Mexico’s Energy Battle Soon to Come to a HeadBy Cas Biekmann | Thu, 10/07/2021 - 17:10
A proposal to profoundly reform the energy sector and bring back power into centralized hands has been presented to congress and simultaneously kicked up a storm around Mexico’s energy sector. Other topics such as lithium, a crucial component of the global energy transition, are under discussion as well. In the rest of the world, soaring natural gas prices cause problems. Read this and more in the weekly roundup!
CFE is to reassume complete responsibility of Mexico’s electric industry under the revised Electricity Industry Law (LIE) and changes to the constitution. BBVA Research warns that the proposed amendments spell out a de facto nationalization, which they anticipate will result in higher energy prices and the withdraw of private investment, in addition it places competition, investment and the environment at risk.
The constitutional reforms President López Obrador sent to congress have caused waves of criticism from the private energy sector, industry analysts, NGOs and other political parties. Many considering these modifications more radical than previous legislative efforts, like the bill that passed through congress earlier this year. In face of the criticism, the president stands his ground as he claims the reform will benefit Mexico’s people instead of private companies.
Sweeping Energy Reform’s First Step is a Matter of Votes
To pass his far-reaching constitutional changes, President López Obrador needs a supermajority in congress, which he does not have. After losing some ground in this year´s mid-term elections the ruling coalition only needs more outside support, and some opposition parties show they are willing to negotiate. Now that alliances could shift, the outcome of a voting process that could put the state once again firmly in charge of the country’s energy sector remains unclear.
The growing importance of environment, social and governance (ESG) criteria is strongly intertwined with the global energy transition. Inclusion and diversity within energy companies are essential to drive ESG forward, agree industry experts involved in Mexican associations energy associations.
The electricity reform that seeks to strengthen the CFE and grant it more than 50 percent of the market share has been sent to congress. If approved, the reform would also give the state exclusive control of the country's lithium reserves, while private companies could lose their concessions if they do not meet the new criteria.
Head of SENER, Rocío Nahle, dispelled rumors that the reform proposal would also end distributed generation (DG), particularly rooftop solar installations below 0.5MW capacity. She emphasized that the government has always supported DG instead.
Inflated natural gas prices are hitting consumers across Europe and Asia particularly affecting ordinary homes and industrial activity alike. The EU’s energy commissioner said that the union has no quick fixes and will remain powerless to stop the rising costs on the short term, reported the Financial Times.
Companies are more often pledging to do something about global warming. They do not remain as pledges and are increasingly turned into action, but experts warn that the pace is still much too slow, as reported by The Guardian.