Iberdrola Denied Permit for Merida Combined Cycle Power Plant

The Environmental Ministry (SEMARNAT) denied Spanish energy giant Iberdrola a permit for the construction of a combined cycle power plant in Merida, Yucatan. The environmental ministry cited Iberdrola’s failure to comply with several legal environmental requirements, including the company’s lacking plan to reduce the displacement of flora and fauna in areas that are considered to be fragile.

The project was originally considered to construct and operate a natural gas-fired combined-cycle plant with a capacity of 579MW, which aimed to supply the country's southern region. The project is currently valued at US$422M.

Over the past years, Iberdrola has faced scrutiny and rejection from several institutional entities to the point where the company has had to halt its operations, revise and file for the renewal of its permits without gaining an effective resolution. For example, Iberdrola’s combined cycle plant in Nuevo Leon has yet to resume operations, following an apparent failure by the energy regulator CRE to convert its legal basis from an expired self-supply scheme, an outdated contract modality frequently singled out by the López Obrador administration, toward the current Wholesale Electricity Market (WEM).

The president has criticized the self-supply model on the basis that it has largely benefited private electric energy firms, to the detriment of publicly owned utility CFE. His counterproposal to these dynamics was seeking to strengthen CFE’s market control, cancel self-supply and all of the private purchase agreements (PPAs) in the WEM, as well as eliminate the independent system operator and independent energy regulatory practices. 

This is not the first time that SEMARNAT has withheld permission from the private sector. In Dec. 2021, the environmental ministry denied the Environmental Impact Manifesto (MIA) to Canadian gold company Argonaut Gold’s project, which aimed to exploit an open-pit mine at Cerro del Gallo in Durango. On that occasion, SEMARNAT explained that the rejection was due to the company’s inability to “determine the environmental viability of the project … [nor] the ability to prevent, mitigate or compensate for these impacts,” stated the ministry in its Ecological Gazette.

Other than the government, several environmental and indigenous rights activists had long since condemned Iberdrola for its developments. In Nov. 2021, activists from the Spanish confederation of organizations Ecologistas en Acción denounced that the company’s use of renewable energy is limited to 27 percent of its overall capacity. “In addition to the most blatant violation of rights, such as the threats [to activists and community members], Iberdrola’s projects at the Isthmus are based on exploitation. Land that was collectively owned has been privatized and local communities have no longer access to it, nor to their source of livelihood,” said María Botella, a member of Ecologistas en Acción.

For its part, Iberdrola emphasized the benefits that energy projects can bring to remote communities. It furthermore launched its Lights of Hope program, which will allegedly provide solar panels to impoverished areas in Mexico.