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Why Mexico will miss its renewable energy target
Recent policy developments in Mexico are negatively impacting the wind and solar pipeline
1 minute read
Mexico was emerging as a promising market for renewables only a few years ago. In 2019, approximately 4 gigawatts (GW) of wind and solar capacity started operations.
Now however, Mexico’s pipeline for wind and solar to be interconnected up to 2022 currently sits at a mere 5.8 GW, according to our latest long-term power outlook for the region.
Long-term power outlooks are available only to clients of Wood Mackenzie power services. To learn more, reach out via the form at top right.
Mexico had set a target of 35% clean energy by 2024, but these clean energy goals are now unlikely to be met largely due to actions by President Andrés Manuel López Obrador's administration.
The indefinite suspension of new auctions rounds, a lack of incentives and mechanisms to promote additional renewable capacity, and increasing regulatory ambiguity are the reasons for Mexico’s slowed progress on renewables.
Gas-based generation remains the preferred base-load technology in Mexico, with more than 3 GW to start operation during 2020, 2.2 GW between 2021 and 2022.
The Comisión Federal de Electricidad (CFE) plans to build an additional 4.5 GW of gas-based generation by 2024.
In the long-term, we expect energy prices in Mexico to remain relatively flat.
Significant transmission investments and more aggressive incentive mechanisms for new renewable capacity will be required to progressively re-align to clean energy goals after the end of Andrés Manuel López Obrador's administration in 2024.
While the regulatory and political direction of the next four years are sure to remain uncertain, the environment beyond remains even less clear but will materially affect long-term asset investments.
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