Congressional Commission Approves Proposal to Prioritize CFE
- The Energy Commission of Mexico’s Chamber of Deputies approved (again) measures that prioritize electricity generated by state-owned Federal Commission of Electricity (CFE) over private producers. This legislative decision underscores an ongoing trend towards bolstering the national entity amid broader debates and legal scrutiny concerning Mexico’s energy policies.
- The approved proposal explicitly seeks to grant preferential dispatch status to CFE- generated electricity. This decision aligns with President Andres Manuel Lopez Obrador’s (AMLO) push for strengthening the State’s role in the energy sector, a priority that many participants in the private sector argue conflicts with established market rules and international trade commitments, such as the USMCA, but the government argues is necessary for energy security and CFE’ long-term viability.
- The legislative move is at odds with the recent Supreme Court ruling that declared similar efforts in 2021 unconstitutional. The Court had argued that such reforms, which also aimed to modify the electricity dispatch order in favor of CFE, limited private sector participation and violated competitive market principles by disrupting the merit order dispatch system. This system seeks to dispatch the least-costly power plants first to benefit consumers with lower prices, but hurts the profitability of state owned CFE, which has older, high-cost plants.
- The full impact of the legislative move will depend on further actions by the Mexican legislature and the response from other branches of government, including potential legal challenges that may arise given the previous Supreme Court decision.
- The upcoming June Presidential and Congressional elections, and future changes in the composition of the Supreme Court, will likely determine the fate of these and other reforms aiming to strengthen CFE at expense of private producers. With Morena favored to win the Presidential election and keep majority in both houses of Congress, and thereby be in a position to appoint an upcoming December vacancy in the Supreme Court and several after that, it is probably just a matter of time before these changes are implemented, effectively canceling the electricity reform of the previous administration. While elements of the private sector will probably seek international arbitration, the government will maintain that national sovereignty should allow for a democratically elected government to set the country’s energy policy.
Energy Regulator Releases New Standards to Issue CELs
- Mexico’s energy regulator CRE published new criteria for the allocation of Clean Energy Certificates (CELs) for the year 2022, as detailed in the latest government publication dated April 8, 2024. This move marks a significant step in the country’s ongoing efforts to regulate and promote clean energy, despite existing controversies over the definition and qualifications for such certificates.
- According to the Official Gazette, the updated criteria aim to refine the process through which energy producers can qualify for and obtain CELs, a crucial component in Mexico’s strategy to boost renewable energy production and reduce carbon emissions. The CRE’s announcement includes detailed guidelines on the eligibility, application process, and issuance of CELs, reflecting the regulator’s intent to streamline and clarify the system amid growing interest and participation in the country’s renewable energy sector.
- This regulatory update follows a contentious period in Mexico’s clean energy policy. In May 2023, the CRE approved a new resolution that notably expanded the definition of clean energy to include steam-generated energy from combined cycle power plants. This decision was criticized by various stakeholders, including COPARMEX, a leading Mexican business association, which argued that the resolution contradicts Mexico’s environmental commitments by diluting the standards for clean energy.
- Furthermore, the energy ministry SENER previously canceled CELs issued in favor of CFE’s older power plants, adhering to a court ruling. This legal backdrop adds layers of complexity to the CRE’s recent guidelines, as it attempts to navigate between court mandates and the evolving policy landscape championed by different government branches.
- Environmental groups like Greenpeace and the Mexican Center for Environmental Law have voiced opposition to the CRE’s new methodology, claiming it could hinder Mexico’s energy transition goals. These organizations assert that by relaxing the criteria for what constitutes clean energy, the CRE is misleading the public and investors about the true nature of Mexico’s energy progression toward sustainability.
- As Mexico continues to adjust its regulatory framework for clean energy, the impact of these new guidelines on the energy market and on Mexico’s international environmental commitments will be closely scrutinized. Stakeholders from all sides of the spectrum, governmental, commercial, and non-governmental, remain engaged in a complex dialogue about the best path forward for achieving both economic growth and environmental sustainability in one of Latin America’s largest energy markets.
- Presidential frontrunner Claudia Sheinbaum is a leading academic energy engineer and has long been a keen supporter of renewable energy to help combat climate change. If she wins the upcoming election, it will be key to see whether her administration backs these new broader criteria for Clean Energy Certificates, or reverts to more environmentally friendly definitions.
PEMEX Reports Offshore Oil Spill
- Mexico’s State producer PEMEX reported a serious incident involving a fire on one of its offshore platforms, resulting in casualties and highlighting ongoing safety challenges within the company. This event adds to a series of mishaps that have raised questions about the safety protocols and infrastructure integrity at PEMEX.
- According to PEMEX and reports from Reuters, the fire broke out on an offshore platform, leading to tragic outcomes. The incident, which occurred early April, resulted in one fatality and two severe injuries among the crew members. The fire was eventually controlled, but the accident underscores the persistent risks associated with offshore oil and gas operations.
- In response to the latest accident, PEMEX released statements detailing immediate actions taken to manage the situation and mitigate further risks. The company has pledged to conduct a thorough investigation and review its safety protocols. Additionally, recent national press releases from PEMEX outline ongoing efforts to enhance safety measures and modernize their facilities, which include significant investments aimed at upgrading equipment and improving emergency response capabilities.
EYES ON ENERGY
Leading Think-Tank Presents Energy Proposals
The Mexican Institute for Competitiveness (IMCO) has unveiled a strategic blueprint aimed at reshaping Mexico’s energy sector from 2024 to 2030. This initiative focuses on enhancing sustainability, boosting economic growth, and ensuring energy security in the nation.
IMCO’s proposals are comprehensive, touching on critical areas of Mexico’s energy sector, including investment in renewables, regulatory reforms, and enhanced transparency in energy transactions. The strategy is built on the premise that a competitive and efficient energy market is vital for national competitiveness and consumer benefits.
A key component of the strategy is the significant emphasis on renewable energy. IMCO advocates for policies that encourage both public and private investment in renewable energy projects. The organization proposes the creation of incentives for solar and wind energy expansion, which could help Mexico capitalize on its abundant natural resources to meet its energy needs sustainably.
• Regulatory Reforms:
The think tank also highlights the necessity for robust regulatory frameworks that promote fair competition and attract foreign direct investment. Streamlining permitting processes and ensuring the autonomy of regulatory bodies like the Energy Regulatory Commission (CRE) are seen as crucial steps toward achieving these goals.
• Transparency Measures:
Transparency in energy transactions is another critical focus. IMCO suggests implementing standards that ensure all contracts and dealings are conducted openly to prevent corruption and increase efficiency. These measures are intended to foster a more trustworthy environment for investors and stakeholders.
• Impact on Energy Security:
IMCO’s strategy is not just about economic growth and environmental sustainability; it also underscores the importance of energy security. By diversifying the energy portfolio and reducing reliance on fossil fuels, Mexico can achieve a more stable and secure energy supply, mitigating risks associated with global energy market fluctuations.
The proposals set forth by IMCO represent a forward-thinking approach to energy policy in Mexico. By focusing on renewables, regulatory reform, and transparency, the suggested strategy promises to revitalize Mexico’s energy sector, making it more competitive, sustainable, and secure. The next steps will involve engaging policymakers, industry stakeholders, and the public to turn these ideas into actionable policies, shaping the future of energy in Mexico.
