US Communicates Complaints About Mexico’s Energy ReformBy María José Goytia | Wed, 03/23/2022 - 14:18
The US toughens its public complaints against Mexico’s energy reform, with Ambassador Ken Salazar voicing the country’s concerns on a bilateral forum in Washington D.C., as Republican congressmen demand the Biden administration to investigate Mexico for violations against USMCA. Meanwhile, Mexico’s gas flaring achieved record-highs during 2021. Also, the approval of the energy reform would leave CFE as the only investor in the energy sector, with a tremendous burden to its finances as a result. In other news, after being the No. 1 importer of wind turbines, Mexico hits a new low in imports of these components during 2021.
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US Ambassador to Mexico Ken Salazar publicly acknowledged the difficulties faced by US energy companies in obtaining permits related to the Mexican energy sector during a forum organized by the Atlantic Council in Washington D.C. Ambassador Salazar was accompanied by Esteban Moctezuma, Mexico's Ambassador to the US. At the panel, both ambassadors discussed the challenges of the bilateral relationship between Mexico and the US on key issues, including energy.
A series of formal complaints from US authorities against President López Obrador's energy reform have arisen as Republican congressmen asked the Biden administration to investigate Mexico for violations against the recently renewed USMCA agreement. Last week, 40 Republican congressmen signed a letter asking Democrat Carolyn Maloney, Chairwoman, House Committee on Oversight and Reform, to convene a hearing and investigate how Mexico fails to comply with its energy-related commitments.
Gas flaring in Mexico reached record levels in 2021. The number of sites where excess gas was flared also increased. Research by the Earth Observation Group, part of the Colorado School of Mines, showed that Mexico flared 229.5Bcf of gas in 2021, compared to 204.8Bcf in 2020. The increase occurred despite the federal government's promises to reduce flaring.
A report by Fitch Ratings showed that if President López Obrador's energy reform is approved, CFE would have to account for all of Mexico's energy investment, which amounts to US$10 billion over the next 15 years. Likewise, Fitch warns that FDI in the energy sector dropped by 37 percent.
Leopoldo Rodríguez, President, Mexican Wind Energy Association (AMDEE), commented on the short-sighted scope of CFE's investment plans to meet Mexico's international green generation commitments by 2024. According to AMDEE, to meet the 35 percent clean electricity generation goal by 2024, Mexico needs an additional generation capacity of 9,500MW from green energy sources. CFE plans to install only 1,350MW of this capacity in the next three years, 85 percent less than the amount required. Furthermore, CFE intends to increase the installed capacity of combined cycles in the country and consume 60 percent more imported natural gas, which would increase Mexico's dependency on fossil fuels.
Mexico finished a boom cycle of wind turbine imports that allowed it to expand its wind energy production. At its peak in 2018, Mexico imported US$1.06 billion in wind turbines, placing it as the world's largest importer. However, since the start of López Obrador's administration, wind turbine imports went down to US$442 million in 2019, US$314 million in 2020 and reached a new low in 2021, as the country imported only US$153 million.