Mexican think tank calls for reconsideration of energy policy, role of Pemex and CFE

Mexico's state-led approach to renewable energy is failing to deliver an energy transition that is fair and sustainable, researchers from economics and budget-focused think tank CIEP told a press conference in the Mexican capital on Tuesday.

They said the current regulatory framework does not incentivize private investment in renewable energy, while national oil company Pemex and state electricity firm CFE do not have the financial resources to lead the transition.

In recent years, the government of outgoing President Andrés Manuel López Obrador (AMLO) has prioritized shoring up the finances of Pemex and increasing the market share of CFE, which relies heavily on fossil fuels for generation. President-elect Claudia Sheinbaum plans to continue with her predecessor's controversial energy sovereignty policy, which is part of the nationalist agenda of ruling party Morena. AMLO’s handpicked successor will start her six-year term on October 1.

Renewable energy's share of electricity generation in Mexico fell from 27.4% in 2021 to 21.9% in 2023, according to an energy transition report released by CIEP. The report is available in the Documents box in the top right corner.

"Mexico has enormous potential to begin to carry out an energy transition and get back to the road that we started along, which the energy policy of recent years has put on hold," said CIEP executive director Alejandra Macías Sánchez.

"The business models of Pemex and CFE have to be rethought to incorporate these new technologies," she said. "The energy transition is an historic opportunity to achieve a more sustainable and fairer development."

"We want to rescue [these companies] but they have to change their business models," Macías added. "If a large part of our budget goes towards rescuing the companies without having returns, we will be in a vicious cycle which we will not escape unless we do something different. Now is when we have to do it."

Ricardo Cantú Calderón, CIEP's deputy director, said that the regulatory framework in Mexico was not up to the job of supporting the rapid rollout of renewable energy.

"There are not adequate incentives to drive forward the energy transition and there is no long-term legal certainty for investors," he said. "We don't have a regulatory framework which encourages clean energy. This is something we need to resolve to be able to achieve the energy transition."

From 2019 to 2024, the size of CFE’s electricity transmission network grew only 0.4%, according to César Augusto Rivera de Jesús, an energy specialist at CIEP. The company spends twice as much every year on pensions as it does on grid maintenance, he added.