Mexico’s recently elected President Claudia Sheinbaum was just named as one of the 100 most influential climate leaders in business for 2024 by Time magazine. With a PhD in energy engineering and extensive experience rolling out renewable energy projects as mayor of Mexico City, there are high hopes that she will be the one to put Mexico on track for a green transition. However, many expect Sheinbaum to follow in the footsteps of former President Andres Manuel Lopez Obrador (AMLO), who led the Morena political party for the last six years and focused heavily on the nationalization of Mexican energy and strongly backed oil and gas.
As an academic, Sheinbaum contributed to two major reports for the U.N.’s Intergovernmental Panel on Climate Change. Then, as mayor of Mexico City, she launched the city’s first electric bus fleet and developed one of the world’s biggest urban solar projects at the Centro de Abasto wholesale market. She has often stated her commitment to renewable energy, in contrast to her predecessor who rarely mentioned the terms ‘sustainability’ or ‘renewable energy’ in his speeches.
During her inaugural speech in October, Sheinbaum pledged to continue to support the indebted state-owned oil company Pemex while also implementing a state-led plan for an energy transition. “We all need strong, public state energy companies that guarantee clean energy at low prices to current and future generations,” she said. Earlier in the year, Sheinbaum stated plans to spend at least $13.6 billion on renewables – including developing Mexico’s wind and solar energy capacity and modernizing five hydroelectric plants, as well as announced a goal of achieving 45 percent clean energy by 2030, from 24 percent in 2023.
In November, Mexico’s government unveiled its new National Electricity Strategy, part of the National Energy Plan, which includes $23.4 billion in investment to support the state-owned national electricity company CFE in adding 13 GW of capacity sourced from both fossil fuels and renewable energy. The funding will contribute towards generation, transmission, and distribution projects. The government also established rules to allow private companies to add up to an additional 9.6 GW from renewable sources by 2030. The new framework permits 46 percent of electricity generation to come from private investments, marking a shift away from AMLO’s strict energy nationalization strategy.
While the plan allows for an increased role from the private sector, the government stated that CFE was “rescued from privatisation” under the AMLO administration, increasing its electricity generation share from 38 percent in 2018 to 54 percent in 2024, through $20 billion in investment and the acquisition of 13 Iberdrola plants, adding 8,639 MW of capacity.
While the new national strategy has provided an optimistic outlook for the energy sector, Mexico’s 2025 budget proposal is aimed at reducing the current deficit by cutting spending across several sectors. Environmental spending has been reduced by 39 percent, while public spending for Pemex has been decreased by 7.5 percent. Although the government is expected to transfer $6.69 billion to Pemex in 2025 to help the severely indebted company meet its debt and loan repayments.
Pemex has become known as “the world’s most indebted oil company”, owing around $120 billion in total. In November, Mexico announced a plan to simplify the tax payment system for Pemex, by merging three existing taxes into one. Sheinbaum stated, “We have to fix Pemex,” and the new plan “would seek to cut inefficiencies, diversify energy sources and pay down debt while protecting output levels.” Meanwhile, the new director of Pemex, Víctor Rodríguez, has been tasked with reducing the company’s costs by $2.44 billion.
The government aims to help Pemex increase estimated oil reserves, boost natural gas production to 5 billion cubic feet per day, and maintain hydrocarbon production at 1.8 million bpd. Although this aim is far less than ALMO’s previous target of 2.6 million bpd. Sheinbaum has publicly discussed the 2013 energy reform from then President Enrique Peña Nieto, which aimed for an output of 3 million bpd. She stated, “That is environmentally impossible… It is better to promote efficiency and renewable sources.” In addition, experts suggest that the once oil-rich Latin American country now has only around ten years of oil left at its current rate of production, unless it launches fracking operations or conducts deepwater exploration.
While Sheinbaum intends to continue backing Pemex, she has also announced plans to expand Mexico’s renewable energy output. The third and fourth phases of the 1 GW Puerto Penasco solar plant in Sonora – set to be the “largest solar farm in Latin America” – are expected to be completed during her six-year term in office, in addition to several other wind and solar projects in the north of Mexico. However, the cap on the capacity that private companies are permitted to add could deter investors from tapping into Mexico’s extensive renewable energy potential.
By Felicity Bradstock for Oilprice.com