Primarily due to existing infrastructure and the continued exploitation of natural gas resources

Over the past decade, Mexico has tried diversifying its energy mix, increasingly integrating renewable sources like wind, solar, and biomass. However, the country’s energy sector relies heavily on fossil fuels, including oil, natural gas, and coal. This dependence presents challenges and opportunities as Mexico navigates its energy transition amidst global pressures to reduce carbon emissions. Environmental concerns, economic incentives, and technological advancements drive this transition.

As of 2023, Mexico’s energy mix is predominantly fossil-fuel-based. According to the latest Secretaría de Energía (SENER) data, approximately 75% of the country’s electricity is generated from fossil fuels. Natural gas is the most significant contributor, providing around 60% of the electricity, followed by oil (10%) and coal (5%). In contrast, renewables—primarily wind, solar, and biomass—account for roughly 25% of the electricity generation. Wind energy contributes about 10%, solar 8%, and biomass and other renewables comprise the remaining 7%.

Trends Over the Last Decade

 

The last ten years have seen notable growth in renewable energy capacity in Mexico. From 2013 to 2023, the share of renewables in the energy mix increased from 12% to 25%. This growth was driven by several factors, including government initiatives, international investments, and a growing recognition of the need to reduce greenhouse gas emissions.

• Wind Energy: Wind power has seen the most substantial increase, growing from 3.3 GW in 2013 to over 9 GW in 2023. This growth has been solid in regions like Oaxaca, home to some of the largest wind farms in Latin America.
• Solar Energy: Solar energy has also expanded rapidly. Installed solar capacity increased from 0.2 GW in 2013 to 7 GW in 2023. The abundance of solar resources in northern Mexico has attracted significant investment in photovoltaic (PV) projects.
• Biomass and Other Renewables: Biomass has grown slower and is limited by resource availability and technology costs. However, it still represents an essential part of the renewable energy mix, particularly in rural areas where biomass is a primary energy source.

 

Trends Over the Next Decade

 

Looking ahead to 2033, the trend toward renewable energy will continue, albeit at a potentially slower pace, if current policy directions remain unchanged. The National Energy Strategy (Estrategia Nacional de Energía) projects that renewables could contribute up to 40% of electricity generation by 2033, assuming favorable investment and regulatory support conditions.

• Wind and Solar Energy: Both wind and solar are expected to see continued growth, with solar energy potentially outpacing wind due to declining costs and advancements in PV technology. Solar capacity could reach 20 GW by 2033, while wind could approach 15 GW.
• Fossil Fuels: Despite the growth in renewables, fossil fuels will likely remain a significant part of Mexico’s energy mix, primarily due to existing infrastructure and the continued exploitation of natural gas resources. The share of fossil fuels in electricity generation might decrease to around 60%, but natural gas will likely remain the dominant energy source.

Factors Influencing the Trend. Several factors have influenced these trends:

• Policy Shifts: The Mexican government’s energy policy has shifted over the last decade. The 2013 Energy Reform initially encouraged private investment in renewables, but recent years have seen a renewed focus on state-controlled energy, particularly fossil fuels. The current administration has prioritized the state-owned energy company PEMEX and the Federal Electricity Commission (CFE), which has slowed the momentum for renewable energy investments.
• Economic Factors: The cost of renewable technologies has dropped significantly, making wind and solar more competitive with fossil fuels. However, financial challenges, such as the economic impacts of COVID-19, have affected renewable energy deployment.
• Climate Change Concerns: Increasing awareness of environmental crises and international pressure to reduce carbon emissions have also played a role in driving renewable energy adoption. Mexico has committed to the Paris Agreement targets, which has spurred some investment in renewables, though progress has been mixed.

 

Recommendations for Expanding Renewable Energy

To further increase the share of renewables in Mexico’s energy market, the following policy recommendations should be considered:

• Strengthened Policy Framework: The government should establish ambitious renewable energy targets and provide clear policy signals to attract investment and stimulate innovation. This includes implementing feed-in tariffs, renewable energy certificates, and other financial incentives.
• Invest in Grid Infrastructure: Upgrading the national grid to handle a higher share of intermittent renewable energy sources is essential. Investments in grid infrastructure will enable better integration of renewables and improve grid stability.
• Promote Research and Development: Encouraging research and development in renewable energy technologies, particularly in energy storage and biomass, can help reduce costs and increase efficiency. Collaboration between public institutions, universities, and the private sector should be fostered to drive innovation.

By implementing these recommendations, Mexico can position itself as a leader in renewable energy and achieve a more sustainable and resilient energy future.

Mexico stands at a crossroads in its energy transition. While progress is being made in expanding renewable energy, the dominance of fossil fuels continues to pose challenges. Mexico has the potential to significantly increase its renewable energy share by applying policies and investments that contribute to combating climate change and ensuring a more sustainable energy future.

This Post was  submitted by Climate Scorecard Mexico Country Manager Pablo Necoechea Porras.