Urgent Need to Diversify Mexico’s Energy Mix

Q: What have been the defining factors for renewable energy development in Mexico in recent years?

A: The fact that Mexico is rich in hydrocarbons has made the development of renewable energy projects slower than in other countries. However, this has been a good thing, despite the challenges renewables have faced. For example, the Isthmus of Tehuantepec has a high concentration of wind energy, which is an interminable resource. But if a huge quantity of megawatts is installed, there will be a serious problem at times with limited wind for the rest of the grid, due to the high concentration of infrastructure in one place. If this capacity is distributed over a larger area, no issues would arise when the wind dies down, since other parts of the network can compensate.

The same goes for nuclear energy which has not grown since the construction of Mexico’s only nuclear power plant. Geothermal energy has had issues, even though it would be an easier option for CFE, requiring lower capital investment and offering high reliability and safety. The problems with geothermal and oil are similar: not every well that is drilled will be a commercial success, and the behavior of a reservoir creates a degree of uncertainty during energy production.

Q: What are the main challenges facing the Mexican energy industry?

A: The main challenge Mexico is facing is how to diversify its energy mix. It will be very difficult for a country with large hydrocarbon resources to undergo diversification to such a degree that it is possible to reduce carbon emissions to required levels. The temptation of having a secure resource without threatening energy security is there. This is the reason why it is essential for Mexico to develop domestic technology for better carbon capture and sequestration.

Q: What is the importance of the renewable energy industry for the Mexican economy?

A: The Mexican economy will continue growing and will require a stable and cost competitive supply of energy. There will be a lot of pressure to make processes more energy efficient, especially in the residential and industrial sectors. This will be a slow process as many Mexican industries have done what they can to reduce energy consumption, due to financial reasons. Reducing energy consumption between 10- 15% and improving energy intensity is rather inexpensive and has been done already. The problem is taking the huge leap of reducing consumption by 30-40%, because this requires a large investment and complete process changes. As plants become older, they will be replaced with much more efficient facilities or with expansions that will use better technologies.

Q: What are the main objectives of the World Energy Council?

A: The World Energy Council is a large NGO in which both companies and governments participate. Its main objective is to promote the use of sustainable energy by everyone. Currently, the major worry is that 2 billion people in the world do not use commercial energy, and if measures are not taken, that figure will grow. Other issues are climate change, energy security and social equity. However, the biggest worry for industrialized countries is energy security. In 2012, coal-fired power generation capacity increased in Europe, the champion of alternative energies, due to economic reasons.

Q: What is expected from the renewable energy sector in the coming years?

The diversification tendency of energy sources will continue. Currently, the low natural gas prices have had a big impact in North America, where coal is being displaced. Coal is currently being sold cheaply to Europe and the continent has seen its carbon emissions increase over the last year. Economists cannot predict what will happen in the next six months, due to the volatility and instability of the global economy. The world is purely reacting to economic indicators, even though the ecological indicators are showing that this course of action might create future problems. Carbon emissions are a problem that will not be solved until there is a global scheme that puts a price on carbon emissions. At the current pace, the International Energy Agency is considering a potential 4°C increase in global temperatures, which is expected to have devastating effects. The precise impact of global warming is unknown and it is very difficult to predict what changes will take place.