Mexico has big ambitions for its renewable energy industry, with plans to double its production by 2030. Several large-scale green energy projects are already underway, with expansion plans. However, the lack of comprehensive climate policy and failures in Mexico’s regulatory framework could restrict the development unless addressed.
Renewable Energy Projects in Mexico
There is currently a wide range of renewable energy projects across Mexico, including hydropower, solar, wind, and geothermal power. Mexico’s solar energy industry is the second biggest in Latin America, after Brazil, with a capacity of over 7 GW over installed solar photovoltaic (PV) in 2021. It also has a significant wind power capacity of roughly 7.7 GW, and 976 MW of geothermal power generation.
The Mexican government has established several ambitious renewable energy targets for the next decade and beyond, targeting 35% of its electricity generation from clean energy sources by 2024, up from roughly 29% in 2022. Several new projects planned for 2023 are expected to support the government’s climate goals.
At the COP27 summit in Egypt last year, Mexico announced the ‘Sonora Plan’ which seeks to increase the country’s renewable energy and manufacturing capacity. The project includes the construction of one of the world’s largest solar power plants, the development of Sonora’s lithium reserves, and the manufacturing of electric vehicle (EV) parts. It also includes the expansion of the state’s principal Guaymas port.
Expectations for Renewables in 2030
Mexico’s energy demand is expected to continue rising. At the same time, many of its fossil fuel operations will start to deplete, meaning that the government is faced with the choice of allowing new oil and gas exploration or developing its renewable energy capacity. President Obrador (AMLO) introduced an ambitious climate target last year, aiming to reduce Mexico’s emissions by 35% by 2030, an increase from its previous 22% target. We expect new clean energy projects to support decarbonization and help Mexico to undergo a green transition.
In 2022, Mexico pledged to double its renewable energy capacity by 2030, with plans to develop another 30 GW of green energy. Mexico’s Foreign Minister Marcelo Ebrard stated at COP27 that the government plans to invest $48 billion in its renewable energy industry. This funding is expected to contribute to new solar, geothermal, wind, and hydroelectric capacity, increasing Mexico’s solar and wind power generation to a combined 40 GW.
Despite the ambitious objectives announced at last year’s COP27, energy experts are worried about the lack of policy and financing to make Mexico’s climate targets a reality. The 2023 federal budget does not include the funds necessary to support renewable energy development to meet decarbonization aims. In addition, the Mexican energy regulator continues to block private investment in the sector by denying several renewable power generation permits and rejecting modifications to existing permits. Further, AMLO has repeatedly mentioned energy nationalization which could restrict foreign investment in the sector.
Our Outlook is Stable
With energy demand expected to grow about 3% to 4% annually, Mexico must expand its renewable energy production to meet its climate goals and support a global green transition. We expect the development of significant new wind and solar projects and the introduction of major new EV factories to drive the country’s green energy sector. However, we believe Mexico should introduce favorable climate policies, an improved regulatory framework, and provide more public investment to achieve its ambitious renewable energy targets. Please contact us to learn more about our project finance solutions in Mexico.