How the 2 frontrunners to be Mexico's next president would impact energy policy

While the two favorites for next year's presidential election in Mexico could relax some energy-permitting rules, the broader framework emphasizing state actors and political control will likely remain in place after the new leader takes over.

The election is coming into sharper focus as the ruling Morena party, founded by President Andrés Manuel López Obrador (AMLO), defined the rules to choose who will succeed the popular head of State who can't stand for reelection. 

Sheinbaum: The frontrunner 

Claudia Sheinbaum, the favorite to win the nomination, who stepped down as Mexico City mayor on Monday to compete in Morena's convoluted selection process, has sponsored clean energy programs focused on distributed generation for residential and small industrial consumption. But she has strongly supported AMLO’s broader energy policy goals.

Sheinbaum, who holds a PhD in electrical engineering and has conducted research on energy efficiency, supports a constitutional reform that would make public utility CFE the main electric power generator, a role it played before the 2013 energy reform. 

She also agrees with the government’s skepticism toward an open generation segment, criticizing the 2013 reform's attempt to create a generation market.

Under that reform, grid control center Cenace and CFE were separated and economic dispatch priority was established, along with giving private players the ability to sell power directly to large private consumers through newly created wholesale market MEM. Energy regulator CRE also became independent from energy ministry Sener.

But Sheinbaum has prioritized energy sovereignty over efficiency, safeguarding national capacity to produce energy while minimizing dependence on other countries, regardless of cost.

As president, Sheinbaum would likely not roll back any key features of the current energy policy, including strong support for CFE and federal oil and gas giant Pemex to expand their investment portfolios while emphasizing direct agreements between the State and large players regarding private sector participation. She would de-emphasize auctions, bidding rounds, private-to-private power purchase agreements (PPAs) and similar market solutions.

In a TV interview last year, Sheinbaum said CFE had been "practically made to disappear" by the 2013 reform and earlier changes to its monopoly. She said taking away CFE’s control over dispatch priority with the separation from Cenace, as well as its inability to supply large clients because of the creation of MEM, have robbed the utility of investment capacity.

Proponents of the reform wanted CFE to focus on transmission and distribution because its competitors were more efficient in the generation business.

Sheinbaum said, “We should allow private power generation to continue to exist, but CFE should decide how it is distributed. It should be allowed to plan for the long-term for the benefit of society, and it should articulate dispatch for the national benefit, and not for the market.”

A recent Enkoll poll showed that Sheinbaum would receive 45% of votes from Morena members. 

Ebrard: The pragmatist

Marcelo Ebrard, who also quit his post as foreign minister on Monday, is currently polling at 29%.

Ebrard is seen as a pragmatist and has avoided commenting on thorny energy issues. Instead, he tried fostering international collaboration and preventing international arbitration over energy policy after the US and Canada filed complaints.

His main energy initiative was the US$48bn Plan Sonora, focused on clean power generation capacity to build batteries, electric vehicles and parts to supply Arizona's planned transformation into a chip manufacturing hub. Among the investments are 5GW of new solar capacity and transmission lines, although details are still scarce.

The plan does not necessarily favor private sector participation, but specifies that all resulting power plants will be owned by CFE, aligning closely with AMLO’s approach to facilitating public-private partnerships like the ones between CFE and TC Energy or Pemex and New Fortress Energy.

His climate change concerns notwithstanding, Ebrard’s pragmatism cuts both ways. He will likely be more conciliatory toward private business while recognizing the interests of CFE and Pemex. 

Energy sovereignty is popular with voters. Last year's constitutional energy proposal, which failed to garner a supermajority in the lower house and would have rolled back key aspects of the 2013 reform, has been backed by 60% of the public.

However, Ebrard is keen to strike major investment deals amid renewed interest in increasing industrial capacity. He is seen to have played a key role in closing a deal with Tesla to invest up to US$5bn in a new factory in Nuevo León state.

Whoever wins the Morena nomination is likely to become Mexico's next president. The party controls both chambers of congress and governs 19 states and Mexico City. In all presidential polls, Morena is 10-30 points ahead of the opposition alliance, comprising the PRI, PAN and PRD parties.

Overall, six candidates belonging to the governing coalition are vying for the nomination to run in next year’s election, but the remaining four trail way behind Sheinbaum and Ebrard. They include interior minister Adrián Augusto López and senator Ricardo Monreal.

Energy minister Rocío Nahle, a staunch supporter of energy sovereignty, previously expressed interest in running, but recently voiced support for Sheinbaum.

On Sunday, Morena’s national council determined the internal process by which it will select its candidate, who will be presented on September 6, following a series of tours and a survey period comprising five polls. No debates among the six were approved, but the council ruled that they must resign from their posts before June 16.