IMCO: Grid Expansion Key to Mexico's Industrial Growth

Summary: Mexico's competitiveness as a manufacturing and nearshoring destination will increasingly depend on whether electricity infrastructure expands in line with industrial demand under Plan Mexico. IMCO estimates the country will require 11.9GW of additional generation capacity by 2030, highlighting transmission investment, regulatory certainty and public-private collaboration as essential to supporting advanced manufacturing, data centers, electromobility and long-term industrial growth under the new Electricity Sector Law (LESE). 

Mexico can strengthen its position as one of North America's leading manufacturing and investment destinations if the expansion of its electricity infrastructure keeps pace with the industrial growth envisioned under Plan Mexico, according to the Mexican Institute for Competitiveness (IMCO). 

The think tank argues that increasing electricity generation, transmission and storage capacity will be critical to sustaining new investment, supporting strategic industries and reinforcing the country's competitiveness as demand for power accelerates over the coming years.

The report comes as Mexico advances a new legal framework for the electricity sector and as the Federal Electricity Commission (CFE) prepares a multibillion-dollar investment program (US$23.4 billion between 2024 and 2030, focused on generation, transmission, and distribution projects) aimed at modernizing the national grid, reported MBN. 

Industry leaders say the combination of public investment, regulatory certainty and private participation will determine whether the country can capitalize on nearshoring and the expansion of advanced manufacturing. 

Electricity Infrastructure Linked to Industrial Expansion

As Mexico seeks to attract new manufacturing projects and move higher in North American supply chains, IMCO argues that the country's electricity system must evolve alongside industrial development.

According to the organization, achieving the economic objectives outlined in Plan Mexico will require expanding electricity generation, transmission and storage capacity. It estimates that electricity consumption will need to grow by an average of 4.5% annually between 2026 and 2030 as manufacturing activity, digital infrastructure and industrial production continue to expand.

IMCO says strengthening energy infrastructure represents an opportunity to support new industrial investment while maintaining Mexico's attractiveness for projects with high added value.

The study highlights Mexico's growing role within North American supply chains, noting that a reliable, flexible and sufficient electricity system will be necessary to support the expansion of sectors including advanced manufacturing, electromobility, data centers and other energy-intensive industries.

According to IMCO, the availability of electricity is becoming an increasingly important factor for investment decisions as companies evaluate locations capable of supporting long-term production and technological growth.

Before those investments can materialize at scale, however, the organization argues that planning and coordination across the electricity sector will become increasingly important. 

Planning and Investment Needed to Meet Future Demand

Meeting future electricity demand will require coordinated investments across the energy value chain, according to IMCO, which recommends accelerating projects while improving regulatory certainty for investors.

The organization proposes increasing investment in transmission infrastructure, expanding generation capacity through low-emissions technologies and strengthening coordination between the Ministry of Energy (SENER), CFE and the private sector so electricity planning aligns with Mexico's industrial policy.

It also recommends streamlining regulatory procedures and providing greater certainty for investment projects to accelerate the entry into operation of new generating capacity.

IMCO estimates that under the economic growth scenario contemplated by Plan Mexico, electricity demand in 2030 would be 10.1% higher than current official planning assumptions. Meeting that demand would require approximately 11.9GW of additional generation capacity beyond existing projections.

Rather than viewing this gap as a constraint, IMCO describes it as an opportunity to develop the infrastructure needed to support a new phase of industrial and economic growth.

The report's recommendations coincide with broader changes in Mexico's electricity market that seek to combine public investment with new mechanisms for private participation. 

New Electricity Framework Expands Investment Options

Mexico's new Electricity Sector Law (LESE) establishes that electricity generation can be carried out by the state, private companies or through mixed-investment models, creating several participation mechanisms for future projects.

Under the framework, generation is divided into distributed generation, self-consumption and generation for the Wholesale Electricity Market.

One of the most significant regulatory changes is the increase in the distributed generation threshold to 0.7MW for exempt generation projects that do not require a permit from the National Energy Commission (CNE). These projects may also sell surplus electricity to qualified suppliers.

The higher threshold expands the number of commercial and industrial installations that can operate without obtaining generation permits while maintaining the ability to commercialize excess energy.

Distributed generation reached between 5GW and 5.5GW by the end of 2025, with additional growth expected during 2026 as companies pursue energy security and decarbonization goals.

However, implementation challenges remain. Santiago Villagomez, CEO and Founder of Energía Real, said that while the regulation establishes the new threshold, CFE has yet to issue the interconnection formats needed to move projects forward, reported MBN. 

"LESE is a signal of a recognition that things need to be done differently. The frameworks are there, and there is a clear priority and urgency for things to happen, which is positive. This is a shift we must leverage to transform our infrastructure," Villagomez said.

The law also creates opportunities under the self-consumption model. Isolated self-consumption projects of up to 20MW are exempt from the energy sector's social impact assessment, reducing one of the regulatory processes that has historically extended renewable energy development timelines.

Meanwhile, privately financed projects developed under long-term production contracts will supply electricity exclusively to CFE, while mixed-investment projects require private investors to be Mexican individuals, legal entities or trusts domiciled in Mexico, with project terms of up to 30 years.

As the regulatory framework takes shape, long-term planning will play a central role in guiding future investments.