Lack of Electricity Infrastructure Risks Industrial Development

The legal firm Santamarina + Steta (S+S) reported that Mexico’s increasing frequency of electricity blackouts occurs largely due to poor transmission line infrastructure. What is more, a shortage in electricity could jeopardize Mexico’s industrial development. 

Electricity transmission is controlled by the government, but neither the Ministry of Energy (SENER) nor CFE have developed projects to modernize or strengthen the network in recent years. Furthermore, since transmission networks appear to be oversaturated, CRE has stopped granting electricity generation permits and approving modifications to granted permits.

Norma Álvarez and Pablo Ortiz, Lawyers, S+S as well as energy, sustainability and infrastructure experts, stated that in February 2023, 12 states suffered power outages. What is more, grid operator CENACE said that transmission lines in areas including Mexicali, Guadalajara, Monterrey, the Isthmus of Tehuantepec and the Mexican Valley are operating to the maximum of their capacity.

Threatened by these problems, the industrial sector faces a possible paralysis of productive activities that will represent enormous economic losses. “If in the past six years the expansion and modernization of transmission infrastructure were urgent, these issues are now critical given the growing electricity demand," the lawyers said. In 2021, CENACE recorded an all-time high of 87 emergency and 2,097 critical status statements, mainly caused by a lack of support infrastructure and network failures.

According to CENACE, only 52km of transmission lines were built in 2021, representing a barely noticeable increase of 0.05% within the national grid. Moreover, from the 167 expansion projects instructed by SENER between 2015 and 2021, only 6 have been completed. The experts also highlighted that Mexico’s current transmission infrastructure is out of date and needs to be upgraded as soon as possible.

In 2019, President López Obrador’s energy policy barred private companies from the development of transmission lines through bidding processes. CFE canceled the Yautepec-Ixtepec Direct Current Transmission Line project, which would have transported wind power from the Isthmus of Tehuantepec to the center of the country. The Ministry of Energy also canceled the Baja California Electrical System Interconnection project, which the government has now resumed through the implementation of the Sonora Plan. 

Álvarez and Ortíz concluded that it is necessary to resume bidding processes in management contracts so that private companies can carry out financing, installation, maintenance, management, operation and expansion of transmission infrastructure on the government’s behalf. “The development of new transmission lines, as well as the modernization of the current lines, will guarantee electricity supply to families, businesses and industries, therefore benefiting the entire country. This will enhance nearshoring, create new sources of employment, avoid electricity blackouts and allow solar and wind generation to be utilized to meet Mexico’s international commitments for clean energy production,” they stated.