Mexico 'falling behind' in energy transition plans

Mexico “is falling behind in its energy-transition plans, having consistently invested insufficiently in transmission,” according to a report from Moody's.

“The country has no robust transition plans and is expected to continue to rely heavily on thermal power generation, much of it from natural gas exports from the US. Today Mexico does not have a regulatory framework for private investments in the transmission sector,” the rating agency said in the report on Latin America and the Caribbean’s transmission networks released on Monday. 

Even though renewable projects are not moving forward as before under the administration of President Andrés Manuel López Obrador, developers have pointed out that there is not enough transmission capacity to dispatch energy generated by renewables.

In November, the International Chamber of Commerce México (ICC México) warned that the country has a cumulative deficit of 4,370km of power transmission lines that were not built between 2018, when López Obrador took office, and 2022. 

There is still hope 

But things could turn around for the country this year, as its federal power company CFE announced in 2023 that it would allocate US$7bn to the transmission segment up until 2029, the report says.

“This figure also includes around US$750mn CFE would need to invest in a project aiming to expand transmission lines in Mexico's northwest, north, and western regions,” Moody’s said. 

CFE is due to invest 377bn pesos (US$22.4bn) by 2028, mainly in generation, transmission and distribution. According to the company’s 2024-28 business plan, 192bn pesos will go to generation, 108bn pesos to transmission and 66.6bn pesos to distribution. 

Moody’s highlighted that Mexico will make the biggest investments in transmission infrastructure this year in the region after Brazil. Total capex expected for the region is US$7bn. 

This year, CFE has launched 13 major transmission tenders identified by BNamericas. 

Bidding is open to international companies and some of the contracts are related to the I19 and I20 projects that involve some 300 transmission and substation works in the Yucatán peninsula and the northwestern states of Sinaloa, Nayarit and Sonora.