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Five Alternatives to Oil Already Taking Off in Mexico

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Even as Mexico pushes through highly controversial and probably over-due reforms in its growing energy sector, alternatives to petroleum are popping up everywhere. Some of them are new. Some are as old as the energy sector itself. But all of the most important aim at generating electricity from renewable and alternative fuels and energy sources.  This has only been possible as the federal government loosens control over state-owned monopolies, including Pemex and the CFE and makes them resemble something closer to energy brokers and grid administrators.

Oil

These are five of the most important alternative energy sub-sectors currently growing or established in the new Mexican energy marketplace.

1. Hydropower

This is one of the oldest methods of generating electricity in Mexico, predating even the federal electricity commission by a good decade. But by 2014, hydropower accounted for a mere 14 percent of all of Mexico’s electricity. Most of these hydro-projects date from the 1970s and 80s. Due to really uneven distribution of water volumes across this big, big country though, hydropower, dams and turbines generating electricity from water flow are heavily concentrated in river valleys the southwest Pacific Coast.

The recent energy reforms have lifted nearly all restrictions on the private ownership of hydropower generators greater than 30 MW a “General Law for Climate Change” established a national goal for some 35 percent electricity generation to be produced by renewable by 2024. The federal Secretary of Energy expects some 5 GW will come from new hydropower projects.

2. Geothermal

Another established 20th century power source, geothermal plants have a thirty year history in Mexico and have increased generating capacity by 2,500% in that time. Though it’s still but 3% of total Mexican electricity (about 959 MW), it has supplied some 65% of electricity for the relatively isolated state of Baja California. Ranked third in the world for geothermal electricity generation, Mexico is only behind the United States and Philippines and the Cerro Prieto Geothermal Power Station, just south of Mexicali remains the largest geothermal plant in the world.

3. Biomass

Energy from animal waste and agricultural scraps is significant, too. 53% of the 28.2 million tons of waste currently being disposed of in landfills is organic and the ten permits for harvesting and using the gas currently offer a capacity of 44.76 MW. Estimates for the entire country range between 650 MW on the low end up to over 900 MW. Sources are likely to include agricultural and forestry residuals, livestock waste and even urban landfills. Biomass jobs are expected to reach some 31,000 jobs by 2020 and to reduce carbon dioxide emissions by some 5 megatons.

4. Wind Power

Among the most important of the energy sector reforms in Mexico is the creation of an electricity market in which the Federal Commission of Electricity, the former government monopoly, must compete, in some limited instances with smaller and more innovative producers.  The wind power industry expects to install somewhere around two gigawatts of capacity per year over the next ten years. There are currently 31 wind farms generating some 2,551 MW of electricity in Mexico. The industry expects to reach 15,000 MW by 2022.

5. Solar Power

But the desert north of Mexico still shines the brightest for the potential of alternative energies in Mexico’s future. All of Mexico’s electricity needs could be met with a couple of 25 km square solar power plants in the Sonora or Chihuahua deserts. And they’d cover, but 0.01& of Mexico’s land area.

Already far ahead of anywhere else in Latin American solar electricity generation, the industry is expanding quickly. The recent reforms in the energy have only bolstered interest (and investment) in this important sub-sector.  

The Federal Commission for Electricity has been installed off-grid solar panels for rural communities for more than ten years. But it is today coordinating with on-grid installations. Virtual net metering and virtual energy storage laws allow on the books in many parts of the north and sophisticated sales and transmission schemes an increasing number of customers to buy and sell on the CFE administered market.

Mexico’s industrial sector makes some 60% of electricity purchases. And changes, via the aforementioned federal reforms to the market, have raised big concerns as federal subsidies for now competitive electricity markets come into play.

Big questions remain about profitability across the energy sector and especially whether smaller and micro-level producers can compete. Capital heavy projects require big peace-of-mind and even bigger bankrolls. And those are just the relatively big questions. Arcane minutiae will be debated for decades to come and a period of strong regulatory transition doesn’t ease investors’ worries. That’s not to say that all promise has gone from the Mexico marketplace. On the contrary, strident and bold reforms are likely even more so in the face of regulatory uncertainty.  

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