Mexico Choosing Not to Participate in Decarbonization PushBy Bradford Cooke | Thu, 02/17/2022 - 15:00
Mexico is a key producer of many metals needed for the coming energy transition, from hydrocarbons to alternatives that are necessary to reduce pollution and slow climate change. But where are the Mexican government policies to encourage the private sector to invest in the discovery, development and operation of new metal mines?
Unfortunately, the current administration lacks policies to support investment by the private sector into the energy and metals sectors. In fact, current government policies are directly opposed to private investment, whether for lithium exploration, solar and wind power developments, or energy and metals production in general, as evidenced by the proposed energy bill and the halt to granting new mineral concessions and mining permits. Mexico has chosen not to participate in this global transformation to decarbonize the economy.
The US Embassy in Mexico recently stated that President Andrés Manuel López Obrador’s energy bill to reform electricity regulations promotes “the use of dirtier, antiquated and expensive technologies over efficient renewable alternatives.” The top US business lobby in Mexico, Amcham, raised concerns about the bill that would strengthen state control of the power market at the expense of private capital, saying it would “make it tougher for companies to reduce their environmental footprints.” US climate envoy John Kerry called for more investment in clean energy and urged Mexico to keep its market “open and competitive” amid tensions over Mexico’s plan to favor its state-owned electricity company and limit private and foreign firms that have invested in renewable power.
It is not possible to decarbonize the global economy without creating massive new demand for multiple natural resources. The World Bank has reported that solar and wind power each need approximately 10 times the concrete, glass, iron and other metals to generate the same amount of energy as hydrocarbon power plants. And that does not count the sharp increase in demand for metals such as copper, nickel, cobalt, silver and lithium needed for alternative uses such as electric vehicles.
For example, a 100MW natural gas power plant capable of energizing 75,000 homes occupies 1,000 square meters and consumes 270 tons of iron, 1,800 tons of concrete and 90 tons of specialty metals as compared to a 100MW wind power project with 20 turbines that occupy 25 square kilometers and consume 27,000 tons of iron, 45,000 tons of concrete, 900 tons of specialty metals and 900 tons of plastic.
Plus, one must consider that alternatives such as solar and wind are variable load sources of energy that require substantial battery storage to make up for inconsistent power generation, so approximately 200MW of power output is required to match the 100MW of power output from a base load source of energy like a natural gas plant.
The largest impacts on the energy transition, however, are the sharply increased risks, costs, time and energy needed to discover, develop and produce new sources of metals as compared to hydrocarbons. The International Energy Agency estimates that the energy transition to alternatives from 5 percent of today’s global economy to 50 percent in 20 years will require 10s of gigatons of new materials for solar, wind and electric vehicles. Lithium demand is forecasted to increase by 4,200 percent, graphite demand by 2,500 percent and nickel demand by 1,900 percent. At these rates, global reserves of such minerals will be exhausted in just a few years.
Mining is well known to be one of the most time- and capital-intensive industries on the planet, so there is no certainty the required mineral deposits will be discovered and developed at all, never mind on a timely basis. Both capital and operating costs in the mining sector are suffering from inflationary pressures, and these increasing costs will ripple up the supply chain to impact the costs of building and operating alternative power sources and uses. North America is dependent on imports for 17 critical metals in the supply chain for the alternative energy sector.
So how can Mexico participate in this global energy transformation? Clearly government policies need to change in order to encourage investment, not only into alternative sources of energy, but also into the mining sector to produce the metals so critically needed for solar and wind power or electric vehicles. The mining industry is doing its part, by continuing to reduce its impacts on the environment and by creating benefits for local communities. Now is the time for the government of Mexico to do its part.