Foreign Executives Need To Understand Mexico's Solar Energy Sector
Mexico is one of the best potential locations for solar energy generation in the world. It has great sun with minimal seasonal variability. On paper at least, Mexico is well-positioned to produce competitively priced solar-generated electricity. Over the last decade, Mexico has successfully attracted billions of dollars in new investment in solar energy. But, investment in solar energy has stalled during the administration of President Andres Manuel Lopez Obrador, a controversial populist who frequently ridicules policy experts and often embraces nationalistic tropes.
Over the last decade Mexican policymakers worked to draft legislation and create opportunities for private sector investment in renewable energy. During 2017 and 2018 Mexico received over $10 billion dollars in renewable energy investment. Within the last few years, the total share of wind and solar energy in Mexico quadrupled from 3% in 2017 to over 12% in 2022. To put this in perspective, however, the share of renewable energy in Mexico is still around half of the share of renewables in U.S. In terms of solar output, Mexico is in second place in Latin America behind Brazil, but it lags behind smaller countries such as Italy, Japan, and the Netherlands in terms of total solar energy production.
Unfortunately, under Lopez Obrador, Mexico has stopped issuing permits and canceled auctions for solar projects, effectively cutting off the flow of private sector investment in solar projects. As president, Lopez Obrador has promoted fossil fuels and mostly ignored renewables. Overall, it seems like Lopez Obrador is not very interested in developing solar energy. His government is now promoting the Puerto Peñasco project, but the actual allocation of funding seems pretty paltry. Lopez Obrador’s government is spending around $400 million during the first phase of the project. To put that in perspective— that’s around 2% of budget of the flagship oil refinery Lopez Obrador is building in his home state of Tabasco.
Lopez Obrador has given the green light to burning coal and fuel oil to generate electricity and has publicly mocked wind turbines. Mexico needs a lot of investment in renewables if it wants to achieve its using clean energy to produce 38.5% of its electricity by 2030. During the Lopez Obrador administration, foreign companies have largely skipped over investment opportunities in Mexico.
During a recent podcast discussion with Latin American Lens's Director of Research Nathaniel Parish Flannery, Diego Rivera Rivota, a Research Associate at the Center on Global Energy Policy at Columbia University, explained “Given the stagnant result of renewable energy development I’m afraid I can only give an F to this government’s energy policy in terms of renewable development. Not only has it failed to promote and increase investment in renewable energy, but the policies implemented by this government have actively undermined the development of these projects.”
In 2017, Mexico received a whopping 35% of all renewable energy investment in Latin America. Today, that figure is just 7%. Sonora, Nuevo Leon, Puebla, and Durango are all states that are taking action locally to attract investment in solar projects, but during the Lopez Obrador, most renewable energy investors have chosen to skip over Mexico in favor of Brazil, Colombia, and Chile.
In 2023, Lopez Obrador tried to modify his messaging and promote Mexico as a destination for electric vehicle production. But, overall, the most meaningful obstacles to renewable energy investment in Mexico will only be removed after Lopez Obrador leaves office in 2024.
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Note: this article was originally published on Forbes.com.