Mexico’s Clean Energy Market Open to New Opportunities

Investing in green energy and renewable industries in Mexico has opened a wide range of opportunities as the world transitions to place environmental matters on top of the current agenda. As the initial blow of the pandemic passes, new investment options in biotechnology and clean and renewable energies are increasingly attracting attention. 

The world is learning that the climate crisis cannot be addressed the way it has been so far and it is extremely necessary to make new types of environmental investment despite potential risks, Henry Fernández, CEO of MSCI, told Milenio. "We have to understand that this coming asset reallocation will have a significant impact on portfolios; there will be opportunities, but also risks that will have to be taken into account."

Exchange Traded Funds (ETFs) have become an important vehicle to achieve proper asset allocation and diversification. Alternative energy ETFs are increasingly emerging in response to the global climate crisis to track the performance of companies investing in sustainable energy. According to Fernández, it is estimated that investment in these instruments will grow more as they are referenced to indexes that already exist and more are being created. This information is backed up by the Ministry of Energy (SENER) in their most recent report on change to clean energy.

SENER mentions that while unconventional renewable capacity additions have slowed compared to previous years and industry forecasts, growth has not stopped. In fact, Mexico is expected to add 1.9GW of new solar capacity while wind power is expected to slow, as mentioned in a BN Americas article. So far, among the proposed changes, the most significant for developers of renewable projects is the alteration of dispatch priority that places state-owned CFE at the top, which brings down renewable generators as they generally dispatch first due to their low cost. The law would also allow CFE's nuclear and hydroelectric generators to obtain clean energy certificates, increasing their availability and reducing their value. As we previously mentioned in MBN, in Mexico, there is an urgency for other types of clean energy since there is a great dependence on hydraulic generation and the country does not have enough water to maintain the current generation pace. Also, Enoch Castellanos, President of the National Chamber of the Transformation Industry (CANACINTRA) and an MBN Contributor, mentioned that in 2021, “It is possible to build the Mexico we want, but we need to do it with energy and, of course, with all the strength of the industry.”