The growth of renewable energy in Mexico will create significant investment opportunities in the T&D infrastructure segment.
Mexico’s power grid will have to be expanded and modernized to handle the large amount of renewable projects that will need to be connected to the grid. Mexico’s Minister of Energy said that “over the next 15 years the country aims to build almost 25,000km of new power transmission lines, achieving an investment of at least $13.4 billion.”
We believe the reforming of the Mexican power market will raise efficiency in the power sector in the coming years, as a result of increased investment in T&D, and pricing mechanisms to alleviate power shortages.
Iberdrola has committed roughly $5 billion worth of investment into the Mexican power sector between with almost half of the capital targeted at T&D infrastructure. The National Infrastructure Plan includes roughly $600 billion for investment including housing, energy, transportation, water and power.
We expect the majority of this to be spent on transportation, with almost 50% of the funds coming from private sources. Although reforms to the electricity sector have faced headwinds in Mexico during the last several years, change continues amid regulatory uncertainty.
The low point may have been reached when the government appeared ready to cancel the fourth renewable energy auction after several delays. The move toward private auctions and subsequent revival of prospects for a fourth public auction significantly improved the overall outlook.
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