Mexico lends itself to renewable energy development thanks to its favorable geographical conditions. The country enjoys around 300 days of sunlight each year, and with over 9,000 km of coastline, there is significant potential for growth across other renewable energy forms. We also believe that more than 70,000 jobs could be created if Mexico reaches its full renewable energy potential.
Diverse Sources of Renewable Energy Presents Opportunities
Mexico has already developed a diverse renewable energy mix consisting of hydropower, solar, wind, and geothermal power. The country’s solar energy sector is the second largest in Latin America, after Brazil, with an installed solar photovoltaic (PV) generation capacity of just over 7 GW in 2021. Mexico’s wind power capacity stood at 7.7 GW, while its geothermal output totaled 976 MW. It also has bioenergy, geothermal, and nuclear power facilities.
The Mexican government welcomed renewable energy early on with the construction of the Eurus wind farm in 2009. Located in the state of Oaxaca, it is one of Latin America’s largest wind energy developments. Meanwhile, Mexico’s first solar park was established by Iberdrola in Sonora in 2018. As an early adopter of renewable energy, we believe Mexico has significant potential to develop the sector substantially over the next decade to become a renewable energy leader in Latin America.
Mexico’s Renewable Energy Potential Remains Strong
The Government of Mexico’s (GoM) energy transition law sets the target for 35% of its electricity generation to come from clean energy sources by 2024. Mexico is well on its way to meeting this aim, generating 26.7% of its electricity from renewable sources in 2021. However, it will have to continue to expand its renewable sector as electricity demand in Mexico is expected to grow by 12.7% by 2024.
As Mexico transitions towards renewable energy, the expansion of the sector is expected to create more high-quality jobs, as well as help Mexico meet its target of net-zero carbon emissions by 2050. Further, renewable energy provides a low-cost means of electrifying rural areas.
According to the US Department of Energy, Mexico has the potential to develop its renewables industry to establish 24,918 GW of solar photovoltaics - spread across the entirety of the country. In addition, it could develop 3,669 GW of wind power, 2.5 GW of conventional geothermal energy, and 1.2 GW of hydropower.
With a well-established transport sector, we believe the country could also benefit greatly from the electrification of its transport vehicles as the renewables sector grows. Public buses throughout Mexico, and the smaller forms of transport known as combis, could be migrated to electric power. Utilizing EVs for public transport would be highly efficient because the charging could be done at a central location, lowering the need for extensive charging infrastructure.
Regional Trends Drive Project Development
We expect the southeast of Mexico to become a major renewable energy hub due to its favorable weather conditions and its proximity to Central America. The region has the potential to raise renewable energy production to 5,561 GW of solar PV, 744 GW of wind, and 272 MW from conventional geothermal power, as well as host the largest hydropower facilities in the country.
Baja California Sur, which has an isolated power grid, is currently powered mainly by fossil fuels. But as the renewable energy sector becomes further developed in the north of Mexico, it could be run entirely from renewable resources in the future. The state has the potential to increase its renewable capacity to approximately 743 GW of solar PV power, 516 GW of concentrating solar power, 110 GW of wind energy, and 154 MW of conventional geothermal power.
However, the GoM must continue to support the development of renewable energy projects to allow the country to transition away from fossil fuels and to help decarbonize the economy. The solar and wind energy industries have grown rapidly in recent years, which we believe demonstrates the potential for further expansion over the next decade.
Our Outlook Remains Stable
Mexico was an early adopter of renewable energy, diversifying its green energy mix to include hydropower, solar, wind, and geothermal power in recent years, with the potential for greater expansion. We expect Mexico’s renewable energy industry to play an important role in the decarbonization of the economy and to support the electrification of rural areas as well as the country’s transport system.