Hello and welcome back to Energy Source, delivering insights from Pittsburgh and Mexico City.
On a visit to Pennsylvania, a crucial state in the US presidential race, I observed how the choices made here could greatly impact the energy industry. Donald Trump has promised to roll back environmental protections to boost oil and gas drilling, which could challenge renewable energies under President Joe Biden’s Inflation Reduction Act.
However, Trump’s administration may not be a smooth ride for fossil fuel companies. His proposal to impose heavy tariffs on imports might initiate a trade war, causing disruptions in the global economy. High-profile industry leaders have cautioned that reducing climate regulations may trigger significant opposition to fossil fuel businesses.
In contrast, a potential win for Kamala Harris would likely mean continued support for renewable initiatives that have characterized the Biden administration, although the US would remain the world leader in oil and gas production.
Our main focus today is on Mexico, where recent changes in administration under President Claudia Sheinbaum may influence the country’s solar energy potential.
Mexico’s Untapped Solar Potential
For the last six years, large solar farms in Mexico have seen minimal growth due to a rise in energy nationalism that affects foreign investment in the sector. Despite this, smaller solar installations, which require less regulatory hurdle, have surged. Since 2018, rooftop solar panels on small businesses and homes producing under 0.5MW have grown over four times, now accounting for around 4% of the nation’s electricity generation capacity.
Experts highlight that with minimal territorial dedication, Mexico could potentially meet its entire annual electricity demand through solar energy. A 2020 World Bank report emphasized that dedicating just 0.1% of its land to big solar power plants could suffice for this need.
Renewable energy expert, Víctor Ramírez, pointed out that almost any area in Mexico would yield productive solar energy. He suggests this could significantly help in reducing emissions associated with electricity production.
Yet, Mexico lags internationally when it comes to renewable energy usage, with only about 20% of its electricity needs being met by renewables, in stark contrast to countries like Chile, Colombia, and Brazil where this figure exceeds 60%.
Former President Andrés Manuel López Obrador did not promote renewable energy development and mandated that state-owned companies meet 54% of the country’s electricity needs with traditional methods. His successor, Sheinbaum, an energy expert, had previously favored smaller solar projects during her tenure as mayor of Mexico City. Nonetheless, she has largely continued López Obrador’s policies.
Balancing Sheinbaum’s ambitious statements about renewable energy with the emphasis on state control presents a complex challenge. Currently, while Mexico’s state utility CFE focuses on hydropower and is developing a solar park in Sonora, substantial investments are necessary for further expansion.
With ongoing concerns regarding public finances, the role of private investment will be pivotal in moving towards renewable energy. Many major companies, drawn to Mexico due to nearshoring opportunities amid ongoing trade tensions with China, have significant interests in renewable energy.
An intriguing proposal has emerged to increase the limit for distributed solar generation from 0.5MW to 1MW. This adjustment would allow larger businesses to take advantage of solar energy initiatives. The Mexican Association of Private Industrial Parks estimates that such a change could enable coverage of 19% of the country’s 80 million square meters of rooftops with solar installations.
Experts, however, warn that while raising this limit could be beneficial, careful consideration is needed, especially with local distribution capacities. Maximizing Mexico’s solar potential relies on large-scale projects, contingent on timely regulatory approvals.
Sheinbaum’s upcoming National Energy Plan will likely draw attention. Yet, uncertainty surrounding the US elections and sweeping judicial changes she is implementing may complicate attracting necessary investments.
As per legal expert José María Lujambio, the rapidly enacted constitutional amendments present challenges to private investments in renewables. The next six months will be crucial in determining the extent to which the private sector can engage in this transition.
Power Points:
- The CEO of TotalEnergies has cautioned Trump against removing climate regulations, warning it could lead to significant backlash from the public.
- Plans by Meta for a nuclear-powered AI data center faced setbacks, in part due to environmental concerns regarding a rare species of bee.
- Anglo American is selling its stake in an Australian coal mining venture for $1.1 billion, as CEO Duncan Wanblad pushes forward with reform plans for the company.