EECEC 2021: Mexico Losing 7B in Renewable Investment

Market specialists at the 2021 Energy Efficiency and Clean Energy Congress have come to the conclusion that after three years of the Lopez Obrador administration, the country´s economic sector has been grinded to a halt, representing an estimated US$7 billion in annual losses, which are now being diverted and absorbed by neighboring Latin American countries says Paolo Salerno, managing director and partner of energy experts Salerno and Associates.

Since the administration’s concerted efforts to centralize the energy sector around the state-owned Federal Electricity Commission (CFE) ended up with lawsuits in court having achieved “neither one thing nor another”, Salerno views the initiative as failure that represents a loss to all involved. Jose Maria Lujambio, partner and director of Cacheaux, Cavazos & Newton firm, views the proposed constitutional amendment as improbable, a last-ditch effort after the administration failed to implement their sought-after changes through other institutional means.

Furthermore, Salerno assured that the cancellation of energy auctions is directly responsible for energy market’s stagnation which has incurred in billions of losses when factoring the estimated loss of US$7 billion in foreign direct investment, which has since been diverted to neighboring countries like the Dominican Republic, Colombia, Peru and Chile. There is also the loss of added value from cancelled transmission projects that were supposed to be built by the federal government and the dramatic reduction of approved new generation permits from the Energy Regulatory Commission (CRE) which drives at the heart of the problem.

Experts say since the commission lost its independence and started to be used as a political instrument, large energy projects that would have otherwise been developed have been frozen causing domestic vertical investments to implode and be rerouted to less volatile markets.

“The first three years (of government) have had an extremely negative impact because the sector is totally frozen, in general the boom that the implementation of renewable energies and a growing wholesale electricity market was having was totally frozen, it did not return, no progress was made, we are just totally frozen said Salerno.

Ramses Pech, partner at Caraiva y Asociados-León & Pech Architects, says Mexico cannot afford to keep wasting time on legal battles or the energy infrastructure that is desperately needed won’t get built. Otherwise, it stands to fall behind making it impossible to participate in the regional market as other economies move increasingly towards renewable energy inadvertently whipping out all the economic advantages it has amassed since 2013.

Overall, Mexico only stands to lose as the administration stubbornly insists on nationalizing its economic development plan thereby hurting not only the energy sector and its consumers, but the country’s long-term economic development as we enter Industry 4.0 and combatting climate change as the world grapples with a code red warning emitted by scientists.