Government Action Sorely Needed to Unlock Renewables

Q: What was the main purpose behind ENTE’s creation?

A: The firm is focused on three main areas: renewable energy, energy efficiency, and climate change. We have been working alongside the International Copper Association for six years now, in addition to working for Germany’s GIZ and USAID, among others. ENTE is involved in non-profit activities within the Network for Energy Transition in which we exchange opinions and information and provide important documents to the authorities.

Q: What are the main limitations and challenges that the renewable energy industry faces at the moment?

A: The country has subsidies for oil, gas, electricity, and liquified natural gas, but not for renewable energy. The previous administration was very noisy about renewable energy but they did not really facilitate progress. The framework has been a bit disorganized. At the center, we have CRE with the regulatory instruments but the law that is supposed to support the industry, from the 2008 package of energy laws, is not functioning. We do not have a clear model, we are using the model of the Electricity Law of 1992, but we have to use a model that would allow open access to the network, such as in Europe with feed-in tariffs, or define a more stringent plan for CFE following the American model of the Renewable Portfolio Standards.

This would require CFE to commit to a certain percentage of the energy it supplies to end users coming from renewable sources. In addition, the current self-supply system is subject to rules that are defined by the executive branch of the federal government in terms of pricing, instead of being defined by the law, which would bring it more certainty. We need a more secure and more consistent regulatory framework.

Despite these challenges, the renewable energy sector has developed well and continues to do so due to pressure from the industry. This is definitely the case for the wind industry, which has had permits since 1995 and has worked with the federal government to develop regulatory instruments that were later used to make the projects in Oaxaca bankable. The photovoltaic industry is also growing stronger. This sector has experienced a bit of chaos because of the way in which the government has determined the technical standards to ensure quality and performance. In my opinion, the government has been reacting to how the private sector has made the renewable energy sector profitable and attractive rather than paving the path or leading with initiatives.

Q: What do you believe the current administration will do to support the renewable energy sector?

A: I believe the private sector will have the upper hand on this subject. As a producer and a final user, the private sector will be in favor of more renewable energy in the country. Companies will look for business opportunities and will pursue the government to push this industry. The current administration has showed its concern for modernization, particularly regarding PEMEX and the oil industry, but I have not heard many plans for a modern, environmentally sustainable energy sector yet. The federal government should definitely set the national priorities while state governments should be involved in promoting renewable energy projects and developing their own legal frameworks.

Q: What should be the top priorities for the development of Mexico’s energy sector?

A: The production of renewable energy should be increased as much as possible. This, however, will require a restructuring of the entire energy sector. Renewable energy is more complicated because it implies actions such as installing PV systems on individual rooftops, municipalities using biogas, or collecting animal waste for biomass. It is easier to think of the big players doing the hard work rather than imagining a more complex transformation to a more decentralized power generation system. Finally, helping municipalities throughout the country with transmission and storage capacity and investing in energy transition at the local level should be priorities. Decisions with an economic impact are usually taken in large urban centers. Therefore, this last priority deals with urban planning, land zoning, transportation infrastructure, and construction regulations.