U.S. climate envoy John Kerry will arrive in Mexico Wednesday amid high tensions over Mexico’s plan to favor its state-owned electricity company and limit private and foreign firms that have invested in renewable energy.
Mexican President Andrés Manuel López Obrador has vowed to forge ahead with changes to Mexico’s power sector, increasing investment in fossil fuels while limiting private wind, natural gas and solar plants to a minority market share.
The U.S. government has expressed “real concerns with the potential negative impact” on U.S. firms and investments. Kerry may also be troubled by López Obrador’s defense of dirty state-owned coal and fuel-oil power plants.
López Obrador sought to downplay the frictions Tuesday, saying “there are opportunities for investment. The only thing we want to do at the same time is strengthen the CFE,” Mexico's state-owned Federal Electricity Commission.
The commission runs plants that burn coal or fuel oil produced by Mexico's state-owned oil company. It also runs some solar, nuclear and hydroelectric plants.
The Mexican president is a big supporter of government firms and fossil fuels like oil. But he denied Mexico didn't want clean energy, and suggested the United States might offer funding for his plans to increase Mexico's hydroelectric power capacity.
“The thing is to reach agreements with the U.S. government on investments ... getting low-interest loans, at interest rates like they charge in the United States, that would be an investment in favor of the environment," López Obrador said.
U.S. Secretary of Energy Jennifer M. Granholm visited Mexico in January and wrote that “In each meeting, we expressly conveyed the Biden-Harris Administration’s real concerns with the potential negative impact of Mexico’s proposed energy reforms on U.S. private investment in Mexico," adding “The proposed reform could also hinder U.S.-Mexico joint efforts on clean energy and climate.”
Last year López Obrador proposed a constitutional reform to restrict sales by private power generators and favor Mexico’s state-owned utility company. The bill is stuck in congress, where it needs a two-thirds majority.
The bill submitted in October would cancel contracts under which 34 private plants sell power into the national grid. The plan would also declare “illegal” an additional 239 private plants that sell energy directly to corporate clients in Mexico. Almost all of those plants are run with renewable energy sources or natural gas.
The measure also would cancel many long-term energy supply contracts and clean-energy preferential buying programs, often affecting foreign companies.
It puts private natural gas plants almost last in line — ahead of only government coal-fired plants — for rights to sell electricity into the grid, despite the fact they produce power about 24% more cheaply. Government-run plants that burn dirty fuel oil would have preference over private wind and solar plants.
The plan guarantees the government electrical utility a market share of “at least” 54%, even though the U.S.-Mexico-Canada free trade pact prohibits favoring local or government businesses.
