Mexico Among Cheapest Electricity Rates in Latin America
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Mexico Among Cheapest Electricity Rates in Latin America

Photo by:   Andrey Metelev - Unsplash
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Eliza Galeana By Eliza Galeana | Junior Journalist & Industry Analyst - Wed, 09/14/2022 - 12:15

According to data from Global Petrol Prices regarding December 2021, Mexico has the fourth-cheapest electricity tariff in Latin America, with a price of US$0.086/Kwh. Meanwhile, Cuba, paying US$0.030/Kwh, Argentina, with US$0.041/Kwh and Paraguay, with US$0.058/Kwh make up the top three countries with the cheapest electricity in the region.

International markets offer similar oil prices, but the differences in electricity and gasoline costs reflect the taxes imposed in each country. As a rule, richer countries have higher prices, while low-income countries as well as those producing and exporting oil maintain significantly cheaper prices. An exception to the rule is the US, an economically advanced country with low gasoline prices, Global Petrol Prices reported.

In Mexico's case, energy prices showed a decrease of 0.31 percent per month in 2021, reaching a year-over-year decrease of 8.14 percent. According to Banco Base, this was mainly due to lower LP gas prices that fell 1.83 percent every month.

Minister of Energy Rocío Nahle assured that Mexico has one of the lowest electricity prices in the global market, well below those registered in European countries. According to a chart shown on the energy ministry’s Twitter account, Mexico pays an approximate rate of US$50/MWh inside the wholesale electricity market, which is below what countries such as Italy, France, Spain and Germany pay. This past March, the EU countries reported prices between US$275/MWh and US$355/MWh.

The EU is living through one of the largest increases in electricity prices in recent decades due to a crisis caused by the shortage of gas supply, an issue imposed by Russia since the beginning of its war against Ukraine. 

Germany has the fourth-highest tariff in the world, followed by the Netherlands, the UK, Spain and Belgium. German President Olaf Scholz announced this week that he wants an electricity market reform to cultivate lower prices and reduce the benefits that the electricity sector is gaining from the problem. The reform is proposed in coordination with the EU and must be implemented at a high speed, starting this winter. "It is inconceivable that those who produce electricity with wind, solar or coal power get additional benefits because the price is determined by the electricity produced with gas," stated Scholz in a speech directed to the heads of the German industry. 

On the other hand, the price of electricity in Spain has risen around 80 percent, with over 10,000 small and medium-sized businesses going bankrupt as a result. In this scenario, electricity companies like Iberdrola have been accused of profiting from high prices, while Spanish citizens struggle with the crisis.

In Mexico, gas prices are dictated by production from the US. While the US gas market has not been impervious to price hikes, its increases are nowhere near as large as those observed in the European markets, meaning Mexico’s electricity prices are remaining relatively stable.

Photo by:   Andrey Metelev - Unsplash

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