congestion continually drives up prices and complicates the connection of clean energy sources. Additionally, to strengthen the energy matrix, the role of natural gas must not be overlooked. Bejos suggests that a new strategy could be formulated to initially capitalize on natural gas prices while optimizing its distribution and utilizing the gas produced within Mexico.