Mexico goes against renewable energies and gives a hard blow to private investment. AMLO’s policy impacts $30 billion in projects and makes energy consumption more expensive.
MEXICO CITY (AP) – Mexico’s government cited the coronavirus pandemic to justify the imposition of new rules to reduce the role of renewable energies, such as solar and wind power.
The decree issued over the weekend has sparked outrage among local and foreign investors. They had been allowed to sell their energy to the government-operated grid.
The measure would affect 28 solar and wind projects already ready to go into operation, and another 16 under construction, with a total investment of $6.4 billion, mostly from foreign companies.
“This represents a frontal attack on the legal certainty of investments in Mexico, causing serious consequences for the country as the loss of jobs, confidence of investors.” Said the Business Coordinating Council in a statement issued Sunday.
Investments of more than USD 30 billion would be affected. “Not only does it discriminate against renewable energies, it also empowers the authorities to artificially increase the cost of electricity generation in the country and arbitrarily displace any private sector generation project”. Says the Business Coordinating Council
This is not the first confrontation of this type between President Andrés Manuel López Obrador, promoter of the parastatal oil industry, and opponents of renewable energy projects and the private sector. Since taking office in December 2018, he has canceled a planned bid for private oil exploration and forced private companies to renegotiate pipeline contracts.
The new rules, released Friday night, appear to meet each of their objectives: guaranteeing income for the government’s electricity provider; boosting consumption of the government’s fuel reserves; reducing the role of private power generators, and avoiding supply disruptions in the state’s old and inadequate energy transmission system.
One surprising point is that the government referred to the coronavirus pandemic – and the accompanying economic closures – to justify the measure.
The government defended the restrictions, noting that they allow it to “ensure the reliability of the National Electrical System in the face of the decrease in demand for electrical energy due to the pandemic. Because intermittent renewable power plants produce oscillation in the SEN and cause interruptions, it requires that the injection of energy from these sources be delayed during the pandemic”.
Many of the companies involved in the sector – Spanish, Canadian, and American – plan to file appeals with their embassies, courts, or arbitration panels.
Mexico’s expensive electricity rates have long been a burden on the industry. Some companies believed they had found a solution in the early 2000s. They could generate sustainable energy from their renewable projects, or those of specialized companies, and have cheaper and greener energy.
Mexico has been slow to build the transmission infrastructure that could bring more power from coastal or desert areas – where solar and wind projects are located. The country has also been slow to build supplementary plants when solar or wind power is naturally produced.
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