Power companies unfazed by Mexican reforms and appear poised to invest

Electricity companies in Mexico are taking constitutional reforms in their stride and are only waiting for more detailed regulations before investing in new projects, according to an industry expert.

"Solar and wind power companies are interested in investing but want to have the security of clear rules," Norma Álvarez, an energy specialist at Mexico City law firm Santamarina y Steta, told BNamericas. 

"There is also interest in hydro… Many companies are just waiting for these rules. The interest is there."

Newly inaugurated President Claudia Sheinbaum, who has made the energy transition one of the priorities of her administration, has said she will publish the national energy plan by the end of this year.

The plan is expected to be followed by detailed guidelines on how private companies can participate in Mexico's electricity market alongside state-owned utility CFE.

"Everyone is hoping that the energy plan and the regulations will permit a level playing field," Álvarez said. "Private companies will bring more expertise and more investment and they will be more proactive in the renewables area." 

Unfazed by reforms

Sheinbaum's government has reserved 54% of the electricity market for CFE, with the remaining 46% available to private companies.

Last week congress approved controversial reforms which will give CFE a legally privileged position in the market. Power generated by CFE will have priority over electricity produced by other firms.

"If CFE is strong it will grow, so private generation will grow to maintain its percentage," Álvarez said. "We have to have a strong state company. Nobody in the sector is against CFE growing."

Rising power demand

Sheinbaum has set a target of 45% of Mexico's electricity coming from renewable sources in 2030, up from under 20% currently.

The State does not have the financial resources to achieve this goal alone and will need private capital to reach the target.

International energy companies are also attracted by the country's rising demand for electricity.

Electricity demand in Mexico is growing by 3.5-4% a year and may rise faster if the nearshoring trend accelerates, Álvarez said.

To attract private investment the government may resume renewable energy auctions, perhaps in specific areas, she added.

The previous administration of Sheinbaum’s mentor Andrés Manuel López Obrador cancelled renewable energy auctions and prioritized investment by CFE in new gas-fired power plants.

Private companies could also have the opportunity to participate with state firms in projects to expand and modernize Mexico's transmission network, Álvarez said.