Beatrice Lang
Mexico's energy sector is facing a critical juncture. Historically reliant on fossil fuels, the country has set ambitious goals for increasing its renewable energy capacity. However, a lack of investment, transmission infrastructure issues, and conflicting energy policies have hindered progress. With growing domestic demand and the need to attract nearshoring investment, Mexico must address these challenges to ensure a reliable and environmentally sustainable energy future for its citizens. This complex situation has sparked intense debates about the role of the state, the market, and the environment in shaping the country's energy landscape.
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What You'll Learn
Mexico's energy sector and market reforms
Mexico has been working to reform its energy sector, with a particular focus on electricity generation and market liberalization. The country has historically relied on fossil fuels, especially oil, and has been a leading producer. However, with the liberalization of the electricity sector through the 2014 Electric Industry Law, Mexico opened its market to private competitors and foreign investments, encouraging the development of renewable energy projects.
The 2014 reforms built on earlier efforts, such as the 2013 decree that restored Article 27, allowing private entities to participate in electricity generation while maintaining state control over transmission and distribution. These changes aimed to create a level playing field for all actors in the sector and promote renewable energy sources. As a result, Mexico's renewable energy capacity doubled between 2014 and 2022.
However, more recent developments indicate a shift back towards state control and nationalization of the energy sector. In 2021, under President López Obrador, an amendment to the Electricity Law was made to restore the state-owned Comisión Federal de la Electricidad (CFE) as the dominant electricity producer. This amendment prioritized power production from the CFE over private companies and abolished renewable energy auctions.
The latest energy reform package, enacted in March 2025 by President Claudia Sheinbaum, further centralized the energy sector. The package included new secondary laws and amendments that gave the CFE a mandated market share of at least 54%, while dissolving independent energy regulators and replacing them with a centralized National Energy Commission (CNE) under the executive branch.
These reforms have raised concerns among private and foreign stakeholders about regulatory transparency, investment risk, and market competition. They also pose a challenge to Mexico's renewable energy sector and its ability to meet climate goals. Nonetheless, the Mexican government frames these reforms around goals of sustainability and energy security, aiming to add 22 gigawatts of new power generation capacity by 2030 and deliver a portfolio of transmission and distribution projects.
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Renewable energy investments and clean energy projects
Mexico has been working to expand its energy sector to meet the demands of its growing population. Historically, Mexico has been reliant on fossil fuels, and it is a leading oil producer. However, the country has also been taking steps towards renewable energy investments and clean energy projects.
In 2014, the Mexican electricity market was liberalized with the Electric Industry Law, opening it up to private competitors and foreign investments. This led to an increase in renewable energy capacity, with Mexico's renewable energy capacity doubling between 2014 and 2022. Some Mexican states have recognized the importance of developing and supporting renewable energy projects as part of their energy matrix. States like Yucatan, Nuevo Leon, Tamaulipas, Puebla, Baja California, and Queretaro prioritize securing a reliable electricity supply to attract more investments for economic growth and sustainable development.
However, recent policy changes have impacted the dynamics of the electricity market for private sector participants. The 2021 amendment to the Electricity Law aimed to restore state control over the energy sector and nationalize the market, with the Federal Electricity Commission (CFE) becoming the country's primary supplier of electricity. This has created challenges for private companies looking to invest in large-scale renewable energy projects due to permitting delays and policy initiatives.
Despite these challenges, companies remain interested in participating in the renewable energy sector in Mexico. They recognize the advantages of utilizing renewable energy and energy storage technologies to reduce electricity costs, increase efficiency, and protect the environment. According to a 2022 report by the National Renewable Energy Labs, Mexico's renewable energy resource base could support significant growth in clean generation capacity. The country has a national technical potential of 24,918 GW of solar photovoltaics, 3,669 GW of wind, 2.5 GW of conventional geothermal, and 1.2 GW of additional capacity from existing hydropower facilities.
To promote renewable energy and clean energy projects, the Mexican government has implemented various programs. These include a program to replace incandescent bulbs with compact fluorescent lamps in the residential sector, an appliances replacement program, the modernization of long-distance public transport, and energy efficiency programs in municipalities, industries, and the commercial sector.
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Transmission infrastructure and distributed generation
Mexico's energy sector is expanding to meet the demands of its growing population. Historically, Mexico has relied on fossil fuels for electricity generation, but the country is now seeking to transition to renewable energy sources.
The Mexican government has implemented various policies and reforms to regulate the electricity sector and encourage investment in renewable energy projects. In 1992, President Carlos Salinas reformed the electricity law, allowing for private participation in generation. In 2014, the Electric Industry Law was enacted, liberalizing the electricity sector and opening it to private competitors and foreign investments. More recently, in 2023, the Secretariat of Energy published the 2023-2037 National Power System Development Program (PRODESEN), which emphasizes the government's commitment to guarantee universal access to electricity and promote social and economic development.
To achieve its renewable energy goals, Mexico has recognized the need to expand and modernize its power grid to accommodate the increasing number of renewable projects. The government has announced plans to build approximately 25,000 kilometers of new power transmission lines, with an investment of at least $13.4 billion. This expansion will enable the connection of remote communities that are currently not connected to the national electricity grid.
Distributed Generation (DG) has gained significant traction in Mexico, with a focus on generating electric energy near the place of consumption and incorporating available technology. From 2020 to 2022, Mexico's DG installed capacity doubled, with 99% of DG coming from photovoltaic panels on roofs. This growth is driven by factors such as cost, innovation, technology adoption, and convergence. The development of DG infrastructure offers advantages such as lower transmission and distribution costs and reduced investment in expensive transmission infrastructure.
However, challenges remain in the electricity sector. The shift to renewable energy sources has faced criticism for including non-renewable energies with a large carbon footprint in long-term plans. Additionally, the reliability of wind and solar power has been questioned during peak demand periods. To address these challenges, Mexico is exploring solutions such as battery energy storage and adapting its transmission and distribution infrastructure to enable energy storage and increase the percentage of renewable energy in its power mix.
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Electricity costs, subsidies and consumer prices
Mexico has been working on reforming its electricity industry to reduce costs, encourage the development of new capacity, and increase competition. The country has historically been reliant on fossil fuels, with almost three-quarters of electricity produced in Mexico coming from fossil fuels in 2022. However, Mexico has set goals to increase its share of clean energy sources in the energy mix, aiming for 35% by 2024, 40% by 2035, and 50% by 2050.
The Mexican government has implemented various market reforms, including in the electricity sector, since the late 1980s and early 1990s. In 1992, President Carlos Salinas reformed the electricity law, allowing for private participation in electricity generation. The Energy Regulatory Commission (CRE) was created in 1993 to regulate the natural gas and electricity industries. In 2014, the Electric Industry Law was passed, liberalizing the electricity sector and opening it up to private competitors and foreign investments.
Despite these reforms, Mexico's electricity rates are still heavily subsidized by the government. The cost of supplying residential customers is more than double what the Comisión Federal de Electricidad (CFE), the state-owned electric company, charges them. The government provides subsidies for homes that conserve energy and seasonal subsidies for homes in regions with extreme temperatures.
In 2016, Mexico opened a new wholesale power market, with average prices ranging from $48 to $60 per megawatt-hour (MWh) in most locations. Prices in border regions, such as Tijuana and Ensenada, averaged $23/MWh during the first six months of 2016. In March, Mexico held its first long-term auction for new electricity generation capacity, with 11 companies awarded contracts for solar and wind energy projects at an average price of $45 per MWh.
Residential electricity prices in Mexico are lower than the world average, with households paying 51.48% of business rates. However, there is a disparity between prices paid by small businesses and large businesses, with small businesses paying 125.62% of the prices paid by big businesses.
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Regulatory framework and energy policies
Mexico's electricity sector has undergone several regulatory changes and policy shifts in recent years. The country's energy policies are defined by the Energy Secretariat (SENER), which operates within the framework of the Mexican Constitution. The Energy Regulatory Commission (CRE) is the primary regulatory agency for the electricity and gas sectors, established in 1993.
In 1992, President Carlos Salinas reformed the electricity law, allowing private participation in generation. However, this move was debated as unconstitutional, and the Mexican Supreme Court ruled against it in 2002. Despite this, the generation sector remains open to private investment, with private generators holding about 23 GW of generation capacity as of 2008.
The Federal Electricity Commission (CFE) is a state-owned enterprise and the dominant player in the generation sector, with two-thirds of installed capacity. In 2024, a decree was signed, re-establishing CFE's status as a State-Owned Enterprise, with a focus on strengthening its position as Mexico's primary electricity supplier.
The Mexican government has implemented various programs to modernise the electrical system, improve energy efficiency, and increase the use of renewable energy sources. The 2023-2037 National Power System Development Program (PRODESEN) emphasises universal access to electricity and social and economic development. It includes plans for the expansion of transmission and distribution networks, the development of new CFE power plants, and the modernisation of hydroelectric plants.
To encourage private investment in the power sector, the government is considering policy changes such as increasing the potential of the private sector, boosting natural gas production, incentivising technological innovations, and restoring regulatory autonomy to governing bodies.
President Claudia Sheinbaum's administration has also proposed a National Strategy for the Electric Sector for 2024-2030, which includes solar panel implementation in northern Mexico, a proposed market structure with a 54% public and 46% private split, and limitations on renewable energy capacity.
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Frequently asked questions
While I can't find a precise answer, it seems that most Mexicans have access to electricity. In 2009, the government seized control of the state-owned Luz y Fuerza del Centro, which supplied power to 25 million Mexicans, and put its operations under the control of CFE.
CFE stands for Comisión Federal de Electricidad (Federal Electricity Commission). It is the state-owned electricity company in Mexico.
Mexico's electricity sector is facing several challenges. The country has a growing demand for electricity, but there has been a notable lack of investment in recent years. There is also a need to reduce the reliance on fossil fuels and a lack of transmission infrastructure.
Mexico has implemented several policies to improve its electricity sector. The country has set goals to increase the use of renewable energy sources, with a target of having at least 35% of green energy in its power mix by 2024. Mexico has also introduced programs to improve energy efficiency and is encouraging private investment in the electricity market.
The electricity sector in Mexico has important implications for the country's economy. Reliable and sufficient access to electricity is critical for attracting investment, especially in the nearshoring of supply chains. However, current energy policies have led to increased electricity costs and decreased reliability, undermining Mexico's attractiveness to potential investors.
