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Clean energy has room to grow in Mexico, a U.S. government report says

October 1, 2022
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Why this is important to Wisconsin businesses: Wisconsin companies in the renewable energy sector still have opportunities in Mexico, even though energy reform has sparked controversy among government leaders.  

Energy reform has been a hot topic in Mexico and is likely to continue to drive controversy in the near future, experts say.

At issue is a 2013 policy change that opened Mexico’s electric industry to private company participation. Prior to that time, two companies had dominated the electric industry, and by 2009, one of the companies dissolved, leaving the Federal Electricity Commission, a government-run utility, in control.

The 2013 reform allowed companies, organizations, and individuals to buy energy from alternative energy sources. The new suppliers, most of them foreign, invested $9.9 billion in the Mexican energy market just between 2014 and 2018, according to Mexico’s secretary of the economy.

Energy reforms also emphasized the development of clean power. Mexico pledged to reduce its carbon emissions by 30% by 2020, and the Mexican congress approved a goal of requiring 35% of total electricity consumption to come from clean energy sources by 2024, according to a report by the Brookings nonprofit public policy institution.

Earlier this year, Mexico’s President Andrés Manuel López Obrador sought to reverse many of the 2013 reforms and put the majority of the country’s electricity business back into the hands of the state-run utility. He said it would make Mexico more energy-independent and would improve national security.

However, energy companies and investors in the U.S. and Canada opposed the reversal, saying it would hurt investors, and could violate terms of the trade agreement signed by the U.S., Mexico, and Canada. The Brookings report, issued in February, said the president’s proposal would damage Mexico’s economic growth. It said since the 2013 reform, solar and wind power have flourished, reducing costs for Mexico’s manufacturing sector. The report said the plan would “destabilize Mexico’s renewable energy sector and the ability of Mexico to meet its already too-modest climate goals.”

According to Bloomberg News, a reversal could jeopardize more than $22 billion in foreign-owned renewable power facilities.

In April, the country’s congress voted on the measure and failed to muster the two-thirds approval needed, the BBC reported.

For American companies in the renewable energy sector—including those in Wisconsin—Mexico remains a “best prospect industry,” according to a report in September by the U.S. Department of Commerce’s International Trade Administration.

“Even as the Mexican administration slows the development of renewables, the country’s energy demand continues to grow at a rate of about 3.4% annually, and existing fossil resources will prove insufficient without increased capacity development through renewables,” the report said.

 

 

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