Mexico Sees Its Energy Future in Fossil Fuels, Not Renewables

MEXICO CITY — On a latest scorching afternoon in his dwelling state of Tabasco, the president of Mexico celebrated his authorities’s newest triumph: a new oil refinery.

Although not but operational, President Andrés Manuel López Obrador hailed the refinery as a centerpiece in his grand marketing campaign to safe Mexico’s vitality independence.

“We ignored the sirens’ track, the voices that predicted, in good religion, maybe, the tip of the oil age and the huge arrival of electrical automobiles and renewable energies,” he advised the cheering crowd.

At a second when scientists are sounding alarms about the necessity to transfer away from fossil fuels that contribute to catastrophic local weather change, Russia’s invasion of Ukraine has sparked a global shift in the opposite direction, with america and European nations shifting to extend oil and fuel manufacturing to counter bans on Russian vitality.

However Mexico goes even additional.

Pushed by Mr. López Obrador’s long-held aim to wrest management of the vitality sector from non-public corporations and permit state corporations to dominate the market, the federal government is undermining efforts to increase renewable energy and staking the nation’s future on fossil fuels.

The coverage is central to Mr. López Obrador’s ambition to reverse what he sees as corrupt privatization of the trade, assure Mexican vitality sovereignty and return the nation to the glory days when oil created 1000’s of jobs and helped bolster the financial system.

To this finish, Mexican authorities are utilizing the may of their regulatory businesses to maintain renewable corporations out of the market, blocking their energy crops from working, and as an alternative propping up fossil fuel-powered crops owned or run by the state, based on interviews with greater than a dozen former authorities officers, analysts and vitality executives.

Consequently, Mexico will nearly definitely fail to fulfill its pledge to the world to cut back its carbon output, based on analysts. The nation has additionally doubtlessly jeopardized billions of {dollars} in renewable funding and created one other supply of stress with the Biden administration, which has made combating local weather change a key pillar of its overseas coverage agenda.

“Folks say: ‘how is he going to meet his commitments to local weather change?’ And I at all times inform folks, ‘nicely, he doesn’t care,’” Tony Payan, a Mexico knowledgeable on the Baker Institute for Public Coverage at Rice College, mentioned of Mr. López Obrador. “He’s an oil man.”

The president’s press workplace, Mexico’s Vitality Ministry and the state electrical firm didn’t reply to requests for remark.

Mr. López Obrador has argued that whereas the transition to renewable vitality will occur finally, Mexico is solely not prepared.

“That technological development will develop into a actuality,” he mentioned throughout the refinery inauguration. “To get there, we’d like extra time.”

The federal government has not utterly deserted renewable vitality. It plans to spend about $1.6 billion to construct a large photo voltaic plant in northern Mexico in addition to refurbish greater than a dozen state-owned hydroelectric crops.

Mexico generates almost 80 p.c of its vitality from fossil fuels, whereas renewables and nuclear energy present the remaining 20 p.c, based on authorities figures.

Mr. López Obrador’s supporters additionally contend that the federal government’s technique will permit the state extra management over the vitality sector and any shift to renewables. The coverage is vital in a rustic the place public oversight of the non-public sector has usually been weak, based on Fluvio Ruíz Alarcón, an analyst and former adviser at Pemex, the state-owned oil agency.

“As soon as a sector as vital in our nation as vitality is managed by non-public palms, state regulation turns into very, very tough,” Mr. Ruíz mentioned. Conserving the sector underneath state management “provides you the flexibility to handle the vitality transition at your personal tempo.”

For Mexico, sovereignty over vitality manufacturing holds a particular place. Within the Thirties, President Lázaro Cárdenas seized the assets of foreign oil firms, together with U.S. companies, accused of exploiting Mexican employees and nationalized the trade, an iconic occasion celebrated as a nationwide vacation.

Mr. López Obrador, who hails Mr. Cárdenas as an inspiration, has made regaining a close to monopoly over vitality for the state a high precedence.

Considered one of his first acts was putting in loyalists on the board of an vitality regulatory fee chargeable for overseeing the facility sector, turning what had been an unbiased company, analysts say, right into a instrument to hold out the president’s agenda.

“You’ve misplaced any semblance of autonomy or independence there,” mentioned Jeremy M. Martin, vice chairman for vitality and sustainability on the Institute of the Americas, a public coverage analysis institute.

As of June, greater than 50 wind and photo voltaic initiatives proposed by non-public and overseas corporations have been awaiting permits from the fee, with some functions relationship to 2019, the final time any new permits for personal vitality corporations have been accepted, based on authorities data. In complete, they signify a possible of just about 7,000 megawatts of renewable vitality — sufficient electrical energy to energy a metropolis the size of Los Angeles.

There’s a “conflict that’s been waged in opposition to renewables,” mentioned Francisco Salazar Diez de Sollano, a former chairman of the vitality regulatory fee.

Antonio Perea, who works in enterprise improvement at Sungrow, a Chinese language agency supplying photo voltaic {hardware}, mentioned three initiatives his firm was engaged on are on maintain as a result of the federal government has not granted permits.

In Mexico, “we had the most cost effective photo voltaic vitality on this planet, and sadly with all these adjustments we’ve been left behind,” Mr. Perea mentioned, referring to the federal government’s vitality agenda. “It’s not an vitality situation, it’s a political situation.”

Mr. López Obrador has additionally centered on reversing sweeping vitality reforms accepted by his predecessor, which opened Mexican vitality markets to personal corporations, together with overseas corporations engaged on renewables, for the primary time in a long time. In 2019, he canceled a public auction for the rights to generate wind and solar energy, although earlier auctions had led to a number of the world’s least expensive renewable costs.

Mr. López Obrador’s governing Morena occasion additionally approved a bill to rewrite guidelines governing the order by which energy crops feed vitality into the grid, reversing earlier adjustments that required cheaper, usually renewable vitality to be dispatched first, and as an alternative prioritizing state-owned crops.

Authorities authorities have additionally prevented no less than 14 privately owned wind and photo voltaic crops which have already been constructed from working commercially, based on two trade executives who requested anonymity out of worry of presidency reprisals.

The federal government has additionally given choice to vitality from coal, fuel and fuel-oil burning crops owned by the state over privately owned renewables within the order that they feed energy into the nationwide grid, citing the reliability wants of the vitality system.

The follow was carried out “with out obvious justification,” based on a report launched final yr by a U.S.-based agency employed by Mexico to observe the nation’s vitality sector. And although the Supreme Courtroom dominated key components of the federal government’s coverage unconstitutional, it’s nonetheless being utilized, based on the trade executives.

And even because it blocks renewable vitality, the state is planning to speculate $6.2 billion to construct 15 fossil fuel-powered crops by 2024, authorities paperwork present.

The authorities’ focusing on of the renewable sector has had a serious financial influence: Overseas direct funding within the vitality sector plunged from $5 billion in 2018, when Mr. López Obrador took workplace, to lower than $600 million final yr, based on authorities figures.

“Mexico will not be open for vitality funding,” Mr. Payan mentioned. “It’s merely shut down.”

With U.S. corporations already having invested closely within the Mexican vitality sector, the coverage adjustments have develop into an rising supply of stress with Washington.

“Now we have repeatedly expressed critical issues a couple of sequence of adjustments in Mexico’s vitality insurance policies,” Katherine Tai, the U.S. commerce consultant, mentioned in an announcement. “However, sadly, U.S. corporations proceed to face unfair remedy.”

Mr. López Obrador, throughout a information convention, appeared to shrug off america’ warning, taking part in a video of a Mexican track referred to as “Ooh, How Scary.”

The Mexican chief has said his nation can be open to overseas funding in renewable initiatives provided that the vitality ministry was answerable for planning and the state-owned utility firm had a majority share — a likely violation of Mexico’s commerce settlement with america.

Mr. López Obrador has insisted that Mexico will meet its aim underneath the 2015 Paris Settlement to provide 35 p.c of its energy from renewable sources by 2024, however a authorities report launched this yr confirmed that the nation is now years behind that concentrate on.

Many environmentalists and renewable vitality consultants mentioned they have been centered on Mexico’s subsequent presidential elections in two years, hoping for an administration friendlier to renewable energy.

“Whoever takes workplace in 2024 goes to must take care of some critical deficiencies within the vitality sector,” Mr. Martin mentioned. However so far as the Paris Settlement, he added, “that ship has sailed.”

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