AMLO’s efforts to chip away at Mexican energy reforms could have dire implications for renewable energy in the country and Mexico’s commitments to the Paris climate agreement.
Andres Manuel Lopez Obrador entered office nearly a year ago promising
“profound and radical” change to just about everything in Mexico. One of his
main targets was the country’s energy sector, which had been overhauled and
opened up to private investment for the first time in many decades by his
predecessor, Enrique Pena Nieto, in a sweeping 2013 reform.
AMLO, as Lopez Obrador is widely known in Mexico, has not reversed that energy
market liberalization, which he strongly opposed. But he has sought to chip
away at it. Those efforts could have dire implications for the expansion of
renewable energy in Mexico and, in turn, the international effort to fight
the world’s 12th-largest greenhouse gas emitter, had pursued a leadership role
on climate policy for several years before AMLO took office. Different
governments demonstrated a desire for strong regional action on climate change
and positioned Mexico as an international leader, particularly after hosting
COP16, the United Nations Climate Change Conference, in 2010. Indeed, Mexico
was the first developing country to submit its climate action plan in advance
of the 2015 COP meeting in France that sealed the Paris climate agreement.
position wasn’t altruistic. Like many countries in the Americas, Mexico is
highly vulnerable to the impacts of climate change, in the form of more extreme
weather patterns such as severe hurricanes, droughts and floods, which could
exacerbate existing social and economic challenges.
in 2012, under then-President Felipe Calderon, Mexico’s Congress approved the
General Law on Climate Change, which provided a mandate to craft comprehensive
long-term national climate policy. It was followed by the Energy Transition Law
in 2015, under Pena Nieto, which sought to transform Mexico’s energy sector by
adopting clean energy technologies and targets, including decarbonization
strategies for the electricity sector.
incentive for private sector investment in renewable energy, the law introduced
clean energy certificates, known as CELs, similar to renewable energy credits
in the United States. In addition to awarding these certificates to energy
companies that complied with national climate goals by generating a set amount
of electricity from clean or renewable sources, the government would also
oversee long-term electricity auctions to drive competition and boost the
development of clean energy.
2016 to 2018, three power market auctions resulted in almost 60 long-term
commitments to clean energy projects that would add more than 7,000 megawatts
of installed capacity, on the order of $8.6 billion in investments. The
auctions were open to all energy technologies, but given the prices offered by
wind and solar projects, those technologies prevailed. But in late 2018, just
days after AMLO took office, the Ministry of Energy indefinitely delayed
that fourth power auction was widely seen as a way of derailing elements of
Pena Nieto’s touted energy reform—part of AMLO’s plan to reestablish a larger
state role in energy policy and energy markets. Echoing his championing of
Pemex, Mexico’s beleaguered state-owned oil company, AMLO’s suspension of the
auction reflected his desire to reassert the role of the state in the power
market, put coal back in the mix, and revive existing state-operated
hydroelectric dams rather than encourage private investment in new renewable
energy projects. Adding some ambiguity, his government didn’t clarify whether
the power auction was canceled, or just delayed in order to ensure that
appropriate infrastructure was in place.
then, in late October, AMLO’s government threw many of Mexico’s renewable
energy goals into doubt when it announced it was changing the market rules for
clean energy certificates. The credits were created to incentivize producers to
help Mexico transition to more renewable energy under its national climate
goals. As mandated by the Energy Transition Law and the General Law of Climate,
those goals include increasing clean energy’s share of the national energy
market from 25 percent in 2018 to 35 percent in 2024 and 50 percent by 2050.
energy certificates are awarded to clean power generators for each unit of
energy produced. In return, they are mandated to demonstrate that their energy
consumption complies with increasing proportions of clean energy, year after
year, in order to contribute to national goals for diversifying energy
generation. The certificate requirements started at 5 percent in 2018 and
increased to 5.8 percent in 2019, 7.4 percent in 2020, 10.9 percent in 2021,
and ultimately 13.9 percent in 2022.
critically, these certificates were only awarded to projects that opened after
2014. The recently announced rules make older producers, including state-owned
hydroelectric dams, eligible to receive the incentives too. Beyond the obvious
market interference, the changes further compromise Mexico’s clean energy goals
by effectively allowing the Federal Electricity Commission to double-count
older energy production—first as part of the base toward incremental clean
energy targets and then again by assigning it clean energy certificates.
decision has led to legal action against the government, with six energy
companies filing legal injunctions against the move, which they say will
cripple their investments in clean energy. In a joint statement, the Mexican
Association of Wind Energy and the Mexican Association of Solar Energy said the
decision has “destroyed the value of renewable energy project assets already in
operation.” They added that the credits “were the main mechanism by which
Mexico was to meet its national and international clean electricity generation
changes to the clean energy certificates are an ominous signal not only for
Mexico’s renewable energy market but also for the government’s commitments to
the Paris climate agreement. By altering the rules, the Ministry of Energy is
dramatically changing the key policy mechanism to achieve the binding
commitment of reaching 35 percent of all power consumed with clean energy
sources by 2024. This new path seriously undermines Mexico’s leadership on
climate change and makes it virtually impossible to meet its pledges under the
moves raise a bigger question: whether AMLO’s administration is quietly leaving
the Paris climate agreement, or will soon make that an explicit goal.
M. Martin is vice president for energy and sustainability at the Institute of
the Americas, an inter-American public policy think tank located at the
University of California, San Diego.