On Dec. 20, Mexico will reach its cutoff for the approval of
legislation related to President Enrique Pena Nieto’s sweeping energy reforms.
Yet while the focus is on Mexico’s oil and gas sector, this deadline is likely
to come and go without any serious debate on the future of renewable energy.
With its abundance of wind, solar and geothermal resources, the renewables
industry should thrive in Mexico. Indeed, many hoped Pena Nieto’s reforms would
catalyze it. Instead, Mexico risks missing an opportunity to make good on its
commitment to a clean energy future and to tackling and adapting to climate
change.
Progress has been made in the year since Mexico passed its historic reforms restructuring the energy sector,
opening the industry to private and foreign investment and ending the monopoly
of Pemex, the state-owned petroleum company. Most secondary legislation has
been passed, new regulatory bodies formed and, on Dec. 11, the government
released the contract terms for shallow water bidding as part of its first oil
and gas auction. But the same cannot be said for renewable energy. And in a
year when ongoing drug-related violence and corruption scandals have exposed the gaps in Pena Nieto’s agenda, lackluster
renewable energy initiatives run counter to another image that the Mexican
government has worked so hard to build: A champion in the global fight against
climate change.
In 2012, Mexico was one of the first nations to pass a climate change law,
which promised to reduce carbon emissions by 30 percent by 2020 and 50 percent
by 2050. In 2008, the country set national targets to reduce its reliance on
fossil fuels. The law aimed to have no more than 65 percent of the nation’s
electricity generated by hydrocarbons by 2024, and no more than 50 percent by
2050.
Many of the challenges facing Mexico’s renewables sector predate the current
administration, making it unrealistic to assume they could be overcome in a
single sexenio, or six-year presidential term. Moreover, Pena Nieto should be
commended for the few positive initiatives developed to foster clean energy
under the reforms—in particular, the introduction of a clean energy certification
scheme, modeled in part on California’s renewable portfolio standards. Under
the system, Mexico’s Energy Regulatory Commission will issue a certificate for
every megawatt hour generated by clean energy. The idea is to provide a mandate
for the power sector to assist the government in reaching its renewable energy
targets while incentivizing the private sector to increase the contribution of
power generated from renewable sources.
Despite such promise, however, criticism has been harsh from the renewable
energy sector. Renewable energy advocates argue that the inclusion of both
large-scale hydropower and efficient cogeneration as certifiable “clean” energy
undermines the purpose of the law and puts renewable energy at a disadvantage.
Efficient cogeneration refers to heat produced by steam as a byproduct of
conventional gas-fired generation.
Consider that assessment against the backdrop of a reform agenda already
heavily focused on the oil and gas sector, with plans to deliver natural gas
across Mexico. Wind and solar generators will likely struggle when faced with
the combined effect of doubling cheap natural gas imports from the United
States and a more open and competitive private electricity market.
But that’s not the entire picture. Even as Mexico massively expands its
pipeline infrastructure, natural gas will not reach every corner of the
country. States like Baja California Sur, which relies almost exclusively on
expensive diesel and fuel oil to generate electricity and is isolated from the
national grid, would welcome solar and wind power at half the cost. Mexico’s
two million residents without access to electricity are also a natural market
for small-scale solar power.
Moreover, the current scenario is based on natural gas prices hovering under $5
per million metric British thermal units (MMBtu), which cannot be assured in
the medium to long term. As the cost of renewables declines, new projects will
become more economically viable. Renewable energy, after all, has dominated the self-supply sector and will continue
to do so.
The Mexican government has answered critics by framing this debate in terms of
reducing emissions, rather than promoting renewable energy. Officials argue
that by switching from fuel oil to natural gas, Mexico is getting on track to
meet its national emissions reductions targets. Moreover, officials argue, the
inclusion of efficient cogeneration is hardly new, and this type of “clean”
technology was accounted for in earlier legislation.
Yet Mexico might not be on track to meet any of its goals under the status quo.
In the five years since the introduction of the national clean energy targets, renewable
generation as a proportion of the electricity mix has remained virtually the
same. In 2013, renewables comprised less than 14 percent of Mexico’s total
power generation. By some accounts, the country’s renewable sector would need
to double every six years in order to reach 35 percent by 2024.
In order to get there, investment in Mexico’s renewable sector must increase.
Foreign investment has been steadily climbing, reaching $11 billion in 2013,
according to investment body ProMexico, with a reported 80 projects totaling
$8.5 billion in the pipeline. But much more is needed.
Investment in new and existing projects must be accompanied by expansion and
upgrades in transmission infrastructure. Close to half the transmission lines
in Mexico are over 20 years old. A lack of interconnection and infrastructure
in resource-rich areas such as Baja California and Baja California Sur only
exacerbate the problem.
The benefits of the vaunted energy reforms can still reach Mexico’s renewable
sector—if the government acts. If current trends continue, however, wind and
solar in particular will struggle to compete with expanding natural gas, and
renewable energy gains will be confined to areas with limited gas supplies,
where it could supplant diesel and fuel oil, and in the self-supply segment.
Expanding renewable energy in this way would help cut carbon emissions, but not
enough for Mexico to hit its pledged clean energy targets. To make a serious
contribution to tackling climate change, Pena Nieto must employ both his
current energy reforms and future legislation to develop the renewable sector
across Mexico and confirm its role in a viable, alternative energy future.
No comments:
Post a Comment