Mexico Loses LATAM Lead in Wind Energy Development

Mexico fell from second place to fourth place in a ranking that calculates Latin America’s wind infrastructure growth, says President of the Global Wind Energy Council (GWEC) for Latin America, Ramón Fiestas. Changes in the country´s legal framework brought on by the government’s reforms affecting the energy sector are key factors behind this drop, as new investment is expected to decrease by 61 percent in 2021.

Fiestas explained the issue in an interview with El Economista: Mexico only installed 12.3 percent of the 4,673MW of wind energy installed in Latin America throughout 2020. The gap with Brazil, which leads with 49.5 percent of this capacity, as well as with Argentina and Chile, is growing significantly. "We see an adverse environment because the political will has completely changed from when it supported wind power and the energy transition," Fiestas said. Since the arrival of the Energy Reform and its renowned long-term energy auctions that boosted private project development through state-backed power purchase agreements (PPAs), Mexico installed around 1GW yearly. But last year, this dropped to 575MW. In terms of capacity, Mexico has installed 7,154 MW so far, representing around 6 percent of Mexico’s total capacity, as well as close to one third of the country’s renewable energy capacity.

Wind energy’s slump will persist for the near future, industry experts predict. Data from the Mexican Wind Energy Association (AMDEE) shows that investments in the energy sector will drop by 61 percent in 2021. In 2020, the wind sector expected approximately US$1.3 billion dollars in investments, but in 2021 investment will barely reach US$500 million. If the pipeline of new projects runs dry, it will take several years to develop wind projects if the regulatory environment is to shift again. Nevertheless, AMDEE President Leopoldo Rodríguez said in a press conference that Mexico could easily double its wind capacity. Nevertheless, a stable legal framework allowing for long-term planning based on secure permitting processes and clear rules would need to be guaranteed first.

Mexico’s energy industry has gone through a paradigm shift after López Obrador took power and vowed to take back the reigns on the 2014 Energy Reform. Several attempts to change this policy, including a recent Congressional bill to reform the Electricity Industry Law, have been met with legal challenges. Associations such as AMDEE has been actively involved in using legal tools to protect private investment in the country. “AMDEE will use the legal mechanisms available to safeguard our rights as investors. We are bound by our fiduciary responsibility. The legislative changes violate fundamental rights established at the constitutional level, in addition to violating a series of obligations that Mexico assumed at the international level, which are geared to protect investment agreements and international treaties.

“We are in constant communication with all our associates and, at the same time, they are communicating with their clients to maintain a clear flow of information and prepare the next steps,” said AMDEE’s Deputy Director Julio Valle in an MER interview.