Renewable Energy: A Great Opportunity for Mexico That Is Still Untapped

By Goodrich, Riquelme y Asociados

Harnessing the potential of renewable energy in Mexico could diversify the energy supply, lower electricity costs, and support companies committed to sustainability and reducing their carbon footprint. Despite political changes and permitting delays, engagement from companies in the renewable energy sector is increasing, potentially opening new opportunities for the future.

Mexico boasts a vast potential for generating energy from renewable sources. The country’s geographical and climatic features include:

Solar Energy: Mexico has some of the highest levels of solar radiation in the world, with an estimated 24,918 GW of technical potential for solar photovoltaics.

Wind Energy: There is potential for 3,669 GW of wind energy, particularly in regions such as the Isthmus of Tehuantepec, which is known for its strong winds.

Hydropower: Existing facilities could contribute an additional 1.2 GW, while new mini-hydroelectric plants could be developed.

Geothermal Energy: Mexico has about 2.5 GW of conventional geothermal capacity, with the potential for further exploration and development.

In addition, there are large volumes of agricultural residues and organic waste that can be utilized for energy generation.

Legal Goals and Advances in Clean Energy

According to the Energy Transition Law and the General Climate Change Law, Mexico aims to achieve 35% of its electricity from clean sources by 2024. This goal includes both renewable sources and non-renewable sources such as nuclear energy.

The National Power System Development Program (PRODESEN) reported that in 2022, total electricity generation in Mexico was 340,713 GWh, with 31.2% coming from clean energy sources, while 68.8% was generated from fossil fuels. This shows that while there has been progress, a significant portion of the electricity still relies on fossil fuels.

In 2022, the installed capacity of clean energy plants (both renewable and non-renewable) reached 31,369 MW, representing an increase of 1.81% compared to 30,812 MW in 2021. The breakdown of this capacity is as follows:

-Hydropower: Approximately 13 GW installed.
-Wind Energy: Roughly 7 GW installed.
-Solar PV: About 8 GW installed.

Despite these advancements, the installed capacity of renewables falls short of the estimated potential, with an additional 30 GW of renewable capacity still untapped.

Over the past three years, the Mexican electricity sector has faced significant policy changes that have altered market dynamics. The government's emphasis on strengthening the role of the Federal Electricity Commission (CFE) has led to a more challenging environment for private sector investments. The 2021 Electric Industry Law sought to prioritize CFE's plants in the dispatch system, impacting the growth of private renewable energy projects.

Despite these challenges, the U.S. Commercial Service Mexico has reported increasing interest from both Mexican firms seeking U.S. renewable energy technologies and U.S. companies attending trade shows to explore opportunities in Mexico. This indicates a persistent optimism about the potential for renewable energy in the country.

The transition to renewable energy could have a significant economic impact, including:

Job Creation: The renewable energy sector has the potential to create thousands of jobs, particularly in construction, maintenance, and technology sectors.

Cost Savings: By reducing dependency on imported fossil fuels, Mexico could achieve substantial savings on energy costs, benefiting consumers and businesses alike.

Environmental Benefits: Increased adoption of renewables could lead to significant reductions in greenhouse gas emissions, aligning with Mexico's commitments under the Paris Agreement.

As the world’s 14th largest economy, Mexico has faced criticism for not doing enough to incentivize investments in renewable energy. Currently, renewables, including large hydropower, account for only 10% of the country’s overall electricity mix. With a renewed focus and more favorable policies, Mexico could capitalize on its immense potential in the clean energy sector and move toward a more sustainable future.