Key Challenges for Energy Transition Policy in Mexico

By PhD. Yolanda Villegas

Tuesday 04/05/2022

The world finds itself in a state of energy transition, evidenced by the number of governments focusing their efforts on lowering their dependence on fossil fuels. Even now, as oil and energy prices are surging again, there is still a firm commitment to the transition while also recognizing the challenges that energy transition policies around the world face.

Mexico has committed to participating in the efforts to combat climate change and has set important goals, the highlight of which is that by 2024, 35 percent of the electricity produced in the country will be with clean energy. However, the efforts have not been enough since some of the strategies implemented by the government have not produced the desired effects. Consequently, the Mexican energy transition policy faces key challenges that should be taken into account in order to make progress in the fight against climate change.

To achieve an effective energy transition in the country, it is necessary to combine a series of factors: economic, environmental and social. The planning and regulation instruments must be adapted so that the National Electric System gradually incorporates more renewable energies into the energy matrix. For this, a new plan and the modernization of the country’s transmission and distribution systems are required, since they were not designed for fluctuating loads.

The corresponding legislation must be modified or created considering international studies and success cases to facilitate the insertion of measures that accelerate the energy transition in our country. Likewise, networks must be created between representatives of states and municipalities to increase awareness of renewable energies and energy efficiency.

Centralized production is a concept that no longer has a place in a country whose population is growing exponentially. The decentralized production of electrical energy from renewable energies must be expanded and to achieve this, private sector support and investment are required, for which new models of business activity must be promoted while eliminating regulatory obstacles. Investments to promote the energy transition must be accompanied by measures that expand the fiscal space of governments in order not to compromise their financial integrity.

The energy transition will not be complete if the social aspect is not considered. An energy sector that recognizes the role that society has in the design, use and operation of the electrical system must be built. To do this, the mechanisms that are generated need to recognize, correct, and address the inequalities that technological progress has, unfortunately, also introduced. The energy transition must be inclusive, so no one is left behind. This requires that the processes of change incorporate issues such as gender equity, accountability, and transparency.

A paradigm shift of the entire system is required. To this end, the energy transition must be collective and inclusive, producing capacities and spaces for meaningful participation and effective representation so that the interested and affected parties are informed and involved in decision-making. The transition must guarantee that the costs and benefits are shared equitably, which must consider not only current but also future generations.

An effective energy transition policy represents benefits not only for the energy sector but also for economy and society in general, and provides guidelines for the adoption of new digital systems that represent the future of the sector and open the way to new services and trends for producers and consumers, such as electric mobility and the circular economy. This is observed in the number of companies focusing their efforts to reduce their dependence on fossil fuels, ranging from the Top 500 firms to small and medium enterprises. This pattern is even changing how big oil companies work. Now, these companies are diversifying their energy portfolio to include alternative, renewable and clean energies that offer greater sustainability and, therefore, a reduction in the generation of greenhouse gases.

In summary, there are key challenges for Mexico’s energy transition policy that should be addressed not only for the sake of climate change but also to pave the way for the next generations to embrace a future fully set on a decarbonized, digitalized and interconnected global economy.

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