Could Mexico Lead the World in Renewable Energy?

Renewable Energy in Mexico pictures

By Omar Romero-Hernández and Sergio Romero-Hernández

Like many other nations, Mexico has been half-hearted about increasing its use of renewable energy. In theory, political leaders recognize the benefits – reduced carbon emissions and particulate pollution; increased energy independence; long-term security in energy prices. In practice, progress has not been as fast as needed to meet its 2024 goal of producing 35% of its electricity from clean technologies.

Mexico remains a major oil-exporting nation, and oil has traditionally dominated the energy policy agenda. Renewables currently supply only 19 percent of Mexico electricity, and most of that comes from big, traditional hydroelectric projects.

Yet Mexico has major untapped resources in renewable energy that could be the envy of the world. With its large land mass and its intense exposure to the sun, Mexico has one of the highest solar generating capacities of any nation in the world. It also has substantial wind-power capacity across the isthmus of Tehuantepec, the Yucatan peninsula, Tamaulipas and Baja California. It has additional opportunities in hydropower, bio-based fuels, geothermic sources, energy efficiency, and waste-to-energy conversion.

What would it take to ramp up production from these substantial renewable resources?
It’s an important question, and not just for Mexico. Every nation has a long-term, strategic interest in reducing carbon emissions and slowing the pace of global climate change. Most nations have a stake in reducing their reliance on imported fossil fuels, which entail both price risk and political risk.

We recently collaborated with experts from Mexico and the United States on a comprehensive review of Mexico’s prospects in renewable energy. We concluded that it has tremendous potential, but it also faces technological, economic, political, and regulatory obstacles.

Renewable Energy in Mexico pictures
To cite just one example, Mexico’s recently approved general energy reform does not include any mechanism specifically tailored for renewable energy sources (such as feed-in tariffs).

The new reform opens energy generation to all players – think here of companies that own wind-farms or solar-panel arrays, or even industrial companies that produce power through co-generation. But it makes it illegal to transmit electricity, because transmission is an exclusive role of the government’s National Center for Control of Energy.

Even if a company is allowed to transmit electricity and sell it to the national grid, the transmission lines may not exist because the sources of renewable energy are often distant from any connection nodes to the national grid. The big question lies ahead: who should be paying for new lines, private investors aiming to develop profitable businesses or a government aiming at social welfare and electricity for all?

Mexican leaders are making headway. There is an active effort to clarify the rules for the energy sector. The specific terms of the implementing legislation for the constitutional amendments will be critical in determining how the private sector will be able to participate in the reform of the power sector. Increased legal certainty would clear further the way for more investments. Ironically, the key precedent may come with new rules for Pemex, Mexico’s state-owned oil company. Investors are paying close attention to the effect of recent constitutional changes. The higher the certainty, the higher the investment in energy projects. The higher the investment, the larger the number of interested parties, who eventually, may aim into larger renewable energy projects.

We also emphasize the social role of renewable energy in Mexico and many other developing economies (check our book on Mexico – Renewable Energy Technologies and Policies). Local solar arrays and wind turbines, for example, are often well-suited for people in remote areas who don’t have access to the national power grid. Our research focuses on opportunities across the USA and Mexico’s border and the way nationally implemented projects, such as thermal solar heating, biofuels, and wind sources may solve the double challenge of economic and social development.

As academics involved in Mexico’s debate – one of us at the Berkeley-Haas Institute for Business and Social Impact, and the other at the Instituto Tecnológico Autónomo de México, we remain optimists. We predict that the inherent logic of renewable energy will lead to its expansion, and we see genuine progress on the legislative and regulatory front. That said, this is as much a legal and political challenge as a technological one. There is no silver bullet to successfully address all the challenges, but opportunity maps have been identified for a lot of regions. If we get collaboration on all fronts, Mexico’s renewable energy industry really could become the envy of the world.

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