Mexico's New Economic Plan Lacks Energy

The first phase of the Puerto Peñasco photovoltaic plant, with a capacity of 120 megawatts and located in the northern state of Sonora, has been operational since 2023. The Mexican government included the project in its multi-billion-dollar investment for the energy sector. Credit: Government of Mexicoby Emilio Godoy (mexico)Friday, January 31, 2025Inter Press Service

MEXICO, Jan 31 (IPS) - This January, Mexico has embarked on a new industrial path for the next six years, where the viability of its energy component faces fundamental challenges that put it at risk.

Energy scarcity is among the main obstacles faced by the economic program of President Claudia Sheinbaum, who has been in office since October.

Researcher Luca Ferrari from the Geosciences Center of the public National Autonomous University of Mexico (UNAM) identified limited financial resources and energy supply as barriers to progress.

"There are budgetary and energy quantity constraints. Increased industrialization for export will run into energy shortages or very limited availability, due to necessary investments and where they will come from. We are in a very precarious energy situation because we are dependent on fossil fuels and are energy deficient," he told IPS.

Launched on January 13 under the general title of the National Industrialization and Shared Prosperity Strategy, Plan Mexico (PM) consists of 10 objectives, 13 goals, 2,000 projects, and a total planned investment of US$277 billion, which would create 1.5 million new jobs in manufacturing and other sectors.

Among the plan's investments, which are seen internally as a partial response to the arrival of ultra-conservative Donald Trump to the U.S. presidency, is an investment by the state-owned Federal Electricity Commissionx (CFE) of US$23.4 billion.

Of this, US$12.3 billion will be allocated to generation, US$7.5 billion to transmission infrastructure, and US$3.6 billion to decentralized photovoltaic production in homes.

Additionally, the government is preparing rules for the private sector's renewed participation in electricity generation, a modality suspended since 2018 to favor CFE and also the state-owned Mexican Petroleum (Pemex).

This return would include, among other measures, lower energy purchase costs for the electric monopoly and the use of storage batteries to maintain grid stability.

As a result, the plan would add 21,893 megawatts (MW) to the national energy matrix, aiming to reach a 37.8% of clean energy, up from the current 22.5%. By law, CFE controls 54% of the electricity market, with the rest being in private hands.

At least 17 transmission and distribution projects are under study for implementation at an undetermined time, but their development would be independent of the new PM, which does incorporate several projects already underway, as well as new ones.

With a current installed capacity of 89,000 MW, in 2024 approximately 63% of electricity generation depended on fossil gas, followed by conventional thermoelectricity (6.8%), hydroelectricity (5.9%), wind energy (5.8%), solar photovoltaic (5.2%), nuclear (3%), and geothermal (1%).

Renewable sources have an installed capacity of 33,517 MW but only contribute 22.5% of electricity.

In December 2023, during the annual climate summit in Dubai, Mexico joined the Global Commitment on Renewables and Energy Efficiency, which aims to triple alternative installed capacity and double the energy efficiency rate by 2030. Thus, the PM would fall short of the clean generation target.

The first phase of the Puerto Peñasco photovoltaic plant, with a capacity of 120 megawatts and located in the northern state of Sonora, has been operational since 2023. The Mexican government included the project in its multi-billion-dollar investment for the energy sector. Credit: Government of Mexico

Gasify, baby, gasify

Since December 2018, when Sheinbaum's predecessor and mentor left-wing populist Andrés Manuel López Obrador took office as president, Mexico has pursued the so far unattained goal of energy sovereignty, one of whose effects has been the halt of the transition to less polluting fuels.

Sheinbaum's new package of projects continues this model but also deviates from its extremes, in what seems like the resurrection of the much-needed energy transition, in a strategy marked by apparent contradictions.

For Carlos Asunsolo, manager of Research and Public Policy at the non-governmental Mexican Center for Environmental Law (Cemda), Plan Mexico lacks specific details, such as the pathways to achieve the goals.

"These are isolated projects that may be interesting. It is a statement of intentions, but it should be read in light of other public policy instruments, such as climate and transition, along with the need to align with a comprehensive energy policy," he analyzed for IPS.

The expert cited concerns about project execution conditions, their type, human rights guarantees, and transparency.

One of the pillars of PM is promoting the relocation (nearshoring) of companies in sectors such as electronics, high technology, and the automotive industry. This is due to the alteration of global maritime transport routes, the repercussions of the Russian invasion of Ukraine in 2022, and the trade dispute between the United States and China.

This section also needs energy and projects progress in the construction of 100 industrial parks, including 12 in the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT), a megaproject already underway under the responsibility of the Ministry of the Navy.

This corridor in the southeast of the country is one of the three most important legacies of the current government, along with the Maya Train in the southeastern Yucatán Peninsula and the Olmeca refinery in the state of Tabasco, also in the southeast. All three are integrated into the new PM.

The CIIT involves the construction and modernization of three rail routes and three ports between the Pacific coast and the Atlantic Gulf of Mexico.

A lone solar panel powering a water well in the rural community of Tahdzui, in the southeastern Mexican state of Yucatán. The government of Claudia Sheinbaum has shown signs of reviving the clean energy transition, which had been suspended since 2018, including decentralized generation. Credit: Emilio Godoy / IPS

But these facilities, which seek regional development in the southeast and the substitution of imports from Asia, require lots of energy. Existing and planned renewable generation would not be enough in this area, which would lead Mexico to deepen its dependence on gas imported from the United States.

Since 2010, the northern neighbor has sent more than 18 billion cubic feet (ft3) of gas to Mexico via pipelines. In 2023, Mexico consumed 8.514 billion ft3 daily, of which it imported 6.141 billion from the United States, making it the supplier of 72% of all its gas.

Additionally, the López Obrador administration promoted the Sonora Sustainable Energy Plan, which includes photovoltaic energy, lithium exploitation, and electric vehicle manufacturing in the northern state of Sonora, and which is now incorporated into Sheinbaum's PM.

One of its components is the Puerto Peñasco photovoltaic plant in Sonora, whose first phase of 120 MW has been operational since 2023. When completed in 2026, it will provide 1,000 MW, with a total investment of $1.6 billion.

For Ferrari, the UNAM researcher, the only possibility for more energy to sustain the business promise is gas.

"We are already in a ridiculously dependent situation. In the United States, production has stabilized over the past year, and it is likely to fall in the coming years. Gas delivery to Mexico is not guaranteed," he predicted.

Meanwhile, specialist Asunsolo considers it essential to question for whom and for what more energy is being generated, the size of the projects, and the fueling of consumption, at a time when the climate crisis is tightening its grip on very vulnerable places like Mexico.

"There is a clear bet for CFE, through gas, and Pemex, through hydrocarbons, to be the main energy policy. We are only swapping one problem for another with the change of source. If it does not translate into a reduction of hydrocarbons, only generation capacity is increased. There is a confusing message," emphasized the Cemda expert.

As it progresses, the PM will not only have to face energy obstacles, according to analysts, but will also have to navigate the growing water deficit.

Northern Mexico and parts of the center, south, and southeast were experiencing some degree of drought by January 15, raising questions about water availability for the large projects outlined in the new industrial plan.

© Inter Press Service (2025) — All Rights ReservedOriginal source: Inter Press Service