Energy Policy: Sheinbaum vs. Xóchitl

With the Mexican presidential elections fast approaching (June 2) and the front-runner candidates, Xóchitl Galvez and Claudia Sheinbaum, having made public, several weeks ago, their energy proposals/policies in their respective platforms, it is time to dissect and contrast them. Even though energy policy is only a part of their political platform, the impact the energy sector has on the Mexican economy is of great importance so as to justify ample discussion and incorporate into each individual’s voting decision. 

Let’s begin by saying that both candidates try to convey that Mexico will have clean energy, that energy will not be scarce and that it will be with competitive prices. But the main difference here is the approach that each candidate is taking. Between the lines, I read that Sheinbaum’s policies maintain the status quo of the last five years, while Xóchitl’s are to return to the policy environment before the current government. But this would be just too simplistic of a conclusion at best.  So, I will try to compare each candidate’s policies, and I will do so by touching 10 key elements of both candidate’s policies combined.

1. Transition to Renewable Energy

Here I need to start by saying that it seems to me that both candidates have an intention of advancing renewable energy in Mexico, although neither has set clear targets for this type of energy penetration. Furthermore, neither of the candidates touch upon a key aspect to ensure that renewable energy can grow its participation in Mexico’s energy matrix, which is the upgrading of the grid to allow a higher intermittent generation percentage.

Xóchitl suggests that the purpose of the transition to more renewable energy is substituting hydrocarbon usage. Sheinbaum does not mention this. On the other hand, Sheinbaum makes one conclude that the government will be the one developing new renewable generation, while Xóchitl specifically mentions that it will start providing generation permits once again (one can assume to private entities as well).  

2. Energy Efficiency

Both have a very similar proposal in terms of solar panel installation on residential rooftops.  The main difference is that Xóchitl focuses solely on residential and Sheinbaum also includes commercial rooftops. Sheinbaum also alludes to promoting solar water heaters in both residential and commerce. The latter, in my opinion, is not as cost-efficient as a solar panel installation.  In the long run, considering maintenance costs and deterioration of the installation, solar generation is a better technical and economical solution.

3. Private Participation in the Energy Sector.

Here, there is a very clear-cut difference, one that Sheinbaum carries from the current administration. While Xóchitl talks about reopening generation permits, Sheinbaum, although not explicitly mentioning that new permits will not be awarded, does mention that CFE will maintain a 54% share in generation.

4. PEMEX and CFE

What is going to happen to PEMEX and CFE? It seems that neither candidate is willing to address how PEMEX will become profitable. Although, Xóchitl promotes production with increased quality, sustainability, profitability, and efficiency.  But the fact remains that even with increased profitability, PEMEX could still be losing money. In essence, neither candidate is willing to lay down a concrete plan to achieve long-term profitability for CFE ,and much less PEMEX.  

5. Transmission and Distribution

Here, both candidates coincide, in that Mexico needs a more robust transmission and distribution grid. But neither candidate has touched upon the much-needed high voltage transmission lines that are necessary to alleviate congestion from the Tehuantepec Isthmus, derived from wind production, and from the northwest, derived from solar production, which, in turn, would incentivize and habilitate more renewable energy generation installations in these zones.  

6. Natural Gas and Liquids Storage

Although only Xóchitl touched upon this topic, it is extremely important and relevant.  Natural gas and liquids storage (gasoline, fuel oil, jet fuel, for example) is not only about energy security, it is also a supply-demand buffer that we currently don’t have.  For both natural gas and liquids, sufficient storage capacity softens any production disruptions. Otherwise, production disruptions would cause an almost immediate lack of supply. Xóchitl proposes the development of minimum reserves, but she does not clarify what that means. Sheinbaum has not commented on this. 

7. Natural Gas Supply to Southeast Mexico

This a very old intention and, in my opinion, much needed for the development of this region (Chiapas, Oaxaca, Quintana Roo, Yucatan, among others). It is impractical to think that the demand for natural gas needs to happen first. That just won’t happen. No large natural gas industrial consumer would consider opening operations in the southeast without guaranteed supply. In this case, the only way for the southeast to develop economically is for the government to create incentives; we are talking about competitive and sufficient natural gas supply. It is understood that only Xóchitl has this topic on her agenda.

8. Self Supply

Xochitl proposes that incentives be created to support farms, and the residential and industrial sectors in generating their own power. If done properly, this could even provide a respite to the current transmission and distribution constraints. No mention of this from Sheinbaum.

9. Increase Natural Gas Production

Sheinbaum mentions that natural gas production would be increased, and hints that it would be done by PEMEX. At the same time, she does not mention how the private sector would participate. No mention of this from Xochitl.

10. Natural Gas Burn to the Atmosphere

This one, only mentioned by Sheinbaum, is a recycled policy from a few presidencies ago.  Every one of the last three to four presidents have promised to reduce natural gas burn, but no advances have been made thus far. The reason for this is that burning natural gas is far cheaper, especially at current natural gas prices, than developing the needed infrastructure to capture, process and transport it.  Let’s hope that if Sheinbaum were to win the election, she could finally be the one to make this happen.

Many are the differences in the energy agenda proposed by each candidate, but there are also some similarities in the direction or vision each candidate wants to put forth. But as alluded to in my introduction, the path to get there is not necessarily the same.