Energy Sector Faces Grid Limits, Market Shocks, Policy Risks

From transmission grid weaknesses and commodity price volatility to permitting delays and climate mitigation pressures, the energy sector faces no shortage of challenges across Latin America, including Mexico. These issues, detailed in the 2025 World Energy Issues Monitor by the World Energy Council, are not isolated but widespread across the region.

The report assesses the energy sector’s most pressing and uncertain challenges.  At the global level, commodity prices top the uncertainty list, seen as the most unpredictable and influential hurdle that, according to the report, “keeps energy leaders awake at night.” Despite the expansion of renewables, fossil fuels remain crucial to meeting energy demand. Contributing factors include self-preservation policies from major economies, unequal access to clean technologies, and ongoing global conflicts, all of which destabilize commodity markets and, by extension, national energy strategies. 

The most urgent priority is grid and transmission infrastructure, reads the report. As electricity demand rises and renewable capacity increases, modernizing and expanding power grids has become critical. However, this progress is slowed by permitting delays, disparities in access to capital, and unresolved energy storage concerns. The World Energy Council stresses that grids play a central role in ensuring equitable and affordable electricity access, especially for marginalized communities and remote areas.

This year’s report also highlights persistent “people blind spots” and evolving regional priorities. According to Angela Wilkinson, Secretary General and CEO, World Energy Council, energy governance remains rigid, policy approaches are inconsistent, and public engagement fragile. “Volatility and inequalities are increasing,” she says, calling for a more human-centered approach to energy systems. “The future of energy is not just about what powers our systems. It is about who they empower and how we harness human collective wisdom to shape new and better energy futures for billions of lives and a healthy planet.”

In Latin America, the picture shifts. Permitting and licensing delays are the region’s most impactful and uncertain energy challenge, followed by access to capital, infrastructure deficits, and commodity price instability. According to the Council, bureaucracy across the region remains a significant obstacle to the efficient deployment of renewable energy and infrastructure. While environmental and social impact assessments are essential, especially in countries with large Indigenous populations, the report calls for clear regulatory frameworks, adequate institutional capacity, and early inclusion of Indigenous and local voices.

Another key uncertainty for the region is policy instability. Frequent regulatory changes and shifting incentives structures complicate project timelines, undermining financial backing and project potential. This calls for consistent and clear policies that recognize clean energy’s socioeconomic benefits and enable shorter implementation cycles. 

For Latin America, the top priority is meeting growing energy demand, reads the report. Industrial growth and nearshoring, particularly in Mexico, increase pressure on energy supply. To keep pace, the region must invest in transmission networks, digital infrastructure, and e-mobility, while expanding equitable access to power.

Mexico exemplifies many of these challenges. Aging transmission infrastructure, rising demand, and recent regulatory instability all complicate the path forward. Pedro Aznar, Country Head, Prosolia, says the main challenge Mexico’s energy sector faces is the lack of transmission capacity. He emphasizes the crucial role that self-consumption paired with battery energy storage systems (BESS) can play to ease the strain on Mexico’s energy infrastructure. “The issue is transmission, as networks simply do not have the capacity,” says Aznar. “But, if you generate where you consume, this problem disappears.”

Mexico’s grid challenges are further intensified by the limited availability of BESS, which helps decrease curtailment and provide reliable backup for renewable generation. Marcos Ripoll, CEO, Solar 180, emphasizes “energy storage is not a luxury or an add-on, it is a foundational piece of a resilient energy system.” Without it, the national grid struggles to balance supply and demand, especially as intermittent renewables make up a larger share of the mix.

President Claudia Sheinbaum’s administration has introduced reforms that many experts say are making dialogue and private investment clearer and more streamlined. Juan Pablo Saenz, Country Manager, Atlas Renewable Energy,  says that the government has two main goals: advancing the energy transition toward low carbon sources and building a more reliable electricity system. “These goals do not always pull in the same direction, and that is the government’s big challenge. Energy must be affordable, clean, and reliable,” says Saenz. “It is key to plan the electricity system’s expansion in order to avoid imbalances between supply and demand or congested transmission corridors that could trigger curtailments and impact project financial health.”