Mexico is Waging a War Against Renewables

It definitely sounds ludicrous, almost Kafkian, but Mexico since the start of the self-proclaimed Fourth Transformation has started a war against macro trends and the future. Like any war, there have been a variety of battles, plots, strategies and fake information to disguise true intentions. How could Mexico, which has indeed become one of the world champions of renewable energy, have changed so dramatically? 

The answer has been in front of us the whole time. If we take a closer look at President López Obrador’s words and comments, we will see that his ideology has always been pro-state, and not in favor of the market. Also, his eagerness to boost the market share of both PEMEX and CFE has made it clear that any company that is private will face major challenges during his administration. 

Since PEMEX is President Andrés Manuel López Obrador’s main priority, generating power with fossil fuels serves a dual-purpose strategy. By doing so, PEMEX increases its market share by selling more fossil fuels to CFE, and CFE, via the agreement published on Friday, would have both technical and legal advantages when compared to renewables.

The agreement goes as far as imposing a sort of tax for renewables policy. If we take a closer look at point eight of the document, it states that new charges will be added to the ancillary services item. One charge, called "Support capacity due to the variability of Power Plants with Intermittent Clean Energy," can be directly viewed as a way to disincentive renewable energies because this ancillary charge could be a tax on them. Therefore, renewables that are actually cheaper than fossil, would be taken out of the market on a price-based decision. 

Sadly, the agreement does not stop there. It also states that CRE, in accordance to what SENER published in the PRODESEN, could limit the licenses for renewable energy. It goes as far as stating that PRODESEN could also limit the capacity of distributed generation. In addition, as if it was not enough to limit the energy transition, the document adds new obligations for distributed generation by mandating that all the power plants that are under this scheme must have the capacity to regulate voltage, frequency and generation.

At first, this does not sound so alarming. However, most of the three-phase inverters have those features included. The agreement also states that even though the power plant is under the distributed generation scheme, CENACE – from what is stated in the document – could curtail these power plants. This will definitely – should and hopefully – trigger legal actions against the government in the form of legal proceedings, challenging what will eventually become a regulation due to the fact that this agreement is a sort of wish list but not a regulation per se. 

Only CRE can regulate, as stated under law, but that does not mean that we can get our hopes up. We have seen CRE’s autonomy diminish as the days go by and it will only be a matter of time before the administration finds a way to make renewables a noncompetitive form of energy, either via ancillary services, lack of interconnection or through a direct ban on permits as the agreement mentions.

Mexico is a great country, with a vast amount of resources, especially renewables. It would take a generation to get back on track regarding our goals in energy transition if measures to halt the agreement are not taken.