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| Fig. 1: Petróleos Mexicanos (PEMEX) (Source: Wikimedia Commons) |
With population and industrialization globally increasing, governments have increased their use of renewable energy and are now globally investing in new technologies to produce renewable energy with lower carbon emission levels. Their reasoning is that using renewable energy not only minimizes the risk of lack of natural resources for the use of future generations but also that it helps the country grow sustainably and with less risk of price volatility that is enabled by conventional energy. [1] To this, Mexico is no exception. In the last few decades, the Mexican government has devoted its political agenda in reforming the energy sector towards the inclusion and proliferation of renewable energy. Although Mexicos efforts to implement renewable energy are relatively recent and still face numerous challenges, their reformed policies and numerous programs that adopt and promote renewable energy offer them an opportunity to innovate, compete, and become a leader across the global energy sector.
Oil exploration in Mexico began in the late 1800s by private entrepreneurs. [1] By the early 1920s, Mexico had become the worlds largest exporter of oil. [1] The oil industry was then expropriated and nationalized in 1938 by Mexican President Lazaro Cardenas, who further created Petroleos Mexicanos (PEMEX), that held a monopoly over the Mexican oil industry, and barred all foreign oil companies from operating in Mexico. [1] Fig. 1 demonstrates the PEMEX logo. Still, production grew steadily throughout the 1900s until 2004, when it eventually peaked to the production of 3.4 million barrels per day (bpd). [2] Production then decreased as national policy hindered PEMEX to legally seek private investment and hence, could not modernize nor grow. After Pemex's declining production and to reduce the electricity price, which was comparatively about 25% higher than in the US, in 2013, the Mexican power market opened for competition and foreign investment through an energy reform that aimed to modernize and advance the country's energy system. [3] Since then, their oil and gas industry has gone through a political and technological revolution that has transformed production and costs. Today, 107 fields have been awarded for investment to 73 companies, there have been significant commercial initiations, and the Mexican government cites to have contracts across the energy sector that will deliver $200 billion in investments. [4]
In 2013, policies promoting energy efficiency were implemented in a diverse amount of industries. To name a few: in energy-intensive industries, the reform sought to increase the use of renewable energy in electrical energy plants, improve energy information in the databases, and replace electric motors with new, high-efficiency ones; regarding office equipment, the reform established mandatory energy consumption rules and low-powered computer equipment; and, in the electro-domestic sector, it established mandatory energy consumption rules, that required the use of low-powered electro domestic equipment with remote-controlled sensors or standby mode technology. [1] The biggest accomplishment this reformation achieved, however, was that it introduced a system of auctions for energy capacity and CECs that offer long-term contracts and consequent stability for foreign and domestic investors: 15 years in the case of energy and capacity; 20 years for CECs. [4] In this way, the auction system was designed to capture relative values of different technologies by its location and production profile, as national projects in higher-priced areas or that deliver power at peak times can secure higher revenues and more investment through the auctions. [4] The International Energy Agency described this auction system as one of the most refined mechanisms for renewable energy attainment and further considered Mexicos electricity market reform as one of the most ambitious, comprehensive and well-developed reforms undertaken in the world since the 1990s. [1]
By the time of political debate in Mexico on whether to pursue a comprehensive energy reform in 2013, energy resource nationalism had been engrained, and the Mexican people feared that energy deals would provide a vehicle for political corruption. [4] Still, this fear was mostly a result of Mexicans being very unaware about the crisis that caused the need for energy reform. [3] In a recent poll, 63 percent Mexicans believed that Mexico's oil production either increased or stayed the same throughout the years prior to the reform. [4] Additionally, the fear existed that private investment in oil exploration and production would not benefit them as holding on to populist promises is much more attractive than suffering the immediate costs of investing in renewable energy whose benefits take time to materialize. Still, 48 percent of the public supports continuing the energy reforms while only 37 opposed. [4] Furthermore, even though few Mexicans understand the full energy sector, the majority of the respondents do support private companies, foreign and domestic, investing in electricity production, and encourage the production and selling of clean energy. [4]
The efficient transformation Mexico went through, as well as their renewed institution implementation in the energy sector has drawn a significant amount of attention and interest from companies who like to invest in emerging growth markets. Given their unique geographic and cultural position, they have been able to leverage on generation trades and fuel exchanges with the United States, while maintaining strong ties to its southern partners and their still growing economies. [4] Today, Mexico has raised close to one hundred billion dollars in foreign direct investment (FDI) projects as Anglo-Dutch oil major Royal Dutch Shell positioned itself as the biggest player in deepwater exploration in Mexico and other main competitors from Qatar, Spain, the United States, Japan, Italy, and Thailand secured winning bids in Mexican investments. [5] And while the unique geopolitics and resources in Mexico make their reformation challenging to duplicate, their ambitious push for energy diversification, climate change policymaking, and legislative action toward clean energy requirements has played a key role in outlining findings for other Latin American countries to revamp their own energy market and continue the expansion of more sustainable objectives. [6] By opening their energy market to the world, they have positively stimulated the energy market and demonstrated the benefits of investing in clean energy.
>The Mexican government has set ambitious targets for the nearby future. Currently, 19% of the energy generated for the public services sector is produced using renewable sources from the 25% the government was targeting to reach. [1] Still, with the year ending soon, it seems pretty ambitious for Mexico to reduce carbon emissions by 50% by 2050. [1] As ambitious as Mexicos goals are for the future, however, their potential of growth in the energy market, as well as their great commitment to the use of clean energy, is one for us to keep an eye out for.
© Dania Cortes. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for non-commercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] S. Romero-Hernández, O. Romero-Hernández, and D. Wood, "Renewable Energy in Mexico," Woodrow Wilson Center, August 2013.
[2] E. Malkin, "In a Change, Mexico Reins In Its Oil Monopoly," New York Times, 23 Apr 12
[3] P. Nance, Initial Results From the Mexico Electricity Reform, 2013-18," Woodrow Wilson Center, May 2018.
[4] C. Pascual et al., "Will Mexican Energy Reform Survive Political Transition," Brookings Institution, June 2018.
[5] E. Malkin and C. Krauss, "Oil and Gas Industry Leaders Eagerly Take Stakes in Mexican Offshore Fields," New York Times, 5 Dec 17.
[6] G. Kieffer et al., "Renewable Energy Market Analysis: Latin America," International Renewable Energy Agency, 2016.
