Sheky Espejo, Platts S&P Global

MEXICO CITY
EnergiesNet.com 04 30 2024

Xóchitl Gálvez Ruiz, who is running second in the polls ahead of Mexico’s upcoming presidential elections, is promising to revive the incipient electricity market in the country if she wins next June by resuming the long-term auctions, a request that has been high in the wish-list of the industry.

The electricity market, designed and initiated by the previous administration of President Enrique Pena Nieto, allowed for the participation of the private industry in the generation rough long-term power supply auctions. Through the auctions, the state utility CFE was able to secure prices below 20 cents/kWh, breaking world records for solar energy in 2017. The auctions were cancelled in 2019 by the current President Andres Manuel López Obrador and his Morena party under a nationalistic agenda that called for the strengthening of the state companies. By the time the auctions were cancelled, Mexico had added roughly 7 GW of installed capacity of solar energy and a similar amount for wind.

«My bet is for renewable energy, with the use of natural gas as a transition fuel,» Gálvez Ruiz said April 28 during a debate with the other two candidates, adding that by 2030, half of the energy generated in the country would be clean. In 2023, Mexico generated roughly 70% of its power using natural gas, which is mostly imported from the US via pipeline.

«For large users, we have to go back to the auctions,» Gálvez said.

The cancelation of the auctions was broadly criticized by the industry; during an energy forum organized in Mexico City on April 22, market participants and observers identified the cancellation of the auctions as one of the main hurdles to investment in the country, together with the rule of law and the lack of infrastructure for transmission and distribution.

Galvez view contrasts with that of the leading candidate Claudia Sheinbaum, from Morena, who claims the liberalization of the market under the previous administration only led to corruption and disorder.

Regarding transmission, Gálvez Ruiz reiterated it is essential to take advantage of the opportunities presented by the relocation of productive chains around the world, a phenomenon known as «nearshoring.»

Prior to the debate, Gálvez Ruiz had mentioned she would spend $20 billion in upgrading the power grid if she won the election. Under López Obrador, the country has built practically zero infrastructure for transmission and distribution, while demand has continued to grow.

The lack of transmission infrastructure was recently listed by Moody’s Rating Services as one of the issues holding Mexico back in the energy transition quest.

Gálvez Ruiz is currently standing roughly 20 points behind Sheinbaum in the polls.

spglobal.com 04 29 2024