Electric Sector Under Scrutiny: Fair Competition, Costs WorryBy María José Goytia | Thu, 01/13/2022 - 17:34
While the electric bill´s discussion approximates Congress, private sector and international trade partners start to communicate their concerns regarding fair competition in Mexico´s energy sector, as well as the abandonment of green energy and increased costs of production. Meanwhile, lithium continues to create great interest for Mexico´s government.
Jayme White, US Deputy Commercial Representative, held a virtual meeting with the Mexican Undersecretary of International Commerce, Luz María de la Mora. The meeting occurred previous to the USMCA undersecretaries meeting. During the meeting, White highlighted the need for an energy policy in Mexico which promotes loyal competition and the production of green energy to fight climate change. The concerns come as the Federal Government continues to favor CFE against private sector in energy production.
The president of the Mexican Association of Eolic Energy, Leopoldo Rodríguez, reported that the private sector in Mexico will invest US$900 million in 2022, in comparison to the US$1.5 billion invested in 2021. Rodríguez explained how President Andrés Manuel López Obrador’s administration has blocked and critiqued wind and solar energy to favor CFE’s fossil fuels’ production. He also mentioned how the potential electric bill is based more in political criteria than in in technical data which harms investment in green energy.
Minister of Energy, Rocío Nahle shared information about potential lithium reserves in Mexico. Data of US Geological Service predicts only 23 countries worldwide possess lithium reserves within their territory, these include Mexico. Data also shows that Mexico could potentially have 2 percent of worldwide reserves. The list includes Bolivia with 24 percent reserves, Argentina with 22 percent, Chile with 11 percent, the US with 9 percent and Australia with 7 percent. The information was shared by Nahle who is promoting the energy bill introduced by President López Obrador in September 2020, where the nationalization of lithium is suggested.
Mexico has suspended importation permits to more than 80 energy companies in favor of PEMEX and CFE, denounced Senator Ron Wyden, president of the Finance Committee of the US Senate. Wyden sent a letter to the US Trade Representative Katherine Tai, where he complained about the violation of the USMCA agreement in regards to economic competitiveness and openness. The letter, also signed by Senator Mike Crapo, highlighted concerns about the electric bill and how its possible approval could jeopardize US investment in Mexico.
According to data presented by the Mexican Institute for Competitiveness (IMCO), CFE will require MX$66 billion (US$3.24 billion) in infrastructure investment, in addition to theMX$73 billion (US$3.59 billion) budget to subsidize electric energy to consumers. The insights found by IMCO were shared by its director, Valeria Moy, during the Economics Perspective Seminar at ITAM last Friday. During her conference, Moy shared IMCO’s insights about the potential costs of the electric reform proposed by President Andrés Manuel López Obrador. The impact of the bill shows the increased cost in two directions: investment and subsidies. Moy said during the panel that “not only would the subsidies rise pressure over public finances, but for CFE to suffice the electricity demand, it would have to invest in new generation plants through an investment that is not considered in the current budget.”