Mexico's energy bet: Fossil fuel -- just like Trump. But Technology is moving faster than old political reflex

Mexican industrial investments in renewable energies, like private micro-grids, wind/solar farms supported by storage infrastructure such as batteries are economically justifiable investment decisions by the owners and CEOs.  The economics of solar at less than $0.015 /Wh make them a far more efficient, but timing-sensitive technology – today new affordable green and long-lasting storage is available – efficient and price competitive

A few weeks ago the Mexican government confirmed its intention to focus on coal and oil fired power plants reducing the role of renewable “disruptive” energies like solar and wind power, because of perceived grid instability.  The government cited the coronavirus pandemic as a justification for new rules that will prevent businesses to use the grids to transport renewables. 

This announced shift is not anything new, since within the fine lines in the 2018 published  Prodesen 2019-2033 development program of Mexico’s national grid, it was evident that within the 600 pages document that Mexico’s government was unhappy that private enterprise had access to CFE grid network. This was communicated in so many ways as a warning to investors. 

Obviously its a sad news as it will affect 28 solar and wind projects that were ready to go online, and 16 more under construction, with a total of $6.4 billion in investments , much of it from foreign firms.  This energy will be sorely missed by Mexico’s enterprise as there are already regional shortage and a lack of power transport across the country.  In fact, CFE has indicated that it will raise tariffs in 2020 (we presume after the Covid-19 crisis). 

However, green energy continues its path forward, and prices continue to decline.  Rumors are that the latest plans were ready to sell their energy at less than US$ 0.015 /Wh which represents a world record in terms of energy prices.  CFE’s own capital issues and the increased energy demand by Mexico’s industry makes closed systems more and more attractive.  The strength of wind and solar are its low distribution costs – when they produce.  Their weakness is their Stochastic output; storage is a viable and price competitive solution.

North American companies are now offering to Mexican industry “power by the hour” at rates 10% to 15% than what CFE offers.  The economics of green alternative energy are obvious – and are less costly than CFE’s offering.  A decoupling from the National grid is now not only possible but also cost effective!

But at the same time, it opens other windows of opportunities.