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Energy Reforms Hamper Mining Companies’ Sustainability Goals

By Karin Dilge | Fri, 07/22/2022 - 11:25

Mexico’s reforms to the energy sector are harming the mining industry’s transition to greener and more sustainable operations, as renewable energy projects face regulatory risks and developmental setbacks.

President López Obrador has made the energy agenda a central axis of his political project. Since the beginning of his administration, the president utilized various means to reverse the liberalization of the Mexican energy sector and give power back to state companies PEMEX and CFE. There have been some hits and misses in López Obrador’s proposals, but the battle seems to be far from over.

López Obrador’s discourse in defense of CFE has been focused on the principles of national sovereignty and energy security. In his opinion, Mexico should not depend on private power production, as national interests could not be guaranteed under such conditions. The president says that opening the electricity market granted unlimited benefits to the private sector, at the expense of CFE.

The proposed reforms would force all productive sectors of Mexico to acquire their energy from CFE, no matter if it is dirty, expensive or inefficient. The government highlights CFE’s clean hydropower capacity, whereas private sector experts point toward the electric utility’s reliance on the polluting fuel oil that PEMEX provides. The reform could hinder Mexico’s competitiveness in the international market, said mining chamber CAMIMEX in a statement.

Nonetheless, investors of the mining industry are increasingly demanding that companies in the sector to strengthen their efforts to contribute to the environment. However, these efforts are hampered by the reforms. Many mining companies are looking to shift to renewable energy to lower their carbon emissions, yet a halt in permitting restrains the industry’s access to clean sources of energy generation. Thirty-four percent of the total energy consumption of mining corporations comes from clean energy sources, added CAMIMEX.

Some of the largest mining firms have committed to cut their emissions by 30 percent by 2030, reaching net zero by 2050. The Mexican government is also looking to evaluate and possibly end projects of self-supply and independent power producers.

Torex Gold, Fresnillo, Peñoles and Grupo Mexico are some of the major companies operating in Mexico with ambitious goals to mitigate their emissions.

Torex Gold has an 8.5MW solar plant at its Morelos property near its El Limón-Guajes and Media Luna projects. The company signed an agreement with Scatec, an energy company, in 2021 to develop the plant and reduce Torex’s scope 2 emissions while reducing energy costs. Nonetheless, “(the project) is tied up in permitting, and I think that is largely a function of the electricity reform that was proposed, which has since not gone through, but permitting has sort of been held in abatement pending resolution of those discussions at the policy level and regulatory level,” said Judy Kuzenko, CEO, Torex Gold to BNamericas.

Moreover, Fresnillo also saw its goal of sourcing 75 percent of its electricity from renewable sources by 2030 affected. The Mexican corporation sourced 60.6 percent of its electricity from wind power in 2018, while in 2021 it only reached 49.7 percent. According to the company’s 2021 annual report the company “paused the analysis of our science-based targets due to the current policies of the Mexican government on renewable electricity.”

Peñoles has integrated three renewable energy power plants. In 2020, the company began operations at its new wind farm in Tamaulipas, adding to the electricity generated at its plants in Oaxaca and Coahuila. Forty percent of electric energy for self-supply came from renewable sources. The goal established by the company is to obtain 60 percent of its electric energy from clean sources by 2024 and 100 percent by 2028.

Grupo Mexico has two wind farms: one in Oaxaca and another in Sonora. The electricity consumption of Grupo Mexico coming from renewable sources increased from 18.6 percent to 19.8 percent in 2021.

The data used in this article was sourced from:  
Forbes, Bnamericas, El Economista
Photo by:   pixabay
Karin Dilge Karin Dilge Journalist and Industry Analyst