News Article

Mexico’s Energy Strategy after the Energy Reform

Wed, 02/25/2015 - 16:27

Leonardo Beltran began by explaining that following the Energy Reform, the government has a real mandate to achieve a transition toward renewable fuels. In December 2013, the passing of the secondary laws of the Energy Reform began a series of actions toward this transition. The new laws include one that governs the electricity industry, which created a market that will include clean energy certificates.

According to Beltran, these certificates will create the conditions to incorporate renewable energies in the Mexican electric sector. The certificates are a compulsory mandate for all market participants, and a number of certificates must be issued per year, based on the number of projects being developed each year. This means the certificates will increase each year and their coverage will be broadened to cover any needs.

Beltran moved to another law, which covers geothermal power, as Mexico is one of the largest producers of geothermal electricity in the world. This law provides market and legal certainty to potential developers so they may intensively develop infrastructure and allocate capital to explore Mexico's geothermal resources. This development was carried out by observing international best practices, although Mexico’s geothermal framework remains one of the few such geothermal frameworks in the world. “We are hoping that this makes Mexico one of the leaders for geothermal in the world,” stated Beltran.

A third law deals with energy transition, tackling climate change on one side and energy consumption on the other. The General Climate Change Law implements the steps Mexico needs to take to grow its economy sustainably, while establishing mechanisms to reduce greenhouse gas emissions. It will operate alongside and in partnership with Mexico's international obligations, such as carbon trading with California and Canada. To further strengthen the reform and ensure its success, SENER has been given an additional mandate to oversee this transition and ensure an orderly market for all participants.

Beltran than dwelt on five clear benefits of the Energy Reform: opening the Mexican energy sector up more widely to foreign investment, creating better perspectives for renewable energies, ensuring better relationships between authorities and communities, creating market mechanisms to attract investment, and putting in place a new regulatory framework for more widespread generation and distribution. “Overall, the government aims to align the sellers’ market and the lenders market for energy,” stated Beltran. “As more projects are connected to the grid, more commerce will take place, which will help to reduce energy consumption in a specific building, community, or city. This will therefore help to establish a better energy market in Mexico while helping us to meet international standards.”

There were two further areas that Beltran thought worthy of discussion. The first was developed in 2013, namely the need to develop a transition strategy toward cleaner technologies and fuels. This law makes the transition the personal responsibility of President Enrique Peña Nieto. This strategy is divided between generation (through wind, solar, geothermal, hydro) and energy efficiency in industry, transportation and commerce. These elements lay out an energy transition agenda in which all market players can participate.

The second area is to reform certain industries. For example, the construction industry is a major contributor to greenhouse gas emissions, due to the materials it uses and the processes involved. Therefore, the government will encourage different technologies, such as efficient LED lighting or air conditioning devices, which will drastically alter energy consumption. “Before 2030, many Mexican cities will require new infrastructure,” warned Beltran. “We can either do as we have always done, with typical materials and less efficient technologies. Or we can answer this challenge head-on by investing in public transportation, green materials, and many other areas over the next few decades. For this, Mexico must seek to complement green building certifications to promote better use of infrastructure and buildings. Certain LEED buildings, for example, have zero energy consumption in that they generate as much as they consume. Through international partnerships, our construction sector has been improving its standards and developing the financial wherewithal to ensure this transition is done profitably.”

In closing, Beltran listed some other specific areas of improvement that are needed to make this development a reality, including the integration of best practices into local construction regulations and empowering local authorities to ensure green construction targets are met. “Mexico must adapt itself to the consequences of climate change, such as the increased happenings of certain meteorological events. We cannot rebuild everything so we must make investments to improve our current buildings, while ensuring any new buildings meet all the standards listed above,” he concluded.